UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT
OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2016
Commission File Number: 001-35617
Sandstorm
Gold Ltd.
(Translation of registrant’s name into English)
Suite
1400 - 400 Burrard Street
Vancouver, British Columbia
V6C 3A6 Canada
(Address of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Indicate
by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If “Yes” is marked, indicate
below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
EXHIBIT INDEX
Exhibit |
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Description of Exhibit |
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99.1 |
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Management’s Discussion
and Analysis for the Period Ended March 31, 2016 and Condensed Consolidated Interim Financial Statements of the Company for the
Three Months Ended March 31, 2016
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99.1 |
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Printer Friendly Copy |
99.2 |
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CEO Certification |
99.3 |
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CFO Certification |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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SANDSTORM GOLD
LTD. |
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Date: May 5, 2016 |
By: |
/s/ Erfan Kazemi |
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Name: Erfan Kazemi |
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Title: Chief Financial Officer |
Exhibit
99.1
SANDSTORM
GOLD LTD.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
Q1
/ 2016
For The Period Ended March 31, 2016
This management’s discussion and analysis
(“MD&A”) for Sandstorm Gold Ltd. and its subsidiary entities (“Sandstorm”, “Sandstorm Gold”
or the “Company”) should be read in conjunction with the unaudited condensed consolidated interim financial statements
of Sandstorm for the three months ended March 31, 2016 and related notes thereto which have been prepared in accordance with International
Accounting Standards (“IAS”) 34: Interim Financial Reporting using accounting policies in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Readers are encouraged to consult the Company’s audited consolidated financial statements for the year ended December 31,
2015 and the corresponding notes to the financial statements which are available on SEDAR at www.sedar.com. The information contained
within this MD&A is current to May 5, 2016 and all figures are stated in U.S. dollars unless otherwise noted.
company
HIGHLIGHTS
Operating Results
| · | Attributable Gold Equivalent ounces sold, for the three months ended March 31, 2016 were 11,381 ounces compared with 12,460
ounces for the comparable period in 2015. |
| · | Revenue for the three months ended March 31, 2016 was $13.4 million compared with $15.3 million for the comparable period in
2015. |
| · | Operating cash flows for the three months ended March 31, 2016 were $9.7 million compared with $8.1 million for the comparable
period in 2015. |
| · | Average cash costs for the three months ended March 31, 2016 of $2671
per Attributable Gold Equivalent ounce compared with $3231 per Attributable
Gold Equivalent ounce for the comparable period in 2015. |
| 1) | Refer to section on non-IFRS measures of this MD&A. |
Significant Acquisitions
| · | During the three months ended March 31, 2016, the Company acquired a royalty portfolio consisting of 52 royalties from Teck
Resources Limited and its affiliates for consideration of $16.8 million, of which $1.4 million was paid in cash and $15.4 million
in common shares of the Company. The transaction provides asset diversification; immediate cash flow and significant cash flow
growth potential with estimated cash flow in 2016 of over $1.0 million with estimated growth to over $10 million in cash flow per
year over the long term; and strong counterparties including Barrick Gold Corporation, Glencore plc, KGHM Polska Miedz SA, Newmont
Mining Corporation and Kinross Gold Corporation. |
Overview
Sandstorm is a growth-focused company that seeks
to acquire gold and other precious metal purchase agreements (“Gold Streams” or “Silver Streams”) and royalties
from companies that have advanced stage development projects or operating mines. In return for making upfront payments to acquire
a Gold Stream, Sandstorm receives the right to purchase, at a fixed price per ounce, a percentage of a mine’s gold, silver,
or other commodity ("Gold Equivalent") production for the life of the mine. Sandstorm helps other companies in the resource
industry grow their businesses, while acquiring attractive assets in the process. The Company is focused on acquiring Gold Streams
and royalties from mines with low production costs, significant exploration potential and strong management teams. The Company
currently has 131 Gold Streams and net smelter returns royalties (“NSR”s), of which 20 of the underlying mines are
producing.
Outlook
Based on the Company’s existing Gold Streams
and NSRs, attributable Gold Equivalent production (individually and collectively referred to as “Attributable Gold Equivalent”)
for 2016 is forecasted to be between 40,000 – 50,000 Attributable Gold Equivalent ounces. The Company is forecasting
Attributable Gold Equivalent production of approximately 65,000 ounces per annum by 2020.
Key
Producing Assets
Yamana Silver Stream |
YAMANA GOLD INC. |
The Company has a Silver Stream on Yamana Gold
Inc.’s (“Yamana”) gold-silver Cerro Moro project, located in Santa Cruz, Argentina (the “Cerro Morro Project”
or “Cerro Moro”) and an agreement to receive interim silver deliveries during years 2016 to 2018 from a number of Yamana’s
currently operating mines.
Silver deliveries
Under the terms of the Yamana Silver Stream,
Sandstorm has agreed to purchase, for on-going per ounce cash payments equal to 30% of the spot price of silver, an amount of silver
from Cerro Moro equal to 20% of the silver produced (up to an annual maximum of 1.2 million ounces of silver), until Yamana has
delivered to Sandstorm 7.0 million ounces of silver; then 9.0% of the silver produced thereafter.
As part of the Yamana Silver Stream, during
the year 2016 through 2018, Sandstorm has also agreed to purchase, for on-going per ounce cash payments equal to 30% of the spot
price of silver, an amount of silver from:
| i. | the Minera Florida mine in Chile equal to 38% of the silver produced (up to an annual maximum of 200,000 ounces of silver);
and |
| ii. | the Chapada mine in Brazil equal to 52% of the silver produced (up to an annual maximum of 100,000 ounces of silver). |
Downside protection
If by January 1, 2019, the Cerro Moro processing
facility has not averaged 80% of its daily nameplate production capacity over a 30-day period (the "Commencement of Production"),
then Yamana´s producing El Peñon mine in Chile will provide a 24 month backstop until the Commencement of Production
has begun. During the 24 month backstop, if applicable, Sandstorm will purchase, for on-going per ounce cash payments equal to
30% of the spot price of silver, an amount of silver equal to 16% of El Peñon´s silver production up to a maximum
of 1.2 million ounces per annum.
About Cerro Moro
The Cerro Moro project is located approximately
70 kilometres southwest of the coastal port city of Puerto Deseado in the Santa Cruz province of Argentina. Cerro Moro contains
a number of high grade epithermal gold and silver deposits, some of which will be mined via open pit and some via underground mining
methods. In February 2015, Yamana announced that it would proceed with the construction of the Cerro Moro mine. The current plan
indicates average annual production in the first three years of 135,000 ounces of gold and 6.7 million ounces of silver, with the
life of mine annual production averaging approximately 102,000 ounces of gold and 5 million ounces of silver at a throughput of
1,000 tonnes per day.
The procurement of long lead items is underway
and Yamana anticipates that construction on Cerro Moro will begin in 2016.
Chapada Copper Stream |
YAMANA GOLD INC. |
The Company has a copper Stream on Yamana’s
open pit gold-copper Chapada mine located 270 kilometres northwest of Brasília in Goiás state, Brazil (“Chapada”
or the “Chapada Mine”). Under the terms of the Yamana copper stream, Sandstorm has agreed to purchase, for on-going
per pound cash payments equal to 30% of the spot price of copper, an amount of copper from the Chapada Mine equal to:
| i. | 4.2% of the copper produced (up to an annual maximum of 3.9 million pounds of copper) until Yamana has delivered 39 million
pounds of copper to Sandstorm (the “First Chapada Delivery Threshold”); then |
| ii. | 3.0% of the copper produced until, on a cumulative basis, Yamana has delivered 50 million pounds of copper to Sandstorm (the
“Second Chapada Delivery Threshold”); then |
| iii. | 1.5% of the copper produced thereafter, for the life of the mine. |
Downside protection
If Cerro Moro has not achieved the Commencement
of Production and Sandstorm has not received cumulative pre-tax cash flow equal to $70 million from the Yamana Silver Stream, then
the First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease to be in effect and Sandstorm will continue
to purchase 4.2% of Chapada’s payable copper production (up to an annual maximum of 3.9 million pounds of copper), until
such time as Sandstorm has received cumulative pre-tax cash flow equal to $70 million, or Cerro Moro has achieved the Commencement
of Production.
About Chapada
Chapada has been in production since 2007 and
is a relatively low-cost operation. The ore is treated through a flotation plant with capacity of 22 million tonnes per annum.
Yamana has benefitted from significant discoveries at Chapada in the past and expects to complete 10,000 metres of exploration
drilling and 12,000 metres of infill drilling over the course of 2015. Yamana recently announced an updated reserve statement which
increased copper mineral reserves to approximately 3,033 million pounds of contained copper.
Diavik Diamond Royalty |
RIO TINTO PLC |
The Company has a 1% gross proceeds royalty
based on the production from the Diavik mine located in Lac de Gras, Northwest Territories, Canada (“Diavik” or the
“Diavik Mine”) which is operated by Rio Tinto PLC (“Rio Tinto”).
The Diavik Mine is Canada’s largest diamond
mine. The mine began producing diamonds in January 2003, and has since produced more than 90 million carats from three kimberlite
pipes (A154 South, A154 North, and A418). Rio Tinto recently approved the development of open pit mining from a fourth pipe (A21)
which is targeted for production in 2018. Recent public announcements have indicated that the development of A-21 pipe continues
to progress according to plan.
Current activities at the
Diavik Mine include:
| » | Dominion Diamond Corp. recently provided an updated reserve and resource estimate for the Diavik Mine. The update resulted
in the A-154 North probable reserves more than doubling to approximately 11.1 million carats. |
Black Fox Gold Stream |
PRIMERO MINING CORP. |
The Company has a Gold Stream to purchase 8%
of the life of mine gold produced from Primero Mining Corp.’s (“Primero”) open pit and underground Black Fox
mine, located in Ontario, Canada (the “Black Fox Mine”), and 6.3% of the life of mine gold produced from Primero’s
Black Fox Extension, which includes a portion of Primero’s Pike River concessions, for a per ounce cash payment equal to
the lesser of $524 and the then prevailing market price of gold.
The Black Fox Mine began operating as an open
pit mine in 2009 (depleted in 2015) and transitioned to underground operations in 2011.
Current activities at the
Black Fox Mine include:
| » | The Froome zone continues to be a priority for Primero and it expects to complete approximately 25,000 metres of drilling by the
first half of 2016, the purpose of which is to define and delineate the Froome deposit. Primero is evaluating the deposit as a
medium term alternative to complement Black Fox ore in order to fill the mill beyond the end of 2017. |
Santa Elena Gold Stream |
FIRST MAJESTIC SILVER CORP. |
The Company has a Gold Stream to purchase 20%
of the life of mine gold produced from First Majestic Silver Corp.’s (“First Majestic”) open-pit and underground
Santa Elena mine, located in Mexico (the “Santa Elena Mine”), for a per ounce cash payment equal to the lesser of $361
and the then prevailing market price of gold until 50,000 ounces of gold have been delivered to Sandstorm, at which time the on-going
per ounce payments will increase to the lesser of $450 and the then prevailing market price of gold.
The Santa Elena Mine was successfully transitioned
from an open pit heap leach operation to an underground mining and milling operation and commercial production for the 3,000 tonne
per day processing plant was declared in 2014.
Current activities at the
Santa Elena Mine include:
| » | First Majestic recently closed its previously announced transaction whereby it acquired SilverCrest Mines Inc., owner of the
Santa Elena Mine. |
Bachelor Lake Gold Stream |
METANOR RESOURCES INC. |
The Company has a Gold Stream to purchase 20%
of the life of mine gold produced from Metanor Resources Inc.’s (“Metanor”) Bachelor Lake gold mine located in
Quebec, Canada (the “Bachelor Lake Mine”), for a per ounce cash payment equal to the lesser of $500 and the then prevailing
market price of gold.
The Bachelor Lake Mine is an underground, narrow vein mining operation with an operating mill and surface
infrastructure, which began production in early 2013.
Current activities at the
Bachelor Lake Mine include:
| » | Metanor recently released positive drill results from its exploration activities at the Bachelor Lake
Mine and the newly discovered Moroy zone. For more information refer to www.metanor.ca.
|
Karma Gold Stream |
ENDEAVOUR MINING CORP. |
The Company has a Gold Stream which entitles
it to purchase 26,875 ounces of gold over a five year period and thereafter 1.625% of the gold produced from Endeavour Mining Corporation
(“Endeavour”)’s, the successor to True Gold Mining Inc., open-pit heap leach Karma gold mine located in Burkina
Faso, West Africa (“Karma” or the “Karma Mine”) for on-going per ounce cash payment equal to 20% of the
spot price of the gold.
The Gold Stream, which on a gross basis requires
Endeavour to deliver 100,000 ounces of gold over a five year period starting March 31, 2016 and thereafter 6.5% of the equivalent
gold production at the Karma Project, is being syndicated between Franco-Nevada Corp. and Sandstorm (together the “Stream
Syndicate”).
The Karma Mine has five defined mineral deposits
that make up the Karma project with probable mineral reserves of 949,000 ounces of gold. The operators of the Karma Mine expected
to convert resources into reserves through further drilling and studies, in order to extend the mine-life beyond its currently
stated 8.5 year life.
Current activities at the
Karma Mine include:
| » | It was recently announced that production had commenced at the Karma Mine.
|
| » | Endeavour recently closed its previously announced arrangement whereby it would acquire True Gold Mining Inc., the owner of
the Karma Mine. |
Bracemac-McLeod Royalty |
GLENCORE PLC |
Sandstorm has a 3% NSR based on 100% of the
production from the Bracemac-McLeod development property located in Matagami, Quebec, Canada (“Bracemac-McLeod” or
the “Bracemac-McLeod Mine”) which is owned and operated by a subsidiary of Glencore plc (“Glencore”).
The Bracemac-McLeod Mine is a high grade volcanogenic massive sulphide deposit located in the historical
and prolific mining district of Matagami, Quebec. Continuous mining and milling operations have been active in the Matagami district
for over fifty years with ten previously operating mines and one other currently producing mine. The Bracemac-McLeod Mine began
initial production in the second half of 2013.
Ming Gold Stream |
RAMBLER METALS & MINING PLC |
The Company has a Gold Stream to purchase approximately 25% of the first 175,000 ounces of gold produced
and 12% of the life of mine gold produced thereafter, from Rambler Metals & Mining PLC’s (“Rambler”) Ming
Copper-Gold mine, located in Newfoundland, Canada (the “Ming Mine”). There are no ongoing per ounce payments required
by Sandstorm in respect of the Ming Mine Gold Stream. In the event that the metallurgical recoveries of gold at the Ming Mine are
below 85%, the percentage of gold that Sandstorm shall be entitled to purchase shall be increased proportionally. Based on 2015
metallurgical recoveries, Sandstorm’s 2016 gold purchase entitlement was adjusted to 30%.
Current activities at the
Ming Mine include:
| » | Rambler recently announced a proposal to raise approximately C$19.05 million from a specialized mining and mineral investment
fund (CEII Roma). The financing is subject to a May 27, 2016 shareholder meeting. |
Other Producing
Assets
Emigrant Springs |
NEWMONT MINING CORP. |
The Company has a 1.5% NSR on the Emigrant Springs
mine (the “Emigrant Springs Mine”) which is located in the Carlin Trend in Nevada, U.S.A. and is owned and operated
by Newmont Mining Corp. (“Newmont”). The Emigrant Springs Mine is an open pit, heap leach operation. In the third quarter
of 2012, construction of the mine was completed and commercial production commenced.
Mine Waste Solutions Royalty |
ANGLOGOLD ASHANTI LTD. |
The Company has a 1% NSR on the gold produced
from Mine Waste Solutions tailings recovery operation (“MWS”) which is located near Stilfontein, South Africa, and
is owned and operated by AngloGold Ashanti Ltd. (“AngloGold”). MWS is a gold and uranium tailings recovery operation.
The operation processes multiple tailings dumps in the area through three production modules, the last of which was commissioned
in 2011.
Gualcamayo Royalty |
YAMANA GOLD INC. |
The Company has a 1% NSR on the Gualcamayo gold
mine (the “Gualcamayo Mine”) which is located in San Juan province, Argentina and owned and operated by Yamana. The
Gualcamayo Mine is an open pit, heap leach operation encompassing three substantial zones of gold mineralization. An expansion
of the operation is expected to increase sustainable production.
San Andres Royalty |
AURA MINERALS INC. |
The Company has a 1.5% NSR on the San Andres
mine (the “San Andres Mine”) which is located in La Únion, Honduras and owned and operated by Aura Minerals
Inc. (“Aura Minerals”). The San Andres Mine is an open pit, heap leach operation. The mine has been in production since
1983 and has well-developed infrastructure, which includes power and water supply, warehouses, maintenance facilities, assay laboratory
and on-site camp facilities.
Development
Assets
Aurizona Gold Royalty |
LUNA GOLD CORP. |
The Company has a 3% – 5%
sliding scale NSR on the production from Luna Gold Corp.’s (“Luna”) open-pit Aurizona mine, located in Brazil
(the “Aurizona Mine”). At gold prices less than or equal to $1,500 per ounce, the royalty is a 3% NSR. In addition,
Sandstorm holds a 2% NSR on Luna’s 190,073 hectares of greenfields exploration ground. At any time prior to the commencement
of commercial production, Luna has the ability to purchase one-half of the greenfields NSR for a cash payment of $10 million.
Luna has initiated a pre-feasibility study for
the restart of the Aurizona Mine and Sandstorm holds a right of first refusal on any future streams or royalties on the Aurizona
project and greenfields.
Hugo North Extension & Heruga Gold Stream |
ENTRÉE GOLD INC. |
During the three months ended March 31, 2016,
Sandstorm amended its Gold Stream with Entrée Gold Inc. (“Entrée”) such that the Company will now purchase
an amount equal to 5.62% and 4.26% of the gold and silver by-products produced from the Hugo North Extension and Heruga deposits
located in Mongolia, (the “Hugo North Extension” and “Heruga”, respectively) for per ounce cash payments
equal to the lesser of $220 per ounce of gold and $5 per ounce of silver and the then prevailing market price of gold and silver,
respectively. Additionally, Sandstorm amended its copper stream such that the Company will now purchase an amount equal to 0.42%
share of the copper produced from Hugo North Extension and Heruga for per pound cash payments equal to the lesser of $0.50 per
pound of copper and the then prevailing market price of copper. In consideration for the amendment and during the three months
ended March 31, 2016, Sandstorm received consideration of $7.0 million (of which $5.5 million was paid in cash and $1.5 million
was received by way of Entrée common shares).
The Company is not required to contribute any
further capital, exploration, or operating expenditures to Entrée.
The Hugo North Extension is a rich copper-gold
porphyry deposit and Heruga is a copper-gold-molybdenum porphyry deposit. Both projects are located in the South Gobi desert of
Mongolia, approximately 570 kilometers south of the capital city of Ulaanbaatar and 80 kilometers north of the border with China.
The Hugo North Extension and Heruga are part of the Oyu Tolgoi mining complex and are managed by Oyu Tolgoi LLC, a subsidiary of
Turquoise Hill Resources and the Government of Mongolia, and its project manager Rio Tinto PLC. Entrée retains a 20% interest
in the resource deposits of the Hugo North Extension and Heruga.
Entrée recently announced that an Oyu
Tolgoi underground mine development and financing plan had been signed by the Government of Mongolia, Entrée's joint venture
partner, Oyu Tolgoi LLC, Turquoise Hill Resources Ltd. and Rio Tinto. The plan provides a path forward to the eventual restart
of underground development, including Lift 1 of the Hugo North Extension. Recently, Entrée’s joint venture partner,
announced that it had signed a $4.4 billion finance facility for underground mine development at the Oyu Tolgoi project. The facility
is being provided by a syndicate of international financial institutions and export credit agencies representing the governments
of Canada, the United States and Australia, along with 15 commercial banks.
Hot Maden Royalty |
MARIANA RESOURCES LTD. |
On January 19, 2016, the Company acquired a
2% NSR on the Hot Maden gold-copper project which is located in the Artvin Province, northeastern Turkey (the “Hot Maden
Project”). The project is co-owned by Mariana Resources Ltd. and its Turkish partner, Lidya Madencilik Sanayi ve Ticaret
A.S., which owns a 70% interest in the project.
A 2015 drill campaign led to the release of
a maiden mineral resource estimate for the Hot Maden Project with an indicated resource of 2.0 million gold equivalent ounces and
also included an inferred resource of 1.0 million gold equivalent ounces.
Hackett River Royalty |
GLENCORE PLC |
On January 19, 2016, the Company acquired a
2% NSR on the Hackett River property located in Nunavut, Canada (the “Hackett River Project” or “Hackett River”)
which is owned by a subsidiary of Glencore.
Hackett River is a silver-rich volcanogenic
massive sulphide project and is one of the largest undeveloped projects of its kind. The property is made up of four massive sulphide
deposits that occur over a 6.6 kilometre strike distance. A preliminary economic assessment updated in 2010 evaluated a possible
large-scale open pit and underground operation, processing up to 17,000 tonnes per day. The most recent technical report, completed
in 2013, reported 25.0 million tonnes of indicated resources containing 4.2% zinc and 130.0 grams per tonne silver plus 57.0 million
tonnes of inferred resources with 3.0% zinc and 100.0 grams per tonne silver.
Lobo-Marte Royalty |
KINROSS GOLD CORP. |
On January 19, 2016, the Company acquired a
1.05% NSR on production from the Lobo-Marte project located in the Maricungha gold district of Chile (the “Lobo-Marte Project”
or “Lobo-Marte”) which is owned by Kinross Gold Corp. (“Kinross”).
Kinross completed a prefeasibility study at
Lobo-Marte that contemplated a heap-leach operation. As a result of changes in the plan of operations and other factors, Kinross
withdrew its previously submitted permit application. Future development and operations at Lobo-Marte will require the re-initiation
of the permitting process.
Agi Dagi & Kirazli |
ALAMOS GOLD INC. |
On January 19, 2016, the Company acquired a
$10/ounce royalty based on the production from the Agi Dagi and the Kirazli gold development projects located in the Çanakkale
Province of northwestern Turkey (“Agi Dagi” and “Kirazli”, respectively) which are both owned by Alamos
Gold Inc. (“Alamos Gold”). The royalty is payable by Newmont and is subject to a maximum of 600,000 ounces from Agi
Dagi and a maximum of 250,000 ounces from Kirazli.
A 2012 pre-feasibility study on Agi Dagi and
Kirazli contemplated both projects as stand-alone open-pit, heap-leach operations. Under the study, Agi Dagi is expected to produce
an average of 143,000 ounces of gold per year over a 7 year mine life while Kirazli is expected to produce an average of 99,000
ounces of gold per year over a 5 year mine life.
Bomboré Royalty |
OREZONE GOLD CORP. |
On January 27, 2015, the Company acquired a
0.45% NSR on the Bomboré gold project (“Bomboré” or “Bomboré Project”) located in
Burkina Faso, West Africa and owned by Orezone Gold Corp. (“Orezone”) for consideration of $3.0 million (the “Upfront
Royalty”). In addition, Sandstorm has committed to providing up to an additional $5.0 million in royalty financing (remittable
in cash and/or shares, subject to certain conditions) to Orezone on a drawdown basis until January 27, 2017 (the “Standby
Royalty”). The Standby Royalty, if fully exercised, would result in the granting of an additional 0.75% NSR. Orezone has
granted Sandstorm a right of first refusal on any future stream or royalty financings related to the Bomboré Project until
36 months following the achievement of commercial production at the mine. Orezone has the option to repurchase the Upfront Royalty
from Sandstorm for a period of 36 months, at a premium of 10% per year. The Standby Royalty can also be repurchased at a premium
of 10% per year if Orezone completes a gold stream financing and Sandstorm participates for no less than $30 million.
Orezone's 168 km2 Bomboré
project is the largest undeveloped oxide gold deposit in Burkina Faso, containing 4.6 million ounces of measured and indicated
gold resources.
Prairie Creek Royalty |
CANADIAN ZINC CORPORATION |
The Company has a 1.2% NSR on the Prairie Creek
project (“the “Prairie Creek Project”) located in the Northwest Territories, Canada and owned by Canadian Zinc
Corporation (“Canadian Zinc”). The Prairie Creek Project is a zinc, silver and lead project that is 100%-owned by Canadian
Zinc and currently reports a proven and probable mineral reserve of 5.2 million tonnes grading 9.4% zinc, 151 grams per tonne silver
and 9.5% lead. Canadian Zinc recently entered into sale agreements with both Boliden and Korea Zinc for the sale of the zinc and
lead concentrates produced at the Prairie Creek mine. This represents a significant step forward in the development of the mine.
Mt. Hamilton Royalty |
WATERTON PRECIOUS METALS FUND II CAYMAN, LP |
The Company has a 2.4% NSR on the Mt. Hamilton
gold project (the "Mt. Hamilton Project"). The Mt. Hamilton Project is located in White Pine County, Nevada, U.S.A. and
is owned by Waterton Precious Metals Fund II Cayman, LP (“Waterton”).
Sandstorm holds a right of first refusal on
any future royalty or gold stream financing for the Mt. Hamilton Project.
Acquisition
Teck Royalty Package
During the three months ended March 31, 2016,
the Company announced that it had acquired a royalty portfolio consisting of 52 royalties from Teck Resources Limited and its affiliates
(“Teck”). The portfolio which was acquired for consideration of $16.8 million, of which $1.4 million was paid in cash
and $15.4 million in common shares of the Company provides:
Asset Diversification: |
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the royalty package consists of assets in North America (32), Asia (10), South America (7) and Europe (3) and includes producing assets (4), development-stage projects (8), advanced exploration-stage projects (7) and exploration-stage properties (33); |
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Immediate Cash Flow and Significant Cash Flow Growth Potential: |
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the Company has estimated cash flow in 2016 of over $1.0 million, with estimated growth to over $10 million in cash flow per year over the long term; |
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Strong Counterparties: |
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royalty counterparties include Barrick Gold Corporation, Glencore plc, KGHM Polska Miedz SA, Newmont Mining Corporation and Kinross Gold Corporation; and |
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Long-Term Optionality: |
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over two dozen royalties on exploration-stage properties, several of which are undergoing active exploration programs. |
Revolving
credit facility
On October 26, 2015, the Company amended its
revolving credit agreement, allowing the Company to borrow up to $110 million (the “Revolving Facility”) from a syndicate
of banks including the Bank of Nova Scotia, Bank of Montreal, National Bank of Canada, and Canadian Imperial Bank of Commerce.
The amounts drawn on the Revolving Facility remain subject to interest at LIBOR plus 3.00% – 4.25% per annum,
and the undrawn portion of the Revolving Facility remains subject to a standby fee of 0.75% – 1.05% per annum,
dependent on the Company’s leverage ratio.
NORMAL
COURSE ISSUER BID
Under the Company’s normal course issuer
bid (“NCIB”), the Company is able until April 3, 2017, to purchase up to 6,896,539 common shares. The NCIB provides
the Company with the option to purchase its common shares from time to time when the Company’s management believes that the
Common Shares are undervalued by the market.
Other
While assessing whether any indications of impairment
exist for mineral properties, consideration is given to both external and internal sources of information. The lack of progress
with respect to advancing some of the royalties within Sandstorm’s mineral interest portfolio, prompted the Company to evaluate
its investment in these specific assets. As a result of its review, the Company, during the three months ended March 31, 2016,
recorded an impairment charge of $1.4 million for the full balance of these specifically identified mineral royalties.
SUMMARY OF QUARTERLY RESULTS
(in accordance with IFRS)
Quarters Ended
In $000s | |
Mar. 31, 2016 | | |
Dec. 31, 2015 | | |
Sep. 30, 2015 | | |
June 30, 2015 | |
Total revenue | |
$ | 13,384 | | |
$ | 9,863 | | |
$ | 12,086 | | |
$ | 15,429 | |
Attributable Gold Equivalent ounces sold 1 | |
| 11,381 | | |
| 8,951 | | |
| 10,834 | | |
| 12,901 | |
Gold sales | |
$ | 8,504 | | |
$ | 6,604 | | |
$ | 9,055 | | |
$ | 11,360 | |
Royalty revenue | |
| 4,880 | | |
| 3,259 | | |
| 3,031 | | |
| 4,069 | |
Average realized gold price per attributable ounce 1 | |
| 1,176 | | |
| 1,102 | | |
| 1,116 | | |
| 1,196 | |
Average cash cost per attributable ounce 1 | |
| 267 | | |
| 258 | | |
| 307 | | |
| 304 | |
Cash flow from operations | |
| 9,685 | | |
| 4,987 | | |
| 8,234 | | |
| 9,479 | |
Cash flow from operations per share (basic) 1 | |
| 0.07 | | |
| 0.04 | | |
| 0.07 | | |
| 0.08 | |
Cash flow from operations per share (diluted) 1 | |
| 0.07 | | |
| 0.04 | | |
| 0.07 | | |
| 0.08 | |
Net income (loss) | |
| 13,159 | | |
| (24,960 | ) | |
| (5,470 | ) | |
| (13,451 | ) |
Basic income (loss) per share | |
| 0.10 | | |
| (0.20 | ) | |
| (0.05 | ) | |
| (0.11 | ) |
Diluted income (loss) per share | |
| 0.10 | | |
| (0.20 | ) | |
| (0.05 | ) | |
| (0.11 | ) |
Total assets | |
| 531,160 | | |
| 496,873 | | |
| 408,170 | | |
| 415,944 | |
Total long-term liabilities | |
$ | 80,130 | | |
$ | 86,779 | | |
$ | 4,768 | | |
$ | 5,316 | |
In $000s | |
Mar. 31, 2015 | | |
Dec. 31, 2014 | | |
Sep. 30, 2014 | | |
June 30, 2014 | |
Total revenue | |
$ | 15,285 | | |
$ | 12,488 | | |
$ | 15,559 | | |
$ | 13,153 | |
Attributable Gold Equivalent ounces sold 1 | |
| 12,460 | | |
| 10,424 | | |
| 12,282 | | |
| 10,149 | |
Gold sales | |
$ | 11,566 | | |
$ | 9,463 | | |
$ | 11,571 | | |
$ | 9,724 | |
Royalty revenue | |
| 3,719 | | |
| 3,025 | | |
| 3,988 | | |
| 3,429 | |
Average realized gold price per ounce 1 | |
| 1,227 | | |
| 1,198 | | |
| 1,267 | | |
| 1,296 | |
Average cash cost per ounce 1 | |
| 323 | | |
| 308 | | |
| 308 | | |
| 310 | |
Cash flow from operations | |
| 8,119 | | |
| 8,854 | | |
| 9,962 | | |
| 9,383 | |
Cash flow from operations per share (basic) 1 | |
| 0.07 | | |
| 0.08 | | |
| 0.08 | | |
| 0.08 | |
Cash flow from operations per share (diluted) 1 | |
| 0.07 | | |
| 0.07 | | |
| 0.08 | | |
| 0.08 | |
Net income | |
| 825 | | |
| 2,608 | | |
| 2,076 | | |
| 3,039 | |
Basic income per share | |
| 0.01 | | |
| 0.02 | | |
| 0.02 | | |
| 0.03 | |
Diluted income per share | |
| 0.01 | | |
| 0.02 | | |
| 0.02 | | |
| 0.03 | |
Total assets | |
| 425,154 | | |
| 431,070 | | |
| 445,368 | | |
| 456,050 | |
Total long-term liabilities | |
$ | 5,341 | | |
$ | 5,892 | | |
$ | 6,161 | | |
$ | 5,922 | |
| 1) | See non-IFRS measures section below. |
Changes in sales, net income and cash flow from
operations from quarter to quarter are affected primarily by fluctuations in production at the mines, the timing of shipments,
changes in the price of gold, as well as acquisitions of Gold Streams, Silver Streams and royalty agreements and the commencement
of operations of mines under construction. For more information refer to the quarterly commentary discussed below.
The Company’s reportable operating segments
for the three months ended
March 31, 2016 are summarized in the table below:
In $000s | |
Attributable ounces sold | | |
Sales and royalty revenues | | |
Cost of sales (excluding
depletion) | | |
Depletion | | |
Impairment of mineral
interests | | |
Income (loss) before taxes | | |
Cash flow from
operations | |
Bachelor Lake | |
| 1,695 | | |
$ | 1,980 | | |
$ | 847 | | |
$ | 694 | | |
$ | - | | |
$ | 439 | | |
$ | 1,133 | |
Black Fox | |
| 1,336 | | |
| 1,587 | | |
| 696 | | |
| 597 | | |
| - | | |
| 294 | | |
| 891 | |
Chapada | |
| 973 | | |
| 1,144 | | |
| 354 | | |
| 552 | | |
| - | | |
| 238 | | |
| 790 | |
Diavik Mine | |
| 1,105 | | |
| 1,300 | | |
| - | | |
| 868 | | |
| - | | |
| 432 | | |
| 1,176 | |
Santa Elena | |
| 2,887 | | |
| 3,391 | | |
| 1,031 | | |
| 664 | | |
| - | | |
| 1,696 | | |
| 2,360 | |
Yamana Silver Stream | |
| 304 | | |
| 357 | | |
| 107 | | |
| 194 | | |
| - | | |
| 56 | | |
| 250 | |
Other Royalties | |
| 3,044 | | |
| 3,580 | | |
| - | | |
| 1,646 | | |
| 1,368 | | |
| 566 | | |
| 4,712 | |
Other | |
| 37 | | |
| 45 | | |
| 4 | | |
| 15 | | |
| - | | |
| 26 | | |
| 45 | |
Corporate | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 10,449 | | |
| (1,672 | ) |
Consolidated | |
| 11,381 | | |
$ | 13,384 | | |
$ | 3,039 | | |
$ | 5,230 | | |
$ | 1,368 | | |
$ | 14,196 | | |
$ | 9,685 | |
THREE
MONTHS ENDED March 31, 2016
COMPARED TO THE THREE MONTHS ENDED March 31, 2015
For the three months ended March 31, 2016, net
income and cash flow from operations were $13.2 million and $9.7 million, respectively, compared with net income and cash flow
from operations of $0.8 million and $8.1 million for the comparable period in 2015. The increase is attributable to a combination
of factors including:
| · | A $13.4 million gain on the revaluation of the Company’s investments primarily driven by the change in fair value of
the Luna Gold Corp. convertible debenture; |
| · | A $3.6 million decrease in depletion expense largely driven by a resetting of the number of ounces in the depletable base due
to various factors including the conversion of exploration upside into resources and reserves; partially offset by |
| · | Certain items recognized during the three months ended March 31, 2015 did not occur during the three months ended March 31,
2016 including a foreign exchange gain of $1.9 million largely driven by fluctuations in the foreign exchange rate; |
| · | A $1.4 million non-cash impairment charge relating to certain of the Company’s mineral royalties; and |
| · | A $0.9 million increase in interest expense as the Company drew on its Revolving Facility in October 2015. |
For the three months ended March 31, 2016, revenue
was $13.4 million compared with $15.3 million for the comparable period in 2015. The decrease is largely attributed to a number
of factors including:
| · | 4% decrease in the average realized selling price of gold; and |
| · | 9% decrease in the number of Attributable Gold Equivalent ounces sold, due to: |
| i. | A decrease of 3,112 gold ounces sold from the Aurizona Mine as Luna has finished processing ore from the stockpile and ceased
mining operations; |
| ii. | 28% decrease in gold ounces sold from the Black Fox Mine primarily related to limited availability of high-grade ore from the
upper, remnant areas of the underground mine. Primero expects daily production rates to increase through the remainder of 2016
as the underground contribution from the Deep Central zone ramps-up; |
| iii. | 17% decrease in gold ounces sold from the Bachelor Lake Mine primarily related to the mine experiencing lower feed grade largely
driven by higher than expected dilution from some stopes and the timing of shipments whereby 163 ounces were received as at March
31, 2016, but were sold subsequent to quarter end; partially offset by |
| iv. | 47% increase in gold deliveries from the Santa Elena Mine (of which 386 ounces remained in inventory at the end of the first
quarter) largely attributable to higher grade ore coming from the main vein, Alejandra vein and the leach pad; and |
| v. | An additional 1,277 Attributable Gold Equivalent ounces were sold from the Company’s recently acquired Yamana Silver
Stream and Chapada copper stream. |
three
MONTHS ENDED March 31, 2016
COMPARED TO THE REMAINING QUARTERS
When comparing net income of $13.2 million and
cash flow from operations of $9.7 million for the three months ended March 31, 2016 with net income/loss and operating cash flow
for the remaining quarters, the following items impact comparability of analysis:
| · | A $13.4 million gain on the revaluation of the Company’s investments primarily driven by the change in fair value of
the Luna Gold Corp. convertible debenture which was recognized during the three months ended March 31, 2016; |
| · | An $8.1 million non-cash income tax expense related to a reduction of the Company’s deferred income tax asset relating
to taxable income previously attributed to its Barbadian subsidiary which was recorded during the three months ended June 30, 2015; |
| · | An $18.3 million non-cash impairment charge relating to the Company’s mineral interests with respect to the Serra Pelada
project, the Emigrant Springs Mine and MWS which was recognized during the three months ended December 31, 2015; |
| · | A $4.3 million gain on the settlement of the Luna Gold Stream and loan which was recognized during the three months ended June
30, 2015; |
| · | A $3.3 million non-cash impairment relating to the Santa Fe Gold Stream recognized during the three months ended June 30, 2015; |
| · | A one-time gain of $2.6 million recognized on the acquisition of Sandstorm Metals & Energy which was recorded during the
three months ended June 30, 2014; |
| · | A non-cash impairment charge of $1.2 million relating the Company’s Bracemac-McLeod royalty recognized during the three
months ended June 30, 2014; |
| · | A general decrease in administration expenses when compared to previous quarters primarily driven by (i)
the implementation of cost reduction programs when the Company acquired 100% of the common shares of Premier Royalty Inc. and (ii)
the elimination of duplicated costs that were previously being consolidated;
|
| · | Overall, Gold Attributable Equivalent ounces sold have increased over the course of the last three years as result of various
assets producing including: (i) the Aurizona Mine and the Santa Elena Mine began initial production late in 2010; (ii) the Company
acquired the Diavik royalty during the three months ended March 31, 2015; and (iii) the Company began receiving Attributable Gold
Equivalent ounces from the Yamana Silver Stream and copper stream in 2016. |
Change
in Total Assets
Total assets increased by $34.3 million from
December 31, 2015 to March 31, 2016 primarily resulting from the acquisition of the Teck royalty package and an increase in the
fair value of the Company’s investments, partially offset by depletion expense and a non-cash impairment charge on certain
mineral interests. Total assets increased by $88.7 million from September 30, 2015 to December 31, 2015 primarily resulting from
the acquisition of the Yamana Silver Stream and copper stream which were largely funded by utilizing the Company’s Revolving
Facility; the increase was partially offset by depletion expense and a non-cash impairment charge on certain mineral interests.
Total assets decreased by $7.8 million from June 30, 2015 to September 30, 2015 primarily resulting from depletion expense, which
was partially offset by operating cash flows. Total assets decreased by $9.2 million from March 31, 2015 to June 30, 2015 primarily
resulting from (i) the reduction of the Company’s deferred tax assets; and (ii) depletion expense; partially offset by operating
cash flows. Total assets decreased by $5.9 million from December 31, 2014 to March 31, 2015 primarily resulting from (i) depletion
expense; and (ii) a decline in the fair value of investments; partially offset by operating cash flows. Total assets increased
by $51.4 million from December 31, 2013 to December 31, 2014 primarily resulting from (i) the assets acquired from the Sandstorm
Metals & Energy business combination; (ii) operating cash flows and (iii) the exercise of warrants; which were partially offset
by (i) depletion expense; (ii) a decline in the fair value of investments; and (iii) by a non-cash impairment charge on the Bracemac-McLeod
royalty.
Non-IFRS
Measures
The Company has included, throughout this document,
certain non-IFRS performance measures, including (i) average cash cost per attributable ounce; (ii) cash flow from operations per
share (basic and diluted); and (iii) average realized gold price per attributable ounce. The presentation of these non-IFRS measures
is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance
prepared in accordance with IFRS.
| i. | Average cash cost per ounce is calculated by dividing the Company’s cost of sales (excluding depletion) by the number
of Attributable Gold Equivalent ounces sold. The Company presents average cash cost per ounce as it believes that certain investors
use this information to evaluate the Company’s performance in comparison to other companies in the precious metals mining
industry who present results on a similar basis. Figure 1.1 provides a reconciliation of average cash cost of gold on a
per ounce basis. |
Figure 1.1
| |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Cost of Sales (excluding depletion) | |
$ | 3,039 | | |
$ | 4,019 | |
| |
| | | |
| | |
Cash cost of sales is comprised of: | |
| | | |
| | |
Total cash cost of gold sold | |
$ | 3,039 | | |
$ | 4,019 | |
Divided by: | |
| | | |
| | |
Total Attributable Gold Equivalent ounces sold 1 | |
| 11,381 | | |
| 12,460 | |
Equals: | |
| | | |
| | |
Average cash cost of gold (per attributable ounce) | |
$ | 267 | | |
$ | 323 | |
| 1) | The Company’s royalty and other commodity stream
income is converted to an Attributable Gold Equivalent ounce basis by dividing the royalty and other commodity income for that
period by the average realized gold price per ounce from the Company’s Gold Streams for the same respective period. These
Attributable Gold Equivalent ounces when combined with the gold ounces sold from the Company’s Gold Streams equal total
Attributable Gold Equivalent ounces sold. |
| ii. | Cash flows from operations per share (basic and diluted) is calculated by dividing cash generated by operating activities by
the weighted average number of shares outstanding (basic and diluted). The Company presents operating cash flows per share as it
believes that certain investors use this information to evaluate the Company’s performance in comparison to other companies
in the precious metals mining industry that present results on a similar basis. Figure 1.2 provides a reconciliation of
cash flow from operations per share (basic and diluted). |
Figure 1.2
| |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Cash generated by operating activities | |
$ | 9,685 | | |
$ | 8,119 | |
| |
| | | |
| | |
Divided by: | |
| | | |
| | |
Basic weighted average number of shares outstanding | |
| 136,030,128 | | |
| 117,478,182 | |
Diluted weighted average number of shares outstanding | |
| 136,728,726 | | |
| 119,053,691 | |
Equals: | |
| | | |
| | |
Operating cash flow per share (basic) | |
$ | 0.07 | | |
$ | 0.07 | |
Operating cash flow per share (diluted) | |
$ | 0.07 | | |
$ | 0.07 | |
| iii. | Average realized gold price per ounce is calculated by dividing the Company’s sales by the number of Attributable Gold
Equivalent ounces sold. The Company presents average realized gold price per attributable ounce as it believes that certain investors
use this information to evaluate the Company’s performance in comparison to other companies in the precious metals mining
industry that present results on a similar basis. Figure 1.3 provides a reconciliation of average realized gold price per
ounce. |
Figure 1.3
| |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Total Revenue | |
$ | 13,384 | | |
$ | 15,285 | |
| |
| | | |
| | |
Divided by: | |
| | | |
| | |
Total Attributable Gold Equivalent ounces sold | |
| 11,381 | | |
| 12,460 | |
Equals: | |
| | | |
| | |
Average realized gold price per ounce | |
$ | 1,176 | | |
$ | 1,227 | |
The Company has also used the non-IFRS measure
of operating cash flows excluding changes in non-cash working capital. This measure is calculated by adding back the decrease in
changes in non-cash working capital to cash generated by operating activities. These non-IFRS measures do not have any standardized
meaning prescribed by IFRS, and other companies may calculate these measures differently.
Liquidity
and Capital Resources
As of March 31, 2016, the Company had cash and cash equivalents of $5.3 million (December 31, 2015 – $5.3
million) and working capital of $0.3 million (December 31, 2015 – $1.8 million).
During the three months ended March 31, 2016,
the Company generated operating cash flows of $9.7 million compared with $8.1 million during the comparable period in 2015, with
the increase being primarily attributable to changes in non-cash working capital; partially offset by a decrease in both the average
realized selling price of gold and the Attributable Gold Equivalent ounces sold.
During the three months ended March 31, 2016,
the Company had cash outflows from investing activities of $3.2 million which were primarily the result of: (i) the payment of
$3.9 million and $1.25 million in connection with the Karma Gold Stream and the Increase Option (defined herein), respectively;
(ii) a $1.4 million payment related to the Teck transaction; and (iii) the acquisition of investments and other assets; partially
offset by the receipt of $5.5 million related to the Company’s amendment of the Entrée commodity streams. During the
three months ended March 31, 2015, the Company had cash outflows from investing activities of $59.2 million, which were primarily
the result of: (i) the payment of $52.5 million to IAMGOLD Corporation in connection with the Diavik royalty and $3.0 million to
Orezone in connection with the Bomboré royalty; and (ii) the acquisition of investments and other assets; partially offset
by $1.5 million in proceeds from the sale of investments.
During the three months ended March 31, 2016,
the Company had net cash outflows from financing activities of $6.6 million largely related to the repayment of debt under the
Company’s Revolving Facility. During the three months ended March 31, 2015, the Company had net cash outflows from financing
activities of $0.5 million as a result of the redemption of the Company’s common shares under the NCIB.
Contractual
Obligations
In connection with its commodity streams,
the Company has committed to purchase the following:
Stream |
|
% of Life of Mine Gold
or Relevant Commodity 5, 6, 7, 8, 9 |
|
Per Ounce Cash Payment:
lesser of amount below and the then
prevailing market price of the gold
(unless otherwise noted) 1, 2, 3, 4 |
Bachelor Lake |
|
20% |
|
$500 |
Black Fox |
|
8% |
|
$524 |
Chapada |
|
4.2% |
|
30% of copper spot price |
Entrée Gold |
|
5.62% on Hugo North Extension
and 4.26% on Heruga |
|
$220 |
Karma |
|
26,875 ounces over 5 years
and 1.625% thereafter |
|
20% of gold spot price |
Ming |
|
25% of the first 175,000 ounces of gold produced, and 12% thereafter |
|
$nil |
Santa Elena |
|
20% |
|
$361 |
Yamana Silver Stream |
|
Varies |
|
30% of silver spot price |
| 1) | Subject to an annual inflationary adjustment except for Ming. |
| 2) | For the Entrée Gold Stream, after approximately 8.6 million ounces of gold have been produced
from the joint venture property, the price increases to $500 per gold ounce. |
| 3) | For the Entrée Silver Stream, percentage of life of mine is 5.62% on Hugo North Extension
and 4.26% on Heruga which the Company can purchase for the lesser of the prevailing market price and $5 per ounce of silver until
40.3 million ounces of silver have been produced from the entire joint venture property. Thereafter, the purchase price will increase
to the lesser of the prevailing market price and $10 per ounce of silver. |
| 4) | For the Santa Elena Gold Stream, the Company can purchase for a per ounce cash payment equal to
(i) the lesser of $357 and the then prevailing market price of gold for the open-pit mine and (ii) the lesser of $357 and the then
prevailing market price of gold until 50,000 ounces of gold have been delivered to Sandstorm (inclusive of ounces already received
from open-pit production), at which time the on-going per ounce payments will increase to the lesser of $450 and the then prevailing
market price of gold for the underground mine. |
| 5) | For the Entrée Gold and Silver Stream, percentage of life of mine is 5.62% on Hugo North
Extension and 4.26% on Heruga if the minerals produced are contained below 560 metres in depth. |
| 6) | For the Entrée Gold and Silver Stream, percentage of life of mine is 8.43% on Hugo North
Extension and 6.39% on Heruga if the minerals produced are contained above 560 metres in depth. |
| 7) | For the Entrée copper stream, the Company has committed to purchase an amount equal to 0.42%
of the copper produced from the Hugo North Extension and Heruga deposits. If the minerals produced are contained above 560 metres
in depth, then the commitment increases to 0.62% for both the Hugo North Extension and Heruga deposits. Sandstorm will make ongoing
per pound cash payments equal to the lesser of $0.50 and the then prevailing market price of copper, until 9.1 billion pounds of
copper have been produced from the entire joint venture property. Thereafter, the on-going per pound payments will increase to
the lesser of $1.10 and the then prevailing market price of copper. |
| 8) | For the Chapada copper stream, the Company has committed to purchase an amount equal to 4.2% of
the copper produced (up to an annual maximum of 3.9 million pounds of copper) until Yamana has delivered 39 million pounds of copper
to Sandstorm; then 3.0% of the copper produced until, on a cumulative basis, Yamana has delivered 50 million pounds of copper to
Sandstorm; then 1.5% of the copper produced thereafter, for the life of the mine. If Cerro Moro has not achieved the Commencement
of Production and Sandstorm has not received cumulative pre-tax cash flow equal to $70 million from the Yamana Silver Stream, then
the First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease to be in effect and Sandstorm will continue
to purchase 4.2% of Chapada’s payable copper production (up to an annual maximum of 3.9 million pounds of copper), until
such time as Sandstorm has received cumulative pre-tax cash flow equal to $70 million, or Cerro Moro has achieved the Commencement
of Production. |
| 9) | Under the terms of the Yamana Silver Stream, Sandstorm has agreed to purchase an amount of silver
from Cerro Moro equal to 20% of the silver produced (up to an annual maximum of 1.2 million ounces of silver), until Yamana has
delivered to Sandstorm 7.0 million ounces of silver; then 9.0% of the silver produced thereafter. As part of the Yamana Silver
Stream, during the year 2016 through 2018, Sandstorm has also agreed to purchase an amount of silver from: (i) the Minera Florida
mine in Chile equal to 38% of the silver produced (up to an annual maximum of 200,000 ounces of silver); and (ii) the Chapada mine
in Brazil equal to 52% of the silver produced (up to an annual maximum of 100,000 ounces of silver). |
In connection with the Karma Gold Stream, the
Stream Syndicate has provided True Gold Mining Inc. (now Endeavour) with an 18 month option to increase funding by up to $20 million
(the “Increase Option”) in exchange for eight quarterly deliveries totaling 30,000 ounces of gold, or the pro-rata
portion of the amount drawn thereunder, starting 18 months from when the first tranche under the Increase Option is drawn down.
During the three months ended March 31, 2016, Sandstorm remitted $1.25 million of its $5 million commitment under the Increase
Option.
In connection with the Bomboré royalty,
Sandstorm has committed to providing up to an additional $5.0 million in royalty financing (remittable in cash and/or shares, subject
to certain conditions) to Orezone on a draw down basis until January 27, 2017.
As part of the Yamana transaction, the Company
drew on its Revolving Facility. The Company will, from time to time, repay balances outstanding on its Revolving Facility with
operating cash flow and cash flow from other sources. The amounts drawn on the Revolving Facility remain subject to interest at
LIBOR plus 3.00% – 4.25% per annum, and the undrawn portion of the Revolving Facility remains subject to a
standby fee of 0.75% – 1.05% per annum, dependent on the Company’s leverage ratio. The Revolving Facility
matures in July 2019.
Share
Capital
As of May 5, 2016, the Company had 138,286,017 common shares outstanding. As disclosed previously, the
funds from the issuance of share capital have been used to finance the acquisition of Gold Streams and royalties (recent acquisitions
are described earlier in greater detail), with the net proceeds of the 2015 equity financing used to reduce the balance of the
Company’s Revolving Facility.
A summary of the Company’s share
purchase options
as of May 5, 2016 are as follows:
Number outstanding | |
Vested | |
Exercise Price per Share (C$) | |
Expiry Date |
66,000 | |
66,000 | |
$6.30 | |
August 25, 2016 |
1,129,000 | |
1,129,000 | |
6.35 | |
November 25, 2016 |
27,000 | |
27,000 | |
18.33 | |
August 22, 2017 |
5,850 | |
5,850 | |
18.33 | |
October 4, 2017 |
402,133 | |
402,133 | |
16.35 | |
December 11, 2017 |
150,000 | |
150,000 | |
11.78 | |
December 21, 2017 |
10,875 | |
10,875 | |
11.31 | |
February 19, 2018 |
3,625 | |
3,625 | |
10.62 | |
March 1, 2018 |
12,375 | |
12,375 | |
8.89 | |
December 13, 2018 |
25,000 | |
8,334 | |
6.03 | |
May 16, 2019 |
3,704,140 | |
1,212,500 | |
2.93 | |
November 13, 2019 |
1,084,000 | |
- | |
3.60 | |
December 9, 2020 |
200,000 | |
- | |
3.64 | |
December 22, 2020 |
2,250 | |
2,250 | |
15.00 | |
March 30, 2022 |
6,822,248 | |
3,029,942 | |
$6.70 | |
|
A summary of the Company’s warrants
as of May 5, 2016 are as follows:
Number outstanding | |
| |
Exercise Price per Share | |
Price Expiry Date |
1,155,873 | |
| |
C$13.79 | |
December 4, 2016 |
5,002,500 | |
| |
$14.00 | |
September 7, 2017 |
3,000,000 | |
| |
4.50 | |
March 23, 2020 |
15,000,000 | |
| |
3.50 | |
October 26, 2020 |
5,043,900 | |
| |
$4.00 | |
November 3, 2020 |
29,202,273 | |
| |
| |
|
The Company has 1,395,517 Restricted Share Rights
(“RSRs”) outstanding as at May 5, 2016.
Key
Management Personnel Compensation
The remuneration of directors and those
persons having authority and responsibility for planning, directing and controlling activities of the Company are as follows:
| |
3 Months Ended March 31, 2016 | | |
3 Months Ended March 31, 2015 | |
Short-term employee salaries and benefits | |
$ | 370 | | |
$ | 543 | |
Share-based payments | |
| 517 | | |
| 561 | |
Total key management compensation expense | |
$ | 887 | | |
$ | 1,104 | |
Financial
Instruments
The fair value of the Company's other financial
instruments which include cash and cash equivalents, trade receivables and other, loans receivable, receivables and other, trade
and other payables and bank debt approximate their carrying values at March 31, 2016. All financial instruments are initially
recorded at fair value.
Credit Risk
The Company’s credit risk is limited to
cash and cash equivalents, trade receivables and other, loan receivable, and receivables and other in the ordinary course of business.
The Company sells gold exclusively to third parties with a history in commodities. The Company’s trade receivables and other
is subject to the credit risk of the counterparties who own and operate the mines underlying Sandstorm’s royalty portfolio.
The Company’s loan receivable and convertible debenture due from Luna is subject to Luna’s credit risk and the Company’s
ability to realize on its security.
Currency Risk
Financial instruments that impact the Company’s
net income or other comprehensive income (loss) due to currency fluctuations include: cash and cash equivalents, trade receivables
and other, investments and trade and other payables denominated in Canadian dollars. Based on the Company's Canadian dollar denominated
monetary assets and monetary liabilities at March 31, 2016 a 10% increase (decrease) of the value of the Canadian dollar relative
to the United States dollar would increase (decrease) net income by $0.4 million and other comprehensive income $2.8 million, respectively.
Interest Rate Risk
The Company is exposed to interest rate risk
on its outstanding borrowings. Presently, all of the Company’s outstanding borrowings are at floating rates. The Company
monitors its exposure to interest rates and has not entered into any derivative contracts to manage risk. During the period ended
March 31, 2016, the weighted average effective interest rate paid by the Company on the amount drawn on its outstanding borrowings
was 4.8% (2015- 3.4%). A fluctuation in interest rates of 100 basis points (1 percent) would have affected finance expense by approximately
$0.4 million.
Other Risks
Sandstorm holds common shares, convertible debentures,
and warrants of other companies with a combined fair market value as at March 31, 2016, of $52.7 million (December 31, 2015 – $26.6
million). The daily exchange traded volume of these shares, including the shares underlying the warrants, may not be sufficient
for the Company to liquidate its position in a short period of time without potentially affecting the market value of the shares.
The Company is subject to default risk with respect to any debt instruments. Aside from the outstanding balance on the Company’s
revolving credit facility, the Company is not subject to other price risks. Except for the Company’s exposure to liquidity
risk with respect to the Luna Debenture and the revolving credit facility, the Company’s exposure to these risks has not
changed significantly from the prior year.
Risks
to Sandstorm
The primary risk factors affecting the Company
are set forth below. For additional discussion of risk factors, please refer to the Company’s annual information form dated
March 30, 2016, which is available on www.sedar.com.
Risks Relating To Mineral Projects
To the extent that they relate to the production
of gold from, or the operation of, the Chapada Mine, the Cerro Moro Project, the Diavik Mine, the Aurizona Mine, the Santa Elena
Mine, the Karma Project, the Ming Mine, the Black Fox Mine, the Bachelor Lake Mine, the Hugo North Extension and Heruga deposits,
the Mt. Hamilton Project, the Gualcamayo Mine, the Emigrant Springs Mine, MWS, the San Andres Mine, the Bomboré Project,
the Prairie Creek Project, the Bracemac-McLeod Mine, the Hot Maden Project, the Hackett River Project, the Lobo-Marte Project,
Agi Dagi and Kirazli or other royalties in Sandstorm’s portfolio (the “Mines”), the Company will be subject to
the risk factors applicable to the operators of such Mines. Whether the Mines will be commercially viable depends on a number of
factors, including cash costs associated with extraction and processing, the particular attributes of the deposit, such as size,
grade and proximity to infrastructure, as well as metal prices which are highly cyclical and government regulations, including
regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental
protection. The Mines are also subject to other risks that could lead to their shutdown and closure including flooding and weather
related events, the failure to receive permits or having existing permits revoked, collapse of mining infrastructure including
tailings pond, as well as community or social related issues. The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may result in the Mines becoming uneconomic resulting in their shutdown and closure. The Company
is not entitled to purchase gold if no gold is produced from the Mines.
No Control Over Mining Operations
The Company has no contractual rights relating
to the operation or development of the Mines. Except for any payments which may be payable in accordance with applicable completion
guarantees or cash flow guarantees, the Company will not be entitled to any material compensation if these mining operations do
not meet their forecasted gold or other production targets in any specified period or if the Mines shut down or discontinue their
operations on a temporary or permanent basis. The Mines may not commence commercial production within the time frames anticipated,
if at all, and there can be no assurance that the gold or other production from such properties will ultimately meet forecasts
or targets. At any time, any of the operators of the Mines or their successors may decide to suspend or discontinue operations.
The Company is subject to the risk that the Mines shut down on a temporary or permanent basis due to issues including, but not
limited to economics, lack of financial capital, floods, fire, mechanical malfunctions, social unrest, expropriation and other
risks. There are no guarantees the Mines will achieve commercial production, ramp-up targets or complete expansion plans. These
issues are common in the mining industry and can occur frequently.
Government Regulations
The Mines are subject to various foreign laws
and regulations governing prospecting, exploration, development, production, exports, taxes, labour standards, waste disposal,
protection and remediation of the environment, reclamation, historic and cultural resources preservation, mine safety and occupation
health, handling, storage and transportation of hazardous substances and other matters. It is possible that the risks of expropriation,
cancellation or dispute of licenses could result in substantial costs, losses and liabilities in the future. The costs of discovering,
evaluating, planning, designing, developing, constructing, operating and closing the Mines in compliance with such laws and regulations
are significant. It is possible that the costs and delays associated with compliance of such laws and regulations could become
such that the owners or operators of the Mines would not proceed with the development of or continue to operate the Mines. Moreover,
it is possible that future regulatory developments, such as increasingly strict environmental protection laws, regulations and
enforcement policies thereunder, and claims for damages to property and persons resulting from the Mines could result in substantial
costs and liabilities in the future.
International Operations
The Chapada Mine and the Aurizona Mine are located
in Brazil, the Santa Elena Mine is located in Mexico, the Emigrant Springs Mine and the Mt. Hamilton Project are located in the
United States of America, the Gualcamayo Mine and the Cerro Moro Project is located in Argentina, MWS is located in South Africa,
the Hugo North Extension and Heruga projects are located in Mongolia, the Karma Project and Bomboré Project are located
in Burkina Faso, the San Andres Mine is located in Honduras, the Hot Maden Project, Agi Dagi and Kirazli are located in Turkey,
the Lobo-Marte Project is located in Chile, and each of the Diavik Mine, the Ming Mine, the Black Fox Mine, Bachelor Lake Mine,
Prairie Creek Project, the Hackett River Project and the Bracemac-McLeod Mine are located in Canada and as such, the Mines are
exposed to various levels of political, economic and other risks and uncertainties. These risks and uncertainties include, but
are not limited to, terrorism, hostage taking, military repression, crime, political instability, currency controls, extreme fluctuations
in currency exchange rates, high rates of inflation, labour unrest, the risks of war or civil unrest, expropriation and nationalization,
renegotiation or nullification of existing concessions, licenses, permits, approvals and contracts, illegal mining, changes in
taxation policies, restrictions on foreign exchange and repatriation, and changing political conditions, and governmental regulations.
Changes, if any, in mining or investment policies or shifts in political attitude in Mexico, Brazil, Mongolia, the United States
of America, Burkina Faso, Argentina, Honduras, French Guiana, Chile, Turkey or Canada may adversely affect the operations or profitability
of the Mines in these countries. Operations may be affected in varying degrees by government regulations with respect to, but not
limited to, restrictions on production, price controls, export controls, currency remittance, income taxes, expropriation of property,
foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use, mine safety
and the rewarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies
from, a particular jurisdiction. Any changes or unfavorable assessments with respect to (i) the validity, ownership or existence
of the Entrée concessions; as well as (ii) the validity or enforceability of Entrée’s joint venture agreement
with Oyu Tolgoi LLC may adversely affect the Company’s profitability or profits realized under the Entrée Gold Stream.
The Serra Pelada royalty cash flow or profitability may be adversely impacted if the Cooperative de Mineracao dos Garimpeiros de
Serra Pelada, which hold a 25% interest in the Serra Pelada Mine, continue to take unfavorable actions. In addition, Colossus’
Brazilian subsidiary has payables in excess of $30 million and accordingly, there is a risk that they may be unable to repay their
debts, resulting in insolvency and loss any rights to the Serra Pelada Mine. Moreover, there is no certainty that the Karma Project
will achieve its intended production and/or construction timeline, if ever. A failure to comply strictly with applicable laws,
regulations and local practices relating to mineral right applications and tenure, could result in loss, reduction or expropriation
of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.
The occurrence of these various factors and uncertainties cannot be accurately predicted and could have an adverse effect on the
Mines.
Income Taxes
The Company has a subsidiary in Barbados, Sandstorm Gold Bank Limited, which entered into Gold Streams
in connection with the Aurizona, Karma, and Santa Elena transactions. No assurance can be given that new taxation rules will not
be enacted or that existing rules will not be applied in a manner which could result in the Company’s past and future profits
being subject to increased levels of income tax. The Company’s international transactions have not yet been reviewed by the
Canada Revenue Agency, and should such transactions be reviewed no assurances can be given that the tax matters will be resolved
favorably. The Company’s commodity streams and royalties in connection with Chapada, Cerro Moro, Diavik, Black Fox, Ming,
Hugo North Extension and Heruga, MWS, Bachelor Lake, Mt. Hamilton, Prairie Creek, San Andres, Hot Maden Project, Hackett River
Project, Lobo-Marte Project, Agi Dagi, Kirazli and Bracemac-McLeod transactions have been entered into directly by Canadian based
subsidiaries and will therefore, be subject to Canadian, and/or U.S./international taxation, as the case may be. The Gualcamayo
NSR was entered into through an Argentinian subsidiary and therefore, may be subject to Canadian, and/or Argentinian taxation,
as the case may be. The Emigrant Springs NSR was entered into through a US subsidiary and therefore, may be subject to Canadian,
and/or US taxation, as the case may be.
Gold and Silver Prices
The price of the common shares, warrants, and
the Company’s financial results may be significantly adversely affected by a decline in the price of gold and silver. The
price of gold and silver fluctuates widely, especially in recent years, and is affected by numerous factors beyond the Company’s
control, including but not limited to, the sale or purchase of gold and silver by various central banks and financial institutions,
interest rates, exchange rates, inflation or deflation, fluctuation in the value of the U.S. dollar and foreign currencies, global
and regional supply and demand, and the political and economic conditions of major gold and silver producing countries throughout
the world. In the event that the prevailing market price of gold is less than $524 per ounce in the case of the Black Fox Gold
Stream, $500 per ounce in the case of the Bachelor Lake Gold Stream, $361 or $450 per ounce in the case of the Santa Elena Gold
Stream, and $220 per ounce in the case of the Hugo North Extension and Heruga Gold Stream, the purchase price will be the then
prevailing market price per ounce of gold and the Company will not generate positive cash flow or earnings on those Gold Streams.
Furthermore, if the gold or silver price drops below the cost of producing gold or silver at the Mines, then the Mines may not
produce any gold or silver. As a result, the Company will not be entitled to purchase any gold or silver.
Diamond Prices and Demand for Diamonds
The price of the common shares, warrants, and
the Company’s financial results may be significantly adversely affected by a decline in the price and demand for diamonds.
Diamond prices fluctuate and are affected by numerous factors beyond the control of the Company, including worldwide economic trends,
worldwide levels of diamond discovery and production, and the level of demand for, and discretionary spending on, luxury goods
such as diamonds. Low or negative growth in the worldwide economy, renewed or additional credit market disruptions, natural disasters
or the occurrence of terrorist attacks or similar activities creating disruptions in economic growth could result in decreased
demand for luxury goods such as diamonds, thereby negatively affecting the price of diamonds. Similarly, a substantial increase
in the worldwide level of diamond production or the release of stocks held back during recent periods of lower demand could also
negatively affect the price of diamonds. In each case, such developments could have a material adverse effect on the Company’s
results of operations.
Copper Prices
The price of the common shares, warrants, and
the Company’s financial results may be significantly adversely affected by a decline in the price of copper. Copper prices
fluctuate widely and are affected by numerous factors beyond the Company’s control, including global supply and demand, expectations
with respect to the rate of inflation, the exchange rates of the U.S. dollar to other currencies, interest rates, forward selling
by producers, central bank sales and purchases, production and cost levels in major producing regions, global or regional political,
economic or financial situations and a number of other factors. Furthermore, if the copper price drops below the cost of producing
copper at the Mines, then the Mines may not produce any copper. As a result, the Company will not be entitled to purchase any copper.
Solvency Risk
The price of the common shares and the Company’s
financial results may be significantly affected by the Mines operators’ ability to continue as a going concern and have access
to capital. The lack of access to capital could result in these companies entering bankruptcy proceedings and as a result, Sandstorm
may not be able to realize any value from its respective streams or royalties.
Other
Critical Accounting Estimates
The preparation of consolidated financial statements
in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets and liabilities
and disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues
and expenditures during the periods presented. Notes 2 and 4 of the Company’s 2015 annual consolidated financial statements
describes all of the significant accounting policies as well as the significant judgments and estimates.
Disclosure Controls and Procedures
Disclosure controls and procedures are designed
to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s
Chief Executive Officer and the Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding
public disclosure. The Company’s system of disclosure controls and procedures includes, but is not limited to, the Disclosure
Policy, the Code of Conduct, the Stock Trading Policy, Corporate Governance, the effective functioning of the Audit Committee and
procedures in place to systematically identify matters warranting consideration of disclosure by the Audit Committee.
As at the end of the period covered by this
Management’s Discussion and Analysis, management of the Company, with the participation of the Chief Executive Officer and
the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as required
by National Instrument 52-109 in Canada (“NI 52-109”) and under the Securities Exchange Act of 1934, as amended, in
the United States. The evaluation included documentation review, enquiries and other procedures considered by management to be
appropriate in the circumstances. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded
that, as of the end of the period covered by this management’s discussion and analysis, the disclosure controls and procedures
(as defined in Rule 13(a) – 15(e) under the Securities Exchange Act of 1934) were effective to provide reasonable
assurance that information required to be disclosed in the Company’s interim filings and other reports filed or submitted
under applicable securities laws, is recorded, processed, summarized and reported within time periods specified by those laws and
that material information is accumulated and communicated to management of the Company, including the Chief Executive Officer and
the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control
Over Financial Reporting
Management of the Company is responsible for
establishing and maintaining effective internal control over financial reporting as such term is defined in the rules of the National
Instrument 52-109 in Canada (“NI 52-109”) and under the Securities Exchange Act of 1934, as amended, in the United
States. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of the Company’s financial reporting for external purposes in accordance with IFRS as issued by the IASB.
The Company’s internal control over financial
reporting includes:
| · | maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets
of the Company; |
| · | providing reasonable assurance that transactions are recorded as necessary for preparation of the consolidated financial statements
in accordance with IFRS as issued by the IASB; |
| · | providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and
the directors of the Company; and |
| · | providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material
effect on the Company’s consolidated financial statements would be prevented or detected on a timely basis. |
The Company’s internal control over financial
reporting may not prevent or detect all misstatements because of inherent limitations. Additionally, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions or
deterioration in the degree of compliance with the Company’s policies and procedures. In connection with the assessment of
effectiveness of the Company's internal control over financial reporting as of December 31, 2015, a material weakness was identified
relating to the review control over the impairment of long-lived assets. The Company is in the process of implementing a remediation
plan to address the deficiency previously noted in the areas of personnel and controls including the engagement of an external
search firm to assist in the hiring of an additional resource to assist in the documentation and review of its internal controls.
Changes in Internal Controls
During the three months ended March 31, 2016,
there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.
Limitations of Controls and Procedures
The Company’s management, including the
Chief Executive Officer and the Chief Financial Officer, believe that any disclosure controls and procedures or internal controls
over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all
control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company
have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty,
and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any systems
of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent
limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.
FORWARD LOOKING STATEMENTS
This MD&A and any exhibits attached hereto
and incorporated herein, if any, contain “forward-looking statements”, within the meaning of the U.S. Securities Act
of 1933, as amended, the U.S. Securities exchange Act of 1934, as amended, the United States Private Securities Litigation Reform
Act of 1995, and applicable Canadian and other securities legislation, concerning the business, operations and financial performance
and condition of Sandstorm. Forward-looking information is provided as of the date of this MD&A and Sandstorm does not intend,
and does not assume any obligation, to update this forward-looking information, except as required by law.
Generally, forward-looking information can be
identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”,
“is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases
or statements that certain actions, events or results “may”, “could”, “would”, “might”
or “will be taken”, “occur” or “be achieved”. Forward-looking information is based on reasonable
assumptions that have been made by Sandstorm as at the date of such information and is subject to known and unknown risks, uncertainties
and other factors that may cause the actual results, level of activity, performance or achievements of Sandstorm to be materially
different from those expressed or implied by such forward-looking information, including but not limited to: the impact of general
business and economic conditions; the Chapada Mine, the Cerro Moro Project, the Ming Mine, the Gualcamayo Mine, the Karma Project,
the Emigrant Springs Mine, MWS, the Hugo North Extension and Heruga deposits, the mines underlying the Sandstorm portfolio of royalties,
the Bachelor Lake Mine, the Diavik Mine, the Mt. Hamilton mine, the Prairie Creek Project, the San Andres Mine, the Bomboré
Project, the Hot Maden Project, the Hackett River Project, the Lobo-Marte Project, Agi Dagi and Kirazli or the Bracemac-McLeod
Mine; the absence of control over mining operations from which Sandstorm will purchase gold and risks related to those mining operations,
including risks related to international operations, government and environmental regulation, actual results of current exploration
activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined; problems inherent
to the marketability of minerals; industry conditions, including fluctuations in the price of metals, fluctuations in foreign exchange
rates and fluctuations in interest rates; government entities interpreting existing tax legislation or enacting new tax legislation
in a way which adversely affects Sandstorm; stock market volatility; competition; as well as those factors discussed in the section
entitled “Risks to Sandstorm” herein and those risks described in the section entitled “Risk Factors” contained
in Sandstorm’s most recent Annual Information Form for the year ended December 31, 2015 available at www.sedar.com and www.sec.gov
and incorporated by reference herein.
Forward-looking information in this MD&A
includes, among other things, disclosure regarding: Sandstorm’s existing Gold Streams and royalties as well as its future
outlook, the mineral reserve and mineral resource estimates for each of the Chapada Mine, the Cerro Moro Project, the Diavik Mine,
the Aurizona Mine, the Gualcamayo Mine, the Emigrant Springs Mine, MWS, the Santa Elena Mine, the Ming Mine, the Black Fox Mine,
the Hugo North Extension and Heruga deposits, the Karma Project, the mines underlying the Sandstorm portfolio of royalties, the
Bachelor Lake Mine, the Mt. Hamilton Mine, the Prairie Creek Project, the San Andres Mine, the Bomboré Project, the Hot
Maden Project, the Hackett River Project, the Lobo-Marte Project, Agi Dagi and Kirazli and the Bracemac-McLeod Mine. Forward-looking
information is based on assumptions management believes to be reasonable, including but not limited to the continued operation
of the mining operations from which Sandstorm will purchase gold, no material adverse change in the market price of commodities,
that the mining operations will operate in accordance with their public statements and achieve their stated production outcomes,
and such other assumptions and factors as set out therein.
Although Sandstorm has attempted to identify
important factors that could cause actual actions, events or results to differ materially from those contained in forward-looking
information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended.
There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially
from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.
SANDSTORM
GOLD LTD.
CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
Q1
/ 2016
Condensed Consolidated Interim
Statements of Financial Position |
Expressed in U.S. dollars ($000s) |
ASSETS | |
Note | | |
March 31, 2016 | | |
December 31, 2015 | |
Current | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
| | | |
$ | 5,316 | | |
$ | 5,346 | |
Trade receivables and other | |
| | | |
| 4,437 | | |
| 3,876 | |
| |
| | | |
$ | 9,753 | | |
$ | 9,222 | |
Non-current | |
| | | |
| | | |
| | |
Mineral interests and royalties | |
| 4 | | |
$ | 422,541 | | |
$ | 414,363 | |
Investments | |
| 5 | | |
| 52,748 | | |
| 26,580 | |
Deferred financing costs | |
| | | |
| 2,060 | | |
| 2,220 | |
Loan receivable | |
| | | |
| 24,203 | | |
| 23,821 | |
Deferred income tax assets | |
| | | |
| 18,918 | | |
| 19,650 | |
Receivables and other | |
| | | |
| 937 | | |
| 1,017 | |
Total assets | |
| | | |
$ | 531,160 | | |
$ | 496,873 | |
| |
| | | |
| | | |
| | |
LIABILITIES | |
| | | |
| | | |
| | |
Current | |
| | | |
| | | |
| | |
Trade and other payables | |
| | | |
$ | 9,465 | | |
$ | 7,443 | |
Non-current | |
| | | |
| | | |
| | |
Bank debt | |
| | | |
| 77,000 | | |
| 83,500 | |
Deferred income tax liabilities | |
| | | |
| 3,130 | | |
| 3,279 | |
| |
| | | |
$ | 80,130 | | |
$ | 86,779 | |
| |
| | | |
$ | 89,595 | | |
$ | 94,222 | |
| |
| | | |
| | | |
| | |
EQUITY | |
| | | |
| | | |
| | |
Share capital | |
| | | |
$ | 507,891 | | |
$ | 491,769 | |
Reserves | |
| | | |
| 24,139 | | |
| 23,368 | |
Deficit | |
| | | |
| (47,767 | ) | |
| (60,926 | ) |
Accumulated other comprehensive loss | |
| | | |
| (42,698 | ) | |
| (51,560 | ) |
| |
| | | |
$ | 441,565 | | |
$ | 402,651 | |
Total liabilities and equity | |
| | | |
$ | 531,160 | | |
$ | 496,873 | |
Contractual
obligations (Note 11)
ON BEHALF OF THE BOARD:
“Nolan Watson”, Director “David
DeWitt”, Director
- The accompanying notes
are an integral part of these condensed consolidated interim financial statements -
Condensed Consolidated Interim
Statements of Income |
Expressed in U.S. dollars ($000s) |
| |
Note | |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Sales | |
12 | |
$ | 8,504 | | |
$ | 11,566 | |
Royalty revenue | |
12 | |
| 4,880 | | |
| 3,719 | |
| |
| |
$ | 13,384 | | |
$ | 15,285 | |
| |
| |
| | | |
| | |
Cost of sales, excluding depletion | |
| |
$ | 3,039 | | |
$ | 4,019 | |
Depletion | |
| |
| 5,230 | | |
| 8,798 | |
Total cost of sales | |
| |
$ | 8,269 | | |
$ | 12,817 | |
| |
| |
| | | |
| | |
Gross Profit | |
| |
$ | 5,115 | | |
$ | 2,468 | |
| |
| |
| | | |
| | |
Expenses and other (income) | |
| |
| | | |
| | |
· Administration expenses 1 | |
8 | |
$ | 1,410 | | |
$ | 1,518 | |
· Project evaluation 1 | |
| |
| 963 | | |
| 995 | |
· Foreign exchange loss (gain) | |
| |
| 37 | | |
| (1,945 | ) |
· (Gain) loss on revaluation of investments | |
5 | |
| (13,449 | ) | |
| 461 | |
· Finance income | |
| |
| (802 | ) | |
| (248 | ) |
· Finance expenses and other | |
| |
| 1,392 | | |
| 319 | |
· Mineral interest and royalty impairments | |
4 (c) | |
| 1,368 | | |
| - | |
Income before taxes | |
| |
$ | 14,196 | | |
$ | 1,368 | |
| |
| |
| | | |
| | |
Current income tax expense | |
7 | |
$ | 329 | | |
$ | 543 | |
Deferred income tax expense | |
7 | |
| 708 | | |
| - | |
| |
| |
| 1,037 | | |
| 543 | |
Net income for the period | |
| |
$ | 13,159 | | |
$ | 825 | |
| |
| |
| | | |
| | |
Basic earnings per share | |
| |
$ | 0.10 | | |
$ | 0.01 | |
Diluted earnings per share | |
| |
$ | 0.10 | | |
$ | 0.01 | |
| |
| |
| | | |
| | |
Weighted average number of common shares outstanding | |
| |
| | | |
| | |
· Basic | |
6(e) | |
| 136,030,128 | | |
| 117,478,182 | |
· Diluted | |
6(e) | |
| 136,728,726 | | |
| 119,053,691 | |
1 Equity settled stock based compensation (a non-cash item) is included in administration expenses and project evaluation | |
| |
$ | 784 | | |
$ | 678 | |
- The accompanying notes
are an integral part of these condensed consolidated interim financial statements -
Condensed Consolidated Interim
Statements of Comprehensive Income (Loss) |
Expressed in U.S. dollars ($000s) |
| |
Note | |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Net income for the period | |
| |
$ | 13,159 | | |
$ | 825 | |
| |
| |
| | | |
| | |
Other comprehensive income (loss) for the period | |
| |
| | | |
| | |
Items that may subsequently be re-classified to net income (loss): | |
| |
| | | |
| | |
· Currency translation differences | |
| |
$ | 95 | | |
$ | (4,993 | ) |
Items that will not subsequently be re-classified to net income (loss): | |
| |
| | | |
| | |
· Unrealized gain (loss) on investments, including a tax recovery of $174 | |
5 | |
| 8,767 | | |
| (2,422 | ) |
· Total other comprehensive income ( loss) for the period | |
| |
$ | 8,862 | | |
$ | (7,415 | ) |
Total comprehensive income (loss) for the period | |
| |
$ | 22,021 | | |
$ | (6,590 | ) |
- The accompanying notes
are an integral part of these condensed consolidated interim financial statements -
Condensed Consolidated Interim
Statements of Cash Flows |
Expressed in U.S. dollars ($000s) |
Cash flow from (used in): | |
Note | |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Operating activities | |
| |
| | | |
| | |
· Net income for the period | |
| |
$ | 13,159 | | |
$ | 825 | |
· Items not affecting cash: | |
| |
| | | |
| | |
· Depletion and depreciation and financing amortization | |
| |
| 5,451 | | |
| 8,959 | |
· Mineral interest impairments | |
4 (c) | |
| 1,368 | | |
| - | |
· Deferred income tax (recovery) expense | |
7 | |
| 760 | | |
| 352 | |
· Share-based payment | |
| |
| 784 | | |
| 678 | |
· (Gain) loss on revaluation of investments | |
| |
| (13,449 | ) | |
| 461 | |
· Unrealized foreign exchange loss (gain) | |
| |
| - | | |
| (2,075 | ) |
· Interest on loan receivable and other | |
| |
| (382 | ) | |
| - | |
· Changes in non-cash working capital | |
9 | |
| 1,994 | | |
| (1,081 | ) |
| |
| |
$ | 9,685 | | |
$ | 8,119 | |
Investing activities | |
| |
| | | |
| | |
· Acquisition of mineral interests and royalties | |
| |
$ | (6,199 | ) | |
$ | (59,073 | ) |
· Acquisition of investments and other assets | |
5 | |
| (2,581 | ) | |
| (1,608 | ) |
· Proceeds from disposition of mineral interests and royalties and other assets | |
4 (b) | |
| 5,599 | | |
| 1,522 | |
| |
| |
$ | (3,181 | ) | |
$ | (59,159 | ) |
Financing activities | |
| |
| | | |
| | |
· Bank debt repaid | |
7 | |
$ | (6,500 | ) | |
$ | - | |
· Redemption of common shares (normal course issuer bid) and other | |
| |
| (50 | ) | |
| (485 | ) |
| |
| |
$ | (6,550 | ) | |
$ | (485 | ) |
| |
| |
| | | |
| | |
Effect of exchange rate changes on cash and cash equivalents | |
| |
$ | 16 | | |
$ | (383 | ) |
Net decrease in cash and cash equivalents | |
| |
| (30 | ) | |
| (51,908 | ) |
Cash and cash equivalents – beginning of the period | |
| |
| 5,346 | | |
| 90,224 | |
Cash and cash equivalents – end of the period | |
| |
$ | 5,316 | | |
$ | 38,316 | |
| |
| |
| | | |
| | |
Cash and cash equivalents, at the end of the period | |
| |
| | | |
| | |
Cash at bank | |
| |
$ | 5,316 | | |
$ | 27,013 | |
Short-term deposit | |
| |
$ | - | | |
$ | 11,303 | |
Supplemental
cash flow information (note 10)
- The accompanying notes
are an integral part of these condensed consolidated interim financial statements -
Condensed Consolidated Interim
Statements of Changes in Equity |
Expressed in U.S. dollars ($000s) |
| |
| |
Share Capital | | |
Reserves | | |
| | |
| | |
| |
| |
Note | |
Number | | |
Amount | | |
Share Options | | |
Share Purchase Warrants | | |
Retained Earnings (Deficit) | | |
Accumulated Other Comprehensive Income (Loss) | | |
Total | |
At January 1, 2015 | |
| |
| 117,478,182 | | |
$ | 456,670 | | |
$ | 9,015 | | |
$ | 12,117 | | |
$ | (17,870 | ) | |
$ | (38,385 | ) | |
$ | 421,547 | |
Redemption of common shares (normal course issuer bid) | |
6 (a) | |
| (147,445 | ) | |
| (485 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (485 | ) |
Issuance of warrants | |
6 (c) | |
| - | | |
| - | | |
| - | | |
| 583 | | |
| - | | |
| - | | |
| 583 | |
Share issuance costs | |
| |
| - | | |
| (26 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (26 | ) |
Share based payment | |
| |
| - | | |
| - | | |
| 678 | | |
| - | | |
| - | | |
| - | | |
| 678 | |
Total comprehensive income (loss) | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| 825 | | |
| (7,415 | ) | |
| (6,590 | ) |
At March 31, 2015 | |
| |
| 117,330,737 | | |
$ | 456,159 | | |
$ | 9,693 | | |
$ | 12,700 | | |
$ | (17,045 | ) | |
$ | (45,800 | ) | |
$ | 415,707 | |
Shares issued | |
| |
| 10,087,800 | | |
| 27,136 | | |
| - | | |
| 1,614 | | |
| - | | |
| - | | |
| 28,750 | |
Options exercised | |
6 (b) | |
| 155,000 | | |
| 684 | | |
| (170 | ) | |
| - | | |
| - | | |
| - | | |
| 514 | |
Vesting of restricted stock rights | |
| |
| 77,138 | | |
| 725 | | |
| (725 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
Expiration of unexercised warrants | |
| |
| - | | |
| 4,388 | | |
| - | | |
| (4,388 | ) | |
| - | | |
| - | | |
| - | |
Redemption of common shares (normal course issuer bid) and other | |
6 (a) | |
| (370,678 | ) | |
| (1,223 | ) | |
| (475 | ) | |
| - | | |
| - | | |
| - | | |
| (1,698 | ) |
Issuance of warrants | |
6 (b) | |
| - | | |
| - | | |
| - | | |
| 3,091 | | |
| - | | |
| - | | |
| 3,091 | |
Share issuance costs (net of tax of $1.0 million) | |
| |
| - | | |
| (1,535 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,535 | ) |
Shares issued on acquisition of Gold Royalties Corporation and other | |
| |
| 1,600,317 | | |
| 5,435 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,435 | |
Share based payment | |
| |
| - | | |
| - | | |
| 2,028 | | |
| - | | |
| - | | |
| - | | |
| 2,028 | |
Total comprehensive loss | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| (43,881 | ) | |
| (5,760 | ) | |
| (49,641 | ) |
At December 31, 2015 | |
| |
| 128,880,314 | | |
$ | 491,769 | | |
$ | 10,351 | | |
$ | 13,017 | | |
$ | (60,926 | ) | |
$ | (51,560 | ) | |
$ | 402,651 | |
Vesting of restricted stock rights | |
| |
| 1,159 | | |
| 13 | | |
| (13 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
Shares issued for acquisition of royalties and other | |
4 (b) | |
| 9,049,322 | | |
| 16,159 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 16,159 | |
Share issuance costs | |
| |
| - | | |
| (50 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (50 | ) |
Share based payment | |
| |
| - | | |
| - | | |
| 784 | | |
| - | | |
| - | | |
| - | | |
| 784 | |
Total other comprehensive income | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,159 | | |
| 8,862 | | |
| 22,021 | |
At March 31, 2016 | |
| |
| 137,930,795 | | |
| 507,891 | | |
| 11,122 | | |
| 13,017 | | |
| (47,767 | ) | |
| (42,698 | ) | |
| 441,565 | |
- The accompanying notes
are an integral part of these condensed consolidated interim financial statements -
Notes to the Condensed
Consolidated
Interim Financial Statements
March 31, 2016
Expressed in U.S. dollars
Sandstorm Gold Ltd. was incorporated
under the Business Corporations Act of British Columbia on March 23, 2007. Sandstorm Gold Ltd. and its subsidiary entities ("Sandstorm",
“Sandstorm Gold” or the "Company") is a resource-based company that seeks to acquire gold and other precious
metal purchase agreements (“Gold Streams” or “Silver Streams”) and royalties from companies that have advanced
stage development projects or operating mines. In return for making an upfront payment to acquire a Gold Stream, Sandstorm receives
the right to purchase, at a fixed price per unit, a percentage of a mine’s production for the life of the mine.
The head office, principal address
and registered office of the Company are located at Suite 1400, 400 Burrard Street, Vancouver, British Columbia, V6C 3A6.
These condensed consolidated interim
financial statements were authorized for issue by the Board of Directors of the Company on May 5, 2016.
| 2. | Summary
of Significant Accounting Policies |
| A. | Statement of Compliance |
These condensed consolidated interim
financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These unaudited condensed
consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 – Interim
Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board ("IASB"). Accordingly,
certain disclosures included in annual financial statements prepared in accordance with International Financial Reporting Standards
("IFRSs") as issued by the IASB have been condensed or omitted. These unaudited condensed consolidated interim financial
statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended
December 31, 2015.
The accounting policies applied in
the preparation of these unaudited condensed consolidated interim financial statements are consistent with those applied and disclosed
in the Company’s audited consolidated financial statements for the year ended December 31, 2015, except for the following:
The Company has adopted the amendments to IFRSs included in the Annual Improvements 2012-2014 cycle and a number of narrow scope
amendments to certain IFRSs and IASs which are effective for annual periods beginning on or after January 1, 2016. The amendments
did not have an impact on the Company's unaudited condensed consolidated interim financial statements. The Company’s interim
results are not necessarily indicative of its results for a full year.
These condensed consolidated interim
financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured
at fair value.
The condensed consolidated interim
financial statements are presented in United States dollars, and all values are rounded to the nearest thousand except as otherwise
indicated.
The Company has allocated certain
salary and related costs and stock based compensation to project evaluation in the Condensed Consolidated Statement of Income during
the three month period ended March 31, 2016. The comparative figures have been adjusted to reflect the reallocation of these costs
from administration expense to project evaluation. The adjustment resulted in a decrease of administration expenses and an increase
in project evaluation by $0.7 million, respectively. This change in presentation did not impact net income or earnings per share
and better reflects the nature of the activities associated with the reclassified expenses.
The fair value hierarchy establishes
three levels to classify the inputs of valuation techniques used to measure fair value. The three levels of the fair value hierarchy
are described below:
Level 1 | Unadjusted
quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Investments in common shares and warrants held that have direct listings on an exchange are classified as Level 1.
Level 2 | Quoted
prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, or inputs that are observable,
either directly or indirectly, for substantially the full term of the asset or liabilities. Investments in warrants and convertible
debt instruments held that are not listed on an exchange are classified as Level 2.
Level 3 | Prices
or valuation techniques that require inputs that are both significant to fair value measurement and unobservable (supported by
little or no market activity).
The following table sets forth the
Company's financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy
as at March 31, 2016. As required by IFRS 13, assets and liabilities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.
In $000s | |
Total | | |
Quoted
prices in active markets for identical assets (Level 1) | | |
Significant other observable inputs (Level 2) | | |
Unobservable inputs (Level 3) | |
Long-term investments – common shares held | |
$ | 27,649 | | |
$ | 27,649 | | |
$ | - | | |
$ | - | |
Long-term investments – convertible debt | |
| 25,099 | | |
| - | | |
| 25,099 | | |
| - | |
| |
$ | 52,748 | | |
$ | 27,649 | | |
$ | 25,099 | | |
$ | - | |
The fair value of the Company's other
financial instruments which include cash and cash equivalents, trade receivables and other, loans receivable, receivables and other,
trade and other payables and bank debt approximate their carrying values at March 31, 2016.
The Company’s credit risk is
limited to cash and cash equivalents, trade receivables and other, loans receivable, and receivables and other in the ordinary
course of business. The Company sells gold exclusively to third parties with a history in commodities. The Company’s trade
receivables and other is subject to the credit risk of the counterparties who own and operate the mines underlying Sandstorm’s
royalty portfolio. The Company’s loan receivable and convertible debenture due from Luna Gold Corp. (“Luna”)
are subject to Luna’s credit risk and the Company’s ability to realize on its security.
Financial instruments that impact
the Company’s net income or other comprehensive income (loss) due to currency fluctuations include: cash and cash equivalents,
trade receivables and other, investments and trade and other payables denominated in Canadian dollars. Based on the Company's Canadian
dollar denominated monetary assets and monetary liabilities at March 31, 2016 a 10% increase (decrease) of the value of the Canadian
dollar relative to the United States dollar would increase (decrease) net income by $0.4 million and other comprehensive income
$2.8 million, respectively.
The Company is exposed to interest
rate risk on its outstanding borrowings. Presently, all of the Company’s outstanding borrowings are at floating rates. The
Company monitors its exposure to interest rates and has not entered into any derivative contracts to manage risk. During the period
ended March 31, 2016, the weighted average effective interest rate paid by the Company on the amount drawn on its outstanding borrowings
was 4.8% (2015- 3.4%). A fluctuation in interest rates of 100 basis points (1 percent) would have affected finance expense by approximately
$0.4 million.
In managing liquidity risk, the Company takes into account its loan facility, anticipated cash flows from
operations and its holding of cash and cash equivalents. As at March 31, 2016, the Company had cash and cash equivalents of $5.3
million (2015: $5.3 million) and working capital of $0.3 million (2015: $1.8 million). The Company has a revolving facility which
matures in July 2019. Additionally, Sandstorm holds common shares, convertible debentures, and warrants of other companies with
a combined fair market value as at March 31, 2016, of $52.7 million (December 31, 2015 – $26.6 million). The
daily exchange traded volume of these shares, including the shares underlying the warrants, may not be sufficient for the Company
to liquidate its position in a short period of time without potentially affecting the market value of the shares.
| 4. | Mineral
Interests and Royalties |
As of and for the three months ended
March 31, 2016:
|
|
Cost |
|
|
Accumulated Depletion |
|
|
|
|
In $000s |
|
Opening |
|
|
Additions
(disposals) |
|
|
Ending |
|
|
Opening |
|
|
Depletion |
|
|
Inventory
depletion
adjustment |
|
|
Impairment |
|
Ending |
|
|
Carrying
Amount |
|
Aurizona, Brazil |
|
|
11,000 |
|
|
|
- |
|
|
|
11,000 |
|
|
|
310 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
310 |
|
|
|
10,690 |
|
Bachelor Lake, Canada |
|
|
22,671 |
|
|
|
- |
|
|
|
22,671 |
|
|
|
14,678 |
|
|
|
694 |
|
|
|
67 |
|
|
|
- |
|
|
15,439 |
|
|
|
7,232 |
|
Black Fox, Canada |
|
|
37,758 |
|
|
|
- |
|
|
|
37,758 |
|
|
|
22,117 |
|
|
|
597 |
|
|
|
- |
|
|
|
- |
|
|
22,714 |
|
|
|
15,044 |
|
Chapada, Brazil |
|
|
69,520 |
|
|
|
3 |
|
|
|
69,523 |
|
|
|
- |
|
|
|
552 |
|
|
|
- |
|
|
|
- |
|
|
552 |
|
|
|
68,971 |
|
Diavik Mine, Canada |
|
|
53,111 |
|
|
|
- |
|
|
|
53,111 |
|
|
|
6,273 |
|
|
|
868 |
|
|
|
- |
|
|
|
- |
|
|
7,141 |
|
|
|
45,970 |
|
Hugo North Extension
and Heruga, Mongolia |
|
|
42,493 |
|
|
|
(7,128 |
) |
|
|
35,365 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
35,365 |
|
Karma Gold Project, Burkina Faso |
|
|
21,174 |
|
|
|
5,115 |
|
|
|
26,289 |
|
|
|
- |
|
|
|
- |
|
|
|
262 |
|
|
|
- |
|
|
262 |
|
|
|
26,027 |
|
Ming, Canada |
|
|
20,068 |
|
|
|
- |
|
|
|
20,068 |
|
|
|
7,622 |
|
|
|
- |
|
|
|
104 |
|
|
|
- |
|
|
7,726 |
|
|
|
12,342 |
|
Santa Elena, Mexico |
|
|
23,342 |
|
|
|
- |
|
|
|
23,342 |
|
|
|
17,202 |
|
|
|
664 |
|
|
|
89 |
|
|
|
- |
|
|
17,955 |
|
|
|
5,387 |
|
Yamana Silver Stream, Argentina |
|
|
74,229 |
|
|
|
- |
|
|
|
74,229 |
|
|
|
- |
|
|
|
194 |
|
|
|
- |
|
|
|
- |
|
|
194 |
|
|
|
74,035 |
|
Royalties1 |
|
|
206,724 |
|
|
|
17,309 |
|
|
|
224,033 |
|
|
|
106,393 |
|
|
|
1,646 |
|
|
|
- |
|
|
|
1,369 |
|
|
109,408 |
|
|
|
114,625 |
|
Other |
|
|
11,339 |
|
|
|
- |
|
|
|
11,339 |
|
|
|
4,471 |
|
|
|
15 |
|
|
|
- |
|
|
|
- |
|
|
4,486 |
|
|
|
6,853 |
|
Total 2 |
|
|
593,429 |
|
|
|
15,299 |
|
|
|
608,728 |
|
|
|
179,066 |
|
|
|
5,230 |
|
|
|
522 |
|
|
|
1,369 |
|
|
186,187 |
|
|
|
422,541 |
|
| 1) | Includes Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Gualcamayo,
Emigrant Springs, Mine Waste Solutions, San Andres, Sao Francisco, Sao Vicente, Thunder Creek, Bomboré, Hat Maden, Hackett
River, Lobo-Marte, Agi Dagi & Kirazli and other. |
| 2) | Total mineral interest and royalties includes $112.9 million of assets located in Canada, $97.5
million in Argentina, $87.6 million in Brazil, $35.4 million in Mongolia, $29.2 million in Burkina Faso, $21.7 million in the United
States, $9.7 million in Turkey, $6.9 million in South Africa, $5.4 million in Mexico, $5.1 million in French Guiana, $5.0 million
in Peru, $2.8 million in Honduras, and $3.3 million in other countries. |
As of and for the year ended December
31, 2015:
| |
Cost | | |
Accumulated Depletion | | |
| |
In $000s | |
Opening | | |
Additions (disposals) | | |
Foreign exchange translation | | |
Ending | | |
Opening | | |
Depletion | | |
Impairment | | |
Disposals | | |
Ending | | |
Carrying Amount | |
Aurizona, Brazil | |
| 27,358 | | |
| (16,358 | ) | |
| - | | |
| 11,000 | | |
| 5,756 | | |
| 1,072 | | |
| - | | |
| (6,518 | ) | |
| 310 | | |
| 10,690 | |
Bachelor Lake, Canada | |
| 22,671 | | |
| - | | |
| - | | |
| 22,671 | | |
| 10,458 | | |
| 4,220 | | |
| - | | |
| - | | |
| 14,678 | | |
| 7,993 | |
Black Fox, Canada | |
| 37,758 | | |
| - | | |
| - | | |
| 37,758 | | |
| 17,836 | | |
| 4,281 | | |
| - | | |
| - | | |
| 22,117 | | |
| 15,641 | |
Chapada, Brazil | |
| - | | |
| 69,520 | | |
| | | |
| 69,520 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 69,520 | |
Diavik Mine, Canada | |
| - | | |
| 53,111 | | |
| - | | |
| 53,111 | | |
| - | | |
| 6,273 | | |
| - | | |
| - | | |
| 6,273 | | |
| 46,838 | |
Hugo North Extension and Heruga, Mongolia | |
| 42,493 | | |
| - | | |
| - | | |
| 42,493 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 42,493 | |
Karma Gold Project, Burkina Faso | |
| 14,456 | | |
| 6,718 | | |
| - | | |
| 21,174 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 21,174 | |
Ming, Canada | |
| 20,068 | | |
| - | | |
| - | | |
| 20,068 | | |
| 5,628 | | |
| 1,994 | | |
| - | | |
| - | | |
| 7,622 | | |
| 12,446 | |
Santa Elena, Mexico | |
| 23,342 | | |
| - | | |
| - | | |
| 23,342 | | |
| 11,087 | | |
| 6,115 | | |
| - | | |
| - | | |
| 17,202 | | |
| 6,140 | |
Yamana Silver Stream, Argentina | |
| - | | |
| 74,229 | | |
| | | |
| 74,229 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 74,229 | |
Royalties 1 | |
| 189,970 | | |
| 19,348 | | |
| (2,594 | ) | |
| 206,724 | | |
| 76,907 | | |
| 11,164 | | |
| 18,322 | | |
| - | | |
| 106,393 | | |
| 100,331 | |
Other 2 | |
| 12,393 | | |
| (1,054 | ) | |
| - | | |
| 11,339 | | |
| 955 | | |
| 193 | | |
| 3,323 | | |
| - | | |
| 4,471 | | |
| 6,868 | |
Total
3 | |
| 390,509 | | |
| 205,514 | | |
| (2,594 | ) | |
| 593,429 | | |
| 128,627 | | |
| 35,312 | | |
| 21,645 | | |
| (6,518 | ) | |
| 179,066 | | |
| 414,363 | |
| 1) | Includes Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Serra Pelada,
Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Sao Francisco, Thunder Creek, Bomboré, the Gold Royalties
royalty portfolio and the Early Gold Deposit. |
| 2) | Includes Summit and other. |
| 3) | Total mineral interest and royalties includes $111.3 million of assets located in Canada, $88.1
million in Brazil, $98.1 million in Argentina, $42.5 million in Mongolia, $21.8 million in the United States, $24.3 million in
Burkina Faso, $6.1 million in Mexico, $6.9 million in South Africa, $5.1 million in French Guiana, $3.1 million in Honduras, $1.0
million in Ghana, and $6.1 million in other South American countries. |
| B. | Acquisitions and Update |
ACQUISITION | Royalty
Portfolio Acquisition
During the three
months ended March 31, 2016, the Company announced that it had acquired a royalty portfolio consisting of 52 royalties from Teck
Resources Limited and its affiliates. The portfolio was acquired for consideration of $16.8 million, of which $1.4 million was
paid in cash and $15.4 million in common shares of the Company (using the closing market price on the date of issuance). Certain
royalties in the portfolio were subject to rights of first offer and first refusal (“ROFR”), which were exercised by
the counterparties. The total consideration paid to Teck was reduced by $2.6 million as a result of the ROFRs being exercised.
As at March 31, 2016, there are no unresolved ROFRs in connection with the acquired royalty portfolio.
UPDATE | Hugo
North Extension & Heruga Gold Stream
During the three months ended March
31, 2016, Sandstorm amended its Gold Stream with Entrée Gold Inc. (“Entrée”) such that the Company will
now purchase an amount equal to 5.62% and 4.26% of the gold and silver by-products produced from the Hugo North Extension and Heruga
deposits located in Mongolia, (the “Hugo North Extension” and “Heruga”, respectively) for per ounce cash
payments equal to the lesser of $220 per ounce of gold and $5 per ounce of silver and the then prevailing market price of gold
and silver, respectively. Additionally, Sandstorm amended its copper stream such that the Company will now purchase an amount equal
to 0.42% share of the copper produced from Hugo North Extension and Heruga for per pound cash payments equal to the lesser of $0.50
per pound of copper and the then prevailing market price of copper. In consideration for the amendment and during the three months
ended March 31, 2016, Sandstorm received consideration of $7.0 million (of which $5.5 million was paid in cash and $1.5 million
was received by way of Entrée common shares).
While assessing
whether any indications of impairment exist for mineral properties, consideration is given to both external and internal sources
of information. The lack of progress with respect to advancing some of the royalties within Sandstorm’s mineral interest
portfolio, prompted the Company to evaluate its investment in these specific assets. The recoverable amount of the asset, for impairment
assessment purposes, was determined using the fair value less costs to sell. Key assumptions used in the analysis to determine
fair value included management’s best estimates of the value of the underlying royalty assets. As a result of its review,
the Company, during the three months ended March 31, 2016, recorded an impairment charge of $1.4 million for the full balance of
these specifically identified mineral royalties.
As of and for the three months
ended March 31, 2016:
In $000s | |
Fair Value December 31, 2015 | | |
Net Additions (Disposals) March 31, 2016 | | |
Fair Value Adjustment March 31, 2016 | | |
Fair Value March 31, 2016 | |
Common shares | |
$ | 14,990 | | |
$ | 4,066 | | |
$ | 8,593 | | |
$ | 27,649 | |
Convertible debt instruments | |
| 11,590 | | |
| 60 | | |
| 13,449 | | |
| 25,099 | |
Total | |
$ | 26,580 | | |
$ | 4,126 | | |
$ | 22,042 | | |
$ | 52,748 | |
As of and for the three months
ended March 31, 2015:
In $000s | |
Fair Value December 31, 2014 | | |
Net Additions (Disposals) March 31, 2015 | | |
Fair Value Adjustment March 31, 2015 | | |
Fair Value March 31, 2015 | |
Common shares | |
$ | 14,254 | | |
$ | 234 | | |
$ | (2,422 | ) | |
$ | 12,066 | |
Warrants | |
| 70 | | |
| - | | |
| 800 | | |
| 870 | |
Convertible debt instruments | |
| 9,665 | | |
| (147 | ) | |
| (1,261 | ) | |
| 8,257 | |
Total | |
$ | 23,989 | | |
$ | 87 | | |
$ | (2,883 | ) | |
$ | 21,193 | |
| 6. | Share
Capital and Reserves |
The Company is authorized to issue
an unlimited number of common shares without par value.
Under the Company’s normal
course issuer bid (“NCIB”), the Company is able until April 3, 2017, to purchase up to 6,896,539 common shares.
The NCIB provides the Company with the option to purchase its common shares from time to time when the Company’s management
believes that the Common Shares are undervalued by the market.
| B. | Stock Options of the Company |
The Company has an incentive stock
option plan (the “Option Plan”) whereby the Company may grant share options to eligible employees, officers, directors
and consultants at an exercise price, expiry date, and vesting conditions to be determined by the Board of Directors. The maximum
expiry date is five years from the grant date. All options are equity settled. The Option Plan permits the issuance of options
which, together with the Company's other share compensation arrangements, may not exceed 10% of the Company’s issued common
shares as at the date of the grant.
A summary of the Company’s
options and the
changes for the period are as follows:
| |
Number of Options | | |
Weighted Average Exercise Price (C$) | |
Options outstanding at December 31, 2014 | |
| 6,852,607 | | |
| 4.69 | |
Granted | |
| 1,284,000 | | |
| 3.61 | |
Addition of outstanding Gold Royalties’ Options | |
| 47,475 | | |
| 15.71 | |
Exercised | |
| (155,000 | ) | |
| (3.39 | ) |
Forfeited | |
| (1,173,500 | ) | |
| (3.40 | ) |
Options outstanding at December 31, 2015 and March 31, 2016 | |
| 6,855,582 | | |
| 5.45 | |
A summary of the Company’s
share purchase options
as of March 31, 2016 is as follows:
Number outstanding | |
Exercisable | |
Exercise Price per Share (C$) | |
Expiry Date |
66,000 | |
66,000 | |
$6.30 | |
August 25, 2016 |
1,129,000 | |
1,129,000 | |
6.35 | |
November 25, 2016 |
27,000 | |
27,000 | |
18.33 | |
August 22, 2017 |
5,850 | |
5,850 | |
18.33 | |
October 4, 2017 |
402,133 | |
402,133 | |
16.35 | |
December 11, 2017 |
150,000 | |
150,000 | |
11.78 | |
December 21, 2017 |
10,875 | |
10,875 | |
11.31 | |
February 19, 2018 |
3,625 | |
3,625 | |
10.62 | |
March 1, 2018 |
12,375 | |
12,375 | |
8.89 | |
December 13, 2018 |
25,000 | |
8,334 | |
6.03 | |
May 16, 2019 |
3,737,474 | |
1,245,834 | |
2.93 | |
November 13, 2019 |
1,084,000 | |
- | |
3.60 | |
December 9, 2020 |
200,000 | |
- | |
3.64 | |
December 22, 2020 |
2,250 | |
2,250 | |
15.00 | |
March 30, 2022 |
6,855,582 | |
3,063,276 | |
$6.70 | |
|
| C. | Share Purchase Warrants |
A summary of the Company’s
warrants and the changes
for the period are as follows:
| |
Number of Warrants | | |
Shares to be Issued Upon Exercise of the Warrants | |
Warrants outstanding at December 31, 2014 | |
| 25,769,272 | | |
| 10,225,553 | |
Addition of Gold Royalties’ Warrants | |
| 368,038 | | |
| 368,038 | |
Issued | |
| 23,043,900 | | |
| 23,043,900 | |
Expired unexercised | |
| (19,874,037 | ) | |
| (4,330,318 | ) |
Warrants outstanding at December 31, 2015 | |
| 29,307,173 | | |
| 29,307,173 | |
Expired unexercised | |
| (72,500 | ) | |
| (72,500 | ) |
Warrants outstanding at March 31, 2016 | |
| 29,234,673 | | |
| 29,234,673 | |
A summary of the Company’s
warrants as of
March 31, 2016 are as follows:
Number outstanding | |
|
Exercise Price per Share | |
Expiry Date |
32,400 | |
C$ | 11.11 | | |
May 1, 2016 |
1,155,873 | |
C$ | 13.79 | | |
December 4, 2016 |
5,002,500 | |
$ | 14.00 | | |
September 7, 2017 |
3,000,000 | |
$ | 4.50 | | |
March 23, 2020 |
15,000,000 | |
$ | 3.50 | | |
October 26, 2020 |
5,043,900 | |
$ | 4.00 | | |
November 3, 2020 |
29,234,673 | |
| | | |
|
| D. | Restricted Share Rights |
The Company has a restricted share
plan (the “Restricted Share Plan”) whereby the Company may grant restricted share rights to eligible employees, officers,
directors and consultants at an expiry date to be determined by the Board of Directors. Each restricted share right entitles the
holder to receive a common share of the Company without any further consideration. The Restricted Share Plan permits the issuance
of up to a maximum of 2,800,000 RSRs.
As at March 31, 2016, the Company
had 1,395,517 RSRs outstanding.
| E. | Diluted Earnings Per Share |
Diluted earnings per share is
calculated
based on the following:
In $000s | |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Net income | |
$ | 13,159 | | |
$ | 825 | |
| |
| | | |
| | |
Basic weighted average number of shares | |
| 136,030,218 | | |
| 117,478,182 | |
Basic earnings per share | |
$ | 0.10 | | |
$ | 0.01 | |
| |
| | | |
| | |
Effect of dilutive securities | |
| | | |
| | |
· Stock options | |
| 522,410 | | |
| 1,575,509 | |
· Warrants | |
| - | | |
| - | |
· Restricted
share rights | |
| 176,098 | | |
| - | |
Diluted weighted average number of common shares | |
| 136,728,726 | | |
| 119,053,691 | |
Diluted earnings per share | |
$ | 0.10 | | |
$ | 0.01 | |
The following table lists the number
of stock options, warrants and RSRs excluded from the computation of diluted earnings per share because the exercise prices exceeded
the average market value of the common shares of C$3.75 during the period ended March 31, 2016 (March 31, 2015 – C$4.43):
| |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Stock Options | |
| 2,918,108 | | |
| 1,786,633 | |
Warrants | |
| 33,528,741 | | |
| 10,225,553 | |
RSRs | |
| 619,935 | | |
| 578,334 | |
The income tax expense differs from
the amount that would result from applying the federal and provincial income tax rate to the net income before income taxes.
These differences result from
the following items:
In $000s | |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Income before income taxes | |
$ | 14,196 | | |
$ | 1,368 | |
Canadian federal and provincial income tax rates | |
| 26.0 | % | |
| 26.0 | % |
Income tax expense based on the above rates | |
$ | 3,691 | | |
$ | 356 | |
Increase (decrease) due to: | |
| | | |
| | |
· Non-deductible expenses and permanent differences | |
| (1,525 | ) | |
| 177 | |
· Change in deductible temporary differences | |
| 520 | | |
| - | |
· Change in unrecognized temporary differences | |
| (1,642 | ) | |
| - | |
· Difference between statutory and foreign tax rates | |
| (55 | ) | |
| (591 | ) |
· Other | |
| 48 | | |
| 601 | |
Income tax expense | |
$ | 1,037 | | |
$ | 543 | |
| 8. | Administration
Expenses |
The administration expenses
for the Company
are as follows:
In $000s | |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Corporate administration | |
$ | 371 | | |
$ | 408 | |
Employee benefits and salaries | |
| 474 | | |
| 468 | |
Professional fees | |
| 231 | | |
| 203 | |
Depreciation | |
| 52 | | |
| 54 | |
Administration expenses before share based compensation | |
$ | 1,128 | | |
$ | 1,133 | |
| |
| | | |
| | |
Equity settled share based compensation (a non-cash expense) | |
| 282 | | |
| 385 | |
Total administration expenses | |
$ | 1,410 | | |
$ | 1,518 | |
| 9. | Supplemental
Cash Flow Information |
In $000s | |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Change in non-cash working capital: | |
| | | |
| | |
· Trade receivables and other | |
$ | (54 | ) | |
$ | (1,546 | ) |
· Trade and other payables | |
| 2,048 | | |
| 465 | |
Net increase (decrease) in cash | |
$ | 1,994 | | |
$ | (1,081 | ) |
Significant non-cash transactions: | |
| | | |
| | |
· Shares issued for acquisition of royalties and other (note 4 (b)) | |
$ | 16,159 | | |
$ | - | |
· Issuance of warrants for Diavik royalty acquisition | |
$ | - | | |
$ | 583 | |
| 10. | Key
Management Compensation |
The remuneration of directors and
those persons having authority and responsibility for planning, directing and controlling activities of the Company are as follows:
In $000s | |
Three Months Ended March 31, 2016 | | |
Three Months Ended March 31, 2015 | |
Short-term employee salaries and benefits | |
$ | 370 | | |
$ | 543 | |
Share-based payments | |
| 517 | | |
| 561 | |
Total key management compensation expense | |
$ | 887 | | |
$ | 1,104 | |
| 11. | Contractual
Obligations |
In connection with its Gold Streams,
the Company has committed to purchase the following:
Gold Stream | |
%
of Life of Mine Gold 5, 6,
7, 8, 9 | |
Per
Ounce Cash Payment: lesser of amount below and the then prevailing market price of gold 1,
2, 3, 4 |
Bachelor Lake | |
20% | |
$500 |
Black Fox | |
8% | |
$524 |
Chapada | |
4.2% | |
30% of copper spot price |
Entrée Gold | |
5.62% on Hugo North Extension and 4.26% on Heruga | |
$220 |
Karma | |
26,875 ounces over 5 years and 1.625% thereafter | |
20% of gold spot price |
Ming | |
25% of the first 175,000 ounces of gold produced, and 12% thereafter | |
$nil |
Santa Elena | |
20% | |
$357 |
Yamana
Silver Stream | |
Varies | |
30%
of silver spot price |
| 1) | Subject to an annual inflationary adjustment except for Ming. |
| 2) | For the Entrée Gold Stream, after approximately 8.6 million ounces
of gold have been produced from the joint venture property, the price increases to $500 per gold ounce. |
| 3) | For the Entrée Silver Stream, percentage of life of mine is 5.62% on Hugo North Extension
and 4.26% on Heruga which the Company can purchase for the lesser of the prevailing market price and $5 per ounce of silver until
40.3 million ounces of silver have been produced from the entire joint venture property. Thereafter, the purchase price will increase
to the lesser of the prevailing market price and $10 per ounce of silver. |
| 4) | For the Santa Elena Gold Stream, the Company can purchase for a per ounce cash payment equal to
(i) the lesser of $357 and the then prevailing market price of gold for the open-pit mine and (ii) the lesser of $357 and the then
prevailing market price of gold until 50,000 ounces of gold have been delivered to Sandstorm (inclusive of ounces already received
from open-pit production), at which time the on-going per ounce payments will increase to the lesser of $450 and the then prevailing
market price of gold for the underground mine. |
| 5) | For the Entrée Gold and Silver Stream, percentage of life of mine is 5.62% on Hugo North
Extension and 4.26% on Heruga if the minerals produced are contained below 560 metres in depth. |
| 6) | For the Entrée Gold and Silver Stream, percentage of life of mine is 8.43% on Hugo North
Extension and 6.39% on Heruga if the minerals produced are contained above 560 metres in depth. |
| 7) | For the Entrée copper stream, the Company has committed to purchase an amount equal to 0.42%
of the copper produced from the Hugo North Extension and Heruga deposits. If the minerals produced are contained above 560 metres
in depth, then the commitment increases to 0.62% for both the Hugo North Extension and Heruga deposits. Sandstorm will make ongoing
per pound cash payments equal to the lesser of $0.50 and the then prevailing market price of copper, until 9.1 billion pounds of
copper have been produced from the entire joint venture property. Thereafter, the on-going per pound payments will increase to
the lesser of $1.10 and the then prevailing market price of copper. |
| 8) | For the Chapada copper stream, the Company has committed to purchase an amount
equal to 4.2% of the copper produced (up to an annual maximum of 3.9 million pounds of copper) until Yamana has delivered 39 million
pounds of copper to Sandstorm; then 3.0% of the copper produced until, on a cumulative basis, Yamana has delivered 50 million pounds
of copper to Sandstorm; then 1.5% of the copper produced thereafter, for the life of the mine. If Cerro Moro has not achieved the
Commencement of Production and Sandstorm has not received cumulative pre-tax cash flow equal to $70 million from the Yamana Silver
Stream, then the First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease to be in effect and Sandstorm
will continue to purchase 4.2% of Chapada’s payable copper production (up to an annual maximum of 3.9 million pounds of copper),
until such time as Sandstorm has received cumulative pre-tax cash flow equal to $70 million, or Cerro Moro has achieved the Commencement
of Production. |
| 9) | Under the terms of the Yamana Silver Stream, Sandstorm has agreed to purchase
an amount of silver from Cerro Moro equal to 20% of the silver produced (up to an annual maximum of 1.2 million ounces of silver),
until Yamana has delivered to Sandstorm 7.0 million ounces of silver; then 9.0% of the silver produced thereafter. As part of the
Yamana Silver Stream, during the year 2016 through 2018, Sandstorm has also agreed to purchase an amount of silver from: (i) the
Minera Florida mine in Chile equal to 38% of the silver produced (up to an annual maximum of 200,000 ounces of silver); and (ii)
the Chapada mine in Brazil equal to 52% of the silver produced (up to an annual maximum of 100,000 ounces of silver). |
In connection with the Karma Gold
Stream, the stream syndicate (Franco Nevada Corp and Sandstorm) has provided True Gold Mining Inc. (now Endeavour Mining Corp)
with an 18 month option to increase funding by up to $20 million (the “Increase Option”) in exchange for eight quarterly
deliveries totaling 30,000 ounces of gold, or the pro-rata portion of the amount drawn thereunder, starting 18 months from when
the first tranche under the Increase Option is drawn down. During the three months ended March 31, 2016, Sandstorm remitted $1.25
million of its $5 million commitment under the Increase Option.
In connection with the Bomboré
royalty, Sandstorm has committed to providing up to an additional $5.0 million in royalty financing (remittable in cash and/or
shares, subject to certain conditions) to Orezone Gold Corp. on a draw down basis until January 27, 2017.
The Company will, from time to time,
repay balances outstanding on its revolving facility with operating cash flow and cash flow from other sources. The amounts drawn
on the revolving facility remain subject to interest at LIBOR plus 3.00% – 4.25% per annum, and the undrawn
portion of the revolving facility remains subject to a standby fee of 0.75% – 1.05% per annum, dependent on
the Company’s leverage ratio. The revolving facility matures in July 2019.
The Company’s reportable operating
segments, which are components of the Company’s business where separate financial information is available and which are
evaluated on a regular basis by the Company’s Chief Executive Officer, who is the Company’s chief operating decision
maker, for the purpose of assessing performance, are summarized in the tables below:
For the three months ended March
31, 2016
In $000s | |
Sales | | |
Royalty revenue | | |
Cost of sales (excluding depletion) | | |
Depletion | | |
Impairment of mineral interests | | |
Income (loss) before taxes | | |
Cash from operations | |
Bachelor Lake, Canada | |
$ | 1,980 | | |
$ | - | | |
$ | 847 | | |
$ | 694 | | |
$ | - | | |
$ | 439 | | |
$ | 1,133 | |
Black Fox, Canada | |
| 1,587 | | |
| - | | |
| 696 | | |
| 597 | | |
| - | | |
| 294 | | |
| 891 | |
Chapada, Brazil | |
| 1,144 | | |
| - | | |
| 354 | | |
| 552 | | |
| - | | |
| 238 | | |
| 790 | |
Diavik, Canada | |
| - | | |
| 1,300 | | |
| - | | |
| 868 | | |
| - | | |
| 432 | | |
| 1,176 | |
Santa Elena, Mexico | |
| 3,391 | | |
| - | | |
| 1,031 | | |
| 664 | | |
| - | | |
| 1,696 | | |
| 2,360 | |
Yamana Silver Stream, Argentina | |
| 357 | | |
| - | | |
| 107 | | |
| 194 | | |
| - | | |
| 56 | | |
| 250 | |
Other Royalties 1 | |
| - | | |
| 3,580 | | |
| - | | |
| 1,646 | | |
| 1,368 | | |
| 566 | | |
| 4,712 | |
Other | |
| 45 | | |
| - | | |
| 4 | | |
| 15 | | |
| - | | |
| 26 | | |
| 45 | |
Corporate | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 10,449 | | |
| (1,672 | ) |
Consolidated | |
$ | 8,504 | | |
$ | 4,880 | | |
$ | 3,039 | | |
$ | 5,230 | | |
$ | 1,368 | | |
$ | 14,196 | | |
$ | 9,685 | |
| 1) | Includes royalty revenue from Bracemac-McLeod, Gualcamayo, Emigrant Springs, Mine Waste Solutions,
San Andres, Thunder Creek, Copper Mountain and Sheerness. Includes royalty revenue from royalty interests located in Canada of
$2.4 million, in the United States of $0.4 million, and other of $2.1 million. |
For the three months ended March
31, 2015
In $000s | |
Sales | | |
Royalty revenue | | |
Cost of sales (excluding depletion) | | |
Depletion | | |
Income (loss) before taxes | | |
Cash from operations | |
Aurizona, Brazil | |
$ | 3,857 | | |
$ | - | | |
$ | 1,263 | | |
$ | 368 | | |
$ | 2,226 | | |
$ | 2,594 | |
Bachelor Lake, Canada | |
| 2,473 | | |
| - | | |
| 1,016 | | |
| 1,208 | | |
| 249 | | |
| 1,457 | |
Black Fox, Canada | |
| 2,288 | | |
| - | | |
| 954 | | |
| 1,327 | | |
| 7 | | |
| 1,334 | |
Diavik Mine, Canada | |
| - | | |
| 1,500 | | |
| - | | |
| 1,458 | | |
| 42 | | |
| - | |
Ming, Canada | |
| 240 | | |
| - | | |
| - | | |
| 242 | | |
| (2 | ) | |
| 240 | |
Santa Elena, Mexico | |
| 2,708 | | |
| - | | |
| 786 | | |
| 1,354 | | |
| 568 | | |
| 1,922 | |
Other Royalties 1 | |
| - | | |
| 2,219 | | |
| - | | |
| 2,841 | | |
| (622 | ) | |
| 2,664 | |
Corporate | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,100 | ) | |
| (2,092 | ) |
Consolidated | |
$ | 11,566 | | |
$ | 3,719 | | |
$ | 4,019 | | |
$ | 8,798 | | |
$ | 1,368 | | |
$ | 8,119 | |
| 1) | Includes royalty revenue from Bracemac-McLeod, Gualcamayo, Emigrant Springs, Mine Waste Solutions,
San Andres, and Thunder Creek. Includes royalty revenue from royalty interests located in Canada of $0.8 million, in the United
States of $0.5 million, and other of $0.9 million. |
Total assets as of:
In
$000s | |
March
31, 2016 1 | | |
December
31, 2015 1 | |
Aurizona | |
$ | 10,690 | | |
$ | 10,690 | |
Bachelor Lake | |
| 7,232 | | |
| 7,993 | |
Black Fox | |
| 15,044 | | |
| 15,641 | |
Chapada | |
| 68,971 | | |
| 69,520 | |
Diavik Mine | |
| 46,094 | | |
| 48,013 | |
Entrée | |
| 35,365 | | |
| 42,493 | |
Karma | |
| 26,026 | | |
| 21,174 | |
Ming | |
| 12,342 | | |
| 12,446 | |
Santa Elena | |
| 5,387 | | |
| 6,140 | |
Yamana Silver Stream | |
| 74,035 | | |
| 74,229 | |
Other Royalties 2 | |
| 118,001 | | |
| 103,634 | |
Other 3 | |
| 6,853 | | |
| 6,868 | |
Corporate | |
| 105,120 | | |
| 78,032 | |
Consolidated | |
$ | 531,160 | | |
$ | 496,873 | |
| 1) | Includes related accounts receivables and payables in relation to the respective properties. |
| 2) | Includes Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Gualcamayo,
Emigrant Springs, Mine Waste Solutions, San Andres, Sao Francisco, Sao Vicente, Thunder Creek, Bomboré, Hat Maden, Hackett
River, Lobo-Marte, Agi Dagi & Kirazli and other. |
| 3) | Includes Summit and other. |
EXHIBIT 99.2
Form
52-109F2
Certification
of Interim Filings
Full
Certificate
I, NOLAN WATSON, Chief Executive
Officer of SANDSTORM GOLD LTD., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together,
the “Interim Filings”) of SANDSTORM GOLD LTD. (the “Issuer”) for the interim period
ended MARCH 31, 2016. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence,
the Interim Filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated
or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to
the period covered by the Interim Filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence,
the interim financial report together with the other financial information included in the Interim Filings fairly present in all
material respects the financial condition, financial performance and cash flows of the Issuer, as of the date of and for the periods
presented in the Interim Filings. |
| 4. | Responsibility: The Issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR),
as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the Issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3,
the Issuer’s other certifying officer(s) and I have, as at the end of the period covered by the Interim Filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the Issuer is made known to us by others, particularly during
the period in which the Interim Filings are being prepared; and |
| (ii) | information required to be disclosed by the Issuer in its annual filings, interim filings or other
reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods
specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with the Issuer’s GAAP. |
| 5.1 | Control framework: The control framework the Issuer’s other certifying officer(s)
and I used to design the Issuer’s ICFR is Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. |
| 5.2 | ICFR – material weakness relating to design: N/A. |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The Issuer has disclosed in its interim MD&A any change
in the Issuer’s ICFR that occurred during the period beginning on January 1, 2016 and ended on March 31, 2016 that has materially
affected, or is reasonably likely to materially affect, the Issuer’s ICFR. |
Date: MAY 5, 2016.
“Nolan Watson”
NOLAN WATSON
Chief Executive Officer
EXHIBIT 99.3
Form
52-109F2
Certification
of Interim Filings
Full
Certificate
I, ERFAN KAZEMI, Chief Financial
Officer of SANDSTORM GOLD LTD., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together,
the “Interim Filings”) of SANDSTORM GOLD LTD. (the “Issuer”) for the interim period
ended MARCH 31, 2016. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence,
the Interim Filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated
or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to
the period covered by the Interim Filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence,
the interim financial report together with the other financial information included in the Interim Filings fairly present in all
material respects the financial condition, financial performance and cash flows of the Issuer, as of the date of and for the periods
presented in the Interim Filings. |
| 4. | Responsibility: The Issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR),
as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the Issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3,
the Issuer’s other certifying officer(s) and I have, as at the end of the period covered by the Interim Filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the Issuer is made known to us by others, particularly during
the period in which the Interim Filings are being prepared; and |
| (ii) | information required to be disclosed by the Issuer in its annual filings, interim filings or other
reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods
specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with the Issuer’s GAAP. |
| 5.1 | Control framework: The control framework the Issuer’s other certifying officer(s)
and I used to design the Issuer’s ICFR is Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. |
| 5.2 | ICFR – material weakness relating to design: N/A. |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The Issuer has disclosed in its interim MD&A any change
in the Issuer’s ICFR that occurred during the period beginning on January 1, 2016 and ended on March 31, 2016 that has materially
affected, or is reasonably likely to materially affect, the Issuer’s ICFR. |
Date: MAY 5, 2016.
“Erfan Kazemi”
ERFAN KAZEMI
Chief Financial Officer
This regulatory filing also includes additional resources:
v438851_ex99-1.pdf
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