UK-based Acacia Mining has reached an agreement to sell a 2% non-core royalty over the Houndé mine in Burkina Faso to Sandstorm Gold in a deal valued at $45m.

The decision is in line with Acacia’s strategy to strengthen its balance sheet and comes after commercial production began at the mine in October.

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Located 250km south-west of Ouagadougou, the Houndé mine is operated by Endeavour Mining.

The net smelter returns royalty (NSR royalty) covers the Kari North and Kari South tenements, amounting to around 500km² of the Houndé property package and containing a significant portion of Houndé mineral reserve of 2.1 million ounces.

“The nearly 500km² area that applies to the royalty is one of the largest prospective land packages in Sandstorm’s royalty portfolio.”

Sandstorm Gold president and CEO Nolan Watson said: “Shareholders will benefit from an immediate 10% increase in cash flow per share beginning in 2018, Endeavour has proven to be an adept operator in West Africa and we’re extremely excited about the exploration potential on what is a massive property.

“The nearly 500km² area that applies to the royalty is one of the largest prospective land packages in Sandstorm’s royalty portfolio and Endeavour has committed tens of millions of dollars in exploration spending in the coming years to aggressively search for new ore.”

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With an initial mine-life of ten years, the site is expected to have an average production of 235,000oz of gold per annum over the first four years of operations.

Endeavour has allocated $40m to discover 2.5 million to 3.5 million ounces of gold at the mine over the next four years.

Sandstorm claims the royalty land holding has several high-priority targets.