DEFA14A: Royal Gold Announces Dual Acquisitions of Sandstorm Gold and Horizon Copper to Expand Royalty Portfolio

Royal Gold, Inc. has entered into definitive agreements to acquire Sandstorm Gold Ltd. in an all-stock transaction and Horizon Copper Corp. in an all-cash transaction, significantly expanding its royalty and streaming portfolio.

Summary

• Royal Gold, Inc. (Royal Gold) and its wholly owned subsidiary International Royalty Corporation (IRC) have agreed to acquire Sandstorm Gold Ltd. (Sandstorm) in an all-stock transaction.
• Sandstorm shareholders will receive 0.0625 shares of Royal Gold common stock for each Sandstorm common share.
• Sandstorm options will fully vest and become exercisable for Royal Gold common stock, adjusted by the Exchange Ratio.
• Sandstorm restricted share rights will be settled for Sandstorm common shares, which will then be exchanged for Royal Gold common shares.
• Sandstorm performance share rights will fully vest, entitling holders to a cash payment equal to 200% of the fair market value of a Sandstorm common share on the last trading day before the effective date.
• Royal Gold and IRC have also agreed to acquire Horizon Copper Corp. (Horizon) in an all-cash transaction.
• Horizon shareholders will receive C$2.00 in cash for each Horizon common share.
• Horizon options and warrants will be transferred to Horizon for a cash payment equal to the amount by which the Horizon Consideration exceeds the applicable exercise price.
• Horizon restricted share rights will be cancelled for a cash payment equal to the Horizon Consideration multiplied by the number of underlying shares.
• Both transactions are subject to various closing conditions, including shareholder approvals (at least 66 2/3% of votes cast by shareholders and a simple majority excluding certain votes for Sandstorm and Horizon, and a majority of votes cast by Royal Gold stockholders), court approvals, regulatory clearances (Canadian Competition Act, Investment Canada Act, South African Competition Act), and limits on dissent rights (no more than 5% for Sandstorm, 10% for Horizon).
• Termination fees are stipulated: $200 million payable by Royal Gold or $130 million by Sandstorm under the Sandstorm Agreement, and $15 million payable by Royal Gold or $10 million by Horizon under the Horizon Agreement.
• Directors and certain senior officers of Sandstorm (collectively holding approximately 1% of outstanding Sandstorm Common Shares) and Horizon (collectively holding approximately 54% of outstanding Horizon Common Shares, including Sandstorm's holdings) have entered into support and voting agreements to vote in favor of the respective arrangements.

Sentiment

Score: 8

Explanation: The announcement of two definitive acquisition agreements is a significant strategic move for Royal Gold, indicating growth and portfolio expansion. The presence of support agreements from key shareholders of the target companies suggests a high likelihood of successful completion. While integration risks and regulatory hurdles exist, the overall tone is positive for Royal Gold's long-term strategic positioning in the royalty and streaming sector.

Positives

• Royal Gold is strategically expanding its royalty and streaming portfolio through two definitive acquisition agreements.
• The acquisitions are expected to diversify Royal Gold's asset base and potentially increase future revenue streams.
• Support and voting agreements from key Sandstorm and Horizon securityholders (54% of Horizon, ~1% of Sandstorm) indicate strong internal backing for the transactions, increasing the likelihood of completion.
• The all-stock nature of the Sandstorm acquisition preserves Royal Gold's cash reserves.
• The all-cash transaction for Horizon provides immediate liquidity and certainty to Horizon shareholders.

Negatives

• Significant termination fees are associated with both agreements ($200 million for Royal Gold, $130 million for Sandstorm; $15 million for Royal Gold, $10 million for Horizon), posing financial penalties if the transactions fail.
• The transactions are subject to various closing conditions, including shareholder and regulatory approvals, which introduce uncertainty.
• There is a risk that dissent rights exercised by shareholders could exceed the specified thresholds (5% for Sandstorm, 10% for Horizon), potentially impacting the transactions.
• Integration risks are inherent in combining the operations and assets of three companies.

Risks

• Shareholders of Royal Gold, Sandstorm, or Horizon may not approve the respective transactions.
• Conditions to closing may not be satisfied, or a party may terminate an arrangement agreement, leading to delays or non-completion.
• Delays or adverse decisions regarding regulatory approval of the transactions could occur.
• Potential adverse reactions or changes to business or employee relationships of Royal Gold, Sandstorm, or Horizon may result from the announcement or completion of the transactions.
• Management time may be diverted to transaction-related issues, impacting ongoing operations.
• Uncertainty exists regarding the ultimate timing, outcome, and results of integrating the operations of Royal Gold, Sandstorm, and Horizon.
• The combined company may not realize anticipated synergies in the timeframe expected or at all.
• Changes in capital markets could affect the combined company's ability to finance operations.
• Fluctuations in the price of gold, silver, copper, or other metals could impact financial performance.
• Operating activities or financial performance of properties underlying royalty or stream interests may vary from forecasts, or operators may face challenges (e.g., project delays, mine plan changes, liquidity needs, hazards, labor disputes, supply chain disruptions, permitting issues, government actions, operational disruptions).
• Changes of control of properties or operators could affect Royal Gold's interests.
• Contractual issues involving stream or royalty agreements may arise.
• The timing of deliveries of metals from operators and subsequent sales of metal could be unpredictable.
• Risks are associated with doing business in foreign countries.
• Increased competition for stream and royalty interests could impact future growth.
• Environmental risks, including those caused by climate change, could affect operations.
• Potential cyber-attacks, including ransomware, pose operational and financial risks.
• Adverse economic and market conditions could impact the company's performance.
• Health epidemics and pandemics could affect operations.
• Changes in laws or regulations governing Royal Gold, Sandstorm, Horizon, operators, or operating properties could have adverse effects.
• Changes in management and key employees could impact business continuity and performance.

Future Outlook

The transactions are expected to be consummated by January 6, 2026, with a potential extension to April 6, 2026, if regulatory approvals are delayed. The combined entity anticipates realizing synergies from the integration of operations.

Management Comments

• Royal Gold Board unanimously determined that the Arrangement and entering into this Agreement are in the best interests of Royal Gold and its stockholders, and resolved to recommend stockholders approve the stock issuance.
• Sandstorm Special Committee unanimously determined that the Arrangement and entering into this Agreement are in the best interests of Sandstorm and recommended the Board approve and recommend to shareholders.
• Sandstorm Board unanimously determined that the Arrangement and entering into this Agreement are in the best interests of Sandstorm, approved the agreement, and resolved to recommend shareholders vote in favor.

Industry Context

These acquisitions represent a strategic expansion for Royal Gold within the mining royalty and streaming sector. This approach allows Royal Gold to grow its portfolio of mineral property interests and diversify its exposure to various commodities and projects without direct operational involvement, a common strategy in the industry to manage risk and enhance revenue streams.

Management Changes

Corporate Governance

Legal Proceedings

• Parties will use commercially reasonable efforts to defend all lawsuits or other legal, regulatory, or other proceedings against them challenging or affecting the agreements or the consummation of the transactions.
• To the knowledge of the Company (Sandstorm/Horizon), there are no material claims, actions, suits, demands, arbitrations, charges, indictments, orders, hearings, or other civil, criminal, administrative, or investigative proceedings pending or threatened against the Company or its Subsidiaries that would have a Company Material Adverse Effect or significantly impede the Arrangement.
• To the knowledge of the Purchaser (Royal Gold), there are no material claims, actions, suits, demands, arbitrations, charges, indictments, orders, hearings, or other civil, criminal, administrative, or investigative proceedings pending or threatened against the Purchaser or its Subsidiaries that would have a Purchaser Material Adverse Effect or significantly impede the Arrangement.

Related Party Transactions

• Sandstorm Gold Ltd. holds 29,274,086 common shares, 734,375 warrants, and $240,059,623 in convertible debentures in Horizon Copper Corp. Sandstorm has entered into a support and voting agreement to vote these securities in favor of the Horizon Arrangement.
• Directors and certain senior officers of Sandstorm (collectively holding approximately 1% of outstanding Sandstorm Common Shares) have entered into support and voting agreements with Royal Gold.
• Directors and certain senior officers of Horizon (collectively holding approximately 54% of outstanding Horizon Common Shares, including Sandstorm's holdings) have entered into support and voting agreements with Royal Gold.
• Directors and certain senior officers of Royal Gold (collectively holding less than 1% of outstanding Royal Gold Common Stock) have entered into support and voting agreements with Sandstorm.

Stakeholder Impact

• Shareholders of Sandstorm will become shareholders of Royal Gold, gaining exposure to a larger, more diversified royalty and streaming company.
• Shareholders of Horizon will receive a cash payment, providing a clear exit and liquidity for their investment.
• Royal Gold shareholders will experience dilution from the issuance of new shares for the Sandstorm acquisition but benefit from an expanded asset base and increased diversification.
• Employees of Sandstorm and Horizon may face changes in employment status, though existing severance and change of control agreements will be honored by Royal Gold.
• Customers, suppliers, and other business counterparties are expected to see continued satisfactory relationships, as the agreements include covenants to maintain these relationships.

Next Steps

• Company (Sandstorm/Horizon) to apply to the Court for an Interim Order.
• Company (Sandstorm/Horizon) to prepare, file, and diligently pursue application for Interim Order.
• Company (Sandstorm/Horizon) to duly call, give notice of, convene, and conduct the Company Meeting for shareholder approval.
• Purchaser (Royal Gold) to duly call, give notice of, convene, and conduct the Purchaser Meeting for stockholder approval of stock issuance.
• Company (Sandstorm/Horizon) to prepare and file Company Circular.
• Purchaser (Royal Gold) to prepare and file Purchaser Proxy Statement.
• Company (Sandstorm/Horizon) to apply to the Court for a Final Order after shareholder approvals.
• Royal Gold to deposit sufficient Purchaser Shares/cash in escrow with the Depositary prior to the Effective Date.
• Company (Sandstorm/Horizon) to cause delisting of Company Shares from TSX/NYSE/TSXV after Effective Time.
• Purchaser (Royal Gold) to file Form S-8 with U.S. SEC to register issuance of Purchaser Shares upon exercise of Company Options.
• Company (Sandstorm/Horizon) to deliver payout statement for Company Credit Facility prior to Effective Date.
• Purchaser (Royal Gold) to repay Company Credit Facility concurrent with Effective Time.
• Purchaser (Royal Gold) to obtain necessary waivers, consents, or amendments to Purchaser Credit Facility.
• Parties to obtain Canadian Competition Act Approval, Investment Canada Act Approval, and SA Competition Act Approval.
• Company (Sandstorm/Horizon) to procure resignations and mutual releases from directors and officers not continuing employment.
• Company (Sandstorm/Horizon) to purchase prepaid non-cancellable tail directors and officers liability insurance.
• Company (Sandstorm/Horizon) to effect Pre-Acquisition Reorganization if requested by Purchaser.

Key Dates

Recommendation

Keywords

Royal Gold, Sandstorm Gold, Horizon Copper, Acquisition, Merger, Royalty, Streaming, Mining, Gold, Silver, Copper, SEC Filing, Arrangement Agreement, All-Stock Transaction, All-Cash Transaction, Corporate Governance, Risk Management, Shareholder Approval, Regulatory Approval, Mineral Properties