Sandstorm Gold Acquires a Gold Stream on the Xstrata Operated Bracemac-McLeod Property
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VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 13, 2011) - Sandstorm Gold Ltd. ("Sandstorm Gold" or the "Corporation") (TSX VENTURE:SSL) is pleased to announce the completion of a gold purchase agreement (the "Agreement") with Donner Metals Ltd. ("Donner") (TSX VENTURE:DON) (via a back-to-back agreement with Sandstorm Metals & Energy Ltd. ("Sandstorm Metals & Energy") (TSX VENTURE:SND) to acquire an amount of gold and gold equivalent based on production at the Bracemac-McLeod development property located in Matagami, Quebec (the "Bracemac-McLeod Property") and operated by Xstrata Canada Corporation ("Xstrata"). Donner is the owner of a 35% joint venture interest in the Bracemac-McLeod Property.
Sandstorm Gold has agreed to purchase an amount of gold and gold equivalent equal to 17.5% of the production from the Xstrata operated Bracemac-McLeod Property. Pursuant to the Agreement, Sandstorm Gold will make an upfront cash payment to Donner of US$5 million (the "Upfront Deposit") on June 30, 2012.
Sandstorm Gold will make ongoing per ounce payments equal to the lesser of US$350 per ounce of gold or gold equivalent and the then prevailing market price of gold (the "Per Ounce Payments"). Donner will have the option, for a period of 24 months, to repurchase up to 50% of the Agreement by making a US$3.5 million payment to Sandstorm Gold whereupon the percentage of gold and gold equivalent that Sandstorm Gold is entitled to purchase shall be decreased from 17.5% to 8.75%. Aside from the Upfront Deposit and Per Ounce Payments, Sandstorm Gold is not required to contribute to any capital, exploration or operating expenditures in respect to the Bracemac-McLeod Property. Sandstorm Gold has received a guarantee that the Corporation will receive minimum before tax cash flows of (i) US$0.8 million in 2013, (ii) US$1.4 million in 2014, (iii) US$1.4 million in 2015, and (iv) US$1.4 million in 2016, thus providing a 100% return of capital within approximately five years.
"We are pleased to have acquired a gold stream on a strong mine, operated by one of the world's largest mining companies," said President & CEO Nolan Watson. "The Donner transaction highlights the financing synergy that we envisioned when Sandstorm Metals & Energy was spun-out from Sandstorm Gold in early 2010."
Further to a metals purchase agreement with Donner, Sandstorm Metals & Energy has agreed to purchase an amount of copper equal to 17.5% of the copper produced from the Bracemac-McLeod Property, in exchange for making a payment of US$20 million upon the completion by Donner of certain funding conditions, which are expected to be completed in the near future.
For more information see the Sandstorm Metals & Energy press release at sandstormmetalsandenergy.com.
In addition, Sandstorm Gold has entered into a cooperation agreement with Sandstorm Metals & Energy whereby the two companies, where applicable, will work together to complete metal streaming transactions and share joint operating expenses.
About the Bracemac-McLeod Property
The Bracemac-McLeod Property is a high grade volcanogenic massive sulphide ("VMS") deposit located in the historical and prolific mining district of Matagami, Quebec. Xstrata has been operating in the Matagami district for almost fifty years with ten previously operating mines and one current producing mine called Perseverance (Xstrata 100%). As Perseverance winds down, Xstrata plans to shift operations to Bracemac-McLeod (Xstrata 65%, Donner 35%) while utilizing the existing Matagami mill to produce concentrates of zinc and copper. Bracemac-McLeod will be an underground mine, accessed via a ramp, and is expected to begin ore production in early 2013. Construction of the Bracemac-McLeod Mine began in April 2010 and the access ramp is currently passing towards the Bracemac ore body. The current mine life is expected to be approximately four years with exploration potential to extend the mine life.
Ore will be processed at the Xstrata operated Matagami mill which is currently processing ore from Xstrata's wholly owned Perseverance mine. The Matagami mill has been in operation since 1963 and underwent a recent upgrade that was completed in 2008. Historically, it has processed similar types of ore from other VMS deposits in Matagami. . Total mine production from Bracemac-McLeod (Xstrata 65%, Donner 35%) is expected to be 2,500 tonnes per day and production of copper is expected to be 24 Mlbs in 2013, 16 Mlbs in 2014, 21 Mlbs in 2015 and 21 Mlbs in 2016.
More information on the Bracemac-McLeod Property and the Matagami mill can be found on Donner's website at www.donnermetals.com and the NI 43-101 technical report located on Donner's SEDAR profile at www.sedar.com.
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