VANCOUVER - Sandstorm Gold Ltd. (NYSE: NYSE:SAND) (TSX: SSL), a precious metals-focused royalty company, has entered into a definitive agreement to sell a selection of non-core, non-precious metals royalties to Evolve Strategic Element Royalties Ltd. for $21 million in cash plus future proceeds. This transaction aligns with the company's strategy to streamline its asset base and strengthen its balance sheet through accelerated debt repayment.
The sale includes eight royalties, notably a 0.5% net profits interest on Teck Resources (NYSE:TECK) Ltd.'s Highland Valley Copper project and a 2.5–5.0% net smelter return royalty on the North Pit at the Copper Mountain mine, both located in British Columbia, Canada. Sandstorm will retain the next $10 million in proceeds from the Copper Mountain Royalty, expecting these to be largely realized over the next 24 months based on current mineral reserves.
The package also comprises royalties on several other projects, including Seymour Lake's lithium development project in Ontario, Canada, and the Saints-Leinster and Scotia nickel development projects in Western Australia.
Sandstorm's board has approved the renewed Normal Course Issuer Bid (NCIB), which permits the company to repurchase its common shares when deemed undervalued by the market. The NCIB renewal allows for the purchase of up to 20 million common shares, representing about 7% of the issued and outstanding shares. The repurchase program is set to commence on May 7, 2024, and will continue until May 6, 2025, or until the maximum shares are bought back or the NCIB is otherwise terminated.
The transaction is expected to close in the second quarter of 2024, subject to customary closing conditions. RBC Capital Markets acted as the financial advisor for this deal. Sandstorm expects no significant impact on its near or long-term production guidance from this sale, maintaining its 2024 production forecast of 75,000 to 90,000 gold equivalent ounces.
This move is part of Sandstorm's ongoing efforts to optimize its portfolio, having sold over $50 million in non-core royalty and equity investments since the third quarter of 2023. While further monetization is possible, the company currently has no plans to divest additional royalty or stream assets.
Sandstorm's strategic focus remains on de-leveraging and investing in initiatives that promise higher returns, including the repurchase of undervalued shares. Following the completion of the transaction with Evolve, Sandstorm will hold a portfolio of approximately 230 royalties, with 39 underlying mines currently producing.
InvestingPro Insights
As Sandstorm Gold Ltd. (NYSE: SAND) continues to refine its asset portfolio and strengthen its financial position, investors may take interest in several key metrics and insights from InvestingPro. With a market capitalization of $1.65 billion, Sandstorm is trading at a high earnings multiple, with a P/E ratio of 39.89 and an adjusted P/E ratio for the last twelve months as of Q4 2023 at 56.87. Despite this high valuation, the valuation implies a strong free cash flow yield, which could be a positive sign for investors looking for companies generating significant cash relative to their share price.
The company's liquid assets surpass its short-term obligations, suggesting a solid liquidity position that can support operational needs and strategic initiatives. Additionally, Sandstorm's recent performance has been robust, with a strong return over the last three months, as evidenced by a 22.7% price total return. This could signal a positive market sentiment towards the company's recent activities and future prospects.
InvestingPro Tips indicate that analysts predict Sandstorm will be profitable this year, which aligns with the company's own production forecasts. The company has been profitable over the last twelve months, reinforcing the potential for continued financial health. For investors interested in further insights, there are additional InvestingPro Tips available that can provide a deeper dive into Sandstorm's financials and market performance.
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