The head of Sandstorm Gold Ltd. is feeling misunderstood. Shares in the Vancouver-based royalty and streaming company haven’t done much since it announced a deal in April to acquire Australia’s Mariana Resources Ltd.
The complexity of the arrangement — in which Sandstorm will obtain a 30 per cent interest in the Hot Maden gold-copper project in Turkey — has been an issue for investors, Chief Executive Officer Nolan Watson said. “Sometimes undervalued means not well understood,” he said in a telephone interview Wednesday.
While some investors believe Sandstorm is acquiring a 30 per cent joint-venture stake in Hot Madden, the acquisition is actually closer to a royalty agreement with upfront capex payments, he said. And since Sandstorm will spin off all other exploration assets received through the cash-and-stock transaction, understanding the asset is key to properly valuing the deal, he said.
The transaction closed this week, freeing up Watson to discuss details that had been restricted under U.K. takeover law. The company plans to convert its stake in Hot Madden to a more straightforward mine streaming arrangement in the next six to 12 months, both to create clarity for investors and to secure possible tax benefits, he said.
Streaming and royalty deals have become increasingly popular sources of funding for miners in recent years. In exchange for upfront payments, the streamer receives the right to buy a portion of the mined metal at a discount over a future period of time.