SA: Sandstorm Gold Provides Update On Luna Gold, Metanor And Prairie Creek
Summary
Thursday, SAND provided an update at various projects underlying the Company's streams and royalties.
Luna gold announces closing of restructuring and financing. Also updates on Matanor and Prairie Creek.
SAND is still a buy around 2.85 despite a depressed gold price environment.
Sandstorm Gold Ltd. (NYSEMKT:SAND)
This article is an update to my preceding article on Sandstorm Gold published on June 22, 2015.
Thursday, the company provided an update at various projects underlying the Company's streams and royalties:
LUNA GOLD ANNOUNCES CLOSING OF RESTRUCTURING AND FINANCING.
METANOR RESOURCES ANNOUNCES POSITIVE DRILL RESULTS.
CANADIAN ZINC DISCOVERS NEW VEIN SYSTEM DURING UNDERGROUND DRILL PROGRAM.
1 - Luna Gold has been a thorn in lion's paw for many months, and it is always appreciated when Sandstorm Gold provides an update regarding this sensitive asset.
On May 8, 2015, Sandstorm Gold announced that Luna Gold Corp. ("Luna") has executed definitive agreements with Pacific Road Resources.
Luna will receive gross proceeds of at least $30 million.
In connection with the Proposed Financing, Sandstorm and Luna have executed definitive agreements for the previously announced restructuring of Luna's gold stream and credit facilities with Sandstorm (the "Restructuring")
Under the terms of the Restructuring, the Gold Stream will be terminated and replaced by two net smelter return royalties ("NSR") (the "Aurizona Project NSR" and the "Greenfields NSR") and a convertible debenture.
3% to 5% royalty on the Aurizona mine,
2% royalty on the Aurizona Greenfield,
The debenture will be a $30 million debenture bearing interest at a rate of 5% per annum. The Debenture is payable in three equal annual tranches of $10 million plus accrued interest beginning January 1, 2018.
Sandstorm has also a $20.0 million Debt Facility Agreement with Luna Gold.
The maturity date of the Sandstorm Debt Facility has been extended from June 30, 2017 to June 30, 2021, the interest rate will be revised to 5% per annum, payable in cash on the maturity date, and Luna would be subject to a default rate of interest equal to 10% per annum.
Yesterday, the company announced that:
Luna Gold Corp. ("Luna") has closed the previously announced $30 million financing with Pacific Road Resources Funds, as part of which Luna's gold steam and debt facility with Sandstorm were restructured ("Luna Restructuring").
Luna "repaid and settled" its debt facility that it previously had with Societe Generale in Canada and Mizuho Corporate Bank. The remaining cash from the restructuring will be used to commence an infill drilling program at the Aurizona project in Brazil.
Commercial production was achieved in Feb. 2011. In 2013, Aurizona produced more than 79,000 ounces of gold. For 2014, Luna's guided production ranges from 75,000 ounces of gold to 80,000 ounces.
The ore feed comes from Proven & Probable Reserves totaling 55.5 million tonnes at 1.32 g/t Au.
Per the last 1Q'15 results, the company suspended operations in the Aurizona mine on Feb 15, 2015. The ore stockpile was 470K T at around 1.12 g/t or 15k Oz of gold potential and 390K T of transitional ore at 1.06g/t or about 11k Oz of gold potential. This stock pile will last until August 2015.
Upon exhausting the stock pile the mine will be placed in care and maintenance condition. Then:
Upon achievement of the Pacific Road Financing and Sandstorm Restructuring, the Company will be in a position to undertake a work program which will have the ultimate goal of restarting operations at the Aurizona gold mine.
The proposed 18-month work program will involve significant infill drilling programs, updating the geological model, calculating a new resource, formulating new and optimized mine plan, producing an updated prefeasibility study and continuing the on-going licensing and permitting process to ultimately secure a permit to restart Aurizona. Commencing in mid-2016, the Company expects to use the augmented drill hole data and the pre-feasibility study to move on to detailed engineering and ultimately the restart of the mine as a hard rock operation.
2 - Metanor New drill results.
Metanor Resources Inc. ("Metanor") has released positive drill results from its exploration activities at the Bachelor Lake Mine in Quebec, Canada ("Bachelor Lake").
A diamond drilling program has been underway in the west sector of Bachelor Lake between underground levels 6 and 8. The assay results have included 22.85 grams per tonne ("g/t") Au over 4.04 metres, 12.8 g/t Au over 10.8 metres as well as 6.82 g/t Au over 8.7 metres. In addition, Metanor recently intersected mineralization in an unknown sector on level 12. The assay results returned 18 g/t Au over 1.5 metres.
SAND has a gold stream agreement with Metanor to purchase 20% of the gold produced from Bachelor Lake at $500/Oz.
3 - Canadian Zinc discovered a new vein system at the UG Prairie Creek mine.
SAND holds a 1.2% NSR royalty on the Prairie Creek project.
Conclusion:
The most important news is obviously Luna Gold, and I am pleased that the project at the Aurizona Mine will start soon with a potentially restart of the mine as a hard rock operation around 4Q'2016.
The stock pile which represents approximately 25K Oz of gold will be depleted next month, and the mine will not produce anymore in 2015 and until the second-half of 2016, if lucky.
However, this new financing was of a paramount importance and I am glad it has been concluded successfully.
Unfortunately, the company is trading lower because of a stubbornly depressed gold price and the PPS will not go anywhere until gold price can resume a definitive uptrend.
The timing of this recovery is far from certain and China may hold the key. In my preceding article I recommended SAND as a buy under $3 and I reiterate this call.
The sudden jump Thursday to $3.20 us showing that $2.85 is a strong support.
