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Good morning. My name is Anes, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sandstorm Gold Royalties Conference Call. [Operator Instructions] Please be aware that some of the commentary may contain forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. [Operator Instructions] Thank you. Mr. Watson, you may begin your conference.
Thank you, operator. Good morning, everyone, and thank you for calling into this 2021 earnings call. This morning, we have a lot of things to review, including the 2021 annual results as well as the announcements that we made yesterday relating to the creation of Horizon Copper and the turning of our Hod Maden interest into a traditional stream. I have to admit that it feels good to be sitting here today discussing record annual revenue and record annual cash flow while simultaneously being able to lay out an elegant path forward with our Hod Maden stream so that Sandstorm continues to set even higher records in the future and turn Sandstorm back into a pure-play precious metal streaming royalty company. In a few minutes, I'll hand it over to Erfan to talk about the specific 2021 results. But prior to that, I'd like to explain both the specifics of the transaction in which we're turning our Hod Maden interest into a traditional stream. But more importantly, I wanted to discuss the why, and specifically, why this way. For those retail investors who may listen to this, I can tell you that every single time I meet with one of our large institutional shareholders that owns millions of dollars of our shares, almost every single time, the first 2 questions they ask are, tell me about Hod Maden, when it's getting its permits and when you're turning it into a stream. And then they ask, do you think you can grow Sandstorm with so much competition in the streaming space that's driving down the average returns on streams? I have answered those 2 questions over the last couple of years literally hundreds of times. The truth is they're good questions that should be asked. Fortunately, for Hod Maden's EIA was granted last quarter. And through this transaction, we are now turning it directly into a stream, which we believe will trade at a higher value in Sandstorm's portfolio because we are once again becoming a pure-play streaming and royalty company. And through this transaction, we are putting the risk of CapEx overruns and the risk of operating cost overruns into this new company, Horizon Copper. The reason as to why we are doing it this way is a response to the second question that those institutional investors keep asking about how does Sandstorm grow in a competitive environment. At Sandstorm, in addition to growing in the way we have in the past, we believe that the marketplace will get us higher rates of return and we can get higher returns for our shareholders if we work with a select group of growth-oriented mining companies and become their streaming partner of choice so that when they buy new mines, we are the only streaming company that they are talking to about the financing of that mine acquisition. We're currently in conversations with a couple of existing mining companies that may become future partners of Sandstorm where we'll buy a gold stream on the next mine they purchase. In addition to talking to existing growth-oriented mining companies, we decided to actually create one, Horizon Copper, focused on copper. I personally am a big believer in copper, and I believe it's needed desperately to help electrify the world and to help reduce climate change. And I believe that by the year 2030, which isn't too far away, there will be a 20% structural deficit of copper production around the world relative to demand. And therefore, the copper industry is going to have to grow to fix that, and the price of copper is definitely going to have to rise in the process. Fortunately, for us, the majority of the world's gold byproduct production comes from copper mines. So I see a great symbiotic opportunity to create Horizon Copper that goes forward, partnered directly with Sandstorm where Horizon Copper will look to acquire copper mining interests around the world, and Sandstorm can help make those acquisitions a reality by buying a gold stream or a silver stream upfront upon acquisition to help pay for the acquisition. I believe it will have the potential to get Sandstorm much, much higher rates of returns on the streams of purchases, but also it allows Sandstorm to help Horizon Copper grow its business. The world needs copper now more than ever. And it just so happens that I believe gold streaming companies such as Sandstorm will play an important role in that industry, and we can be a part of the solution to climate change while staying a pure-play precious metals, streaming and royalty company. That is the why we are doing it this way. I want to emphasize to investors that this is only the baby first step for Horizon Copper. We're already in the background looking for such acquisitions that we can make together where Sandstorm will have the precious metal stream, and Horizon Copper will have the copper mining interest. So stay tuned for more deals in the future with this partnership model for growth. Now to dig into the details of the transaction. We're selling our 30% Hod Maden stake to Horizon, and we're taking back 3 things. The first is a stream on 20% of the gold produced at Hod Maden. The second is a 34% equity stake in Horizon Copper. And the third is a $95 million IOU or debenture from Horizon Copper to be paid to Sandstorm in the future. We're also contributing our equity stake in the equity shares we hold in Entrée Resources to Horizon copper. However, Sandstorm will continue to hold and own the stream that we already have on the Turquoise Hill through Entrée Resources. I'd like to clarify a couple of points about this $95 million debenture or IOU that will be owed by Horizon Copper to Sandstorm. I've already noticed a couple of analysts that are discounting the value of that debenture by using a high discount rate and assuming a bullet repayment in 10 years. Although this transaction is still at the letter of intent or LOI stage, and the final debenture is yet to be entered into, the LOI specifies that Horizon must pay back the debenture with excess cash flow from Hod Maden, meaning that Horizon Copper cannot simply sit on the cash and make sense and wait to get paid back. We structured it this way so that in the first few years of the mine life, Sandstorm will still effectively be receiving all of the cash flow from Hod Maden either through the stream or through the repayment of the IOU. It's also worth mentioning that the LOI also states that as long as Sandstorm maintains a material equity ownership position, it has a right of first refusal on streams sold by Horizon copper. Now as Horizon Copper grows its business and issues more shares and starts to dilute Sandstorm's ownership position, we have structured the IOU such that Sandstorm can elect to convert portions of the IOU to shares to ensure that it doesn't get overly diluted and so that Sandstorm can keep its right of first refusal without Sandstorm having to contribute any further cash. We thought this would be a good flexibility for Sandstorm to have. Overall, this transaction will have many regulatory hurdles across, and it will take several months to complete the necessary shareholder votes, the exchange approvals, et cetera. And we believe that the actual closing of this transaction is likely to happen in the second half of this year. It's also worth noting that our Investor Relations team has uploaded a video that goes into much more detail on the transaction that I have time for on this call. So I'd encourage anyone who wants to know more and truly understand this transaction to go to our website and watch that video. Briefly, I think it's worth mentioning details about Horizon Copper and who will own it. As noted, Sandstorm will be taking a 34% ownership stake, and I will sit on the Board as Chairman. As part of this transaction, there will be a $20 million financing for Horizon. And anyone, including the public and people listening on this call, can participate in those new -- and those new shareholders will own approximately 40% -- or sorry, 47% of Horizon. This $20 million, combined with the cash already in the company, combined with the $10 million that Sandstorm is contributing, will be the amount of Hod Maden CapEx that Verizon will be required to contribute to get the mine up and running. There are some existing investors in that entity, including myself. And it's important to note that because my reputation is very, very important to me, we ensure that the value of the shares at Sandstorm is receiving -- has no implied shell value or lift, as some people call it. Normally, in transactions like these, there would be a shell value, meaning there might be no assets or no cash in the vehicle, and Sandstorm would effectively have to pay a few million dollars in value to take control of the public vehicle that had no real assets. In this case, however, the shell value was $0, meaning Sandstorm got to use the vehicle with no leakage in NAV because the implied value of the existing shares that Sandstorm is receiving of Horizon is equal to the cash in the company, plus a conservative value estimate of the one asset the shell company has, which is a royalty that pays approximately $1 million a year every year. And as I said, we have structured this transaction, so there will be a $20 million financing that will be done at the same implied price per share. So if there are people out there who are bullish on copper, you can invest at the same value per share. And on that note, we have had a very strong amount of interest in this Horizon Copper financing already. And literally within an hour of the press release going out yesterday, we had millions of dollars in investor demand sort of immediately coming in. So it seems I'm not the only one here that's bullish on copper as well as gold. Now in terms of the specifics of what does this gold stream look like, the stream will be for 20% of the gold produced by the Hod Maden mine with a purchase price of 50% of the spot price of gold. This mine should be able to produce gold for $500 or $600 an ounce. So even on the ounces that Sandstorm is buying, Horizon Copper should have some profit on those ounces, plus the gold ounces that are entirely Horizon as well as all of Horizon's interest in the copper. Once Sandstorm has purchased 405,000 ounces of gold, the stream will drop to 12% of production for the life of the mine. Some investors will note that this transaction brings down our production guidance in the future. But what's important to note is 2 things: one, Sandstorm no longer has to pay the CapEx. So as before, Sandstorm still had ongoing financial obligations to the mine. Now it no longer does. And two, Sandstorm is getting back a considerable IOU in the transaction that is just shy of 10% of the value of our entire company. So from an overall NAV perspective, the NAV is approximately the same. It's just that Sandstorm's risk is materially reduced, and we are once again a pure-play streaming and royalty company. I think it's also important to note that our cost, when we originally bought this 30% interest in Hod Maden, is approximately $180 million. And we are monetizing it for a $200 million stream and shares and a large IOU. So we're crystallizing a considerable amount of profit over and above our cost base. Looking now at our track record of growth over the years. We have had a new production record every single year since inception, with the only exception being during the dark days of COVID when some of the mines temporarily curtailed operations. You can see that consistent growth from this production chart. What this chart doesn't show, however, is the complete transformation over the years of the quality of our portfolio as well as the average mine life in our portfolio. In 2016, for example, with around 50,000-ish ounces of production per year, our average mine life was only about 8 years. Only 5 years later, fast forward to today, we not only increased our production to 68,000 ounces, but the average mine life in our portfolio now is down to 16-plus years. It literally doubled in the last 5 years. So we're not only growing our production per year, we're also increasing dramatically and growing the average mine life underlying our streams. It is not an easy feat to grow both of these things at the same time, but we have managed to do it. Sandstorm is a growth company, and I personally find it exciting to be in this position with our production growing from 68,000 ounces last year to over 100,000 ounces in a few years with absolutely no additional cost to Sandstorm. This is all now bought and paid for growth. If you compare how much growth we now have fully bought and paid for compared to the peers in our industry, it's clear that Sandstorm has more growth built in than anyone else. And now as of this moment, that growth is largely permitted and is officially in the form of the stream. I'm excited about the state of our company. I'm excited about the growth coming from within the portfolio. I am very bullish on the gold price. And I'm excited that we have both the opportunity in front of us to grow and the balance sheet flexibility to do so. So shareholders can expect further growth through acquisitions this year. Before I turn it over to Erfan, I would like to take a minute to thank the Sandstorm employees for working so hard these past few months. Normally, I wouldn't do this on an investor call. In fact, I've never done this before on our investor call. But I know our employees do listen to these. And I can say I've never before been part of a team that has put in so many hours of work day after day. These transactions are not only hard to put together and to complete in their own right, but they're only the tip of the iceberg on the number of deals that we're working on behind the scenes. And our team has been putting in 16-hour workdays literally for months now. And because we're a small team, it may be months more of work like this. So I just want to take the opportunity to thank them. I'm proud to be working with these people as part of the Sandstorm team. And I think if our investors saw how hard they are working, they would be proud, too. I'm very excited about where we're going with this company. And with that, I'll hand it over to Erfan to talk about the 2021 results.
Thanks, Nolan. I echo those comments as well. 2022 is certainly shaping up to be an exciting year for Sandstorm shareholders. And I want to take the next while to look back at 2021 and cover a few of the financial highlights. 2021 continued the trend of record revenue and production at Sandstorm. For those that have joined us on the webcast, the chart on the left-hand side of this slide shows this trend over the last 4 years. Revenue in 2021 came in at $114.9 million, and attributable gold equivalent ounces were 67,548. This is approximately 23% and 29% increase, respectively, compared to the year previous. It's worth reminding investors that 2020 production was affected by temporary shutdowns at certain operations due to the pandemic. But this year, all cash flowing operations appear to be back on track. The second chart on this slide shows the year-over-year trend of the average realized gold price, which remains relatively constant at around $1,780 per attributable ounce. This next slide provides a bit more detail on the financial results for the year ended December 31, 2021, along with the year-over-year comparison. The total revenue figure I mentioned was comprised of $71.7 million in sales from our stream agreement and $43.1 million in royalty revenue. These top line figures were driven in part by the increase in silver and copper prices in 2021 when compared to 2020. In particular, the Yamana silver stream, the Chapada copper stream as well as the addition of the Vale royalties package that we acquired in June all contributed to the increase in revenue this year. In a moment, we'll walk through more detail regarding a few of these assets. Continuing down the list with an average realized gold price per attributable ounce of [ 17 88 ], the average cash cost for the year was $249 per attributable ounce. This resulted in strong cash operating margins of $1,539 per attributable gold equivalent ounce. Sandstrom also set a new record for cash flow from operations, including changes in working capital at $83.5 million. This is an increase of 22% compared to 2020. Finally, net income for the year was $27.6 million, almost double the company's net income in the previous year and another record for the company. Looking at the quarterly results in more detail. Total revenue for the 3 months ended December 31, 2021, was $29.8 million, and attributable gold equivalent ounces for the quarter totaled 16,586. Taking into consideration all 4 quarters of 2021, we noticed a relatively consistent, stable trend in revenue and production throughout the year. Comparing the 3 months ended December 31, 2021, with the same period in 2020, total revenue and attributable gold equivalent ounces were up slightly, the latter representing a 5% increase year-over-year. The average cash cost per attributable ounce for the fourth quarter was $224, resulting in cash operating margins of 15 34 per attributable ounce. This was down from $1,632 per ounce in the same period of 2020. Cash flows from operating activities, excluding changes in noncash working capital, were comparable to the fourth quarter in 2020 at $22.1 million, while net income for the fourth quarter was $7.4 million. The decrease in net income compared to the fourth quarter in 2020 was partially attributable to a decrease in gains recognized on the revaluation of the company's investments during the 3 months ended December 31, 2021. On the next slide, we see the top contributors in the portfolio for 2021. The Yamana silver stream, which is from production at the Cerro Moro mine contributed over 14,000 gold equivalent ounces in 2021. In January, the amount of gold announced that production at Cerro Moro continued to benefit from access to additional mining faces, which supported the increase in mill feed coming from higher grade underground ore and stable throughput. According to the company, the mine had its strongest quarter of the year, producing over 58,000 gold equivalent ounces. Due to the timing of one Sandstrom received deliveries from Yamana, Sandstrom expects to see strong first quarter production delivered from this asset in 2022. As I mentioned earlier, Cerro Moro was a key beneficiary of the nearly 30% increase in Sandstorm's average realized selling price of silver between 2020 and 2021. The Chapada copper stream was another strong contributor to Sandstorm in 2021 with nearly 8,500 gold equivalent ounces sold. Recently, Lundin mining reported that Chapada has exceeded its copper guidance for the year. Similar to Cerro Moro, sales from the Chapada copper stream benefited from a rise in our average realized selling price of copper, which increased from an average of $2.73 per pound during the year ended December 31, 2020, to an average of $4.04 per pound during the equivalent period in 2021. Other assets to highlight on this list include the addition of the Vale royalties package. Sandstorm purchased the Vale royalties in June 2021, and the transaction was the largest royalty transaction or acquisition of the year. The royalties contributed over 5,700 gold equivalent ounces Sandstrom's production. These long-life and low-cost assets are expected to produce for several decades. The last asset I want to touch on is the Aurizona mine. Aurizona contributed just over 5,500 gold equivalent ounces for the year. The operator, Equinox Gold, released a prefeasibility study in September 2021. This PFS outlined expansion to Aurizona through the development of underground mine and additional satellite open pit deposits, which would be operating concurrently with the existing open pit mine. The assessment outlines a total production of 1.5 million ounces of gold over an 11-year mine life. As a Sandstorm shareholder, it's encouraging to see this study outline further upside Aurizona. As a reminder, Sandstorm has a 3% to 5% sliding scale NSR royalty on the Aurizona project. At current gold prices between $1,500 and $2,000 per ounce, the royalty is a 4% NSR, increasing to 5% NSR when the gold price is above $2,000 per ounce. The next slide provides a breakdown of Sandstorm's attributable gold equivalent ounces for the year ended December 31, 2021, broken out by region and metal type. Over 90% of production came from assets operating in the Americas, with over half coming from South America. Sandstrom remains a precious metal-focused royalty company with nearly 70% of attributable gold equivalent ounces from precious metals. A few final highlights from the year before I wrap up. As many of you are aware, Sandstorm declared its first dividend in 2021, which was paid out to shareholders in January of this year. With the stable and consistent growth that Sandstorm has demonstrated over the last several years, it feels great to be able to include a dividend as another way of returning capital to shareholders. This is in addition to the 5.5 million shares of the company purchased and canceled through its active share buyback program in 2021. Another highlight this year was in regards to our continued efforts to ensure Sandstorm is a leader in sustainability. Sandstorm became the first royalty company with a credit facility tied to various sustainability goals, incorporating incentive pricing based on the company meeting certain ESG-related criteria and proved our sustainability efforts while benefiting shareholders at the same time. The $350 million revolving credit facility represents an increase of approximately 55% in Sandstorm's credit capacity, further expanding the company's available capital for future acquisition. And as Nolan mentioned earlier, we're quite busy working on a number of opportunities. 2021 was a busy year for Sandstorm in many ways. And with today's announcement that Nolan discussed earlier, I expect that 2022 will be truly transformative. And with that, I'll turn things back over to Nolan.
Thanks, Erfan. We're going to turn it over in a second here to question-and-answer period to the operator. But because the transaction that we're going to be talking about, I'm guessing we're going to have a lot of questions, and I do want to be sensitive to people's time. So what we're going to do is we'll only take questions right now from analysts that cover Sandstorm. And for all of our investors, we're all sitting here in the office, phone us, e-mail us after this meeting, and we'll give all the time and attention that's required to answer any and all questions from investors. So with that, I'll hand it over to the operator.
[Operator Instructions] First question comes from Josh Wolfson with RBC Capital Markets.
So when I think about the overall risk from this transaction, ultimately, there's no additional risk that's created or reduced. It's ultimately sort of declined on Sandstorm's basis but increased for the RTO company, Horizon. So in the event that there's a default or crunch for Horizon, what is the seniority of the stream and the IOU in that capital structure?
Yes. Great question. So Horizon is going to be going and doing its own equity financings to put in the CapEx to build the mine and those types of things. And as Horizon grows, it'll -- further acquisitions, it'll be able to sort of bear the brunt of those risks. In the interim step, you're right, Hod Maden is the main asset. So its ability to observe shocks is going to be based on how much money it raises and how much money it's capable of raising going forward. The good news for Horizon is that the asset is Hod Maden. And the pricing that we have moved the asset over on already leaves some buffer for CapEx overruns, and it's still to be a good transaction for investors in Horizon Copper. In terms of the hierarchy of the debenture, it will be the only debt in the entity. So that debt will be secured by the Hod Maden interest. And the -- all the cash flows from Hod Maden, whatever they may be, have to be paid back either to Sandstorm and the stream or that IOU first.
Okay. And then the seniority of the actual stream?
So the stream has senior secured against the 30% Hod Maden interest.
Okay. And you mentioned Horizon looking for external capital, and I assume that partially is with this original -- or the initial financing. The initial structure indicates something like $30 million-ish of cash, but there seem to be $100 million of capital required for its pro rata initial capital for Hod Maden, plus the $95 million debenture payable to Sandstorm. So it's a pretty levered structure. And as you identified, it will likely look to raise equity. So when you think about the path forward for Horizon and its equity financings, Sandstorm going to consider maintaining its pro rata stake or contributing to that? Or is this -- is the motivation to dilute its interest in over time?
As I mentioned in the comments before, so one of the reasons for starting Horizon is so that we can make future acquisitions together, and Sandstorm having a lighter first [indiscernible] any streams that it issues. And that right of first refusal would be lost if we diluted our interest down too much. So certainly, our goal is not to do with the interest and lose that. That would sort of defeat the whole focus of why we're doing this, this way. In terms of the actual capital upfront, we just had a meeting with our partner, [ Lidya Madencilik ], again last week, and they reconfirmed that the plan for the asset, which is well underway for financing, is to finance 2/3 of the CapEx at the asset level, which means that Horizon will not have to contribute that portion of the capital that was debt financed. So its contribution as it currently stands is only expected to be $30 million. And so Horizon, in order to complete this transaction with Sandstorm, has to do a financing large enough so that they'll have that $30 million in hand. If there are any overruns on CapEx, then Horizon would have to go and raise additional capital for that.
Okay. I guess that creates sort of issues down the road given that the stream will be payable to Sandstorm when production starts, but the cash from the asset is going to be repaying the debt for at least the first couple of years?
Yes. Exactly. That's a good point. So we've actually done this on a number of our streams before. It's actually pretty normal when you are financing the construction of the mine. So to take a step back, with Horizon Copper, we're going to be looking at situations where we're buying existing mines going forward. But if you're paying for the construction of a mine and you turn the mine on, it almost never actually makes any money in its first year. It usually doesn't even start washing its face until year 2 and start making money by year 3. So we've been in situations a number of times where the companies owe us gold under a stream. They don't have the cash because they're still fixing the mine. And so what we do is we give them a temporary loan that says here's the money to pay us the gold, but you would now also owe us the money back as soon as you get cash flow next year. So we'll probably look to do that in this particular situation during the period of time where at the asset level in Turkey, they're paying back the debt. And -- but Horizon is having to deliver the Sandstorm stream. Now having said that, if Horizon Copper is very successful and it gets very large, and it doesn't need that back up, then we won't provide it.
Your next question comes from Brian MacArthur with Raymond James.
Two more questions. Just within Horizon Copper, if the copper price goes to, say, $5 or $6, will you hedge in there to kind of protect the cash flows coming out, and therefore, accelerate debt repayments and stuff? I mean what's the general thinking on that structuring? And the second question, is there any tax benefit or leakage in this transaction? I'm not quite sure how it's structured. Before, you would have owned, I assume, a dividend stream coming out. Now you're going to be taking a stream and then payments out of Horizon, as I understand it, for the debt as you go forward. Any color on that would be helpful.
Yes. So on the first question, if we're right on the copper price and copper prices go up, I mean, you mentioned $5, I wouldn't be surprised if I -- the late 2020s, it's $10. But certainly, the way we've structured this deal is that there's a cash sweep on any additional dividends until that IOU is paid back. So if copper prices go up and rising copper starts cash flowing dramatically more than anticipated, that accelerates the payback of the IOUs. So Sandstorm would get that cash flow upfront. In terms of the second question, sorry, it's already skipped in my mind here.
Just it's far beyond me to figure it out, any tax efficiency or leakage in the [indiscernible] flows given -- before, you own [ 30% ] dividend. And now you're getting stream versus debt back from whatever. I mean, just conceptually, is there any tax leakage in all this structure?
There is almost no tax leakage. It's actually one of the reasons why this took us so long to get here as we spent a lot of time and a lot of money on tax advice, trying to make some that we did enact this entire transaction without anyone asking for tax upfront because you've got certain cost bases that already exist in certain entities that we inherited when we bought Mariana. So we're doing a very careful step-by-step -- a series of transactions behind the scenes to make sure there's no tax invoked upfront on this transaction. And the way we're doing it is you get a full depreciation tax shield in Canada on the $200 million stream so that it's shielding Sandstorm Gold from having to pay tax on those streams.
Right. So the stream would have basically 0% tax. Is that correct?
Pretty close. It'll have a tiny bit of tax incrementally, but not very much at all.
The next question comes from Derick Ma with TD Securities.
Just a broader question. Growth copper company, why would they agree to a bilateral negotiation with no future obligations? What's the benefit to them?
I can't hear you. It's not coming through very clear.
Is this better?
That's better.
Okay. Sorry about that. Just a broader question. Why would a growth company looking for copper assets agreed to bilateral negotiation on streams with Sandstorm? What's the benefit to them?
So we've found this a couple of times already, is if you're a company that's going out trying to acquire mines, sometimes even if you're close to being the high bidder, it's not clear to the seller of that mine that you have the financial capacity to complete that acquisition, you lose the process. And so walking hand-in-hand with Sandstorm where Sandstorm can actually have the in the data room during the mine sale process and say definitively, here is what we're able to contribute and provide a letter to them so that the seller of the mine knows that the entity is good for the cash portion of the transaction. These transactions aren't always just cash, sometimes they are. Sometimes it will be a combination of shares of the acquirer and cash. And Sandstorm would be coming in with a cash portion of that and giving them an advantage there. And Sandstorm, quite candidly, we being a streaming royalty company, we're in the deal flow of the industry more so than any one individual mining company. We see more than they do. And often, you think it will be us and our team actually taking the acquisition opportunities to that partner company.
Does that mean Sandstorm will be willing to provide shares to give additional capital as well in those kind of situations?
So in the case of Horizon, for example, we would own 1/3 of the company. And because we have IOUs, we have the ability to not provide equity capital but to avoid dilution. We can convert the IOU into shares if we want with a decision that we would have the rights to make at that time in individual circumstances. But what I think you'll see -- I'm just being candid here -- is for the first transaction or 2 with Horizon, you'll probably see Sandstorm come in by the precious metal stream and maybe help with some of the other purchased costs to be paid back again in the future. And then once -- because Horizon needs to get to a critical mass so that it can go out and swing big and try to buy really awesome world-class large copper mines and be able to raise the equity to do that. And after the first couple of transactions, what we're envisioning is a situation where Horizon is on the hook for all of the purchase prices except for the value of the precious metal stream, and Sandstorm just walks in right to check for the gold stream and the silver stream, and that's all we're contributing.
Your next question comes from John Tumazos with John Tumazos Very Independent Research.
Congratulations. First, could you explain the 50% participation in the gold stream prior to the step-down where you then retain 40% of the gold price? That's the lowest terms of any gold stream I'm aware of. Has the -- the cash cost in the early studies was negative. The copper was going to cover all the direct costs. As the cash cost of the mine risen, so the $4.5 copper, it's not generating as much as a $3 copper? Or is the reinvestment more? Or is this just a way of transferring economics to Horizon Copper to make them a stronger company?
So I would say that from the prefeasibility study to the feasibility study, there were changes to the assumptions on the underground mining costs, particularly with the top half of the ore body. So the cost per ounce in the feasibility study were higher such that the copper did no longer cover of all of the operating costs. So that's -- this deal was done sort of in line with the feasibility study estimates of operating costs. That's kind of why we picked it. I've been in the streaming industry since it's existed and has been a part of a number of situations where the streams were too high. And you got into -- I've seen in multiple situations where the streamer was taking more than 100% of the free cash flow of the entity. And it's a situation I never want to get into again. It just creates a very unhealthy relationship that's not sustainable. And if Horizon is going to be successful, which we need it to be if we're going to be able to use it for this new part of growth model, then we need to make sure that we're never in a situation where Sandstorm is taking more than 100% of the free cash flow that Horizon is getting. So that's why we did it that way. Now you're correct that the value of the stream is less than the value of the 30% Hod Maden interest, which is why we're making Horizon pay us back an IOU of $95 million to sort of recapture that value.
I can ask a second question, Nolan. You increased your line of credit, and you described the rationale for the Horizon transaction. And my impression speaking to many investors over several years is that people were uncomfortable. With the size of the Mariana's acquisition, it was too big a fraction of your company in one bet as well as permitting and country risk in Turkey, more so than just the structure of it not being streamed. With the line of credit being increased, should we still worry that there's going to be a bet that's a quarter or half of the company on one asset? Some portfolio managers want you to be well diversified.
Yes. If we look -- in fact, it's one of the things that we're -- we track very closely. And actually in our public investor presentation, we've got a slide that speaks to it, sort of looking at diversification of all of the streaming royalty companies of any material size in terms of asset concentration risk in their top assets. Sandstorm is the second most diversified company in terms of value tied up in our top 5 assets versus the value tied up in other people's top 5 assets. So we think we've done a good job at that. I would echo your concerns with respect to -- I've heard all the investor feedback over the years, and I'm well aware that the general feeling, which I agree with, was that it's not just a big bet. It was a big bet on a mine that was unpermitted and in a riskier jurisdiction and with a partner that was just not well known. And so that gave people cause for concern, and I understand that. Fortunately, today, we're here in a situation where they've got their EIA. The project is going into construction. And now we've turned that asset directly into a stream. So we're a pure-play streaming royalty company again. What I can do and can say is we will not again purchase our largest asset in the form that's not a stream. You'll never see Sandstorm do that again. I mean I won't make a promise that we won't go buy a big stream that is 25% of the value if we think it makes a lot of sense, and it's [indiscernible] and makes sense on its portfolio better. But certainly, if we're swinging big, it'll be for streams and royalties, not for other interests.
As we -- if I could just follow up. As we look at the current quarter, Cerro Moro was almost 1/4 of the revenue for the year. And the horizon value now at 34% of its common stock, the $200 million stream and the $95 million debenture is probably as big a chunk or bigger chunk in the same magnitude so that your -- you still got a couple of -- have a big asset in the Horizon-related value in Cerro Moro and the other stuff sort of small so that -- it's not perfect diversification, but it's -- this is an improvement, certainly.
Yes. I would echo that, that this is one step towards achieving that diversification. It's an important step. But certainly, we need Horizon Copper to grow and get its own legitimacy so that it's not beholden to all of the risks of just talking about. And that's the plan, and we're working on it right now.
So there's other transactions around like McEwen Copper is getting advanced. And 2, 3 years from now, they might offer to sell it. Maybe Yamana keeps all of the MARA copper gold project in Argentina. Maybe they divest 10 or 20 ownership points. Are those the kinds of things that we should think about Horizon Copper looking at several years down the road or wanting to be financially strong enough to be in the game with where each of these has a gold credit that maybe would be something Sandstorm would be in Horizon for the copper? Is that sort of the model?
To a certain extent, what I would say, though, is certainly in the next few years, we are focused almost exclusively on trying to purchase operating interest in mines or mines -- sorry, interest in mines that are already operating. And we want to do that because we see it over and over and over again, development companies, even if you've got a good asset, if you've got a massive CapEx overhang, you perpetually trade at massive discounts until you solve that, CapEx overhang and the risk inherent in building mines. And we don't want Horizon Copper to get stuck in evaluation trap because it bought development assets to begin with. We want it to become a strong, robust, exciting cash flow and copper vehicle that can directly participate in increases in the copper prices. And so -- and at Sandstorm Gold, we are really trying to focus our acquisitions on gold streams that are producing, too. So I think if you see us make acquisitions for the first few years together, it'll be on operating assets.
Your next question comes from Heiko Ihle with H.C. Wainright.
I'll stress that Paragraph 3 of the strategic partner release starts with streamline as a key theme for Sandstorm this year. When you started talking about the Hod Maden thing earlier on the call here, I mean, average returns for streams tend to be going down. And clearly, all of you, and frankly, also myself are firm believers in the streaming industry. I mean that said, again, the past 5 years, things have been -- not -- it's been tough to buy new assets, essentially. What are you seeing in the current risk-off environment? I mean all of a sudden, we worry about raising rates. We worry about invasions. We worry about geopolitical risk factors that no one really considered 6 months ago. And all of a sudden, they are a reality. I mean I'd also note that earlier on this call, you did mention that this transaction reduces your overall risk. So clearly, it seems to be something in your mind. Maybe just open-ended answer.
Open-ended answer just in terms of -- I'm not quite sure what kind of comments on that. But...
I mean you're saying you're reducing your risk. Clearly, this is something on your mind. Has anything changed internally have stricter risk standards been implemented for potential future acquisitions, that kind of stuff?
Yes. No, understood. So one of the things that is consistent feedback that I've been getting from investors is, hey, the reason we buy a streaming and royalty company is because a streaming royalty company does not have the risk of operating cost overruns and CapEx over cost overrun, full stop. And we would like you to get that risk out of the company and be a pure-play streaming royalty company. So we wanted to do that all the way along when we first announced the Hod Maden acquisition. When I came out with a video that said we're going to try to turn this into a stream. Now it took longer than I was hoping it would. But we certainly recognize that, that's a hallmark of why generalist investors specifically prefer to buy streaming royalty companies over mining companies. And so this step is de-risking, but it's also a signal to the market that we're not going to put that risk in Sandstorm Gold ever again. We want to be a low-risk, diversified streaming royalty company focused on gold. That is who we are. That's what we're going to be. And we're not going to take steps like we did in the Hod Maden previously. Having said that, Hod Maden's worked out fantastic for us in the end. We located $180 million for it. And today, we're crystallizing the $300 million of value approximately. And so it's an asset that never would have had a stream on it. So no one ever was going to get a stream on it. But we not only got a stream on it. We made money on the transaction. But having said that, we certainly -- our valuation lumps in the process and don't want to do that again. So that's why we're focusing on de-risking. It's not really any changes in the industry. It's just Sandstorm specifically.
Got it. Got it. More general, and just to clarify, the revised agreement, there is no minimum and no maximum figures for the initial 50% and the eventual 60% of the spot gold price, right?
Correct.
Okay. Perfect. My third question have already been answered, so I'll get back in queue.
Thank you. There are no further questions at this time. Mr. Watson, you may proceed.
Great. Well, thanks, everybody. Appreciate you taking the time. I know this call took a little bit longer than they traditionally do, but there's lots of stuff to go through. As always, we're here. Ask us any questions in the office. Send us an e-mail, and we'll get back to you. And thanks again, and have a good day.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.