Sandstorm Gold Ltd. (TSX: T.SSL, Stock Forum) has entered into a US$55 million financing package with Entrée Gold Inc. (TSX: T.ETG, Stock Forum) which includes a US$40 million production based metal credit purchase agreement, a CAD$10 million private placement and a US$5 million net smelter returns royalty.
According to the Sandstorm Gold press release, the company has agreed to purchase metal credits equivalent to 25.7% or 33.8% of Entrée's 20% share of the gold and silver by-products produced from the Heruga and Hugo North Extension deposits, respectively.
The deposits are on the Entrée - Oyu Tolgoi LLC joint venture property in Mongolia that forms part of the world-class Oyu Tolgoi copper mining complex.
Sandstorm will pay an upfront cash deposit of US$35 million to Entrée and ongoing payments equal to the lesser of the prevailing market price and US$220 per ounce of gold and US$5 per ounce of silver until approximately 8.6 million ounces of gold and 40.3 million ounces of silver have been produced from the joint venture property.
As part of the funding agreement, the company has also agreed to purchase metal credits equivalent to 2.5% of Entrée's share of copper produced from the Heruga and Hugo North Extension deposits in exchange for an upfront cash deposit of US$5 million and ongoing payments equal to the lesser of the prevailing market price and US$0.50 per pound of copper until approximately 9.1 billion pounds of copper have been produced from the joint venture property.
Furthermore, Sandstorm has agreed to purchase 17,857,142 common shares of Entrée at a price of CAD$0.56 per share for a total consideration of approximately CAD$10 million. After the private placement, Sandstorm will own 12% of the issued and outstanding shares of Entrée.
Finally, Sandstorm has agreed to purchase a 0.4% NSR royalty on the future sale of any metals and minerals derived from a portion of the Ann Mason project in Nevada. In consideration for the royalty, Sandstorm will make a US$5 million payment to Entrée.
Sandstorm provides upfront financing for gold mining companies that are looking for capital. In return, Sandstorm receives a gold streaming agreement.
On Friday morning, Sandstorm was trading at $11.85 a share. The company has a market cap of $1 billion, based on 86 million shares outstanding. The 52-week high and low was $14.95 and $6.95 respectively.