Sandstorm Gold Ltd. (“Sandstorm” or the “Company”) (NYSE MKT: SAND, TSX: SSL) is pleased to announce that it has agreed to acquire 56 royalties (the “Royalty Package”) from Teck Resources Limited and its affiliates (collectively, “Teck”) for total consideration of US$22 million (C$32 million), payable in US$1.4 million (C$2 million) in cash and US$20.6 million (C$30 million) in common shares of the Company (the “Common Shares”) (the “Transaction”). Certain royalties in the Royalty Package are subject to rights of first offer and first refusal as well as the requirement for various transfer consents and as a result, the Transaction will have a number of closing dates, with today being the first such closing date.

As consideration for the royalties, Sandstorm has issued a total of 8,365,863 Common Shares priced at C$3.57 per share, the price of the Common Shares being based on the ten (10) day volume weighted average price of the Company’s Common Shares traded on the Toronto Stock Exchange. A portion of the Common Shares will be held in escrow to be released on subsequent closing dates.

TRANSACTION HIGHLIGHTS

Asset Diversification: Royalty Package consists of assets in North America (33), Asia (11), South America (9) and Europe (3) and includes producing assets (4), development- stage projects (9), advanced exploration-stage projects (8) and exploration-stage properties (35);
Immediate Cash Flow and Significant Cash Flow Growth Potential: Estimated cash flow in 2016 of US$1.5 million to US$2.0 million, growing to US$10 million to US$15 million in cash flow per year;
Strong Counterparties: Royalty counterparties include Barrick Gold Corporation, Glencore plc (“Glencore”), KGHM Polska Miedz SA, Newmont Mining Corporation (“Newmont”), Kinross Gold Corporation (“Kinross”), Centerra Gold Inc. (“Centerra”), New Gold Inc. and Imperial Metals Corporation;
Long-Term Optionality: Over two dozen royalties on exploration-stage properties, several of which are undergoing active exploration programs.
ROYALTY PORTFOLIO: KEY ASSETS

The Royalty Portfolio includes the following key assets:

a 2.0% net smelter returns (“NSR”) royalty on the high-grade, advanced exploration-stage Hot Maden project located in Turkey, owned by Mariana Resources Ltd. (“Mariana”). Lidya Madencilik Sanayi ve Ticaret A.S. has an option to earn-in up to 70% in Hot Maden from Mariana;
a 2.0% NSR royalty on the development-stage Hackett River project in Nunavut, Canada owned by Glencore plc;
a 1.75% NSR royalty, on 60% of production subject to a US$40 million cap, on the development-stage Lobo-Marte project in Chile owned by Kinross Gold Corporation;
a 2.0% NSR royalty on the development-stage Burhaniye project in Turkey owned by Tumad Madencilik Sanayi ve Ticaret A.S. The Burhaniye royalty begins paying after 300,000 ounces have been produced;
a 5.0% NSR royalty on copper, and a 2.5% NSR royalty on all other metals produced, on a portion of the producing Copper Mountain project in British Columbia, Canada owned by Copper Mountain Mining Corporation;
a US$10/ounce production royalty, subject to a maximum ounce cap, on the development-stage Ağı Dağı/Kirazli projects in Turkey owned by Alamos Gold Inc. and payable by Newmont; and
a 0.5%-1.5% NSR royalty, based on cumulative production, on the development stage Öksüt project in Turkey owned by Centerra Gold Inc. (“Centerra”). Centerra holds a right of first offer on the sale of the Öksüt royalty.
“The acquisition of this royalty package from Teck materially enhances Sandstorm’s existing portfolio while allowing the Company to maintain a strong balance sheet,” said Sandstorm’s President & CEO Nolan Watson. “We believe this deal enhances, on a per share basis, the Company’s production growth, cash flow growth, NAV, diversification and precious metal optionality. With over 130 streams and royalties now in our portfolio, we believe Sandstorm is well positioned for an exciting future.”

Hot Maden – 2.0% NSR

The Hot Maden gold-copper project is located approximately 20 kilometres (“km”) southeast of Artvin and 130 km northeast of Erzurum in north-eastern Turkey. A highly successful 2015 drill campaign led to the release, by Mr. Stewart Coasts from RungePincockMinarco, of a maiden mineral resource estimate for the high-grade mineralisation at Hot Maden as follows:

Indicated Resource – 2.0 million gold equivalent ounces; 4.7 million tonnes (“Mt”) at 10.0 grams per tonne (“g/t”) gold and 2.2% copper, for a gold equivalent grade of 13.4 g/t;
Inferred Resource – 1.0 million gold equivalent ounces; 3.7 Mt at 5.5 g/t gold and 1.8% copper, for a gold equivalent grade of 8.2 g/t.
High grade gold-copper mineralisation was first intersected at Hot Maden in the Phase I diamond drill program, which was completed in January 2015 and included the following key intercepts (not true widths):

DH HTD-04: 103.0 metres @ 9.0 g/t gold and 2.2% copper from 25.0 metres, including a significantly higher grade massive sulphide zone containing 33.4m @ 18.3 g/t gold and 3.3% copper from 79.8m downhole (February 2, 2015 NR, Mariana Resources Ltd., Eric Roth QP);
DH HTD-05: 82.0 metres @ 20.4 g/t gold and 1.9% copper from 147.0 metres downhole, including a bonanza 13.0 meters @ 88.0 g/t gold and 2.5% copper from 150.0 metres (February 12, 2015 NR, Mariana Resources Ltd., Eric Roth QP).
The immediate focus for exploration at Hot Maden is to continue with resource delineation drilling within, and around, the main mineralised zone. Future work will include geophysics and new target generation activities along an extended portion of the Hot Maden Fault Zone.

Hackett River – 2.0% NSR

The Hackett River property is located in Nunavut, Canada, approximately 480 km northeast of Yellowknife. Hackett River is a silver-rich volcanogenic massive sulphide project and is one of the largest undeveloped projects of its kind. The property is made up of four massive sulphide deposits that occur over a 6.6 km strike distance.

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, contained a mineral resource estimate prepared by Sabina Gold and Silver Corporation, with technical support from Xstrata Canada Corporation, now Glencore plc. The updated resource reported 25.0 million tonnes of indicated resources containing 4.2% zinc and 130.0 g/t silver plus 57.0 million tonnes of inferred resources with 3.0% zinc and 100.0 g/t silver.

Sandstorm’s 2.0% NSR royalty covers 7,141 hectares of the Hackett River property including the licenses where the mineral resources have been defined.

Lobo-Marte – 1.75% NSR (on 60% of production)

The Lobo-Marte project contains two potential open-pit gold resources located in the Maricunga Gold District of Chile. The resources are seven kilometers apart, and are located 60 km south of Kinross’s La Coipa mine, and 60 km north of Kinross’s Refugio mine, 100 kilometres east of Copiapó.

Kinross completed a prefeasibility study at Lobo-Marte that contemplated a heap-leach operation and submitted an environmental and social impact study to Chilean authorities. Kinross has since withdrawn its permit application due to changes in the plan of operations, project economics, and other factors. As a result of the permit withdrawal, much of the historic 7.0 million ounces of measured and indicated gold resources, contained in 185.4 Mt @ 1.2 g/t gold, were reclassified from historic mineral reserves. Future development and operations at Lobo-Marte will require the re-initiation of the permitting process.

Sandstorm holds a 1.75% net smelter return royalty on 60% of future production at Lobo-Marte, up to a maximum of US$40 million.

Copper Mountain – 5.0% NSR on copper, 2.5% NSR on other metals

The Copper Mountain mine is a large-scale, open pit copper-gold-silver mine, operated by Copper Mountain Mining Corporation. The mine is located 300 km east from the port of Vancouver, in southern British Columbia. Mining began in 2011 and with the recent addition of a secondary crusher to the project, the mine has been able to achieve production rates up to 40,000 tonnes per day from multiple open pits. During the full year 2014, Copper Mountain produced 81 million pounds of copper, 22,600 ounces of gold and 443,800 ounces of silver at an operating cost of $1.49/pound, net of by-products.

Sandstorm holds a 5.0% NSR on copper, and a 2.5% NSR on all other metals produced from the Alabama and Virginia pits, located to the north of the Copper Mountain Superpit. The copper royalty is a sliding scale royalty and is a 5.0% NSR at copper prices above US$1.20 per pound. Mining operations are active at the Virginia pit and Sandstorm expects to receive cash flow from this royalty in 2016.

Aği Dağı/Kirazli – US$10/ounce

The Ağı Dağı and Kirazlı gold development projects are located in the Çanakkale Province of northwestern Turkey. A positive pre-feasibility study (PFS) was completed by Dr. Dennis Ferrigno, CAF & Associates, LLC et al. on Ağı Dağı and Kirazli in 2012 with both projects evaluated for a potential stand-alone open-pit, heap-leach operation. The PFS evaluated production for an average 99,000 ounces of gold per year over a 5 year mine life at Kirazli. The PFS at Ağı Dağı evaluated production for an average of 143,000 ounces of gold per year over a 7 year mine life. Initial production from Ağı Dağı is projected to commence approximately 18 months after first production at Kirazli.

Sandstorm holds a US$10/ounce production royalty payable by Newmont, subject to a maximum of 600,000 ounces from Ağı Dağı and a maximum of 250,000 from Kirazli.

Öksüt – 0.5%-1.5% NSR

The Öksüt property contains an epithermal precious metals resource, located on the Anatolian Plateau in south-central Turkey, near the city of Develi. The property is owned and operated by Centerra. In July 2015, Centerra completed a feasibility study which evaluated a conventional truck and shovel, open pit, heap leach mining operation. The property contains probable reserves of 26.1 Mt @ 1.4 g/t gold, containing 1.16 million ounces of gold. The Öksüt feasibility study evaluates a mine plan that incorporates two open pits that are operated over an eight year mine life. Centerra has received environmental permits and pending final permits proposes to begin construction in mid-2016 with heap leach processing to begin in the first quarter of 2017.

Sandstorm holds a 0.5% to 1.5% NSR royalty based on cumulative production at the mine. The 0.5% NSR royalty begins after 250,000 ounces have been produced at Öksüt. Centerra has a right of first offer on the sale of the Öksüt royalty.

OTHER ROYALTIES

Below is a list of the other assets that make up the Royalty Package.



PROJECT OPERATOR LOCATION STATUS TERMS
Sheerness Westmoreland Coal Company Canada Producing 5% GRR
Magmont The Doe Run Resources Corporation USA Producing 1.25% NSR
Altintepe Bahar Madencilik Sanayi ve Ticaret A.S. Turkey Producing 1.5% NSR
Ajax KGHM Polska Miedz Canada Development 1.5% NSR
Keno Hill Alexco Resources Corp. Canada Development 25% NPI
Ruddock Creek Imperial Metals Corporation Canada Development 1% NSR
Los Verdes Minera Alamos Sonora S.A. de C.V. Mexico Development 2% NSR
Box Fortune Bay Corp. Canada Advanced Exploration 1.5% NSR
Homestake Ridge Homestake Resource Corporation Canada Advanced Exploration 2% NSR
Railroad Gold Standard Ventures Corporation USA Advanced Exploration 3% NSR
Whistler Brazil Resources Inc. USA Advanced Exploration 2% NPI
Karaagac Anadolu Export Maden Sanayi ve Ticaret A.S. Turkey Advanced Exploration 1.5% NSR
Tac/Corak Cengiz Kaya Turkey Advanced Exploration 1.5%-2% NSR
Tavsan (Red Rabbit) Ariana Resources plc Turkey Advanced Exploration 2% NSR
Abitibi/Sarah Lake Commander Resources Ltd. Canada Exploration 1% NSR
Big Bulk LCT Holdings Inc. Canada Exploration 1.5% NSR
Butterfly Lake North Arrow Minerals Inc. Canada Exploration 0.71% GOR
Caramelia Huakan International Mining Inc. Canada Exploration 2% NSR
CT Kreft Resources Ltd. Canada Exploration 0.75% NSR
Lorrain Canadian Silver Hunter Inc. Canada Exploration 2% NSR
Mainstreet Beaufield Resources Inc. Canada Exploration 1.2% NSR
New Afton New Gold Inc. Canada Exploration 2% NSR
Rossland Rossland Resources Inc. Canada Exploration 1%-2% NSR
Snip 2 Colorado Resources Ltd. Canada Exploration 2% NSR
Summit Lake Rainy Mountain Royalty Corp. Canada Exploration 1.9% NSR
Ten Mile Creek Bernie Kreft Canada Exploration 1.5% NSR
Tsacha Independence Gold Corp. Canada Exploration 2% NSR
Wrigley Devonian Metals Inc. Canada Exploration 2% NSR
Aurora Carlin Resources LLC USA Exploration 2% NSR
Big W Barrick Gold U.S. Inc. USA Exploration 3% NSR
Cabin Creek McEwen Mining Inc. USA Exploration 10% NPI
Cherry Creek McEwen Mining Inc. USA Exploration 1.5% GOR
Lichen Silver Phoenix Resources Inc. USA Exploration 2% NSR
Shotgun TNR Gold Corp. USA Exploration 5% NPI
Van Stone Equinox Resources (WASH) Inc. USA Exploration 1.5% NSR
Amapari Mineracao Amapari S.A. Brazil Exploration 3% NPI
Rio Novo South Rio Minas Mineracao S.A. Brazil Exploration 0.75% NSR
Gatita Compania Minera Potosi S.A. Peru Exploration 1% NSR
Huajoto Alturas Minerals Corp. Peru Exploration 0.5%-1% NSR
Mario Fortuna Silver Mines Inc. Peru Exploration 2% NSR
Arcas Altius Minerals Corporation Chile Exploration 1% NSR
Celeste Coro Mining Corp. Chile Exploration 2% NSR
Pampa Lina Sierra Gorda Sociedad Contractual Minera Chile Exploration 0.3% NSR
Kiskama Talga Resources Ltd. Sweden Exploration 1% NSR
Masugnsbyn Talga Resources Ltd. Sweden Exploration 1% NSR
Vittangi Talga Resources Ltd. Sweden Exploration 1% NSR
Hasandagi Newmont Mining Corporation Turkey Exploration 2% NSR
Muratdagi Kenz Enerji ve Madencilik San. Ve Tic A.S. Turkey Exploration 2% NSR
Tombul Elazig Baskil Madencilik A.S. Turkey Exploration 2% NSR
RESERVES AND RESOURCES
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http://www.sandstormgold.com/news/2016/


Sandstorm Gold Ltd.
Precious Metals - Producer | Flash Update

Sandstorm further diversifies portfolio with acquisition of Tech royalties
SSL-TSX | Price (19-Jan) C$3.13 | Market Cap C$418.4M
BUY
PRICE TARGET C$5.25

Impact: Positive. Sandstorm Gold announced the acquisition of 56 royalties from Teck Resources (TCK.B:TSX; rated SELL by Peter Bures) for a total consideration of $22 million ($1.4 million in cash and $20.6 million in common shares). The royalty portfolio consists of three producing assets, four development-stage assets, nine advanced-stage exploration assets and eight early-stage exploration assets. Overall, we view this royalty package acquisition positively since the transaction:

1. further upgrades, derisks and diversifies the current portfolio with up to seven producing/development-stage assets (and the potential of many other longer term exploration-stage projects) spanning five metals (Au, Ag, Cu, Pb, Zn);

2. provides imminent cash flow from currently producing mines and eventually from development-stage projects (at spot metal prices we estimate $1.3 million in incremental cash flow in 2016 and 2017, increasing to $5 million in 2021 and averaging $6 million annually in 2022+);

3. involves assets operated by strong counter-parties such as Barrick, Kinross, Newmont, New Gold, Centerra, Glencore and KGHM.

Based on our preliminary forecasts, we believe Sandstorm paid an attractive price for the royalty package - at currently depressed spot metal prices we estimate an after-tax 10%/NPV of $43 million and an after-tax IRR of 17%. This discount paid is appropriate given the high valuation weighting towards development-stage assets Hackett River (Glencore), Hot Maden (Mariana Resources) and Lobo-Marte (Kinross).

Sandstorm currently trades at 0.76x P/NAV and 6.4x EV/EBITDA (2017E), marking respective discounts of 41% and 46% to the streaming and royalty peer group average. While the discount was appropriate (in our opinion) a year ago, we believe Sandstorm management has done a commendable job diversifying and derisking its portfolio since then. In our opinion, Sandstorm's multiple should improve substantially over the next 12 months as the recently acquired streams/royalties begin to generate free cash flow.

Transaction highlights
· Total consideration of US$22 million (C$32 million) consists of US$1.4 million (C$2 million) in cash and US$20.6 million (C$30 million) in common shares (Sandstorm issued 8,365,863 common shares at C$3.57/share).
· The royalty package includes:
· 2% NSR on the advanced-stage exploration Hot Maden project in Turkey (Mariana Resources)
· 2% NSR on the development-stage Hackett River project in Nunavut, Canada (Glencore)
· 1.75% NSR on 60% of the production from the development-stage Lobo-Marte project in Chile (Kinross)
· 2% NSR on the development-stage Burhaniye project in Turkey (Tumad)
· 5% NSR on Cu and 2.5% NSR on other metals on the Copper Mountain mine in BC, Canada (Copper Mountain Mining)
· $10/oz royalty on the development-stage Kirazli and Agi Dagi projects in Turkey (Alamos)
· 0.5-1.5% NSR on the development-stage Oksut project in Turkey (Centerra)

Figure 1: Preliminary valuation (key assets acquired) 10%/NPV (US$M) at spot metal prices