Sandstorm Gold, which is my favorite stock, gets a piece of Brigus' Black Fox Mine production for the life of the mine, both pit and underground. I am not sure yet whether the latest Black Fox discovery news from this week is on land whewre SSL can buy 12 percent of the production or 10 percent???
THIS IS WHAT THE SSL SITE SAYS ABOUT Black Fox:
The Black Fox Mine is located outside of Matheson, Ontario, Canada in the Timmins Gold District and is 100% owned and operated by Brigus Gold Corp. (TSXV:BRD). Both the open pit and underground operations are running concurrently with estimated average annual gold production of 110,000 ounces per year for 10+ years. The ore from the open pit and underground operations are trucked to the Black Fox mill, which Brigus recently announced would be expanded to process up to 2,200 tonnes per day.
Brigus has been improving production rates and reducing cash costs at Black Fox quarter over quarter since the beginning of commercial production. In the third quarter of 2011, Black Fox produced close to 17,000 ounces of gold, and production is continuing to ramp up. Brigus also has an aggressive drilling program underway that is testing to identify resource additions from underground and from surface.
Sandstorm Transaction
Sandstorm has an agreement to purchase 12% of the life of mine gold produced from Black Fox and 10% of the life of mine gold produced from the Black Fox extension (which includes a portion of the Pike River concessions) for an upfront payment of $56.3 million and ongoing per ounce payments equal to the lesser of US$500 and the prevailing market price per ounce of gold. Brigus will have the option, for a period of 24 months, to repurchase 50% of the gold purchase agreement by making a US$36.6 million payment to Sandstorm, upon receipt of which, the percentage of gold Sandstorm is entitled to purchase shall be decreased to 6% for the Black Fox mine and 4.5% for the Black Fox extension.
HERE IS THE SSL PRESENTATION DATED EARLY APRIL:
sandstormgold.com
HERE ARE SOME THOUGHTS I HAVE ON THE IMPORTANCE OF BLACK FOX TO SSL.
Brigus is already producing 70,000 ounces a year and expects to do 110,000 ounce a year, or more, in succeeding years.
Sandstorm Gold SSL has the right to buy 10 TO 12 percent of the life of mine production, mostly 12 percent, from Black Fox for a cash payment of $500 per ounce.
If Brigus wants out of this deal, it must pay Sandstorm Gold $36.6 million by the end of this year!
To show how big a payout that would be, consider that there will be only 69.5 million shares of Sandstorm Gold outstanding after a planned reverse split that will get approved in early May.
Dividing the 36.6 mm by the expected share count works out to 53 cents per share.
Another indication of the built-in value in SSL. |
