2017
Annual Report
Corporate & Shareholder Information
STOCK EXCHANGE LISTINGS
AUDITORS
CORPORATE OFFICES
Toronto Stock Exchange
PricewaterhouseCoopers LLP
Vancouver Head Office
TSX: SSL
PricewaterhouseCoopers Place
Suite 1400, 400 Burrard Street
Suite 1400, 250 Howe Street
Vancouver, British Columbia
New York Stock Exchange
Vancouver, British Columbia
V6C 3A6
NYSE.AMERICAN: SAND
V6C 3S7
T 604 806 7000
F 604 806 7806
BOARD OF DIRECTORS
Andrew T. Swarthout
David Awram
David E. De Witt
John P. A. Budreski
Mary L. Little
Nolan Watson
TRANSFER AGENT
Computershare Investor Services
2nd Floor, 510 Burrard Street
Vancouver, British Columbia
V6C 3B9
T 604 661 9400
CORPORATE SECRETARY
Christine Gregory
— 02
T 604 689 0234
F 604 689 7317
info@sandstormltd.com
www.sandstormgold.com
Toronto Office
Suite 1110, 8 King Street
Toronto, Ontario
M5C 1B5
T 416 238 1152
Sandstorm Gold Ltd.SECTION 01Company Profile SECTION 01
04
Company Profile
05
A Message to our Shareholders
11
12
13
Global Assets Map
Management Team
Board of Directors
SECTION 02
14
Management's Discussion & Analysis
15
18
19
Company Highlights
Overview and Outlook
Key Producing Assets
25 Other Producing Assets
26
32
35
Development Assets
Summary of Annual Results
Summary of Quarterly Results
39 Quarterly Commentary
SECTION 03
63
Consolidated Financial Statements
64
65
66
67
68
69
Financial Position
Income (Loss)
Comprehensive Income (Loss)
Cash Flows
Changes in Equity
Notes to the Consolidated
Financial Statements
03 —
Sandstorm Gold Ltd.2017 Annual Report
Company
Profile
Sandstorm Gold Ltd. is a gold streaming and royalty company. Sandstorm provides
upfront financing to gold mining companies that are looking for capital and in
return, receives the right to a percentage of the gold produced from a mine,
for the life of the mine. Sandstorm has acquired a portfolio of 174 streams and
royalties, of which 21 of the underlying mines are producing. Sandstorm plans
to grow and diversify its low cost production profile through the acquisition of
additional gold streams and royalties.
— 04
Sandstorm Gold Ltd.SECTION 01Company Profile A Message to Our Shareholders
It is not an exaggeration to say that double digit returns
were ubiquitous in equity markets during 2017. We are
experiencing one of the longest bull markets in history
and the developed world saw equity market returns
of between 15% and 20%, on average! Most investors
would concede that almost all asset classes are looking
expensive whether it be stocks, real estate, or Bitcoin,
but at this stage of the cycle there is an asset that I
think is surprisingly cheap, and that’s gold.
05 —
Sandstorm Gold Ltd.2017 Annual Report I think gold is cheap given the backdrop of
Global Debt (% of GDP)
central banks attempting to normalize interest
rate policy, because with the world awash in debt
public and private non-financial sector
WEIGHTED AVERAGE
at the government, corporate and individual
275%
levels, there is little room to raise rates without
bursting the various financial bubbles in the
250%
market. One alternative for central bankers is to
keep interest rates low and allow the economy
225%
to run hot, which could cause material inflation
and lead to people looking to real assets such
200%
as gold to protect against inflation. Alterna-
tively, central bankers could continue materially
175%
increasing interest rates and risk causing the
2008
financial crisis
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next credit crisis. Since the world is significantly
more indebted than before the 2008 credit
crisis, the next crisis could be far worse than
the last one resulting in investors looking for
safe-haven investments, which would also be
great for gold. Either way, gold wins! We are
in a goldilocks scenario that we think plays out
over the next few years and as a Sandstorm
shareholder, you are in a good position to profit
from these outcomes.
Source: Bank for International Settlements
87th Annual Report, June 25, 2017
In the background, Sandstorm has quietly gone
about its business. Our portfolio of royalty as-
sets generated a record $45 million in annual
cash flow during 2017 and we sold $33 million
in non-core assets which together helped fund
our most active year yet. We deployed more
than $240 million during the year and added
almost 40 royalties in the process.
— 06
Sandstorm Gold Ltd.SECTION 01Company Profile “The key to being
successful is finding
anchor assets.”
Total Royalty Assets
Number of Acquistions
3
5
2
7
2
12
5
33
21
45
12
174
135
75
30
60
39
2009
2010
2011
2012
2013
2014
2015
2016
2017
In the course of building a royalty company,
One example was in late December when we
acquisitions will come in all shapes and sizes
announced the acquisition of a 2% NSR royalty
(our deals in 2017 ranged in size from $375,000
on the Houndé gold mine in Burkina Faso. En-
to $175 million) but the key to being successful
deavour Mining Corporation owns and operates
is finding anchor assets to establish a long-term
the asset and the current mineral reserves un-
stable cash flow base that creates sustainability
derpin a decade of gold production and royalty
and a platform for growth. I am happy to say
cash flow to Sandstorm. But what really gets
that two of the acquisitions that we made during
us excited about this asset is the exploration
2017 did just that.
upside. The royalty covers approximately 500
square kilometres of property and there is no
shortage of targets to explore. Endeavour has
set a discovery goal of adding 2.5 million to 3.5
million ounces of gold and have committed to
spending $40 million in exploration expendi-
tures over the next four years. In addition, the
production guidance at Houndé for 2018 is
250,000 to 260,000 ounces of gold, resulting
in a material increase in ongoing cash flow per
share to Sandstorm shareholders. Overall, the
deal was a great bookend to a successful year.
Houndé Gold Mine
Overhead view of processing facility
07 —
Sandstorm Gold Ltd.2017 Annual Report HOT MADEN
“One of the best
discoveries of the
last decade.”
Sandstorm Technical Team
Reviewing data from the Hot Maden project
The other anchor asset that we added to the
least a decade of gold and copper production,
Sandstorm royalty portfolio was the Hot Maden
generating hundreds of millions of dollars of
30% net profits interest. Hot Maden is a high-
cash flow to Sandstorm. The addition of Hot
grade, gold-copper project located in northeast
Maden is expected to propel Sandstorm’s annual
Turkey and is one of the best discoveries of the
cash flow to above the $100 million mark, a level
last decade. But because the project operator is
that puts our company in an enviable position
a private Turkish company, Hot Maden did not
and will allow us to return capital to sharehold-
experience the level of acclaim that you would
ers while continuing to make acquisitions and
expect from one of the most economically robust
grow the business. Like Houndé, the exploration
development-stage projects in the world. As a
potential at Hot Maden is substantial and we
result, we were able to pick up the royalty asset
are excited to see its future success play out
at an attractive valuation and we did it in an
over the next several years.
unconventional manner by acquiring Mariana
Resources plc, a junior exploration company that
held the 30% net profit interest. The deal initially
took the market by surprise, but it didn’t take
long for investors to get excited about its merits.
Sandstorm’s Attributable AuEq Ounces
Hot Maden
0
20k
40k
60k
80k
100k
120k
140k
Hot Maden will increase Sandstorm’s attribut-
able gold production by approximately 100%
2022 E
2021 E
when the mine starts operating, and we won’t
2020 E
have to wait long. A Pre-Feasibility study is
expected to be released within the next few
months and then the permitting process will
begin. Once the permits are in hand, we expect
an 18-month construction period followed by at
2019 E
2018 E
2017 A
— 08
100%
Sandstorm Gold Ltd.SECTION 01Company Profile Together, the Houndé and Hot Maden acquisi-
tions provide meaningful cash flow now as
well as substantial growth for the future, and
nicely supplement the foundation of assets
that we’ve built over the last 9 years.
Two other development-stage assets that are
We have a unique vantage point here at Sand-
worth highlighting are the Cerro Moro and
storm as we are in regular conversation with
Aurizona projects in South America as both
senior mining executives across the industry
projects will transition to producing mines during
as well as other financiers including bankers,
2018. Cerro Moro is located in Argentina and is
brokers and private equity firms. A consistent
being built by Yamana Gold Inc. The operation
theme from all our interactions has been that
will process high-grade gold and silver material
raising money as a resource company has been
and is expected to reach commercial produc-
a struggle. But I don’t believe that the industry
tion around mid-year. Yamana has forecasted
is capital starved due to a lack of investors. No,
output of 150,000 ounces of gold and 7.2 mil-
the problem has been that the finance world
lion ounces of silver annually during the first
has undergone permanent structural changes
few years of operations and Sandstorm will be
and as an industry, we’re trying to source water
purchasing 20% of the silver at 30% of the spot
from the same dry well.
Aurizona
Project
price beginning in 2019. The silver stream will
add more than $10 million in annual cash flow
for many years to come.
The Aurizona project in Brazil is another asset
that we’re excited to see up and running. The
project is a past-producer and is in the hands of
the newly formed mid-tier, Equinox Gold Corp.
The company is fully funded to production and
is expected to pour gold during Q4, followed
by a ramp up period to approximately 135,000
ounces of gold production per year. Sandstorm
has a 3% to 5% sliding scale NSR royalty in
Aurizona and we expect that the mine will have
a long operating life.
Cerro Moro
Project
Nolan Watson on "Where Did All The Equity Go?"
Keynote speech from 2017 Mines and Money in London
The structural changes that I’m talking about
are things like the estimated $1 trillion dollars
flowing out of the hands of active investors,
and into passive investment vehicles during
2017. To use Sandstorm as an example, we’ve
seen our investor base go from 0% passive in
2014 to approximately 30% today. That’s a big
shift. The issue is that passive investors do not
participate in equity capital raises by virtue of
how they are set up to operate.
09 —
MexicoThe BahamasCubaPanamaEl SalvadorGuatemalaBelizeHondurasNicaraguaCosta RicaJamaicaHaitiDominicanRepublicDominicaArgentinaBoliviaColombiaVenezuelaPeruBrazilFrenchGuianaSurinameGuyanaChileEcuadorParaguayUruguaySandstorm Gold Ltd.2017 Annual Report Disruptive technologies have also had a marked
Combined Market Cap of Stream and Royalty Companies
impact, reducing the number of intermediaries
in $US Billions
across the finance world. I’m talking about in-
novations like the discount brokerage account
that enables you and I to buy and sell securities
from home, for commissions that are fractions
of the cost of what traditional brokers charge.
A more recent innovation along the same vein
is the robo-advisor, an automated investment
manager that has captivated the next gen-
eration of investors, a demographic who are
more comfortable with trusting technology to
optimize their portfolio, rather than a finance
guy in a suit. To understand the extent of these
changes in the resource sector, we talked to
one of Canada’s largest banks and asked how
many mining focused bankers and brokers they
employed today as compared to 5 years ago.
The answer was that the head count of their
mining group had declined by 78%. And this is
not an isolated story! Brokers and bankers are
disappearing at a rapid rate and I don’t think
they’re coming back.
40
35
30
25
20
15
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Fortunately for the mining industry, stream and
royalty companies like Sandstorm have helped
to fill in the financing gap, growing from relative
obscurity 10 years ago to more than $30 billion
in combined market capitalization today. But the
royalty companies can’t be the only solution.
As an industry, we need to change the way that
we think about raising capital.
“As an industry, we need to
change the way that we
think about raising capital.”
Sandstorm Shareholder Base
Active Investors vs.
Passive Investors
2014
2015
2016
2017
— 10
Sandstorm Gold Ltd.SECTION 01Company Profile At Sandstorm, we’re committed to innovation; to
in our portfolio that cover exploration-stage
thinking outside the box and reinventing the way
properties, many of which are being actively
resource companies think about project finance.
explored. We have seen some very exciting
Something new that we’re putting together
discoveries come from exploration properties
this year is an internal marketing group that
in our royalty portfolio and we expect that this
will be 100% focused on attracting investors to
portfolio will continue to provide our investors
Sandstorm and our royalty partners. We spend
with positive surprises.
a great deal of time and energy completing due
diligence on the projects and companies that
We are glad to have you as a shareholder here
we invest in and the goal is to find others who
into our 10th year as a company. I am optimistic
can benefit from our work.
that it will be another step forward for our group.
With the success that Sandstorm had in 2017,
Sincerely,
we’ve been able to attract the attention of a
broader pool of investors recently. Not because
generalists are gravitating towards gold per se,
but rather they’re attracted to our business.
The fact that we have a diverse portfolio of
stable, cash flowing royalties, that we have an
industry leading growth profile ahead of us and
that there is a huge amount of optionality that
you currently get for free as an investor. What
I’m talking about is the more than 130 royalties
NOLAN WATSON
PRESIDENT AND CEO
Global Assets
B e a u f o r t S e a
B a f f i n B a y
A r c t i c O c e a n
B a r e n t s S ea
Kara Sea
G r e e n l a n d S ea
N o r w e g i a n S ea
Gulf of Alaska
Hudson Bay
Baltic Sea
North Sea
A t l a n t i c
O c e an
Gulf
of Mexico
Caribbean Sea
Black Sea
Mediterranean Sea
P a c i f i c
O c e an
L a p t e v S ea
E a s t S i b e r i a n S ea
Chukchi Sea
Sea of
Okhotsk
B e r i n g S ea
Sea of
Japan
(East Sea)
Yellow
Sea
East
China
Sea
P a c i f i c O c e a n
A r a b i a n S ea
Bay of Bengal
South China
Sea
I n d i a n
O c e a n
C o r a l S ea
Great
Australian
Bight
T a s m a n S ea
11 —
Sandstorm Gold Ltd.2017 Annual Report Taking the
Mining Industry
by Storm
6
1
— 12
3
4
2
1. Nolan Watson | FCPA, FCA, CFA
President and CEO
2. David Awarm | B.Sc, Geologist
Sr. Executive VP
3. Erfan Kazemi | CPA, CA, CFA
Chief Financial Officer
4. Adam Spencer | CFA
Sr. VP of Corporate Development
5. Tom Bruington | P.Eng., M.Sc
Executive VP of Project Evaluation
6. Keith Laskowski | Mining Geologist, MSc, QP
VP of Technical Services
Sandstorm’s management team has an
optimal balance of deal making and tech-
nical expertise. The Company’s founders,
Nolan Watson and David Awram, have
been completing stream and royalty
financings for almost 15 years. Erfan
Kazemi and Adam Spencer round out our
senior management team and together
the group has executed more than $3.0
billion in transactions.
Our in-house technical team consists of
Tom Bruington and Keith Laskowski who
individually have more than 30 years of
experience evaluating resource projects
and have each worked in or conducted
project evaluations in more than 60
countries. Needless to say, our technical
5
team has seen it all and they work hard to
ensure that Sandstorm invests in quality
projects with exploration upside.
Sandstorm Gold Ltd.SECTION 01Company Profile 1
2
3
4
5
6
1
2
3
4
5
6
Teaming With
Experience
3. David Awram | Director
6. John P. A. Budreski | Director
Cofounder
Cofounder of Sandstorm and
former Director, Investor Relations
for Wheaton Precious Metals.
Mr. Awram has overseen the
company’s corporate development
group, evaluating hundreds of
projects and completing on-site
due diligence on dozens of mining
projects across the globe.
President and CEO of bulk
commodities royalty company,
Morien Resources. Prior to Morien,
Mr. Budreski was the Vice Chairman
of Cormark Securities and has more
than 25 years of experience in the
resource and resource financing
industries.
1. Mary L. Little | Director
4. Nolan Watson | Director
Founder and Director of Mirasol
Cofounder
Resources. Ms. Little led Mirasol’s
Cofounder of Sandstorm and
growth as a successful prospect
former CFO of Wheaton Precious
generator, and spearheaded
Metals. Mr. Watson has been
corporate development activities,
involved in more than $2 billion in
including the negotiation of joint
streaming and royalty transactions
ventures and the sale of a principal
and has won numerous awards
asset.
for his professional and charitable
achievements.
2. Andrew T. Swarthout | Director
Founder and Executive Chairman
5. David E. De Witt | Chairman
of multi-asset silver company, Bear
Founder and Chairman of venture
Creek Mining. Mr. Swarthout has
capital firm, Pathway Capital. Mr.
participated in several discoveries
De Witt practiced corporate and
and reserve expansions on projects
securities law prior to Pathway
in North and South America that
and has held directorships in many
are in production or will be in
public companies involved in the
production in the future.
natural resource field.
13 —
Sandstorm Gold Ltd.2017 Annual Report Management’s
Discussion
and Analysis
For The Year Ended December 31, 2017
This management’s discussion and analysis (“MD&A”) for Sandstorm Gold Ltd.
and its subsidiary entities (“Sandstorm”, “Sandstorm Gold” or the “Company”)
should be read in conjunction with the audited consolidated financial statements
of Sandstorm for the year ended December 31, 2017 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”). The information contained within this MD&A is current to February 15,
2018 and all figures are stated in U.S. dollars unless otherwise noted.
— 14
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis Company Highlights
OPERATING RESULTS
A record year in terms of
production, revenue and
cash flow
и Attributable Gold Equivalent ounces
sold (as defined hereinafter),
for the three months and year
ended December 31, 2017 were
12,032 ounces and 54,633 ounces,
respectively, compared with 13,245
ounces and 49,731 ounces for
the comparable periods in 2016.
Attributable Gold Equivalent ounces
sold for the most recently completed
year represented a record for the
Company.
и Revenue for the three months and
year ended December 31, 2017
was $15.4 million and $68.3 million,
respectively, compared with $16.5
million and $62.4 million for the
comparable periods in 2016. Revenue
for the most recently completed
year represented a record for the
Company.
и Cash flows from operating activities
for the three months and year ended
December 31, 2017 were $9.9 million
and $44.8 million, respectively,
compared with $10.1 million and
$39.0 million for the comparable
periods in 2016. Operating cash flows
for the most recently completed
year represented a record for the
Company.
и Cost of sales, excluding depletion
for the three months and year
ended December 31, 2017 were $4.1
million and $15.3 million, respectively,
compared with $3.3 million and $12.8
million for the comparable periods in
2016.
и Average cash costs for the year
ended December 31, 2017 of $280 1
per Attributable Gold Equivalent
ounce, compared with $258 1 per
Attributable Gold Equivalent ounce
for the year ended December 31,
2016.
1
Refer to section on non-IFRS and other measures of this MD&A.
15 —
Sandstorm Gold Ltd.MD&A2017 Annual Report SIGNIFICANT ACQUISITIONS
Acquired over 35 royalties
in 2017
и On July 3, 2017, Sandstorm
completed its previously announced
arrangement to acquire all the issued
and ordinary share capital of Mariana
Resources Ltd. (that Sandstorm
did not already own). Under the
terms of the arrangement and as
consideration for the acquisition, the
Company issued 32,685,228 common
shares and paid an additional $47.3
million in cash. The transaction and
the addition of the 30% Hot Maden
net profits interest to the Company’s
portfolio of royalties provides for:
↳ approximately 100% increase in estimated
future production for only 19% dilution;
↳ an anchor asset that is high-grade and low-
cost with significant exploration upside;
↳ a strong local partner with experience
in exploring, developing, permitting and
operating projects in Turkey; and
↳ exploration properties in Côte d’Ivoire,
Turkey, and Argentina which the Company
intends on selling and retaining NSRs as
well as equity in the spin outs. To date,
Sandstorm has already sold a number
of these assets and continues to make
progress in divesting of the remaining
properties.
и In January 2018, the Company
acquired a 2% NSR on the producing
Houndé gold mine in Burkina
Faso, operated by Endeavour
Mining Corporation. The royalty
— 16
was acquired from Acacia Mining
PLC for $45 million in cash and
covers the Kari North and Kari
South tenements, representing
approximately 500 square kilometres
of the Houndé property package.
The Houndé royalty is a natural fit
for the Sandstorm portfolio as the
asset meets all of the criteria that the
Company pursues in an acquisition
including immediate increase on a
cash flow per share basis, a strong
counterparty in Endeavour and
significant exploration upside.
OTHER NOTABLE EVENTS
Monetization of Invest-
ments, Amendments,
Share buy backs and
Impairments
MONETIZATION OF SECURITIES
и In January 2018, the Company closed
its previously announced agreement
to sell $18.3 million in debt and equity
securities of Equinox Gold Corp.
to Mr. Ross Beaty. When combined
with the approximately $14.4 million
in sales of other debt and equity
investments in 2017, the Company
has monetized over $32 million of its
non-core assets and reinvested the
proceeds through the acquisition of
new royalties.
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis CREDIT FACILITY AMENDMENT
и On December 20, 2017, the Company
amended its revolving credit facility
by increasing the facility to $150
million and adjusting its terms such
that the facility can now be used
for general corporate purposes. The
tenure of the facility is four years and
is extendable by mutual consent of
Sandstorm and the majority of the
banking syndicate.
GOLD STREAM AMENDMENT
и During the year ended December
31, 2017, the Company amended the
Bachelor Lake Gold Stream with
Metanor Resources Inc. Beginning
October 1, 2017, Sandstorm will
и The amendment allows Sandstorm
to maintain meaningful exposure
to production from the Bachelor
Lake mine while adding a royalty
on the Barry project, an advanced
exploration-stage asset located in the
emerging Urban-Barry camp.
SHARE BUY-BACK UPDATE
и Under the Company’s normal
course issuer bid, the Company is
able until April 4, 2018, to purchase
approximately 7.6 million common
shares. During the year ended
December 31, 2017, the Company
purchased approximately 4.1 million
common shares.
purchase 20% of the gold produced
IMPAIRMENTS
from the Bachelor Lake mine at an
ongoing cost of $500 per ounce,
until 12,000 ounces of gold have
been purchased by the Company
at which time the Gold Stream will
convert into a 3.9% NSR. As part of
the amendment, Metanor has agreed
it will sell a minimum of 1,500 ounces
of gold to Sandstorm on a quarterly
basis until the 12,000 ounce threshold
has been reached. In consideration
for the amendment, Sandstorm
received:
↳ a 3.9% NSR on Metanor’s Barry project; and
↳ $2.0 million in the common shares of
Metanor.
и During the year ended December 31,
2017, the Company recognized $9.1
million in impairments relating to
certain royalties within the Company’s
portfolio.
17 —
Sandstorm Gold Ltd.MD&A2017 Annual Report Overview
Sandstorm is a growth-focused 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 upfront payments to acquire a
Gold 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 174 Streams
and net smelter returns royalties (“NSR”), of which 21 of 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, Streams, and NSRs,
attributable Gold Equivalent production (individually and collectively
referred to as “Attributable Gold Equivalent”) for 2018 is forecasted
to be between 50,000 – 60,000 Attributable Gold Equivalent ounces.
The Company is forecasting Attributable Gold Equivalent production of
approximately 125,000 ounces per annum in 2022.
— 18
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis MD&A
2017 Annual Report
Sandstorm Gold Ltd.
― 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 project, located in Santa Cruz, Argentina (the “Cerro Moro Project”
or “Cerro Moro”) and an agreement to receive interim silver deliveries through
2018 from a number of Yamana’s currently operating mines.
SILVER DELIVERIES
Under the terms of the Yamana silver stream, Sandstorm has agreed to purchase,
beginning January 1, 2019, 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.
As part of the Yamana silver stream, through 2018, Sandstorm has also agreed
to purchase, for ongoing per ounce cash payments equal to 30% of the spot
price of silver, an amount of silver from:
i.
the Minera Florida mine in Chile equal to 38% of the silver produced
(up to an annual maximum of 200,000 ounces of silver); and
ii.
the Chapada mine in Brazil equal to 52% of the silver produced (up to
an annual maximum of 100,000 ounces of silver).
19 —
Sandstorm Gold Ltd.MD&A2017 Annual Report DOWNSIDE PROTECTION
If by January 1, 2019, the Cerro Moro processing facility has not averaged 80%
of its daily nameplate production capacity over a 30-day period (the "Com-
mencement of Production"), then Yamana´s producing El Peñon mine in Chile
will provide a 24 month backstop until the Commencement of Production has
begun. During the 24 month backstop, if applicable, Sandstorm will purchase,
for ongoing per ounce cash payments equal to 30% of the spot price of silver, an
amount of silver equal to 16% of El Peñon´s silver production up to a maximum
of 1.2 million ounces per annum.
ABOUT CERRO MORO
The Cerro Moro project is located approximately 70 kilometers southwest of the
coastal port city of Puerto Deseado in the Santa Cruz province of Argentina.
Cerro Moro contains a number of high grade epithermal gold and silver deposits,
some of which will be mined via open pit and some via underground mining
methods. The current plan indicates average annual production in the first three
years of 150,000 ounces of gold and 7.2 million ounces of silver, with the life of
mine annual production averaging approximately 130,000 ounces of gold and
6.4 million ounces of silver at a throughput of 1,000 tonnes per day.
CURRENT ACTIVITIES
Yamana recently reported that it is progressing well with respect
to site construction activities and it anticipates mill commissioning
will occur in the first quarter of 2018 with commercial production
expected by the second half of 2018.
Chapada Copper Stream
◀ YAMANA GOLD INC.
The Company has a copper stream on Yamana’s open pit gold-copper Chapada
mine located 270 kilometers northwest of Brasília in Goiás State, Brazil (“Chapada”
or the “Chapada Mine”). Under the terms of the Yamana 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 Yamana has delivered 39 million pounds of
copper to Sandstorm (the “First Chapada Delivery Threshold”); then
ii. 3.0% of the copper produced until, on a cumulative basis, Yamana has
delivered 50 million pounds of copper to Sandstorm (the “Second
Chapada Delivery Threshold”); then
iii.
1.5% of the copper produced thereafter, for the life of the mine.
— 20
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis DOWNSIDE PROTECTION
If Cerro Moro has not achieved the Commencement of Production and Sand-
storm has not received cumulative pre-tax cash flow equal to $70 million from
the Yamana silver stream, then the First Chapada Delivery Threshold and the
Second Chapada Delivery Threshold will cease to be in effect and Sandstorm will
continue to purchase 4.2% of Chapada’s payable copper production (up to an
annual maximum of 3.9 million pounds of copper), until such time as Sandstorm
has received cumulative pre-tax cash flow equal to $70 million, or Cerro Moro
has achieved the Commencement of Production.
ABOUT CHAPADA
Chapada has been in production since 2007 and is a relatively low-cost South
American operation. The ore is treated through a flotation plant with capacity of
22 million tonnes per annum. Yamana has benefitted from significant discoveries
Chapada Mine
at Chapada in the past and in 2016 it announced an updated reserve statement
which increased proven and probable copper mineral reserves to 3.25 billion
pounds of copper contained in 559.5 million tonnes at 0.26% copper (see www.
yamana.com for more information on this and recent drill results). Yamana an-
nounced positive results from its exploration program which is primarily focused
on increasing mineral resources and mineral reserves by testing near mine and
district targets including Baru, Suruca, Buriti and Formiga. Some of the highlights
include: (i) the identification of a near surface, higher grade core to the Baru
deposit that lies above Sucupira, a northeast to southwest trending mineral body
immediately adjacent to the north wall of the main Chapada pit; (ii) at Suruca,
current drilling has discovered a higher grade core to the mineralization that is
at or above current life of mine grades with metallurgy similar to the Chapada
deposit; (iii) a new copper-gold mineralization identified three kilometers from
the Chapada mine, called the Buriti target which adds another near surface
discovery at Chapada; and (iv) given the proximity of the Baru and Sucupira
deposits to plant infrastructure, studies are underway to review a larger open
pit scenario that would include both these deposits.
Houndé Royalty
◀ ENDEAVOUR MINING CORP.
In January 2018, the Company acquired a 2% NSR based on the production
from the Houndé mine located in Burkina Faso, West Africa (“Houndé” or the
“Houndé Mine”) which is owned and operated by Endeavour Mining Corporation
(“Endeavour”).
The royalty, which was acquired from Acacia Mining PLC for $45 million in cash,
covers the Kari North and Kari South tenements, representing approximately 500
square kilometres of the Houndé property package. Nearly the entire Houndé
mineral reserve of 2.1 million ounces (as of December 2014) is located on the
Kari North and Kari South tenements, including the Vindaloo deposit and most
of the Bouéré deposit. The highlights of the acquisition include:
21 —
Sandstorm Gold Ltd.MD&A2017 Annual Report »
Immediate Cash Flow: Commercial production was announced on October
31, 2017 and the Houndé Mine is expected to produce 235,000 ounces of
gold per year on average over the first four years of operations. The mine
has an initial ten year mine life based on the current mineral reserves.
»
Strong Operator: Endeavour is a mid-tier gold producer with five operating
mines in Africa. The construction of the Houndé Mine was completed
ahead of schedule and below budget and represents Endeavour’s flag-
ship gold mine.
»
Exploration Upside: Endeavour has set a discovery target at Houndé of
2.5 million to 3.5 million ounces of gold over the next four years with $40
million in budgeted expenditures expected to occur from 2018 to 2021. A
number of the high-priority targets are on the Sandstorm royalty ground.
ABOUT HOUNDÉ
Houndé Gold Mine
Houndé is an open-pit mine with a 3.0 million tonne per year gravity circuit
and carbon-in-leach plant. The gravity concentrate is processed through an
intensive cyanide leach reactor followed by electrowinning to recover the gold.
The carbon-in-leach feed is thickened and fed into a standard carbon-in-leach
circuit. Construction of the project began in April 2016 and commercial pro-
duction was announced in October 2017. Reserves referenced above include
proven and probable reserves contained in 30.6 million tonnes with an average
grade of 2.1 grams per tonne using a cut-off grade of 0.5 grams per tonne Au.
See www.endeavourmining.com for more information.
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 100 million carats from
three kimberlite pipes (A154 South, A154 North, and A418). Rio Tinto has approved
the development of an open pit mine on a fourth pipe (A21) which is targeted for
production by the end of 2018. Recent public announcements have indicated that
the development of the A21 pipe continues to progress according to plan.
Overview of open pits from
Diavik Diamond Mine
— 22
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis 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 $450 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 announced that it had successfully completed the
CURRENT ACTIVITIES
connection of the San Salvador ramp to the Main vein which has
resulted in a reduction in haulage bottlenecks and has improved
mine planning logistics. In addition, the new ramp is expected to
support future exploration activities around the Tortuga vein.
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 $540 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. On October 6, 2017,
McEwen completed its previously announced acquisition of the Black Fox Mine
from the previous owner, Primero Mining Corp.
Bachelor Lake Gold Stream
◀ METANOR RESOURCES INC.
On September 29, 2017, the Company amended its Gold Stream with Metanor
Resources Inc (“Metanor”). Beginning October 1, 2017, Sandstorm will purchase
20% of the gold produced from Metanor’s 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, until 12,000
ounces of gold have been purchased by the Company at which time the Gold
Stream will convert into a 3.9% NSR. As part of the amendment, Metanor has
agreed it will sell a minimum of 1,500 ounces of gold to Sandstorm on a quarterly
basis until the 12,000 ounce threshold has been reached. Under the previous
Gold Stream, there were no requirements for minimum deliveries nor was there
a subsequent conversion of the Gold Stream into a NSR. In consideration for
entering into the amendment, Sandstorm received:
23 —
Sandstorm Gold Ltd.MD&A2017 Annual Report ↳ a 3.9% NSR on Metanor’s Barry project; and
↳ $2.0 million in the common shares of Metanor.
Metanor may elect to reduce the 3.9% NSR on the Bachelor Lake or Barry projects
by making a $2.0 million payment to Sandstorm in each case (the “Purchase Op-
tion”). Upon exercising either of the Purchase Options, the respective Sandstorm
NSR will decrease to 1.8%. In addition to the Gold Stream, Sandstorm has an already
existing 1% NSR on the Bachelor Lake gold mine, which remains unaffected by
the amendment. In connection with the amendment, the Company recognized
a gain of $3.0 million during the year ended December 31, 2017.
Bachelor Lake
The Bachelor Lake Mine is an underground mining operation with an operat-
ing mill and surface infrastructure, which began production in early 2013. The
amendment not only allows Sandstorm to maintain meaningful exposure to the
production from the Bachelor Lake mine, but it also adds a royalty on the Barry
project, which is an advanced exploration-stage asset located in the emerging
Urban-Barry camp. Metanor is currently conducting exploration drilling at the
Barry project and has plans to complete a pre-feasibility study as it continues
the permitting process.
Karma Gold Stream
◀ ENDEAVOUR MINING CORP.
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 the 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 five defined mineral deposits that make up the Karma project.
Based on recent drilling, Endeavour has extended the mine life beyond 10 years.
CURRENT ACTIVITIES
Endeavour recently announced that it has successfully completed
plant optimization work at the mine and that the newly installed
front-end and the ADR plant are expected to boost stacking
capacity beyond the initial design capacity of 4 million tonnes per
annum.
— 24
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis 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
Close-up of visible gold from Ming Mine
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 recoveries, Sandstorm’s 2017 gold
purchase entitlement was 32%.
― OTHER PRODUCING ASSETS
Gualcamayo Royalty
◀ YAMANA GOLD INC.
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 oper-
ated by Yamana. The Gualcamayo Mine is an open pit, heap leach operation
encompassing three substantial zones of gold mineralization. Yamana recently
announced exploration success in near pit targets of Cerro Condor and Potenciales
which, Yamana believes, provides support for extending the life of the open pit.
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.
25 —
Sandstorm Gold Ltd.MD&A2017 Annual Report San Andres Royalty
◀ AURA MINERALS INC.
The Company has a 1.5% NSR on the San Andres 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.
Thunder Creek Royalty
◀ TAHOE RESOURCES INC.
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 oper-
ated by Tahoe Resources Inc. (“Tahoe”). Thunder Creek is an underground mine
San Andres
that has been in production since 2010 and has produced more than 500,000
ounces of gold.
Emigrant Springs Royalty
◀ NEWMONT MINING CORP.
The Company has a 1.5% NSR on the Emigrant Springs mine (the “Emigrant Springs
Mine”) which is located in the Carlin Trend in Nevada, U.S.A. and is owned and
operated by Newmont Mining Corp. (“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
Hot Maden
◀ LYDIA MADENCILIK A.S.
The Company has a 30% net profits interest and a 2% NSR on the Hot Maden
gold-copper project which is located in the Artvin Province, northeastern Turkey
(the “Hot Maden Project” or “Hot Maden”). The project is operated and co-owned
by a Turkish partner, Lidya Madencilik Sanayi ve Ticaret A.S. (“Lydia”), which owns
the remaining interest in the project. Lydia is an experienced Turkish company
who is also a joint-venture partner with Alacer Gold Corp. on the producing
Çöpler mine in Turkey. The Hot Maden Project is envisaged as a conventional
underground mine and processing facility producing concentrates without the
use of cyanide.
Sandstorm acquired its interest in Hot Maden on July 3, 2017 when Sandstorm
completed its previously announced arrangement to acquire all the issued and
ordinary share capital of Mariana Resources Ltd. (“Mariana”) (that Sandstorm
did not already own) (the “Arrangement”). Under the terms of the Arrangement
and as consideration for the acquisition, the Company issued 32,685,228 com-
mon shares and paid an additional $47.3 million in cash. The highlights of the
— 26
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis transaction and the addition of the 30% Hot Maden net profits interest to the
Company’s portfolio include:
и 100% increase in expected future production for 19% dilution;
»
Hot Maden is an anchor asset that is expected to increase the Company’s
attributable gold equivalent ounces to approximately 125,000 in 2022.
и Hot Maden has significant exploration upside;
»
Total land package is 74 square kilometers in size with the current focus
being a 7.0 kilometer long north-south alteration zone. The majority of
the exploration drilling has been within a 1.0 kilometer strike length of
this alteration zone with several exploration targets identified along
strike and parallel to the identified orebody.
Hot Maden
и Majority operator Lydia 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 partnered with Alacer Gold Corp. on several projects in
Turkey including the producing Çöpler mine and the development-stage
Gediktepe and Kartaltepe projects.
и Acquisition of Mariana includes exploration properties in Côte d’Ivoire,
Turkey, and Argentina which the Company intends on selling and retaining
NSRs as well as equity in the spin outs. To-date, Sandstorm has already sold
a number of these assets and continues to make progress in divesting of
the remaining properties.
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. In addition, Sandstorm holds a 2% NSR on Equinox’s
190,073 hectares of greenfields exploration ground. At any time prior to the
commencement of commercial production, Equinox has the ability to purchase
one-half of the greenfields NSR for a cash payment of $10 million.
Equinox, the successor to Luna Gold Inc. and Trek Mining Inc. ("Trek"), recently
announced that it was fully funded to complete construction of the Aurizona
project, with gold production expected by the end of 2018.
A feasibility study on the Aurizona project, which was released on July 31, 2017,
included proven and probable mineral reserves of 971,000 ounces of gold (con-
tained 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)
27 —
Sandstorm Gold Ltd.MD&A2017 Annual Report Exploration activities
at Aurizona Project
with expected annual production of 136,000 ounces. Equinox recently announced
that it intends on pursuing, after the receipt of the Tatajuba mining licence, a
34,000 metre drill program focused on resource growth, target development
and discovery. For more information refer to www.equinoxgold.com. Equinox also
has an exploration agreement with AngloGold covering the greenfields explora-
tion property. Sandstorm holds a right of first refusal on any future streams or
royalties on the Aurizona project and greenfields property.
In connection with a series of business combinations resulting in Equinox Gold
Corp., Sandstorm was able to monetize a number of its historical debt and
equity investments held in Equinox’s predecessor companies. On March 31,
2017, the term debt facility that was owed to Sandstorm, in the amount of $20
million plus accrued interest, was settled in the form of equity. The Company
recognized a gain of $1.8 million on the settlement of that debt. In addition, on
January 3, 2018, the Company closed its previously announced agreement to
sell $18.3 million in debt and equity securities of Equinox to Mr. Ross Beaty, the
new chairman of Equinox.
Hugo North Extension & Heruga Gold Stream
◀ ENTRÉE RESOURCES LTD.
The Company has a Gold Stream with Entrée Resources Ltd. (“Entrée”) to pur-
chase an amount equal to 5.62% and 4.26% of the gold and silver by-products
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 rich 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 kilometers south of the
capital city of Ulaanbaatar and 80 kilometers 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. (“Turquoise Hill”) and the Government of Mongolia, and its project manager
Rio Tinto PLC. Entrée retains a 20% interest in the resource deposits of the Hugo
North Extension and Heruga.
Entrée recently released the results of a 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.
— 28
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis 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 mas-
sive sulphide bodies that occur over a 6.6 kilometer 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 technical report, completed in 2013, reported 25.0 million tonnes of
indicated resources containing 4.2% zinc and 130.0 grams per tonne silver plus
57.0 million tonnes of inferred resources with 3.0% zinc and 100.0 grams per
tonne silver. For more information refer to the technical reports dated July 26,
2010 and July 31, 2013 under Sabina Gold & Silver Corp’s profile on www.sedar.
com. Glencore has recently disclosed that a pre-feasibility study is currently
Agi Dagi
underway and that they are revisiting both the mining methods and boundaries
between open pit and underground.
Lobo-Marte Royalty
◀ KINROSS GOLD CORP.
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 2009, Kinross completed a pre-feasibility study at Lobo-Marte that contem-
plated an open-pit/ heap-leach operation. As a result of changes in the plan of
operations and other factors, in 2014, Kinross withdrew its previously submitted
permit application. As a result of the permit withdrawal, approximately 6 million
estimated gold ounces were reclassified from Mineral Reserves to Measured and
Indicated Resources. Future development and operations at Lobo-Marte will
require the re-initiation of the permitting process. 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 con-
templated 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.
29 —
Sandstorm Gold Ltd.MD&A2017 Annual Report Prairie Creek Royalty
◀ CANADIAN ZINC CORPORATION
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 Canadian
Zinc Corporation (“Canadian Zinc”). The Prairie Creek Project is a zinc, silver
and lead project that is 100%-owned by Canadian Zinc and based on a recently
announced feasibility study has a proven and probable mineral reserve of 8.1
million tonnes containing 8.6% zinc, 124.2 grams per tonne silver and 8.1% lead.
Canadian Zinc recently announced that the Mackenzie Valley Environmental
Impact Review Board had recommended approval for the proposed all season
road at the Prairie Creek Project. Development of the all season road will enable
the transportation of concentrates and supplies throughout the year. For more
information, refer to www.canadianzinc.com.
Mt. Hamilton Royalty
◀ WATERTON PRECIOUS METALS FUND II CAYMAN, LP
Prairie Creek
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 (“Waterton”).
Sandstorm holds a right of first refusal on any future royalty or gold stream
financing for the Mt. Hamilton Project.
― REVOLVING CREDIT FACILITY
On December 20, 2017, the Company amended its revolving credit agreement,
allowing the Company to borrow up to $150 million (the “Revolving Facility”), for
general corporate purposes, from a syndicate of banks including the Bank of Nova
Scotia, Bank of Montreal, National Bank of Canada, Canadian Imperial Bank of
Commerce and Royal Bank of Canada (the “Syndicate”). The term of the Revolv-
ing Facility is for four years and is extendable by mutual consent of Sandstorm
and the Syndicate. The amounts drawn on the Revolving Facility are subject to
an interest rate of LIBOR plus 2.50% –3.50% per annum, and the undrawn portion
of the Revolving Facility is subject to a standby fee of 0.60% – 0.80% per annum,
dependent on the Company’s leverage ratio. Subsequent to year end, the Company
utilized a portion of the facility to fund the Houndé royalty acquisition. As of the
date of the MD&A, only $7.5 million remains outstanding under the Revolving
Facility, leaving $142.5 million undrawn and available for future acquisitions and
for general corporate purposes.
— 30
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis ― IMPAIRMENTS
While assessing whether any indications of impairment exist for mineral interests
and royalties, consideration is given to both external and internal sources of infor-
mation. A reduction in the mineral resource estimate for the Coringa gold project
prompted the Company to evaluate the carrying value of its royalty investment.
As a result, during the three months ended June 30, 2017 the Company recorded
an impairment charge of $4.5 million relating to Coringa. During the three months
ended December 31, 2017, an update to the life of mine production plan for the
Emigrant Springs property reduced the ounces expected to be produced from
areas of the mine subject to Sandstorm’s royalty. This prompted the Company to
evaluate the carrying value of this royalty investment and as a result, the Company
recorded an impairment charge of $4.6 million.
― OTHER
Under the Company’s normal course issuer bid (“NCIB”), the Company is able until
April 4, 2018, to purchase up to 7.6 million common shares. The NCIB provides
the Company with the option to purchase its common shares from time to time.
During 2017 and pursuant to the NCIB, the Company purchased and cancelled
approximately 4.1 million common shares.
On January 26, 2017, Orezone Gold Corporation exercised its option to repurchase
the royalty on the Bomboré gold project for $3.6 million, representing a 20%
premium to the original upfront payment. Sandstorm retains a right of first refusal
on any future stream or royalty financings related to the Bomboré gold project.
― SUBSEQUENT EVENTS
On January 3, 2018, the Company completed its previously announced agreement
to sell $18.3 million in debt and equity securities of Equinox Gold Corp. to Mr.
Ross Beaty. The sale was conditional upon the closing of the announced business
combination between Trek Mining Inc., NewCastle Gold Ltd. and Anfield Gold
Corp which occurred on December 22, 2017.
On January 17, 2018, the Company acquired a 2% NSR on the producing Houndé
gold mine in Burkina Faso, owned and operated by Endeavour Mining Corporation.
31 —
Sandstorm Gold Ltd.MD&A2017 Annual Report Summary of Annual Results
YEAR ENDED
In $000s
Total revenue
Attributable Gold Equivalent ounces sold 1
Sales
Royalty revenue
Average realized gold price per attributable ounce 1
Average cash cost per attributable ounce 1
Cash flows from operating activities
Net income (loss)
Basic income (loss) per share
Diluted income (loss) per share
Total assets
Total long-term liabilities
1
Refer to section on non-IFRS and other measures of this MD&A.
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
$
$
68,275
54,633
49,208
19,067
1,250
280
44,773
10,537
0.06
0.06
660,915
2,807
$
$
62,371
$
49,731
41,634
$
20,737
1,254
258
38,991
25,254
0.18
0.17
534,882
3,288
52,663
45,146
38,585
14,078
1,167
300
30,819
(43,056)
(0.36)
(0.36)
496,873
86,779
Attributable Gold Equivalent
Ounces Sold 1
Total Revenue
in US$000’s
average
realized
gold price
54,633
49,731
44,821
45,146
$68,275
$62,371
$56,494
$52,663
$1,2 6 0
$1,2 5 4
$1,2 5 0
$1,16 7
2014
2015
2016
2017
2014
2015
2016
2017
1
Refer to section on non-IFRS and other measures of this MD&A.
— 32
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis The Company’s operating segments for the year ended
December 31, 2017 are summarized in the table below:
Attributable
Gold
Equivalent
ounces sold
Sales
& royalty
revenues
Cost
of sales,
excluding
depletion
Depletion
expense
Impairment
of mineral,
royalty and
other
interests
(Gain) loss
on disposal
of mineral
interest and
other
Income (loss)
before taxes
Cash flow
from
operating
activities
6,466
$
8,085
$
3,082
$
4,074
$
5,370
6,693
2,847
2,520
8,783
11,001
3,249
3,765
5,727
7,150
-
6,080
5,469
6,863
1,365
3,437
658
796
-
356
9,229
11,570
3,485
1,098
3,387
4,252
1,267
2,253
-
-
-
-
-
-
-
-
$
(2,952)
$
3,881
$
5,030
-
-
-
-
-
-
-
1,326
3,953
3,987
7,753
1,070
6,781
2,061
5,489
440
796
6,987
7,548
732
2,985
9,282
11,538
262
-
327
-
-
26
-
5,894
9,104
(866)
(2,594)
13,693
103
-
-
-
221
(23)
294
(1,251)
(3,253)
(9,549)
In $000s
Bachelor Lake
Gold
Black Fox
Gold
Chapada
Copper
Diavik
Diamonds
Karma
Gold
Ming
Gold
Santa Elena
Gold
Yamana silver
stream
Silver
Other Royalties 1
Various
Other
Gold
Corporate
Consolidated
54,633 $
68,275 $
15,321 $
29,580 $
9,104 $ (4,848)
$
14,614 $
44,773
1
Includes royalty revenue from Gold of $6.5 million, Copper of $1.5 million and Other Base Metals of $3.5 million.
33 —
Attributable Gold Equivalent Ounces SoldFor the three months ended September 30, 2017Sales & Royalty RevenuesFor the year ended December 31, 2017Sales & Royalty RevenuesFor the year ended December 31, 2017Bachelor Lake01,0005002,0001,5002,5004,0003,5003,000Other RoyaltiesSanta ElenaKarmaDiavikChapadaBlack FoxYamana silver streamMing42%Canada22%North Americaex Canada25%South America11%OtherBY REGIONBY METAL61%Gold10%Diamonds6%Silver5%Base Metals18%CopperSandstorm Gold Ltd.MD&A2017 Annual Report The Company’s operating segments for the year ended
December 31, 2016 are summarized in the table below:
Attributable
Gold
Equivalent
ounces sold
Sales
& royalty
revenues
Cost
of sales,
excluding
depletion
Depletion
expense
Impairment
of mineral,
royalty and
other
interests
(Gain) loss
on disposal
of mineral
interest and
other
Income (loss)
before taxes
Cash flow
from
operating
activities
7,358
$
9,183
$
3,494
$
4,411
$
4,500
5,617
2,354
2,011
4,839
6,075
1,843
2,737
4,669
5,856
-
5,519
3,334
4,272
860
2,095
1,586
2,025
-
792
9,419
11,772
3,385
2,001
2,323
2,926
876
1,427
$
-
-
-
-
-
-
-
-
11,522
14,419
181
-
226
-
4
18
-
6,592
2,507
69
-
-
-
-
-
-
-
-
-
-
-
-
-
$
1,278
$
5,481
1,252
2,951
1,495
4,232
337
5,901
1,317
3,314
1,233
2,025
6,386
8,460
623
2,050
5,316
14,073
139
208
1,107
10,409
(9,704)
In $000s
Bachelor Lake
Gold
Black Fox
Gold
Chapada
Copper
Diavik
Diamonds
Karma
Gold
Ming
Gold
Santa Elena
Gold
Yamana silver
stream
Silver
Other Royalties 1
Various
Other
Gold
Corporate
Consolidated
49,731 $
62,371 $
12,834 $
27,654 $
2,507 $
1,107
$
29,785 $
38,991
1
Includes royalty revenue from Gold of $9.2 million, Copper of $2.5 million and Other Base Metals of $2.7 million.
— 34
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis Summary of Quarterly Results
QUARTERS ENDED
In $000s
Total revenue
Attributable Gold Equivalent ounces sold 1
Sales
Royalty revenue
Average realized gold price per attributable ounce 1
Average cash cost per attributable ounce 1
Cash flows from operating activities
Net income (loss)
Basic income (loss) per share
Diluted income (loss) per share
Total assets
Total long-term liabilities
Dec. 31, 2017
Sept. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
$
$
15,446
$
17,939
$
16,066
$
12,032
14,293
12,750
12,978
$
11,534
$
11,835
$
2,468
1,284
340
9,859
709
0.00
0.00
660,915
2,807
6,405
1,255
246
11,864
4,773
0.03
0.02
667,185
2,915
4,231
1,260
290
11,112
(1,909)
(0.01)
(0.01)
545,557
2,969
18,824
15,558
12,861
5,963
1,210
258
11,938
6,964
0.05
0.04
550,342
3,197
1
Refer to section on non-IFRS and other measures of this MD&A.
Dec. 31, 2016
Sept. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
In $000s
Total revenue
Attributable Gold Equivalent ounces sold 1
Sales
Royalty revenue
Average realized gold price per attributable ounce 1
Average cash cost per attributable ounce 1
Cash flows from operating activities
Net income (loss)
Basic income (loss) per share
Diluted income (loss) per share
Total assets
Total long-term liabilities
$
$
16,463
$
16,815
$
15,709
$
13,245
12,588
12,517
10,970
$
11,302
$
10,858
$
5,493
1,243
250
10,058
(19)
(0.00)
(0.00)
534,882
3,288
5,513
1,336
255
10,313
6,915
0.05
0.04
540,419
3,320
4,851
1,255
261
8,935
5,199
0.04
0.04
525,353
62,854
1
Refer to section on non-IFRS and other measures of this MD&A.
13,384
11,381
8,504
4,880
1,176
267
9,685
13,159
0.10
0.10
531,160
80,130
35 —
Sandstorm Gold Ltd.MD&A2017 Annual Report Attributable Gold Equivalent
Ounces Sold 1
Total Revenue
in US$000’s
average
realized
gold price
15,558
14,293
12,750
12,032
$18,824
$17,939
$16,066
$15,446
$1,2 6 0
$1,2 5 5
$1,2 8 4
$1,21 0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2 0 1 7
2 0 1 7
1
Refer to section on non-IFRS and other measures of this MD&A.
и 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.
36 —
Sandstorm Gold Ltd.MD&A2017 Annual Report The Company’s operating segments for the three months ended
December 31, 2017 are summarized in the table below:
In $000s
Bachelor Lake
Gold
Black Fox
Gold
Chapada
Copper
Diavik
Diamonds
Karma
Gold
Ming
Gold
Santa Elena
Gold
Yamana silver
stream
Silver
Other Royalties 1
Various
Other
Gold
Corporate
Attributable
Gold
Equivalent
ounces sold
Sales
& royalty
revenues
Cost
of sales,
excluding
depletion
Depletion
expense
Impairment
of mineral,
royalty and
other
interests
(Gain) loss
on disposal
of mineral
interest and
other
Income (loss)
before taxes
Cash flow
from
operating
activities
1,405
$
1,819
$
677
$
396
$
1,383
1,766
2,423
3,111
735
898
653
935
1,361
1,747
-
1,987
1,484
1,923
382
933
-
-
-
-
2,480
3,162
1,039
284
918
1,178
354
618
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
746
$
1,293
378
1,045
1,278
2,214
(240)
1,747
608
1,543
-
-
1,839
1,886
206
825
(4,548)
2,951
510
655
68
-
85
-
-
6
-
633
4,570
26
-
-
-
226
500
(173)
75
594
(3,720)
Consolidated
12,032 $
15,446 $
4,091 $
6,465 $
4,570 $
726 $
688 $
9,859
1
Includes royalty revenue from Gold of ($0.8) million, Copper of $0.4 million and Other Base Metals of $1.1 million.
— 37
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis The Company’s operating segments for the three months ended
December 31, 2016 are summarized in the table below:
Attributable
Gold
Equivalent
ounces sold
Sales
& royalty
revenues
Cost
of sales,
excluding
depletion
Depletion
expense
Impairment
of mineral,
royalty and
other
interests
(Gain) loss
on disposal
of mineral
interest and
other
Income (loss)
before taxes
Cash flow
from
operating
activities
In $000s
Bachelor Lake
Gold
Black Fox
Gold
Chapada
Copper
Diavik
Diamonds
Karma
Gold
Ming
Gold
Santa Elena
Gold
Yamana silver
stream
Silver
Other Royalties 1
Various
Other
Gold
Corporate
1,920
$
2,364
$
907
$
1,552
$
1,270
1,595
1,725
2,144
666
651
568
917
935
1,161
-
1,573
833
1,053
216
684
855
-
1,638
2,018
591
524
405
302
716
889
267
436
3,381
4,203
143
-
181
-
4
14
-
1,572
54
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
$
(95)
$
1,375
361
957
576
1,493
(412)
1,330
313
450
739
855
1,125
1,500
186
622
2,627
3,920
113
168
41
(5,560)
(2,901)
$
41
$
(316)
$
10,058
Consolidated
13,245 $
16,463 $
3,316 $
7,903 $
1
Includes royalty revenue from Gold of $2.2 million, Copper of $0.8 million and Other Base Metals of $1.2 million.
38 —
Sandstorm Gold Ltd.MD&A2017 Annual Report Three Months Ended December 31, 2017
Compared to the Three Months Ended
December 31, 2016
For the three months ended December 31, 2017, net income and cash flow from
operating activities were $0.7 million and $9.9 million, respectively, compared with
net loss and cash flow from operating activities of $0.0 million and $10.1 million
for the comparable period in 2016. The change is attributable to a combination
of factors including:
10.1
9.9
↳ A $7.6 million increase in the gains recognized on the revaluation of the
Company’s investments primarily driven by the change in fair value of the
Equinox (formerly Trek) convertible debenture;
↳ A $1.4 million decrease in depletion expense largely related to a decrease
in the number of Attributable Gold Equivalent ounces sold;
Partially offset by:
↳ A $4.6 million non-cash impairment charge relating to the Company’s
Emigrant Springs royalty; and
↳ A $0.7 million decrease in finance income largely as a result of the March
2017 repayment of the Company’s loan receivable due from Equinox
(formerly Trek); and
For the three months ended December 31, 2017, revenue was $15.4 million compared
with $16.5 million for the comparable period in 2016. The decrease is primarily
attributed to a 9% decrease in the number of Attributable Gold Equivalent ounces
sold; partially offset by a 3.3% increase in the average realized selling price of
gold. In particular, the fluctuations in revenue were impacted by:
↳ A $3.5 million decrease in Other Royalty revenue primarily related to a
one-time reversal of previously accrued revenue. During the three months
ended December 31, 2017, it was identified that the Company had received,
over the course of fiscal 2017, an excess of $1.9 million in royalty payments
from Newmont relating to mining concessions that were not subject to
the Emigrant Springs royalty. To adjust for this overpayment, during the
three months ended December 31, 2017, the Company made a one-time
reversal of $1.9 million in royalty revenue;
Q4
2016
Q4
2017
Cash Flow From
Operating Activities ($M)
Quarter Ended
16.5
15.4
↳ A $0.9 million decrease in revenue attributable to the Ming Mine primarily
as a result of a decrease of 684 gold ounces sold during the period. The
difference was largely related to the timing of shipments whereby 524
ounces were received by December 31, 2017, but were sold subsequent
to quarter end; and
Q4
2016
Q4
2017
Revenue ($M)
Quarter Ended
↳ A $0.5 million decrease in revenue attributable to the Bachelor Lake Mine,
largely related to the timing of sales whereby 430 gold ounces were
received by December 31, 2017 but were sold subsequent to quarter end;
39 —
Sandstorm Gold Ltd.MD&A2017 Annual Report Partially offset by:
↳ An increase of $1.1 million in revenue related to the Santa Elena gold
stream largely due to a 51% increase in gold ounces sold from the Santa
Elena Mine. The increase in gold ounces was partly due to First Majestic
sourcing a higher tonnage of ore from the high-grade Alejandra vein
which resulted in an increase in gold deliveries, however, of that increase
1,450 gold ounces were received by December 31, 2017, but were sold
subsequent to quarter end;
↳ An increase of $1.0 million in sales revenue from the Chapada copper
stream primarily due to an increase in the average realized selling price
of copper from $2.15 per pound in the fourth quarter of 2016 to $3.14 per
pound in fourth quarter of 2017; and
↳ A $0.9 million increase in revenue attributable to the Karma Mine largely
related to a 78% increase in gold ounces sold from the Karma Mine gold
stream.
Year Ended December 31, 2017
Compared to the Year Ended
December 31, 2016
For the year ended December 31, 2017, net income and cash flow from operating
activities were $10.5 million and $44.8 million, respectively, compared with net
income and cash flow from operating activities of $25.3 million and $39.0 million
for the comparable period in 2016. The changes are attributable to a combination
of factors including:
↳ A $4.8 million gain primarily consisting of (i) $3.0 million, which was
recognized during the three months ended September 30, 2017, arising
from the Bachelor Lake Gold Stream amendment; (ii) a $1.8 million gain
relating to the settlement of the Equinox (previously Trek) debt and a $0.6
million gain relating to the 20% premium associated with Orezone exercising
its option to repurchase the royalty on the Bomboré gold project, both
of which were recognized during the three months ended March 31, 2017;
↳ During the year ended December 31, 2017, the Company recognized a $2.4
million foreign exchange gain largely driven from currency trades and
the resulting cash held in escrow which were required to meet the cash
commitments under Sandstorm’s bid to acquire Mariana; and
↳ During the year ended December 31, 2017, the Company recognized a
$0.5 million decrease in project evaluation costs primarily driven by cost
reduction strategies;
44.8
39.0
2016
2017
Cash Flow From
Operating Activities ($M)
Year Ended
— 40
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis Partially offset by:
↳ A decrease in the gains recognized on the revaluation of the Company’s
investments; whereby, a gain of $5.8 million was recognized during the
year ended December 31, 2017 which was $16.3 million less when compared
to the year ended December 31, 2016;
↳ The recognition of a $9.1 million in non-cash impairment charges during
the year ended December 31, 2017, relating to a number of the Company’s
underlying royalties;
↳ A $4.4 million increase in cost of sales primarily driven by an increase in
the number of Attributable Gold Equivalent ounces sold;
↳ A $1.9 million decrease in finance income largely as a result of the March
2017 repayment of the Company’s loans receivable due from Equinox
(formerly Trek); and
↳ A $1.7 million increase in administration costs driven largely by the acquisi-
tion of Mariana and related operating costs and the vesting of previously
granted stock based compensation.
For the year ended December 31, 2017, revenue was $68.3 million compared
with $62.4 million for the year ended December 31, 2016. The increase is largely
attributed to an increase in the number of Attributable Gold Equivalent ounces
sold. In particular, the increase in revenue was driven by:
↳ An increase of $4.9 million in sales revenue from the Chapada copper
stream due to: (i) a 29% rise in the average realized selling price of copper
which accounted for $2.5 million of the increase and (ii) an additional 1.1
million pounds of copper sold which accounted for the remaining $2.4
million increase;
↳ A $2.6 million increase in revenue attributable to the Karma Mine largely
related to a 64% increase in gold ounces sold;
↳ A $1.3 million increase in revenue from the Yamana silver stream largely
due to an additional 80,000 silver ounces sold; and
↳ A $1.1 million increase in sales revenue from the Black Fox Mine largely
due to an additional 870 gold ounces sold;
Partially offset by:
↳ A decrease of $2.9 million in Other Royalty revenue due to a reduction
in royalties received from the Emigrant Springs Mine and the San Andres
Mine, partially offset by increases in royalties received from the Bracemac-
Mcleod Mine;
68.3
62.4
2016
2017
Revenue ($M)
Year Ended
41 —
Sandstorm Gold Ltd.MD&A2017 Annual Report
↳ A $1.2 million decrease in revenue attributable to the Ming Mine primarily
as a result of a decrease of 928 gold ounces sold during the year. The
difference was largely related to the timing of shipments whereby 524
ounces were received by December 31, 2017, but were sold subsequent
to quarter end; and
↳ A $1.1 million decrease in revenue attributable to the Bachelor Lake Mine,
partly related to the timing of sales whereby 430 gold ounces were received
by December 31, 2017 but were sold subsequent to quarter end.
Three Months Ended December 31, 2017
Compared to the Other Quarters Presented
When comparing net income of $0.7 million and cash flow from operating
activities of $9.9 million for the three months ended December 31, 2017 with net
income/loss and cash flow from operating activities for the remaining quarters,
the following items impact comparability of analysis:
↳ A $4.6 million non-cash impairment charge relating to the Company’s
Emigrant Springs royalty was recognized during the three months ended
December 31, 2017 and a $4.5 million non-cash impairment charge relating
to the Company’s royalty on the Coringa gold project was recognized
during the three months ended June 30, 2017;
↳ A $3.0 million gain resulting from the Bachelor Lake Gold Stream amendment
for which Sandstorm received consideration consisting of $2.0 million in
the common shares of Metanor and a 3.9% NSR on Metanor’s Barry project
was recognized during the three months ended September 30, 2017;
↳ 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 (previously Trek) convertible debenture. For the three
months ended September 30, 2017 and the three months ended June 30,
2017, these losses amounted to $0.5 million and $0.9 million, respectively,
while for the three months ended December 31, 2017 and the three months
ended March 31, 2017, these gains amounted to $4.4 million and $2.7 million
respectively. In the first three quarters of 2016 these gains amounted to
$13.4 million, $6.0 million and $5.8 million, respectively and in the fourth
quarter of 2016, the Company recognized a loss of $3.1 million on revaluation;
↳ During the three months ended March 31, 2017, the Company recognized a
$2.2 million gain primarily resulting from (i) the settlement of the Equinox
(previously Trek) debt and (ii) the 20% premium associated with Orezone
exercising its option to repurchase the royalty on the Bomboré gold project;
↳ Non-cash impairment charges of $1.4 million and $1.1 million were recorded
during the three months ended March 31, 2016 and the three months ended
September 30, 2016, respectively;
— 42
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis ↳ A general decrease in finance expenses when compared to previous
quarters primarily driven by the repayment of the Company's revolving
credit facility; and
↳ Overall, Attributable Gold Equivalent ounces sold have increased over
the course of the last three years as a result of the acquisition of various
assets including the Teck Resources Limited (“Teck”) royalty package
which consists of 52 royalties and was purchased during the three months
ended March 31, 2016.
― CHANGE IN TOTAL ASSETS
Total assets decreased by $6.3 million from September 30, 2017 to December
31, 2017 primarily resulting from (i) non-cash impairment charges; (ii) depletion
expense; and (iii) a reduction in the Hot Maden interest due to a devaluation of
the Turkish Lira relative to the US dollar; partially offset by increases in the value
of the Company’s investments and increases in the Company’s cash balance due
to positive operating cash flow. Total assets increased by $121.6 million from
June 30, 2017 to September 30, 2017 primarily resulting from the acquisition
of Mariana and operating cash flow; partially offset by depletion expense. Total
assets decreased by $4.8 million from March 31, 2017 to June 30, 2017 primarily
resulting from a decrease in the value of the Company’s investments and a
non-cash impairment charge relating to the Company’s royalty on the Coringa
gold project; partially offset by increases in the Company’s cash balance due
to positive operating cash flow. Total assets increased by $15.5 million from
December 31, 2016 to March 31, 2017 primarily resulting from an increase in the
value of the Company’s investments and operating cash flow; partially offset by
depletion expense. Total assets decreased by $5.5 million from September 30,
2016 to December 31, 2016 primarily resulting from depletion expense and a
decrease in the value of the Company’s investments; partially offset by increases
in the Company’s cash balance due to positive operating cash flow. Total assets
increased by $15.1 million from June 30, 2016 to September 30, 2016 primarily
resulting from increases in the Company’s cash balance due to positive operating
cash flow and an increase in the value of the Company’s investments; partially
offset by depletion expense. Total assets decreased by $5.8 million from March
31, 2016 to June 30, 2016 primarily resulting from depletion expense; partially
offset by an increase in the value of the Company’s investments.
43 —
Sandstorm Gold Ltd.MD&A2017 Annual Report ― NON-IFRS AND OTHER MEASURES
The Company has included, throughout this document, certain performance
measures, including (i) average cash cost per attributable ounce and (ii) aver-
age realized gold price per attributable ounce. 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 ounce is calculated by dividing the
Company’s cost of sales, excluding depletion by the number of Attribut-
able Gold Equivalent ounces sold. The Company presents average cash
cost per 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
Cost of Sales, excluding depletion 1
Cash cost of sales is comprised of:
Total cash cost of gold sold
Divided by:
Total Attributable Gold Equivalent
ounces sold 2
Equals:
Average cash cost of gold
(per attributable ounce)
$
$
3 Months Ended
Dec. 31, 2017
3 Months Ended
Dec. 31, 2016
Year Ended
Dec. 31, 2017
Year Ended
Dec. 31, 2016
4,091
$
3,316
$
15,321
$
12,834
4,091
$
3,316
$
15,321
$
12,834
12,032
13,245
54,633
49,731
$
340
$
250
$
280
$
258
1
2
Cost of Sales, excluding depletion, includes cash payments made for Gold Equivalent ounces associated with commodity streams.
The Company’s royalty and other commodity stream income is converted to an Attributable Gold Equivalent ounce basis by dividing the royalty and other
commodity income 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.
— 44
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis ii. Average realized gold price per attributable ounce is calculated by divid-
ing the Company’s sales by the number of Attributable Gold Equivalent
ounces sold. The Company presents average realized gold price per
attributable 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 ounce.
Figure 1.2
Total Revenue
Divided by:
3 Months Ended
Dec. 31, 2017
3 Months Ended
Dec. 31, 2016
Year Ended
Dec. 31, 2017
Year Ended
Dec. 31, 2016
$
15,446
$
16,463
$
68,275
$
62,371
Total Attributable Gold Equivalent ounces sold
12,032
13,245
54,633
49,731
Equals:
Average realized gold price
(per attributable ounce)
$
1,284
$
1,243
$
1,250
$
1,254
― LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2017, the Company had cash and cash equivalents of $12.5
million (December 31, 2016 – $21.4 million) and a working capital of $31.9 million
(December 31, 2016 – $23.8 million). As of the date of the MD&A, only $7.5 million
has been drawn under the Revolving Facility, leaving $142.5 million undrawn and
available for future acquisitions and general corporate purposes.
During the year ended December 31, 2017, the Company generated cash flows
from operating activities of $44.8 million compared with $39.0 million during
the comparable period in 2016, with the increase being primarily attributable to
both an increase in the average realized selling price of gold and an increase in
Attributable Gold Equivalent ounces sold.
45 —
Sandstorm Gold Ltd.MD&A2017 Annual Report During the year ended December 31, 2017, the Company had net cash outflows
from investing activities of $40.1 million which were primarily the result of: (i)
$48.3 million in cash outflows relating to the Mariana acquisition which included
the cash consideration of the transaction and associated acquisition costs, which
were partially offset by the cash Mariana had on acquisition; (ii) $4.8 million in
payments relating to the acquisition of investments and other assets; and (iii)
$4.4 million in payments related to the acquisition of royalty interests; partially
offset by: (i) $14.4 million of cash inflows largely resulting from the sale of
investments as the Company continues to monetize its non-core investments
and (ii) $3.6 million relating to Orezone exercising its option to repurchase its
royalty on the Bomboré gold project. During the year ended December 31, 2016,
the Company had net cash inflows from investing activities of $3.8 million which
were primarily the result of: (i) $18.4 million cash inflow largely consisting of the
disposition of a portion of the Company’s investments and the receipt of $5.5
million related to the Company’s amendment of the Entrée commodity streams;
and (ii) the repayment of a $3.0 million loan; which were partially offset by (i)
the acquisition of investments and other assets; (ii) the payment of $4.0 million
and $5.2 million in connection with the Yamana commodity streams and the
Karma Gold Stream, respectively; and (iii) a $1.4 million payment related to the
Teck transaction.
During the year ended December 31, 2017, the Company had net cash outflows
from financing activities of $15.1 million largely related to a cash out flow of $17.7
million related to the redemption of the Company’s common shares under the
NCIB and $2.6 million in proceeds from the exercise of stock options. Additionally,
during the year ended December 31, 2017, the Company drew down $16 million on
its revolving credit facility to fund a portion of the cash consideration required
for the Mariana acquisition. The $16 million drawn down was subsequently repaid
within the same period utilizing cash flow from operating activities and the
proceeds from the sale of non-core investments. During the year ended December
31, 2016, the Company had net cash outflows from financing activities of $26.9
million largely related to $83.5 million in the net repayment of debt under the
Company’s Revolving Facility; partially offset by (i) $57.5 million raised in gross
proceeds from the Company’s July 2016 equity financing and (ii) $5.5 million in
proceeds from the exercise of stock options.
— 46
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis ― CONTRACTUAL OBLIGATIONS
In connection with its commodity streams, the Company has
committed to purchase the following:
Stream
Bachelor Lake
Black Fox
Chapada
Entrée
Karma
Ming
% of Life of Mine Gold or
Relevant Commodity 4, 5, 6, 7, 8, 9
Per Ounce Cash Payment:
lesser of amount below
and the then prevailing market
price of the commodity
(unless otherwise noted) 1, 2, 3
20%
8%
4.2%
5.62% on Hugo North Extension
and 4.26% on Heruga
26,875 ounces over 5 years and
1.625% thereafter
25% of the first 175,000 ounces
of gold produced, and 12%
thereafter
$500
$540
30% of copper spot price
$220
20% of gold spot price
$nil
$450
30% of silver spot price
Santa Elena
Yamana silver stream
20%
Varies
1
2
3
4
5
6
7
Subject to an annual inflationary adjustment except for Ming.
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.
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.
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.
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.
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.
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 Yamana has delivered
39 million pounds of copper to Sandstorm; then 3.0% of the copper produced until, on a cumulative basis,
Yamana has delivered 50 million pounds of copper to Sandstorm; then 1.5% of the copper produced thereafter,
for the life of the mine. If Cerro Moro has not achieved the Commencement of Production and Sandstorm
has not received cumulative pre-tax cash flow equal to $70 million from the Yamana silver stream, then the
First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease to be in effect and
Sandstorm will continue to purchase 4.2% of Chapada’s payable copper production (up to an annual maximum
of 3.9 million pounds of copper), until such time as Sandstorm has received cumulative pre-tax cash flow
equal to $70 million, or Cerro Moro has achieved the Commencement of Production.
47 —
Sandstorm Gold Ltd.MD&A2017 Annual Report 8 Under the terms of the Yamana silver stream, Sandstorm has agreed to purchase an amount of silver from
Cerro Moro equal to 20% of the silver produced (up to an annual maximum of 1.2 million ounces of silver), until
Yamana has delivered to Sandstorm 7.0 million ounces of silver; then 9.0% of the silver produced thereafter.
As part of the Yamana silver stream, through 2018, Sandstorm has also agreed to purchase an amount of
silver from: (i) the Minera Florida mine in Chile equal to 38% of the silver produced (up to an annual maximum
of 200,000 ounces of silver); and (ii) the Chapada mine in Brazil equal to 52% of the silver produced (up to an
annual maximum of 100,000 ounces of silver).
9
For the Bachelor Lake Gold Stream, the Company has committed to purchase 20% of gold produced until
12,000 ounces have been purchased.
― SHARE CAPITAL
As of February 15, 2018, the Company had 183,559,416 common shares outstanding.
As disclosed previously, the funds from the issuance of share capital have been
used to finance the acquisition of Gold Streams and royalties (recent acquisitions
are described earlier in greater detail), with the net proceeds of the 2016 equity
financing used to reduce the balance of the Company’s Revolving Facility.
A summary of the Company’s share purchase options
as of February 15, 2018 are as follows:
Year of
expiry
Number
outstanding
Vested
Exercise price
per share
(range) (CAD$)
Weighted average
exercise price
per share (CAD$)
2018
2019
2020
2021
2022
157,637
157,637
2.92 - 11.31
2,968,106
2,968,106
1.46 - 6.03
1,284,000
1,405,740
1,257,534
856,005
515,079
462,534
7,073,017
4,959,361
3.60 - 3.64
2.65 - 4.96
4.86 - 15.00
5.20
2.76
3.61
4.65
4.91
3.38
A summary of the Company’s warrants
as of February 15, 2018 are as follows:
Number
outstanding
1,042,875
3,000,000
15,000,000
4,966,400
24,009,275
Exercise price
per share
0.97
4.50
3.50
4.00
Expiry Date
May 6, 2018
March 23, 2020
October 27, 2020
November 3, 2020
The Company has 2,002,707 Restricted Share Rights (“RSRs”) outstanding as
at February 15, 2018.
— 48
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis ― KEY MANAGEMENT PERSONNEL COMPENSATION
The remuneration of directors and those persons having authority and respon-
sibility for planning, directing and controlling activities of the Company are as
follows:
In $000s
Employee salaries and benefits
Share-based payments
Total key management compensation expense
Year Ended
Dec. 31, 2017
Year Ended
Dec. 31, 2016
$
$
2,340
$
2,569
4,909
$
1,699
2,041
3,740
― FINANCIAL INSTRUMENTS
The Company’s financial instruments consist of cash and cash
equivalents, trade receivables and other, short-term and long-term
investments, receivables and other, and trade and other payables.
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 receivables and other,
and trade and other payables approximate their carrying values
at December 31, 2017.
Credit Risk
The Company’s credit risk is limited to cash and cash equivalents and trade
receivables and other in the ordinary course of business. The Company’s trade
receivables and other 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 convertible debenture due from Equinox is subject to Equinox’s
credit risk, the Company’s ability to realize on its security, and the risk that the
value of Equinox’s equity decreases below the puttable price of the instrument.
49 —
Sandstorm Gold Ltd.MD&A2017 Annual Report
Currency Risk
Financial instruments that impact the Company’s net income or other comprehen-
sive income due to currency fluctuations include: cash and cash equivalents, trade
receivables and other, investments and trade and other payables denominated
in Canadian dollars. Based on the Company's Canadian dollar denominated
monetary assets and monetary liabilities at December 31, 2017 a 10% increase
(decrease) of the value of the Canadian dollar relative to the United States dollar
would increase (decrease) net income by $0.5 million and other comprehensive
income by $2.9 million, respectively.
Other Risks
Sandstorm holds common shares, convertible debentures, and warrants of other
companies with a combined fair market value as at December 31, 2017 of $78.9
million (December 31, 2016 – $61.3 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 December 31, 2017 a 10% increase (decrease) in the equity
prices of these investments would increase (decrease) net income by $1.2 million
and other comprehensive income by $2.4 million.
― 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 29, 2017,
which is available on www.sedar.com.
The Chapada Mine, the Cerro Moro Project, the Diavik Mine, the Aurizona Mine,
the Santa Elena Mine, the Karma Project, 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 Hot Maden Project, the Hackett River Project, the Lobo-Marte
Project, Agi Dagi and Kirazli, Houndé Mine and other royalties and commodity
streams in Sandstorm’s portfolios are hereafter referred to as the “Mines”.
— 50
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis Risks Relating to Mineral Projects
To the extent that they relate to the production of gold or an applicable com-
modity 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 Hot 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 pros-
pecting, exploration, development, production, exports, taxes, labour standards,
waste disposal, protection and remediation of the environment, reclamation,
historic and cultural resources preservation, mine safety and occupation health,
handling, storage and transportation of hazardous substances and other matters.
51 —
Sandstorm Gold Ltd.MD&A2017 Annual Report 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, operat-
ing 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 and other precious metals
interests are conducted in Canada, Mexico, the United States, Mongolia, Africa,
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,
and 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
Hot 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 Hot Maden Project into a commodity
stream or royalty. 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.
— 52
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis 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 Com-
pany’s past and future profits being subject to increased levels of income tax.
The Company prior years’ tax returns are currently under audit by the Canada
Revenue Agency, and no assurances can be given that tax matters, if they so
arise will be resolved favorably. The majority of the Company’s Streams and
royalties has 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 disrup-
tions, natural disasters or the occurrence of terrorist attacks or similar activities
creating disruptions in economic growth could result in decreased demand for
53 —
Sandstorm Gold Ltd.MD&A2017 Annual Report 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 increas-
ing 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 precious metal purchase agreements,
protect networks, equipment, information technology (“IT”) 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 assur-
ance 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 a priority.
Key Management
The Company is dependent upon the services of a small number of key manage-
ment 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.
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.
— 54
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis ― 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
2017 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 Of-
ficer, 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.
As at the end of the period covered by this Management’s Discussion and Analysis,
management of the Company, with the participation of the Chief Executive Officer
and the Chief Financial Officer, evaluated the effectiveness of the Company’s
disclosure controls and procedures as required by National Instrument 52-109
in Canada (“NI 52-109”) and under the Securities Exchange Act of 1934, as
amended, in the United States. The evaluation included documentation review,
enquiries and other procedures considered by management to be appropriate
in the circumstances. Based on that evaluation, the Chief Executive Officer and
the Chief Financial Officer have concluded that, as of December 31, 2017, the
disclosure controls and procedures (as defined in Rule 13(a) – 15(e) under the
Securities Exchange Act of 1934) were effective to provide reasonable assurance
that information required to be disclosed in the Company’s annual and interim
filings and other reports filed or submitted under applicable securities laws, is
recorded, processed, summarized and reported within time periods specified
by those laws and that material information is accumulated and communicated
to management of the Company, including the Chief Executive Officer and
the Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
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
55 —
Sandstorm Gold Ltd.MD&A2017 Annual Report Securities Exchange Act of 1934, as amended, in the United States. The Company’s
internal control over financial reporting is designed to provide reasonable assur-
ance 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 changes in conditions or deterioration in the degree
of compliance with the Company’s policies and procedures. Management assessed
the effectiveness of the Company's internal control over financial reporting as of
December 31, 2017 based on the criteria set forth in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on this assessment, management has con-
cluded that, as of December 31, 2017, the Company's internal control over financial
reporting is effective and no material weaknesses were identified.
Changes in Internal Controls
Except for controls that were implemented in relation to the Mariana acquisition,
there were no changes in internal controls of the Company during the year ended
December 31, 2017 that have materially affected, or are likely to materially affect,
the Company’s internal control over financial reporting or disclosure controls
and procedures.
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
— 56
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis operated, can provide only reasonable, not absolute, assurance that the objec-
tives 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.
Future Changes in Accounting Policies
The IASB has issued the following new standards but they are not yet effective.
Pronouncements that are not applicable to the Company have been excluded
from this note.
IFRS 15 Revenue from Contracts with Customers— The final standard on revenue
from contracts with customers was issued on May 28, 2014 and is effective for
annual reporting periods beginning after January 1, 2018 for public entities. Entities
have the option of using either a full retrospective or a modified retrospective
approach to adopt the guidance. The Company has completed its assessment of
the impact of the new standard on its future financial statements. The process has
included a review of all material contracts as well as the nature and type of the
various Streams and royalties that the Company holds. This assessment has also
included identifying the contract with the customer, the separate performance
obligations contained therein and the appropriate transaction price. The adoption
of the new standard will not give rise to any material changes to the Company’s
sub processes, IT controls or consolidated financial statements.
In January 2016, the IASB issued IFRS 16 Leases, which requires lessees to recognize
assets and liabilities for most leases. IFRS 16 becomes effective for annual periods
beginning on or after January 1, 2019 and is to be applied retrospectively with
early adoption permitted, provided IFRS 15 has been applied or is applied at
the same date as IFRS 16. The new standard is not expected to have a material
impact on the Company’s consolidated financial statements.
57 —
Sandstorm Gold Ltd.MD&A2017 Annual Report 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 Project, the Houndé Mine, the Ming Mine, the Gualcamayo Mine, 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 mine, the Prairie Creek Project, the San Andres Mine, the Hot 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, 2016 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
Project, the Houndé Mine, the Diavik Mine, the Aurizona Mine, the Gualcamayo Mine, 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 Mine, the Prairie Creek Project, the San Andres
Mine, the Hot 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.
— 58
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Sandstorm Gold Ltd. and all the informa-
tion in this annual report are the responsibility of management and have been approved by the
Board of Directors.
The consolidated financial statements have been prepared by management on a going concern
basis in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”). When alternative accounting methods
exist, management has chosen those it deems most appropriate in the circumstances. Financial
statements are not exact since they include certain amounts based on estimates and judgments.
Management has determined such amounts on a reasonable basis in order to ensure that the
financial statements are presented fairly, in all material respects. Management has prepared the
financial information presented elsewhere in the annual report and has ensured that it is consistent
with that in the financial statements.
Sandstorm Gold Ltd. maintains systems of internal accounting and administrative controls in order
to provide, on a reasonable basis, assurance that the financial information is relevant, reliable
and accurate and that the Company's assets are appropriately accounted for and adequately
safeguarded.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities
for financial reporting and is ultimately responsible for reviewing and approving the financial
statements. The Board carries out this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board, and all of its members are independent directors.
The Committee meets at least four times a year with management, as well as the external auditors,
to discuss internal controls over the financial reporting process, auditing matters and financial
reporting issues, to satisfy itself that each party is properly discharging its responsibilities, and
to review the quarterly and the annual reports, the financial statements and the external auditors'
report. The Committee reports its findings to the Board for consideration when approving the
financial statements for issuance to the shareholders. The Committee also considers, for review
by the Board and approval by the shareholders, the engagement or reappointment of the external
auditors. The consolidated financial statements have been audited by PricewaterhouseCoopers
LLP, Chartered Professional Accountants, in accordance with Canadian generally accepted
auditing standards and standards of the Public Company Accounting Oversight Board (United
States) on behalf of the shareholders. PricewaterhouseCoopers LLP have full and free access to
the Audit Committee.
“Nolan Watson”
President & Chief Executive Officer
“Erfan Kazemi”
Chief Financial Officer
February 15, 2018
59 —
Sandstorm Gold Ltd.MD&A2017 Annual Report REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Sandstorm Gold Ltd.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Sandstorm
Gold Ltd. and its subsidiaries, (together, the Company) as of December 31, 2017 and December
31, 2016, and the related consolidated statements of income (loss), comprehensive income (loss),
cash flows and changes in equity for the years then ended, including the related notes (collectively
referred to as the consolidated financial statements). We also have audited the Company's internal
control over financial reporting as of December 31, 2017, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2017 and December 31, 2016,
and their financial performance and their cash flows for the years then ended in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards
Board (IFRS). Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2017, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for
maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included in Management's Report on
Internal Control over Financial Reporting included in Management’s Discussion and Analysis. Our
responsibility is to express opinions on the Company’s consolidated financial statements and
on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement, whether due to error
or fraud, and whether effective internal control over financial reporting was maintained in all
material respects.
Our audits of the consolidated financial statements included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to er-
ror or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
— 60
Sandstorm Gold Ltd.SECTION 02Management's Discussion & Analysis financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of consolidated financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could
have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, 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
that the degree of compliance with the policies or procedures may deteriorate.
/S/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
February 15, 2018
We have served as the Company’s auditor since 2016.
61 —
Sandstorm Gold Ltd.MD&A2017 Annual Report — 62
Sandstorm Gold Ltd. Consolidated
Financial
Statements
For The Year Ended December 31, 2017
63 —
Sandstorm Gold Ltd.FS2017 Annual Report Consolidated Statements
of Financial Position
Assets
Current
Cash and cash equivalents
Short-term investments
Trade receivables and other
Non-current
Mineral, royalty and other interests
Hot Maden interest
Investments
Deferred income tax assets
Exploration assets
Deferred financing costs and other long term assets
Loan receivable
Total assets
Liabilities
Current
Trade and other payables
Non-current
Deferred income tax liabilities
Equity
Share capital
Reserves
Deficit
Accumulated other comprehensive loss
Total liabilities and equity
Contractual obligations (Note 16)
Subsequent events (Note 18)
ON BEHALF OF THE BOARD:
“Nolan Watson”, Director
“David De Witt”, Director
— 64
Note
December 31, 2017
December 31, 2016
9
6
8
9
12
7
10
9
12
$
$
$
$
$
$
$
$
$
$
12,539
$
18,252
7,568
38,359
$
21,434
-
6,663
28,097
365,477
$
402,785
177,452
60,630
13,581
2,599
2,817
-
-
61,293
16,934
-
2,416
23,357
660,915
$
534,882
6,438
$
4,289
2,807
2,807
9,245
$
$
693,880
$
23,659
(25,135)
(40,734)
651,670
660,915
$
$
3,288
3,288
7,577
573,085
23,915
(35,672)
(34,023)
527,305
534,882
Expressed in U.S. Dollars ($000s)The accompanying notes are an integral part of these consolidated financial statements ↖ Consolidated Statements
of Income (Loss)
Expressed in U.S. Dollars ($000s)
Except for per share amounts
Note
Year Ended
December 31, 2017
Year Ended
December 31, 2016
Sales
Royalty revenue
Cost of sales, excluding depletion
Depletion
Total cost of sales
Gross profit
Expenses and other (income)
‣ Administration expenses 1
‣ Project evaluation 1
‣ Foreign exchange (gain) loss
‣ (Gain) on revaluation of investments
‣ Finance income
‣ Finance expense
‣ Mineral, royalty and other interests impairments
‣ (Gain) loss on mineral interest disposal and other
Income before taxes
Current income tax expense
Deferred income tax expense
Net income for the year
Basic earnings per share
Diluted earnings per share
Weighted average number of common shares outstanding
‣ Basic
‣ Diluted
1 Equity settled stock based compensation (a non-cash item) is
included in administration expenses and project evaluation
17
17
17
17
13
9
6 (c)
6 (b)
12
12
11 (e)
11 (e)
$
$
$
$
$
$
$
$
$
$
$
$
49,208
19,067
68,275
15,321
29,580
44,901
23,374
$
$
$
$
$
6,736
$
4,564
(2,434)
(5,827)
(722)
2,187
9,104
(4,848)
14,614
868
3,209
4,077
10,537
0.06
0.06
$
$
$
$
$
41,634
20,737
62,371
12,834
27,654
40,488
21,883
5,031
5,064
87
(22,093)
(2,598)
2,993
2,507
1,107
29,785
306
4,225
4,531
25,254
0.18
0.17
167,265,059
174,703,186
144,159,678
149,961,923
3,785
$
3,106
65 —
↗ The accompanying notes are an integral part of these consolidated financial statements
Consolidated Statements
of Comprehensive Income (Loss)
Note
Year Ended
December 31, 2017
Year Ended
December 31, 2016
Net income for the year
Other comprehensive (loss) income for the year
Items that may subsequently be re-classified to net income:
Currency translation differences
Items that will not subsequently be re-classified to net income:
Gain on FVTOCI investments
Tax recovery on FVTOCI investments
Total other comprehensive (loss) income for the year
Total comprehensive income for the year
$
$
$
$
9
10,537
$
25,254
(15,205)
$
121
8,159
335
(6,711)
3,826
$
$
16,902
514
17,537
42,791
— 66
Expressed in U.S. Dollars ($000s)The accompanying notes are an integral part of these consolidated financial statements ↖ Consolidated Statements
of Cash Flows
Cash flow from (used in):
Operating activities
‣ Net income for the year
Items not affecting cash:
‣ Depletion and depreciation and financing amortization
‣ Mineral, royalty and other interests impairments
‣ Deferred income tax expense
‣ Share-based payments
‣ (Gain) on revaluation of investments
‣ Unrealized foreign exchange gain
‣ Interest on loan receivable
‣ (Gain) loss on mineral interest disposal and other
‣ Changes in non-cash working capital
Investing activities
‣ Acquisition of Mariana Resources Limited
‣ Proceeds from disposal of investments and other
‣ Proceeds from disposal of mineral, royalty and other interests
‣ Acquisition of mineral, royalty and other interests
‣ Acquisition of investments and other assets
‣ Investment in Hot Maden interest
‣ Loan repayment
‣ Loan issuance
Financing activities
6
12
9
14
6
8
‣ Redemption of common shares (normal course issuer bid)
11
‣ Bank debt drawn
‣ Bank debt repaid
‣ Proceeds on exercise of warrants, options and other
‣ Proceeds from issuance of common shares net of financing costs
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents — beginning of the year
Cash and cash equivalents — end of the year
Supplemental cash flow information (Note 14)
Note
Year Ended
December 31, 2017
Year Ended
December 31, 2016
$
10,537
$
25,254
30,723
9,104
3,209
3,785
(5,827)
(2,122)
(409)
(5,024)
797
44,773
(48,299)
14,352
3,600
(4,409)
(4,761)
(584)
-
-
(40,101)
(17,729)
16,000
(16,000)
2,605
-
(15,124)
1,557
(8,895)
21,434
$
$
$
$
$
$
12,539
$
$
$
$
$
$
$
$
28,489
2,507
4,225
3,106
(22,093)
-
(1,528)
655
(1,624)
38,991
-
12,774
5,617
(10,806)
(5,731)
-
2,993
(1,000)
3,847
(2,280)
5,000
(88,500)
5,455
53,453
(26,872)
122
16,088
5,346
21,434
67 —
Expressed in U.S. Dollars ($000s)↗ The accompanying notes are an integral part of these consolidated financial statements Consolidated Statements
of Changes in Equity
Share Capital
Reserves
Note
Number
Amount
Share
Options and
Restricted
Share
Rights
Share
Purchase
Warrants
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
At January 1, 2016
128,880,314
$
491,769
$
10,351
$
13,017
$
(60,926)
$
(51,560)
$
402,651
Shares issued
12,921,400
57,500
-
Options exercised
11 (b)
1,516,402
7,609
(2,199)
Vesting of restricted share rights
79,858
360
(360)
Acquisition and cancellation
of common shares
(normal course issuer bid)
Share issuance costs (net of
deferred tax of $1.0 million)
Shares issued for acquisition of
royalties and other
Share based payments
Total comprehensive income
(619,999)
(2,280)
-
(2,807)
9,153,307
20,934
-
-
-
-
-
-
-
3,106
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
57,500
5,410
-
(2,280)
(2,807)
20,934
3,106
25,254
17,537
42,791
At December 31, 2016
151,931,282
$
573,085
$
10,898
$
13,017
$
(35,672)
$
(34,023)
$
527,305
Options exercised
11 (b)
797,128
3,127
(1,114)
-
Warrants exercised
11 (c )
1,059,242
3,911
-
(2,803)
Vesting of restricted share rights
319,394
1,035
(1,035)
-
Expiration of unexercised
warrants
Acquisition and cancellation
of common shares
(normal course issuer bid)
Shares issued for acquisition of
Mariana Resources Ltd.
Issuance of Mariana Resources
Ltd. replacement equity awards
7
7
Financing costs and other
Share based payments
Total comprehensive income
-
7,874
(4,106,772)
(17,729)
32,685,228
122,569
-
-
-
-
-
8
-
-
-
-
-
(7,874)
-
-
3,207
5,578
-
3,785
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,537
(6,711)
2,013
1,108
-
-
(17,729)
122,569
8,785
8
3,785
3,826
At December 31, 2017
182,685,502
$
693,880
$
15,741
$
7,918
$
(25,135)
$
(40,734)
$
651,670
— 68
Expressed in U.S. Dollars ($000s)The accompanying notes are an integral part of these consolidated financial statements ↖ Notes to the Consolidated
Financial Statements
December 31, 2017 | Expressed in U.S. Dollars
1 NATURE OF OPERATIONS
B
Basis of Presentation
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", “Sand-
storm 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
These consolidated financial statements have been
prepared on a historical cost basis except for
certain financial instruments, which are measured
at fair value.
The consolidated financial statements are pre-
sented in United States dollars, and all values
are rounded to the nearest thousand except as
advanced stage development projects or operating
otherwise indicated.
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 consolidated financial statements were
authorized for issue by the Board of Directors of
the Company on February 15, 2018.
2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
A
Statement of Compliance
These consolidated financial statements have been
prepared in accordance with International Financial
C
Principles of Consolidation
These consolidated financial statements include
the accounts of the Company and its subsidiaries
(all wholly owned) Sandstorm Gold (Barbados)
Limited, Sandstorm Gold (Canada) Holdings
Ltd., Bridgeport Gold Inc., Inversiones Mineras
Australes Holdings (BVI) Inc., Inversiones Mineras
Australes S.A., Premier Royalty U.S.A. Inc., SA
Targeted Investing Corp., Sandstorm Metals &
Energy (Canada) Holdings Ltd., Sandstorm Metals &
Energy (Canada) Ltd., Sandstorm Metals & Energy
(US) Inc., Mariana Resources Limited (Guernsey),
Mariana Turkey Limited (Guernsey), and Mariana
International Limited (Guernsey). Subsidiaries are
fully consolidated from the date the Company
obtains control, and continue to be consolidated
until the date that control ceases. Control is
achieved when the Company is exposed to, or
has rights to, variable returns from its involvement
with the entity and has the ability to affect those
returns through its power over the entity.
All intercompany balances, transactions, revenues
Reporting Standards (“IFRS”) as issued by the
and expenses have been eliminated on consolidation.
International Accounting Standards Board (“IASB”).
69 —
Sandstorm Gold Ltd.FS2017 Annual Report D
Business Combinations
On the acquisition of a business, the acquisition
method of accounting is used, whereby the pur-
chase consideration is allocated to the identifiable
assets and liabilities on the basis of fair value at the
in the financial and operating policy decisions of the
associate but does not have control or joint control
over those policies. The Hot Maden interest on the
Company’s Consolidated Statements of Financial
Position represents an investment in an associate.
date of acquisition. Provisional fair values allocated
The Company accounts for its investment in an
at a reporting date are finalized as soon as the
associate using the equity method. Under the equity
relevant information is available, within a period
method, the Company’s investment in an associate
not to exceed twelve months from the acquisition
is initially recognized at cost when acquired and
date with retrospective restatement of the impact
subsequently increased or decreased to recognize
of adjustments to those provisional fair values ef-
the Company's share of net income and losses of
fective as at the acquisition date. Incremental costs
the associate, after any adjustments necessary
related to acquisitions are expensed as incurred.
to give effect to uniform accounting policies, any
When the amount of purchase consideration is
contingent on future events, the initial cost of the
acquisition recorded includes an estimate of the
fair value of the contingent amounts expected
to be payable in the future. When the fair value
of contingent consideration as at the date of ac-
quisition is finalized before the purchase price
allocation is finalized, the adjustment is allocated
to the identifiable assets and liabilities acquired.
Subsequent changes to the estimated fair value
of contingent consideration are recorded in the
Consolidated Statement of Income (Loss).
When the cost of the acquisition exceeds the
fair values of the identifiable net assets acquired,
the difference is recorded as goodwill. If the fair
value attributable to the Company’s share of the
identifiable net assets exceeds the cost of acquisi-
tion, the difference is recognized as a gain in the
Consolidated Statement of Income (Loss).
Non-controlling interests represent the fair value of
net assets in subsidiaries, as at the date of acquisi-
tion, which are not held by the Company and are
presented in the equity section of the Consolidated
Statement of Financial Position.
E
Investment in Associate
An associate is an entity over which the Company
has significant influence, and is neither a subsidiary
nor a joint arrangement. The Company has signifi-
cant influence when it has the power to participate
— 70
other movement in the associate’s reserves, and
for impairment losses after the initial recognition
date. The Company's share of income and losses
of associates is recognized in net income during
the period. Dividends received from an associate
are accounted for as a reduction in the carrying
amount of the Company’s investment.
F
Goodwill
The Company allocates goodwill arising from busi-
ness combinations to each cash-generating unit or
group of cash-generating units that are expected to
receive the benefits from the business combination.
Irrespective of any indication of impairment, the
recoverable amount of the cash-generating unit or
group of cash-generating units to which goodwill
has been allocated is tested annually for impairment
and when there is an indication that the goodwill
may be impaired. Any impairment is recognized
as an expense immediately. Any impairment of
goodwill is not subsequently reversed.
G Mineral, Royalty and Other Interests
Mineral, royalty and other interests consist of ac-
quired royalty interests and stream metal purchase
agreements. These interests are recorded at cost
and capitalized as tangible assets with finite lives.
They are subsequently measured at cost less ac-
cumulated depletion and accumulated impairment
losses, if any. Project evaluation costs that are not
related to a specific agreement are expensed in
the period incurred.
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements Producing mineral, royalty and other interests are
An assessment is made at each reporting period
depleted using the units-of-production method
if there is any indication that a previous impair-
over the life of the property to which the interest
ment loss may no longer exist or has decreased.
relates, which is estimated using available infor-
If indications are present, the carrying amount
mation of proven and probable reserves and the
of the mineral interest is increased to the revised
portion of resources expected to be classified as
estimate of its recoverable amount, but so that the
mineral reserves at the mine corresponding to the
increased carrying amount does not exceed the
specific agreement.
On acquisition of a mineral, royalty or other interest,
an allocation of its fair value is attributed to the
exploration potential of the interest and is recorded
as an asset on the acquisition date. The value of the
exploration potential is accounted for in accordance
with IFRS 6, Exploration and Evaluation of Mineral
Resources and is not depleted until such time as
the technical feasibility and commercial viability
have been established at which point the value of
the asset is accounted for in accordance with IAS
16, Property, Plant and Equipment.
H
Impairment of Mineral, Royalty and Other
Interests
Evaluation of the carrying values of each mineral
property is undertaken when events or changes in
circumstances indicate that the carrying values may
carrying amount net of depletion that would have
been determined had no impairment loss been
recognized for the mineral interest in previous
periods.
I
Exploration Assets
All costs incurred prior to obtaining the legal right
to undertake exploration and evaluation activities
on a project are expensed in the period incurred. Ex-
ploration and evaluation costs arising following the
acquisition of an exploration licence are capitalised
on a project-by-project basis. Costs incurred include
appropriate technical and administrative overheads.
Exploration assets are carried at historical cost
less any impairment losses recognized. Explora-
tion and evaluation activity includes geological
and geophysical studies, exploratory drilling and
sampling and resource development.
not be recoverable. If any indication of impairment
Upon demonstration of the technical and com-
exists, the recoverable amount is estimated to
mercial feasibility of a project and a development
determine the extent of any impairment loss. The
decision, any past exploration and evaluation costs
recoverable amount is the higher of the fair value
related to that project are subject to an impairment
less costs of disposal and value in use. Estimated
test and are reclassified in accordance with IAS 16,
values in use are calculated using estimated produc-
Property Plant and Equipment.
tion, sales prices, and a discount rate. Estimated
production is determined using current reserves
and the portion of resources expected to be clas-
sified as mineral reserves as well as exploration
Management annually assesses exploration assets
for impairment when facts and circumstances
suggest that the carrying value of capitalized
potential expected to be converted into resources.
exploration costs may not be recoverable.
Estimated sales prices are determined by reference
to an average of long-term metal price forecasts
by analysts and management’s expectations. The
J
Revenue Recognition
discount rate is estimated using an average discount
Revenue comprises of revenue earned in the period
rate incorporating analyst views to value precious
from royalty and mineral stream interests. Revenue
metal royalty companies. If it is determined that
is measured at the fair value of the consideration
the recoverable amount is less than the carrying
received or receivable when management can
value then an impairment is recorded with a charge
reliably estimate the amount, pursuant to the terms
to net income (loss).
of the royalty and/or stream agreements. In some
instances, the Company will not have access to
71 —
Sandstorm Gold Ltd.FS2017 Annual Report sufficient information to make a reasonable estimate
resulting exchange differences are recognized in
of revenue and, accordingly, revenue recognition is
other comprehensive income (loss).
deferred until management can make a reasonable
estimate. Differences between estimates and actual
amounts are adjusted and recorded in the period
that the actual amounts are known.
For the Company’s Hot Maden Interest, the func-
tional currency of this associate is the Turkish
Lira. To translate the Hot Maden Interest to the
presentation currency of the U.S. dollar, all assets
For royalty interests, revenue recognition gener-
and liabilities are translated using the exchange
ally occurs in the month of production from the
rate as of the reporting date and all income and
royalty property. For stream agreements, revenue
expenses are translated using the average exchange
recognition occurs when the relevant commodity
rates during the period. All resulting exchange
received from the stream operator is physically
differences are recognized in other comprehensive
delivered and then sold by the Company to its
income (loss).
third party customers.
Under the terms of certain royalty agreements,
recorded in the entity’s functional currency as
revenue may be subject to adjustment upon final
the rate on the date of the transaction. Monetary
settlement of estimated metal prices, weights, and
assets and liabilities denominated in foreign cur-
assays. Provisionally-priced revenues are initially
rencies are translated using the closing rate as at
recognized based on forward prices. Adjustments
the reporting date.
Transactions in foreign currencies are initially
to revenue from metal prices are recorded at each
reporting period and other adjustments are re-
corded on final settlement and are offset against
revenue when incurred.
K
Foreign Currency Translation
L
Financial Instruments
The Company’s financial instruments consist of cash
and cash equivalents, trade receivables and other,
short and long-term investments, loans receiv-
able, and trade and other payables. All financial
The functional currency of the Company and its
instruments are initially recorded at fair value and
subsidiaries is the principal currency of the eco-
designated as follows:
nomic environment in which they operate. For
the Company and its subsidiaries Sandstorm Gold
(Barbados) Limited, Sandstorm Gold (Canada) Ltd.,
Bridgeport Gold Inc., Inversiones Mineras Australes
Holdings (BVI) Inc., Premier Royalty U.S.A. Inc.,
SA Targeted Investing Corp., Sandstorm Metals &
Energy (Canada) Holdings Ltd, Sandstorm Metals
& Energy (Canada) Ltd. and Sandstorm Metals &
Energy (US) Inc. the functional currency is the
U.S. dollar.
For Inversiones Mineras Australes S.A., the func-
tional currency of this subsidiary is the Argentine
Peso. To translate Inversiones Mineras Australes
S.A. to the presentation currency of the U.S. dol-
lar, all assets and liabilities are translated using
the exchange rate as of the reporting date and
all income and expenses are translated using the
average exchange rates during the period. All
Cash and cash equivalents, trade receivables and
other, and loans receivable are classified as financial
assets at amortized cost and trade and other
payables and bank debt are classified as financial
liabilities at amortized cost. Both financial assets at
amortized cost and financial liabilities at amortized
cost are measured at amortized cost using the
effective interest method.
Investments in common shares are held for long-
term strategic purposes and not for trading. Upon
the adoption of IFRS 9, the Company made an
irrevocable election to designate these investments
as fair value through other comprehensive income
(“FVTOCI”) in order to provide a more meaningful
presentation based on management’s intention,
rather than reflecting changes in fair value in net
income. Such investments are measured at fair value
— 72
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements at the end of each reporting period, with any gains
N
Cash and Cash Equivalents
or losses arising on re-measurement recognized as
a component of other comprehensive income under
the classification of gain (loss) on revaluation of
investments. Cumulative gains and losses are not
subsequently reclassified to profit or loss.
Cash and cash equivalents include cash on account,
demand deposits and money market investments
with maturities from the date of acquisition of
three months or less, which are readily convert-
ible to known amounts of cash and are subject to
Investments in warrants and convertible debt instru-
insignificant changes in value.
ments are classified as fair value through profit or
loss (“FVTPL”). These warrants, and convertible
debt instruments are measured at fair value at the
O
Income Taxes
end of each reporting period, with any gains or
Current income tax assets and liabilities are mea-
losses arising on re-measurement recognized as a
sured at the amount expected to be recovered from
component of net income (loss) under the classifi-
or paid to the taxation authorities. The tax rates
cation of gain (loss) on revaluation of investments.
and tax laws used are those that are substantively
Transaction costs on initial recognition of financial
enacted at the reporting date.
instruments classified as FVTPL are expensed
Deferred income taxes are provided using the
as incurred. Transaction costs incurred on initial
liability method on temporary differences at the
recognition of financial instruments classified as
reporting date between the tax bases of assets and
loans and receivables, FVTOCI and other financial
liabilities and their carrying amounts for account-
liabilities are recognized at their fair value amount
ing. The change in the net deferred income tax
and offset against the related loans and receivables
asset or liability is included in income except for
or capitalized when appropriate.
Financial assets are derecognized when the con-
tractual rights to the cash flows from the asset
expire. Financial liabilities are derecognized only
when the Company’s obligations are discharged,
cancelled or they expire. On derecognition, the
difference between the carrying amount (measured
at the date of derecognition) and the consideration
received (including any new asset obtained less
any new liability obtained) is recognized in profit
or loss.
M
Inventory
deferred income tax relating to equity items which
is recognized directly in equity. The income tax
effects of differences in the periods when revenue
and expenses are recognized in accordance with
Company accounting practices, and the periods
they are recognized for income tax purposes are
reflected as deferred income tax assets or liabili-
ties. Deferred income tax assets and liabilities are
measured using the substantively enacted statutory
income tax rates which are expected to apply to
taxable income in the years in which the assets
are realized or the liabilities settled. A deferred
tax asset is recognized for unused tax losses, tax
credits and deductible temporary differences to
the extent that it is probable that future taxable
When refined gold or the applicable commodity,
profits will be available for utilization.
under the Stream agreement, is delivered to the
Company, it is recorded as inventory. The amount
recognized as inventory includes both the cash
payment and the related depletion associated with
that commodity.
Deferred income tax assets and liabilities are offset
only if a legally enforceable right exists to offset
current tax assets against liabilities and the deferred
tax assets and liabilities relate to income taxes
levied by the same taxation authority on the same
taxable entity and are intended to be settled on
a net basis.
73 —
Sandstorm Gold Ltd.FS2017 Annual Report The determination of current and deferred taxes
R
Share Based Payments
requires interpretations of tax legislation, estimates
of expected timing of reversal of deferred tax assets
and liabilities, and estimates of future earnings.
P
Share Capital and Share Purchase Warrants
The proceeds from the issue of units are allocated
between common shares and share purchase war-
rants (with an exercise price denominated in U.S.
dollars) on a pro-rata basis based on relative fair
values at the date of issuance. The fair value of
common shares is based on the market closing price
on the date the units are issued and the fair value
of share purchase warrants is determined using
the quoted market price or if the warrants are not
traded, using the Black-Scholes Model (“BSM”) as
of the date of issuance. Equity instruments issued
to agents as financing costs are measured at their
fair value at the date the services were provided.
Upon exercise, the original consideration is real-
located from share purchase warrants reserve to
issued share capital along with the associated
exercise price. Original consideration associated
with expired share purchase warrants is reallocated
to issued share capital.
Q
Earnings per share
Basic earnings per share is computed by dividing
the net income available to common sharehold-
ers by the weighted average number of common
shares issued and outstanding during the period.
Diluted earnings per share is calculated assuming
that outstanding share options and share purchase
warrants, with an average market price that exceeds
the average exercise prices of the options and war-
rants for the year, are exercised and the proceeds
are used to repurchase shares of the Company at
the average market price of the common shares
for the year.
The Company recognizes share based compensa-
tion expense for all share purchase options and
restricted share rights (“RSRs”) awarded to employ-
ees, officers and directors based on the fair values
of the share purchase options and RSRs at the date
of grant. The fair values of share purchase options
and RSRs at the date of grant are expensed over the
vesting periods of the share purchase options and
RSRs, respectively, with a corresponding increase
to equity. The fair value of share purchase options
is determined using the BSM with market related
inputs as of the date of grant. Share purchase op-
tions with graded vesting schedules are accounted
for as separate grants with different vesting periods
and fair values. The fair value of RSRs is the market
value of the underlying shares at the date of grant.
At the end of each reporting period, the Company
re-assesses its estimates of the number of awards
that are expected to vest and recognizes the impact
of any revisions to this estimate in the Consolidated
Statement of Income (Loss).
The BSM requires management to estimate the
expected volatility and expected term of the equity
instrument, the risk-free rate of return over the
term, expected dividends, and the number of equity
instruments expected to ultimately vest. Volatility
is estimated using the historical stock price of the
Company, the expected term is estimated using
historical exercise data, and the number of equity
instruments expected to vest is estimated using
historical forfeiture data.
S
Related Party Transactions
Parties are considered related if one party has
the ability, directly or indirectly, to control the
other party or exercise significant influence over
the other party in making financial and operating
decisions. Parties are also considered related if they
are subject to common control or significant influ-
ence. A transaction is considered a related party
transaction when there is a transfer of resources
or obligations between related parties.
— 74
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements T
Segment Reporting
An operating segment is a component of the
Company that engages in business activities from
which it may earn revenues and incur expenses. The
Company’s operating segments are components of
the Company’s business for which discrete financial
information is available and which are reviewed
regularly by the Company’s Chief Executive Officer
to make decisions about resources to be allocated
to the segment and assess its performance.
3 FUTURE CHANGES IN ACCOUNTING
POLICIES
The IASB has issued the following new standards
but they are not yet effective. Pronouncements
that are not applicable to the Company have been
excluded from this note:
IFRS 15 Revenue from Contracts with Customers—
The final standard on revenue from contracts with
customers was issued on May 28, 2014 and is effec-
tive for annual reporting periods beginning after
4 KEY SOURCES OF ESTIMATION
UNCERTAINTY AND CRITICAL ACCOUNTING
JUDGMENTS
The preparation of the Company’s consolidated fi-
nancial statements in conformity with IFRS requires
management to make judgments, estimates and
assumptions that affect the reported amounts of
assets, liabilities and contingent liabilities at the
date of the consolidated financial statements and
reported amounts of revenues and expenses during
the reporting period. Estimates and assumptions
are continuously evaluated and are based on man-
agement’s experience and other factors, including
expectations of future events that are believed to
be reasonable under the circumstances. However,
actual outcomes can differ from these estimates.
Information about significant areas of estimation
uncertainty and judgments made by management
in preparing the consolidated financial statements
are described below.
A Attributable Reserve and Resource
January 1, 2018 for public entities. The Company has
Estimates
completed its assessment of the impact of the new
standard on its future financial statements under the
modified retrospective approach. The process has
included a review of all material contracts as well
as the nature and type of the various Streams and
royalties that the Company holds. This assessment
has also included identifying the contract with the
customer, the separate performance obligations
contained therein and the appropriate transaction
price. The adoption of the new standard will not
give rise to any material changes to the Company’s
sub processes, IT controls or consolidated financial
statements.
In January 2016, the IASB issued IFRS 16 Leases,
which requires lessees to recognize assets and
liabilities for most leases. IFRS 16 becomes effective
for annual periods beginning on or after January
1, 2019 and is to be applied retrospectively with
early adoption permitted, provided IFRS 15 has
been applied or is applied at the same date as
IFRS 16. The new standard is not expected to have
a material impact on the Company’s consolidated
financial statements.
The Company’s business is the acquisition of Gold
Streams, Streams and royalties. Each mineral,
royalty and other interest agreement has its own
unique terms and judgement is required to assess
the appropriate accounting treatment.
Mineral, royalty and other interests are a significant
class of assets of the Company, with a carrying
value of $365.5 million at December 31, 2017
(2016 - $402.8 million). This amount represents the
capitalized expenditures related to the acquisition
of the mineral, royalty and other interests net of
accumulated depletion and any impairments. The
Company estimates the reserves and resources
relating to each agreement. Reserves are estimates
of the amount of minerals that can be economically
and legally extracted from the mining properties
at which the Company has purchase and royalty
agreements, adjusted where applicable to reflect
the Company’s percentage entitlement to minerals
produced from such mines. The Company estimates
its reserves and resources based on information
compiled by appropriately qualified persons relating
75 —
Sandstorm Gold Ltd.FS2017 Annual Report to the geological data on the size, depth and shape
↳ The size and dispersion of other voting interests,
of the ore body, and requires complex geological
including the existence of voting blocks.
judgments to interpret the data. The estimation of
recoverable reserves is based upon factors such as
estimates of foreign exchange rates, commodity
prices, future capital requirements, and produc-
tion costs along with geological assumptions and
judgments made in estimating the size and grade
of the ore body. Changes in the reserve or resource
estimates may impact the carrying value of the
Company’s mineral, royalty and other interests
and depletion charges.
↳ Other investments in or relationships with the
investee entity including, but not limited to,
current or possible board representation, royalty
and/or stream investments, loans and other
types of financial support, material transac-
tions with the investee entity, interchange of
managerial personnel or consulting positions.
↳ Other relevant and pertinent factors.
The Company’s mineral and royalty interests are
If it is determined that the Company neither has
depleted on a units-of-production basis, with es-
control, joint control or significant influence over
timated recoverable reserves and resources being
an investee entity, the Company accounts for the
used to determine the depletion rate for each
corresponding investment in equity interest at
of the Company’s mineral and royalty interests.
fair value through other comprehensive income
These calculations require the use of estimates
as further described in note 2.
and assumptions, including the amount of recover-
able reserves and resources to be converted into
reserves. Changes to depletion rates are accounted
for prospectively.
B
Investments
C
Income Taxes
The interpretation of existing tax laws or regulations
in Canada, Barbados, the United States of America,
Australia, Argentina, Chile, Turkey, Guernsey, Mexico
or any of the countries in which the mining opera-
In the normal course of operations, the Company
tions are located or to which shipments of gold
invests in equity interests of other entities. In such
are made requires the use of judgment. Differing
circumstances, management considers whether
interpretation of these laws or regulations could
the facts and circumstances pertaining to each
result in an increase in the Company’s taxes, or
such investment result in the Company obtaining
other governmental charges, duties or impositions.
control, joint control or significant influence over
In addition, the recoverability of deferred income
the investee entity. In some cases, the determination
tax assets, including expected periods of reversal
of whether or not the Company controls, jointly
of temporary differences and expectations of future
controls or significantly influences the investee
taxable income, are assessed by management at
entities requires the application of significant
the end of each reporting period and adjusted, as
management judgment to consider individually
necessary, on a prospective basis. Refer to note
and collectively such factors as:
12 for more information.
↳ The purpose and design of the investee entity.
↳ The ability to exercise power, through substan-
tive rights, over the activities of the investee
entity that significantly affect its returns.
↳ The size of the company’s equity ownership and
voting rights, including potential voting rights.
— 76
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements D
Impairment of Assets
E
Asset Acquisition
Assessment of impairment of mineral, royalty and
The assessment of whether an acquisition meets
other interests requires the use of judgments, as-
the definition of a business or whether assets are
sumptions and estimates when assessing whether
acquired is an area of key judgement. If deemed to
there are any indicators that could give rise to the
be a business combination, applying the acquisition
requirement to conduct a formal impairment test
method to business combinations requires each
as well as in the assessment of fair values.
identifiable asset and liability to be measured at its
acquisition date fair value. The excess, if any, of the
fair value of the consideration over the fair value of
the net identifiable assets acquired is recognized
as goodwill. The determination of the acquisition
date fair values often requires management to make
assumptions and estimates about future events.
The assumptions and estimates with respect to
determining the fair value of mineral, royalty and
other interests generally requires a high degree
of judgement, and include estimates of mineral
reserves and resources acquired, future metal
prices, discount rates and conversion of reserves
and resources. Changes in any of the assumptions
or estimates used in determining the fair value of
acquired assets and liabilities could impact the
amounts assigned to assets and liabilities.
F
Functional Currency
The functional currency for each of the Company’s
subsidiaries and associates is the currency of the
primary economic environment in which the entity
operates. Determination of functional currency
may involve certain judgments to determine the
primary economic environment and the Company
reconsiders the functional currency of its entities
if there is a change in events and conditions which
determined the primary economic environment.
Under the Fair Value approach, the net present
value (“NPV”) methodology is used. NPV is esti-
mated by using a discount rate to calculate the
present value of expected future cash flows. The
discount rate is based on the Company’s weighted
average cost of capital, adjusted for various risks.
The expected future cash flows are management’s
best estimates of expected future revenues and
costs. Under each method, expected future rev-
enues reflect the estimated future production
for each mine at which the Company has a Gold
Stream or royalty based on detailed life of mine
plans received from each of the partners. Included
in these forecasts is the production of mineral
resources that do not currently qualify for inclusion
in proven and probable ore reserves where there
is a high degree of confidence in its economic
extraction. This is consistent with the methodol-
ogy that is used to measure value beyond proven
and probable reserves when determining the fair
value attributable to acquired mineral and royalty
interests. Expected future revenues also reflect
management’s estimated long term metal prices,
which are determined based on current prices,
forward pricing curves and forecasts of expected
long-term metal prices prepared by analysts. These
estimates often differ from current price levels, but
are consistent with how a market participant would
assess future long-term metal prices. Estimated
future cash costs are fixed based on the terms of
each Gold Stream, Stream or royalty, as disclosed
in note 16 to the financial statements.
During the year ended December 31, 2017, the
Company recorded an impairment charge of $9.1
million (2016 - $2.5 million).
77 —
Sandstorm Gold Ltd.FS2017 Annual Report 5 FINANCIAL INSTRUMENTS
A
Capital Risk Management
The Company manages its capital such that it
The following table sets forth the Company's fi-
endeavors to continue as a going concern while
nancial assets and liabilities measured at fair value
maximizing the return to stakeholders through the
on a recurring basis by level within the fair value
optimization of the debt and equity balance. The
hierarchy as at December 31, 2017 and December 31,
capital structure of the Company consists of $651.7
2016. As required by IFRS 13, assets and liabilities
million (2016 - $527.3 million) of equity attributable
are classified in their entirety based on the lowest
to common shareholders, comprising of issued
level of input that is significant to the fair value
capital (note 11), accumulated reserves and deficit.
measurement.
The Company was not subject to any externally
imposed capital requirements with the exception of
complying with certain covenants under the credit
agreement governing bank debt. The Company is
in compliance with the debt covenants described
in note 10 as at December 31, 2017.
B
Fair Value Estimation
As at December 31, 2017:
In $000s
Total
Short-term investments
Quoted
prices in
active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Un-
observable
inputs
(Level 3)
The fair value hierarchy establishes three levels
to classify fair value measurements based upon
‣ Common shares held
$ 3,252
$ 3,252
$
-
$
‣ Convertible debt
15,000
-
15,000
the observability of significant inputs used in the
Long-term investments
valuation techniques. The three levels of the fair
‣ Common shares held
$ 40,722
$ 40,722
$
-
$
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. Invest-
ments 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,
‣ Warrants
‣ Convertible debt
3,313
16,595
-
-
3,313
16,595
$ 78,882
$ 43,974
$ 34,908
$
As at December 31, 2016:
Quoted
prices in
active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Un-
observable
inputs
(Level 3)
either directly or indirectly, for substantially the
In $000s
Total
full term of the asset or liabilities. Investments in
warrants and convertible debt instruments held
that are not listed on an exchange are classified
as Level 2.
Level 3 | Prices or valuation techniques that re-
quire inputs that are both significant to fair value
measurement and unobservable (supported by
little or no market activity).
Long-term investments
‣ Common shares held
$ 28,850
$ 28,850
$
-
$
‣ Warrants
‣ Convertible debt
3,404
29,039
-
-
3,404
29,039
$ 61,293
$ 28,850
$ 32,443
$
-
-
-
-
— 78
-
-
-
-
-
-
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements The fair value of the Company's other financial
and its holding of cash and cash equivalents. As
instruments which include cash and cash equiva-
at December 31, 2017, the Company had cash and
lents, trade receivables and other, and trade and
cash equivalents of $12.5 million (December 31,
other payables approximate their carrying values
2016 – $21.4 million). Sandstorm holds common
at December 31, 2017.
C
Credit Risk
The Company’s credit risk is limited to cash and
cash equivalents and trade receivables and other
in the ordinary course of business. The Company’s
trade receivables and other is subject to the credit
shares, convertible debentures, and warrants of
other companies with a combined fair market value
as at December 31, 2017, of $78.9 million (Decem-
ber 31, 2016 – $61.3 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
risk of the counterparties who own and operate
market value of the shares.
the mines underlying Sandstorm’s royalty portfolio.
In order to mitigate its exposure to credit risk, the
Company closely monitors its financial assets and
F Other Price Risk
maintains its cash deposits in several high-quality
The Company is exposed to equity price risk as
financial institutions. The Company’s convertible
a result of holding investments in other mining
debenture due from Equinox Gold Corp. ("Equinox")
companies. The Company does not actively trade
is subject to Equinox’s credit risk and the Company’s
these investments. The equity prices of long term
ability to realize on its security.
investments are impacted by various underlying
D
Currency Risk
Financial instruments that impact the Company’s
net income (loss) or other comprehensive income
factors including commodity prices. Based on the
Company's investments held as at December 31,
2017 a 10% increase (decrease) in the equity prices
of these investments would increase (decrease) net
income by $1.2 million and other comprehensive
(loss) due to currency fluctuations include: cash
income by $2.4 million.
and cash equivalents, trade receivables and other,
investments and trade and other payables denomi-
nated in Canadian dollars. Based on the Company's
Canadian dollar denominated monetary assets and
monetary liabilities at December 31, 2017 a 10%
increase (decrease) of the value of the Canadian
dollar relative to the United States dollar would
increase (decrease) net income by $0.5 million
and other comprehensive income by $2.9 million,
respectively.
E
Liquidity Risk
The Company has in place a planning and budgeting
process to help determine the funds required to
support the Company’s normal operating require-
ments on an ongoing basis. In managing liquidity
risk, the Company takes into account the amount
available under the Company’s Revolving Facility,
anticipated cash flows from operating activities
79 —
Sandstorm Gold Ltd.FS2017 Annual Report 6 MINERAL, ROYALTY AND OTHER INTERESTS
A
Carrying Amount
As of and for the year ended December 31, 2017:
In $000s
Opening
Cost
Net
Additions
(disposals)
Accumulated Depletion
Ending
Opening
Depletion 1
Depletion
in Ending
Inventory
Impairment
Ending
Carrying
Amount
Aurizona
Brazil
Bachelor Lake
Canada
Black Fox
Canada
Chapada
Brazil
Diavik
Canada
Hot Maden
Turkey
Hugo North
Extension and
Heruga
Mongolia
Karma
Burkina Faso
Ming
Canada
Santa Elena
Mexico
Yamana silver
stream
Argentina
Other 3
Total 4
$
11,033
$
-
$
11,033
$
310
$
-
$
-
$
24,009
19,339
3,823
21
37,791
24,395
2,253
183
23,972
37,761
69,528
53,111
5,818
35,351
26,289
20,068
23,342
74,234
37
30
-
-
-
-
-
2
-
2
69,528
2,737
3,765
53,111
11,792
6,080
5,818
35,351
-
-
-
-
26,289
2,619
2,913
20,070
8,585
23,342
19,308
185
992
74,236
1,427
2,253
-
-
-
-
-
-
-
-
-
-
-
$
310
$
10,723
23,183
826
26,831
10,960
6,502
63,026
17,872
35,239
-
-
5,818
35,351
6,203
20,086
9,046
11,024
20,466
2,876
3,680
70,556
9,104
130,492
94,201
-
4,670
4,791
-
-
-
-
671
276
166
-
-
27
Other Royalties 2
222,097
2,596
224,693
115,492
5,896
10,725
(1,264)
9,461
4,540
103
$ 613,329
$
1,403
$ 614,732
$ 210,544
$ 28,263
$
1,344
$
9,104
$ 249,255
$
365,477
1 Depletion during the year in the Consolidated Statements of Income of $29.6 million is comprised of depletion expense for the year of $28.3 million, and $1.3
million from depletion in ending inventory as at December 31, 2016.
2
Includes Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San
Andres, Sao Francisco, Thunder Creek, the Early Gold Deposit, Hackett River, Lobo-Marte, Agi Dagi & Kirazli, Forrestania and other.
3
Includes Koricancha Stream and other.
4 Mineral, Royalty and Other Interests includes assets accounted for under IFRS 6 (Exploration and Evaluation) of $52.3 million and assets accounted for
under IAS 16 (Property, Plant and Equipment) of $313.2 million.
— 80
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements As of and for the year ended December 31, 2016:
In $000s
Opening
Cost
Net
Additions
(disposals)
Accumulated Depletion
Ending
Opening
Depletion
Depletion
in Ending
Inventory
Impairment
Ending
Carrying
Amount
$
11,000
$
33
$
11,033
$
310
$
-
$
-
$
-
$
310
$
10,723
Aurizona
Brazil
Bachelor Lake
Canada
Black Fox
Canada
Chapada
Brazil
Diavik
Canada
Hot Maden
Turkey
Hugo North
Extension and
Heruga
Mongolia
Karma
Burkina Faso
Ming
Canada
Santa Elena
Mexico
Yamana silver
stream
Argentina
Other 2
Total 3
22,671
1,301
23,972
14,678
4,411
37,758
69,520
53,111
5,818
3
8
-
-
37,761
22,117
2,011
69,528
-
2,737
53,111
6,273
5,519
5,818
42,493
(7,142)
35,351
21,174
5,115
26,289
-
-
-
-
-
2,095
20,068
23,342
-
-
20,068
7,622
792
23,342
17,202
2,001
74,229
5
74,234
-
1,427
250
267
-
-
-
-
524
171
105
-
-
-
-
-
-
-
-
-
-
-
-
-
19,339
4,633
24,395
13,366
2,737
66,791
11,792
41,319
-
-
5,818
35,351
2,619
23,670
8,585
11,483
19,308
4,034
1,427
72,807
2,507
115,492
106,605
-
4,540
6,185
Other Royalties 1
200,906
21,191
222,097
106,393
6,592
11,339
(614)
10,725
4,471
69
$ 593,429
$ 19,900
$ 613,329
$ 179,066
$ 27,654
$
1,317
$
2,507
$ 210,544
$
402,785
1
Includes Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Serra Pelada, Gualcamayo, Emigrant Springs, Mine Waste
Solutions, San Andres, Sao Francisco, Thunder Creek, Bomboré, the Early Gold Deposit, Hackett River, Lobo-Marte, Agi Dagi & Kirazli, Forrestania and
others.
2
Includes Koricancha Stream and other.
3 Mineral, Royalty and Other Interests includes assets accounted for under IFRS 6 (Exploration and Evaluation) of $73.8 million and assets accounted for under
IAS 16 (Property, Plant and Equipment) of $329.0 million.
81 —
Sandstorm Gold Ltd.FS2017 Annual Report B
Significant Updates and
Other Transactions
C
Impairments
During the year ended December 31, 2017:
Orezone
◀ UPDATE
During the year ended December 31, 2017:
A reduction in the mineral resource estimate for the
Coringa gold project announced during the period
On January 26, 2017, Orezone Gold Corporation
prompted the Company to evaluate the carrying
exercised its option to repurchase the royalty on the
value of its royalty investment. As a result of this
Bomboré gold project for $3.6 million, representing
review, the Company recorded an impairment
a 20% premium to the original upfront payment.
charge of $4.5 million. The recoverable amount of
$3.4 million was determined using a discounted
Bachelor Lake Stream
◀ UPDATE
cash flow model in estimating the fair value less
On September 29, 2017, the Company amended its
Gold Stream with Metanor Resources Inc (“Meta-
nor”). Beginning October 1, 2017, Sandstorm will
purchase 20% of the gold produced from Metanor’s
Bachelor Lake gold mine for a per ounce cash
payment equal to the lesser of $500 and the then
prevailing market price of gold, until 12,000 ounces
of gold have been purchased by the Company at
which time the Gold Stream will convert into a
3.9% net smelter returns royalty (“NSR”). As part
of the amendment, Metanor has agreed it will sell a
minimum of 1,500 ounces of gold to Sandstorm on
a quarterly basis until the 12,000 ounce threshold
has been reached. Under the previous Gold Stream,
there were no requirements for minimum deliveries
nor was there a subsequent conversion of the Gold
Stream into a NSR. In consideration for entering
into the amendment, Sandstorm received:
↳ a 3.9% NSR on Metanor’s Barry project; and
↳ $2.0 million in the common shares of Metanor.
Metanor may elect to reduce the 3.9% NSR on the
Bachelor Lake or Barry projects by making a $2.0
million payment to Sandstorm in each case (the
“Purchase Option”). Upon exercising either of the
Purchase Options, the respective Sandstorm NSR
will decrease to 1.8%. In addition to the Gold Stream,
Sandstorm has an already existing 1% NSR on the
Bachelor Lake gold mine, which remains unaffected
by the amendment. In connection with the partial
disposition of the stream, the Company recognized
a $3.0 million gain in other income during the year
ended December 31, 2017.
costs of disposal. Key assumptions used in the
cash flow forecast were: a 5 year mine life, a long
term gold price of $1,300 and a 6% discount rate.
As a result of an update to the production profile of
the Emigrant Springs mine and the ounces expected
from the area subject to the royalty, the Company
re-evaluated the carrying value of its investment.
Based on its review, the Company recorded an
impairment charge of $4.6 million. The recoverable
amount of $0.5 million was determined using a
discounted cash flow model in estimating the
fair value less costs of disposal. Key assumptions
used in the cash flow forecast were: a 1 – 3 year
mine life, a long term gold price of $1,300 and a
4% discount rate.
During the year ended December 31, 2016:
While assessing whether any indications of impair-
ment exist for mineral properties, consideration
is given to both external and internal sources of
information. The lack of progress with respect to
the advancement of some of the properties which
Sandstorm holds royalties on within Sandstorm’s
mineral interest portfolio, prompted the Company to
evaluate its investment in these specific assets. As
part of the assessment, the Company recorded an
impairment charge of $1.4 million for the full balance
of those royalties that were specifically identified
as lacking significant progress. The recoverable
amount of the assets, for impairment assessment
purposes, was determined using the fair value less
costs of disposal method and considered whether
the mining operator had dropped certain mineral
claims. Key assumptions used in the analysis to
— 82
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements determine fair value included a liquidation scenario
$1,300 and an estimated mine life of 12 - 14 years.
and management’s best estimates of the value of
the underlying royalty assets. In addition to these
impairments, the Company recorded an additional
impairment charge of $1.1 million relating to other
royalties within the Company’s royalty portfolio.
This impairment charge was prompted by changes
in the underlying operations of the assets including
estimated production. The recoverable amount of
the assets, for impairment assessment purposes,
was determined using the fair value less costs of
disposal method. Key assumptions used in the
discounted cash flow analysis to determine fair
value included a long term gold price of $1,300
and a 4% discount rate.
7 ACQUISITION OF MARIANA RESOURCES LTD.
On July 3, 2017, Sandstorm completed its previously
announced arrangement to acquire all the issued
and ordinary shares of Mariana Resources Ltd. (that
Sandstorm did not already own) (“Mariana”) (the
“Arrangement”). Under the terms of the Arrange-
ment and as consideration for the acquisition, the
Company issued 32,685,228 common shares and
paid an additional $47.3 million in cash. In addition,
all outstanding stock options and warrant holders
of Mariana received 0.3487 Sandstorm stock option
or warrant for each Mariana stock option or warrant
previously held. The transaction was accounted for
as an asset acquisition, with the capitalized costs
of $199.6 million being determined by reference to
the fair value of the net assets acquired.
As part of the transaction, the Company acquired
a 30% net profits interest in the Hot Maden gold-
copper project, located in the Artvin Province,
northeastern Turkey (“Hot Maden” or “Hot Maden
Interest”). The project is operated and co-owned by
a Turkish partner, Lidya Madencilik Sanayi ve Ticaret
A.S. (“Lydia”), who owns the remaining interest in
the project. On acquisition, the fair value ascribed
to the net profits interest was $190.7 million. In
determining the fair value of the Company’s inter-
est in Hot Maden, a discounted cash flow model
was utilized. Key assumptions used in the analysis
were a 7% discount rate, a long term gold price of
The Company’s 30% net profits interest in Hot
Maden represents an investment in an associate
and is accounted for in accordance with IAS 28 -
Investments in associates and joint ventures. Refer
to note 8 for further information.
In addition, the acquisition of Mariana included
exploration properties in Côte d’Ivoire, Turkey,
and Argentina. The fair value of $5.0 million as-
cribed to these assets was determined based on
management’s best estimate of the recoverable
value and took into consideration the exploration
expenditures at the respective properties. Sand-
storm intends on selling the exploration properties
and expects to retain NSRs as well as equity in the
eventual sale. As part of that process and during
the year ended December 31, 2017, Sandstorm was
able to dispose of a number of these properties
in exchange for receiving NSRs and equity to be
granted to Sandstorm in the future. The other assets
acquired in the transaction included cash and other
assets of approximately $5.0 million and accounts
payable and accrued liabilities of approximately $1.1
million. Other key assumptions utilized in the fair
value assessment of the replacement warrants and
options included a risk-free annual interest rate of
approximately 1%, an expected volatility of up to
30% and an expected average life of up to 1.6 years.
8 HOT MADEN INTEREST
On July 3, 2017, the Company acquired a 30% net
profits interest in Artmin Madencilik Sanaya ve
Ticaret A.S, incorporated in Turkey which owns
and operates the Hot Maden project. This interest
is accounted for using the equity method and its
financial results are adjusted, where appropriate,
to give effect to uniform accounting policies.
As of December 31, 2017 the Company has com-
mitted to funding $4.3 million in expenditures in
2018 relating to the ongoing development and
construction activities at the Hot Maden project.
83 —
Sandstorm Gold Ltd.FS2017 Annual Report The following table summarizes the changes in the carrying amount
of the Company’s Hot Maden interest:
In $000s
Beginning of Year
Acquisition of Investment in Associate (note 7)
Company’s share of net income (loss) of associate
Capital investment
Currency translation adjustments
End of Year
Year Ended
December 31, 2017
Year Ended
December 31, 2016
$
$
-
$
190,714
(28)
584
(13,818)
177,452
$
-
-
-
-
-
-
Summarized financial information for the Company’s investment in associate, on a 100% basis and reflecting
adjustments made by the Company, including fair value adjustments made at the time of acquisition and
adjustments for differences in accounting policies is as follows:
In $000s
Revenue
Administration expenses
Other income
Total net (loss) income
Company’s share of net income (loss) of associate
Period Ended 1
December 31, 2017
Year Ended
December 31, 2016
$
$
$
-
$
(113)
20
(93)
(28)
$
$
-
-
-
-
-
1
Financial results presented above pertain to the period beginning July 3, 2017, the date of acquisition, to December 31, 2017.
In $000s
Current Assets
Non-current Assets
Total Assets
Current Liabilities
Non-current Liabilities
Total Liabilities
Net Assets
Company’s share of net assets of associate
December 31, 2017
December 31, 2016
$
$
$
$
619
591,343
591,962
456
-
456
591,506
177,452
$
$
$
$
-
-
-
-
-
-
-
-
— 84
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements 9
INVESTMENTS
As of and for the year ended December 31, 2017:
In $000s
Short-term investments
‣ Common shares 1
‣ Convertible debt instruments 2
Total short-term investments
Non-current investments
‣ Common shares 1
‣ Warrants 2
‣ Convertible debt instruments 2
Total non-current investments
Total Investments
Fair Value
Jan. 1, 2017
Net Additions
(Disposals)
Transfers
Fair Value
Adjustment
Fair Value
Dec. 31, 2017
$
$
$
$
$
-
-
-
28,850
3,404
29,039
61,293
61,293
$
$
$
$
$
-
-
-
6,965
(1,979)
(1,383)
3,603
3,603
$
$
$
$
$
3,252
15,000
18,252
(3,252)
-
(15,000)
(18,252)
-
$
$
$
$
$
-
-
-
8,159
1,888
3,939
13,986
13,986
$
$
$
$
$
3,252
15,000
18,252
40,722
3,313
16,595
60,630
78,882
1
2
Fair value adjustment recorded within Other Comprehensive Income (loss) for the year.
Fair value adjustment recorded within Net Income (loss) for the year.
In connection with a series of business transactions resulting in Equinox Gold Corp. ("Equinox"), Sandstorm
was able to monetize a number of its historical debt and equity investments held in Equinox’s predecessor
companies. On March 31, 2017, the term debt facility that was owed to Sandstorm, in the amount of $20 million
plus accrued interest, was settled in the form of equity of Equinox. The Company recognized a gain of $1.8
million on the settlement of that debt. In addition, on January 3, 2018, the Company closed its previously
announced agreement to sell $18.3 million in debt and equity securities of Equinox to Mr. Ross Beaty, the
new chairman of Equinox. The value of these debt and equity securities have been classified as short-term
investments on the Company’s Consolidated Statement of Financial Position.
As of and for the year ended December 31, 2016:
In $000s
Fair Value
Jan. 1, 2016
Net Additions
(Disposals)
Transfers
Fair Value
Adjustment
Fair Value
Dec. 31, 2016
‣ Common shares 1
$
14,990
$
(3,042)
$
‣ Warrants 2
35
(1,240)
‣ Convertible debt instruments 2
11,555
-
Total Investments
$
26,580
$
(4,282)
$
1
2
Fair value adjustment recorded within Other Comprehensive Income (loss) for the year.
Fair value adjustment recorded within Net Income (loss) for the year.
-
-
-
-
$
16,902
$
28,850
4,609
17,484
3,404
29,039
$
38,995
$
61,293
85 —
Sandstorm Gold Ltd.FS2017 Annual Report 10 REVOLVING FACILITY AND DEFERRED
11 SHARE CAPITAL AND RESERVES
FINANCING COSTS
On December 20, 2017, the Company amended
its revolving credit agreement, allowing the Com-
pany to borrow up to $150 million (the “Revolving
Facility”), for general corporate purposes, from
a syndicate of banks including the Bank of Nova
Scotia, Bank of Montreal, National Bank of Canada,
Canadian Imperial Bank of Commerce and Royal
Bank of Canada (the “Syndicate”). The term of the
A
Shares Issued
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, 2018,
to purchase up to 7,597,730 common shares. The
NCIB provides the Company with the option to
Revolving Facility is for four years and is extendable
purchase its common shares from time to time.
by mutual consent of Sandstorm and the Syndicate.
The amounts drawn on the Revolving Facility are
During the year ended December 31, 2017 and
subject to interest at LIBOR plus 2.5% – 3.5% per
pursuant to the NCIB, the Company purchased
annum, and the undrawn portion of the Revolving
and cancelled an aggregate of 4,106,772 common
Facility is subject to a standby fee of 0.6% – 0.8% per
shares.
annum, dependent on the Company’s leverage ratio.
Under the credit agreement, the Company is re-
quired to maintain a leverage ratio of net debt
divided by EBITDA (as defined in the credit facility
agreement) of less than or equal to 3.50:1.00 for
each fiscal quarter. For any consecutive four fiscal
quarters following a material permitted acquisition,
the borrower shall maintain the leverage ratio of
less than or equal to 4.00:1.00. The Company is
further required to maintain a tangible net worth
greater than the aggregate of $136.8 million and
50% of positive net income for each fiscal quarter
beginning with the fiscal quarter ended September
30, 2017. The Revolving Facility is secured against
the Company’s assets, including the Company’s
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.
mineral, royalty and other interests and investments.
During the year ended December 31, 2017, the
As of December 31, 2017, the Company was in
compliance with the covenants and the balance
of the Revolving Facility was nil.
Deferred financing costs are amortized on a
straight-line basis over the term of the Revolving
Facility. At December 31, 2017, deferred financing
costs, net of accumulated amortization, was $2.3
million (December 31, 2016 - $1.9 million).
Company issued 795,000 options with a weighted
average exercise price of C$5.50 and a fair value
of $1.1 million or $1.33 per option. The fair value
of the options granted was determined using a
Black-Scholes model using the following weighted
average assumptions: grant date share price and
exercise price of C$5.50, expected volatility of
43%, risk-free interest rate of 1.64 % and expected
life of 3 years. Expected volatility is determined
by considering the trailing 3 year historic average
share price volatility of the Company and similar
companies in the same industry and business model.
— 86
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements A summary of the Company’s options and the changes
for the year are as follows:
Note
Number of
Options
Weighted Average
Exercise Price (CAD$)
Options outstanding at December 31, 2015
Granted
Exercised
Expired unexercised
Options outstanding at December 31, 2016
Mariana Resources Ltd. replacement options 1
7
Granted
Exercised
Expired unexercised
Options outstanding at December 31, 2017
1
Exercisable in GBP. Exercise price is translated to CAD using the year end exchange rate.
6,855,582
1,336,000
(1,516,402)
(440,000)
6,235,180
2,078,248
795,000
(797,128)
(584,983)
7,726,317
5.45
4.96
(4.63)
(6.35)
4.71
3.41
5.50
(3.23)
(15.29)
3.79
The weighted-average share price at the time of exercise for the year ended December 31, 2017 was C$5.69 per
share (C$7.16 – year ended December 31, 2016). The weighted average remaining contractual life of the options
for the year ended December 31, 2017 was 2.82 years (3.35 years – year ended December 31, 2016).
A summary of the Company’s share purchase options
as of December 31, 2017 is as follows:
Year of expiry
2018
2019
2020
2021
2022
Number
outstanding
175,072
3,478,439
1,284,000
1,405,740
1,383,066
Vested
175,072
3,478,439
856,005
515,079
588,066
7,726,317
5,612,661
Exercise Price per Share
(range) (CAD$) 1
Weighted average exercise
price per share (CAD$) 1
2.92 - 11.31
1.46 - 6.03
3.60 - 3.64
2.65 - 4.96
4.86 - 15.00
5.26
2.79
3.61
4.65
4.90
3.38
1
For options exercisable in GBP, exercise price is translated to CAD using the year end exchange rate.
87 —
Sandstorm Gold Ltd.FS2017 Annual Report C
Share Purchase Warrants
A summary of the Company’s warrants and the
changes for the year are as follows:
Note
Warrants outstanding at December 31, 2015
Expired unexercised
Exercised
Warrants outstanding at December 31, 2016
Mariana Resources Ltd. replacement warrants
7
Exercised
Expired unexercised
Number
of Warrants
29,307,173
(1,256,662)
(4,111)
28,046,400
2,025,314
(1,059,242)
(5,002,500)
Shares to be Issued
Upon Exercise of the
Warrants
29,307,173
(1,256,662)
(4,111)
28,046,400
2,025,314
(1,059,242)
(5,002,500)
Warrants outstanding at December 31, 2017
24,009,972
24,009,972
A summary of the Company’s warrants as of
December 31, 2017 are as follows:
Number Outstanding
Exercise price per share 1
Expiry Date
1,043,572
3,000,000
15,000,000
4,966,400
24,009,972
0.97
4.50
3.50
4.00
May 6, 2018
March 23, 2020
October 27, 2020
November 3, 2020
1
For warrants exercisable in GBP, exercise price is translated to USD using the year end exchange rate.
D
Restricted Share Rights
The Company has a restricted share plan (the “Restricted Share Plan”) whereby the Company may grant
restricted share rights 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 (“RSRs”).
During the year ended December 31, 2017, the Company granted 597,200 RSRs with a fair value of $2.6
million, a three year vesting term, and a weighted average grant date fair value of $4.30 per unit. As at
December 31, 2017, the Company had 2,222,624 RSRs outstanding.
— 88
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements E
Diluted Earnings Per Share
Diluted earnings per share is calculated
based on the following:
In $000s (excluding share amounts)
Net income for the year
Basic weighted average number of shares
Basic earnings per share
Effect of dilutive securities
‣ Stock options
‣ Warrants
‣ Restricted share rights
Year Ended
December 31, 2017
Year Ended
December 31, 2016
10,537
$
25,254
167,265,059
144,159,678
0.06
$
0.18
$
$
2,217,597
3,582,912
1,637,618
1,903,699
2,709,987
1,188,559
Diluted weighted average number of common shares
174,703,186
149,961,923
Diluted earnings per share
$
0.06
$
0.17
The following table lists the number of stock options and warrants excluded from the computation of diluted
earnings per share because the exercise prices exceeded the average market value of the common shares of
C$5.55 during the year ended December 31, 2017 (December 31, 2016 — C$5.55) or because a performance
obligation had not been met as at December 31, 2017.
Stock Options
Warrants
Year Ended
December 31, 2017
Year Ended
December 31, 2016
1,967,557
6,412,664
1,213,208
8,064,894
89 —
Sandstorm Gold Ltd.FS2017 Annual Report 12 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 (loss) before income taxes.
These differences result from the following items:
In $000s
Income before income taxes
Canadian federal and provincial income tax rates
Income tax expense based on the above rates
Increase (decrease) due to:
‣ Non-deductible expenses and permanent differences
‣ Change in unrecognized temporary differences
‣ Non-taxable portion of capital gain or loss
‣ Change in future substantively enacted tax rate
‣ Other
Income tax expense
The deferred tax assets and liabilities are shown below:
Year Ended
December 31, 2017
Year Ended
December 31, 2016
$
$
$
$
$
$
$
14,614
26.0%
3,800
989
1,146
(1,801)
(84)
27
29,785
26.0%
7,744
815
(1,261)
(3,244)
-
477
4,077
$
4,531
In $000s
As at December 31, 2017 As at December 31, 2016
Deferred Income Tax Assets
‣ Non-capital losses
‣ Share issue costs and other
‣ Mineral, royalty and other interests
Total deferred income tax assets
Deferred Income Tax Liabilities
‣ Mineral, royalty and other interests
Total deferred income tax liabilities
Total deferred income tax asset, net
$
$
$
$
$
30,027
$
1,966
(18,412)
13,581
(2,807)
(2,807)
10,774
$
$
$
$
31,410
1,906
(16,382)
16,934
(3,288)
(3,288)
13,646
Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same
taxation authority and the Company has the legal right and intent to offset. Non-capital losses have been
recognized as a deferred income tax asset to the extent there will be future taxable income against which
the Company can utilize the benefit prior to their expiration. The Company recognized deferred tax assets
in respect of tax losses as at December 31, 2017 of $111.2 million (2016: $120.8 million) as it is probable that
there will be future taxable profits to recover the deferred tax assets.
— 90
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements Movement in net deferred income taxes:
In $000s
Balance, beginning of the year
‣ Recognized in net income (loss) for the year
‣ Recognized in equity
‣ Recognized in other comprehensive income (loss) for the year
Balance, end of year
Year Ended
December 31, 2017
Year Ended
December 31, 2016
$
$
13,646
$
(3,209)
2
335
16,371
(4,225)
986
514
10,774
$
13,646
The Company has deductible unused tax losses, for which a deferred tax asset has been recognized, expiring as follows:
In $000s
Location
Amount
Expiration
Non-capital loss carry-forwards
Canada
$
111,212
2030 - 2036
The aggregate amount of deductible temporary differences associated with capital losses and other items,
for which deferred income tax assets have not been recognized as at December 31, 2017 are $34.3 million
(2016: $27.9 million). No deferred tax asset is recognized in respect of these items because it is not probable
that future taxable capital gains or taxable income will be available against which the Company can utilize
the benefit.
13 ADMINISTRATION EXPENSES
The administration expenses for the Company are as follows:
In $000s
Corporate administration
Employee benefits and salaries
Professional fees
Depreciation
Administration expenses before share based compensation
Equity settled share based compensation (a non-cash expense)
Total administration expenses
Year Ended
December 31, 2017
Year Ended
December 31, 2016
$
$
$
1,742
$
1,921
801
108
4,572
$
2,164
6,736
$
1,275
1,570
819
231
3,895
1,136
5,031
91 —
Sandstorm Gold Ltd.FS2017 Annual Report 14 SUPPLEMENTAL CASH FLOW INFORMATION
In $000s
Change in non-cash working capital:
‣ Trade receivables and other
‣ Trade and other payables
Net increase (decrease) in cash
Significant non-cash transactions:
‣ Shares and replacement equity awards issued for Mariana acquisition
‣ Shares issued for acquisition of mineral, royalty and other interests
Year Ended
December 31, 2017
Year Ended
December 31, 2016
$
$
$
$
$
$
(602)
1,399
797
131,354
-
(1,847)
223
(1,624)
-
20,892
15 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
Employee salaries and benefits
Share-based payments
Total key management compensation expense
Year Ended
December 31, 2017
Year Ended
December 31, 2016
$
$
2,340
2,569
4,909
$
$
1,699
2,041
3,740
— 92
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements 16 CONTRACTUAL OBLIGATIONS
In connection with its commodity streams, the Company
has committed to purchase the following:
Stream
Bachelor Lake
Black Fox
Chapada
Entrée
Karma
Ming
% of Life of Mine Gold
or Relevant Commodity 4, 5, 6, 7, 8, 9
20%
8%
4.2%
5.62% on Hugo North Extension
and 4.26% on Heruga
26,875 ounces over 5 years
and 1.625% thereafter
25% of the first 175,000 ounces
of gold produced, and 12% thereafter
Santa Elena
Yamana silver stream
20%
Varies
Subject to an annual inflationary adjustment except for Ming.
Per Ounce Cash Payment:
lesser of amount below and the then
prevailing market price of commodity
(unless otherwise noted) 1, 2, 3
$500
$531
30% of copper spot price
$220
20% of gold spot price
$nil
$450
30% of silver spot price
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.
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.
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.
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.
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.
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 Yamana has delivered 39 million pounds of copper to Sandstorm; then 3.0% of the copper produced until, on a
cumulative basis, Yamana has delivered 50 million pounds of copper to Sandstorm; then 1.5% of the copper produced thereafter, for the life of the
mine. If Cerro Moro has not achieved the Commencement of Production and Sandstorm has not received cumulative pre-tax cash flow equal to $70
million from the Yamana silver stream, then the First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease to be in
effect and Sandstorm will continue to purchase 4.2% of Chapada’s payable copper production (up to an annual maximum of 3.9 million pounds of
copper), until such time as Sandstorm has received cumulative pre-tax cash flow equal to $70 million, or Cerro Moro has achieved the Commencement
of Production.
1
2
3
4
5
6
7
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 the Yamana silver stream, through 2018, Sandstorm has also agreed to purchase an amount of silver
from: (i) the Minera Florida mine in Chile equal to 38% of the silver produced (up to an annual maximum of 200,000 ounces of silver); and (ii) the
Chapada mine in Brazil equal to 52% of the silver produced (up to an annual maximum of 100,000 ounces of silver).
9
For the Bachelor Lake Gold Stream, the Company has committed to purchase 20% of gold produced until 12,000 ounces have been purchased.
93 —
Sandstorm Gold Ltd.FS2017 Annual Report 17 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 year ended December 31, 2017
In $000s
Product
Sales
Impairment
(Gain) loss
Royalty
revenue
Cost
of sales,
excluding
depletion
of mineral,
on disposal
Income
Cash flow
royalty
of mineral
and other
interest and
Depletion
interests
other
(loss)
before
taxes
from
operating
activities
Bachelor Lake
Canada
Black Fox
Canada
Chapada
Brazil
Diavik
Canada
Karma
Burkina Faso
Ming
Canada
Santa Elena
Mexico
Yamana
silver stream
Argentina
Gold
$
7,706
$
379
$
3,082
$
4,074
$
Gold
6,693
Copper
11,001
-
-
2,847
2,520
3,249
3,765
Diamonds
-
7,150
-
6,080
Gold
Gold
Gold
6,863
796
11,570
Silver
4,252
-
-
-
-
1,365
3,437
-
356
3,485
1,098
1,267
2,253
-
-
-
-
-
-
-
-
$ (2,952)
$
3,881
$
5,030
-
-
-
-
-
-
-
1,326
3,953
3,987
7,753
1,070
6,781
2,061
5,489
440
796
6,987
7,548
732
2,985
Other Royalties 1
Various
-
11,538
Other
Gold
327
-
-
26
5,894
9,104
(866)
(2,594)
13,693
103
-
221
(23)
294
Total Segments
$ 49,208
$ 19,067
$ 15,321
$ 29,580
$
9,104
$ (3,597)
$ 17,867
$ 54,322
Corporate:
Administration & Project
evaluation expenses
Foreign exchange gain
Gain on revaluation of
investments
Finance expense, net
Other
Total Corporate
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
(11,300)
(7,408)
2,434
5,827
-
-
(1,465)
(1,593)
(1,251)
1,251
(548)
$ (1,251)
$ (3,253)
$ (9,549)
Consolidated
$ 49,208
$ 19,067
$ 15,321
$ 29,580
$ 9,104
$ (4,848)
$ 14,614
$ 44,773
1 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
Bracemac-McLeod, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Thunder Creek, Copper Mountain, Forrestania and Sheer-
ness. Includes royalty revenue from royalty interests located in Canada of $5.7 million, in the United States of $1.5 million, Argentina of $1.8 million,
Honduras of $1.8 million and other of $0.7 million. Includes royalty revenue from Gold of $6.5 million, Copper of $1.5 million and Other Base Metals
of $3.5 million.
— 94
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements For the year ended December 31, 2016:
In $000s
Product
Sales
Impairment
(Gain) loss
Royalty
revenue
Cost
of sales,
excluding
depletion
of mineral,
on disposal
Income
Cash flow
royalty
of mineral
and other
interest and
Depletion
interests
other
(loss)
before
taxes
from
operating
activities
Bachelor Lake
Canada
Black Fox
Canada
Chapada
Brazil
Diavik
Canada
Karma
Burkina Faso
Ming
Canada
Santa Elena
Mexico
Yamana
silver stream
Argentina
Gold
$
8,721
$
462
$
3,494
$
4,411
$
Gold
5,617
Copper
6,075
-
-
2,354
2,011
1,843
2,737
Diamonds
-
5,856
-
5,519
Gold
Gold
Gold
4,272
2,025
11,772
Silver
2,926
-
-
-
-
860
2,095
-
792
3,385
2,001
876
1,427
$
-
-
-
-
-
-
-
-
Other Royalties 1
Various
-
14,419
Other
Gold
226
-
4
18
6,592
2,507
69
-
Total Segments
$ 41,634
$ 20,737
$ 12,834
$ 27,654
$
2,507
$
Corporate:
Administration & Project
evaluation expenses
Foreign exchange loss
Gain on revaluation of
investments
Finance expense, net
Other
Total Corporate
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
Consolidated
$ 41,634
$ 20,737
$ 12,834
$ 27,654
$ 2,507
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
1,278
$
5,481
1,252
2,951
1,495
4,232
337
5,901
1,317
3,314
1,233
2,025
6,386
8,460
623
2,050
5,316
14,073
139
208
$ 19,376
$ 48,695
(10,095)
(6,758)
(87)
22,093
-
-
(395)
(2,388)
1,107
(1,107)
(558)
1,107
$ 10,409
$ (9,704)
1,107
$ 29,785
$ 38,991
$
$
1 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
Bracemac-McLeod, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Thunder Creek, Copper Mountain, Forrestania and Sheer-
ness. Includes royalty revenue from royalty interests located in Canada of $5.6 million, in the United States of $2.5 million, Argentina of $1.9 million,
Honduras of $3.7 million and other of $0.7 million. Includes royalty revenue from Gold of $9.2 million, Copper of $2.5 million and Other Base Metals
of $2.7 million.
95 —
Sandstorm Gold Ltd.FS2017 Annual Report Total assets as of:
In $000s
Aurizona
Bachelor Lake
Black Fox
Chapada
Diavik
Hot Maden 1
Hugo North Extension and Heruga
Karma
Ming
Santa Elena
Yamana silver stream
Other Royalties 2
Other 3
Total Segments
Corporate:
Cash
Investments
Deferred Tax Assets
Deferred Financing Costs and Other
Loan Receivable
Total Corporate
Consolidated
December 31, 2017
December 31, 2016
$
10,723
$
1,124
11,350
63,026
36,739
183,271
35,351
21,034
11,300
3,693
70,556
96,131
7,423
$
551,721
$
12,539
78,882
13,581
4,192
-
$
$
109,194
660,915
$
$
10,723
5,268
13,946
66,791
42,450
5,818
35,351
24,389
11,653
4,345
72,807
108,844
6,190
408,575
21,434
61,293
16,934
3,289
23,357
126,307
534,882
1
Includes royalty interest of $5.8 million and investment in associate of $177.5 million in 2017. Includes $5.8 million royalty interest in 2016.
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 Bracemac-McLeod, Coringa, Mt. Hamilton,
Paul Isnard, Prairie Creek, Ann Mason, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Sao Francisco, Sao Vicente, Thunder
Creek, Bomboré, Hackett River, Lobo-Marte, Agi Dagi & Kirazli and other.
3
Includes Koricancha Stream and other.
— 96
Sandstorm Gold Ltd.SECTION 03Notes to the Consolidated Financial Statements Non-current assets by geographical region as of:
In $000s
North America
Canada
USA
Mexico
South & Central America
Argentina
Brazil
French Guiana
Peru
Honduras
Chile
Paraguay
Africa
Burkina Faso
South Africa
Cote D'Ivoire
Botswana
Asia & Australia
Turkey
Mongolia
Australia
Consolidated
December 31, 2017 1
December 31, 2016 1
$
$
$
$
$
86,832
$
16,055
2,874
94,166
$
77,113
5,154
6,434
1,430
2,460
-
20,087
$
4,301
400
1,017
187,725
$
36,589
2,891
99,728
21,403
4,033
95,191
85,410
5,153
4,899
2,248
2,460
1,264
26,807
4,066
-
-
10,260
36,589
3,274
545,528
$
402,785
1
Includes Mineral, Royalty and Other Interests (Note 6), Investment in Associate (Note 8) and Exploration Assets.
18 SUBSEQUENT EVENTS
On January 3, 2018, the Company completed its
On January 17, 2018, the Company acquired a 2%
previously announced agreement to sell $18.3
NSR on the producing Houndé gold mine in Burkina
million in debt and equity securities of Equinox
Faso, owned and operated by Endeavour Mining
Gold Corp. to Mr. Ross Beaty. The sale was condi-
Corporation. The royalty was acquired from Acacia
tional upon the closing of the announced business
Mining PLC for $45 million in cash and covers the
combination between Trek Mining Inc., NewCastle
Kari North and Kari South tenements.
Gold Ltd. and Anfield Gold Corp. which occurred
on December 22, 2017.
97 —
Sandstorm Gold Ltd.FS2017 Annual Report WWW.SANDSTORMGOLD.COM