Ross Beaty awarded TNM’s lifetime achievement award
Since 2017 as chairman, Beaty has built Equinox Gold into a nearly 1-million-oz. annual producer with a $2.5-billion market value
Shares in Sandstorm Gold Ltd. (TSE:SSL, NYSE MKT:SAND) dropped sharply on Tuesday in heavier than usual volumes, after the company announced the signing of a production streaming deal with fellow Canadian miner Yamana Gold Inc (NYSE:AUY, TSE:YRI) and bought deal financing with a syndicate of banks.
In early afternoon trade the Vancouver-based company was trading at $2.64, down more than 12.6% in New York, after recovering somewhat from a 13.6% plunge at the open. The $315 million company is down by more than a fifth in value this year while investors on the Toronto Stock Exchange have to cope with only a 10% decline thanks to the weak loonie. Yamana added 2.2% affording the Toronto-based gold miner a C$3.3 billion market capitalization.
What hurt the shares of Sandstorm was a $25 million bought deal with with a syndicate of underwriters co-led by National Bank Financial and BMO Capital Markets with the banks buying 8.77 million units of Sandstorm for $2.85. In addition, Sandstorm granted underwriters an option to purchase up to an additional 1.3 million units on the same terms. Each unit will consist of one common share of Sandstorm and one-half of one common share purchase warrant which entitle the holder to acquire one common share of Sandstorm at a price of $4.00 within five years.
The streaming deal appeared to be on better terms with the agreement with Yamana including production streams from up to five of Yamana’s projects. According to a company statement for $148 million cash upfront, $4 million in cash payable in six months and 15 million Sandstorm warrants, the company will receive a silver stream on Yamana’s Cerro Moro development project in Argentina that includes interim silver deliveries during years 2016 to 2018 from currently operating mines, a copper stream on the operating Chapada mine in Brazil and a potential gold stream on the Agua Rica project in Argentina.
The Sandstorm warrants issued to Yamana have a strike price of $3.50, a term of 5 years and are exercisable upon achievement of specific milestones with respect to the construction of Cerro Moro.
Streaming transaction highlights according to Sandstorm include:
3 Comments
ChiSpy
Sandstorm President Nolan Watson’s musing: “Let’s see. We’ll exercise our line of credit, add our cash on hand, and dilute our shareholders’ interests by selling more stock well below market, all to increase our company’s exposure to the political risk in a country where we’ve already had business go bad. What could go wrong?” No wonder the stock dumped 12%.
Graham Smith
Sandstorm did the financing in the US not in Canada, the US quote before it was announced was $3.00 and the financing was done at $2.85 – not a huge discount. Only after the announcement did the stock fall below $2.85 (currently about $2.66).
IF Yamana deliver on their side of the transaction, and at $20 silver and $3.50 copper, Sandstorm could get $30m of cashflow a year.
Looks like a pretty reasonable deal for Sandstorm to me
MINING.com Editors
You’re right Graham, the discount wasn’t that deep on the bought deal but the market was clearly disappointed. Also $20 Ag and $3.50 copper (up 48% from today) in 2019 is not a sure thing.