EX-99.7 8 a12-11867_1ex99d7.htm EX-99.7

Exhibit 99.7

SECTION

/02/

SANDSTORM GOLD LTD.

cONDeNSeD cONSOLiDATeD iNTeRiM FiNANciAL STATeMeNTS

cONDeNSeD cONSOLiDATeD iNTeRiM STATeMeNTS OF FiNANciAL POSiTiON | FINANCIAL POSITION

Expressed in U.S. dollars ($000s)/unaudited

|  | Note |  | June 30, 2012 |  | December 31, 2011 |
ASSETS |  |  |  |  |  |  |
Current |  |  |  |  |  |  |
Cash |  |  |  | $ | 25,089 |  | $ | 13,073 |
Inventory |  |  |  | 534 |  | — |
Loan receivable |  |  |  | 4,000 |  | — |
Trade receivables and other |  |  |  | 110 |  | 50 |
|  |  |  | $ | 29,733 |  | $ | 13,123 |
Non-current |  |  |  |  |  |  |
Mineral interests and royalties |  | 5 |  | 143,574 |  | 128,982 |
Investments |  | 6 |  | 3,175 |  | 8,362 |
Deferred financing costs |  | 7 |  | 752 |  | — |
Deferred income tax assets |  | 9 |  | — |  | 1,343 |
Other |  |  |  | 812 |  | 982 |
Total assets |  |  |  | $ | 178,046 |  | $ | 152,792 |
LIABILITIES |  |  |  |  |  |  |
Current |  |  |  |  |  |  |
Trade and other payables |  |  |  | $ | 577 |  | $ | 834 |
Mineral interest payable |  | 5 |  | 4,000 |  | — |
|  |  |  | $ | 4,577 |  | $ | 834 |
Non-Current |  |  |  |  |  |  |
Deferred income tax liability |  | 9 |  | 187 |  | — |
EQUITY |  |  |  |  |  |  |
Share capital |  | 8 |  | $ | 138,941 |  | $ | 125,466 |
Reserves |  | 8 |  | 18,801 |  | 20,435 |
Retained earnings |  |  |  | 15,441 |  | 5,742 |
Accumulated other comprehensive income |  |  |  | 99 |  | 315 |
|  |  |  | $ | 173,282 |  | $ | 151,958 |
Total liabilities and equity |  |  |  | $ | 178,046 |  | $ | 152,792 |

Contractual obligations (Note 12)

ON BeHALF OF THe BOARD:

“Nolan Watson”, Director

“David DeWitt”, Director

- The accompanying notes are an integral part of these condensed consolidated interim financial statements -

25

cONDeNSeD cONSOLiDATeD iNTeRiM STATeMeNTS OF cOMPReHeNSiVe iNcOMe | COMPREHENSIVE INCOME

Expressed in U.S. dollars ($000s)/unaudited

|  |  |  | 3 Months Ended |  | 3 Months Ended |  | 6 Months Ended |  | 6 Months Ended |
|  | Note |  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2012 |  | June 30, 2011 |
Sales |  |  |  | $ | 14,954 |  | $ | 5,582 |  | $ | 28,418 |  | $ | 9,250 |
Cost of sales, excluding depletion |  |  |  | 2,762 |  | 1,607 |  | 5,255 |  | 2,706 |
Depletion |  |  |  | 4,308 |  | 1,171 |  | 7,985 |  | 1,785 |
Total cost of sales |  |  |  | $ | 7,070 |  | $ | 2,778 |  | $ | 13,240 |  | $ | 4,491 |
Gross profit |  |  |  | $ | 7,884 |  | $ | 2,804 |  | $ | 15,178 |  | $ | 4,759 |
Expenses and other (income) |  |  |  |  |  |  |  |  |  |  |
Administration expenses |  | 10 |  | 1,300 |  | 901 |  | 2,548 |  | 1,880 |
Project evaluation |  |  |  | 334 |  | 3 |  | 448 |  | 32 |
Foreign exchange loss |  |  |  | 82 |  | 12 |  | 108 |  | 12 |
Other expenses |  |  |  | 353 |  | — |  | 414 |  | 5 |
Income from deferral of production guarantee |  | 13 |  | — |  | (774 | ) | — |  | (774 | )
Income from operations |  |  |  | $ | 5,815 |  | $ | 2,662 |  | $ | 11,660 |  | $ | 3,604 |
Income before taxes |  |  |  | $ | 5,815 |  | $ | 2,662 |  | $ | 11,660 |  | $ | 3,604 |
Income tax expense |  | 9 |  | 532 |  | 401 |  | 1,961 |  | 385 |
Net income for the period |  |  |  | $ | 5,283 |  | $ | 2,261 |  | $ | 9,699 |  | $ | 3,219 |
Other comprehensive income (loss) |  |  |  |  |  |  |  |  |  |  |
Unrealized loss on investments - common shares held, net of tax |  | 6 |  | (319 | ) | — |  | (216 | ) | — |
Total comprehensive income for the period |  |  |  | $ | 4,964 |  | $ | 2,261 |  | $ | 9,483 |  | $ | 3,219 |
Basic earnings per share |  |  |  | $ | 0.07 |  | $ | 0.04 |  | $ | 0.14 |  | $ | 0.05 |
Diluted earnings per share |  |  |  | $ | 0.06 |  | $ | 0.03 |  | $ | 0.11 |  | $ | 0.04 |
Weighted average number of common shares outstanding |  |  |  |  |  |  |  |  |  |  |
Basic |  | 8(f) |  | 68,814,660 |  | 63,960,033 |  | 69,148,399 |  | 63,787,291 |
Diluted |  | 8(f) |  | 82,606,962 |  | 75,257,162 |  | 84,520,862 |  | 72,662,150 |

- The accompanying notes are an integral part of these condensed consolidated interim financial statements -

26

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS Expressed in U.S. dollars ($000s) / unaudited | CASH FLOWS

|  |  |  | 3 Months Ended |  | 3 Months Ended |  | 6 Months Ended |  | 6 Months Ended |
Cash flow from (used in): |  | Note |  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2012 |  | June 30, 2011 |
Operating activities |  |  |  |  |  |  |  |  |  |  |
Net income for the period |  |  |  | $ | 5,283 |  | $ | 2,261 |  | $ | 9,699 |  | $ | 3,219 |
Items not affecting cash: |  |  |  |  |  |  |  |  |  |  |
· Depletion and depreciation |  |  |  | 4,398 |  | 1,171 |  | 8,159 |  | 1,785 |
· Deferred income tax expense |  | 9 |  | 532 |  | 401 |  | 1,961 |  | 385 |
· Share-based payment |  | 8 |  | 451 |  | 492 |  | 929 |  | 1,020 |
· Loss on fair value adjustment of investments |  | 6 |  | 194 |  | — |  | 128 |  | — |
· Unrealized foreign exchange loss (gain) |  |  |  | 81 |  | (8 | ) | 87 |  | (12 | )
Changes in non-cash working capital |  | 11 |  | 319 |  | (1,672 | ) | (441 | ) | (2,137 | )
|  |  |  | $ | 11,258 |  | $ | 2,645 |  | $ | 20,522 |  | $ | 4,260 |
Investing activities |  |  |  |  |  |  |  |  |  |  |
Acquisition of mineral interests and royalties |  |  |  | (18,853 | ) | (787 | ) | (18,853 | ) | (27,937 | )
Acquisition of investments |  | 6 |  | (213 | ) | — |  | (2,224 | ) | — |
Disposal of investments |  | 6 |  | 1,323 |  | — |  | 6,686 |  | — |
Loan issuance |  |  |  | (4,000 | ) | — |  | (4,000 | ) | — |
Acquisition of other assets |  |  |  | — |  | 9 |  | — |  | (255 | )
|  |  |  | $ | (21,743 | ) | $ | (778 | ) | $ | (18,391 | ) | $ | (28,192 | )
Financing activities |  |  |  |  |  |  |  |  |  |  |
Proceeds on exercise of warrants, options, and compensation warrants |  |  |  | 1,472 |  | 1,315 |  | 10,865 |  | 1,315 |
Share issue costs |  |  |  | — |  | (4 | ) | — |  | 28 |
Deferred financing costs |  | 7 |  | — |  | — |  | (893 | ) | — |
|  |  |  | $ | 1,472 |  | $ | 1,311 |  | $ | 9,972 |  | $ | 1,343 |
Effect of exchange rate changes on cash |  |  |  | $ | (70 | ) | $ | 8 |  | $ | (87 | ) | $ | 6 |
Net (decrease) increase in cash |  |  |  | (9,083 | ) | 3,186 |  | 12,016 |  | (22,583 | )
Cash – beginning of the period |  |  |  | 34,172 |  | 2,764 |  | 13,073 |  | 28,533 |
Cash – end of the period |  |  |  | $ | 25,089 |  | $ | 5,950 |  | $ | 25,089 |  | $ | 5,950 |

- The accompanying notes are an integral part of these condensed consolidated interim financial statements -

27

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY Expressed in U.S. dollars ($000s) / unaudited | CHANGES IN EQUITY

|  |  |  | Share Capital |  | Reserves |  |  |  | Accumulated |  |  |
|  |  |  |  |  |  |  |  |  | Share |  |  |  | Retained |  | Other Comprehensive |  |  |
|  |  |  |  |  |  |  | Share |  | Purchase |  | Compensation |  | Earnings |  | Income |  |  |
|  | Note |  | Number |  | Amount |  | Options |  | Warrants |  | Warrants |  | (Deficit) |  | (loss) |  | Total |
At January 1, 2011 |  |  |  | 63,612,629 |  | $ | 117,199 |  | $ | 1,051 |  | $ | 17,378 |  | $ | 2,045 |  | $ | (6,747 | ) | $ | — |  | $ | 130,926 |
Compensation warrants exercised |  |  |  | 580,251 |  | 1,249 |  | — |  | 555 |  | (846 | ) | — |  | — |  | 958 |
Share issue cost (net of tax) |  | 8 (b) |  | — |  | 21 |  | — |  | — |  | — |  | — |  | — |  | 21 |
Options exercised |  |  |  | 22,000 |  | 70 |  | (16 | ) | — |  | — |  | — |  | — |  | 54 |
Share based payment |  | 8 (b) |  | — |  | — |  | 1,020 |  | — |  | — |  | — |  | — |  | 1,020 |
Warrants exercised |  |  |  | 101,000 |  | 370 |  | — |  | (68 | ) | — |  | — |  | — |  | 302 |
Total comprehensive income |  |  |  | — |  | — |  | — |  | — |  | — |  | 3,219 |  | — |  | 3,219 |
At June 30, 2011 |  |  |  | 64,315,880 |  | $ | 118,909 |  | $ | 2,055 |  | $ | 17,865 |  | $ | 1,199 |  | $ | (3,528 | ) | $ | — |  | $ | 136,500 |
At January 1, 2011 |  |  |  | 63,612,629 |  | $ | 117,199 |  | $ | 1,051 |  | $ | 17,378 |  | $ | 2,045 |  | $ | (6,747 | ) | $ | — |  | $ | 130,926 |
Compensation warrants exercised |  |  |  | 1,157,405 |  | 2,492 |  | — |  | 1,105 |  | (1,687 | ) | — |  | — |  | 1,910 |
Options exercised |  |  |  | 22,000 |  | 70 |  | (17 | ) | — |  | — |  | — |  | — |  | 53 |
Share based payment |  |  |  | — |  | — |  | 1,599 |  | — |  | — |  | — |  | — |  | 1,599 |
Share issue costs (net of tax) |  | 8 (b) |  | — |  | 21 |  | — |  | — |  | — |  | — |  | — |  | 21 |
Warrants exercised |  |  |  | 1,547,980 |  | 5,684 |  | — |  | (1,039 | ) | — |  | — |  | — |  | 4,645 |
Total comprehensive income |  |  |  | — |  | — |  | — |  | — |  | — |  | 12,489 |  | 315 |  | 12,804 |
At December 31, 2011 |  |  |  | 66,340,014 |  | 125,466 |  | 2,633 |  | 17,444 |  | 358 |  | 5,742 |  | 315 |  | 151,958 |
Compensation warrants exercised |  |  |  | 245,510 |  | 528 |  | — |  | — |  | — |  | — |  | — |  | 528 |
Options exercised |  | 8 (b) |  | 260,000 |  | 725 |  | (150 | ) | — |  | — |  | — |  | — |  | 575 |
Share based payment |  |  |  | — |  | — |  | 929 |  | — |  | — |  | — |  | — |  | 929 |
Share issue costs |  |  |  | — |  | 49 |  | — |  | — |  | — |  | — |  | — |  | 49 |
Warrants exercised |  | 8 (c) |  | 3,294,247 |  | 12,173 |  | — |  | (2,055 | ) | (358 | ) | — |  | — |  | 9,760 |
Total comprehensive income |  | 6 |  | — |  | — |  | — |  | — |  | — |  | 9,699 |  | (216 | ) | 9,483 |
At June 30, 2012 |  |  |  | 70,139,771 |  | 138,941 |  | 3,412 |  | 15,389 |  | — |  | 15,441 |  | 99 |  | 173,282 |

- The accompanying notes are an integral part of these condensed consolidated interim financial statements -

28

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

June 30, 2012 / Expressed in U.S. dollars / unaudited

1. Nature Of Operations

Sandstorm Gold Ltd. was incorporated under the Business Corporations Act of British Columbia on March 23, 2007 under the name Sandstorm Resources Ltd. effective February 17, 2011, the Company changed its name to Sandstorm Gold Ltd. Sandstorm Gold Ltd. and its subsidiary entities (“Sandstorm” or the “Company”) is a resource based company that seeks to acquire gold streams (“Gold Streams”) from companies that have advanced stage development projects or operating mines. In return for making a one-time upfront payment to acquire a Gold Stream, Sandstorm receives the right to purchase, at a fixed price per unit, a percentage of a mine’s production for the life of the mine.

The head office, principal address and registered office of the Company are located at Suite 1400, 400 Burrard Street, Vancouver, British Columbia, V6C 3A6.

These condensed consolidated interim financial statements were authorized for issue by the board of directors of the Company on July 25, 2012.

2. Basis Of Presentation

A. STATEMENT OF COMPLIANCE

These condensed consolidated interim financial statements, including comparatives, have been prepared in accordance with International Accounting Standards (“IAS”) 34 ‘Interim Financial Reporting (“IAS 34”) using accounting policies consistent with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”). These condensed consolidated interim financial statements have been prepared on the basis of accounting policies and methods of computation consistent with those applied in and should be read in conjunction with the Company’s December 31, 2011 consolidated financial statements.

B. BASIS OF PRESENTATION

These condensed consolidated interim annual financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at fair value.

The condensed consolidated interim financial statements are presented in United States dollars, and all values are rounded to the nearest thousand except as otherwise indicated.

3. Future Changes In Accounting Policies

The IASB issued a number of new and revised accounting standards which are effective for annual periods beginning on or after December 1, 2013, with early adoption permitted. These standards include the following:

· IFRS 10, Consolidated Financial Statements;

· IFRS 11, Joint Arrangements;

· IFRS 12, Disclosure of Interests in Other Entities;

· IFRS 13, Fair Value Measurement;

· Amended IAS 27, Separate Financial Statements; and

· Amended IAS 28, Investments in Associates and Joint Ventures.

In June 2011, the IASB also issued amended IAS 1, Presentation of Financial Statements, which is effective for annual periods beginning on or after July 1, 2012.

These new and revised accounting standards have not yet been adopted by Sandstorm, and the Company has not yet completed the process of assessing the impact that they will have on its financial statements, or whether to early adopt any of the new requirements.

29

4. Financial Instruments

CAPITAL RISK MANAGEMENT

The Company’s objective of capital management is to ensure that it will be able to continue as a going concern and identify, evaluate, and acquire Commodity and Energy streams. The capital of the Company consists of shareholders’ equity. The Company is not subject to any externally imposed capital requirements with the exception of complying with the minimum tangible net worth covenant under the Revolving Loan (note 7). The Company is in compliance with the debt covenants described in note 7.

5. Mineral Interests and Royalties

A. CARRYING AMOUNT

As of June 30, 2012

|  | Cost |  | Accumulated Depletion |  |  |
In $000s |  | Opening |  | Additions |  | Ending |  | Opening |  | Depletion |  | Inventory Depletion Adjustment |  | Ending |  | Carrying Amount |
Aurizona, Brazil |  | $ | 19,977 |  | $ | — |  | $ | 19,977 |  | $ | 1,328 |  | $ | 705 |  | $ | — |  | $ | 2,033 |  | $ | 17,944 |
Bachelor Lake, Canada |  | 20,845 |  | — |  | 20,845 |  | — |  | 41 |  | 32 |  | 73 |  | 20,772 |
Black Fox, Canada |  | 56,524 |  | — |  | 56,524 |  | 2,614 |  | 2,658 |  | 273 |  | 5,545 |  | 50,979 |
Bracemac-McLeod, Canada |  | 32 |  | 5,000 |  | 5,032 |  | — |  | — |  | — |  | — |  | 5,032 |
Coringa and Cuiú Cuiú, Brazil |  | — |  | 7,838 |  | 7,838 |  | — |  | — |  | — |  | — |  | 7,838 |
Ming, Canada |  | 20,068 |  | — |  | 20,068 |  | — |  | 2,766 |  | — |  | 2,766 |  | 17,302 |
Mt. Hamilton, U.S.A |  | — |  | 10,044 |  | 10,044 |  | — |  | — |  | — |  | — |  | 10,044 |
Santa Elena, Mexico |  | 13,342 |  | — |  | 13,342 |  | 1,473 |  | 1,529 |  | — |  | 3,002 |  | 10,340 |
Summit, U.S.A. |  | 4,063 |  | — |  | 4,063 |  | 454 |  | 286 |  | — |  | 740 |  | 3,323 |
Total |  | $ | 134,851 |  | $ | 22,882 |  | $ | 157,733 |  | $ | 5,869 |  | $ | 7,985 |  | $ | 305 |  | $ | 14,159 |  | $ | 143,574 |

As of and for the year ended December 31, 2011:

|  | Cost |  | Accumulated Depletion |  | Carrying |
In $000s |  | Opening |  | Additions |  | Ending |  | Opening |  | Depletion |  | Ending |  | Amount |
Aurizona, Brazil |  | $ | 19,977 |  | $ | — |  | $ | 19,977 |  | $ | 296 |  | $ | 1,032 |  | $ | 1,328 |  | $ | 18,649 |
Bachelor Lake, Canada |  | — |  | 20,845 |  | 20,845 |  | — |  | — |  | — |  | 20,845 |
Black Fox, Canada |  | 56,470 |  | 54 |  | 56,524 |  | — |  | 2,614 |  | 2,614 |  | 53,910 |
Bracemac-McLeod, Canada |  | — |  | 32 |  | 32 |  | — |  | — |  | — |  | 32 |
Ming, Canada |  | 7,062 |  | 13,006 |  | 20,068 |  | — |  | — |  | — |  | 20,068 |
Santa Elena, Mexico |  | 13,342 |  | — |  | 13,342 |  | 42 |  | 1,431 |  | 1,473 |  | 11,869 |
Summit, U.S.A. |  | 4,063 |  | — |  | 4,063 |  | 7 |  | 447 |  | 454 |  | 3,609 |
Total |  | $ | 100,914 |  | $ | 33,937 |  | $ | 134,851 |  | $ | 345 |  | $ | 5,524 |  | $ | 5,869 |  | $ | 128,982 |

30

B. DEPLETABLE VS. NON-DEPLETABLE BALANCES

The value allocated to reserves is classified as depletable and is depleted on a units-delivered basis over the estimated recoverable proven and probable reserves at the mine. The value associated with resources and exploration potential is the value beyond proven and probable reserves allocated at acquisition and is classified as non-depletable until such time as it is transferred to the depletable category, generally as a result of the conversion of resources or exploration potential into reserves.

As of June 30, 2012

In $000s |  | Depletable |  | Non-depletable |  | Total |
Aurizona |  | $ | 14,990 |  | $ | 2,954 |  | $ | 17,944 |
Bachelor Lake |  | 19,385 |  | 1,387 |  | 20,772 |
Black Fox |  | 47,915 |  | 3,064 |  | 50,979 |
Bracemac-McLeod |  | — |  | 5,032 |  | 5,032 |
Coringa and Cuiú Cuiú |  | 7,838 |  | — |  | 7,838 |
Ming |  | 17,302 |  | — |  | 17,302 |
Mt. Hamilton |  | 10,044 |  | — |  | 10,044 |
Santa Elena |  | 8,116 |  | 2,224 |  | 10,340 |
Summit |  | 3,030 |  | 293 |  | 3,323 |
Total |  | $ | 128,620 |  | $ | 14,954 |  | $ | 143,574 |

As of December 31, 2011

In $000s |  | Depletable |  | Non-depletable |  | Total |
Aurizona |  | $ | 15,695 |  | $ | 2,954 |  | $ | 18,649 |
Bachelor Lake |  | 19,457 |  | 1,387 |  | 20,844 |
Black Fox |  | 50,526 |  | 3,385 |  | 53,911 |
Bracemac-McLeod |  | 32 |  | — |  | 32 |
Ming |  | 13,389 |  | 6,679 |  | 20,068 |
Santa Elena |  | 9,640 |  | 2,229 |  | 11,869 |
Summit |  | 3,317 |  | 292 |  | 3,609 |
Total |  | $ | 112,056 |  | $ | 16,926 |  | $ | 128,982 |

C. SUMMARY OF GOLD STREAMS

AURIZONA MINE > The Company has a Gold Stream to purchase 17% of the life of mine gold produced from Luna Gold Corp.’s open-pit Aurizona mine, located in Brazil (the “Aurizona Mine”) for a per ounce cash payment equal to the lesser of $400 and the then prevailing market price of gold.

BACHELOR LAKE MINE > The Company has a Gold Stream with Metanor Resources Inc. (“Metanor”) to purchase 20% of the life of mine gold produced from Metanor’s Bachelor Lake gold mine located in Quebec, Canada (“Bachelor Lake Mine”) for an upfront payment of $20.0 million plus ongoing per ounce payments equal to the lesser of $500 and the then prevailing market price per ounce of gold. Metanor has provided a guarantee that Sandstorm will receive a minimum of $20.0 million in pre-tax cash flow over the next 4.5 years.

BLACK FOX MINE > The Company has a Gold Stream to purchase 12% of the life of mine gold produced from Brigus Gold Corp.’s (“Brigus”) open pit and underground Black Fox mine, located in Canada (the “Black Fox Mine”) and 10% of the life of mine gold produced from Brigus’ Black Fox extension, which includes a portion of Brigus’ Pike River concessions for a per ounce cash payment equal to the lesser of $500 and the then prevailing market price of gold. Brigus has the option until January 1, 2013 to repurchase 50% of the Brigus Gold Stream by making a $36.6 million payment to the Company, upon receipt of which, the percentage of gold the Company is entitled to purchase will decrease to 6% for the Black Fox Mine and 4.5% for the Black Fox extension.

BRACEMAC-MCLEOD MINE > The Company has a Gold Stream with Donner Metals Ltd. (“Donner”) via a back-to-back agreement with Sandstorm Metals & Energy Ltd. (“Sandstorm Metals & Energy”) to purchase 17.5% of the life of mine gold and gold equivalent of silver (“Gold Equivalent”) produced from the Bracemac-McLeod Property located in Quebec, Canada which is operated by Xstrata Canada Corporation (“the Bracemac-McLeod Mine”). Donner is the owner of a 35% joint venture interest in the Bracemac-McLeod Mine.

For consideration, the Company made an upfront payment of $5.0 million during the three months ended June 30, 2012 and will continue to make ongoing per ounce payments equal to the lesser of $350 and the then prevailing market price of gold. Donner has provided a guarantee, via a back-to-back agreement with Sandstorm Metals & Energy, that the Company will receive a minimum of $5.0 million in pre-tax cash flows between 2013 and 2016 from the Bracemac-McLeod Gold Stream.

Donner has the option until July 13, 2013 to repurchase 50% of the Bracemac-McLeod Gold Stream by making a $3.5 million payment to the Company, upon receipt of which, the percentage of gold and Gold Equivalent the Company is entitled to purchase will decrease to 8.75%.

31

CORINGA AND CUIÚ CUIÚ PROJECT > On May 11, 2012 the Company acquired a 2.5% net smelter returns royalty (“NSR”) from Magellan Minerals Ltd (“Magellan”) on the Coringa gold project (“Coringa”) and a 1.0% NSR on the Cuiú Cuiú gold project (“Cuiú Cuiú”) both of which are located in Para state, Brazil. For consideration, Sandstorm made an upfront payment of $7.5 million and subscribed for one million shares of Magellan at a price of $0.50 per share. As part of the agreement, Magellan has provided Sandstorm with a right of first refusal on any future royalty or gold stream financing at Coringa and Cuiú Cuiú.

MING MINE > The Company has a Gold Stream to purchase approximately 25% of the first 175,000 ounces of gold produced and 12% of the life of mine gold produced thereafter, from Rambler Metals & Mining plc’s (“Rambler”) Ming mine, located in Canada (the “Ming Mine”). There are no ongoing per ounce payments required by Sandstorm in respect of the Ming Mine Gold Stream. In the event that the metallurgical recoveries of gold at the Ming Mine are below 85%, the percentage of gold that Sandstorm shall be entitled to purchase shall be increased proportionally.

MT. HAMILTON PROJECT > The Company has a 2.4% NSR on the Mt. Hamilton gold project. The Mt. Hamilton gold project is located in White Pine County, Nevada, U.S.A. and is held by Mt. Hamilton LLC (“MH-LLC”) which is 80% owned by Solitario Exploration & Royalty Corp. and 20% owned by Ely Gold & Minerals Inc. For consideration, the Company made an initial upfront payment of $6.0 million during the three months ended June 30, 2012 and will make a further upfront payment of $4.0 million on January 15, 2013.

If MH-LLC enters into a gold stream agreement with Sandstorm that has an upfront deposit of no less than US$30 million, MH-LLC will have the option, for a period of 30 months, to repurchase up to 100% of the NSR for US$12 million. In addition, MH-LLC has provided Sandstorm with a right of first refusal on any future royalty or gold stream financing for the Mt. Hamilton project

SANTA ELENA MINE > The Company has a Gold Stream to purchase 20% of the life of mine gold produced from SilverCrest Mines Inc.’s open pit Santa Elena mine, located in Mexico (the “Santa Elena Mine”) for a per ounce cash payment equal to the lesser of $350 and the then prevailing market price of gold.

SUMMIT MINE > The Company has a Gold Stream to purchase 50% of the first 10,000 ounces of gold produced, and 22% of the life of mine gold produced thereafter, from Santa Fe Gold Corporation’s Summit mine, located in the U.S.A. (the “Summit Mine”) for a per ounce cash payment equal to the lesser of $400 and the then prevailing market price of gold. The Company is currently in discussions with Santa Fe regarding the deferral of amounts due by Santa Fe to the Company.

6. Investments

|  | Opening Balance |  |  |  | Change in Fair |  |  |  |  |
In $000s |  | January 1, 2012 |  | Additions |  | Value |  | Disposals |  | Carrying Amount |
Common shares held |  | $ | 7,923 |  | $ | 2,224 |  | $ | (598 | ) | $ | (6,686 | ) | $ | 2,863 |
Warrants held |  | 439 |  | — |  | (127 | ) | — |  | 312 |
|  | $ | 8,362 |  | $ | 2,224 |  | $ | (725 | ) | $ | (6,686 | ) | $ | 3,175 |

The fair value of the investments is calculated as the quoted market price of the share or warrant multiplied by the quantity of the shares or warrants held by the Company. During the three and six months ended June 30, 2012, the Company acquired common shares for total consideration of $0.2 million and $2.2 million, respectively (2011 - $nil). During the three and six months ended June 30, 2012 the Company realized proceeds on disposition of investments of $1.3 million and $6.7 million, respectively (2011 - $nil). The tax impact of the changes in investments during the period was $o.8 million (2011 - $nil).

7. Deferred Financing Costs

On January 12, 2012, the Company entered into a $50.0 million revolving term loan (the “Revolving Loan”). The Revolving Loan has a term of three years, which is extendable by mutual consent of The Bank of Nova Scotia and the Company. The Revolving Loan can be drawn down at any time to finance acquisitions, investments or for general corporate purposes. Amounts drawn incur interest at LIBOR plus 3.00% to 4.25% per annum dependent upon the Company’s leverage ratio. Undrawn amounts are subject to a standby fee of 0.75% to 1.05% per annum, dependent on the Company’s leverage ratio.

Under the credit agreement, the Company is required to maintain an interest coverage ratio greater than or equal to 4.00:1, a leverage ratio less than or equal to 2.50:1, and a tangible net worth greater than the aggregate of $100.0 million and 50% of positive Net

32

Income for each fiscal quarter after September 30, 2011. The Revolving Loan is secured against the Company’s assets, including the Company’s gold interests and investments. As of June 30, 2012, the Company was in compliance with these covenants.

As at June 30, 2012 the Company had not drawn down on its credit facility and therefore, the full $50.0 million remains available for future acquisitions.

Deferred financing costs are capitalized and amortized on a straight-line basis over the life of the debt instrument as presented below:

In $000s |  | Cost |  | Accumulated Amortization |  | Carrying Amount |
Debt issuance costs |  | $ | 893 |  | $ | 141 |  | $ | 752 |

The company did not have any deferred financing costs as at December 31, 2011.

8. Share Capital and Reserves

A. SHARES ISSUED

The Company is authorized to issue an unlimited number of common shares without par value.

On May 9, 2012, the Company completed its five for one consolidation (the “Consolidation”) of the Company’s common shares. The 349,658,858 common shares issued and outstanding prior to the Consolidation have been consolidated to approximately 69,931,771 common shares. The Company’s outstanding stock options were adjusted on the same basis with proportionate adjustments being made to the stock option exercise prices.

The Company’s listed warrants were not consolidated. Following the Consolidation, each five (5) listed warrants of SSL.WT (expiring on April 23, 2014) will entitle the holder to purchase one post-Consolidation common share at the adjusted total exercise price of US$3.00. Each five (5) listed warrants of SSL.WT.A (expiring on October 19, 2015) will entitle the holder to purchase one post-Consolidation common share at the adjusted total exercise price of US$5.00.

All comparative period information has been adjusted to reflect this Consolidation.

B. STOCK OPTIONS

The Company has an incentive stock option plan (the “Option Plan”) whereby the Company may grant stock options to eligible employees, officers, directors and consultants at an exercise price, expiry date, and vesting conditions to be determined by the board of directors. The maximum expiry date is five years from the grant date. All options are equity settled. The Option Plan provides for the issuance of up to 10% of the Company’s issued common shares as at the date of the grant.

A summary of the Company’s options and the changes for the period are as follows:

|  |  |  | Weighted average |
|  | Number of Options |  | exercise price (C$) |
Options outstanding at December 31, 2010 |  | 2,664,000 |  | 2.85 |
Granted |  | 1,238,000 |  | 6.30 |
Exercised |  | (22,000 | ) | 2.35 |
Forfeited |  | (10,000 | ) | 3.40 |
Options outstanding at December 31, 2011 |  | 3,870,000 |  | 3.95 |
Exercised |  | (260,000 | ) | 2.15 |
Options outstanding at June 30, 2012 |  | 3,610,000 |  | 4.08 |

33

A summary of the Company’s options as of June 30, 2012 are as follows:

Number outstanding |  | Exercisable |  | Price per Share (C$) |  | Expiry Date |
650,000 |  | 650,000 |  | $ | 2.25 |  | June 16, 2014 |
140,000 |  | 140,000 |  | $ | 2.20 |  | July 6, 2014 |
200,000 |  | 200,000 |  | $ | 2.18 |  | July 28, 2014 |
20,000 |  | 20,000 |  | $ | 3.35 |  | May 19, 2015 |
1,362,000 |  | 1,362,000 |  | $ | 3.40 |  | November 26, 2015 |
91,000 |  | — |  | $ | 6.30 |  | August 25, 2016 |
1,147,000 |  | — |  | $ | 6.35 |  | November 25, 2016 |
3,610,000 |  | 2,372,000 |  |  |  |  |

The weighted-average share price at date of exercise for the three and six months ended June 30, 2012 was C$8.81 and C$8.93, respectively (C$5.36 — three and six months ended June 30, 2011)

A summary of share-based payment recognized is as follows:

|  | 3 Months Ended |  | 3 Months Ended |  | 6 Months Ended |  | 6 Months Ended |
In $000s |  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2012 |  | June 30, 2011 |
Employees |  | $ | (451 | ) | $ | (389 | ) | $ | (929 | ) | $ | (874 | )
Non-employees |  | — |  | (103 | ) | — |  | (146 | )
|  | $ | (451 | ) | $ | (492 | ) | $ | (929 | ) | $ | (1,020 | )

C. SHARE PURCHASE WARRANTS

A summary of the Company’s warrants and the changes for the period are as follows:

|  | Number of warrants on a |  | Shares to be issued upon |
|  | pre-consolidated basis |  | exercise of the warrants |
Warrants outstanding at January 1, 2011 |  | 119,036,211 |  | 23,807,242 |
Issued upon exercise of Compensation Warrants |  | 2,893,511 |  | 578,702 |
Exercised |  | (7,739,900 | ) | (1,547,980 | )
Warrants outstanding at December 31, 2011 |  | 114,189,822 |  | 22,837,964 |
Exercised |  | (15,857,462 | ) | 3,171,492 |
Warrants outstanding at June 30, 2012 |  | 98,332,360 |  | 19,666,472 |

A summary of the Company’s warrants as of June 30, 2012 are as follows:

|  | Pre-consolidated |  | Shares to be issued |  |  |  |  |
Number of warrants on a |  | exercise price per |  | upon exercise of the |  | Consolidated exercise |  |  |
pre-consolidated basis |  | warrant |  | warrants |  | price per share |  | Expiry Date |
78,643,672 |  | $ | 0.60 |  | 15,728,734 |  | $ | 3.00 |  | April 23, 2014 |
19,688,688 |  | $ | 1.00 |  | 3,937,738 |  | $ | 5.00 |  | October 19, 2015 |
98,332,360 |  |  |  | 19,666,472 |  |  |  |  |

34

D. COMPENSATION WARRANTS

Each Compensation Warrant entitles the holder to acquire one unit comprised of one common share of the Company and one-half of a share purchase warrant. Each Compensation Warrant has an exercise price of $0.33 and each five full share purchase warrants issued upon exercise of the Compensation Warrants will entitle the holder to purchase one common share at an adjusted exercise price of $3.00 until April 23, 2014.

A summary of the Company’s Compensation Warrants and the changes for the period are as follows:

|  | Number of Compensation Warrants |
Compensation Warrants outstanding at December 31, 2011 |  | 1,227,550 |
Exercised |  | (1,227,550 | )
Compensation Warrants outstanding at June 30, 2012 |  | — |

E. RESTRICTED SHARE PLAN

On April 4, 2011, the Company adopted a restricted share plan (the “Restricted Share Plan”) whereby the Company may grant restricted share rights to eligible employees, officers, directors and consultants at an expiry date to be determined by the board of directors. Each restricted share right entitles the holder to receive a common share of the Company without any further consideration. The Restricted Share Plan provides for the issuance of up to 4,000,000 restricted share rights outstanding at a given time. As of June 30, 2012 and December 31, 2011, no restricted share rights had been granted by the Company under the Restricted Share Plan.

F. DILUTED EARNINGS PER SHARE

Diluted earnings per share is calculated based on the following:

|  | 3 Months Ended |  | 3 Months Ended |  | 6 Months Ended |  | 6 Months Ended |
In $000s |  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2012 |  | June 30, 2011 |
Net income |  | $ | 5,283 |  | $ | 2,261 |  | $ | 9,699 |  | $ | 3,219 |
Basic weighted average number of shares |  | 68,814,660 |  | 63,960,033 |  | 69,148,399 |  | 63,787,291 |
Effect of dilutive securities |  |  |  |  |  |  |  |  |
· Compensation warrants - shares |  | 61,247 |  | 821,460 |  | 104,398 |  | 870,522 |
· Compensation warrants - warrants |  | 41,603 |  | 162,107 |  | 71,901 |  | 119,772 |
· Stock options |  | 1,997,313 |  | 1,196,562 |  | 2,737,250 |  | 970,336 |
· Warrants |  | 11,692,139 |  | 9,117,000 |  | 12,458,914 |  | 6,914,229 |
Diluted weighted average number of common shares |  | 82,606,962 |  | 75,257,162 |  | 84,520,863 |  | 72,662,150 |

The following lists the stock options and share purchase warrants excluded from the computation of diluted weighted average number of common shares as they were anti-dilutive:

|  | 3 Months Ended |  | 3 Months Ended |  | 6 Months Ended |  | 6 Months Ended |
|  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2012 |  | June 30, 2011 |
Warrants |  | — |  | — |  | — |  | 19,692,025 |

35

9. Income Taxes

The income tax expense differs from the amount that would result from applying the federal and provincial income tax rate to the net income before income taxes. These differences result from the following items:

|  | 3 Months Ended |  | 3 Months Ended |  | 6 Months Ended |  | 6 Months Ended |
In $000s |  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2012 |  | June 30, 2011 |
Income before income taxes |  | $ | 5,815 |  | $ | 2,662 |  | $ | 11,660 |  | $ | 3,604 |
Canadian federal and provincial income tax rates |  | 25.0 | % | 26.5 | % | 25.0 | % | 26.5 | %
Income tax expense based on the above rates |  | 1,454 |  | 705 |  | 2,915 |  | 955 |
Increase (decrease) due to: |  |  |  |  |  |  |  |  |
· Permanent differences |  | — |  | 168 |  | — |  | 255 |
· Non-deductible expenses |  | 115 |  | — |  | 236 |  | — |
· Difference between statutory and foreign tax rates |  | (972 | ) | (610 | ) | (1,907 | ) | (963 | )
· Other |  | (65 | ) | 138 |  | 717 |  | 138 |
Deferred tax expense |  | $ | 532 |  | $ | 401 |  | $ | 1,961 |  | $ | 385 |

The components of deferred income taxes are as follows:

|  | 6 Months Ended |  | Year ended |
In $000s |  | June 30, 2012 |  | December 31, 2011 |
Deferred Income Tax Assets |  |  |  |  |
· Non-capital losses |  | 837 |  | 1,260 |
· Share issue costs |  | 1,873 |  | 1,811 |
· Long term investments in shares and warrants |  | 337 |  | — |
Deferred income tax assets |  | $ | 3,047 |  | $ | 3,071 |
Deferred Income Tax Liabilities |  |  |  |  |
· Mineral Interest |  | 3,234 |  | 1,579 |
· Long term investments in shares and warrants |  | — |  | 149 |
Deferred income tax liabilities |  | 3,234 |  | 1,728 |
Deferred income tax (liability) asset, net |  | $ | (187 | ) | $ | 1,343 |

The Company has deductible temporary differences, unused tax losses, and unused tax credits expiring as follows:

In $000s |  | Location |  | Amount |  | Expiration |
Non-capital loss carry-forwards |  | Canada |  | $ | 7,745 |  | 2029-2032 |
Non-capital loss carry-forwards |  | Barbados |  | $ | 1,287 |  | 2018-2021 |

36

10. Administration Expenses

The administration expenses for the Company are as follows:

|  | 3 Months Ended |  | 3 Months Ended |  | 6 Months Ended |  | 6 Months Ended |
In $000s |  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2012 |  | June 30, 2011 |
Corporate administration |  | $ | 329 |  | $ | 179 |  | $ | 636 |  | $ | 336 |
Employee benefits and salary |  | 348 |  | 170 |  | 676 |  | 344 |
Professional fees |  | 172 |  | 60 |  | 307 |  | 180 |
|  | $ | 849 |  | $ | 409 |  | $ | 1,619 |  | $ | 860 |
Equity settled stock based compensation (a non-cash expense) |  | 451 |  | 492 |  | 929 |  | 1,020 |
Total administration expenses |  | $ | 1,300 |  | $ | 901 |  | $ | 2,548 |  | $ | 1,880 |

11. Supplemental Cash Flow Information

|  | 3 Months Ended |  | 3 Months Ended |  | 6 Months Ended |  | 6 Months Ended |
In $000s |  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2012 |  | June 30, 2011 |
Change in non-cash working capital |  |  |  |  |  |  |  |  |
· Trade and other receivables |  | $ | 87 |  | $ | (1,672 | ) | $ | 67 |  | $ | (1,633 | )
· Inventory |  | 93 |  | 42 |  | (227 | ) | — |
· Prepaid expenses |  | (95 | ) | (24 | ) | (88 | ) | (14 | )
· Trade and other payables |  | 234 |  | (18 | ) | (193 | ) | (490 | )
Net increase (decrease) in cash |  | $ | 319 |  | $ | (1,672 | ) | $ | (441 | ) | $ | (2,137 | )

12. Contractual Obligations

GOLD STREAMS

In connection with its Gold Streams, the Company has committed to purchase the following:

|  |  |  | Per ounce cash payment: |  |  |
|  |  |  | lesser of amount below and the |  | Inflationary adjustment to per |
Gold Stream |  | % of life of mine gold |  | then prevailing market price of gold |  | ounce cash payment |
Aurizona |  | 17 | % | $ | 400 |  | 1% annual inflationary adjustment beginning on February 9, 2014 |
Bachelor Lake |  | 20 | % | $ | 500 |  | None |
Black Fox |  | 12 | % | $ | 500 |  | An inflationary adjustment beginning in 2013, not to exceed 2% per annum |
Bracemac-McLeod |  | 17.5 | % | $ | 350 |  | None |
Ming |  | 25% of the first 175,000 ounces of gold produced, and 12% thereafter |  | $ | nil |  | N/A |
Santa Elena |  | 20 | % | $ | 350 |  | 1% annual inflationary adjustment beginning July 13, 2014 |
Summit |  | 50% of the first 10,000 ounces of gold produced, and 22% thereafter |  | $ | 400 |  | 1% annual inflationary adjustment beginning 3 years after the mine achieves commercial production |

In connection with the Mt. Hamilton royalty, the Company has committed an upfront payment of $4.0 million on January 15, 2013.

37

13. Segmented Information

The Company’s reportable segments are summarized in the tables below:

For the three months ended June 30, 2012

|  |  |  | Cost of sales |  |  |  | Net income |  | Cash from (used in) |
In $000s |  | Sales |  | (excluding depletion) |  | Depletion |  | (loss) |  | operations |
Aurizona |  | $ | 3,530 |  | $ | 886 |  | $ | 326 |  | $ | 2,318 |  | $ | 2,644 |
Bachelor Lake |  | 122 |  | 38 |  | 39 |  | 45 |  | 52 |
Black Fox |  | 3,238 |  | 1,001 |  | 1,397 |  | 840 |  | 2,131 |
Bracemac-McLeod |  | — |  | — |  | — |  | — |  | — |
Coringa and Cuiú Cuiú |  | — |  | — |  | — |  |  |  | — |
Ming |  | 4,139 |  | — |  | 1,555 |  | 2,584 |  | 4,139 |
Mt. Hamilton |  | — |  | — |  | — |  | — |  | — |
Santa Elena |  | 3,925 |  | 837 |  | 991 |  | 2,097 |  | 3,317 |
Summit |  | — |  | — |  | — |  | — |  | — |
Corporate |  | — |  | — |  | — |  | (2,601 | ) | (1,025 | )
Consolidated |  | $ | 14,954 |  | $ | 2,762 |  | $ | 4,308 |  | $ | 5,283 |  | $ | 11,258 |

For the three months ended June 30, 2011

|  |  |  |  |  |  |  | Income from |  |  |  |  |
|  |  |  |  |  |  |  | deferral of |  |  |  |  |
|  |  |  | Cost of sales |  |  |  | production |  | Net income |  | Cash from |
In $000s |  | Sales |  | (excluding depletion) |  | Depletion |  | guarantee |  | (loss) |  | operations |
Aurizona |  | $ | 1,466 |  | $ | 393 |  | $ | 145 |  | $ | — |  | $ | 928 |  | $ | 928 |
Bachelor Lake |  | — |  | — |  | — |  | — |  | — |  | — |
Black Fox |  | 2,555 |  | 845 |  | 725 |  | — |  | 985 |  | 612 |
Bracemac-McLeod |  | — |  | — |  | — |  | — |  | — |  | — |
Ming |  | — |  | — |  | — |  | — |  | — |  | — |
Santa Elena |  | 1,299 |  | 301 |  | 263 |  | — |  | 735 |  | 219 |
Summit |  | 262 |  | 68 |  | 38 |  | 774 |  | 930 |  | 225 |
Corporate |  | — |  | — |  | — |  | — |  | (1,317 | ) | 661 |
Consolidated |  | $ | 5,582 |  | $ | 1,607 |  | $ | 1,171 |  | $ | 774 |  | $ | 2,261 |  | $ | 2,645 |

For the six months ended June 30, 2012

|  |  |  | Cost of sales |  |  |  | Net income |  | Cash from (used in) |
In $000s |  | Sales |  | (excluding depletion) |  | Depletion |  | (loss) |  | operations |
Aurizona |  | $ | 7,855 |  | $ | 1,918 |  | $ | 705 |  | $ | 5,232 |  | $ | 5,677 |
Bachelor Lake |  | 122 |  | 38 |  | 39 |  | 45 |  | 52 |
Black Fox |  | 6,292 |  | 1,905 |  | 2,659 |  | 1,728 |  | 4,192 |
Bracemac-McLeod |  | — |  | — |  | — |  | — |  | — |
Coringa and Cuiú Cuiú |  | — |  | — |  | — |  | — |  | — |
Ming |  | 7,537 |  | — |  | 2,766 |  | 4,771 |  | 7,536 |
Mt. Hamilton |  | — |  | — |  | — |  | — |  | — |
Santa Elena |  | 6,205 |  | 1,292 |  | 1,530 |  | 3,383 |  | 4,913 |
Summit |  | 407 |  | 102 |  | 286 |  | 19 |  | 306 |
Corporate |  | — |  | — |  | — |  | (5,479 | ) | (2,154 | )
Consolidated |  | $ | 28,418 |  | $ | 5,255 |  | $ | 7,985 |  | $ | 9,699 |  | $ | 20,522 |

38

For the six months ended June 30, 2011

|  |  |  |  |  |  |  | Income from |  |  |  |  |
|  |  |  |  |  |  |  | deferral of |  |  |  |  |
|  |  |  | Cost of sales |  |  |  | production |  | Net income |  | Cash from |
In $000s |  | Sales |  | (excluding depletion) |  | Depletion |  | guarantee |  | (loss) |  | operations |
Aurizona |  | $ | 3,441 |  | $ | 962 |  | $ | 354 |  | $ | — |  | $ | 2,125 |  | $ | 2,125 |
Bachelor Lake |  | — |  | — |  | — |  | — |  | — |  | — |
Black Fox |  | 3,487 |  | 1,180 |  | 1,011 |  | — |  | 1,296 |  | 922 |
Bracemac-McLeod |  | — |  | — |  | — |  | — |  | — |  | — |
Ming |  | — |  | — |  | — |  | — |  | — |  | — |
Santa Elena |  | 1,949 |  | 464 |  | 366 |  | — |  | 1,119 |  | 605 |
Summit |  | 373 |  | 100 |  | 54 |  | 774 |  | 993 |  | 286 |
Corporate |  | — |  | — |  | — |  | — |  | (2,314 | ) | 322 |
Consolidated |  | $ | 9,250 |  | $ | 2,706 |  | $ | 1,785 |  | $ | 774 |  | $ | 3,219 |  | $ | 4,260 |

Total assets as of:

In $000s |  | June 30, 2012 |  | December 31, 2011 |
Aurizona |  | $ | 17,944 |  | $ | 18,649 |
Bachelor Lake |  | 20,772 |  | 20,844 |
Black Fox |  | 50,979 |  | 53,911 |
Bracemac-McLeod |  | 5,032 |  | 32 |
Coringa and Cuiú Cuiú |  | 7,838 |  | — |
Ming |  | 17,302 |  | 20,068 |
Mt. Hamilton |  | 10,044 |  | — |
Santa Elena |  | 10,340 |  | 11,869 |
Summit |  | 3,323 |  | 3,609 |
Corporate |  | 34,472 |  | 23,810 |
Consolidated |  | $ | 178,046 |  | $ | 152,792 |

39