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As of 12:11 p.m. EST, Gold Royalties’ share price was up 70 percent, to $0.18, on news that Sandstorm Gold will be acquiring the company.
The gold price may have been down on Wednesday, but it’s been anything but a bad day so far for Gold Royalties (TSXV:GRO). As of 12:48 p.m. EST its share price was up 70 percent, at $0.18, on news that Sandstorm Gold (TSX:SSL) will be acquiring the company.
Both companies announced the deal on Wednesday. Under the terms of the arrangement, Gold Royalties shareholders will receive 0.045 of a Sandstorm share for each Gold Royalties share held, with each Gold Royalties share being valued at roughly $0.20 per share. That’s a 70-percent premium to the 20-day volume-weighted average trading price (C$0.118), and an even higher premium to Tuesday’s close of $0.105.
According to Sandstorm’s release, based on Sandstorm’s February 17 closing price, the transaction has a value of roughly C$5.7 million.
No doubt Ryan Kalt, CEO of Gold Royalties, is pleased with the news. “Despite a challenged equity market for junior mining, Gold Royalties has successfully built a substantial portfolio of valuable gold royalty assets in Canada,” he said in a company release on Wednesday. “Not only does the agreement with Sandstorm provide a tremendous premium for our shareholders, but equally important, it is structured such that our shareholders continue to have exposure to not only our existing gold royalty assets but also to the diversified and growing royalty portfolio held by Sandstorm.”
Gold Royalties believes the deal provides “substantial benefits” to shareholders, and it certainly appears that the market agrees — in addition to a rising share price, the company saw a significant spike in trading volume on Wednesday, with roughly 1.14 million shares trading hands compared to a daily average of just 38,000.
Attracting Sandstorm to Gold Royalties was its portfolio of 18 royalties on 13 mining projects in Canada, as well as the fact that the company has about C$2 million in cash. That will bring Sandstorm’s portfolio to 10 streams and 59 royalties following the closing of the transaction.
Sandstorm seems to be on a roll lately, as its acquisition of Gold Royalties comes just a few weeks after it secured royalties on 10 projects in Africa and Nevada. The royalty company sold eight of its Nevada properties to Tarsis Resources (TSXV:TCC) for 1.5 million shares of Tarsis as well as net smelter royalties (NSRs) of 2 to 3 percent on each of the properties, acquired a royalty on Orezone Gold’s (TSX:ORE) Bombore project in Burkina Faso and made an agreement for an NSR on Castle Peak Mining’s (TSXV:CAP) Akorade project in Ghana.
The Sandstorm/Gold Royalties deal isn’t the only merger that’s happened this week in the gold space either — on Tuesday, Timmins Gold (TSX:TMM,NYSEMKT:TGD) announced that it will be acquiring Newstrike Capital (TSXV:NES).
Certainly, despite a poor performance from gold prices, investors will be keeping an eye out for further action from gold companies.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Related reading:
Sandstorm Gold Gains on Announcement of 10 New Royalties
Timmins to Create Intermediate Gold Miner with Newstrike Acquisition
