After a major business development, Sandstorm Gold Ltd.’s (NYSE: SAND) shares jumped 9.44% in pre-market trading to $10.55. The news that Sandstorm had finalized a deal to be purchased by Royal Gold Inc. in an all-share deal for around $3.5 billion triggered the rise.
Royal Gold Makes Two Acquisitions to Grow Its Portfolio
A 17% premium over the most recent closing price of Sandstorm shares will be paid to Sandstorm shareholders, who will receive 0.0625 shares of Royal Gold common stock for every Sandstorm share held under the terms of the agreement.
At the same time, Royal Gold declared a separate final contract to buy Horizon Copper Corp. for all cash for around $196 million. Shareholders of Horizon Copper will get C$2.00 per share, which is 72% more than the closing price on the TSX Venture Exchange on July 4. It is anticipated that these deals would greatly improve Royal Gold’s reputation in the precious metals industry.
Increased Market Presence and Strategic Value
At closure, Sandstorm shareholders will control 23% and Royal Gold stockholders approximately 77% of the combined company on a fully diluted basis. The combined business, which will remain known as Royal Gold, Inc., intends to combine a top streaming and royalty portfolio that includes premium, long-lasting assets. Given that Sandstorm’s shares are already trading at 10-year highs, the deal offers an instant and convincing value boost.
It is anticipated that the purchase will lower the risk of portfolio concentration, close valuation gaps with mid-tier royalty rivals, and uncover the true value of Sandstorm’s gold-focused asset base. The expanded and diverse platform may also appeal to institutional investors because of its greater scale and liquidity.
Setting Up for Capital Returns and Long-Term Growth
In addition to a short-term premium, Sandstorm owners will gain equity in a more robust, diversified royalties business that has a track record of generating profits for its investors. As Royal Gold continues on its current development trajectory in the global precious metals streaming and royalty industry, the move is anticipated to improve portfolio maturity, increase market appeal, and provide significant long-term re-rating potential.
