Shares in American precious metal streaming company Royal Gold dropped on Monday following the news that it is to purchase gold-focused royalty group Sandstorm Gold in an all-stock deal worth $3.5bn, along with a smaller $196m cash purchase of miner Horizon Copper.
Royal Gold has offered 0.0625 shares for each Sandstorm share held, which implies a purchase price of $11.24 a share – a 21% premium to Sandstorm’s 20-day volume-weighted average price, which is currently trading at a 10-year high.
Once completed, Sandstorm shareholders will own 23% of the combined company. Sandstorm shares were up 5.5% at $10.15 on the news.
The acquisition combines 393 precious metal assets in one portfolio, 80 of which are producing assets and 47 in development, with the remainder (266) in earlier stages of evaluation or exploration. Gold represents 78% of the portfolio by net asset value, which remains weighted to Canada and the US markets.
The combined company, valued at an estimated market capitalisation of $15.4bn, will be the third largest precious metals streaming and royalty company in the world, behind Wheaton Precious Metals ($41.2bn) and Franco-Nevada ($31.9bn).
Separately, Royal Gold also announced it would be Horizon Copper, which has interests in assets in Peru, Mongolia and Turkey, for C$2.00 per share, causing its share price to rocket 67% to C$1.94 in Toronto.
Royal Gold shares were down nearly 9% at $164.45 by 1031 in New York.