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Iamgold to sell Diavik royalty stream to Sandstorm for $56.8 mln

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Iamgold (TSE:IMG), a Canadian gold producer, has agreed to sell the company's Diavik diamond royalty stream to Sandstorm Gold (TSE:SSL), a gold streaming and royalty company, for C$56.8 million.

Sandstorm has agreed to pay $52.5 million in cash on closing and three million warrants exercisable after for up to five years after initial production from the Diavik Diamond Mine's A21 pipe, at an exercise price of $4.50, Toronto-based Iamgold said in a statement today.

The royalty covers a property in the Northwest Territories that includes the Diavik Diamond Mine, which is owned 60 percent by Rio Tinto (NYSE:RIO) and 40 percent by Dominion Diamond (TSE:DDC).

The Diavik Mine is Canada's largest diamond mine, located on a 20 square kilometre island at Lac de Gras, Northwest Territories, approximately 300 kilometres from Yellowknife.

Diavik began producing diamonds in January 2003, and has since produced more than 90 million carats  from three kimberlite pipes.

"Given the quality of the Diavik Diamond Royalty we received very strong interest in the sale, which resulted in a satisfactory outcome for both parties," Iamgold’s chief executive officer Steve Letwin said in the statement.

"As a result of this sale, the previously completed sale of Niobec and ongoing initiatives to conserve cash, Iamgold is left in a very strong financial position with the ability to invest further in its existing portfolio of assets and to consider acquisition opportunities that will contribute to positive cash flow.”

Sandstorm said the deal with Iamgold will add $7 to $8 million per year in cash flow to its portfolio.

Sandstorm gained 3.5 percent to C$4.17 at 2:34 a.m. in Toronto, while Iamgold fluctuated and was trading at C$2.65, down 0.4 percent.

Quick facts: IAMGOLD Corp

Price: 4.69 CAD

TSX:IMG
Market: TSX
Market Cap: $2.19 billion
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