TORONTO (miningweekly.com) – TSX Venture Exchange-listed Sandstorm Resources has relaunched itself as a royalty company, after hiring former Silver Wheaton CFO Nolan Watson as president and CEO in September last year.
The Vancouver-based company entered into a letter of intent to buy 17% of the life-of-mine gold production from Luna Gold's Aurizona project, in Brazil, and has signed a separate letter with SilverCrest Mines, to acquire 20% of the gold produced at the firm's Santa Elena project, in Mexico.
Both operations are scheduled to begin commercial production next year.
So-called metal-streaming agreements are becoming increasingly attractive to juniors who do not have existing production to help fund development projects.
Although several larger producers have been able to raise funds for minebuilding in the last three or four months, credit markets remain closed to exploration and development firms, and low market valuations generally make the alternative - dilutive equity offerings - unattractive.
Sandstorm will pay Luna $17,8-million upfront, place ongoing per ounce payments equal to the lesser of $400/oz and the prevailing market price per ounce of gold, the firm announced on Thursday evening.
The company will also provide Luna with a senior secured loan of $7,2-million, which will be used to fund development at the project.
Aurizona will be an openpit mine with a gravity and carbon-in-leach milling operation expected to produce an average of more than 62 000 oz/y of gold.
Sandstorm has also agreed to make an upfront payment of $12-million to SilverCrest, as well as ongoing payments of the lesser of $350/oz and the prevailing gold price.
The company may also lend SilverCrest $6-million through a senior secured convertible loan, to fund development of the Santa Elena project.
Santa Elena is expected to produce an average of 30 000 oz of gold and 500 000 oz of silver over an eight year life-of-mine.
Sandstorm also announced this week it will raise up to C$60-million in a best-efforts offering of subscription receipts.
Sandstorm said this week that it had agreed not to compete with either Silver Wheaton, which announced this week it would buy the only other silver-streaming firm, Silverstone, nor with gold-streaming company Gold Wheaton.
“While the corporation's understanding is that Gold Wheaton will focus on larger transactions, Sandstorm anticipates that it will dedicate its efforts to completing smaller scale, yet accretive, mineral purchase agreements,” the firm said in a statement.
“The board of directors of the corporation has also agreed that it will not compete with Silver Wheaton in pursuing silver-streaming transactions.”
Watson left Silver Wheaton in June last year, citing “personal reasons”. He also sits on the Gold Wheaton and Luna Gold boards.
Ex-Silver Wheaton investor relations director David Awram has also joined the Sandstorm board.