Sandstorm Gold Ltd. (“Sandstorm” or the “Company”) (NYSE MKT: SAND, TSX: SSL) has released its results for the third quarter ended September 30, 2016 (all figures in U.S. dollars).

THIRD QUARTER HIGHLIGHTS
•Attributable gold equivalent ounces sold1 of 12,588 ounces (Q3 2015 - 10,834 ounces);
•Revenue of $16.8 million (Q3 2015 - $12.1 million);
•Average cash cost per attributable gold equivalent ounce of $255 resulting in cash operating margins1 of $1,081 per ounce (Q3 2015 - $307 per ounce and $809 per ounce respectively);
•Operating cash flow of $10.3 million (Q3 2015 - $8.2 million);
•Net income of $6.9 million (Q3 2015 - $5.5 million loss); and
•The Company completed an equity financing for aggregate gross proceeds of $57.5 million. The majority of the net proceeds were used to reduce the balance of the Company’s revolving credit facility. As a result, the Company currently has no bank debt and the entire $110 million revolving credit facility remains available for acquisition purposes.

“The first three quarters of 2016 have demonstrated the strength of the Sandstorm business model as our ever increasing asset diversification has led to strong revenue and cash flow growth,” said Sandstorm’s President & CEO Nolan Watson. “Our Q3 net income figures have again been bolstered by the strong performance of the Company’s equity and debt investments which we intend to liquidate in due course. With no debt on the balance sheet, we have over $130 million in available capital to pursue acquisitions.”

OUTLOOK

Based on the Company’s existing gold streams and royalties, attributable gold equivalent production for 2016 is forecasted to be between 47,000 and 50,000 ounces. The Company is forecasting attributable gold equivalent production of approximately 65,000 ounces per annum by 2020.

FINANCIAL RESULTS

During the third quarter, 80% of the Company’s revenue was produced by precious metal streams and royalties with the balance coming from base metal assets. Compared to the third quarter of 2015, there was a 39% increase in revenue, largely attributable to a 20% increase in the average realized selling price of gold and a 16% increase in the number of attributable gold equivalent ounces sold. The increase in ounces sold was driven by the approximately 3,000 gold equivalent ounces delivered by the silver and copper streams from Yamana Gold Inc. (“Yamana”) and the gold stream from the Karma mine, operated by Endeavour Mining Corporation. The gains in ounces sold compared to 2015 were offset by decreases from the Aurizona mine and the Black Fox mine during the quarter.

Cash flow from operations of $10.3 million and net income of $6.9 million are higher when compared to the same period in 2015. The factors contributing to the change in net income included a $5.8 million gain on the revaluation of the Company’s investments and a $0.7 million decrease in depletion expense and were partially offset by a $1.1 million impairment charge relating to the Company’s mineral royalties and a $0.3 million increase in finance expense on account of amounts drawn on the revolving credit facility.

STREAMS & ROYALTIES: Q3 UPDATES

The Company’s revenue was generated by 21 producing assets during the third quarter of 2016. Of the gold equivalent ounces delivered to Sandstorm, 74% were from operations run by major and mid-tier mining companies. Approximately 49% of the ounces were produced at mines located in Canada, 23% from the rest of North America and 28% from South America and other countries.


Three months ended September 30, 2016
Revenu (in millions)
Gold Equivalent Ounces
Canada $ 8.13 6,081
North America ex Canada $ 3.89 2,916
South America & Other $ 4.80 3,591
Total $ 16.82 12,588

Canada

Gold equivalent ounces attributable to Canadian mines made up close to 50% of the Company’s total ounces in Q3 2016 and was 17% higher when compared to the third quarter of 2015. Due to timing of shipments there were 813 gold ounces received from Canadian mines which were sold subsequent to quarter end and will be included in the Company’s fourth quarter gold equivalent ounce figures.

North America ex Canada

Gold equivalent ounces from the rest of North America (excluding Canada) increased by 5% compared to 2015 and accounted for 23% of the ounces sold during the third quarter of 2016.

At the Santa Elena mine in Mexico, First Majestic Silver Corp. modified the production split between underground ore and the reprocessing of ore from the heap leach pad due to achieving higher production rates from the Alejandra vein underground. As a result, production of underground ore increased to a rate of 1,750 tonnes per day while reducing heap leach production to 1,000 tonnes per day. This improved run rate is expected to increase production in subsequent quarters due to the higher grades and recoveries of underground ore.

South America & Other

Attributable gold equivalent ounces from South America and the rest of the world was 28% higher than the third quarter of 2015, and made up approximately 29% of Sandstorm’s total gold equivalent production during the quarter. The addition of copper and silver from the streams on Yamana’s Chapada and Minera Florida mines as well as the contribution from the gold stream on the Karma mine in Burkina Faso drove the increase.

A portion of Sandstorm’s projected growth is from the Cerro Moro silver stream. Cerro Moro is a high grade gold and silver deposit in the Santa Cruz province of Argentina, currently in the development stage with first production planned for 2018. Yamana, the owner of Cerro Moro, has been ramping-up construction activities, completing detailed engineering and advancing underground mining at the project. Yamana’s planned expenditures for 2016 are expected to be approximately US$53 million, leaving US$224 million in total for 2017 and 2018, with the majority of the capital being spent in 2017. Further exploration drilling is planned in order to increase the size of the Cerro Moro mineral resources, and to improve the current mineral resource categorization.