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Bachelor Lake stream the key asset of Gold Royalties Corp (0.5% NSR). Sandstorm already has a deal with Metanor to purchase 20% of life of gold  produced at Bachelor for $500/oz.(Image: Sandstorm Gold)

Sandstorm Gold (SSL:TSX) has purchased Gold Royalties Corp (GRO:TSXV) this morning in a share based deal worth $5.7 million. The deal involves 0.045 of a Sandstorm share for each one Gold Royalties share held.  The proposed arrangement values Gold Royalties shares at ~20 cents per share.

Gold royalty shareholders receive a 70 percent premium on the 20 day weighted average. The majority of investors in Gold Royalties will not be happy as since the company was formed the share price has had a slow and steady decline from the 90 cent level.

A smart move by Sandstorm as if you net out the cash ($2 million) Gold Royalties had the deal only cost them $3.7 million in shares.

Sandstorm will add 18 royalties on 13 mining projects located in Canada to the portfolio. One of the royalties is a producing asset which is the Bachelor Lake mine of Metanor Resources. Gold Royalties owned a 0.5% NSR on all life of mine production from Bachelor lake properties. Of note is that Sandstorm already has a deal with Metanor to purchase 20% of the life of mine gold produced from Bachelor Lake at $500 US per ounce.

The majority of the remaining royalties would be considered early stage by investors.

A meeting of Gold Royalties shareholders will take place in April to vote on the deal. If the deal is somehow terminated a $200,000 fee will be payable to Sandstorm.

This is the second small royalty company Sandstorm has acquired in the last couple years. The first was Premier Royalty in a share based deal in August 2013.

Read:  Sandstorm Gold Announces Agreement to Acquire Gold Royalties

Related: Why "Trying to Get Rich" is Not a Worthy Endeavour- Sandstorm Gold CEO Nolan Watson or Sandstorm Gold not ruling out acquisitions, CEO says

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This is not investment advice. All facts are to be checked and verified by reader. As always please do your own due diligence.