Nolan Watson - President, CEO and Chairman of Sandstorm Gold

Nolan Watson - President, CEO and Chairman of Sandstorm Gold

Nolan Watson’s Sandstorm Gold (SSL:TSX), the junior precious metals streaming company (they make upfront payments for future gold production which they pay a fixed per ounce amount on, discounted to the spot price of the metal) announced today that it has entered into an agreement to purchase Premier Royalty (NSR:TSX) for 0.145 shares of Sandstorm.  The total deal puts a value of $28.3 million on Premier with a per share purchase price equating to $0.89 per share of Premier, representing a 16% premium to the 20-day volume weighted average price.

In January 2013, Sandstorm bought 59.9% of Premier " in order to have continued exposure to smaller stream and royalty acquisitions, while allowing Sandstorm to focus on larger transactions that are material to the company."  This may be a sign of the growing pains to come for Sandstorm and its challenge going forward; to find quality smaller scale streams and royalties which are not being absorbed by the larger streaming companies and that are not too far away from cash flowing.  However, given management's caliber and their track record of doing accretive deals, any risks associated with these types of transactions should be viewed as manageable.

Earlier this year, Premier bought a royalty package from Yamana Gold (YRI:TSX) which included cash flowing royalties on mines operated by Aura Minerals (ORA:TSX).  The company also holds a 1.5% NSR on the Emigrant Springs Mine on the Carlin Trend in Nevada, operated by Newmont.  Before this transaction, Sandstorm was expecting to produce between 33,000 and 40,000 ounces of attributable gold in 2013, but now they may add up to the 6,900 ounces Premier expected to produce.

News Release here: Sandstorm Gold Announces Agreement to Acquire Premier Royalty

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