Sandstorm to acquire 2% NSR on Endeavour’s Hounde

Sandstorm to acquire 2% NSR on Endeavour’s Hounde

 2017-12-19 06:31 ET – News Release

Mr. Nolan Watson reports


Sandstorm Gold Ltd. has agreed to purchase an existing 2-per-cent net smelter returns royalty (NSR) on the producing Hounde gold mine in Burkina Faso, operated by Endeavour Mining Corp. The NSR royalty will be acquired from Acacia Mining PLC for $45-million (U.S.) in cash and covers the Kari North and Kari South tenements, representing approximately 500 square kilometres of the Hounde property package. Nearly the entire Hounde mineral reserve of 2.1 million ounces (as of December, 2014) is located on the Kari North and Kari South tenements, including the Vindaloo deposit and most of the Bouere deposit. The NSR royalty acquisition is expected to close in January, 2018.

Acquisition highlights:

  • Immediate cash flow: Commercial production was announced on Oct. 31, 2017, and the Hounde mine is expected to produce 235,000 ounces of gold per year on average over the first four years of operations. The mine has an initial 10-year mine life based on the current mineral reserves.
  • Strong operator: Endeavour is a mid-tier gold producer with five operating mines in Africa. The construction of the Hounde mine was completed ahead of schedule and below budget and the asset is now Endeavour’s flagship gold mine.
  • Exploration upside: Endeavour has set a discovery target at Hounde of 2.5 million to 3.5 million ounces of gold over the next four years with $40-million (U.S.) in budgeted expenditures from 2018 to 2021. A number of the high-priority targets are on the Sandstorm royalty ground.

Sandstorm’s president and chief executive officer Nolan Watson remarked: “The Hounde royalty is a natural fit for the Sandstorm portfolio as the asset meets all of the criteria that we look for in an acquisition. Shareholders will benefit from an immediate 10-per-cent increase in cash flow per share beginning in 2018, Endeavour has proven to be an adept operator in West Africa and we’re extremely excited about the exploration potential on what is a massive property. The nearly 500-square-kilometre area that applies to the royalty is one of the largest prospective land packages in Sandstorm’s royalty portfolio and Endeavour has committed tens of millions of dollars in exploration spending in the coming years to aggressively search for new ore. Sandstorm will be a direct beneficiary of that work.”

About Hounde

Hounde is Endeavour’s flagship asset and ranks amongst West Africa’s top-tier cash-generating mines. The average annual production during the first four years of operations is expected to be 235,000 ounces of gold at an all-in sustaining cost of $610 (U.S.) per ounce.

The Hounde project is located 250 kilometres southwest of Ouagadougou, the capital city of Burkina Faso. Infrastructure in the area includes a paved highway approximately 2.7 kilometres from the mine site, a 225-kilovolt power line as close as 200 metres in some areas and a rail line that extends to the port of Abidjan, Ivory Coast, approximately 25 kilometres west of the deposit area.

Hounde is an open-pit mine with a 3.0-million-tonne-per-year gravity circuit and carbon-in-leach plant. The gravity concentrate is processed through an intensive cyanide leach reactor followed by electrowinning to recover the gold. The carbon-in-leach feed is thickened and fed into a standard carbon-in-leach circuit. Construction of the project began in April, 2016, and was completed in October, 2017, ahead of schedule and below budget. Commercial production was declared in early November, 2017, more than two months ahead of schedule following the rapid construction and ramp-up periods, with nameplate capacity achieved within weeks following the introduction of ore into the mill. Production results to date have exceeded design parameters including recovery rates which have averaged 95 per cent.

The mineralization at Hounde is mainly quartz stockwork style and is weakly to moderately pyritic. The Vindaloo trend, where the bulk of the mineral reserves have been identified, has been drill tested for a distance of approximately 7.7 kilometres along strike and up to 350 m depth. The intrusion-hosted zones range up to 70 metres in true thickness and average close to 20 m true thickness along a 1.2-kilometre section of the zone called Vindaloo main. Volcanic and sediment-hosted zones are generally less than five metres wide. The entire mineralized package strikes north-northeast and dips steeply to the west. The mineralization remains open both along strike and to depth.

The Sandstorm NSR royalty covers approximately 500 square kilometres within the highly prospective Birimian greenstone belt. Exploration drilling resumed on the property in early 2017 following a two-year period of inactivity and has confirmed the occurrence of high-grade mineralization at the nearby Kari pump as well as other targets such as Bouere, Bombi, Koho and Kari fault. Endeavour has incurred approximately $5-million (U.S.) in exploration spending during 2017 and has set an exploration budget of $40-million (U.S.) to be spent over the next four years.

In 2018, Endeavour will undertake an exploration campaign on the Kari pump target to test the continuity of the mineralized corridors and its extensions along strike and at depth. In addition, infill drilling will be conducted to delineate a maiden indicated mineral resource at Kari pump, expected to be released during the second half of 2018. Mineralization will also be tested at the Kari target with an exploration program on a large gold-in-soil anomaly.

Reserves and resources

                  PROPERTY EFFECTIVE AS OF DEC. 31, 2014 

Category                            Tonnage   Gold grade      Contained gold
                                       (Mt)        (g/t)               (koz)

Proven reserves                         3.7          2.5                 295
Probable reserves                      26.9          2.1               1,780
Proven and probable reserves           30.6          2.1               2,073
Measured resources                      3.7          2.6                 305
Indicated resources                    34.1          2.1               2,242
Measured and indicated
resources                              37.8          2.1               2,546
Inferred resources                      3.2          2.6                 273

(1) Mineral resources that are not mineral reserves do not have 
demonstrated economic viability.
(2) All mineral resources are reported inclusive of mineral reserves.
(3) Tonnages are rounded to the nearest 1,000 tonnes; gold grades are 
rounded to one decimal place; ounces are rounded to the nearest 1,000 
ounces. Rounding may result in apparent summation differences between 
tonnes, grade and contained metal.
(4) Tonnes and grade measurements are in metric units; contained gold is 
in troy ounces.
(5) The reporting of mineral reserves and resources are based on a gold 
price of $1,300 (U.S.) and $1,500 (U.S.) per ounce, respectively.
(6) The cut-off grade used is 0.5 g/t gold.
(7) For more information see the company's website and the news release 
dated Feb. 19, 2015.

Qualified person

Keith Laskowski (MSc), Sandstorm’s vice-president, technical services, is a qualified professional (No. 01221QP) of the Mining and Metallurgical Society of America and a qualified person as defined by Canadian National Instrument 43-101. Mr. Laskowski has not independently verified the resource estimates contained in this disclosure. He has reviewed and approved the technical information in this press release.

About Sandstorm Gold Ltd.

Sandstorm Gold is a gold royalty company. Sandstorm provides upfront financing to gold mining companies that are looking for capital and, in return, receives the right to a percentage of the gold produced from a mine, for the life of the mine. Sandstorm has acquired a portfolio of 171 royalties, of which 20 of the underlying mines are producing. Sandstorm plans to grow and diversify its low-cost production profile through the acquisition of additional gold royalties.


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