Sandstorm Gold Ltd. (“Sandstorm Gold Royalties”, “Sandstorm” or the “Company”) (NYSE: SAND) (TSX: SSL) has released its results for the second quarter ended June 30, 2022 (all figures in U.S. dollars).
SECOND QUARTER HIGHLIGHTS
- Record attributable gold equivalent ounces1 of 19,276 ounces (Q2 2021—18,004 ounces);
- Record revenue of $36.0 million (Q2 2021—$26.4 million);
- Cash flows from operating activities, excluding changes in non-cash working capital1 of $21.9 million (Q2 2021—$17.6 million);
- Average cash cost per attributable gold equivalent ounce1 of $273 resulting in cash operating margins1 of $1,593 per ounce (Q2 2021—$227 per ounce and $1,569 per ounce respectively);
- Record net income of $39.7 million (Q2 2021—$8.6 million); and
- Transformative transactions:
- Horizon Copper and Hod Maden Gold Stream: In July 2022, the Company signed an agreement with Royalty North Partners Ltd. (to be renamed Horizon Copper) to spin out several assets and retain gold and silver streams, including a flagship gold stream on Hod Maden (the “Hod Maden Gold Stream”), along with a portion of debt and equity interest in Horizon. These transactions further reposition Sandstorm as a pure-play precious metals royalty and streaming company. On closing, Horizon Copper will hold a portfolio of high-quality cash-flowing and development stage copper assets with the size and scale required to grow the company and strengthen the strategic partnership opportunities with Sandstorm.
- BaseCore Royalty Package: In July 2022, the Company closed its previously announced agreement to acquire nine royalties and one stream from BaseCore Metals LP for $425 million in cash and approximately 13.5 million common shares of Sandstorm. The royalty package includes exposure to high quality, long-life assets of which three are on currently producing interests.
- Nomad Royalty Acquisition: In August 2022, the shareholders of both the Company and Nomad Royalty Company Ltd. (“Nomad”) approved the previously announced agreement whereby Sandstorm agreed to acquire all of the issued and outstanding common shares of Nomad (the “Nomad Acquisition”). Nomad is a high-growth precious metals-focused royalty company with a portfolio of 20 royalty and stream assets, of which seven are on currently producing mines. Through the Nomad Acquisition, Sandstorm adds several high-quality and low-cost assets. With several assets in active development, Nomad’s portfolio adds meaningful increases to Sandstorm’s production in both the near and long-term. The Nomad Acquisition is subject to certain customary conditions and expected to close in August 2022.
- Unlocking value through creation of Sandbox Royalties: In June 2022, the Company closed its previously announced sale of a portfolio of royalties to Sandbox Royalties Corp. (“Sandbox”) for $65 million comprising common shares of Sandbox, cash, and a convertible promissory note. With the creation of Sandbox, a diversified royalty company, Sandstorm expects to surface value of certain royalties that it believes are not receiving their warranted value within Sandstorm’s existing portfolio.
OUTLOOK
Based on the Company’s existing royalties and contingent on the completion of the Nomad Acquisition, attributable gold equivalent ounces for 2022 is forecast to be between 80,000 and 85,000 ounces. Subject to the conversion of the Hod Maden interest into a gold stream and the closing of the Nomad Acquisition, the Company is forecasting attributable gold equivalent production to be 155,000 ounces in 2025.
FINANCIAL RESULTS
During the three months ended June 30, 2022, the Company realized record revenue of $36.0 million compared with $26.4 million for the comparable period in 2021. The increase is attributable to a 7% increase in attributable gold equivalent ounces sold as well as a 4% increase in the average realized selling price of gold. In particular, the increase in revenue was driven by an increase in revenue attributable to the Mercedes mine which commenced making deliveries in April 2022, and an increase in revenue attributable to the Chapada copper stream due to an increase in the average realized selling price of copper and an increase in the number of copper pounds sold. Additionally, there was an increase in revenue attributable to the Vale Royalties, which were purchased in June 2021, and an increase in revenue attributable to the Vatukoula God Stream, which commenced making deliveries in December 2021.
Net income was higher during the second quarter of 2022 when compared to the same period in 2021. The increase is attributable to the increase in revenue (as described above) as well as a $22.9 million gain on the disposal of a portfolio of royalties to Sandbox for consideration of common shares of Sandbox, cash, and a convertible promissory note. Additionally, the increase in net income was attributable to a $12.5 million gain resulting from the sale of the Company’s equity interest in Entrée Resources to Horizon Copper. The year-over-year increase in net income was partially offset by an increase in depletion largely due to an increase in attributable gold ounces sold, a decrease in the gains recognized on the revaluation of the Company’s investments, and certain items that were recognized during the three months ended June 30, 2021 that did not occur during the three months ended June 30, 2022, including the recognition of a $5.9 million gain on the revaluation of the Company’s financial instrument related to the Vale Royalties which was both entered into and disposed of during the three months ended June 30, 2021.
STREAMS & ROYALTIES
Of the gold equivalent ounces sold by Sandstorm during the second quarter of 2022, approximately 16% were attributable to mines located in Canada, 23% from the rest of North America, 49% from South America, and 12% from other countries.
| Revenue (in Millions) |
Gold Equivalent Ounces |
|
| Canada | $5.8 | 3,109 |
| North America excl. Canada | $8.1 | 4,361 |
| South America | $17.6 | 9,410 |
| Other | $4.5 | 2,395 |
| Total | $36.0 | 19,276 |
Canada
Streams and royalties on Canadian mines contributed 31% more gold equivalent ounces to Sandstorm when compared to the second quarter of 2021. The change is primarily due to an increase in royalty revenue from the Diavik mine in the Northwest Territories, driven by diamond price increases and the timing of sales, and an increase in ounces received from the Black Fox mine. The increase was partially offset by a decrease in royalty revenues from the Bracemac-McLeod mine in Québec, which is in the process of winding down operations.
North America Excluding Canada
The gold equivalent ounces sold from operations located within North America, but outside of Canada, contributed 32% more gold equivalent ounces when compared to the second quarter of 2021. The change was primarily driven by an increase in the ounces received from the Mercedes mine, which commenced making deliveries to Sandstorm in April 2022. The increase was partially offset by a decrease in ounces received from the Santa Elena mine, partly due to mining activity on concessions not subject to the gold stream.
South America
Operations in South America contributed 15% less gold equivalent ounces sold when compared to the second quarter of 2021. The decrease was driven, in part, by a decrease in royalty revenue received from the Aurizona mine in Brazil. As well, in the second quarter 2021, the Company recognized a gain on the revaluation of the financial instrument related to the Vale Royalties purchased in June 2021, resulting in higher attributable gold equivalent ounces for the comparative period in 2021. The decrease was partially offset by an increase in gold equivalent ounces sold from the Chapada mine in Brazil, and an increase in royalty revenue from the Fruta del Norte mine.
Other
Streams and royalties on mines in other countries contributed 87% more gold equivalent ounces sold when compared to the second quarter of 2021. This change is primarily due to an increase in ounces sold from the Vatukoula mine in Fiji, which commenced making deliveries to Sandstorm in December 2021, and an increase in royalty revenue from the Houndé mine in Burkina Faso. The increase was partially offset by a decrease in gold equivalent ounces sold from the Karma mine in Burkina Faso.