US$1.1 Billion Acquisition of Nomad Royalty Company and BaseCore Portfolio

hello everyone we are incredibly excited to talk to you today about these transactions that we've just announced they are absolutely transformational for sandstorm they were a long time in the works and a lot of hard work to get to this point but we're very pleased that we're able to deliver to our shareholders company transforming day and announcement and there's a lot of moving parts to this and so i'd like to take the time to walk everyone through these two transactions the acquisition of nomad as well as the acquisition of a base core portfolio of royalties and walk you through not only the specifics of the transactions but specifically what sandstorm looks like now [Music] with these transactions sandstorm has become the go-to mid-tier streaming and royalty company in the world over 90 of our production is coming from precious metals they're high quality assets we've become the most diversified royalty and streaming company in the entire world and we still have the highest growth amongst all of our peers going forward to get into the specifics of these transactions the first transaction is the acquisition of nomad royalties for shares in sandstorm to the tune of 600 million dollars u.s the second transaction is the purchase of a portfolio of royalties from a company called base core and that transaction is 525 million dollars u.s we'll walk you through both of those in detail in a second but from a high level perspective these two transactions combined have turned sandstorm into a much larger company with greater scale but also more diversified for our investors to increase the safety and solidity of their investment and to be able to attract future generalist investors and it adds most importantly high quality long life assets so that our shareholders can profit from what we believe are going to be increasing commodity prices going forward the first of the two transactions where we are buying nomad royalties at sandstorm we are a high growth high quality royalty company and so is nomad we think it was a very logical transaction to merge these two companies together to benefit the shareholders of both companies the specifics of what sandstorm is paying is 1.21 sandstorm shares for every nomad share we're very excited about the nomad portfolio they have a number of incredible assets our current gold equivalent production estimates for this year are just over 70 000 ounces and you can see from this chart that nomad is going to be a material addition to that and as their portfolio and sales increases over the next few years some of their mines come on eventually it'll add we think over 40 000 additional gold equivalent ounces to sandstorms portfolios this is a very meaningful addition and growth to our sales both now and into the future as part of this transaction as i've already mentioned we will be issuing shares to nomad shareholders and as many of samstorm's existing investors know that we have been very very careful about dilution over the years and purposefully buying back our own shares in the market when we feel they are undervalued and so issuing shares is a painful thing for me at times although i'm very excited about what this brings and i think it makes a lot of sense for sandstorm growing into the future but this is a transaction that we had the ability to structure it in a way if we wanted so that a shareholder vote would not be required but we decided this is an important enough transaction for sandstorm and its shareholders we do think it's one that shareholders will love and the market will love and future prospective investors will love but it's one that we decided we did want to take to shareholders and so sandstorm shareholders will have an opportunity to vote on this transaction we're very confident they're going to vote yes this transaction i think is a logical no-brainer to take sandstorm in the direction that it needs to go it makes us stronger more stable more diversified gives us scale increases our cash flow and it increases the reason why we think investors are going to want to buy sandstorm and therefore will result in a higher share price in the future now some people may ask why nomad as opposed to one of the other streaming and royalty companies well as sandstorm investors have known sandstorm is very focused on precious metals nomad has a portfolio that is very high in concentration of precious metals 91 of their value is tied up in precious metals one of the other things the sandstorm shareholders know that has been really important to me over the years is growing a company that is focused on minds with longer mind lives nomads mine lives are already as long as sandstorms and growing 18 years plus on average and so they're very long mine lives relative to some of the other portfolios and one thing that nomad has that's important to us is the underlying cost of producing metals at those mines is very low we've been very trying very hard at sandstorm to ensure that the streams and royalties that we have in our portfolio are stable for investors through thick and thin through the upsides of the market and through the downsides and so these are strong assets that we believe will stand the test of time and are a great addition to samsara's portfolio in addition one of the things that's very important is the value that we're getting we believe that nomad has been trading in the markets at a significant discount to his peers and we believe that it was one of the only transactions that really made sense for us to be able to do that was of large scale and still be accretive to sandstorm shareholders and so we're pleased that we're able to come to this agreement with nomad now on to the base core transaction as mentioned this is a 525 million dollar u.s transaction for those of you who are not familiar with base core it's a portfolio that was built over time jointly owned by the ontario teachers pension plan and a mining company called glencore and so we're able to purchase this entire portfolio of royalties from them for 525 million dollars comprised of 425 million dollars us of cash and 100 million dollars worth of sandstorm shares and so in conjunction with this transaction to be able to come up with that cash we have worked with our banking debt syndicate and we're able to get an upsize revolving line of credit at sandstorm from our bankers to the tune of 500 million dollars u.s so that we can not only pay for this 425 million dollars u.s but we have room left over for future deals and future growth without having to add any dilution at sandstorm it's been well known that we really like silver and i think it's also well known that our view is very constructive on copper and one of the key crown jewels in this base core portfolio is a royalty on the antamina mine in peru it's the world's third largest copper mine it is one of the lower cost copper mines in the entire world it is one of the longest life copper mines in the entire world it's a very high quality asset and so we were able to acquire this royalty and one of the things that we then want to do to ensure that we aren't too much focused on copper inside sandstorm we're doing a transaction with this new entity that we've created called horizon copper whereby we are going to put this royalty into horizon copper and take back a number of things including first and foremost a silver stream on 1.66 of all the silver produced in antamina for the entire life of the mine and we're also going to take back a royalty on 0.55 percent of the profits of antomina we're also going to receive from horizon copper 50 million dollars in cash that's money that horizon is going to have to go out and raise and pay to sandstorm before we give them this royalty and then horizon is also going to issue us 25 million dollars worth of their shares and then a debenture for call it an iou for just over 100 million dollars so this transaction increases sandstorms silver exposure it increases our copper exposure and it allows us to beef up the size and strength of our new partner horizon copper so that it can have the scale required to go out and grow so we can make future precious metal and copper acquisitions together keeping copper more on the horizon side and keeping the precious metals in sandstorm gold for those of you who aren't familiar with ryzen copper it's a company that we announced the spin out of recently we're working through the transaction to complete that spin out and it's the entity that's going to hold the hot modern interest and it's the entity that also is going to be paying sandstorm the gold stream on hot mod and gold production but just to take a brief minute to understand a little bit better this new partner that sandstorm is going to be working with again we'll own about one-third of that entity but the goal of horizon copper is to go out and acquire copper mines where sandstorm gold can come in and buy a gold or a silver stream on the asset at the same time to help pay for the acquisition so it's a symbiotic growth model is what we're working on or part of our new partnership model if you will and we're also looking for one or two other companies that we can add to this partnership model over time but if you look at horizon copper today with the closing of this transaction it'll be a small to mid cap company focused on copper but despite its size we'll have exposure to three of the best copper assets on planet earth in the form of the copper from hot modern antamina and its interest in oyutogoy and so i think people and investors would be hard-pressed to find any mid-size or smaller copper company where the assets are this high quality so we are pleased with the strong established and solid base the cop that horizon copper is now growing from over the years as sandstorms ceo i've had the opportunity to talk face-to-face with many of our investors and especially our institutional investors a lot of our investors are actually generalist investors they're not necessarily mining focus specific investors it's it's funds that want to get some gold exposure but they aren't necessarily experts in mining and one of the reasons that they look at streaming royalty companies in the first place is because they know that if anything that goes wrong with just one particular mine it's not going to take down the entire company diversification is really really important for them and they know that if they invest in a streaming royalty company that it's going to be a safe investment and people aren't going to get mad at them if things don't go well because they invested in in a one asset or a two asset mining company then things technically went wrong so diversification is a theme that we've been trying to push in sandstorm to make sure that we appeal to those investors and generalist investors because we believe if we do we'll in the end have the highest stock price so with these two transactions that we're announcing today nomad and base core we're bringing in a number of key assets that will help not only increase our production and our sales but they help increase the diversity and strength of the overall portfolio we've got a list here of all the precious metal assets and streams and royalties that we're buying as well as the the copper asset streams and royalties these are high quality long life assets that really will increase the diversification and so you can see here now we've got a list of our top streams and royalties no one stream of royalty is greater than 13 of our value which we think sends a very very strong message that sandstorm is a stable and safe royalty company that people can buy hold put in their portfolios and forget about with these transactions i'm i'm particularly excited about the position in the market where sandstorm is relative to our peers we're sort of in that place where we're the largest intermediate in the world now by production but we have lots of room to grow before we're ever considered a major and become more stagnant and so as we sit here today we're about 40 the size of royal gold in a production basis which is substantial and material but we have a lot of growth ahead of us sandstorm is finally in that sweet spot where we have enormous amounts of cash flow coming in lots of access to capital the world is our oyster in terms of growth and we're strong and stable and diversified it really is the best of both worlds once both of these transactions close our current shareholders will loan about 70 of the new sandstorm percent of the shares will be owned by base core which would be glencore and ontario teachers pension plan then the other percent of the combined company will be owned by nomads existing shareholders of which orion is the largest one of those i think one of the important things to note here is that even before these transactions in the intermediate royalty space sandstorm was the most liquid and most traded company on the markets post these transactions we believe that we're going to attract a whole host of new investors as well as bringing on the existing nomad investors and so we think that our liquidity is going to go up even further sandstorm is poised to become the most liquid streaming royalties company in the intermediate space by a mile one of the things that we've always been proud about at sandstorm is that year after year we have set production records we've done it many years now and with these new transactions we're poised to set production records for many years to come with production going to over 155 000 ounces a year over the next few years again because we're a royalty company these ounces are incredibly high margin so when you translate that into actual cash flow you can see that we are poised to generate enormous amounts of free cash flow this chart has done free cash flow after tax at only 1800 gold and gold prices are quite a bit higher than that right now so if they stay where they are or go even higher which i suspect they will our actual cash flow numbers are going to increase beyond this we have free cash flow after tax growing to over 170 million dollars plus u.s per year and like i said because i believe the gold prices are going to be higher than they are now the copper prices are going to be much higher than they are now these numbers will likely be over 200 million dollars a year in u.s again that's per year i remember the days when sandstorm was not worth 200 million dollars u.s as a market cap we're now cash flowing those numbers it's it's an exciting place to be now where does that cash flow come in terms of a revenue mix the vast majority of that cash flow with this new sandstorm is coming from precious metals we've got 81 percent of our expected production coming from gold and when you add in silver and other precious metal by-products that gets over 88 precious metals and so we do think we have a little bit of room to grow in the non-precious metal space of our portfolio but candidly right now if i'm being honest everything that we're looking at acquiring everything that's in our deal pipeline right now that hasn't been announced is precious metals so sandstorm is a precious metal company we've got a lot of precious metal growth in future acquisitions to come for a lot of years i've been beating the drum that sandstorm is a growth company we're fortunately to be in a position where we can pay dividends and grow the company very significantly and if you look at us today relative to our peers the growth that we have already built in and bought post these transactions is almost double what the second highest growth company in the streaming royalty space is and we're not done yet we still have a deal pipeline although it will take a while to absorb these transactions and to close them we're not done growing but again when you're growing and you're making acquisitions it's important to grow with the right types of acquisitions like we believe we are doing here today if you layer in the nomad portfolio and you layer in the pieces of the base core portfolio that we're keeping and you re-look at sandstorm on a number of key metrics that we always evaluate ourselves against our peers we still screen incredibly well on these important metrics 64 of the new sandstorms production is going to be coming from mines that produce their primary product in the lowest cost quartile in the world wheat and precious metals is second in this list and virtually no other streaming royalty company is even close to having that high quality of assets underpinning their streams and royalties it's something that we are very proud of and we have worked very hard on it's a key tenant of the types of things that we have been trying to buy the types of things that we are buying in these two transactions now and the types of things that we're looking at acquiring in the future when you look at diversification and i've mentioned this in the past sandstorm is now the most diversified portfolio of streams and royalties in the world in terms of what percentage do our top assets make up of the entire portfolio franco nevada used to be the most diversified in the sense that the top five assets only made up 61 of their total value of their portfolio and that was the most diversified in the world well sandstorm today after we closed the nomad acquisitions and the base core acquisition 38 only 38 of our production is going to be coming from our top five assets is a very very diversified portfolio it's very rare to find diversification and quality i've seen a lot of portfolios in my career and life that are very diversified and very low quality but if you can find a portfolio that is both high quality and diversified that's an investment worth making we've been working very hard over many many many months to bring these two exciting transactions to sandstorm shareholders we're looking forward to being able to close them over the coming months but once we do sandstorm gold will be the largest highest growth most liquid and most diversified streaming and royalty company in the mid-tier space [Music] you

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Length: 19min 28sec (1168 seconds)

Published: Mon May 02 2022