Photo by: Reuters
TORONTO (miningweekly.com) – Merger and acquisition activity in the mining space continued on Wednesday with precious metals streaming firm Sandstorm Gold agreeing to buy smaller rival Gold Royalties in an all-scrip deal worth about C$5.7-million.
This followed Tuesday’s announcement that Timmins Gold had agreed to buy fellow Mexico-focused explorer Newstrike Capital for about C$140-million, giving rise to an emerging intermediate gold mining company in the North American country.
The TSX-V-listed stock of Gold Royalties, which currently had about C$2-million in cash and a portfolio of 18 royalties on 13 mining projects located in Canada, including one royalty that was generating cash flow from gold production, jumped more than 75% after the companies jointly announced the transaction that would be undertaken by way of a statutory plan of arrangement.
The transaction would enhance Sandstorm’s portfolio to ten streams and 59 royalties.
Under the terms of the transaction, Gold Royalties shareholders would receive 0.045 of a Sandstorm share for each Gold Royalties share held, valuing Gold Royalties shares at about C$0.20 apiece, which represented a premium of 70% to the 20-day volume-weighted average trading price of about C$0.118.
Based on Sandstorm's closing share price on Tuesday, the total value of this transaction would be about C$5.7-million.
Warrant holders would be eligible to receive 0.045 of a Sandstorm share for each outstanding Gold Royalties warrant exercised, while each outstanding option to acquire Gold Royalties shares would also receive 0.045 of a Sandstorm share when it is exercised.
The arrangement was subject to the approval of at least two-thirds of the votes cast by Gold Royalties shareholders at a special meeting scheduled for April, as well as regulatory approval.
The company had agreed to pay Sandstorm a termination fee of C$200 000, should the arrangement not be completed under certain circumstances.
Sandstorm Gold had last month entered into no fewer than ten royalty agreements on properties in West Africa and Nevada, while it also sold eight of its Nevada properties to TSX-V-listed Tarsis Resources for 1.5-million shares of Tarsis, as well as net smelter royalties (NSRs) of 2% to 3% on each of the properties.
The company had also acquired a royalty on TSX-listed Orezone Gold’s Bombore project, in Burkina Faso, and struck an accord for an NSR on TSX-V-listed Castle Peak Mining’s Akorade project, in Ghana.