Sandstorm Metals & Energy Acquires Copper Stream, Natural Gas Stream and Launches a Cdn$25 Million Equity Financing
July 13 2011 - 8:26AM
Marketwired Canada
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Sandstorm Metals & Energy Ltd. (the "Corporation" or "Sandstorm Metals &
Energy") (TSX VENTURE:SND) is pleased to announce that it has entered into
purchase agreements to acquire copper and natural gas at development assets
located in Canada and the United States of America. These acquisitions further
establish Sandstorm Metals & Energy as the world's first diversified commodity
streaming company.
Sandstorm Metals & Energy has:
-- entered into a copper purchase agreement with Donner Metals Ltd.
("Donner") (TSX VENTURE:DON) to acquire an amount of copper equal to
17.5% of the copper produced at the Bracemac-McLeod development property
(the "Bracemac-McLeod Property") located in Matagami, Quebec and
operated by Xstrata Canada Corporation ("Xstrata"). Donner is the owner
of a 35% joint venture interest in the Bracemac-McLeod Property.
-- entered into a natural gas purchase agreement with Thunderbird Energy
Corp. ("Thunderbird") (TSX VENTURE:TBD) to acquire 35% of all natural
gas produced from Thunderbird's Gordon Creek project located in Utah,
USA ("Gordon Creek").
-- engaged Cormark Securities Inc. as co-lead underwriter with National
Bank Financial, and a syndicate including BMO Capital Markets, Canaccord
Genuity Corp, Paradigm Capital Inc and Casimir Capital Ltd. to raise
gross proceeds of approximately Cdn$25 million (the "Offering").
Donner Transaction
Sandstorm Metals & Energy has entered into a copper purchase agreement with
Donner pursuant to which the Corporation has agreed to purchase an amount of
copper equal to 17.5% of the copper produced from the Xstrata operated
Bracemac-McLeod Property. Sandstorm Metals & Energy will make an upfront cash
payment to Donner of US$20 million (the "Upfront Deposit") upon the completion
of certain funding conditions by Donner, which are expected to be completed in
the near future. In addition, Sandstorm Metals & Energy will receive 6,428,571
common shares of Donner. Donner has also agreed to issue US$1.4 million worth of
common shares to the Corporation on June 30, 2012.
Sandstorm Metals & Energy will make ongoing per pound payments equal to the
lesser of US$0.80 per pound of copper and the then prevailing market price of
copper (the "Per Pound Payments"). If the spot price of copper falls below
US$2.75 per pound, the Per Pound Payments will decrease and be equal to the
lesser of US$0.55 per pound of copper and the then prevailing market price of
copper. Once Sandstorm Metals & Energy has purchased 14.8 million pounds of
copper under the agreement, the Per Pound Payments will be increased by US$0.25
per pound to US$1.05 per pound (or US$0.80 per pound if the spot price of copper
falls below US$2.75 per pound.) Donner will have the option, for a period of 24
months, to repurchase up to 50% of the Agreement by making a US$14 million
payment to Sandstorm Metals & Energy, upon receipt of which the percentage of
copper that Sandstorm Metals & Energy is entitled to purchase will be decreased
from 17.5% to 8.75%.
Aside from the Upfront Deposit and Per Pound Payments, the Corporation is not
required to contribute to any capital, exploration or operating expenditures in
respect to the Bracemac-McLeod Property. Donner has provided Sandstorm Metals &
Energy with a guarantee that the Corporation will receive minimum before tax
cash flows of (i) US$5.7 million in 2013, (ii) US$5.1 million in 2014, (iii)
US$5.6 million in 2015, and (iv) US$3.6 million in 2016, thus providing a 100%
return of capital within approximately five years.
As part of this transaction, Sandstorm Gold Ltd. ("Sandstorm Gold") has agreed
to purchase 17.5% of the gold and gold equivalent from the Bracemac-McLeod
Property, in exchange for making a payment to Donner (via a back-to-back
agreement between Sandstorm Gold and Sandstorm Metals & Energy) of US$5 million
on June 30, 2012. For more information on the transaction see the Sandstorm Gold
press release at http://www.sandstormgold.com.
"We are pleased to have acquired a copper stream on a strong mine, operated by
one of the world's largest mining companies," said President & CEO Nolan Watson.
"With the acquisition of 5 commodity streams in the past 7 months, the vision of
Sandstorm Metals & Energy as a multi-resource streaming company has come to
fruition and we are excited to continue developing the business."
Sandstorm Metals & Energy has entered into a cooperation agreement with
Sandstorm Gold whereby the two companies, where applicable, will work together
to complete metal streaming transactions and share joint operating expenses.
About the Bracemac-McLeod Property
The Bracemac-McLeod Property is a high grade volcanogenic massive sulphide
("VMS") deposit located in the historical and prolific mining district of
Matagami, Quebec. Xstrata has been operating in the Matagami district for almost
fifty years with ten previously operating mines and one current producing mine
called Perseverance (Xstrata 100%). As Perseverance winds down, Xstrata plans to
shift operations to Bracemac-McLeod (Xstrata 65%, Donner 35%) while utilizing
the existing Matagami mill to produce concentrates of zinc and copper.
Bracemac-McLeod will be an underground mine, accessed via a ramp, and is
expected to begin ore production in early 2013. Construction of the
Bracemac-McLeod Mine began in April 2010 and the access ramp is currently
passing towards the Bracemac ore body. The current mine life is expected to be
approximately four years with exploration potential to extend the mine life.
Ore will be processed at the Xstrata operated Matagami mill which is currently
processing ore from Xstrata's wholly owned Perseverance mine. The Matagami mill
has been in operation since 1963 and underwent a recent upgrade that was
completed in 2008. Historically, it has processed similar types of ore from
other VMS deposits in Matagami. Total mine production from Bracemac-McLeod
(Xstrata 65%, Donner 35%) is expected to be 2,500 tonnes per day and production
of copper is expected to be 24 Mlbs in 2013, 16 Mlbs in 2014, 21 Mlbs in 2015
and 21 Mlbs in 2016.
More information on the Bracemac-McLeod Property and the Matagami mill can be
found on Donner's website at http://www.donnermetals.com and the NI 43-101
technical report located on Donner's SEDAR profile at http://www.sedar.com.
Thunderbird Transaction
Sandstorm Metals & Energy has entered into a purchase agreement with Thunderbird
to which the Corporation has agreed to purchase 35% of all natural gas produced
from Gordon Creek. Pursuant to the agreement, Sandstorm Metals & Energy will
make an upfront cash payment to Thunderbird of US$15 million upon signing the
agreement and a future cash remittance (together the "Upfront Deposit") of US$10
million on May 15, 2012. Sandstorm Metals & Energy will make ongoing per unit
payments equal to the lesser of the prevailing market price and US$1.00 per Mcf
of gas delivered plus 20% of the market price received above US$4.00 per Mcf
(the "Ongoing Payments").
Thunderbird has provided a guarantee that the Corporation will receive minimum
before tax cash flows of (i) US$2.3 million prior to December 31, 2012, (ii)
US$5.1 million in 2013, (iii) US$4.6 million in 2014, (iv) US$4.2 million in
2015, (v) US$3.8 million in 2016, (vi) US$3.3 million in 2017, and (vii) US$1.7
million in 2018 thus providing a 100% return of capital within approximately
seven years. The cash flow guarantees will not apply in a given calendar year if
the Gordon Creek field achieves specified minimum production levels.
Thunderbird has also provided minimum development commitments at Gordon Creek
including the drilling of 50 new wells and workover operations on five existing
wells prior to December 31, 2012, subject to certain conditions. Sandstorm
Metals & Energy may participate in future wells drilled at Gordon Creek beyond
the initial 50 well program by providing additional production payment advances
to Thunderbird at an agreed amount per well.
The Corporation has granted Thunderbird a two year right to buy back half of the
future production under the agreement upon Thunderbird making a payment of
US$16.25 million to Sandstorm Metals & Energy, upon receipt of which, the
percentage of production Sandstorm Metals & Energy is entitled to purchase will
be decreased to 17.5%.
About the Gordon Creek Property
Thunderbird's Gordon Creek field is comprised of roughly 7900 acres, four
producing wells, seven shut in wells and a 100% owned gas gathering and water
disposal system. Gordon Creek is located adjacent to, and shares geology with,
Utah's largest natural gas field known as "Drunkard's Wash". Gordon Creek
currently has 7.5 Bcf of proved reserves and 18.5 Bcf of probable reserves (as
per Thunderbird's January 2011 NI 51-101 reserves report) as well as substantial
undeveloped acreage.
More information on Gordon Creek and Thunderbird can be found on Thunderbird's
website at http://www.thunderbirdenergy.com and the NI 51-101 technical report
located on Thunderbird's SEDAR profile at http://www.sedar.com.
Equity Financing
The Corporation has entered into an agreement with a syndicate of underwriters
led by Cormark Securities Inc. and National Bank Financial Inc., and including
BMO Capital Markets, Canaccord Genuity Corp., Paradigm Capital Inc. and Casimir
Capital Ltd. (collectively the "Underwriters") pursuant to which they have
agreed to purchase, on a bought deal basis, 45,500,000 units (the "Units") at a
price of Cdn$0.55 per Unit for gross proceeds of Cdn$25,025,000 (the
"Offering"). The Corporation has agreed to grant to the Underwriters an
over-allotment option for a period of 30 days from the closing of the Offering
under which they may purchase up to an additional 15% of the number of Units
issued pursuant to the Offering, to cover over-allotments, if any, and for
market stabilization purposes. In the event that the option is exercised in its
entirety, the aggregate gross proceeds of the Offering to the Corporation will
be Cdn$28,778,750. Each Unit will consist of one common share of the Corporation
(each, a "Common Share") and one-half of one common share purchase warrant (each
whole common share purchase warrant, a "Warrant"). Each Warrant will entitle the
holder to acquire one common share of the Corporation at a price of US$0.70 at
any time prior to December 23, 2012 (same terms as the warrants that are
currently trading on the TSX Venture Exchange under the symbol SND.WT). The
Common Shares and Warrants comprising the Units to be issued under the Offering
will be offered by way of a short form prospectus in all of the provinces of
Canada, other than the Province of Quebec.
The net proceeds of the Offering will be used to fund the upfront consideration
for the Thunderbird Transaction, for future streaming acquisitions and for
working capital purposes.
The Offering is expected to close on or about August 3, 2011 and is subject to
certain conditions including, but not limited to, the receipt of all necessary
regulatory and other approvals, including the approval of the TSXV and the
securities regulatory authorities.
The securities offered have not been, and will not be, registered under the U.S.
Securities Act of 1933, as amended (the "U.S. Securities Act") or any U.S. state
securities laws, and may not be offered or sold in the United States or to, or
for the account or benefit of, United States persons absent registration or any
applicable exemption from the registration requirements of the U.S. Securities
Act and applicable U.S. state securities laws. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy securities in
the United States, nor shall there be any sale of these securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful.
The following tables set forth the estimated mineral resources and mineral
reserves for the Bracemac-McLeod Property as of August 30, 2010:
----------------------------------------------------------------------------
Mineral Resource
Classification Tonnage (t) Zn % Cu % Au g/t Ag g/t SG t/m3
----------------------------------------------------------------------------
Measured 2,599,387 11.31 1.58 0.45 36.95 3.48
----------------------------------------------------------------------------
Indicated 1,031,423 8.87 1.13 0.56 20.61 3.39
----------------------------------------------------------------------------
Total M&I 3,630,811 10.62 1.45 0.48 32.31 3.46
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Inferred 2,628,455 8.79 1.31 1.06 38.84 3.72
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Mineral Reserve
Classification Tonnage (t) Zn % Cu % Au g/t Ag g/t SG t/m3
----------------------------------------------------------------------------
Proven 2,788,940 9.84 1.39 0.39 31.55
----------------------------------------------------------------------------
Probable 939,436 8.90 0.87 0.54 18.46
----------------------------------------------------------------------------
Total 3,728,376 9.60 1.26 0.43 28.25 3.36
----------------------------------------------------------------------------
Robin Adair, Donner's Vice President, Exploration, is the Qualified Person as
defined under National Instrument 43-101 who has verified that the technical
information with respect to the Bracemac-McLeod Property reported in this news
release is as originally stated in the "Technical Report and Feasibility Study
for the Bracemac-McLeod Project, Matagami Area, Quebec" dated September, 2010 as
prepared jointly by GENIVAR Limited Partnership and Xstrata Canada
Corporation-Xstrata Zinc Canada Division in accordance with NI 43-101.
ABOUT SANDSTORM METALS & ENERGY
Sandstorm Metals & Energy Ltd. is a growth focused resource based company that
seeks to complete commodity purchase agreements with companies that have
advanced stage development projects or operating projects. A commodity purchase
agreement involves Sandstorm Metals & Energy making an upfront cash payment to
its partners and in exchange, Sandstorm Metals & Energy receives the right to
purchase a percentage of the commodity produced for the life of the asset, at a
fixed price per unit. Sandstorm Metals & Energy helps other companies in the
resource industry grow their business, while acquiring attractive assets in the
process.
Sandstorm Metals & Energy is focused on low cost operations with excellent
exploration potential and strong management teams. Sandstorm Metals & Energy has
completed commodity purchase agreements with NovaDX Ventures Corp., Royal Coal
Corp., Terrex Energy Inc., Donner Metals Ltd. and Thunderbird Energy Corp. For
more information visit: http://www.sandstormmetalsandenergy.com.
Cautionary Note Regarding Forward-Looking Information
Except for the statements of historical fact contained herein, the information
presented constitutes "forward-looking information" within the meaning of
applicable Canadian securities legislation. Forward-looking information is based
on reasonable assumptions that have been made by Sandstorm Metals & Energy 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 Metals & Energy to be
materially different from those expressed or implied by the forward-looking
information, including but not limited to: the impact of general business and
economic conditions; the absence of control over mining and oil and gas
operations from which Sandstorm Metals & Energy will purchase coal, copper and
oil and gas and risks related to those 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, coal and oil and gas, fluctuations in
foreign exchange rates and fluctuations in interest rates; stock market
volatility and competition. Although Sandstorm Metals & Energy has attempted to
identify important factors that could cause actual results to differ materially
from those contained in forward-looking information, there may be other factors
that cause 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 Metals & Energy does not undertake to
update any forward-looking information that is contained or incorporated by
reference herein, except in accordance with applicable securities laws.
Sandstorm Metals & Energy does not provide any representation as to its
comparability with other companies in its industry including, but not limited to
Franco-Nevada Corporation, BHP Billiton, Rio Tinto and Western Coal.
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