Vancouver, British Columbia–(Newsfile Corp. – May 2, 2022) – Royalty North Partners Ltd. (TSXV: RNP) (“RNP” or the “Company”) is pleased to announce that it has entered into an amended and restated letter of intent (the “LOI”) with Sandstorm Gold Ltd. (“Sandstorm”) (NYSE: SAND) (TSX: SSL) to grow its portfolio with the addition of a cash-flowing copper asset. Under the terms of the LOI, dated May 1, 2022, Horizon Copper will purchase a 1.66% net profits interest on the low-cost, high-grade Antamina copper mine (the “Antamina NPI”) from Sandstorm (the “NPI Transaction”).
The NPI Transaction will form part of RNP’s previously announced reverse take-over transaction with Sandstorm (the “RTO”), as announced in the Company’s news release dated February 17, 2022 (the “Initial News Release”). The transactions detailed in the previous Letter of Intent between the Company and Sandstorm, as announced in the Initial News Release remain in place and the NPI Transaction will be in addition to those transactions announced in the Initial News Release. Concurrent with closing the RTO RNP intends to change its name to Horizon Copper Corp. Any following references to “Horizon” or to the “Resulting Issuer” are to RNP following the closing of the RTO.
The NPI Transaction will further transform Horizon’s portfolio with the addition of an anchor cash-flowing asset linked to one of the world’s top copper mines. The Antamina NPI will be added to the Resulting Issuer’s portfolio along with the previously announced acquisitions of a 30% interest in the Hod Maden copper-gold project and a 25% equity stake in Entrée Resources Ltd. (TSX: ETG), which provides excellent exposure to the Oyu Tolgoi copper project (see the Initial News Release for full details). Horizon’s resulting portfolio will bring together three world-renowned copper projects. With a strong partner in Sandstorm, this transformative transaction is expected to provide the size and scale required to further grow and diversify the Resulting Issuer.
NPI TRANSACTION DETAILS
Under the terms of the LOI, Horizon will acquire Sandstorm’s 1.66% Antamina NPI, following Sandstorm’s acquisition of the Antamina NPI from BaseCore Metals LP (the “Sandstorm BaseCore Transaction”). See Sandstorm’s press release dated May 2, 2022, for full details of the Sandstorm BaseCore Transaction. In consideration for the Antamina NPI, Horizon will:
- Enter into a 1.66% silver stream with Sandstorm on the Antamina mine;
- Issue a royalty to Sandstorm with payments equal to approximately one-third of the total Antamina NPI, after deducting the silver stream servicing commitments, as described further below;
- Pay Sandstorm US$50 million in cash, which will be funded by way of a subscription receipt financing to close prior to the closing of the RTO;
- Provide Sandstorm a debenture with a principal amount of approximately US$105 million; and
- Issue US$26 million of RNP shares, maintaining Sandstorm’s 34% equity interest in the Company following completion of the RTO.
Full terms of the consideration to be paid to Sandstorm are outlined below.
THE WORLD’S THIRD-LARGEST COPPER MINE
The Antamina copper mine is an open-pit operation located in the Andes mountain range of Peru, 270 kilometres north of Lima. The mine is operated by Compañìa Minera Antamina (“CMA”), a top-tier operator jointly owned by major stakeholders BHP Billiton plc (33.75%), Glencore plc (33.75%), Teck Resources Limited (22.5%), and Mitsubishi Corporation (10%). It is the world’s third-largest copper mine on a copper equivalent (“CuEq”) basis, producing approximately 560,000 CuEq tonnes per annum. Antamina has been in consistent production since 2001, including a throughput expansion completed in 2012 to the mine’s current operating capacity of 145,000 tonnes per day. Total copper production in 2022 is estimated to be between 404,000-426,000 tonnes and between 400,000-422,000 tonnes in 2023-2025.
Antamina ‘s Measured & Indicated Mineral Resources, inclusive of Reserves, total 925 million tonnes (“Mt”) at 0.87% copper, 0.69% zinc, and 11 grams per tonne (“g/t”) silver. Mineral Reserves total 336 Mt at 0.94% copper, 0.81% zinc and 10 g/t silver, which are constrained by current tailings capacity. Both Mineral Reserves and Resources are effective as of December 31, 2021 (cut-off grade unavailable).
Since 2006, the 1.66% Antamina NPI has paid between approximately US$7-$40 million per year, with an average annual payment of US$19 million. In 2021, the Antamina NPI payment was approximately US$40 million. The project operates in the first cost quartile of copper mines. The NPI is paid by a Canadian affiliate of Teck Resources Limited (“Teck”) and is guaranteed by Teck.
The 1.66% Antamina NPI is calculated based on free cash flow at CMA. The calculation includes net proceeds from all sales less all site costs, offsite costs, capital expenditures, all incoming and mining taxes and environmental costs, third-party financing inflows and outflows, third party interest, and working capital changes. The holder of the NPI cannot be called upon to contribute cash to the operation.
FINANCING THE NPI TRANSACTION
Antamina Silver Stream and Residual Royalty
Concurrent with the Sandstorm BaseCore Transaction, Horizon will issue Sandstorm a silver stream on the Antamina mine (the “Antamina Silver Stream”). Under the terms of the Antamina Silver Stream, the Resulting Issuer will sell to Sandstorm silver ounces equal to 1.66% of all silver produced at the Antamina mine at a price equal to 2.5% of the silver spot price. The Antamina Silver Stream will be senior secured by the 1.66% Antamina NPI.
Horizon will also issue a royalty to Sandstorm equal to approximately one-third of the total Antamina NPI (approximately 0.55%), paid net of the Antamina Silver Stream servicing commitments (the “Antamina Residual Royalty”).
Debenture, Cash and Equity
Under the terms of the LOI, Horizon will be required to raise US$50 million, which amount will be paid to Sandstorm at closing of the RTO. Full details of the proposed subscription receipt financing will be issued in a subsequent RNP press release in due course.
The Resulting Issuer will issue Sandstorm a US$105 million debenture (the “Debenture”). The Debenture is in addition to the previously announced debenture with Sandstorm (see Initial News Release) and is expected to bear an interest rate of 3% over a 10-year term. Principal repayments are subject to a 100% cash sweep of the excess cash flow Horizon receives from the 1.66% Antamina NPI after the Antamina Silver Stream and Antamina Residual Royalty obligations are paid. The Debenture will be senior secured by the Antamina NPI. Prepayment of the Debenture can occur at any time prior to maturity without penalty.
Horizon will also issue Sandstorm US$26 million worth of RNP shares. Post issuance, Sandstorm expects to maintain its 34% equity interest in Horizon following completion of the RTO.
Conditions and Timing
The Horizon LOI is subject to a number of conditions, including but not limited to, execution of definitive agreements, TSX Venture Exchange (the “TSX-V”) acceptance, disinterested RNP shareholder approval, and RNP raising US$50 million, as described above.
It is intended that the NPI Transaction will form part of the RTO, however, the RTO, as originally contemplated and announced in the Initial Press Release, will not be contingent on the closing of the NPI Transaction. RNP intends to seek shareholder approval for the RTO as originally contemplated and for the RTO including the NPI Transaction as separate resolutions of the RNP shareholders.
The RTO is currently expected to close in the second half of 2022.
Keith Laskowski (MSc), Sandstorm’s Vice President, Geology is a Qualified Professional (#01221QP) of the Mining and Metallurgical Society of America and a Qualified Person as defined by Canadian National Instrument 43-101. He has reviewed and approved the scientific and technical information in this press release.
ABOUT HORIZON COPPER
On February 17, 2022. Royalty North Partners Ltd. announced plans to transition the business into a premier copper company through a transaction constituting a “Reverse Takeover” under the policies of the TSX-V. Upon completion of the RTO, RNP plans to change its name to “Horizon Copper Corp”, or such other name as may be determined. The business intent of the Resulting Issuer is to actively grow its portfolio of assets, with a focus on copper projects. For full details regarding the RTO transaction please see RNP’s Initial Press Release.
RTO PROCESS & NEXT STEPS
The NPI Transaction and RTO involves Non-Arm’s Length Parties (as defined in the TSX-V policies) as Nolan Watson, a director of RNP, is also a director and officer of Sandstorm. Pursuant to TSX-V Policy 5.2, the RTO will require the approval of shareholders of RNP. RNP intends to seek a waiver of sponsorship from the TSX-V, however, there is no certainty that this waiver will be granted.
A subsequent news release will be disseminated in accordance with TSX-V Policy 5.2 once additional information with respect to the RTO is available, including without limitation financial information relating to the target business, information relating to the Principals (as defined in TSX-V Policy 1.1) of the Resulting Issuer and the final terms of the new subscription receipt financing. The full particulars of the RTO, the transferred assets and the Resulting Issuer will be described in an information circular to be prepared in accordance with the policies of the TSX-V. A copy of the information circular will be available electronically on SEDAR (www.sedar.com) under RNP’s issuer profile in due course.
Completion of the RTO is subject to a number of conditions, including but not limited to, TSX-V acceptance and if applicable, disinterested shareholder approval. Where applicable, the RTO cannot close until the required shareholder approval is obtained. There can be no assurance that the RTO will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the information circular to be prepared in connection with the RTO, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the securities of RNP should be considered highly speculative.
The TSX-V has in no way passed upon the merits of the RTO and has neither approved nor disapproved the contents of this news release.
Trading in the common shares of RNP is currently halted and it is not anticipated that trading in the common shares of RNP will resume prior to completion of the RTO.
No deposit, advance or loan (as contemplated in s. 2.3 of TSX-V Policy 5.2) has been made or is to be made in connection with the RTO.
For more information about Royalty North Partners Ltd., please contact:
Chief Financial Officer
Phone: (604) 628-1033
Forward Looking Information
This news release contains forward-looking information within the meaning of Canadian securities laws. Such information includes, without limitation, information regarding the terms and steps of the NPI Transaction, the RTO, the assets, financial position and ownership of the Resulting Issuer, the terms of the subscription receipt financing, the terms of the Antamina Silver Stream and the Debenture and the expected closing date of the NPI Transaction. Although RNP believes that such information is reasonable, it can give no assurance that such expectations will prove to be correct.
Forward looking information is typically identified by words such as: “believe”, “expect”, “anticipate”, “intend”, “estimate”, “postulate” and similar expressions, or are those, which, by their nature, refer to future events. RNP cautions investors that any forward-looking information provided by RNP is not a guarantee of future results or performance, and that actual results may differ materially from those in forward looking information as a result of various factors, including, but not limited to: RNP’s ability to complete the NPI Transaction and the RTO; the expected timing and terms of the NPI Transaction, the Financing and the issuance of the Antamina Silver Stream and the Debenture; the state of the financial markets for RNP’s securities; the state of the natural resources sector in the event the NPI Transaction is completed; recent market volatility and potentially negative capital raising conditions resulting from the continued COVID-19 pandemic and risks relating to the extent and duration of such pandemic and its impact on global markets; RNP’s ability to raise the necessary capital or to be fully able to implement its business strategies; and other risks and factors that RNP is unaware of at this time.
The forward-looking statements contained in this news release are made as of the date of this news release. RNP disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
The securities referred to in this news release have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from the U.S. registration requirements.
This news release does not constitute an offer for sale of securities, nor a solicitation for offers to buy any securities.
 Value of RNP shares issued to Sandstorm based on assumption RNP raises US$50 million, subject to change depending on the amount raised by RNP.
 BMO Capital Markets & S&P Capital IQ; Antamina mine’s 2022 estimated production ranks #3 on a copper equivalent basis.
 Source: Teck Resources Limited press release dated February 23, 2022
 Source: Glencore Resources & Reserves Report, as at December 31, 2021
 S&P Global Market Intelligence, 2021 Copper Total Cash Cost, Co-product basis
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