First Majestic Announces It Will Acquire SilverCrest - Why I Like The Deal
seekingalpha.com
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This deal also positively affects Sandstorm Gold (NYSEMKT:SAND), a precious metals streaming company which owns a 20% gold stream on all production at the Santa Elena mine. In exchange for purchasing 20% of gold production, Sandstorm pays $350 per ounce to SilverCrest. SAND paid $12 million in cash and 700,000 common shares to buy the stream in May of 2009, and also exercised its underground mine option (20% of all underground gold produced) in 2014 for $10 million.
Santa Elena is arguably one of Sandstorm's most important assets. As mentioned in a previous article, in the second quarter, the company will net 2,827 ounces from this stream for the second quarter and pay $350 per ounce - with gold prices averaging $1,170, I calculate that Sandstorm will net roughly $820 per ounce, which equates to $2.3 million in cash flow.
This stream accounts for approximately 20% of Sandstorm's total production, and having a larger, healthier and more experienced First Majestic company managing the asset is definitely good news for SAND.
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