Sandstorm Gold Ltd. (“Sandstorm” or the “Company”) (NYSE MKT: SAND, TSX: SSL) has released its results for the second quarter ended June 30, 2017 (all figures in U.S. dollars).
Second Quarter Highlights
•Attributable gold equivalent ounces sold1 of 12,750 ounces (Q2 2016 - 12,517 ounces);
•Revenue of $16.1 million (Q2 2016 - $15.7 million);
•Average cash cost per attributable gold equivalent ounce of $290 resulting in cash operating margins1 of $970 per ounce (Q2 2016 - $261 per ounce and $994 per ounce respectively);
•Operating cash flow of $11.1 million (Q2 2016 - $8.9 million); and
•Net loss of $1.9 million (Q2 2016 - net income of $5.2 million).
On July 3, 2017, Sandstorm completed its previously announced arrangement to acquire all the issued and ordinary share capital of Mariana Resources Ltd (“Mariana”) that Sandstorm did not already own. Under the terms of the arrangement and as consideration for the acquisition, the Company issued 32,685,228 common shares and paid an additional $47.3 million in cash. The transaction and the addition of the 30% Hot Maden interest to the Company’s portfolio of royalties provides for.
•100% increase in production for only 19% dilution;
•adds an anchor asset that is high-grade and low-cost with significant exploration upside;
•utilizes a strong local partner with experience in exploring, developing, permitting and operating projects in Turkey; and
•also includes exploration properties in Côte d’Ivoire, Turkey, and Argentina. Sandstorm has begun the process to sell the exploration properties and will retain net smelter return royalties as well as equity in the spin-out.
Sandstorm’s President & CEO, Nolan Watson commented, “The focus of the second quarter was closing the acquisition of Mariana Resources and adding the Hot Maden anchor asset to the Company’s royalty portfolio. Meanwhile, our producing streams and royalties continued to generate strong free cash flow and as a result we have a healthy balance sheet that we can utilize to continue pursuing acquisitions and to buy back shares.”
Based on the Company’s existing gold streams and royalties, attributable gold equivalent production for 2017 is forecast to be between 50,000 and 55,000 ounces. The Company is forecasting attributable gold equivalent production of approximately 130,000 ounces per annum in 2022.
When compared to the second quarter of 2016 there was a slight increase in attributable gold equivalent production and revenue primarily due to increases from the Company’s silver and copper stream on the Chapada mine in Brazil as well as additional gold equivalent ounces sold from the Emigrant, Bachelor Lake and Black Fox mines. As a result, cash flow from operations was higher when compared to Q2 2016.
Net income was lower when compared to the same period in 2016 due to a number of factors including a $4.5 million non-cash impairment charge relating to the Coringa royalty, a $0.9 million non-cash loss relating to the revaluation of the Company’s investments and a $0.5 million non-cash increase in depletion expense driven by an increase in the number of attributable gold equivalent ounces sold. The decrease in net income was partially offset by a foreign exchange gain as well as a decrease in finance expense related to the Company’s revolving line of credit.
STREAMS & ROYALTIES: Q2 UPDATES
Of the gold equivalent ounces delivered to Sandstorm, approximately 37% were attributable to mines located in Canada, 25% from the rest of North America and 38% from South America and other countries.
Three months ended June 30, 2017
Revenue (in millions)
Gold Equivalent Ounces
Canada $ 6.0 4,758
North America excl. Canada $ 4.0 3,127
South America & Other $ 6.1 4,865
Total $ 16.1 12,750
Streams and royalties on Canadian mines contributed 6% fewer gold equivalent ounces to Sandstorm when compared to the second quarter of 2016. The change is primarily attributable to a decrease in gold equivalent ounces sold from the Diavik mine in the Northwest Territories, offset by increases from the Bachelor mine in Quebec and the Black Fox mine in Ontario.
North America excl. Canada
When compared to Q2 2016, gold equivalent ounces coming from North America, excluding Canada, decreased by 26%. The change was driven by a decrease in gold equivalent ounces sold attributable to the Santa Elena mine in Mexico and the San Andres mine in Honduras, offset by an increase in ounces sold from the Emigrant mine in Nevada, USA.
South America & Other
Operations in South America and other countries contributed an additional 1,605 gold equivalent ounces sold when compared to Q2 2016, representing a 49% increase. The Yamana silver stream and Chapada copper stream contributed approximately 1,340 of those ounces.
Trek Mining Inc. (“Trek”) announced the results of a Feasibility Study at the Aurizona gold mine in Brazil. The study is based on a new mine plan and updated Mineral Reserve estimate and outlines the design of an open-pit gold mine producing approximately 136,000 ounces of gold per year on average, with an initial 6.5-year mine life and significant exploration upside, as demonstrated by recent drill results. Initial capital to fund construction and commissioning is estimated at approximately $130.8 million due to Trek’s ability to leverage significant existing infrastructure in place at the brownfields mine site. All-in-sustaining costs are estimated at $754 per ounce over the life of the project and the after-tax internal rate of return and net present value is estimated to be 34% and $197.1 million, respectively, using a base case gold price of $1,250 per ounce and a discount rate of 5%. Operations are expected to restart by the end of 2018.
The most significant opportunity to add value at Aurizona is through exploration success. Near-mine exploration targets have the potential to extend the Piaba deposit up to five kilometres along strike to the southwest. Early results from the planned 30,000-metre 2017 drilling program have successfully demonstrated that significant gold mineralization persists below the shallow, westernmost reserve pit and that the Piaba gold deposit extends along strike at least 350 metres to the west. Trek will continue to test mineralization along strike and also at depth, with the objective of increasing the reserve and resource base and extending the mine life.
Mineral Reserve Estimate - Effective Date May 29, 2017
PROVEN PROBABLE TOTAL
Tonnage(kt) Gold Grade(g/t)Contained Gold (oz) Tonnage(kt) Gold Grade(g/t)
Contained Gold (oz) Tonnage(kt) Gold Grade(g/t) ContainedGold (oz)
Laterite 122 1.94 8,000 539 0.98 17,000 661 1.16 25,000
Saprolite 1,684 1.52 82,000 1,310 1.38 58,000 2,994 1.46 140,000
Transition 2,553 1.34 110,000 1,363 1.18 52,000 3,916 1.29 162,000
Fresh Rock 4,079 1.46 192,000 8,186 1.72 452,000 12,265 1.63 644,000
Total 8,438 1.44 392,000 11,398 1.58 579,000 19,836 1.52 971,000
Note: This Mineral Reserve estimate has an effective date of May 29, 2017 and is based on the Mineral Resource estimate dated January 5, 2017 by SRK. The Mineral Reserve calculation was completed under the supervision of Gordon Zurowski, PEng of AGP, who is a Qualified Person as defined under NI 43-101. Mineral Reserves are stated within the final design pit based on a $1,056 per ounce gold price pit shell with a $1,200 per ounce gold price for revenue. The cut-off grade was 0.60 g/t Au for the Piaba pit area and 0.41 g/t Au for the Boa Esperança area. The mining cost averaged $2.32/tonne mined, processing averaged $11.30/tonne milled and G&A was $2.84/tonne milled. The process recovery averaged 90.3%. The exchange rate assumption applied was R$3.30 equal to $1.00. The FS scope only considers the Piaba and Boa Esperança open pit mineralized zones. The Mineral Reserve estimates contained herein may be subject to legal, political, environmental or other risks that could materially affect the potential development of such Mineral Reserves. Mineral resources that are not included within the Mineral Reserves do not have demonstrated economic viability.
For more information refer to www.trekmining.com and see the press release dated July 31, 2017.
WEBCAST AND CONFERENCE CALL DETAILS
A conference call will be held on Friday, August 4, 2017 starting at 8:30am PDT to further discuss the first quarter results. To participate in the conference call, use the following dial-in numbers and conference ID, or join the webcast using the link below:
Local/International: (+1) 416 764 8609
North American Toll-Free: (+1) 888 390 0605
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