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 October, 2019
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-
Incorporation by Reference
Exhibit 99.1 (Management’s Discussion and Analysis for
the Period Ended September 30, 2019 and Condensed Consolidated Interim Financial Statements of the Company for the Three and Nine
Month Periods Ended September 30, 2019 and September 30, 2018) to this Report on Form 6-K is incorporated by reference into this
report and is hereby incorporated by reference into and as an exhibit to the registrant’s Registration Statement on Form
F-10 (File No. 333-229756), as amended or supplemented, to the extent not superseded by documents or reports subsequently filed
or furnished by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, in each case as amended.
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 September 30, 2019 and Condensed Consolidated
Interim Financial Statements of the Company for the Three and Nine Month Periods Ended September 30, 2019 and September 30, 2018
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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 |
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Exhibit 99.1 (Management’s Discussion and Analysis for the Period Ended September 30, 2019 and Condensed
Consolidated Interim Financial Statements of the Company for the Three and Nine Month Periods Ended September 30, 2019 and September
30, 2018) to this Report on Form 6-K is incorporated by reference into this report and is hereby incorporated by reference into
and as an exhibit to the registrant’s Registration Statement on Form F-10 (File No. 333-229756), as amended or supplemented,
to the extent not superseded by documents or reports subsequently filed or furnished by us under the Securities Act of 1933 or
the Securities Exchange Act of 1934, in each case as amended.
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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: October 30, 2019 |
By: |
/s/ Erfan Kazemi |
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Name: Erfan Kazemi |
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Title: Chief Financial Officer |
Exhibit 99.1
Management’s Discussion
and Analysis
For The Period Ended September 30,
2019
This management’s discussion and analysis (“MD&A”)
for Sandstorm Gold Ltd. and its subsidiary entities (collectively “Sandstorm”, “Sandstorm Gold” or the
“Company”) should be read in conjunction with the unaudited condensed consolidated interim financial statements of
Sandstorm for the three and nine months ended September 30, 2019 and related notes thereto which have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”), applicable to the preparation of interim financial statements including International Accounting Standard
34 — Interim Financial Reporting ("IAS 34"). Readers are encouraged to consult the Company’s audited consolidated
financial statements for the year ended December 31, 2018 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 October 30, 2019 and all figures are stated
in U.S. dollars unless otherwise noted.
Company Highlights
Record Results
| · | Attributable Gold Equivalent ounces sold1 (as defined hereinafter), for the three and nine months ended September
30, 2019 were 17,289 ounces and 47,716 ounces, respectively, compared with 14,314 and 43,464 ounces for the comparable periods
in 2018. Attributable Gold Equivalent ounces sold for the three months ended September 30, 2019 represented a record for the Company. |
| · | Revenue for the three and nine months ended September 30, 2019 was $25.8 million and $65.4 million, respectively, compared
with $17.3 million and $55.7 million for the comparable periods in 2018. Revenue for the three months ended September 30, 2019
represented a record for the Company. |
| · | Cash flows from operating activities, excluding changes in non-cash working capital1, for the three and nine months
ended September 30, 2019 were $18.2 million and $45.5 million, respectively, compared with $11.7 million and $37.9 million for
the comparable periods in 2018. Cash flows from operating activities, excluding changes in non-cash working capital1,
for the three months ended September 30, 2019 represented a record for the Company. |
| · | Cost of sales, excluding depletion, for the three and nine months ended September 30, 2019 were $5.0 million and $13.3 million,
respectively, compared with $3.5 million and $11.9 million for the comparable periods in 2018. |
| · | Average cash costs1 for the three and nine months ended September 30, 2019 were $288 and $279 per Attributable Gold
Equivalent ounce, respectively, compared with $248 and $273 per Attributable Gold Equivalent ounce for the comparable periods in
2018. |
| · | Cash operating margins1 for the three and nine months ended September 30, 2019 were $1,203 and $1,092 per Attributable
Gold Equivalent ounce, respectively, compared with $960 and $1,008 per Attributable Gold Equivalent ounce for the comparable periods
in 2018. |
| 1 | Refer
to section on non-IFRS and other measures of this MD&A. |
Commercial production
| · | On July 1, 2019, Equinox Gold achieved commercial production at the Aurizona Gold Mine. Sandstorm has a 3%-5% sliding scale
NSR royalty on the project. At gold prices less than or equal to $1,500 per ounce, the royalty is a 3% NSR. At gold prices between
$1,500 and $2,000 per ounce, the royalty is a 4% NSR. |
Overview
Sandstorm is a growth-focused company that seeks to acquire
royalties and gold and other metals purchase agreements (“Gold Streams” or “Streams”) from companies that
have advanced stage development projects or operating mines. In return for making upfront payments to acquire a Stream, Sandstorm
receives the right to purchase, at a fixed price per ounce or at a fixed percentage of the spot price, a percentage of a mine’s
gold, silver, or other commodity ("Gold Equivalent")1 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 189 Streams and royalties, of which 23 relate to properties where the underlying mines
are producing.
| 1 | Refer to section on non-IFRS and
other measures of this MD&A. |
Outlook
Based on the Company’s existing Gold Streams and royalties,
attributable Gold Equivalent ounces sold (individually and collectively referred to as “Attributable Gold Equivalent”)
are forecasted to be between 63,000 – 70,000 ounces in 2019. The Company is forecasting Attributable Gold Equivalent production
of 140,000 ounces in 2023.
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 mine, located in Santa Cruz, Argentina (the “Cerro Moro Mine” or “Cerro
Moro”). Under the terms of the Yamana silver stream, Sandstorm has agreed to purchase for ongoing 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% of the
silver produced thereafter.
About Cerro Moro
The Cerro Moro Mine, which commenced commercial production in
2018, is located approximately 70 kilometres southwest of the coastal port city of Puerto Deseado in the Santa Cruz province of
Argentina. Cerro Moro contains several high-grade epithermal gold and silver deposits, some of which will be mined via open pit
and some via underground mining methods. Yamana has also set an exploration objective of adding one million gold equivalent ounces
to the mineral inventory at Cerro Moro over the next several years.
Yamana announced a $15 million exploration budget in 2019 for
the Cerro Moro mine. The budget is intended to be used for a drill program designed to test major structures that have the potential
to host new mineralized zones and generate new targets.
Chapada Copper Stream
Lundin
Mining Corporation
The Company has a copper stream on Lundin Mining Corporation’s
(“Lundin Mining”) 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 Lundin Mining copper stream, Sandstorm
has agreed to purchase, for ongoing 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 the
mine has delivered 39 million pounds of copper to Sandstorm; then |
| ii | 3.0% of the copper produced until, on a cumulative basis, the mine has delivered 50 million pounds
of copper to Sandstorm; then |
| iii | 1.5% of the copper produced thereafter, for the life of the mine. |
About Chapada
In July 2019, Lundin Mining completed its previously announced
agreement to acquire the Chapada Mine from Yamana. Chapada has been in production since 2007 and is a relatively low-cost South
American copper-gold operation. The ore is treated through a flotation plant with processing capacity of 24 million tonnes of ore
per annum. Yamana, the previous owners, discovered additional resources at Chapada and as a result began examining a potential
plant expansion that would increase the processing rate up to 32 million tonnes of ore per annum. Lundin Mining is currently evaluating
these and other scenarios for expansion. In October 2019, an updated technical report was filed which outlines production through
2050. For more information, visit the Lundin Mining website at www.lundinmining.com.
Houndé Royalty
Endeavour
Mining Corporation
The Company has a 2% net smelter returns royalty (“NSR”)
based on the production from the Houndé gold mine located in Burkina Faso, West Africa (“Houndé” or the
“Houndé Mine”) which is owned and operated by Endeavour Mining Corporation (“Endeavour”).
The royalty covers the Kari North and Kari South tenements,
representing approximately 500 square kilometres of the Houndé property package, and includes a Mineral Reserve of 1.7 million
ounces (27.5 million tonnes at 2.0 grams per tonne using a cut-off grade of 0.5 grams per tonne gold, as of December 2018), including
the Vindaloo deposit and the Bouéré deposit. See www.endeavourmining.com for more information.
About Houndé
Houndé is an open pit gold mine with a 3.0 million tonne
per year processing plant using a gravity circuit and a carbon-in-leach plant. Endeavour recently announced that it has successfully
extended the Kari Pump mineralized zone along with discovering additional mineralized zones. A number of the high-priority targets
are on the Sandstorm royalty ground.
A 90,000 meter drilling campaign continues with the aim of delineating
a maiden resource and reserve for the Kari West and Kari Center discoveries by the end of 2019.
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 120 million carats from three kimberlite pipes (A154
South, A154 North, and A418). In the fourth quarter of 2018, Rio Tinto announced that it had achieved commercial production at
its fourth open pit diamond pipe (A21).
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 $455 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. First Majestic recently announced that it has installed a new high intensity grinding mill with a design
capacity of 3,000 tonnes per day. First Majestic further anticipates that the new mill will improve overall metallurgical recoveries
and lower energy costs compared to traditional ball milling.
Aurizona Gold Royalty
Equinox
Gold Corp.
The Company has a 3%–5% sliding scale NSR on the production
from Equinox Gold Corp.’s (“Equinox”) open-pit Aurizona mine, located in Brazil (“Aurizona” or the
“Aurizona Mine”). At gold prices less than or equal to $1,500 per ounce, the royalty is a 3% NSR. At gold prices between
$1,500 and $2,000 per ounce, the royalty is a 4% NSR. The royalty is calculated based on sales for the month and the average monthly
gold price. In addition, Sandstorm holds a 2% NSR on Equinox’s greenfields exploration ground. At any time prior to the
commencement of commercial production at the greenfields exploration ground, Equinox can purchase one-half of the greenfields
NSR for a cash payment of $10 million.
On July 1, 2019, Equinox achieved commercial production at the
Aurizona Gold Mine. A Feasibility Study on the Aurizona project, which was released on July 31, 2017, included estimated Proven
and Probable Mineral Reserves of 971,000 ounces of gold (contained in 19.8 million tonnes at 1.5 grams per tonne gold with a cut-off
grade of 0.4 grams per tonne from Boa Esperanza and 0.6 grams per tonne from Piaba) with expected annual production of 136,000
ounces. In March 2019, Equinox announced an updated mineral resource estimate whereby the total Measured & Indicated Resources
(exclusive of reserves) increased to an estimated 692,000 ounces contained in 12.8 million tonnes at 1.7 grams per tonne gold (cut-off
grade of 0.6 grams per tonne for open pit and 1.0 grams per tonne for underground resources). For more information refer to www.equinoxgold.com.
Black Fox Gold Stream
McEwen
Mining Inc.
The Company has a Gold Stream to purchase 8% of the life of
mine gold produced from McEwen Mining Inc.’s (“McEwen”) 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 McEwen’s Black Fox Extension,
which includes a portion of McEwen’s Pike River concessions, for a per ounce cash payment equal to the lesser of $551 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. McEwen announced a 2019 exploration budget of $18 million
for the Black Fox complex which includes surface and underground drilling. For more information on the recently announced positive
drill results, refer to www.mcewenmining.com.
Bachelor Lake Gold Stream & Royalties
Bonterra
Resources Inc.
The Company has a Gold Stream to purchase 20% of the gold produced
from Bonterra Resources Inc.’s (“Bonterra”) 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. Under
the terms of the agreement, once a cumulative 12,000 ounces of gold were purchased by the Company, during the period between October
1, 2017 and October 1, 2019, the Gold Stream converted into a 3.9% NSR (the “Conversion Threshold”). As at the date
of the MD&A, the Conversion Threshold had been met and accordingly, when combined with Sandstorm’s existing royalties,
the Company now holds a total 4.9% NSR on the Bachelor Lake Mine, a 3.9%-4.9% NSR on Bonterra’s Barry gold project and a
1% NSR on a portion of Bonterra’s Gladiator gold project.
Bonterra has the option to reduce the respective NSRs on the
Bachelor Lake Mine or the Barry gold project by making a $2.0 million payment to Sandstorm in each case (the “Purchase Option”).
Upon exercising either of the Purchase Options, the respective NSR will decrease by 2.1%.
The Bachelor Lake Mine is an underground mining operation with
an operating mill and surface infrastructure, which began production in early 2013. The Barry gold project and the Gladiator gold
deposit are advanced exploration-stage assets located in the emerging Urban Barry camp.
Bonterra recently announced a company-wide mineral resource
estimate for all of its Urban Barry exploration assets, including the Gladiator, Barry and Moroy deposits. The combined mineral
resource estimate is part of Bonterra’s strategy to fast track the development of the three deposits simultaneously and to
optimize feed to the Urban Barry Mill over the life of the three mines. In order to concentrate on the exploration of all three
of the deposits, Bonterra’s mining operations are on care and maintenance.
Karma Gold Stream
Endeavour Mining Corporation
The Company has a Gold Stream which entitles it to purchase
25,000 ounces of gold over a five year period and thereafter 1.625% of the gold produced from Endeavour’s open pit heap leach
Karma gold mine located in Burkina Faso, West Africa (“Karma” or the “Karma Mine”) for ongoing per ounce
cash payment equal to 20% of the spot price of 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 Mine, is syndicated 75% and 25% between Franco-Nevada Corp. and Sandstorm, respectively.
The Karma Mine has several defined mineral deposits that make
up the Karma project. Based on recent exploration work, Endeavour expects to extend the mine life beyond 10 years.
Bracemac-McLeod Royalty
Glencore PLC
Sandstorm has a 3% NSR based on 100% of the production from
the Bracemac-McLeod 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 historic and prolific Matagami mining district of 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 2018 metallurgical recoveries, Sandstorm’s 2019 gold purchase entitlement was adjusted
to 30%.
In 2018, Rambler announced a new Mineral Resource and Reserve
estimate for the Ming Mine which results in a life of mine plan of more than 20 years. Production is expected from both the high-grade
Massive Sulphide Zone and the Lower Footwall Zone at an average throughput of 1,250 tonnes of ore per day. For more information
refer to www.ramblermines.com.
Other Producing Assets
Gualcamayo Royalty
Mineros S.A.
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 Mineros S.A. (“Mineros”). The
Gualcamayo Mine is an open pit, heap leach operation. Mineros is a Latin American gold producer with operations in Argentina, Colombia
and Nicaragua.
Thunder Creek Royalty
Pan
American Silver Corp.
The Company has a 1% NSR on the gold produced from the
Thunder Creek and 144 properties (“Thunder Creek” or the “Thunder Creek Mine”) which are part of the
Timmins West mine complex in Ontario, Canada which is owned and operated by Pan American Silver Corp. Thunder Creek is an
underground mine that has been in production since 2010 and has produced more than 500,000 ounces of gold.
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 re-processes
multiple tailings dumps in the area through three production modules, the last of which was commissioned in 2011.
San Andres Royalty
Aura
Minerals Inc.
The Company has a 1.5% NSR on the San Andres gold mine (the
“San Andres Mine”) which is located in La Únion, Honduras and is 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.
Emigrant Springs Royalty
Newmont
Goldcorp Corporation
The Company has a 1.5% NSR on a portion of the Emigrant Springs
gold mine (the “Emigrant Springs Mine”) which is located in the Carlin Trend in Nevada, U.S.A. and is owned and operated
by Newmont Goldcorp Corporation (“Newmont”). The Emigrant Springs Mine is an open pit, heap leach operation that has
been in production since the third quarter of 2012.
Development Assets
Hod Maden
Lidya
Madencilik Sanayi ve Ticaret A.S.
The Company has a 30% net profits interest and a 2% NSR on the
Hod Maden gold-copper project, which is located in Artvin Province, northeastern Turkey (the “Hod Maden Project” or
“Hod Maden”). The project is operated and co-owned by a Turkish partner, Lidya Madencilik Sanayi ve Ticaret A.S. (“Lidya”),
which owns the remaining interest in the project. Lidya is an experienced Turkish company and is also a joint-venture partner with
Alacer Gold Corp. on the producing Çöpler mine in Turkey. The Hod Maden Project Preliminary Feasibility Study envisions
a conventional underground mine and processing facility producing copper-gold concentrates. The results of the recent 2018 Preliminary
Feasibility Study demonstrate an estimated Proven and Probable Mineral Reserve of 2.6 million ounces of gold and 284.4 million
pounds of copper being mined over an 11 year mine life (9.12 million tonnes at 8.9 grams per tonne gold and 1.4% copper or 11.9
grams per tonne gold equivalent based on a 2.6 grams per tonne gold equivalent cut-off grade). The study projects an estimated
pre-tax net present value (5% discount rate) of $1.4 billion and an internal rate of return of 60%. It is estimated that gold will
be produced at an all-in sustaining cost on a co-product basis1 of $374 per ounce. For more information refer to www.sandstormgold.com.
With the release of the study, Hod Maden moves into the next
stage of development. A gap analysis and trade-off studies on Hod Maden were completed during the first quarter of 2019 which will
contribute to the Feasibility Study work, which began during the second quarter of 2019. In conjunction with the Feasibility Study,
an Environmental Impact Assessment has been submitted and a public participation meeting was successfully conducted as part of
the permitting process. The Feasibility Study is expected to be completed in the second half of 2020, with first production projected
by the end of 2022.
The 30% Hod Maden net profits interest is a key component of
the Company’s portfolio, with some of the highlights including:
| · | Significant increase in expected future production: Hod Maden is an anchor asset that is expected to increase the Company’s
Attributable Gold Equivalent ounces to over 140,000 in 2023. |
| · | Significant exploration upside: The Hod Maden deposit occurs within a significant 7.0 kilometre long north-south alteration
zone. The majority of the exploration drilling has been within a 1.0 kilometre strike length of this alteration zone with several
exploration targets identified along strike and parallel to the identified orebody. |
| · | Strong partner: Majority operator Lidya is a strong local partner with experience exploring, developing, permitting
and operating projects in Turkey. Lidya is part of a large Turkish conglomerate called Çalik Holding and is currently involved
in several projects in Turkey including a partnership with Alacer Gold Corp. on the producing Çöpler mine. |
| 1. | Refer to section on non-IFRS and other measures of this MD&A. |
Relief Canyon Gold Stream
Americas
Gold and Silver Corporation
On April 3, 2019, the Company entered into a $42.5 million financing
package with Americas Gold and Silver Corporation (“Americas Silver”) which includes a $25 million precious metal stream
and an NSR on the Relief Canyon gold project in Nevada, U.S.A. (“Relief Canyon” or the “Relief Canyon Project”),
a $10 million convertible debenture and a $7.5 million private placement.
Under the terms of the precious metals stream, Sandstorm is
entitled to receive 32,022 ounces of gold over a 5.5 year period beginning in April 2020 (the “Fixed Deliveries”).
Under certain conditions, the starting date under the Fixed Deliveries may be extended by up to six months. After receipt of the
Fixed Deliveries, the Company is entitled to purchase 4% of the gold and silver produced from the Relief Canyon Project for ongoing
per ounce cash payments equal to 30%-65% of the spot price of gold or silver, with the range dependent on the concession’s
existing royalty obligations. In addition, Sandstorm will also receive a 1.4%-2.8% NSR on the area surrounding the Relief Canyon
mine. The $25 million precious metal stream advance, of which $10 million was advanced during the nine months ended September 30,
2019 and an additional $5 million which was advanced in October 2019, is conditional upon commencement of construction of the project
and other customary provisions.
Americas Silver may elect to reduce the 4.0% Stream and NSR
on the Relief Canyon Project by delivering 4,000 ounces of gold to Sandstorm (the “Purchase Option”). The Purchase
Option may be exercised by Americas Silver at any time and is subject to a 10% annual premium. Upon exercising the Purchase Option,
the 4.0% Stream will decrease to 2.0% and the NSR will decrease to 1.0%. Acquisition highlights include:
| · | Near-Term Cash Flow: Americas Silver expects Relief Canyon to produce an average of 91,000 ounces of gold per year. |
| · | Exploration Upside: Relief Canyon has a large prospective land package that is relatively underexplored. Sandstorm’s
royalty covers the full property area surrounding the mine site. |
| · | Safe Jurisdiction: Relief Canyon is located in Nevada, USA, one of the world’s best mining jurisdictions. Americas
Silver has mining and processing permits in place to re-start operations at the past-producing Relief Canyon mine. |
The Relief Canyon Project is a past producing open pit mine
located in Nevada, USA at the southern end of the Pershing Gold and Silver Trend, which hosts other projects such as Coeur Mining
Inc.’s Rochester mine. Americas Silver has received permits to start construction and resume mining. Infrastructure on site
includes access to power and water as well as a 21,500 ton per day heap leach processing facility that is fully permitted and constructed.
Fruta Del Norte Royalty
Lundin Gold Inc.
In January 2019, the Company acquired a 0.9% NSR on the precious
metals produced from Lundin Gold Inc.’s (“Lundin Gold”) Fruta del Norte gold project located in Ecuador (“Fruta
del Norte” or “Fruta del Norte Mine”).
The royalty was acquired from a private third party for $32.8
million in cash and covers more than 644 square kilometres, including all 30 mining concessions held by Lundin Gold. The Fruta
del Norte Mineral Reserve contains an estimated 5.0 million ounces of gold in 17.8 million tonnes of ore with an average grade
of 8.7 grams per tonne, as of September 2018, ranking it amongst the highest-grade gold projects in the world (based on cut-off
grade of 3.8 grams per tonne and 5.0 grams per tonne depending on mining method). Acquisition highlights include:
| · | Near-Term Cash Flow: Lundin Gold expects to pour first gold at Fruta del Norte in the fourth quarter of 2019, with
commercial production expected in the first half of 2020. Fruta del Norte’s average annual production is expected to exceed
300,000 ounces of gold per year over the initial mine life. Current reserves support a 15-year initial mine life. |
| · | Exploration Upside: The royalty covers precious metals production from all 644 square kilometres of concessions
held by Lundin Gold, plus an additional one kilometre area of interest around the property. Exploration potential at Fruta del
Norte remains excellent, with multiple early and advanced exploration targets already identified. Exploration is currently focused
on the Suarez pull-apart basin, the structure that hosts the Fruta del Norte gold deposit. |
| · | Strong Partner: Lundin Gold is backed by Mr. Lukas Lundin, an established mining entrepreneur, and its management
team has significant mine development and operating experience. |
Hugo North Extension & Heruga Gold
Stream
Entrée Resources Ltd.
The Company has a Gold Stream with Entrée Resources Ltd.
(“Entrée”) to purchase an amount equal to 5.62% and 4.26%, respectively, of the gold and silver 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 has a copper stream to purchase an amount equal
to 0.42% 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.
The Company is not required to contribute any further capital,
exploration, or operating expenditures to Entrée.
The Hugo North Extension is a 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 kilometres south of the capital city of Ulaanbaatar and 80 kilometres 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 Ltd. and the Government of Mongolia, and its project manager Rio Tinto PLC.
Entrée retains a 20% interest in the Hugo North Extension and Heruga.
In 2018, Entrée released a National Instrument 43-101
Technical Report relating to its interests in the Hugo North Extension and Heruga. The report allows Entrée to discuss preliminary
economics for the potential future phases of the Oyu Tolgoi mine, beyond Lift 1, including Lift 2 and Heruga.
Hackett River Royalty
Glencore PLC
The Company has 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
deposit and is one of the largest undeveloped projects of its kind. The property contains four massive sulphide bodies that occur
over a 6.6 kilometre strike length. 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 Glencore Reserves and Resources statement, effective
December 31, 2018, reported an estimated 27.1 million tonnes of Indicated Resources containing 4.5% zinc and 130.0 grams per tonne
silver plus 60.0 million tonnes of Inferred Resources with 4.0% zinc and 150.0 grams per tonne silver. For more information refer
to www.glencore.com and the Technical Report dated July 26, 2010 under Sabina Gold & Silver Corp.’s profile on www.sedar.com.
Lobo-Marte Royalty
Kinross
Gold Corporation
The Company has a 1.05% NSR on production from the Lobo-Marte
project located in the Maricunga gold district of Chile (the “Lobo-Marte Project” or “Lobo-Marte”) which
is owned by Kinross Gold Corp. (“Kinross”).
In 2019, Kinross announced a Scoping Study for Lobo-Marte (effective
December 31, 2018). The study estimates a mine life that could extend beyond 10 years and a total life of mine production of approximately
4.1 million ounces of gold at a grade of 1.2 grams per tonne gold from the current Measured and Indicated Resources of 185.4 million
tonnes at 1.2 grams per tonne containing 7.0 million ounces. Kinross is now progressing to a Preliminary Feasibility Study with
permitting efforts also underway. For more information refer to www.kinross.com.
Agi Dagi & Kirazli Royalty
Alamos Gold Inc.
The Company has a $10 per 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 2017 Feasibility Study on Agi Dagi and a 2017 Feasibility
Study on Kirazli contemplated both projects as stand-alone open pit, heap leach operations. Under the respective studies, Agi Dagi
is expected to produce an average of 177,600 ounces of gold per year over a 6-year mine life while Kirazli is expected to produce
an average of 104,000 ounces of gold per year over a 5 year mine life. For more information refer to www.alamosgold.com.
Prairie Creek Royalty
NorZinc Ltd.
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 NorZinc Ltd. (“NorZinc”).
The Prairie Creek Project is a zinc, silver and lead project that is 100%-owned by NorZinc and based on a Feasibility Study has
an estimated Proven and Probable Mineral Reserve of 8.1 million tonnes containing 8.6% zinc, 124.2 grams per tonne silver and 8.1%
lead. For more information, refer to www.norzinc.com.
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.
Other
Under the Company’s normal course issuer bid (“NCIB”),
the Company is able until April 4, 2020, to purchase up to 13.0 million common shares. The NCIB provides the Company with the option
to purchase its common shares from time to time. During the nine months ended September 30, 2019, the Company, under its previous
and current NCIB, purchased and cancelled approximately 8.1 million common shares for a total of $43.2 million. Subsequent to period
end and under the Company’s current NCIB, the Company purchased and cancelled an additional 0.6 million common shares for
a total of $3.4 million.
Summary of Quarterly Results
Quarters
Ended
| In $000s (except for per share amounts) | |
Sep. 30, 2019 | | |
Jun. 30, 2019 | | |
Mar. 31, 2019 | | |
Dec. 31, 2018 | |
| Total revenue | |
$ | 25,778 | | |
$ | 21,493 | | |
$ | 18,168 | | |
$ | 17,458 | |
| Attributable Gold Equivalent ounces sold 1 | |
| 17,289 | | |
| 16,356 | | |
| 14,071 | | |
| 14,182 | |
| Sales | |
$ | 17,518 | | |
$ | 16,443 | | |
$ | 12,627 | | |
$ | 12,523 | |
| Royalty revenue | |
| 8,260 | | |
| 5,050 | | |
| 5,541 | | |
| 4,935 | |
| Average realized gold price per attributable ounce 1 | |
| 1,491 | | |
| 1,314 | | |
| 1,291 | | |
| 1,231 | |
| Average cash cost per attributable ounce 1 | |
| 288 | | |
| 301 | | |
| 241 | | |
| 292 | |
| Cash flows from operating activities | |
| 14,255 | | |
| 13,449 | | |
| 13,965 | | |
| 10,844 | |
| Net income | |
| 6,150 | | |
| 2,434 | | |
| 2,497 | | |
| 2,749 | |
| Basic income per share | |
| 0.03 | | |
| 0.01 | | |
| 0.01 | | |
| 0.02 | |
| Diluted income per share | |
| 0.03 | | |
| 0.01 | | |
| 0.01 | | |
| 0.01 | |
| Total assets | |
| 608,817 | | |
| 601,062 | | |
| 620,143 | | |
| 588,887 | |
| Total long-term liabilities | |
| 51,576 | | |
| 40,727 | | |
| 47,265 | | |
| 510 | |
| In $000s (except for per share amounts) | |
Sep. 30, 2018 | | |
Jun. 30, 2018 | | |
Mar. 31, 2018 | | |
Dec. 31, 2017 | |
| Total revenue | |
$ | 17,289 | | |
$ | 18,933 | | |
$ | 19,470 | | |
$ | 15,446 | |
| Attributable Gold Equivalent ounces sold 1 | |
| 14,314 | | |
| 14,465 | | |
| 14,685 | | |
| 12,032 | |
| Sales | |
$ | 10,766 | | |
$ | 13,771 | | |
$ | 13,572 | | |
$ | 12,978 | |
| Royalty revenue | |
| 6,523 | | |
| 5,162 | | |
| 5,898 | | |
| 2,468 | |
| Average realized gold price per attributable ounce 1 | |
| 1,208 | | |
| 1,309 | | |
| 1,326 | | |
| 1,284 | |
| Average cash cost per attributable ounce 1 | |
| 248 | | |
| 296 | | |
| 276 | | |
| 340 | |
| Cash flows from operating activities | |
| 11,092 | | |
| 14,110 | | |
| 11,528 | | |
| 9,859 | |
| Net income | |
| 2,093 | | |
| 658 | | |
| 372 | | |
| 709 | |
| Basic income per share | |
| 0.01 | | |
| 0.00 | | |
| 0.00 | | |
| 0.00 | |
| Diluted income per share | |
| 0.01 | | |
| 0.00 | | |
| 0.00 | | |
| 0.00 | |
| Total assets | |
| 577,098 | | |
| 623,430 | | |
| 647,321 | | |
| 660,915 | |
| Total long-term liabilities | |
| 582 | | |
| 660 | | |
| 2,749 | | |
| 2,807 | |
| 1 | Refer
to section on non-IFRS and other measures of this MD&A. |
Summary
of Quarterly Results QUARTERS ENDED Attributable Gold Equivalent ounces sold 1Sales & Royalty Revenue in $000sAverage realized
gold price per attributable ounce 114,182oz $17,458 14,071oz $18,168 16,356 oz $21,493 17,289oz $25,778 $1,231 $1,291 $1,314 $1,491
Q1 Q2 Q3 Q4 2018 20191 Refer to section non-IFRS and other measures of this MD&A.
Changes in sales, net income and cash flow from operating activities
from quarter to quarter are affected primarily by fluctuations in production at the mines, the timing of shipments, changes in
the price of commodities, as well as acquisitions of 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 operating segments for the three months
ended September 30, 2019 are summarized in the table below:
| In $000s | |
Product | | |
Attributable
Gold
Equivalent
ounces sold | | |
Sales and
royalty
revenues | | |
Cost of sales,
excluding
depletion | | |
Depletion
expense | | |
Other | | |
Income
(loss) before
taxes | | |
Cash flow
from
operating
activities | |
| Aurizona | |
| Gold | | |
| 985 | | |
$ | 1,468 | | |
$ | - | | |
$ | 371 | | |
$ | - | | |
$ | 1,097 | | |
$ | 168 | |
| Bachelor Lake | |
| Gold | | |
| 1,500 | | |
| 2,250 | | |
| 750 | | |
| 150 | | |
| - | | |
| 1,350 | | |
| 750 | |
| Black Fox | |
| Gold | | |
| 690 | | |
| 1,024 | | |
| 380 | | |
| 459 | | |
| - | | |
| 185 | | |
| 645 | |
| Bracemac-McLeod 1 | |
| Various | | |
| 653 | | |
| 973 | | |
| - | | |
| 399 | | |
| - | | |
| 574 | | |
| 903 | |
| Chapada | |
| Copper | | |
| 1,780 | | |
| 2,654 | | |
| 797 | | |
| 803 | | |
| - | | |
| 1,054 | | |
| 1,857 | |
| Diavik | |
| Diamonds | | |
| 1,193 | | |
| 1,779 | | |
| - | | |
| 1,324 | | |
| - | | |
| 455 | | |
| 1,729 | |
| Houndé | |
| Gold | | |
| 1,073 | | |
| 1,600 | | |
| - | | |
| 934 | | |
| - | | |
| 666 | | |
| 737 | |
| Karma | |
| Gold | | |
| 1,250 | | |
| 1,851 | | |
| 372 | | |
| 806 | | |
| - | | |
| 673 | | |
| 1,485 | |
| Ming | |
| Gold | | |
| 590 | | |
| 884 | | |
| - | | |
| 505 | | |
| - | | |
| 379 | | |
| 884 | |
| Santa Elena | |
| Gold | | |
| 2,901 | | |
| 4,325 | | |
| 1,332 | | |
| 174 | | |
| - | | |
| 2,819 | | |
| 2,994 | |
| Yamana silver stream | |
| Silver | | |
| 3,038 | | |
| 4,530 | | |
| 1,355 | | |
| 3,052 | | |
| - | | |
| 123 | | |
| 3,174 | |
| Other Royalties 2 | |
| Various | | |
| 1,636 | | |
| 2,440 | | |
| - | | |
| 1,021 | | |
| (59 | ) | |
| 1,478 | | |
| 1,474 | |
| Corporate | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 550 | | |
| (2,275 | ) | |
| (2,545 | ) |
| Consolidated | |
| | | |
| 17,289 | | |
$ | 25,778 | | |
$ | 4,986 | | |
$ | 9,998 | | |
$ | 491 | | |
$ | 8,578 | | |
$ | 14,255 | |
| 1 | Royalty revenue from Bracemac-McLeod consists of $0.4 million from copper and $0.6 million from zinc. |
| 2 | Includes royalty revenue from gold of $2.3 million and other base metals of $0.1 million. |
Q3 2019 Attributable Gold Equivalent Ounces Sold Yamana Silver Stream 3,038oz Santa Elena 2,901oz Chapada 1,780oz Bachelor
Lake 1,500oz Karma 1,250oz Diavik 1,193oz Hounde 1,073oz Aurizona 985oz Black Fox 690oz Bracemac-McLeod 653oz Ming 590oz Other
Royalties 1,636oz Q3 2019 Sales & Royalty Revenues by Region North America Canada South America Other 14% 31% 51% 35%
The Company’s operating segments for the three months
ended September 30, 2018 are summarized in the table below:
| In $000s | |
Product | | |
Attributable
Gold
Equivalent
ounces sold | | |
Sales
and
royalty
revenues | | |
Cost of sales,
excluding
depletion | | |
Depletion
expense | | |
Other | | |
Income
(loss) before
taxes | | |
Cash flow
from
operating
activities | |
| Bachelor Lake | |
| Gold | | |
| 1,541 | | |
$ | 1,859 | | |
$ | 750 | | |
$ | 113 | | |
$ | - | | |
$ | 996 | | |
$ | 1,122 | |
| Black Fox | |
| Gold | | |
| 895 | | |
| 1,080 | | |
| 484 | | |
| 261 | | |
| - | | |
| 335 | | |
| 596 | |
| Bracemac-McLeod
1 | |
| Various | | |
| 595 | | |
| 718 | | |
| - | | |
| 332 | | |
| - | | |
| 386 | | |
| 783 | |
| Chapada | |
| Copper | | |
| 2,347 | | |
| 2,835 | | |
| 851 | | |
| 1,032 | | |
| - | | |
| 952 | | |
| 1,984 | |
| Diavik | |
| Diamonds | | |
| 2,110 | | |
| 2,549 | | |
| - | | |
| 1,196 | | |
| - | | |
| 1,353 | | |
| 2,249 | |
| Houndé | |
| Gold | | |
| 1,399 | | |
| 1,690 | | |
| - | | |
| 973 | | |
| - | | |
| 717 | | |
| 1,469 | |
| Karma | |
| Gold | | |
| 1,484 | | |
| 1,799 | | |
| 365 | | |
| 913 | | |
| - | | |
| 521 | | |
| 1,435 | |
| Ming | |
| Gold | | |
| 204 | | |
| 246 | | |
| - | | |
| 120 | | |
| - | | |
| 126 | | |
| 246 | |
| Santa Elena | |
| Gold | | |
| 1,886 | | |
| 2,274 | | |
| 858 | | |
| 124 | | |
| - | | |
| 1,292 | | |
| 1,278 | |
| Yamana silver stream | |
| Silver | | |
| 598 | | |
| 722 | | |
| 236 | | |
| 482 | | |
| - | | |
| 4 | | |
| 485 | |
| Other
Royalties 2 | |
| Various | | |
| 1,255 | | |
| 1,517 | | |
| - | | |
| 904 | | |
| - | | |
| 613 | | |
| 1,260 | |
| Other | |
| Gold | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 359 | | |
| (359 | ) | |
| - | |
| Corporate | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (505 | ) | |
| (3,737 | ) | |
| (1,815 | ) |
| Consolidated | |
| | | |
| 14,314 | | |
$ | 17,289 | | |
$ | 3,544 | | |
$ | 6,450 | | |
$ | (146 | ) | |
$ | 3,199 | | |
$ | 11,092 | |
| 1 | Royalty revenue from Bracemac-McLeod consists of $0.3 million from copper and $0.4 million from zinc. |
| 2 | Includes royalty revenue from gold of $1.3 million and other base metals of $0.2 million. |
Three Months Ended September 30, 2019 Compared
to the Three Months Ended September 30, 2018
For the three months ended September 30, 2019, net income and
cash flow from operating activities were $6.2 million and $14.3 million, respectively, compared with net income and cash flow from
operating activities of $2.1 million and $11.1 million for the comparable period in 2018. The change in net income is attributable
to an increase in revenue (described in greater detail below) and several other factors including:
| · | A $2.0 million increase in the gains recognized on the
revaluation of the Company’s investments; whereby, a gain of $2.1 million was recognized during the three months ended September
30, 2019 largely driven by the change in fair value of the Americas Silver and Equinox convertible debentures, while during the
three months ended September 30, 2018, the Company recognized a gain of $0.1 million; |
| · | A $3.5 million increase in non-cash depletion expense and a $1.4 million increase in cost of sales, excluding depletion, primarily
driven by an increase in the number of Attributable Gold Equivalent ounces sold. |
For the three months ended September 30, 2019, revenue was $25.8
million compared with $17.3 million for the comparable period in 2018. The increase is largely attributable to a 21% increase in
the Attributable Gold Equivalent Ounces sold and a 23% increase in the average realized gold price per attributable ounce. In particular,
the increase in revenue was driven by:
| · | A $3.8 million increase in sales revenue attributable to the Yamana silver stream largely driven by an increase in the number
of silver ounces sold. In July 2019, Sandstorm received its second quarterly silver delivery from Yamana’s Cerro Moro Mine.
This delivery, which amounted to 300,000 silver ounces, represented the maximum quarterly amount under the stream agreement; |
| | | |
| · | A $2.1 million increase in sales revenue from the Santa Elena mine largely driven by an increase of approximately 1,015 gold
ounces sold. The increase is partly attributed to the timing of sales and higher gold grades from the mine’s Main Vein; |
| | | |
| · | A $1.5 million increase in royalty revenue attributable to the Aurizona Mine which commenced commercial production in July
2019; and |
| | | |
| · | A $0.9 million increase in revenue attributable to the Company’s Other Royalties. This increase is partly attributable
to the commencement of production on several mineral concessions which are subject to the Company’s underlying royalties. |
Nine Months Ended September 30, 2019 Compared
to the Nine Months Ended September 30, 2018
For the nine months ended September 30, 2019, net income and
cash flow from operating activities were $11.1 million and $41.7 million, respectively, compared with net income and cash flow
from operating activities of $3.1 million and $36.7 million for the comparable period in 2018. The increase is partly related to
an increase in revenue (described in greater detail below) as well as due to items that were recognized during the nine months
ended September 30, 2018 that did not occur during the nine months ended September 30, 2019, including the recognition of a $4.5
million non-cash impairment charge relating to the Company’s Gualcamayo royalty. In addition, the increase is attributable
to several other factors including:
| · | A $5.7 million increase on the gains recognized on the revaluation of the Company’s investments; whereby, a gain of $4.7
million was recognized during the nine months ended September 30, 2019 largely driven by the change in fair value of the Americas
Silver and Equinox convertible debentures, while during the nine months ended September 30, 2018, the Company recognized a loss
of $1.0 million;
Partially offset by: |
| · | A $6.6 million increase in non-cash depletion expense, primarily driven by an increase in the number of Attributable Gold Equivalent
ounces sold; |
| | | |
| · | A $3.3 million increase in deferred income tax expense partly related to certain items that were recognized during the nine
months ended September 30, 2018 that did not occur during the nine months ended September 30, 2019 including a reduction in the
deferred tax liability on the Gualcamayo royalty as a result of the related impairment charge recognized thereon; and |
| | | |
| · | A $1.4 million increase in finance expense as the Company had drawn more debt under its revolving credit facility during the
nine months ended September 30, 2019 when compared to the comparable period in 2018. |
For the nine months ended September 30, 2019, revenue was $65.4
million compared with $55.7 million for the comparable period in 2018. The increase is largely attributable to a 10% increase in
the number of Attributable Gold Equivalent ounces sold and a 7% increase in the average realized gold price per attributable ounce.
In particular, the increase in revenue was driven by:
| · | A $6.9 million increase in sales revenue attributable to the Yamana silver stream largely driven by an increase in the number
of silver ounces sold. In April and July of 2019, Sandstorm received its respective quarterly silver deliveries from Yamana’s
Cerro Moro Mine. Both deliveries, which amounted to 300,000 silver ounces each, represented the maximum quarterly amount under
the stream agreement; |
| | | |
| · | A $2.5 million increase in sales revenue from the Ming Mine largely driven by a 249% increase in the number of gold ounces
sold. The increase is largely attributable to the timing of sales, whereby the Company had received 1,191 gold ounces by December
31, 2018 and those ounces were sold in the subsequent period; |
| | | |
| · | A $1.5 million increase in revenue attributable to the Company’s Other Royalties. This increase is partly attributable
to the commencement of production on several mineral concessions which are subject to the Company’s underlying royalties; |
| | | |
| · | A $1.5 million increase in royalty revenue attributable to the Aurizona Mine which commenced commercial production in July
2019; and |
| | | |
| · | A $1.4 million increase in gold sales revenue attributable to the Bachelor Lake Mine Gold Stream largely driven by a 20% increase
in the number of gold ounces sold. The increase was largely related to the timing of sales. A total of 1,500 gold ounces were in
inventory as at September 30, 2019 and were sold subsequent to quarter end; |
| · | A $1.6 million decrease in revenue attributable to the Black Fox Mine primarily driven by a 38% decrease in the number of gold
equivalent ounces sold. The decrease is partly related to a reduction in production at the mine; and |
| | | |
| · | A $0.8 million decrease in sales revenue from the Chapada copper stream primarily due to a decrease in the average realized
selling price of copper which decreased from an average of $3.05 per pound in the first nine months of 2018 to an average of $2.76
per pound in the first nine months of 2019. |
Three Months Ended September 30, 2019 Compared
to the Other Quarters Presented
When comparing net income of $6.2 million and cash flow from
operating activities of $14.3 million for the three months ended September 30, 2019 with net income/loss and cash flow from operating
activities for the other quarters presented, the following items impact comparability of analysis:
| · | A $4.5 million non-cash impairment charge relating to the Company’s Gualcamayo royalty was recognized during the three
months ended March 31, 2018, and during the three months ended December 31, 2017, a $4.6 million non-cash impairment charge relating
to the Company’s Emigrant Springs royalty was recognized; |
| | | |
| · | The Company recognized gains and losses with respect to the revaluation of its investments, which were primarily driven by
changes in the fair value of the Equinox and Americas Silver convertible debentures. These gains/losses were recognized as follows: |
| − | During the three months ended September 30, 2019, a gain of $2.1 million was recognized; |
| − | During the three months ended June 30, 2019, a gain of $1.4 million was recognized; |
| − | During the three months ended March 31, 2019, a gain of $1.2 million was recognized; |
| − | During the three months ended December 31, 2018, a gain of $1.1 million was recognized; |
| − | During the three months ended September 30, 2018, a gain of $0.1 million was recognized; |
| − | During the three months ended June 30, 2018, a loss of $0.5 million was recognized; |
| − | During the three months ended March 31, 2018, a loss of $0.6 million was recognized; |
| − | During the three months ended December 31, 2017, a gain of $4.4 million was recognized; and |
| · | Overall, Attributable Gold Equivalent ounces sold have increased over the course of the last four years as a result of the
acquisition of various assets including the Houndé royalty acquisition in January 2018, the Teck Resources Limited royalty
package which consists of 52 royalties and was purchased during the three months ended March 31, 2016 and the Yamana silver stream
and copper stream which were acquired in the three months ended December 31, 2015. |
Change in Total Assets
Total assets increased by $7.8 million from June 30, 2019 to
September 30, 2019, partly resulting from (i) $10 million remitted to Americas Silver for the construction of the Relief Canyon
mine, which was partly financed through the Company’s revolving credit facility; and (ii) an increase in the Hod Maden interest
due to the appreciation of the Turkish Lira, which is the functional currency of the entity that holds the Hod Maden interest,
relative to the U.S. dollar, which is the presentation currency of Sandstorm Gold Ltd.; partially offset by depletion expense.
The appreciation was partly responsible for the increase in other comprehensive income during the three months ended September
30, 2019. Total assets decreased by $19.1 million from March 31, 2019 to June 30, 2019, partly resulting from depletion expense.
Total assets increased by $31.3 million from December 31, 2018 to March 31, 2019 primarily resulting from the acquisition of the
Fruta del Norte royalty which was partly financed through the Company’s revolving credit facility; partially offset by a
decrease in the Hod Maden interest due to the devaluation of the Turkish Lira. The devaluation was largely responsible for the
decrease in other comprehensive income during the three months ended March 31, 2019. Total assets increased by $11.8 million from
September 30, 2018 to December 31, 2018 primarily resulting from an increase in the Hod Maden interest due to the appreciation
of the Turkish Lira relative to the U.S. dollar. This change was largely responsible for the increase in other comprehensive income
during the three months ended December 31, 2018. Total assets decreased by $46.3 million from June 30, 2018 to September 30, 2018
primarily resulting from (i) a reduction in the Hod Maden interest due to a devaluation of the Turkish Lira relative to the U.S.
dollar; and (ii) a decrease in the valuation of investments. Both of these items were largely responsible for the decrease in other
comprehensive income in the period. Total assets decreased by $23.9 million from March 31, 2018 to June 30, 2018 primarily resulting
from (i) depletion expense; and (ii) a reduction in the Hod Maden interest due to a devaluation of the Turkish Lira relative to
the U.S. dollar, with a corresponding decrease in other comprehensive income in the period; partially offset by increases in the
Company’s cash balance due to positive cash flow from operating activities. Total assets decreased by $13.6 million from
December 31, 2017 to March 31, 2018 primarily resulting from (i) depletion expense; (ii) non-cash impairment charges; and (iii)
a reduction in the Hod Maden interest due to a devaluation of the Turkish Lira relative to the U.S. dollar, with a corresponding
decrease in other comprehensive income in the period.
Non-IFRS and Other Measures
The Company has included, throughout this document, certain
performance measures, including (i) average cash cost per Attributable Gold Equivalent ounce, (ii) average realized gold price
per Attributable Gold Equivalent ounce, (iii) cash operating margin, (iv) cash flows from operating activities excluding changes
in non-cash working capital and (v) all-in sustaining cost per gold ounce on a co-product basis. 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. These non-IFRS measures do not have any standardized meaning prescribed by IFRS,
and other companies may calculate these measures differently.
| i. | Average cash cost per Attributable Gold Equivalent 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 Attributable Gold Equivalent ounce as it believes that certain investors use this information to evaluate the Company’s
performance in comparison to other streaming 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 | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Cost of Sales, excluding depletion 1 | |
$ | 4,986 | | |
$ | 3,544 | | |
$ | 13,314 | | |
$ | 11,867 | |
| Divided by: | |
| | | |
| | | |
| | | |
| | |
| Total Attributable Gold Equivalent ounces sold 2 | |
| 17,289 | | |
| 14,314 | | |
| 47,716 | | |
| 43,464 | |
| Equals: | |
| | | |
| | | |
| | | |
| | |
Average cash cost
(per Attributable Gold Equivalent ounce) | |
$ | 288 | | |
$ | 248 | | |
$ | 279 | | |
$ | 273 | |
| 1 | Cost of Sales, excluding depletion, includes cash payments made for Gold Equivalent ounces associated with commodity streams. |
| 2 | The Company’s royalty and other commodity stream revenue is converted to an Attributable Gold Equivalent ounce basis
by dividing the royalty and other commodity revenue 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. | Average realized gold price per Attributable Gold Equivalent 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 Gold Equivalent ounce as it believes that certain investors use this information to evaluate the Company’s
performance in comparison to other streaming companies in the precious metals mining industry that present results on a similar
basis. Figure 1.2 provides a reconciliation of average realized gold price per Attributable Gold Equivalent ounce. |
| Figure 1.2 | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Total Revenue | |
$ | 25,778 | | |
$ | 17,289 | | |
$ | 65,439 | | |
$ | 55,692 | |
| Divided by: | |
| | | |
| | | |
| | | |
| | |
Total Attributable Gold Equivalent
ounces sold | |
| 17,289 | | |
| 14,314 | | |
| 47,716 | | |
| 43,464 | |
| Equals: | |
| | | |
| | | |
| | | |
| | |
Average realized gold price
(per Attributable Gold Equivalent ounce) | |
$ | 1,491 | | |
$ | 1,208 | | |
$ | 1,371 | | |
$ | 1,281 | |
| iii. | Cash operating margin is calculated by subtracting the average cash cost per Attributable Gold
Equivalent ounce from the average realized gold price per Attributable Gold Equivalent ounce. The Company presents cash operating
margin as it believes that certain investors use this information to evaluate the Company’s performance in comparison to
other streaming companies in the precious metals mining industry that present results on a similar basis. |
| iv. | Cash flows from operating activities excluding changes in non-cash working capital is calculated
by adding back the decrease or subtracting the increase in changes in non-cash working capital to or from cash provided by (used
in) operating activities. The Company presents cash flows from operating activities excluding changes in non-cash working capital
as it believes that certain investors use this information to evaluate the Company’s performance in comparison to other streaming
companies in the precious metals mining industry that present results on a similar basis. Figure 1.3 provides a reconciliation
of cash flows from operating activities excluding changes in non-cash working capital. |
| Figure 1.3 | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Cash flows from operating activities | |
$ | 14,255 | | |
$ | 11,092 | | |
$ | 41,669 | | |
$ | 36,730 | |
| Add: | |
| | | |
| | | |
| | | |
| | |
| Changes in non-cash working capital | |
$ | 3,947 | | |
$ | 564 | | |
$ | 3,871 | | |
$ | 1,161 | |
| Equals: | |
| | | |
| | | |
| | | |
| | |
| Cash flows from operating activities excluding changes in non-cash working capital | |
$ | 18,202 | | |
$ | 11,656 | | |
$ | 45,540 | | |
$ | 37,891 | |
| v. | The Company has also used the non-IFRS measure of all-in sustaining cost per gold ounce on a
co-product basis. With respect to the Hod Maden project, all-in sustaining cost per gold ounce on a co-product basis is calculated
by removing the impact of other metals that are produced as a result of gold production and apportions the costs (operating costs,
royalties, treatment and refining costs and sustaining capital) to each commodity produced on a percentage of revenue basis. These
gold apportioned costs are then divided by the payable gold ounces produced. The Company presents all in sustaining cost per gold
ounce on a co-product basis 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. |
| | | |
| | | [(Operating Costs ($557.6 million) + Royalties
($131.4 million) + Treatment & Refining Costs ($164.9 million) + Sustaining Capital ($114.2 million)) x Gold Revenue ($2,586.4
million)/Total Revenue ($3,360.8 million)] / Payable Gold Ounces (1,990,000 ounces) = $374 all in sustaining cost per ounce. |
Liquidity and Capital Resources
As of September 30, 2019, the Company had cash and cash equivalents
of $5.1 million (December 31, 2018 – $5.9 million) and working capital, defined as current assets less current
liabilities, of $25.6 million (December 31, 2018 – $21.7 million). As of the date of the MD&A, $46 million remains
outstanding under the revolving credit facility, leaving $179 million undrawn and available for future acquisitions and for general
corporate purposes.
During the nine months ended September 30, 2019, the Company
generated cash flows from operating activities of $41.7 million compared with $36.7 million during the comparable period in 2018,
with the increase being primarily attributable to (i) an increase in the number of Attributable Gold Equivalent ounces sold and
(ii) an increase in the average realized selling price of gold; partially offset by changes in non-cash working capital.
During the nine months ended September 30, 2019, the Company
had net cash outflows from investing activities of $50.7 million which were primarily the result of (i) the $32.8 million payment
in connection with the Fruta del Norte royalty acquisition; (ii) the $10 million payment to Americas Silver as part of the Relief
Canyon stream; and (iii) the acquisition of $21.9 million in investments and other. These outflows were partially offset by cash
receipts of $19.0 million largely related to the sale of investments as the Company continues its strategy of monetizing its non-core
assets. During the nine months ended September 30, 2018, the Company had net cash outflows from investing activities of $29.5 million
which were primarily the result of the $45.0 million payment in connection with the Houndé royalty acquisition; partially
offset by $24.0 million in cash receipts largely driven from the sale of Equinox debt and equity investments as the Company continues
to monetize its non-core investments.
During the nine months ended September 30, 2019, the Company
had net cash inflows from financing activities of $8.3 million largely related to: (i) a $84.5 million draw down on its revolving
credit facility to help fund the Company’s recent acquisitions; (ii) the subsequent repayment of $36.5 million under the
same revolving credit facility as well as $2.0 million in related interest expense; and (iii) $42.5 million related to the redemption
of the Company’s common shares under the NCIB; partially offset by $4.8 million in proceeds from the exercise of stock options
and warrants. During the nine months ended September 30, 2018, the Company had net cash outflows from financing of $8.3 million
largely related to cash outflows of $11.0 million related to the redemption of the Company’s common shares under the NCIB;
partially offset by $3.4 million in proceeds from the exercise of stock options and warrants. During this same period, the Company
drew down $16 million on its revolving credit facility to help fund the acquisition of the Houndé royalty. The $16 million
draw down was subsequently repaid within the same period utilizing cash flow from operating activities and the proceeds from the
sale of non-core investments.
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 4,5,6,7,8 | |
Per Ounce Cash Payment:
lesser of amount below and the then
prevailing market price of commodity
(unless otherwise noted) 1, 2, 3 |
| Black Fox | |
8% | |
$551 |
| Chapada | |
4.2% | |
30% of copper spot price |
| Entrée | |
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 |
| Relief Canyon | |
32,022 ounces over 5.5 years and 4% thereafter | |
Varies |
| Santa Elena | |
20% | |
$455 |
| Yamana silver stream | |
20% | |
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 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. |
| 5 | 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. |
| 6 | 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 ongoing per pound payments will increase to the lesser of $1.10 and the then
prevailing market price of copper. |
| 7 | 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 the mine has delivered 39 million pounds of copper to Sandstorm; then
3.0% of the copper produced until, on a cumulative basis, the mine has delivered 50 million pounds of copper to Sandstorm; then
1.5% of the copper produced thereafter, for the life of the mine. |
| 8 | 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 Sandstorm’s Relief Canyon Gold Stream and subject
to customary provisions, the Company has $10 million remaining of its commitment to remit to Americas Silver for the construction
of the project.
Share Capital
As of October 30, 2019, the Company had 174,791,982 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 2016 equity
financing used to reduce the balance of the Company’s revolving credit facility.
A summary of the Company’s share purchase
options
as of October 30, 2019 is as follows:
| Year of expiry | |
Number
outstanding | | |
Vested | | |
Exercise
price per share
(range) (CAD)1 | | |
Weighted average
exercise price per share
(CAD)1, 2 | |
| 2019 | |
| 229,374 | | |
| 229,374 | | |
| 2.93 | | |
| 2.93 | |
| 2020 | |
| 921,333 | | |
| 921,333 | | |
| 3.60 – 3.64 | | |
| 3.61 | |
| 2021 | |
| 1,313,000 | | |
| 875,338 | | |
| 4.96 | | |
| 4.96 | |
| 2022 | |
| 1,257,534 | | |
| 727,537 | | |
| 4.66 – 15.00 | | |
| 5.00 | |
| 2023 | |
| 3,130,000 | | |
| - | | |
| 5.92 | | |
| - | |
| | |
| 6,851,241 | | |
| 2,753,582 | | |
| | | |
| 4.33 | |
| 1 | For options exercisable in British Pounds Sterling (“GBP”), exercise price is translated to Canadian Dollars (“CAD”)
using the period end exchange rate. |
| 2 | Weighted average exercise price of options that are exercisable. |
A summary of the Company’s warrants
as of October 30, 2019 is as follows:
| Number outstanding | |
Exercise price per share | | |
Expiry Date |
| 3,000,000 | |
$ | 4.50 | | |
March 23, 2020 |
| 15,000,000 | |
| 3.50 | | |
October 27, 2020 |
| 4,959,700 | |
| 4.00 | | |
November 3, 2020 |
| 22,959,700 | |
| | | |
|
The Company has 2,263,932 Restricted Share Rights (“RSRs”)
outstanding as at October 30, 2019.
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:
| In $000s | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Employee salaries and benefits | |
$ | 305 | | |
$ | 299 | | |
$ | 910 | | |
$ | 912 | |
| Share based payments | |
| 921 | | |
| 673 | | |
| 2,734 | | |
| 1,998 | |
| Total key management compensation expense | |
$ | 1,226 | | |
$ | 972 | | |
$ | 3,644 | | |
$ | 2,910 | |
Financial Instruments
The Company’s financial instruments consist of cash and
cash equivalents, trade and other receivables, short-term and long-term investments, loans receivable which are included in other
assets, trade and other payables and bank debt. The Company’s short and long-term investments are initially recorded at fair
value and subsequently revalued to their fair market value at each period end based on inputs such as equity prices. Investments
are held for long-term strategic purposes. The fair value of the Company's other financial instruments which include cash and cash
equivalents, trade and other receivables, loans receivable which are included in other assets, trade and other payables and bank
debt approximate their carrying values at September 30, 2019.
Credit Risk
The Company’s credit risk is limited to cash and cash
equivalents, loans receivable which are included in other assets, trade and other receivables and the Company’s investments
in convertible debentures. The Company’s trade and other receivables are subject to the credit risk of the counterparties
who own and operate the mines underlying Sandstorm’s royalty portfolio. In order to mitigate its exposure to credit risk,
the Company closely monitors its financial assets and maintains its cash deposits in several high-quality financial institutions.
The Company’s investments in convertible debentures are subject to the counterparties’ credit risk. In particular,
the Company’s convertible debentures due from Equinox and Americas Silver are subject to the respective counterparty credit
risk and the Company’s ability to realize on its security. Furthermore, the convertible debenture due from Equinox is subject
to the risk that the value of Equinox’s equity decreases below the puttable price of the instrument. The impact of expected
credit losses on trade receivables and financial assets held at amortized cost is not material.
Currency Risk
Financial instruments that impact the Company’s net income
(loss) or other comprehensive income (loss) due to currency fluctuations include: cash and cash equivalents, trade and other receivables
and trade and other payables denominated in Canadian dollars. Based on the Company's Canadian dollar denominated monetary assets
and monetary liabilities at September 30, 2019 a 10% increase (decrease) of the value of the Canadian dollar relative to the United
States dollar would not have a material impact on net income or other comprehensive income.
Other Risks
Sandstorm holds common shares, convertible debentures, warrants
and investments of other companies with a combined fair market value as at September 30, 2019 of $69.6 million (December 31, 2018 – $60.2
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. The Company is exposed to equity price risk as a result
of holding these investments in other mining companies. The Company does not actively trade these investments. Based on the Company's
investments held as at September 30, 2019 a 10% increase (decrease) in the equity prices of these investments would increase (decrease)
net income by $1.1 million and other comprehensive income by $3.9 million.
Other 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 22, 2019,
which is available on www.sedar.com.
The Chapada Mine, the Cerro Moro Mine, the Diavik Mine, the
Aurizona Mine, the Fruta del Norte Mine, the Relief Canyon Project, the Santa Elena Mine, the Karma Mine, 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, the Thunder Creek Mine, MWS, the San Andres Mine, the Prairie Creek Project, the Bracemac-McLeod Mine,
the Hod Maden Project, the Hackett River Project, the Lobo-Marte Project, Agi Dagi and Kirazli, the Houndé Mine and other
royalties and commodity streams in Sandstorm’s portfolio are hereafter referred to as the “Mines”.
Risks Relating to Mineral Projects
To the extent that they relate to the production of gold or
an applicable commodity from, or the operation of, 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,
other commodities, receive royalties or receive economic benefit from its interest in the Hod Maden Project, if no gold or applicable
commodity 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
occupational 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 operations with respect to the Company’s gold, other
precious metals and other interests are conducted in Canada, Mexico, the United States, Mongolia, Burkina Faso, Ecuador, South
Africa, Ghana, Botswana, Cote D’Ivoire, Argentina, Brazil, Chile, Peru, Paraguay, Honduras, French Guiana, Turkey, Sweden
and Australia 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, international sanctions, 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, changing political conditions, and governmental regulations. Changes, if any, in mining or investment policies or
shifts in political attitude 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 adverse
developments with respect to Lidya, its cooperation or in its exploration, development, permitting and operation of the Hod Maden
Project in Turkey may adversely affect the Company’s 30% net profits interest in the project. There are no assurances that
the Company will be able to successfully convert its 30% interest in the Hod Maden Project into a commodity stream or royalty nor
are there any assurances that the Company may be able to maintain its interest in Hod Maden if sanctions are imposed on Turkey
or Lidya and its related entities. 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 Stream.
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
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 prior years’ tax returns may be audited by the Canada
Revenue Agency (“CRA”), and no assurances can be given that tax matters, if they so arise will be resolved favorably.
The CRA recently completed an audit of Sandstorm Gold Ltd.’s 2009 – June 2015 tax returns and issued a corresponding
finalization letter in February 2019. Based on the letter received, there would be no adverse implications for the Company’s
financial statements if the Company accepted the CRA’s proposed adjustments. The majority of the Company’s Streams
and royalties have been entered into directly by Canadian based subsidiaries and are therefore, subject to Canadian tax. The profits
attributable to the Company’s historical Barbados entity have all been attributed to Canada and the profits from these Streams
continue to be subject to Canadian tax.
Commodity Prices for Metals Produced from
the Mines
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, silver and/or copper (collectively,
the “Metals”). The price of the Metals 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 the Metals 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, silver and
copper producing countries throughout the world.
In the event that the prevailing market price of the Metals
are at or below the price at which the Company can purchase such commodities pursuant to the terms of the Stream agreements associated
with the metal interests, the Company will not generate positive cash flow or earnings. Declines in market prices could cause an
operator to reduce, suspend or terminate production from an operating project or construction work at a development project, which
may result in a temporary or permanent reduction or cessation of revenue from those projects, and the Company might not be able
to recover the initial investment in Streams and royalties.
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.
Information Systems and Cyber Security
The Company’s information systems, and those of its counterparties
under the precious metal purchase agreements and vendors, are vulnerable to an increasing threat of continually evolving cybersecurity
risks. Unauthorized parties may attempt to gain access to these systems or the Company’s information through fraud or other
means of deceiving the Company’s counterparties.
The Company’s operations depend, in part, on how well
the Company and its suppliers, as well as counterparties under the commodity purchase and royalty agreements, protect networks,
equipment, information technology systems and software against damage from a number of threats. The failure of information systems
or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s
reputation and results of operations.
Although to date the Company has not experienced any material
losses relating to cyber-attacks or other information security breaches, there can be no assurance that the Company will not incur
such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other
things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls,
processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized
access remain an area of attention.
Key Management
The Company is dependent upon the services of a small number
of key management personnel who are highly skilled and experienced. The Company’s ability to manage its activities will depend
in large part on the efforts of these individuals. The Company faces intense competition for qualified personnel, and there can
be no assurance that the Company will be able to attract and retain such personnel. The loss of the services of one or more of
such key management personnel could have a material adverse effect on the Company.
Environmental
All phases of mining and exploration operations are subject
to environmental regulation pursuant to a variety of government laws and regulations. Environmental legislation is becoming stricter,
with increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and heightened
responsibility for companies and their officers, directors and employees. Continuing issues with tailings dam failures at other
companies’ operations may increase the likelihood that these stricter standards and enforcement mechanisms will be implemented
in the future. There can be no assurance that possible future changes in environmental regulation will not adversely affect the
operations at the Mines, and consequently, the results of Sandstorm’s operations. Failure by the operators of the Mines to
comply with these laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions. The occurrence of any environmental violation or enforcement action
may have an adverse impact on the operations at the Mines, Sandstorm’s reputation and could adversely affect Sandstorm’s
results of operations.
Government regulation relating to emission levels (such as carbon
taxes) and energy efficiency is becoming more prevalent and stringent. While some of the costs associated with reducing emissions
may be offset by increased energy efficiency and technological innovation, Sandstorm expects that increased government regulation
will result in increased costs at some operations at the Mines if the current regulatory trend continues. All of Sandstorm’s
mining interests are exposed to climate-related risks through the operations at the Mines. Climate change could result in challenging
conditions and extreme weather that may adversely affect the operations at the Mines and there can be no assurances that mining
operations will be able to predict, respond to, measure, monitor or manage the risks posed as a result of climate change factors.
Solvency Risk of Counterparties
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 2018 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.
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 of changes in conditions or deterioration
in the degree of compliance with the Company’s policies and procedures.
Changes in Internal Controls
There were no changes in internal controls of the Company during
the three months ended September 30, 2019 that have materially affected, or are 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.
New Accounting Policies
The IASB has issued the following new standards which are effective
January 1, 2019. Pronouncements that are not applicable to the Company have been excluded from this note.
IFRS 16: LEASES
IFRS 16 establishes a comprehensive framework for recognition,
measurement and classification of leases and requires lessees to recognize assets and liabilities for most leases. It has replaced
International Accounting Standard (“IAS”) 17 Leases and related interpretations. The Company has adopted IFRS 16 retrospectively
from January 1, 2019 and has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional
provisions in the standard. The reclassifications and adjustments arising from the new leasing rules are recognized on the opening
statement of financial position on January 1, 2019 to the extent they arise; however, no adjustments were necessary to the Company’s
opening retained earnings as a result of the adoption of this standard. With respect to the Company’s office leases, a $3
million right-of-use asset and a corresponding liability for the same amount was recognized as at January 1, 2019. Adoption of
the new standard did not give rise to any material changes to the Company’s processes, IT controls or condensed consolidated
interim financial statements.
On adoption of IFRS 16, the Company recognized lease liabilities
in relation to leases which had previously been classified as operating leases under the principles of IAS 17 Leases. These liabilities
were measured at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing
rate as of January 1, 2019. The associated right-of-use assets were measured at an amount equal to the lease liability, adjusted
by the amount of any prepaid or accrued lease payments relating to that lease recognized in the statement of financial position
as at December 31, 2018. Refer to note 2 of the condensed consolidated interim financial statements for the amended accounting
policy as a result of adoption of IFRS 16.
IFRIC INTERPRETATION 23: UNCERTAINTY
OVER INCOME TAX TREATMENTS
In June 2017, the IASB issued IFRS Interpretations Committee
(“IFRIC”) Interpretation 23 Uncertainty over Income Tax Treatments, which is applied to the determination of taxable
profit or loss, unused tax losses, unused tax credits, tax rates and tax bases, when there is uncertainty about income tax treatment
under IAS 12 Income Taxes. IFRIC 23 is effective January 1, 2019 and is to be applied retrospectively. The new standard did not
have a material impact on the Company’s condensed consolidated interim financial statements.
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 Mine, the Houndé Mine, the Ming Mine, the Gualcamayo
Mine, the Fruta del Norte Mine, the Santa Elena Mine, the Black Fox Mine, the Aurizona Mine, the Relief Canyon Project, the Karma
Mine, the Emigrant Springs Mine, the Thunder Creek 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 Project, the Prairie Creek Project,
the San Andres Mine, the Hod 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, 2018 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 Mine, the Houndé Mine, the Diavik Mine,
the Aurizona Mine, the Gualcamayo Mine, the Fruta del Norte Mine, the Relief Canyon Project, the Emigrant Springs Mine, the Thunder
Creek Mine, MWS, the Santa Elena Mine, the Ming Mine, the Black Fox Mine, the Hugo North Extension and Heruga deposits, the Karma
Mine, the mines underlying the Sandstorm portfolio of royalties, the Bachelor Lake Mine, the Mt. Hamilton Project, the Prairie
Creek Project, the San Andres Mine, the Hod 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, other commodity or
receive royalties from, 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.
Condensed Consolidated
Interim Financial Statements
(Unaudited)
For The Period Ended September
30, 2019
Condensed Consolidated Interim Statements of Financial Position
(unaudited) | Expressed in U.S. Dollars
($000s) |
| — ASSETS | |
Note | | |
September 30, 2019 | | |
December 31, 2018 | |
| Current | |
| | |
| | |
| |
| Cash and cash equivalents | |
| | |
$ | 5,119 | | |
$ | 5,892 | |
| Short-term investments | |
6 | | |
| 14,227 | | |
| 13,937 | |
| Trade and other receivables | |
| | |
| 7,851 | | |
| 4,915 | |
| Other current assets | |
| | |
| 3,518 | | |
| 1,955 | |
| | |
| | |
$ | 30,715 | | |
$ | 26,699 | |
| Non-current | |
| | |
| | | |
| | |
| Mineral, royalty and other interests | |
4 | | |
$ | 390,511 | | |
$ | 374,206 | |
| Hod Maden interest | |
5 | | |
| 121,353 | | |
| 127,224 | |
| Investments | |
6 | | |
| 55,369 | | |
| 46,243 | |
| Deferred income tax assets | |
| | |
| 5,017 | | |
| 9,038 | |
| Other long term assets | |
| | |
| 5,852 | | |
| 5,477 | |
| Total assets | |
| | |
$ | 608,817 | | |
$ | 588,887 | |
| — LIABILITIES | |
| | |
| |
| | |
| | |
| |
| Current | |
| | |
| |
| Trade and other payables | |
$ | 5,151 | | |
$ | 4,980 | |
| | |
| | | |
| | |
| Non-current | |
| | | |
| | |
| Bank debt | |
$ | 48,000 | | |
$ | - | |
| Lease liabilities and other | |
| 3,576 | | |
| 510 | |
| | |
$ | 56,727 | | |
$ | 5,490 | |
| — EQUITY | |
| | |
| | |
| |
| | |
| | |
| | |
| |
| Share capital | |
7 | | |
$ | 650,169 | | |
$ | 684,722 | |
| Reserves | |
| | |
| 21,043 | | |
| 20,712 | |
| Deficit | |
| | |
| (8,182 | ) | |
| (19,263 | ) |
| Accumulated other comprehensive loss | |
| | |
| (110,940 | ) | |
| (102,774 | ) |
| | |
| | |
$ | 552,090 | | |
$ | 583,397 | |
| Total liabilities and equity | |
| | |
$ | 608,817 | | |
$ | 588,887 | |
Contractual Obligations (Note 12)
ON BEHALF OF THE BOARD:
“Nolan Watson”, Director
“David De Witt”, Director
The accompanying notes are an integral
part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Income (Loss)
(unaudited) |
Expressed
in U.S. Dollars ($000s)
Except for per share amounts |
| | |
Note | | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Sales | |
13 | | |
$ | 17,518 | | |
$ | 10,766 | | |
$ | 46,588 | | |
$ | 38,109 | |
| Royalty revenue | |
13 | | |
| 8,260 | | |
| 6,523 | | |
| 18,851 | | |
| 17,583 | |
| | |
| | |
$ | 25,778 | | |
$ | 17,289 | | |
$ | 65,439 | | |
$ | 55,692 | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Cost of sales, excluding depletion | |
13 | | |
$ | 4,986 | | |
$ | 3,544 | | |
$ | 13,314 | | |
$ | 11,867 | |
| Depletion | |
13 | | |
| 9,998 | | |
| 6,450 | | |
| 28,762 | | |
| 22,132 | |
| Total cost of sales | |
| | |
$ | 14,984 | | |
$ | 9,994 | | |
$ | 42,076 | | |
$ | 33,999 | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Gross profit | |
| | |
$ | 10,794 | | |
$ | 7,295 | | |
$ | 23,363 | | |
$ | 21,693 | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Expenses and other (income) | |
| | |
| | | |
| | | |
| | | |
| | |
| Administration expenses
1 | |
9 | | |
$ | 1,914 | | |
$ | 1,608 | | |
$ | 5,594 | | |
$ | 4,914 | |
| Project evaluation
1 | |
| | |
| 1,193 | | |
| 1,072 | | |
| 3,720 | | |
| 3,180 | |
| Foreign exchange loss | |
| | |
| 20 | | |
| 1,314 | | |
| 104 | | |
| 2,301 | |
| (Gain) loss on revaluation of investments | |
6 | | |
| (2,098 | ) | |
| (88 | ) | |
| (4,690 | ) | |
| 1,022 | |
| Finance income | |
| | |
| (152 | ) | |
| (56 | ) | |
| (639 | ) | |
| (92 | ) |
| Finance expense | |
| | |
| 848 | | |
| 392 | | |
| 2,676 | | |
| 1,268 | |
| Mineral, royalty and other interests impairments | |
| | |
| - | | |
| - | | |
| 212 | | |
| 4,475 | |
| Other | |
| | |
| 491 | | |
| (146 | ) | |
| (34 | ) | |
| 186 | |
| Income before taxes | |
| | |
$ | 8,578 | | |
$ | 3,199 | | |
$ | 16,420 | | |
$ | 4,439 | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Current income tax expense | |
| | |
$ | 637 | | |
$ | 464 | | |
$ | 1,712 | | |
$ | 974 | |
| Deferred income tax expense | |
| | |
| 1,791 | | |
| 642 | | |
| 3,627 | | |
| 342 | |
| | |
8 | | |
$ | 2,428 | | |
$ | 1,106 | | |
$ | 5,339 | | |
$ | 1,316 | |
| Net income for the period | |
| | |
$ | 6,150 | | |
$ | 2,093 | | |
$ | 11,081 | | |
$ | 3,123 | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic earnings per share | |
| | |
$ | 0.03 | | |
$ | 0.01 | | |
$ | 0.06 | | |
$ | 0.02 | |
| Diluted earnings per share | |
| | |
$ | 0.03 | | |
$ | 0.01 | | |
$ | 0.06 | | |
$ | 0.02 | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average number of common shares
outstanding | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic | |
7(e) | | |
| 176,968,327 | | |
| 183,236,530 | | |
| 178,062,195 | | |
| 183,790,578 | |
| Diluted | |
7(e) | | |
| 189,972,176 | | |
| 188,607,227 | | |
| 189,917,859 | | |
| 191,869,416 | |
| 1
Equity settled stock based compensation (a non-cash item) is included in administration expenses and project evaluation | |
$ | 1,249 | | |
$ | 993 | | |
$ | 3,775 | | |
$ | 2,842 | |
The accompanying notes are an integral
part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(unaudited) |
Expressed in U.S. Dollars
($000s) |
| | |
Note | | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| | |
| | |
| | |
| | |
| | |
| |
| Net income for the period | |
| | | |
$ | 6,150 | | |
$ | 2,093 | | |
$ | 11,081 | | |
$ | 3,123 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| — OTHER COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD | |
| | | |
| | | |
| | | |
| | | |
| | |
| Items that may subsequently be re-classified to net income: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Currency translation differences | |
| | | |
$ | 3,889 | | |
$ | (35,683 | ) | |
$ | (8,528 | ) | |
$ | (67,174 | ) |
| Items that will not subsequently be re-classified to net income: | |
| | | |
| | | |
| | | |
| | | |
| | |
| (Loss) gain on FVTOCI investments | |
| 6 | | |
| (1,423 | ) | |
| (3,058 | ) | |
| 436 | | |
| (10,803 | ) |
| Tax recovery (expense) on FVTOCI investments | |
| | | |
| 71 | | |
| 3 | | |
| (74 | ) | |
| (846 | ) |
| Total other comprehensive income (loss) for the period | |
| | | |
$ | 2,537 | | |
$ | (38,738 | ) | |
$ | (8,166 | ) | |
$ | (78,823 | ) |
| Total comprehensive income (loss) for the period | |
| | | |
$ | 8,687 | | |
$ | (36,645 | ) | |
$ | 2,915 | | |
$ | (75,700 | ) |
The accompanying notes are an integral
part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Cash Flows
(unaudited) |
Expressed in U.S. Dollars
($000s) |
| Cash flow from (used in): | |
Note | | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| — OPERATING ACTIVITIES | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income for the period | |
| | | |
$ | 6,150 | | |
$ | 2,093 | | |
$ | 11,081 | | |
$ | 3,123 | |
| Items not affecting cash: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Depletion and depreciation | |
| | | |
$ | 10,116 | | |
$ | 6,530 | | |
$ | 29,087 | | |
$ | 22,430 | |
| Mineral, royalty and other interests impairments | |
| | | |
| - | | |
| - | | |
| 212 | | |
| 4,475 | |
| Deferred income tax expense | |
| | | |
| 1,791 | | |
| 642 | | |
| 3,627 | | |
| 342 | |
| Share based payments | |
| | | |
| 1,249 | | |
| 993 | | |
| 3,775 | | |
| 2,842 | |
| (Gain) loss on revaluation of investments | |
| 6 | | |
| (2,098 | ) | |
| (88 | ) | |
| (4,690 | ) | |
| 1,022 | |
| Interest expense and financing amortization | |
| | | |
| 802 | | |
| 384 | | |
| 2,546 | | |
| 1,218 | |
| Unrealized foreign exchange (gain) loss | |
| | | |
| (21 | ) | |
| 1,278 | | |
| 93 | | |
| 2,305 | |
| Loss (gain) on mineral interest disposal and other | |
| | | |
| 213 | | |
| (176 | ) | |
| (191 | ) | |
| 134 | |
| Changes in non-cash working capital | |
| 10 | | |
| (3,947 | ) | |
| (564 | ) | |
| (3,871 | ) | |
| (1,161 | ) |
| | |
| | | |
$ | 14,255 | | |
$ | 11,092 | | |
$ | 41,669 | | |
$ | 36,730 | |
| — INVESTING ACTIVITIES | |
| | | |
| | | |
| | | |
| | | |
| | |
| Acquisition of mineral, royalty and other interests | |
| 4(b) | | |
$ | (10,113 | ) | |
$ | (60 | ) | |
$ | (44,869 | ) | |
$ | (46,004 | ) |
| Proceeds from disposal of investments and other | |
| | | |
| 758 | | |
| 860 | | |
| 19,038 | | |
| 24,000 | |
| Acquisition of investments and other assets | |
| | | |
| (2,515 | ) | |
| (2,695 | ) | |
| (21,876 | ) | |
| (5,980 | ) |
| Investment in Hod Maden interest | |
| 5 | | |
| (2,000 | ) | |
| - | | |
| (3,000 | ) | |
| (1,529 | ) |
| | |
| | | |
$ | (13,870 | ) | |
$ | (1,895 | ) | |
$ | (50,707 | ) | |
$ | (29,513 | ) |
| — FINANCING ACTIVITIES | |
| | | |
| | | |
| | | |
| | | |
| | |
Redemption of common shares
(normal course issuer bid) | |
| | | |
$ | (13,338 | ) | |
$ | (10,953 | ) | |
$ | (42,519 | ) | |
$ | (10,953 | ) |
| Bank debt drawn | |
| | | |
| 16,000 | | |
| - | | |
| 84,500 | | |
| 16,000 | |
| Bank debt repaid | |
| | | |
| (5,000 | ) | |
| - | | |
| (36,500 | ) | |
| (16,000 | ) |
| Interest paid | |
| | | |
| (607 | ) | |
| (224 | ) | |
| (1,991 | ) | |
| (745 | ) |
| Proceeds on exercise of warrants, options and other | |
| | | |
| 143 | | |
| 68 | | |
| 4,764 | | |
| 3,356 | |
| | |
| | | |
$ | (2,802 | ) | |
$ | (11,109 | ) | |
$ | 8,254 | | |
$ | (8,342 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Effect of exchange rate changes on cash
and cash equivalents | |
| | | |
$ | 97 | | |
$ | (169 | ) | |
$ | 11 | | |
$ | (267 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net decrease in cash and cash equivalents | |
| | | |
$ | (2,320 | ) | |
$ | (2,081 | ) | |
$ | (773 | ) | |
$ | (1,392 | ) |
| Cash and cash equivalents — beginning of the period | |
| | | |
| 7,439 | | |
| 13,228 | | |
| 5,892 | | |
| 12,539 | |
| Cash and cash equivalents — end of the period | |
| | | |
$ | 5,119 | | |
$ | 11,147 | | |
$ | 5,119 | | |
$ | 11,147 | |
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
(unaudited) |
Expressed in U.S. Dollars
($000s) |
| | |
| |
SHARE
CAPITAL | | |
RESERVES | | |
| | |
| | |
| |
| | |
Note | |
Number | | |
Amount | | |
Share
Options
and Restricted
Share Rights | | |
Share
Purchase Warrants | | |
Deficit | | |
Accumulated
Other Comprehensive Loss | | |
Total | |
| At
January 1, 2018 | |
| |
| 182,685,502 | | |
$ | 693,880 | | |
$ | 15,741 | | |
$ | 7,918 | | |
$ | (25,135 | ) | |
$ | (40,734 | ) | |
$ | 651,670 | |
| Options
exercised | |
7(b) | |
| 1,113,575 | | |
| 3,842 | | |
| (996 | ) | |
| - | | |
| - | | |
| - | | |
| 2,846 | |
| Warrants
exercised and expired | |
7(c) | |
| 1,020,624 | | |
| 3,961 | | |
| - | | |
| (2,954 | ) | |
| - | | |
| - | | |
| 1,007 | |
| Vesting
of restricted share rights | |
| |
| 348,585 | | |
| 1,910 | | |
| (1,910 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Acquisition
and cancellation of common shares (normal course issuer bid) | |
| |
| (2,537,400 | ) | |
| (10,953 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (10,953 | ) |
| Share
based payments | |
| |
| - | | |
| - | | |
| 2,842 | | |
| - | | |
| - | | |
| - | | |
| 2,842 | |
| Total
comprehensive income (loss) | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,123 | | |
| (78,823 | ) | |
| (75,700 | ) |
| At
September 30, 2018 | |
| |
| 182,630,886 | | |
$ | 692,640 | | |
$ | 15,677 | | |
$ | 4,964 | | |
$ | (22,012 | ) | |
$ | (119,557 | ) | |
$ | 571,712 | |
| Options
exercised | |
7(b) | |
| 327,332 | | |
| 992 | | |
| (257 | ) | |
| - | | |
| - | | |
| - | | |
| 735 | |
| Warrants
exercised and expired | |
7(c) | |
| 1,000 | | |
| 4 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4 | |
| Vesting
of restricted share rights | |
| |
| 173,737 | | |
| 688 | | |
| (688 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Acquisition
and cancellation of common shares (normal course issuer bid) | |
| |
| (2,251,375 | ) | |
| (9,602 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (9,602 | ) |
| Share
based payments | |
| |
| - | | |
| - | | |
| 1,016 | | |
| - | | |
| - | | |
| - | | |
| 1,016 | |
| Total
comprehensive income (loss) | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,749 | | |
| 16,783 | | |
| 19,532 | |
| At
December 31, 2018 | |
| |
| 180,881,580 | | |
$ | 684,722 | | |
$ | 15,748 | | |
$ | 4,964 | | |
$ | (19,263 | ) | |
$ | (102,774 | ) | |
$ | 583,397 | |
| Options
exercised | |
7(b) | |
| 2,431,400 | | |
| 8,114 | | |
| (2,965 | ) | |
| - | | |
| - | | |
| - | | |
| 5,149 | |
| Warrants
exercised and expired | |
7(c) | |
| 2,600 | | |
| 11 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 11 | |
| Vesting
of restricted share rights | |
| |
| 113,504 | | |
| 479 | | |
| (479 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
Acquisition
of common shares
(normal course issuer bid) | |
7(a) | |
| (8,109,342 | ) | |
| (43,157 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (43,157 | ) |
| Share
based payments | |
| |
| - | | |
| - | | |
| 3,775 | | |
| - | | |
| - | | |
| - | | |
| 3,775 | |
| Total
comprehensive income (loss) | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| 11,081 | | |
| (8,166 | ) | |
| 2,915 | |
| At
September 30, 2019 | |
| |
| 175,319,742 | | |
$ | 650,169 | | |
$ | 16,079 | | |
$ | 4,964 | | |
$ | (8,182 | ) | |
$ | (110,940 | ) | |
$ | 552,090 | |
The accompanying notes are an integral
part of these condensed consolidated interim financial statements.
Notes to the Unaudited
Condensed Consolidated Interim
Financial Statements
September
30, 2019
Expressed in U.S. dollars
1 – Nature
of Operations
Sandstorm Gold Ltd. was incorporated under the Business Corporations
Act of British Columbia on March 23, 2007. Sandstorm Gold Ltd. and its subsidiary entities (collectively "Sandstorm",
"Sandstorm Gold" or the "Company") is a resource-based company that seeks to acquire gold and other metals
purchase agreements (“Gold Streams” or “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 or royalty, Sandstorm
receives the right to purchase, at a fixed price per unit or at a fixed percentage of the spot price, a percentage of a mine’s
production for the life of the mine (in the case of a stream) or a portion of the revenue generated from the mine (in the case
of a royalty).
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 October 30, 2019.
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”), applicable to the preparation of interim financial statements
including International Accounting Standard 34-Interim Financial Reporting ("IAS 34"). Accordingly, certain disclosures
included in annual financial statements prepared in accordance with IFRS 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, 2018.
The accounting policies applied in the preparation of these
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, 2018 with the exception of new accounting policies described
in note 2 (c). 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 or amortized
cost.
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.
| C. | New Accounting Policies |
ADOPTION OF IFRS 16: LEASES
IFRS 16 establishes a comprehensive framework for recognition,
measurement and classification of leases and requires lessees to recognize assets and liabilities for most leases. It has replaced
International Accounting Standard (“IAS”) 17 Leases and related interpretations. The Company has adopted IFRS 16 retrospectively
from January 1, 2019 and has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional
provisions in the standard. The reclassifications and adjustments arising from the new leasing rules are recognized on the opening
statement of financial position on January 1, 2019 to the extent they arise; however, no adjustments were necessary to the Company’s
opening retained earnings as a result of the adoption of this standard. With respect to the Company’s office leases, a $3
million right-of-use asset, recognized in non-current other assets, and a corresponding liability for the same amount was recognized
as at January 1, 2019. Adoption of the new standard did not give rise to any material changes to the Company’s processes,
IT controls or condensed consolidated interim financial statements.
On adoption of IFRS 16, the Company recognized lease liabilities
in relation to leases which had previously been classified as operating leases under the principles of IAS 17 Leases. These liabilities
were measured at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing
rate as of January 1, 2019. The associated right-of-use assets were measured at an amount equal to the lease liability, adjusted
by the amount of any prepaid or accrued lease payments relating to that lease recognized in the statement of financial position
as at December 31, 2018.
The following is the accounting policy that has been amended
as a result of adoption of IFRS 16.
Leases
Upon lease commencement, the Company recognizes a right-of-use
asset, which is initially measured at the amount of the lease liability plus any direct costs incurred, which is then amortized
over the life of the lease on a straight-line basis. The lease liability is initially measured at the present value of the lease
payments payable over the lease term, discounted at the rate implicit in the lease; if the implicit lease rate cannot be determined,
the incremental borrowing rate is used. Payments against the lease are then offset against the lease liability. The lease liability
and right-of-use asset are subsequently re-measured to reflect changes to the terms of the lease. Assets and liabilities are recognized
for all leases unless the lease term is twelve months or less or the underlying asset has a low value.
IFRIC INTERPRETATION 23: UNCERTAINTY
OVER INCOME TAX TREATMENTS
In June 2017, the IASB issued IFRS Interpretations Committee
(“IFRIC”) Interpretation 23 Uncertainty over Income Tax Treatments, which is applied to the determination of taxable
profit or loss, unused tax losses, unused tax credits, tax rates and tax bases, when there is uncertainty about income tax treatment
under IAS 12 Income Taxes. IFRIC 23 is effective January 1, 2019 and is to be applied retrospectively. The new standard did not
have a material impact on the Company’s condensed consolidated interim financial statements.
3 – Financial
Instruments
The fair value hierarchy establishes three levels to classify
the inputs of valuation techniques used to measure fair value. 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. 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 liability. Investments in warrants and convertible debt instruments
held that are not listed on an exchange are classified as Level 2. The fair value of warrants, convertible debt instruments and
related instruments are determined using a Black-Scholes model based on relevant assumptions including risk free interest rate,
expected dividend yield, expected volatility and expected warrant life which are supported by observable current market conditions.
The use of reasonably possible alternative assumptions would not significantly impact the Company’s results.
Level 3 | Inputs that are 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 September 30, 2019 and
December 31, 2018.
As at September 30, 2019:
| In $000s | |
Total | | |
Quoted prices
in active
markets for
identical assets
(Level 1) | | |
Significant
other observable
inputs
(Level 2) | | |
Significant
unobservable
inputs
(Level 3) | |
| Short-term investments | |
| | | |
| | | |
| | | |
| | |
| Convertible debt | |
$ | 14,227 | | |
$ | - | | |
$ | 14,227 | | |
$ | - | |
| Long-term investments | |
| | | |
| | | |
| | | |
| | |
| Common shares held | |
$ | 38,903 | | |
$ | 38,903 | | |
$ | - | | |
$ | - | |
| Warrants and other | |
| 3,065 | | |
| - | | |
| 3,065 | | |
| - | |
| Convertible debt | |
| 13,401 | | |
| - | | |
| 13,401 | | |
| - | |
| | |
$ | 69,596 | | |
$ | 38,903 | | |
$ | 30,693 | | |
$ | - | |
As at December 31, 2018:
| In $000s | |
Total | | |
Quoted prices
in active
markets for
identical assets
(Level 1) | | |
Significant
other observable
inputs
(Level 2) | | |
Significant
unobservable
inputs
(Level 3) | |
| Short-term investments | |
| | | |
| | | |
| | | |
| | |
| Convertible debt | |
$ | 13,937 | | |
$ | - | | |
$ | 13,937 | | |
$ | - | |
| Long-term investments | |
| | | |
| | | |
| | | |
| | |
| Common shares held | |
$ | 33,139 | | |
$ | 33,139 | | |
$ | - | | |
$ | - | |
| Warrants and other | |
| 2,106 | | |
| - | | |
| 2,106 | | |
| - | |
| Convertible debt | |
| 10,998 | | |
| - | | |
| 10,998 | | |
| - | |
| | |
$ | 60,180 | | |
$ | 33,139 | | |
$ | 27,041 | | |
$ | - | |
The fair value of the Company's other financial instruments
which include cash and cash equivalents, trade and other receivables, loans receivable which are included in other assets and trade
and other payables approximate their carrying values at September 30, 2019 and December 31, 2018 due to their short-term nature.
The fair value of the Company’s bank debt approximates its carrying value due to the nature of its market-based rate of interest.
There were no transfers between the levels of the fair value hierarchy during the period ended September 30, 2019 and the year
ended December 31, 2018.
The Company’s credit risk is limited to cash and cash
equivalents, loans receivable which are included in other assets, trade and other receivables and the Company’s investments
in convertible debentures. The Company’s trade and other receivables is subject to the credit risk of the counterparties
who own and operate the mines underlying Sandstorm’s royalty portfolio. In order to mitigate its exposure to credit risk,
the Company closely monitors its financial assets and maintains its cash deposits in several high-quality financial institutions.
The Company’s investments in convertible debentures are subject to the counterparties’ credit risk. In particular,
the Company’s convertible debentures due from Equinox Gold Corp. (“Equinox”) and Americas Silver (defined herein)
is subject to the respective counterparty credit risk and the Company’s ability to realize on its security. Furthermore,
the convertible debenture due from Equinox is subject to the risk that the value of Equinox’s equity decreases below the
puttable price of the instrument. The impact of expected credit losses on trade receivables and financial assets held at amortized
cost is not material.
Financial instruments that impact the Company’s net income
or other comprehensive income due to currency fluctuations include: cash and cash equivalents, trade and other receivables and
trade and other payables denominated in Canadian dollars. Based on the Company's Canadian dollar denominated monetary assets and
monetary liabilities at September 30, 2019 a 10% increase (decrease) of the value of the Canadian dollar relative to the United
States dollar would not have a material impact on net income or other comprehensive income.
The Company has in place a planning and budgeting process to
help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. In managing
liquidity risk, the Company takes into account the amount available under the Company’s revolving credit facility, anticipated
cash flows from operating activities and its holding of cash and cash equivalents. As at September 30, 2019, the Company had cash
and cash equivalents of $5.1 million (December 31, 2018 – $5.9 million). Sandstorm holds common shares, convertible debentures,
warrants and other of other companies with a combined fair market value as at September 30, 2019, of $69.6 million (December 31,
2018 – $60.2 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 exposed to equity price risk as a result of holding
investments in other mining companies. The Company does not actively trade these investments. The equity prices of long term investments
are impacted by various underlying factors including commodity prices. Based on the Company's investments held as at September
30, 2019 a 10% increase (decrease) in the equity prices of these investments would increase (decrease) net income by $1.1 million
and other comprehensive income by $3.9 million.
4
– Mineral, Royalty and Other Interests
As of and for the nine months ended September
30, 2019:
| |
|
COST | | |
ACCUMULATED
DEPLETION | | |
| |
| |
|
| | |
| | |
| |
| In $000s |
|
Opening | | |
Net
Additions
(Disposals) | | |
Ending | | |
Opening | | |
Depletion
1 | | |
Depletion
in Ending
Inventory | | |
Impairment | | |
Ending | | |
Carrying
Amount | |
| Aurizona,
Brazil |
|
$ | 11,033 | | |
$ | - | | |
$ | 11,033 | | |
$ | 310 | | |
$ | 371 | | |
$ | - | | |
$ | - | | |
$ | 681 | | |
$ | 10,352 | |
| Bachelor Lake,
Canada |
|
| 24,029 | | |
| 4 | | |
| 24,033 | | |
| 23,564 | | |
| 395 | | |
| 74 | | |
| - | | |
| 24,033 | | |
| - | |
| Black Fox,
Canada |
|
| 37,799 | | |
| 18 | | |
| 37,817 | | |
| 28,091 | | |
| 948 | | |
| - | | |
| - | | |
| 29,039 | | |
| 8,778 | |
| Bracemac-McLeod,
Canada |
|
| 21,495 | | |
| - | | |
| 21,495 | | |
| 16,521 | | |
| 1,220 | | |
| - | | |
| - | | |
| 17,741 | | |
| 3,754 | |
| Chapada, Brazil |
|
| 69,528 | | |
| 26 | | |
| 69,554 | | |
| 10,602 | | |
| 2,433 | | |
| - | | |
| - | | |
| 13,035 | | |
| 56,519 | |
| Diavik, Canada |
|
| 53,111 | | |
| - | | |
| 53,111 | | |
| 23,569 | | |
| 5,834 | | |
| - | | |
| - | | |
| 29,403 | | |
| 23,708 | |
| Fruta del
Norte, Ecuador |
|
| - | | |
| 33,258 | | |
| 33,258 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 33,258 | |
| Hod Maden,
Turkey |
|
| 5,818 | | |
| - | | |
| 5,818 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,818 | |
| Houndé,
Burkina Faso |
|
| 45,036 | | |
| 65 | | |
| 45,101 | | |
| 4,478 | | |
| 3,153 | | |
| - | | |
| - | | |
| 7,631 | | |
| 37,470 | |
| Hugo North
Extension and Heruga, Mongolia |
|
| 35,351 | | |
| - | | |
| 35,351 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 35,351 | |
| Karma, Burkina
Faso |
|
| 26,289 | | |
| - | | |
| 26,289 | | |
| 9,873 | | |
| 2,569 | | |
| - | | |
| - | | |
| 12,442 | | |
| 13,847 | |
| Ming, Canada |
|
| 20,070 | | |
| - | | |
| 20,070 | | |
| 9,866 | | |
| 993 | | |
| - | | |
| - | | |
| 10,859 | | |
| 9,211 | |
| Relief Canyon,
United States |
|
| - | | |
| 11,417 | | |
| 11,417 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 11,417 | |
| Santa Elena,
Mexico |
|
| 23,354 | | |
| - | | |
| 23,354 | | |
| 21,058 | | |
| 410 | | |
| - | | |
| - | | |
| 21,468 | | |
| 1,886 | |
| Yamana silver
stream, Argentina |
|
| 74,236 | | |
| 17 | | |
| 74,253 | | |
| 6,072 | | |
| 6,640 | | |
| - | | |
| - | | |
| 12,712 | | |
| 61,541 | |
| Other
Royalties 2 |
|
| 209,579 | | |
| (560 | ) | |
| 209,019 | | |
| 128,518 | | |
| 2,688 | | |
| - | | |
| 212 | | |
| 131,418 | | |
| 77,601 | |
| Total
3 |
|
$ | 656,728 | | |
$ | 44,245 | | |
$ | 700,973 | | |
$ | 282,522 | | |
$ | 27,654 | | |
$ | 74 | | |
$ | 212 | | |
$ | 310,462 | | |
$ | 390,511 | |
| 1 | Depletion
during the period in the Consolidated Statements of Income of $28.8 million is comprised
of depletion expense for the period of $27.7 million, and $1.1 million from depletion
in ending inventory as at December 31, 2018. |
| 2 | Includes
Mt. Hamilton, Prairie Creek, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San
Andres, Thunder Creek, Hackett River, Lobo-Marte, Agi Dagi & Kirazli, and others. |
| 3 | Mineral,
Royalty and Other Interests includes assets accounted for under IFRS 6 (Exploration and
Evaluation) of $55.0 million and assets accounted for under IAS 16 (Property, Plant and
Equipment) of $335.5 million. |
As of and for the year ended December 31, 2018:
| |
|
COST | | |
ACCUMULATED
DEPLETION |
| | |
| |
| |
|
| | |
|
| | |
| |
| In $000s |
|
Opening | | |
Net
Additions (Disposals) | | |
Ending | | |
Opening | | |
Depletion
1 | | |
Depletion
in Ending Inventory | | |
Impairment | | |
Ending | | |
Carrying
Amount | |
| Aurizona,
Brazil |
|
$ | 11,033 | | |
$ | - | | |
$ | 11,033 | | |
$ | 310 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 310 | | |
$ | 10,723 | |
| Bachelor Lake,
Canada |
|
| 24,009 | | |
| 20 | | |
| 24,029 | | |
| 23,183 | | |
| 381 | | |
| - | | |
| - | | |
| 23,564 | | |
| 465 | |
| Black Fox,
Canada |
|
| 37,791 | | |
| 8 | | |
| 37,799 | | |
| 26,831 | | |
| 1,260 | | |
| - | | |
| - | | |
| 28,091 | | |
| 9,708 | |
| Bracemac-McLeod,
Canada |
|
| 21,495 | | |
| - | | |
| 21,495 | | |
| 15,194 | | |
| 1,327 | | |
| - | | |
| - | | |
| 16,521 | | |
| 4,974 | |
| Chapada, Brazil |
|
| 69,528 | | |
| - | | |
| 69,528 | | |
| 6,502 | | |
| 4,100 | | |
| - | | |
| - | | |
| 10,602 | | |
| 58,926 | |
| Diavik, Canada |
|
| 53,111 | | |
| - | | |
| 53,111 | | |
| 17,872 | | |
| 5,697 | | |
| - | | |
| - | | |
| 23,569 | | |
| 29,542 | |
| Hod Maden,
Turkey |
|
| 5,818 | | |
| - | | |
| 5,818 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,818 | |
| Houndé,
Burkina Faso |
|
| - | | |
| 45,036 | | |
| 45,036 | | |
| - | | |
| 4,478 | | |
| - | | |
| - | | |
| 4,478 | | |
| 40,558 | |
| Hugo North
Extension and Heruga, Mongolia |
|
| 35,351 | | |
| - | | |
| 35,351 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 35,351 | |
| Karma, Burkina
Faso |
|
| 26,289 | | |
| - | | |
| 26,289 | | |
| 6,203 | | |
| 3,270 | | |
| 400 | | |
| - | | |
| 9,873 | | |
| 16,416 | |
| Ming, Canada |
|
| 20,070 | | |
| - | | |
| 20,070 | | |
| 9,046 | | |
| 120 | | |
| 700 | | |
| - | | |
| 9,866 | | |
| 10,204 | |
| Santa Elena,
Mexico |
|
| 23,342 | | |
| 12 | | |
| 23,354 | | |
| 20,466 | | |
| 584 | | |
| 8 | | |
| - | | |
| 21,058 | | |
| 2,296 | |
| Yamana silver
stream, Argentina |
|
| 74,236 | | |
| - | | |
| 74,236 | | |
| 3,680 | | |
| 2,392 | | |
| - | | |
| - | | |
| 6,072 | | |
| 68,164 | |
| Other
Royalties 2 |
|
| 203,198 | | |
| 1,577 | | |
| 204,775 | | |
| 115,298 | | |
| 3,941 | | |
| - | | |
| 4,475 | | |
| 123,714 | | |
| 81,061 | |
| Other
3 |
|
| 9,461 | | |
| (4,657 | ) | |
| 4,804 | | |
| 4,670 | | |
| 134 | | |
| - | | |
| - | | |
| 4,804 | | |
| - | |
| Total
4 |
|
$ | 614,732 | | |
$ | 41,996 | | |
$ | 656,728 | | |
$ | 249,255 | | |
$ | 27,684 | | |
$ | 1,108 | | |
$ | 4,475 | | |
$ | 282,522 | | |
$ | 374,206 | |
| 1 | Depletion
during the year in the Consolidated Statements of Income of $29.0 million is comprised
of depletion expense for the year of $27.7 million, and $1.3 million from depletion in
ending inventory as at December 31, 2017. |
| 2 | Includes
Mt. Hamilton, Prairie Creek, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San
Andres, Thunder Creek, Hackett River, Lobo-Marte, Agi Dagi & Kirazli, and others. |
| 3 | Includes
Koricancha Stream and other. |
| 4 | Mineral,
Royalty and Other Interests includes assets accounted for under IFRS 6 (Exploration and
Evaluation) of $58.1 million and assets accounted for under IAS 16 (Property, Plant and
Equipment) of $316.1 million. |
fruta del norte
On January 18, 2019, the Company acquired a 0.9% NSR royalty
on precious metals produced from the Fruta del Norte gold project in Ecuador, currently under construction by Lundin Gold Inc.
The NSR royalty was acquired from a private third party for $32.8 million in cash and covers all mining concessions held by Lundin
Gold Inc. on the Fruta del Norte gold project.
Relief Canyon
On April 3, 2019, the Company entered into a $42.5 million financing
package with Americas Gold and Silver Corp. (“Americas Silver”) which includes a $25 million precious metal stream
and an NSR on the Relief Canyon gold project in Nevada, U.S.A. (“Relief Canyon” or the “Relief Canyon Project”),
a $10 million convertible debenture and a $7.5 million private placement.
Under the terms of the precious metals stream, Sandstorm is
entitled to receive 32,022 ounces of gold over a 5.5 year period beginning in April 2020 (the “Fixed Deliveries”).
Under certain conditions, the starting date under the Fixed Deliveries may be extended by up to six months. After receipt of the
Fixed Deliveries, the Company is entitled to purchase 4% of the gold and silver produced from the Relief Canyon Project for ongoing
per ounce cash payments equal to 30%-65% of the spot price of gold or silver, with the range dependent on the concession’s
existing royalty obligations. In addition, Sandstorm will also receive a 1.4%-2.8% NSR on the area surrounding the Relief Canyon
mine. The $25 million precious metal stream advance, of which $10 million has been remitted as at September 30, 2019, and an additional
$5 million which was advanced in October 2019, is conditional upon commencement of construction of the project and other customary
provisions.
Americas Silver may elect to reduce the 4.0% Stream and NSR
on the Relief Canyon Project by delivering 4,000 ounces of gold to Sandstorm (the “Purchase Option”). The Purchase
Option may be exercised by Americas Silver at any time and is subject to a 10% annual premium. Upon exercising the Purchase Option,
the 4.0% Stream will decrease to 2.0% and the NSR will decrease to 1.0%.
5
– Hod Maden Interest
The following table summarizes the changes in the carrying amount
of the Company’s Hod Maden interest:
| In $000s | |
| |
| At December 31, 2017 | |
$ | 177,452 | |
| Company’s share of net loss of associate | |
| (178 | ) |
| Capital investment | |
| 1,979 | |
| Currency translation adjustments | |
| (52,029 | ) |
| At December 31, 2018 | |
$ | 127,224 | |
| Company’s share of net loss of associate | |
| (306 | ) |
| Capital investment | |
| 3,000 | |
| Currency translation adjustments | |
| (8,565 | ) |
| At September 30, 2019 | |
$ | 121,353 | |
6 – Investments
As of and for the nine months ended September
30, 2019:
| In $000s | |
Fair Value
Jan. 1, 2019 | | |
Additions | | |
Disposals | | |
Transfers | | |
Fair Value
Adjustment | | |
Fair Value
Sep. 30, 2019 | |
| Short-term investments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Convertible debt instruments 2 | |
$ | 13,937 | | |
$ | 725 | | |
$ | (10,452 | ) | |
$ | 8,541 | | |
$ | 1,476 | | |
$ | 14,227 | |
| Total short-term investments | |
$ | 13,937 | | |
$ | 725 | | |
$ | (10,452 | ) | |
$ | 8,541 | | |
$ | 1,476 | | |
$ | 14,227 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Non-current investments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Common shares 1 | |
$ | 33,139 | | |
$ | 22,685 | | |
$ | (17,357 | ) | |
$ | - | | |
$ | 436 | | |
$ | 38,903 | |
| Warrants and other
2 | |
| 2,106 | | |
| - | | |
| (27 | ) | |
| - | | |
| 986 | | |
| 3,065 | |
| Convertible
debt instruments 2 | |
| 10,998 | | |
| 9,275 | | |
| (559 | ) | |
| (8,541 | ) | |
| 2,228 | | |
| 13,401 | |
| Total non-current investments | |
$ | 46,243 | | |
$ | 31,960 | | |
$ | (17,943 | ) | |
$ | (8,541 | ) | |
$ | 3,650 | | |
$ | 55,369 | |
| Total Investments | |
$ | 60,180 | | |
$ | 32,685 | | |
$ | (28,395 | ) | |
$ | - | | |
$ | 5,126 | | |
$ | 69,596 | |
| 1. | Fair value adjustment recorded within
Other Comprehensive Income (loss) for the period. |
| 2. | Fair value adjustment recorded within
Net Income (loss) for the period. |
On June 28, 2019 and in accordance with the terms of the Equinox
convertible debenture, Sandstorm received $10.5 million of Equinox’s common shares in consideration of an annual debenture
payment.
As of and for the nine months ended September
30, 2018:
| In $000s | |
Fair Value
Jan. 1, 2018 | | |
Additions | | |
Disposals | | |
Transfers | | |
Fair Value
Adjustment | | |
Fair Value
Sep. 30, 2018 | |
| Short-term investments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Common shares 1 | |
$ | 3,252 | | |
$ | - | | |
$ | (3,252 | ) | |
$ | - | | |
$ | - | | |
$ | - | |
| Convertible
debt instruments 2 | |
| 15,000 | | |
| - | | |
| (15,000 | ) | |
| 8,726 | | |
| 284 | | |
| 9,010 | |
| Total short-term investments | |
$ | 18,252 | | |
$ | - | | |
$ | (18,252 | ) | |
$ | 8,726 | | |
$ | 284 | | |
$ | 9,010 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Non-current investments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Common shares 1 | |
$ | 40,722 | | |
$ | 8,891 | | |
$ | (6,765 | ) | |
$ | - | | |
$ | (10,803 | ) | |
$ | 32,045 | |
| Warrants and other
2 | |
| 3,313 | | |
| 1,030 | | |
| (333 | ) | |
| - | | |
| (1,906 | ) | |
| 2,104 | |
| Convertible
debt instruments 2 | |
| 16,595 | | |
| 2,405 | | |
| - | | |
| (8,726 | ) | |
| 600 | | |
| 10,874 | |
| Total non-current investments | |
$ | 60,630 | | |
$ | 12,326 | | |
$ | (7,098 | ) | |
$ | (8,726 | ) | |
$ | (12,109 | ) | |
$ | 45,023 | |
| Total Investments | |
$ | 78,882 | | |
$ | 12,326 | | |
$ | (25,350 | ) | |
$ | - | | |
$ | (11,825 | ) | |
$ | 54,033 | |
| 1. | Fair value adjustment recorded within
Other Comprehensive Income (loss) for the period. |
| 2. | Fair value adjustment recorded within
Net Income (loss) for the period. |
7 – Share Capital and Reserves
| A. | Authorized Share Capital |
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 4, 2020, to purchase up to 13.0 million common shares. The NCIB provides the Company with the option
to purchase its common shares from time to time.
During the nine months ended September 30, 2019, the Company,
utilizing its previous and current NCIB, purchased and cancelled approximately 8.1 million common shares. Subsequent to period
end and under the Company’s current NCIB, the Company purchased and cancelled an additional 0.6 million common shares for
a total of $3.4 million.
| 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 8.5% 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 is as follows:
| | |
Number of options | | |
Weighted
average exercise
price per share (CAD) 1 | |
| Options outstanding at December 31, 2017 | |
| 7,726,317 | | |
| 3.79 | |
| Granted | |
| 3,130,000 | | |
| 5.92 | |
| Exercised | |
| (1,440,907 | ) | |
| (3.22 | ) |
| Expired unexercised | |
| (77,436 | ) | |
| (7.19 | ) |
| Forfeited | |
| (15,333 | ) | |
| (4.96 | ) |
| Options outstanding at December 31, 2018 | |
| 9,322,641 | | |
| 4.58 | |
| Exercised | |
| (2,431,400 | ) | |
| (2.83 | ) |
| Options outstanding at September 30, 2019 | |
| 6,891,241 | | |
| 5.18 | |
| 1. | For options exercisable in British
Pounds Sterling (“GBP”), exercise price is translated to Canadian Dollars
(“CAD”) using the period end exchange rate. |
The weighted-average share price, at the time of exercise, for
those shares that were exercised during the nine months ended September 30, 2019 was CAD7.34 per share (CAD6.07 – year ended
December 31, 2018). The weighted average remaining contractual life of the options as at September 30, 2019 was 3.02 years (3.02
years – as at December 31, 2018).
A summary of the Company’s options as
of September 30, 2019 is as follows:
| Year of expiry | | |
Number
outstanding | | |
Vested | | |
Exercise price per share
(range) (CAD) 1 | | |
Weighted average
exercise price per share
(CAD) 1, 2 | |
| 2019 | | |
| 269,374 | | |
| 269,374 | | |
| 2.93 | | |
| 2.93 | |
| 2020 | | |
| 921,333 | | |
| 921,333 | | |
| 3.60 – 3.64 | | |
| 3.61 | |
| 2021 | | |
| 1,313,000 | | |
| 875,338 | | |
| 4.96 | | |
| 4.96 | |
| 2022 | | |
| 1,257,534 | | |
| 727,537 | | |
| 4.66 – 15.00 | | |
| 5.00 | |
| 2023 | | |
| 3,130,000 | | |
| - | | |
| 5.92 | | |
| - | |
| | | |
| 6,891,241 | | |
| 2,793,582 | | |
| | | |
| 4.33 | |
| 1. | For options exercisable in GBP, exercise
price is translated to CAD using the period end exchange rate. |
| 2. | Weighted
average exercise price of options that are exercisable. |
| C. | Share Purchase Warrants |
A summary of the Company’s warrants and
the changes for the period is as follows:
| | |
Number of warrants | | |
Shares to be issued
upon exercise of warrants | |
| Warrants outstanding at December 31, 2017 | |
| 24,009,972 | | |
| 24,009,972 | |
| Exercised | |
| (1,021,624 | ) | |
| (1,021,624 | ) |
| Expired unexercised | |
| (22,948 | ) | |
| (22,948 | ) |
| Warrants outstanding at December 31, 2018 | |
| 22,965,400 | | |
| 22,965,400 | |
| Exercised | |
| (2,600 | ) | |
| (2,600 | ) |
| Warrants outstanding at September 30,
2019 | |
| 22,962,800 | | |
| 22,962,800 | |
A summary of the Company’s warrants as
of September 30, 2019 is as follows:
| Number outstanding |
|
Exercise price per share |
|
|
Expiry date |
| 3,000,000 |
|
$ |
4.50 |
|
|
March 23, 2020 |
| 15,000,000 |
|
|
3.50 |
|
|
October 27, 2020 |
| 4,962,800 |
|
|
4.00 |
|
|
November 3, 2020 |
| 22,962,800 |
|
|
|
|
|
|
| D. | Restricted Share Rights |
The Company has a restricted share plan (the
“Restricted Share Plan”) whereby the Company may grant restricted share rights (“RSRs”) 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 3,800,000 restricted share rights.
As at September 30, 2019, the Company had 2,263,932 RSRs outstanding.
| E. | Diluted Earnings Per Share |
Diluted earnings per share is calculated based
on the following:
In $000s
(excluding per share amounts) | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Net income for the period | |
$ | 6,150 | | |
$ | 2,093 | | |
$ | 11,081 | | |
$ | 3,123 | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic weighted average number of shares | |
| 176,968,327 | | |
| 183,236,530 | | |
| 178,062,195 | | |
| 183,790,578 | |
| Basic earnings per share | |
$ | 0.03 | | |
$ | 0.01 | | |
$ | 0.06 | | |
$ | 0.02 | |
| | |
| | | |
| | | |
| | | |
| | |
| Effect of dilutive securities | |
| | | |
| | | |
| | | |
| | |
| Stock options | |
| 2,217,144 | | |
| 1,754,930 | | |
| 2,306,079 | | |
| 2,225,895 | |
| Warrants | |
| 8,851,000 | | |
| 2,168,802 | | |
| 7,590,060 | | |
| 4,306,523 | |
| Restricted share rights | |
| 1,935,705 | | |
| 1,446,965 | | |
| 1,959,525 | | |
| 1,546,420 | |
| Diluted weighted average number of common shares | |
| 189,972,176 | | |
| 188,607,227 | | |
| 189,917,859 | | |
| 191,869,416 | |
| Diluted earnings per share | |
$ | 0.03 | | |
$ | 0.01 | | |
$ | 0.06 | | |
$ | 0.02 | |
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 CAD7.42 during the nine months ended September 30, 2019 (September 30, 2018 - CAD5.83) or CAD8.03
during the three months ended September 30, 2019 (September 30, 2018 - CAD5.31), or because a performance obligation had not been
met as at September 30, 2019.
| | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Stock options | |
| 2,250 | | |
| 834,625 | | |
| 2,250 | | |
| 852,777 | |
| Warrants | |
| - | | |
| 3,000,000 | | |
| - | | |
| - | |
8
– Income Taxes
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 | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Income before income taxes | |
$ | 8,578 | | |
$ | 3,199 | | |
$ | 16,420 | | |
$ | 4,439 | |
| Canadian federal and provincial income tax rates | |
| 27 | % | |
| 27 | % | |
| 27 | % | |
| 27 | % |
| Income tax expense based on the above rates | |
$ | 2,316 | | |
$ | 864 | | |
$ | 4,433 | | |
$ | 1,199 | |
| | |
| | | |
| | | |
| | | |
| | |
| Increase (decrease) due to: | |
| | | |
| | | |
| | | |
| | |
| Non-deductible expenses and permanent differences | |
$ | 11 | | |
$ | 272 | | |
$ | 698 | | |
$ | 776 | |
| Non-taxable portion of capital (loss) gain | |
| (257 | ) | |
| (12 | ) | |
| (607 | ) | |
| 138 | |
| Change in future substantively enacted tax rate | |
| - | | |
| - | | |
| - | | |
| (401 | ) |
| Change in valuation allowance and other | |
| 358 | | |
| (18 | ) | |
| 815 | | |
| (396 | ) |
| Income tax expense | |
$ | 2,428 | | |
$ | 1,106 | | |
$ | 5,339 | | |
$ | 1,316 | |
9
– Administration Expenses
The administration expenses for the Company
are as follows:
| In $000s | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Corporate administration | |
$ | 512 | | |
$ | 369 | | |
$ | 1,589 | | |
$ | 1,401 | |
| Employee benefits and salaries | |
| 455 | | |
| 475 | | |
| 1,295 | | |
| 1,299 | |
| Professional fees | |
| 235 | | |
| 200 | | |
| 574 | | |
| 575 | |
| Administration expenses before share based compensation | |
$ | 1,202 | | |
$ | 1,044 | | |
$ | 3,458 | | |
$ | 3,275 | |
| Equity settled share based compensation (a
non-cash expense) | |
| 712 | | |
| 564 | | |
| 2,136 | | |
| 1,639 | |
| Total administration expenses | |
$ | 1,914 | | |
$ | 1,608 | | |
$ | 5,594 | | |
$ | 4,914 | |
10
– Supplemental Cash Flow Information
| In $000s | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Change in non-cash working capital: | |
| | | |
| | | |
| | | |
| | |
| Trade receivables and other | |
$ | (3,912 | ) | |
$ | (601 | ) | |
$ | (3,606 | ) | |
$ | (262 | ) |
| Trade and other payables | |
| (35 | ) | |
| 37 | | |
| (265 | ) | |
| (899 | ) |
| Net decrease in cash | |
$ | (3,947 | ) | |
$ | (564 | ) | |
$ | (3,871 | ) | |
$ | (1,161 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Significant non-cash transactions: | |
| | | |
| | | |
| | | |
| | |
| Common shares received in consideration of a
convertible debenture payment | |
$ | 460 | | |
$ | - | | |
$ | 10,912 | | |
$ | - | |
| Financial instruments received in disposal of mineral, royalty and other interests | |
$ | 62 | | |
$ | 4,275 | | |
$ | 62 | | |
$ | 4,275 | |
11
– 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 | |
3 Months Ended
Sep. 30, 2019 | | |
3 Months Ended
Sep. 30, 2018 | | |
9 Months Ended
Sep. 30, 2019 | | |
9 Months Ended
Sep. 30, 2018 | |
| Employee salaries and benefits | |
$ | 305 | | |
$ | 299 | | |
$ | 910 | | |
$ | 912 | |
| Share based payments | |
| 921 | | |
| 673 | | |
| 2,734 | | |
| 1,998 | |
| Total key management compensation expense | |
$ | 1,226 | | |
$ | 972 | | |
$ | 3,644 | | |
$ | 2,910 | |
12
– 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 4, 5, 6, 7, 8 | |
Per Ounce Cash Payment:
lesser of amount below and the then
prevailing market price of commodity
(unless otherwise noted) 1, 2, 3 |
| Black Fox | |
8% | |
$551 |
| Chapada | |
4.2% | |
30% of copper spot price |
| Entrée | |
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 |
| Relief Canyon | |
32,022 ounces over 5.5 years and 4% thereafter | |
Varies |
| Santa Elena | |
20% | |
$455 |
| Yamana silver stream | |
20% | |
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 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. |
| 5. | 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. |
| 6. | 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 ongoing per pound payments will increase to the lesser of $1.10 and the then prevailing
market price of copper. |
| 7. | 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 the mine has delivered 39
million pounds of copper to Sandstorm; then 3.0% of the copper produced until, on a cumulative
basis, the mine has delivered 50 million pounds of copper to Sandstorm; then 1.5% of
the copper produced thereafter, for the life of the mine. |
| 8. | 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 Sandstorm’s Relief Canyon Gold Stream and
subject to customary provisions, the Company has $15 million remaining of its commitment to remit to Americas Silver for the construction
of the project, of which $5 million was advanced in October 2019.
13
– Segmented Information
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 September 30, 2019:
| In $000s | |
Product | |
Sales | | |
Royalty
revenue | | |
Cost of sales,
excluding
depletion | | |
Depletion | | |
Other | | |
Income (loss)
before taxes | | |
Cash flow from
operating
activities | |
| Aurizona, Brazil | |
Gold | |
$ | - | | |
$ | 1,468 | | |
$ | - | | |
$ | 371 | | |
$ | - | | |
$ | 1,097 | | |
$ | 168 | |
| Bachelor Lake, Canada | |
Gold | |
| 2,250 | | |
| - | | |
| 750 | | |
| 150 | | |
| - | | |
| 1,350 | | |
| 750 | |
| Black Fox, Canada | |
Gold | |
| 1,024 | | |
| - | | |
| 380 | | |
| 459 | | |
| - | | |
| 185 | | |
| 645 | |
| Bracemac-McLeod, Canada 1 | |
Various | |
| - | | |
| 973 | | |
| - | | |
| 399 | | |
| - | | |
| 574 | | |
| 903 | |
| Chapada, Brazil | |
Copper | |
| 2,654 | | |
| - | | |
| 797 | | |
| 803 | | |
| - | | |
| 1,054 | | |
| 1,857 | |
| Diavik, Canada | |
Diamonds | |
| - | | |
| 1,779 | | |
| - | | |
| 1,324 | | |
| - | | |
| 455 | | |
| 1,729 | |
| Houndé, Burkina Faso | |
Gold | |
| - | | |
| 1,600 | | |
| - | | |
| 934 | | |
| - | | |
| 666 | | |
| 737 | |
| Karma, Burkina Faso | |
Gold | |
| 1,851 | | |
| - | | |
| 372 | | |
| 806 | | |
| - | | |
| 673 | | |
| 1,485 | |
| Ming, Canada | |
Gold | |
| 884 | | |
| - | | |
| - | | |
| 505 | | |
| - | | |
| 379 | | |
| 884 | |
| Santa Elena, Mexico | |
Gold | |
| 4,325 | | |
| - | | |
| 1,332 | | |
| 174 | | |
| - | | |
| 2,819 | | |
| 2,994 | |
| Yamana silver stream, Argentina | |
Silver | |
| 4,530 | | |
| - | | |
| 1,355 | | |
| 3,052 | | |
| - | | |
| 123 | | |
| 3,174 | |
| Other Royalties 2 | |
Various | |
| - | | |
| 2,440 | | |
| - | | |
| 1,021 | | |
| (59 | ) | |
| 1,478 | | |
| 1,474 | |
| Total Segments | |
| |
$ | 17,518 | | |
$ | 8,260 | | |
$ | 4,986 | | |
$ | 9,998 | | |
$ | (59 | ) | |
$ | 10,853 | | |
$ | 16,800 | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Corporate: |
|
|
|
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Administration & Project evaluation expenses |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,107 | ) | |
| (1,741 | ) |
| Foreign exchange loss |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (20 | ) | |
| - | |
| Gain on revaluation of investments |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,098 | | |
| - | |
| Finance (expense) income, net |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (696 | ) | |
| 105 | |
| Other |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| 550 | | |
| (550 | ) | |
| (909 | ) |
| Total Corporate |
|
|
|
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 550 | | |
$ | (2,275 | ) | |
$ | (2,545 | ) |
| Consolidated |
|
|
|
$ | 17,518 | | |
$ | 8,260 | | |
$ | 4,986 | | |
$ | 9,998 | | |
$ | 491 | | |
$ | 8,578 | | |
$ | 14,255 | |
| 1. | Royalty revenue from Bracemac-McLeod consists of $0.4 million from copper and $0.6 million from zinc. |
| 2. | Where a mineral interest represents less than 10% of the Company’s sales, gross margin or aggregate asset book value
and represents a royalty on gold, silver or other metal, the royalty interest has been summarized under Other Royalties. Other
Royalties includes royalty revenue from Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Thunder Creek and others.
Includes royalty revenue from royalty interests located in Canada of $1.1 million, the United States of $0.4 million, Argentina
of $0.3 million, Honduras of $0.4 million and other of $0.2 million. Includes royalty revenue from gold of $2.3 million and other
base metals of $0.1 million. |
For the three months ended September 30, 2018:
| In $000s | |
Product | |
Sales | | |
Royalty
revenue | | |
Cost of sales,
excluding
depletion | | |
Depletion | | |
Other | | |
Income
(loss) before
taxes | | |
Cash flow from
operating
activities | |
| Bachelor Lake, Canada | |
Gold | |
$ | 1,810 | | |
$ | 49 | | |
$ | 750 | | |
$ | 113 | | |
$ | - | | |
$ | 996 | | |
$ | 1,122 | |
| Black Fox, Canada | |
Gold | |
| 1,080 | | |
| - | | |
| 484 | | |
| 261 | | |
| - | | |
| 335 | | |
| 596 | |
| Bracemac-McLeod, Canada 1 | |
Various | |
| - | | |
| 718 | | |
| - | | |
| 332 | | |
| - | | |
| 386 | | |
| 783 | |
| Chapada, Brazil | |
Copper | |
| 2,835 | | |
| - | | |
| 851 | | |
| 1,032 | | |
| - | | |
| 952 | | |
| 1,984 | |
| Diavik, Canada | |
Diamonds | |
| - | | |
| 2,549 | | |
| - | | |
| 1,196 | | |
| - | | |
| 1,353 | | |
| 2,249 | |
| Houndé, Burkina Faso | |
Gold | |
| - | | |
| 1,690 | | |
| - | | |
| 973 | | |
| - | | |
| 717 | | |
| 1,469 | |
| Karma, Burkina Faso | |
Gold | |
| 1,799 | | |
| - | | |
| 365 | | |
| 913 | | |
| - | | |
| 521 | | |
| 1,435 | |
| Ming, Canada | |
Gold | |
| 246 | | |
| - | | |
| - | | |
| 120 | | |
| - | | |
| 126 | | |
| 246 | |
| Santa Elena, Mexico | |
Gold | |
| 2,274 | | |
| - | | |
| 858 | | |
| 124 | | |
| - | | |
| 1,292 | | |
| 1,278 | |
| Yamana silver stream, Argentina | |
Silver | |
| 722 | | |
| - | | |
| 236 | | |
| 482 | | |
| - | | |
| 4 | | |
| 485 | |
| Other Royalties 2 | |
Various | |
| - | | |
| 1,517 | | |
| - | | |
| 904 | | |
| - | | |
| 613 | | |
| 1,260 | |
| Other | |
Gold | |
| - | | |
| - | | |
| - | | |
| - | | |
| 359 | | |
| (359 | ) | |
| - | |
| Total Segments | |
| |
$ | 10,766 | | |
$ | 6,523 | | |
$ | 3,544 | | |
$ | 6,450 | | |
$ | 359 | | |
$ | 6,936 | | |
$ | 12,907 | |
| Corporate: |
|
|
|
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Administration & Project evaluation expenses |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,680 | ) | |
| (1,686 | ) |
| Foreign exchange loss |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,314 | ) | |
| - | |
| Gain on revaluation of investments |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 88 | | |
| - | |
| Finance expense, net |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (336 | ) | |
| (4 | ) |
| Other |
|
|
|
| - | | |
| - | | |
| - | | |
| - | | |
| (505 | ) | |
| 505 | | |
| (125 | ) |
| Total
Corporate |
|
|
|
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | (505 | ) | |
$ | (3,737 | ) | |
$ | (1,815 | ) |
| Consolidated |
|
|
|
$ | 10,766 | | |
$ | 6,523 | | |
$ | 3,544 | | |
$ | 6,450 | | |
$ | (146 | ) | |
$ | 3,199 | | |
$ | 11,092 | |
| 1 | Royalty revenue from Bracemac-McLeod consists of $0.3 million from copper and $0.4 million from zinc. |
| 2 | Where a mineral interest represents less than 10% of the Company’s sales, gross margin or aggregate asset book value
and represents a royalty on gold, silver or other metal, the royalty interest has been summarized under Other Royalties. Other
Royalties includes royalty revenue from Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Thunder Creek and others.
Includes royalty revenue from royalty interests located in Canada of $0.2 million, the United States of $0.3 million, Argentina
of $0.3 million, Honduras of $0.4 million and other of $0.3 million. Includes royalty revenue from gold of $1.3 million and other
base metals of $0.2 million. |
For the nine months ended September 30, 2019:
| In $000s | |
Product | |
Sales | | |
Royalty
revenue | | |
Cost of
sales,
excluding
depletion | | |
Depletion | | |
Mineral,
royalty
and other
interests
impairments | | |
Other | | |
Income (loss)
before taxes | | |
Cash flow
from
operating
activities | |
| Aurizona, Brazil | |
Gold | |
$ | - | | |
$ | 1,468 | | |
$ | - | | |
$ | 371 | | |
$ | - | | |
$ | - | | |
$ | 1,097 | | |
$ | 168 | |
| Bachelor Lake, Canada | |
Gold | |
| 6,284 | | |
| - | | |
| 2,250 | | |
| 395 | | |
| - | | |
| - | | |
| 3,639 | | |
| 3,308 | |
| Black Fox, Canada | |
Gold | |
| 3,032 | | |
| - | | |
| 1,231 | | |
| 948 | | |
| - | | |
| - | | |
| 853 | | |
| 1,801 | |
| Bracemac-McLeod, Canada 1 | |
Various | |
| - | | |
| 2,547 | | |
| - | | |
| 1,220 | | |
| - | | |
| - | | |
| 1,327 | | |
| 2,442 | |
| Chapada, Brazil | |
Copper | |
| 8,075 | | |
| - | | |
| 2,430 | | |
| 2,433 | | |
| - | | |
| - | | |
| 3,212 | | |
| 5,645 | |
| Diavik, Canada | |
Diamonds | |
| - | | |
| 4,502 | | |
| - | | |
| 5,834 | | |
| - | | |
| - | | |
| (1,332 | ) | |
| 4,502 | |
| Houndé, Burkina Faso | |
Gold | |
| - | | |
| 4,897 | | |
| - | | |
| 3,153 | | |
| - | | |
| - | | |
| 1,744 | | |
| 3,386 | |
| Karma, Burkina Faso | |
Gold | |
| 6,278 | | |
| - | | |
| 1,260 | | |
| 2,969 | | |
| - | | |
| - | | |
| 2,049 | | |
| 5,141 | |
| Ming, Canada | |
Gold | |
| 3,414 | | |
| - | | |
| - | | |
| 1,693 | | |
| - | | |
| - | | |
| 1,721 | | |
| 3,414 | |
| Santa Elena, Mexico | |
Gold | |
| 9,593 | | |
| - | | |
| 3,174 | | |
| 418 | | |
| - | | |
| - | | |
| 6,001 | | |
| 6,419 | |
| Yamana silver stream, Argentina | |
Silver | |
| 9,912 | | |
| - | | |
| 2,969 | | |
| 6,640 | | |
| - | | |
| - | | |
| 303 | | |
| 6,942 | |
| Other Royalties 2 | |
Various | |
| - | | |
| 5,437 | | |
| - | | |
| 2,688 | | |
| 212 | | |
| (340 | ) | |
| 2,877 | | |
| 3,610 | |
| Total Segments | |
| |
$ | 46,588 | | |
$ | 18,851 | | |
$ | 13,314 | | |
$ | 28,762 | | |
$ | 212 | | |
$ | (340 | ) | |
$ | 23,491 | | |
$ | 46,778 | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Corporate: | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Administration & Project evaluation expenses | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (9,314 | ) | |
| (5,218 | ) |
| Foreign exchange loss | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (104 | ) | |
| - | |
| Gain on revaluation of investments | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,690 | | |
| - | |
| Finance (expense) income, net | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,037 | ) | |
| 351 | |
| Other | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 306 | | |
| (306 | ) | |
| (242 | ) |
| Total
Corporate | |
| |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 306 | | |
$ | (7,071 | ) | |
$ | (5,109 | ) |
| Consolidated | |
| |
$ | 46,588 | | |
$ | 18,851 | | |
$ | 13,314 | | |
$ | 28,762 | | |
$ | 212 | | |
$ | (34 | ) | |
$ | 16,420 | | |
$ | 41,669 | |
| 1 | Royalty revenue from Bracemac-McLeod consists of $0.9 million from copper and $1.6 million from zinc. |
| 2 | Where a mineral interest represents less than 10% of the Company’s sales, gross margin or aggregate asset book value
and represents a royalty on gold, silver or other metal, the royalty interest has been summarized under Other Royalties. Other
Royalties includes royalty revenue from Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Thunder Creek and others.
Includes royalty revenue from royalty interests located in Canada of $1.8 million, in the United States of $0.8 million, Argentina
of $0.8 million, Honduras of $0.6 million and other of $1.4 million. Includes royalty revenue from gold of $4.7 million and other
base metals of $0.7 million. |
For the nine months ended September 30, 2018:
| In $000s | |
Product | |
Sales | | |
Royalty
revenue | | |
Cost of
sales,
excluding
depletion | | |
Depletion | | |
Mineral,
royalty
and other
interests
impairments | | |
Other | | |
Income (loss)
before taxes | | |
Cash flow
from
operating
activities | |
| Bachelor Lake, Canada | |
Gold | |
$ | 4,902 | | |
$ | 239 | | |
$ | 1,917 | | |
$ | 278 | | |
$ | - | | |
$ | - | | |
$ | 2,946 | | |
$ | 3,426 | |
| Black Fox, Canada | |
Gold | |
| 4,656 | | |
| - | | |
| 1,952 | | |
| 1,204 | | |
| - | | |
| - | | |
| 1,500 | | |
| 2,910 | |
| Bracemac-McLeod, Canada 1 | |
Various | |
| - | | |
| 3,027 | | |
| - | | |
| 1,011 | | |
| - | | |
| - | | |
| 2,016 | | |
| 3,018 | |
| Chapada, Brazil | |
Copper | |
| 8,833 | | |
| - | | |
| 2,634 | | |
| 3,055 | | |
| - | | |
| - | | |
| 3,144 | | |
| 6,200 | |
| Diavik, Canada | |
Diamonds | |
| - | | |
| 5,235 | | |
| - | | |
| 4,015 | | |
| - | | |
| - | | |
| 1,220 | | |
| 5,235 | |
| Houndé, Burkina Faso | |
Gold | |
| - | | |
| 5,148 | | |
| - | | |
| 3,421 | | |
| - | | |
| - | | |
| 1,727 | | |
| 4,427 | |
| Karma, Burkina Faso | |
Gold | |
| 6,224 | | |
| - | | |
| 1,252 | | |
| 3,028 | | |
| - | | |
| - | | |
| 1,944 | | |
| 5,079 | |
| Ming, Canada | |
Gold | |
| 940 | | |
| - | | |
| - | | |
| 396 | | |
| - | | |
| - | | |
| 544 | | |
| 940 | |
| Santa Elena, Mexico | |
Gold | |
| 9,010 | | |
| - | | |
| 3,150 | | |
| 531 | | |
| - | | |
| - | | |
| 5,329 | | |
| 5,624 | |
| Yamana silver stream, Argentina | |
Silver | |
| 3,003 | | |
| - | | |
| 919 | | |
| 1,842 | | |
| - | | |
| - | | |
| 242 | | |
| 2,082 | |
| Other Royalties 2 | |
Various | |
| - | | |
| 3,934 | | |
| - | | |
| 3,190 | | |
| 4,475 | | |
| - | | |
| (3,731 | ) | |
| 3,668 | |
| Other | |
Gold | |
| 541 | | |
| - | | |
| 43 | | |
| 161 | | |
| - | | |
| 359 | | |
| (22 | ) | |
| 506 | |
| Total Segments | |
| |
$ | 38,109 | | |
$ | 17,583 | | |
$ | 11,867 | | |
$ | 22,132 | | |
$ | 4,475 | | |
$ | 359 | | |
$ | 16,859 | | |
$ | 43,115 | |
| Corporate: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Administration & Project
evaluation expenses | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (8,094 | ) | |
| (5,246 | ) |
| Foreign exchange loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,301 | ) | |
| - | |
| Loss on revaluation of investments | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,022 | ) | |
| - | |
| Finance expense, net | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,176 | ) | |
| (34 | ) |
| Other | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (173 | ) | |
| 173 | | |
| (1,105 | ) |
| Total
Corporate | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | (173 | ) | |
$ | (12,420 | ) | |
$ | (6,385 | ) |
| Consolidated | |
$ | 38,109 | | |
$ | 17,583 | | |
$ | 11,867 | | |
$ | 22,132 | | |
$ | 4,475 | | |
$ | 186 | | |
$ | 4,439 | | |
$ | 36,730 | |
| 1 | Royalty revenue from Bracemac-McLeod
consists of $0.9 million from copper and $2.1 million from zinc. |
| 2 | Where a mineral interest represents
less than 10% of the Company’s sales, gross margin or aggregate asset book value
and represents a royalty on gold, silver or other metal, the royalty interest has been
summarized under Other Royalties. Other Royalties includes royalty revenue from Gualcamayo,
Emigrant Springs, Mine Waste Solutions, San Andres, Thunder Creek and others. Includes
royalty revenue from royalty interests located in Canada of $0.5 million, in the United
States of $0.4 million, Argentina of $1.1 million, Honduras of $1.1 million and other
of $0.8 million. Includes royalty revenue from gold of $3.3 million and other base metals
of $0.6 million. |
Total assets as of:
| In $000s | |
September 30, 2019 | | |
December 31, 2018 | |
| Aurizona | |
$ | 11,652 | | |
$ | 10,723 | |
| Bachelor Lake | |
| 824 | | |
| 525 | |
| Black Fox | |
| 8,778 | | |
| 9,708 | |
| Bracemac-McLeod | |
| 4,252 | | |
| 5,366 | |
| Chapada | |
| 56,519 | | |
| 58,926 | |
| Diavik | |
| 25,358 | | |
| 31,192 | |
| Fruta del Norte | |
| 33,258 | | |
| - | |
| Hod Maden 1 | |
| 127,171 | | |
| 133,042 | |
| Houndé | |
| 39,155 | | |
| 41,549 | |
| Hugo North Extension and Heruga | |
| 35,351 | | |
| 35,351 | |
| Karma | |
| 13,847 | | |
| 16,983 | |
| Ming | |
| 9,211 | | |
| 10,904 | |
| Relief Canyon | |
| 11,417 | | |
| - | |
| Santa Elena | |
| 1,886 | | |
| 2,356 | |
| Yamana silver stream | |
| 61,541 | | |
| 68,164 | |
| Other Royalties 2 | |
| 79,225 | | |
| 82,092 | |
| Total Segments | |
$ | 519,445 | | |
$ | 506,881 | |
| Corporate: | |
| | | |
| | |
| Cash and cash equivalents | |
| 5,119 | | |
| 5,892 | |
| Investments | |
| 69,596 | | |
| 60,180 | |
| Deferred income tax assets | |
| 5,017 | | |
| 9,038 | |
| Other assets | |
| 9,640 | | |
| 6,896 | |
| Total Corporate | |
$ | 89,372 | | |
$ | 82,006 | |
| Consolidated | |
$ | 608,817 | | |
$ | 588,887 | |
| 1 | Includes royalty interest of $5.8 million
and investment in associate of $121.4 million at September 30, 2019. Includes royalty
interest of $5.8 million and investment in associate of $127.2 million at December 31,
2018. |
| 2 | Where a mineral interest represents
less than 10% of the Company’s sales, gross margin or aggregate asset book value
and represents a royalty on gold, silver or other metal, the royalty interest has been
summarized under Other Royalties. Includes Mt. Hamilton, Prairie Creek, Gualcamayo, Emigrant
Springs, Mine Waste Solutions, San Andres, Thunder Creek, Hackett River, Lobo-Marte,
Agi Dagi & Kirazli, and others. |
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 SEPTEMBER 30, 2019. |
| 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 July 1, 2019 and ended on September 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Issuer’s ICFR. |
Date: October 30, 2019.
“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 SEPTEMBER 30, 2019. |
| 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 July 1, 2019 and ended on September 30, 2019 that has materially
affected, or is reasonably likely to materially affect, the Issuer’s ICFR. |
Date: October 30, 2019.
“Erfan Kazemi”
ERFAN KAZEMI
Chief Financial Officer
This regulatory filing also includes additional resources:
exhibit99-1.pdf
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