Sandstorm Gold Announces 2017 Fourth Quarter And Annual Results

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Overig advies 16/02/2018 06:30
Sandstorm Gold Ltd. (“Sandstorm” or the “Company”) (NYSEAMERICAN: SAND, TSX: SSL) has released its results for the fourth quarter and year ended December 31, 2017 (all figures in U.S. dollars).

Fourth Quarter Highlights
•Attributable gold equivalent ounces sold1 of 12,032 ounces (Q4 2016 – 13,245 ounces);
•Revenue of $15.4 million (Q4 2016 - $16.5 million);
•Operating cash flow of $9.9 million (Q4 2016 – $10.1 million);
•Net income of $0.7 million (Q4 2016 – net loss of $0.02 million);
•Credit Facility Amendment: The Company’s revolving credit facility was increased to $150 million and amended such that the facility can be used for general corporate purposes. The tenure of the facility is four years.
•Royalty Acquisition: Agreed to acquire a 2% net smelter return (“NSR”) royalty on the Houndé gold mine in Burkina Faso, operated by Endeavour Mining Corporation (“Endeavour”). The royalty was acquired from Acacia Mining plc for $45 million in cash and covers the Kari North and Kari South tenements, representing approximately 500 square kilometres of the Houndé property package.

Full Year Highlights
•Record attributable gold equivalent ounces sold1 of 54,633 ounces (FY 2016 – 49,731 ounces);
•Record revenue of $68.3 million (FY 2016 - $62.4 million);
•Average cash cost per attributable gold equivalent ounce of $280 resulting in cash operating margins1 of $970 per ounce (FY 2016 - $258 per ounce and $996 per ounce respectively);
•Record operating cash flow of $44.8 million (FY 2016 – $39.0 million);
•Net income of $10.5 million (FY 2016 –$25.3 million);
•Royalty Acquisitions: During 2017, the Company acquired 39 NSR royalties on properties located in Canada, Mexico, Peru, Botswana, Burkina Faso, Côte d'Ivoire and South Africa. The acquisitions added NSR royalties on operating mines, development-stage assets and exploration-stage projects.
•Hot Maden Anchor Asset: Sandstorm added a 30% net profits interest on the Hot Maden project in Turkey by acquiring Mariana Resources Ltd. (“Mariana Resources”). The addition of Hot Maden to the Company’s portfolio of royalties provides for: ?approximately 100% increase in estimated future production for only 19% dilution;
?an anchor asset that is high-grade and low-cost with significant exploration upside;
?a strong local partner with experience in exploring, developing, permitting and operating projects in Turkey; and
?exploration properties in Côte d’Ivoire, Turkey, and Argentina which Sandstorm intends on selling and retaining NSR royalties. Sandstorm has sold a number of these assets and continues to make progress in divesting of the remaining properties.

•Monetization of Securities: More than $14 million of non-core assets were monetized and reinvested into royalty acquisitions during 2017 and an additional $18.3 million in securities was sold subsequent to quarter end.
•Gold Stream Amendment: The Bachelor Lake gold stream with Metanor Resources Inc. (“Metanor”) was amended such that Sandstorm will purchase 20% of the gold produced from the Bachelor Lake mine until 12,000 ounces of gold have been purchased by the Company at which time the gold stream will convert into a 3.9% NSR royalty. In consideration for the amendment, Sandstorm also received a 3.9% NSR royalty on Metanor’s Barry project and $2.0 million in the common shares of Metanor. The amendment allows Sandstorm to maintain meaningful exposure to production from the Bachelor Lake mine while adding a royalty on the Barry project, an advanced exploration-stage asset located in the emerging Urban-Barry camp.
•Normal Course Issuer Bid: Under Sandstorm’s normal course issuer bid, the Company is able to purchase approximately 7.6 million common shares until April 4, 2018. During the year ended December 31, 2017, the Company purchased approximately 4.1 million common shares.


Sandstorm’s President & CEO, Nolan Watson reflected, “When looking back on the 2017 year, I’m glad to say that we accomplished our objectives and exceeded our goals. As we move forward the Company has a strong cash flow base and a number of exciting projects advancing towards production that will bring substantial growth in the coming years. We’ve seen another very active period on the exploration side of things with more than 500,000 metres drilled on Sandstorm properties. This represents a huge amount of potential upside for our shareholders. In 2018 our continued focus will be to make royalty acquisitions in order to grow and diversify our portfolio.”

Outlook
Based on the Company’s existing royalties, attributable gold equivalent production for 2018 is forecast to be between 50,000 and 60,000 ounces. The Company is forecasting attributable gold equivalent production of approximately 125,000 ounces per annum in 2022.

Financial Results

Over the course of the full 2017 year, gold sales reached a record, driving annual records for both revenue and cash flow of $68.3 million and $44.8 million respectively. The records represent a 9% increase in revenue and a 15% increase in cash flow compared to the 2016 year. A notable contributor to the record gold sales and revenue figures was the Chapada copper stream as 82% more gold equivalent ounces were delivered to Sandstorm and rising copper prices added 29% to the average realized selling price per pound of copper when compared to 2016. The Company also saw annual attributable production increases from the Karma gold stream, the Minera Florida and Chapada silver streams and the Black Fox gold stream among others.

During the fourth quarter of 2017, there was a 9% decline in attributable gold equivalent ounces sold compared to the fourth quarter of 2016 due to a temporary reduction in revenue recognized on the Company’s Emigrant Springs royalty. The decrease in production resulted in a 6% lower revenue and a 2% decrease in cash flow compared to the fourth quarter of 2016. An increase in the average realized selling price per ounce of gold partially offset the decline in ounces.

Net income was higher in the fourth quarter of 2017 compared to the same period in 2016 partly due to a $7.6 million increase in gains recognized on the revaluation of the Company’s investments and a $1.4 million decrease in depletion expenses due to the decrease in attributable gold equivalent ounces sold. The gain on the revaluation of investments was driven by the change in fair value of the Equinox Gold Corporation (“Equinox”) convertible debenture. The increases during the quarter were offset by a $4.6 million non-cash impairment charge relating to the Emigrant Springs royalty and a decrease in financing income as a result of the repayment of a loan receivable.

Net income was lower when comparing the 2017 year to the 2016 year due to factors such as a decrease in gains recognized on the revaluation of investments, non-cash impairment charges relating to some of the Company’s royalties and a temporary increase in administration costs related partly to the acquisition of Mariana Resources. These declines were offset by gains related to the Bachelor Lake gold stream amendment, the settlement of Equinox debt and the Orezone royalty repurchase.

Streams & Royalties

Of the gold equivalent ounces sold by Sandstorm during the fourth quarter of 2017, approximately 45% were attributable to mines located in Canada, 11% from the rest of North America and 44% from South America and other countries.

Three months ended Dec. 31, 2017
Year ended Dec. 31, 2017 Revenue (in millions)
Gold Equivalent Ounces Revenu (in millions) Gold Equivalent Ounces

Canada $6.9 5,378 $28.4 22,784
North America excl. Canada $1.6 1,310 $14.8 11,882
South America & Other $6.9 5,344 $25.1 19,967
Total $15.4 12,032 $68.3 54,633

Canada

Streams and royalties on Canadian mines contributed 15% fewer gold equivalent ounces to Sandstorm when compared to the fourth quarter of 2016. The change is primarily due to a decrease in gold equivalent ounces sold from the Bachelor Lake mine in Québec and the Ming mine in Newfoundland, offset by increases from the Diavik mine in the Northwest Territories and the Bracemac-McLeod mine in Québec.

North America Excluding Canada

The gold equivalent ounces sold from operations located within North America, but outside of Canada, decreased by 46% compared to the same period in 2016. The changes were driven by a decrease in royalty revenue from the Emigrant Springs mine in Nevada, offset by an increase in the gold ounces sold from the Santa Elena mine in Mexico. At Emigrant, an update to the life of mine production plan reduced the ounces expected to be produced from areas of the mine subject to Sandstorm’s royalty and required a one-time reversal of royalty revenue in the amount of $1.9 million.

South America & Other

Operations in South America and other countries contributed 24% more gold equivalent ounces when compared to the fourth quarter of 2016. The copper stream on the Chapada mine in Brazil and the gold stream on the Karma project in Burkina Faso were responsible for the bulk of the gains.

CERRO MORO SILVER STREAM

Sandstorm has a silver stream with Yamana Gold Inc. (“Yamana”) whereby it will purchase silver from the Cerro Moro mine in Argentina beginning in 2019. Yamana recently reported that construction is on schedule at Cerro Moro with mill commissioning expected in early 2018 and commercial production expected by mid-year. Expenditures at Cerro Moro totaled $172 million in 2017.

HOUNDÉ ROYALTY

In early 2018, Sandstorm completed the purchase of a 2% NSR royalty on the Houndé mine in Burkino Faso. The Houndé royalty is a natural fit for the Sandstorm portfolio as the asset meets all of the criteria that the Company pursues in an acquisition including immediate increase on a cash flow per share basis, a strong counterparty in Endeavour and significant exploration upside. Endeavour expects the operation to produce between 250,000 and 260,000 ounces of gold in 2018 which will contribute to Sandstorm’s 2018 first quarter production figures. Houndé is also a focus project for exploration activities by Endeavour with $40 million committed over the next four years.

Webcast & Conference Call Details

A conference call will be held on Friday, February 16, 2018 starting at 8:30am PST to further discuss the fourth quarter and annual results.



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