Sandstorm Metals & Energy Announces Metal Credit Purchase Agreement with Entree Gold
15.02.2013 | Marketwired
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 02/15/13 -- Sandstorm Metals & Energy Ltd. ("Sandstorm Metals" or the "Company") (TSX VENTURE: SND) is pleased to announce that it has entered into a US$5 million production based metal credit purchase agreement (the "Copper Funding Agreement") with Entree Gold Inc. ("Entree") (TSX: ETG) (NYSE MKT: EGI) (via a back-to-back agreement with Sandstorm Gold Ltd. ("Sandstorm Gold") which has entered into a funding agreement related to precious metals and copper with Entree (the "Funding Agreement")) to purchase metal equivalent to 2.5% of Entree's 20% share of the copper produced from the Heruga and Hugo North Extension deposits. The deposits are on the Entree - Oyu Tolgoi LLC joint venture property in Mongolia which forms part of the world-class Oyu Tolgoi copper mining complex.Pursuant to the back-to-back agreement, Sandstorm Metals will purchase the Copper Funding Agreement from Sandstorm Gold in exchange for US$5 million in shares of Sandstorm Metals. Sandstorm Metals will issue the shares at a price of CAD$0.45 per share, subject to the approval of the TSX Venture Exchange. Sandstorm Metals and Sandstorm Gold allocated the total purchase price payable for the Funding Agreement as between themselves (by agreeing on the purchase price payable by Sandstorm Metals for the copper portion) by applying fundamental net asset value valuation methodologies as are typical for precious metal and copper metal credit purchase agreements, respectively.
As part of the Copper Funding Agreement, Sandstorm Metals will make ongoing payments to Entree equal to the lesser of the prevailing market price and US$0.50 per pound of copper (subject to inflationary adjustments) until approximately 9.1 billion pounds of copper have been produced from the joint venture property. Thereafter, the purchase price will increase to the lesser of the prevailing market price and US$1.10 per pound of copper (subject to inflationary adjustments). The Copper Funding Agreement does not require the delivery of physical metal and Entree may use future cash flows from any of its mineral property interests to purchase and deliver metal credits to Sandstorm Metals to fulfill the requirements under the Copper Funding Agreement.
As previously mentioned, Sandstorm Gold has agreed to purchase metal credits equivalent to 25.7% or 33.8% of Entree's share of the gold and silver by-products produced from the Heruga and Hugo North Extension deposits, respectively, in exchange for an upfront cash deposit of US$35 million. For more information, see the Sandstorm Gold press release at www.sandstormgold.com.
About Hugo North Extension and Heruga
Hugo North Extension is one of the world's richest porphyry copper-gold deposits and Heruga is a world class, copper-gold-molybdenum porphyry deposit. Both projects are located in the South Gobi desert of Mongolia, approximately 570 kilometres south of the capital city of Ulaanbaatar and 80 kilometres north of the border with China. Hugo North Extension and Heruga are part of the Oyu Tolgoi mining complex and are being developed by Oyu Tolgoi LLC, a subsidiary of Turquoise Hill Resources and the Government of Mongolia, and its project manager Rio Tinto. Entree retains a 20% interest in the Hugo North Extension and Heruga deposits.
Hugo North Extension Mineral Reserves - March 29, 2012
(as reported for the entire joint venture property)
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Recovered Metal
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Tonnage NSR Cu Au Cu Au
Classification (Mt) (US$/t) (%) (g/t) ('000 lb) (oz)
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Probable 27 79.40 1.91 0.74 1,000,000 500,000
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-- From Table 1.4 in NI 43-101 Technical Report on the Lookout Hill
Property, Omnogovi, Mongolia, AMC Consultants Pty Ltd, March 2012
-- The block cave shell was defined using a net smelter return (NSR) cut-
off of $20/t NSR
-- Metal prices used for calculating the Hugo North Underground NSR are
copper US$1.80/lb, gold US$750/oz, and silver US$12.00/oz based on long
term metal price forecasts at the beginning of the mineral reserve work.
The analysis indicates that the mineral reserve is still valid at these
metal prices
-- The NSR has been calculated with assumptions for smelter refining and
treatment charges, deductions and payment terms, concentrate transport,
metallurgical recoveries and royalties
-- For the underground block cave, all material within the shell has been
converted to Mineral Reserve; this includes low grade Indicated and
Inferred material assigned zero grade and treated as dilution
-- Only Indicated Resources were used to report Probable Reserves
-- Entree - Oyu Tolgoi LLC Joint Venture includes a portion of the Shivee
Tolgoi license and all of the Javhlant license. The licenses are held by
Entree and Oyu Tolgoi LLC is the joint venture manager. Entree will
receive 20% of cash flows after capital and operating costs for material
originating below 560m and 30% above this depth
-- The Mineral Reserves are not additive to the Mineral Resources
Hugo North Extension Mineral Resources - February 20, 2007
(as reported for the entire joint venture property)
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Contained Metal
---------------------------------
Tonnage Cu Au CuEq Cu Au CuEq
Classification (Mt) (%) (g/t) (%) ('000 lb) (oz) ('000 lb)
----------------------------------------------------------------------------
Indicated 117.0 1.80 0.61 2.19 4,640,000 2,290,000 5,650,000
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Inferred 95.5 1.15 0.31 1.35 2,420,000 950,000 2,840,000
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-- From Table 1.1 in NI 43-101 Technical Report on the Lookout Hill
Property, Omnogovi, Mongolia, AMC Consultants Pty Ltd, March 2012
-- The mineral resource estimate has an effective date of February 20, 2007
and was prepared by Scott Jackson, F.AusIMM. from Quantitative Group Pty
Ltd.
-- Based on drilling completed as of 01 November, 2006
-- Copper Equivalent (CuEq) has been calculated using assumed metal prices
of US$1.35/lb for copper and US$650/oz for gold. The equivalence formula
was calculated assuming that gold recovery was 91% of copper recovery.
CuEq was calculated using the formula: CuEq = %Cu + (Au g/t (i)
19.98)/29.76
-- Entree - Oyu Tolgoi LLC Joint Venture includes a portion of the Shivee
Tolgoi license and all of the Javhlant license. The licenses are held by
Entree and Oyu Tolgoi LLC is the joint venture manager. Entree will
receive 20% of cash flows after capital and operating costs for material
originating below 560m and 30% above this depth
-- The 0.6% CuEq cut-off is used as the base case resource for underground
bulk mining
-- Mineral resources that are not mineral reserves do not have demonstrated
economic viability.
Heruga Mineral Resource - March 30, 2010
(as reported for the entire joint venture property)
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Contained Metal
----------------------------------
Classifi- Tonnage Cu Au Mo CuEq Cu Au CuEq
cation (Mt) (%) (g/t) (%) (%) ('000 lb) (oz) ('000 lb)
----------------------------------------------------------------------------
Inferred 910 0.48 0.49 0.014 0.87 9,570,000 14,000,000 17,390,000
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-- From Table 1.3 in NI 43-101 Technical Report on the Lookout Hill
Property, Omnogovi, Mongolia, AMC Consultants Pty Ltd, March 2012
-- The mineral resource estimate has an effective date of March 30, 2010
and was prepared by Scott Jackson, F.AusIMM. from Quantitative Group Pty
Ltd.
-- Based on drilling completed as of 21 June, 2009
-- Copper Equivalent (CuEq) has been calculated using assumed metal prices
of US$1.35/lb for copper, US$650/oz for gold and US$10/lb for
molybdenum. The equivalence formula was calculated assuming that gold
and molybdenum recovery was 91% and 72% of copper recovery respectively.
CuEq was calculated using the formula: CuEq = %Cu + ((Au g/t (i) 19.98)
+ (Mo g/t (i) 0.01586))/29.76
-- Entree - Oyu Tolgoi LLC Joint Venture includes a portion of the Shivee
Tolgoi license and all of the Javhlant license. The licenses are held by
Entree and Oyu Tolgoi LLC is the joint venture manager. Entree will
receive 20% of cash flows after capital and operating costs for material
originating below 560m and 30% above this depth
-- The 0.6% CuEq cut-off is used as the base case resource for underground
bulk mining
-- Mineral resources that are not mineral reserves do not have demonstrated
economic viability.
Robert Cann, P.Geo., Entree's Vice President Exploration, is the Qualified Person under NI 43-101 responsible for reviewing and approving the technical information contained in this news release.
For more information, visit the Entree Gold website at www.entreegold.com.
Fairness Opinion
National Bank Financial Inc. has provided a fairness opinion to the board of directors of Sandstorm Metals to the effect that the consideration paid by Sandstorm Metals pursuant to the Copper Funding Agreement transaction is fair, from a financial point of view, to Sandstorm Metals. National Bank Financial Inc. has also provided a fairness opinion to the board of directors of Sandstorm Gold to the effect that the consideration paid by Sandstorm Gold pursuant to the transaction involving the purchase of the Funding Agreement is fair, from a financial point of view, to Sandstorm Gold.
National Bank Financial Inc. reviewed the methodologies relating to the allocation of total purchase price payable for the Funding Agreement and has provided an opinion to the boards of directors of Sandstorm Metals and Sandstorm Gold to the effect that the use of such methodologies to arrive at the Funding Agreement purchase price allocated to Sandstorm Metals (as the purchase price for the copper portion) is fair, from a financial point of view, to Sandstorm Metals and Sandstorm Gold.
ABOUT SANDSTORM METALS & ENERGY
Sandstorm Metals & Energy Ltd. is the world's first diversified streaming company. Sandstorm provides upfront financing to resource companies that are looking for capital and in return, receives a commodity streaming agreement. This agreement gives Sandstorm the right to purchase a percentage of the commodity produced, for the life of the asset, at a fixed price. Sandstorm has acquired a portfolio of seven commodity streams in copper, palladium, oil, natural gas and coal. Sandstorm plans to grow its production base through the acquisition of additional commodity streams.
Sandstorm Metals & Energy is focused on low cost operations with excellent exploration potential and strong management teams. Sandstorm has completed commodity purchase agreements with Colossus Minerals Inc., Donner Metals Ltd., Entree Gold Inc., Novadx Ventures Corp. and Thunderbird Energy Corp.
For more information visit: www.sandstormmetalsandenergy.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking information" or "forward-looking statements" within the meaning of applicable Canadian securities legislation. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "continue", "plans", or similar terminology. Forward-looking information is based on reasonable assumptions that have been made by Sandstorm as at the date of such information and is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Sandstorm to be materially different from those expressed or implied by the forward-looking information, including but not limited to: the impact of general business and economic conditions; the absence of control over operations from which Sandstorm will purchase commodities and risks related to those operations, including risks related to international operations, government and environmental regulation, actual results of current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined; problems inherent to the marketability of commodities; industry conditions, including fluctuations in the price of commodities, fluctuations in foreign exchange rates and fluctuations in interest rates; stock market volatility; competition; as well as those factors discussed in the section entitled "Risks to Sandstorm" in Sandstorm's annual report for the financial year ended December 31, 2011. Although Sandstorm has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Sandstorm does not undertake to update any forward-looking information that is contained or incorporated by reference herein, except in accordance with applicable securities laws. Sandstorm does not provide any representation as to its comparability with other companies in its industry including, but not limited to, Franco-Nevada Corp., BHP Billiton and Rio Tinto.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Sandstorm Metals & Energy Ltd.
Nolan Watson, President & Chief Executive Officer
(604) 689-0234
Sandstorm Metals & Energy Ltd.
Denver Harris, Investor Relations Contact
(604) 628-1178
www.sandstormmetalsandenergy.com
