Sandstorm Buys Into an Old Cadillac

Sandstorm Metals and Energy and Sandstorm Gold have made a small offering to Canadian Zinc (CZN in Canada, CZICF on the pink sheets) in exchange for a 1.2% NSR royalty on their Prairie Creek Mine. This is a zinc and lead mine with substantial silver resources, formerly known as the Cadillac mine back when the Hunt Brothers tried to use it as part of their plan to control the silver market decades ago.

This mine has been in a laborious permitting process for more than five years now, it was teased as a silver stalwart by Greg McCoach way back in 2007 and has had some ups and downs as they’ve moved through permitting, land use, water use, and crown and aboriginal issues as they try to get through to actually building the mine. Now they seem to be on track to get the permitting finished sometime later this year, and they think they might even start building the access road by next Winter. So they’re looking for financing.

Sandstorm Metals & Energy stepped in to offer up $10 million for that 1.2% NSR, and if the mine is built and they get production at the levels they say they expect in their press releases (and if zinc, silver and lead all stay at current prices), then this should yield Sandstorm Metals about $2.4 million per year. The reserves seem to indicate that the mine would have a life of about five years at those production levels, though presumably, like most mines, they would extend those reserves by further exploring their inferred resources and firming up those expected but not proven assets as the mine produces enough cash to make that exploration worthwhile. Sandstorm Gold bought in for the silver portion of the deal, paying $3.2 million for the silver part of the royalty (which, at the estimated production levels, would in $528,000 a year at $22 silver — so the lead and zinc are about $1.8 million a year and Sandstorm Metals effectively put up $6.8 million for that).

Those seem like decent royalty deals for a pretty well-explored and close-to-possible-production high-grade mine if you think the Prairie Creek mine will indeed survive the permitting process and reach production in the next couple years. Sandstorm Metals and their partner, big sister Sandstorm Gold (SAND), probably aren’t really in this for the royalty, though — they want first ...

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