The Gold Report - Wed, Dec 27, 2017

Mining Project Financing Firm Transacts Royalty Agreement

BMO Capital Markets reported on this company's recent royalty transaction and its upside potential.


Sandstorm Gold Ltd. (SSL:TSX; SAND:NYSE.MKT) has agreed to purchase a 2% net smelter return (NSR) royalty for $45 million in cash from Acacia Mining Plc (ACA:LSE) on the Endeavour Silver Corp. (EDR:TSX; EXK:NYSE; EJD:FSE)-operated Houndé gold mine, "providing for immediate cash flow starting in 2018 and upside potential through additional exploration efforts," BMO analyst Andrew Kaip noted in a Dec. 20 research report.

The deal is expected to close in January 2018. The NSR royalty covers Kari North and Kari South, almost the whole mineral reserve, according to Sandstorm.

The Houndé project, which likely will become Endeavour Silver's flagship asset, declared commercial production on Oct. 31, two months ahead of schedule and $15 million under the initial budget. Now, the company will concentrate on exploration results, "which are likely to become increasingly important in demonstrating potential to maintain production rates, extend the mine life and deliver further value," reported Kaip.

Given that Sandstorm finished Q3/17 with $6.1 million in cash and cash equivalents, "we expect the company to draw on its revolver in the near term" to fund the $45 million NSR royalty purchase, wrote Kaip.

BMO Capital has a Market Perform rating on Sandstorm Gold.

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