Mariana Resources rockets on merger proposal with Sandstorm

Mariana Resources has agreed to merge with US based royalty company Sandstorm, which sees the AIM-listed explorer's shares valued at 109.71p and would see its shareholders own 19% of the enlarged group.

NYSE- and Toronto-listed Sandstorm and Mariana's directors agreed to recommended a share and cash acquisition of Mariana's shares by Sandstorm, which currently owns 7% of the company and warrants over around half that amount.

The merger will see Mariana delist from AIM and its shareholders would receive 0.2573 new Sandstorm shares and 28.75p in cash for each share held.

Sandstorm closed at a price of US$4.04 on the NYSE MKT and the valuation was calculated at a currency exchange rate of £0.7788 per dollar, which values Mariana at £166.85m on a fully diluted basis and is a premium of approximately 84.38% to the closing price of 59.5p on 25 April.

Sandstorm said the merger would create "a leading mid-tier stream and royalty company", delivering significant benefits to shareholders of both companies.

"Stream and royalty finance involves making an upfront payment to a mining partner that is in need of capital to build their mine, refinance their obligations, complete an acquisition or for various other reasons," Sandstorm said.

"In exchange for that upfront payment, Sandstorm receives the right to purchase a percentage of the gold produced from the mine (in the case of a stream) or a portion of the revenue generated from the mine (in the case of a royalty)."

Mariana chairman John Horsburgh said the independent directors of Mariana recommended shareholders approve the combination as it "not only de-risks Mariana's exposure as a single development/production asset company but provides a stronger diverse platform and ability to finance the development of the 30% owned high grade gold-copper discovery at Hot Maden in Turkey".

He said the deal represented a significant and attractive premium to the market price with the combination of cash and shares providing an opportunity to participate in the upside of Hot Maden, as it advances to production, as well as exposure to the existing exploration properties and the combined group's streaming and royalty portfolio.

"The independent directors have also taken into account the high liquidity of Sandstorm shares in arriving at this recommendation."

Nolan Watson, president and CEO of Sandstorm said: "We believe that, by combining Mariana and Sandstorm and subsequently converting the Hot Maden JV interest into a gold stream, we can unlock the inherent value of Hot Maden and deliver the optimal outcome for shareholders without incurring further equity dilution to finance the interest in Hot Maden.

"We believe that Hot Maden is a unique asset with a robust cash flow profile and will be an anchor gold stream asset that has the potential to more than double Sandstorm's attributable gold equivalent production once in full operation. We are confident in Lidya as the operating partner at Hot Maden and we look forward to watching the project advance towards production and the mineralization expand through continued exploration." plan to monetize."

Broker SP Angel said Mariana appeared to have secured a significant premium for its shareholders through the transaction.