Exhibit 99.2







SANDSTORM
GOLD LTD.

MANAGEMENT’S
DISCUSSION AND ANALYSIS

Annual
2014



For
The Year Ended December 31, 2014

This
management’s discussion and analysis (“MD&A”) for Sandstorm Gold Ltd. and its subsidiary entities
(“Sandstorm” or the “Company”) should be read in conjunction with the audited consolidated financial
statements of Sandstorm for the year ended December 31, 2014 and related notes thereto which have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”). The information contained within this MD&A is current to March  17, 2015 and all figures are
stated in U.S. dollars unless otherwise noted.



HIGHLIGHTS

| | · | Strong
                                         balance sheet with over $90 million in cash at December 31, 2014.
| | - | -----------------------------------------------------------------------------------------------------------------

| | · | Operating
                                         cash flows for the three months and year ended December 31, 2014 were $8.9 million and
                                         $35.2 million, respectively, compared with $8.1 million and $32.2 million for the comparable
                                         periods in 2013, representing an increase of 9% and 9%, respectively.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Attributable
                                         Gold Equivalent ounces sold, for the three months and year ended December 31, 2014 were
                                         10,424 ounces and 44,821 ounces, respectively, compared with 12,415 ounces and 42,709
                                         ounces for the comparable periods in 2013. Attributable Gold Equivalent ounces sold for
                                         the most recently completed year represented a record for the Company.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Revenue
                                         for the three months and year ended December 31, 2014 was $12.95 million and $56.5 million,
                                         respectively, compared with $15.8 million and $59.8 million for the comparable periods
                                         in 2013.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Average
                                         cash costs for the three months and year ended December 31, 2014 of $3081and $3211 per Attributable
                                         Gold Equivalent ounce, respectively, compared with $3451and $3561 per Attributable
                                         Gold Equivalent ounce, respectively, for the comparable periods in 2013.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | During
                                         the year, the Company exercised its option to purchase an amount equal to 20% of the
                                         gold produced from the Santa Elena underground mine. In consideration and as contemplated
                                         in the original purchase agreement, Sandstorm agreed to make an upfront payment of $10
                                         million which represents approximately 20% of the upfront capital expenditures relating
                                         to gold production and will continue to make ongoing per ounce payments equal to $354
                                         until 50,000 ounces of gold have been delivered to Sandstorm (inclusive of ounces already
                                         received from open-pit production), at which time the ongoing per ounce payments will
                                         increase to $450.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | On
                                         May 29, 2014, the Company closed its plan of arrangement with Sandstorm Metals &
                                         Energy Ltd. pursuant to which the Company acquired 100% of the issued and outstanding
                                         shares of Sandstorm Metals & Energy Ltd., allowing Sandstorm management to focus
                                         on gold going forward.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The
                                         Company amended its revolving credit agreement, extending the term to five years. The
                                         revolving loan allows the Company to borrow up to $100 million, for acquisition purposes,
                                         from a syndicate of banks including the Bank of Nova Scotia, Bank of Montreal and National
                                         Bank of Canada.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



1 Refer
to section on non-IFRS measures of this MD&A.







| | · | On
                                         August 8, 2014, the Company participated in a Luna non-brokered private placement to
                                         align the interests of Luna and Sandstorm and to allow the facilitation of an orderly
                                         resolution of Luna’s current challenges.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | On
                                         August 11, 2014, the Company announced that it had partnered with Franco-Nevada Corporation
                                         in entering into a $120 million Gold Stream with True Gold Mining Inc. with respect to
                                         its Karma Project in Burkina Faso, West Africa. The Gold Stream is being syndicated between
                                         Franco-Nevada and Sandstorm with Franco-Nevada providing 75% of the funding, and Sandstorm
                                         providing the remaining 25% of the funding. This is the first syndicated Gold Stream
                                         between two royalty and streaming companies.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | On
                                         December 15, 2014, the Company announced that it intended to proceed with a normal course
                                         issuer bid allowing the Company to purchase up to 5,882,879 common shares. The normal
                                         course issuer bid provides the Company with the option to purchase its common shares
                                         when management believes those shares are undervalued.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Subsequent
to year end, the Company announced that it had entered into an arrangement agreement to acquire 100% of the outstanding common
shares of Gold Royalties Corp. Gold Royalties has approximately C$2 million in cash and a portfolio of royalties on 12 mining
projects located in Canada, including one royalty that is generating cash flow from gold production. When combined with an additional
10 royalty agreements, that was also entered into subsequent to year end, Sandstorm will now have a portfolio of 10 streams and
58 royalties.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Overview

The Company
is a growth-focused company that seeks to acquire gold and other precious metal purchase agreements (“Gold Streams”)
and royalties from companies that have advanced stage development projects or operating mines. In return for making upfront payments
to acquire a Gold Stream, Sandstorm receives the right to purchase, at a fixed price per ounce, a percentage of a mine’s
gold, silver, or other commodity ("Gold Equivalent") production for the life of the mine. Sandstorm helps other companies
in the resource industry grow their businesses, while acquiring attractive assets in the process. The Company is focused on acquiring
Gold Streams and royalties from mines with low production costs, significant exploration potential and strong management teams.
The Company currently has 10 Gold Streams and 46 net smelter returns royalties (“NSR”s), of which 14 of the underlying
mines are producing gold.



Outlook

Based
on the Company’s existing Gold Streams and NSRs, attributable Gold Equivalent production (individually and collectively
referred to as “Attributable Gold Equivalent”) for 2015 is forecasted to be between 36,000 – 44,000 Attributable
Gold Equivalent ounces. The Company is forecasting Attributable Gold Equivalent production of approximately 45,000 ounces per
annum in 2018.

2









Key
PRoducing Assets



BLACK FOX GOLD STREAM
Primero Mining Corp.

The Company
has a Gold Stream to purchase 8% of the life of mine gold produced from Primero Mining Corp.’s (“Primero”) open
pit and underground Black Fox mine, located in Ontario, Canada (the “Black Fox Mine”), and 6.3% of the life of mine
gold produced from Primero’s Black Fox Extension (the “Black Fox Extension”), which includes a portion of Primero’s
Pike River concessions, for a per ounce cash payment equal to the lesser of $518 and the then prevailing market price of gold.

The Black
Fox Mine began operating as an open pit mine and in 2010, development of an underground mine began. Both open pit and underground
operations are now running concurrently, feeding the 2,200 tonne-per-day mill.

Current
activities at the Black Fox Mine include:

| | · | Primero
                                         anticipates that the Black Fox Mine’s 2015 production will increase to 75,000—85,000
                                         ounces of gold largely related to a higher proportion of production coming from the higher
                                         grade underground ore.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Primero
                                         intends on producing predominantly from the open-pit until the middle of 2015 when production
                                         from the underground mine is expected to increase to approximately 1,000 tonnes of ore
                                         per day. The open-pit is expected to be depleted by September 2015.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Primero recently announced positive drill results
                                  at the Black Fox Mine. For more information refer to www.primeromining.com.                                                                                                                                                                                                                            



SANTA ELENA GOLD STREAM
SilverCrest Mines Inc.

The Company
has a Gold Stream to purchase 20% of the life of mine gold produced from SilverCrest Mines Inc.’s (“SilverCrest”)
open-pit and underground Santa Elena mine, located in Mexico (the “Santa Elena Mine”), for a per ounce cash payment
equal to the lesser of $354 and the then prevailing market price of gold until 50,000 ounces of gold have been delivered to Sandstorm,
at which time the on-going per ounce payments will increase to the lesser of $450 and the then prevailing market price of gold.

In 2014,
SilverCrest completed their transition from both an open pit to an underground operation at the Santa Elena Mine and from a heap
leach operation to a conventional mill. During the year ended December 31, 2014, the Company received official notification of
SilverCrest’s intention to develop an underground mine and milling operation. As contemplated in the original purchase agreement,
Sandstorm exercised its option to purchase an amount equal to 20% of the gold produced from the Santa Elena underground mine.
In consideration, Sandstorm made an upfront payment of $10.0 million which represents approximately 20% of the upfront capital
expenditures relating to gold production.

3







Current
activities at the Santa Elena Mine include:

| | · | SilverCrest
                                         recently announced that they had temporarily restarted their open pit operations which
                                         they anticipate will provide approximately 6 months of low cost production. Their current
                                         operational focus is to improve underground stope production and continue to optimize
                                         the mill to ensure throughput tonnages are at or above the nameplate capacity of 3,000
                                         tonnes of ore per day.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







AURIZONA GOLD STREAMLuna Gold Corp.

The Company
has a Gold Stream to purchase 17% of the life of mine gold produced from Luna Gold Corp.’s (“Luna”) open-pit
Aurizona mine, located in Brazil (the “Aurizona Mine”) for a per ounce cash payment equal to the lesser of $408 and
the then prevailing market price of gold.

In accordance
with its previously announced commitment, the Company remitted a $20.0 million loan to Luna (whereby $10.0 million was advanced
in 2013 and the remaining $10.0 million commitment was remitted in April 2014). The non-revolving loan is subject to interest
at a rate of 12% per annum, subject to certain conditions, and will mature on June 30, 2017.

During
the year ended December 31, 2014, the Company entered into a strategic investment agreement (the “Investment Agreement”)
with Luna, as part of which, Sandstorm participated in a Luna non-brokered private placement. Pursuant to the Investment Agreement,
Sandstorm purchased 19.5 million of the Luna common shares at a price of C$1.02 per share, which when combined with the 8.5 million
shares of Luna already owned by the Company, resulted in Sandstorm becoming the largest shareholder of Luna, owning approximately
19.8% of Luna’s issued and outstanding shares. The Investment Agreement allowed Sandstorm to appoint one member to Luna’s
board of directors. The transaction aligns the interests of Luna and Sandstorm and allows the facilitation of an orderly resolution
of Luna’s current challenges.

Current
activities at the Aurizona Mine include:

| | · | Luna announced, in February 2015, that it was suspending its mining operations. Luna intends on
                                                                                                                           processing ore from a stockpile and once the stockpile has been depleted it is expected that Luna will cease
                                                                                                                           mining operations for the remainder of 2015.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Given
                                         Luna’s current financial situation, it will likely need additional capital to continue
                                         its mining operations, meet its financial obligations and remain solvent. There can be
                                         no assurances that Luna will have access to the capital necessary to meet these requirements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4









BACHELOR LAKE GOLD STREAM
Metanor Resources Inc.

The Company
has a Gold Stream to purchase 20% of the life of mine gold produced from Metanor Resources Inc.’s (“Metanor”)
Bachelor Lake gold mine located in Quebec, Canada (the “Bachelor Lake Mine”), for a per ounce cash payment equal to
the lesser of $500 and the then prevailing market price of gold.

Production
at the Bachelor Lake Mine began in early 2013 and the findings from the 2011 pre-feasibility study highlighted an expected ramp
up to 60,000 ounces of gold per year at full commercial production. The Bachelor Lake Mine is a long hole mining operation with
an operating mill and surface infrastructure.

Current
activities at the Bachelor Lake Mine include:

| | · | During the fourth quarter of 2014, Metanor experienced lower feed grade primarily driven by higher than expected
dilution from three specific stopes.  These three stopes were adjacent to openings already mined.  These old workplaces
were outside the mineralized structure and when the stopes were blasted, some of the non-mineralized sections associated with the
old workings fell and diluted the ore grade.  Metanor considers this occurrence to be isolated and expects grades to increase
in the coming months.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Metanor
                                         recently announced an equity financing to raise additional capital to improve its balance
                                         sheet and for the continued development of the Bachelor Lake Mine. Concurrently, Metanor
                                         announced that it was seeking approval to extend the maturity date of its outstanding
                                         convertible debentures.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







BRACEMAC-MCLEOD ROYALTY
Glencore-Xstrata PLC.

Sandstorm
has a 3% NSR based on 100% of the production from the Bracemac-McLeod development property located in Matagami, Quebec, Canada
(“Bracemac-McLeod” or the “Bracemac-McLeod Mine”) which is owned and operated by a subsidiary of Glencore
Xstrata plc (“Glencore”).

The
Bracemac-McLeod Mine is a high grade volcanogenic massive sulphide deposit located in the historical and prolific mining district
of Matagami, Quebec. Continuous mining and milling operations have been active in the Matagami district for almost fifty years
with ten previously operating mines and one other currently producing mine. The Bracemac-McLeod Mine began initial production
in the second half of 2013.

As
a part of the fair value assessment of Sandstorm Metals & Energy Ltd.’s assets for business combination purposes, the
Company reviewed the fair value of the Bracemac-McLeod royalty. As a result of this assessment, the Company recorded an impairment
charge of $1.2 million during the year ended December 31, 2014. The recoverable amount of the NSR, for impairment assessment purposes,
was determined using a discounted cash flow calculation to estimate the fair value less costs to sell.



5









MING GOLD STREAM
Rambler Metals & Mining PLC

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 Copper-Gold mine, located in Newfoundland,
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. Based on 2013 metallurgical recoveries, Sandstorm’s
2014 gold purchase entitlement was increased to 33%.

Current
activities at the Ming Mine include:

| | · | Rambler
                                         recently provided a reserve and resource estimate update for the Ming Mine. The reserve
                                         update shows the replacement of all tonnes mined from the 1807 Zone to-date; thereby,
                                         extending the mine life by one year.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Rambler
                                         released a favorable preliminary economic assessment that identifies the potential for
                                         an expansion of the Ming Mine into the lower footwall zone following additional value
                                         optimization studies and a feasibility study. While the improvements in the lower footwall
                                         zone resource estimate have yet to be converted into a mineral reserve; Rambler intends
                                         on initiating a pre-feasibility study to evaluate the economic viability of this new
                                         resource and how it can be integrated into the current mine plan. The results of this
                                         work will be announced in concert with the filing of the associated technical report
                                         which Rambler is targeting for the middle of 2015.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





other
producing assets

EMIGRANT SPRINGS ROYALTY
Newmont Mining Corp.

The Company
has a 1.5% NSR on the Emigrant Springs mine (the “Emigrant Springs Mine”) which is located in the Carlin Trend in
Nevada, U.S.A. and is owned and operated by Newmont Mining Corp. (“Newmont”). The Emigrant Springs Mine is an open
pit, heap leach operation. In the third quarter of 2012, construction of the mine was completed and commercial production commenced.



6







MINE WASTE SOLUTIONS ROYALTY
Anglogold Ashanti Ltd.

The Company
has a 1% NSR on the gold produced from Mine Waste Solutions tailings recovery operation (“MWS”) which is located near
Stilfontein, South Africa, and is owned and operated by AngloGold Ashanti Ltd. (“AngloGold”). MWS is a gold and uranium
tailings recovery operation. The operation processes multiple tailings dumps in the area through three production modules, the
last of which was commissioned in 2011. It also includes a modern tailings storage facility approximately 15 kilometres from the
gold plant modules where residues from the treatment plants are deposited.



GUALCAMAYO ROYALTY
Yamana Gold Inc.

The
Company has a 1.0% NSR on the Gualcamayo gold mine (the “Gualcamayo Mine”) which is located in San Juan province,
Argentina and owned and operated by Yamana Gold Inc. (“Yamana”). The Gualcamayo Mine is an open pit, heap leach operation
encompassing three substantial zones of gold mineralization. An expansion of the operation is expected to increase sustainable
production.



SAN ANDRES ROYALTY
Aura Minerals Inc.

The
Company has a 1.5% NSR on the San Andres mine (the “San Andres Mine”) which is located in La Únion, Honduras
and owned and operated by Aura Minerals Inc. (“Aura Minerals”). The San Andres Mine is an open pit, heap leach operation.
The mine has been in production since 1983 and has well-developed infrastructure, which includes power and water supply, warehouses,
maintenance facilities, assay laboratory and on-site camp facilities.









7







Development
assets

KARMA GOLD STREAM
True Gold Mining

On August
11, 2014, Sandstorm entered into a Gold Stream agreement which entitles the Company to purchase 25,000 ounces of gold over a five
year period and thereafter 1.625% of the gold produced from True Gold Mining Inc.’s (“True Gold”) open-pit heap
leach Karma gold mine located in Burkina Faso, West Africa (“Karma” or the “Karma Project”) for on-going
per ounce cash payment equal to 20% of the spot price of the gold.

The Gold
Stream, which on a gross basis requires True Gold to deliver 100,000 ounces of gold over a five year period starting March 31,
2016 and thereafter 6.5% of the equivalent gold production at the Karma Project, is being syndicated between Franco-Nevada Corp.
(“Franco-Nevada”) and Sandstorm (the “Stream Syndicate”). Franco-Nevada will be providing 75% of the funding
and Sandstorm will be providing the remaining 25% of the funding. In consideration for acquiring the Gold Stream, the Stream Syndicate
will make a payment of $100 million. During the year ended December 31, 2014, Sandstorm remitted $14.4 million of its commitment
to fund $25 million of the upfront payment. In addition, the Stream Syndicate has provided True Gold with an 18 month option to
increase funding by up to $20.0 million (the “Increase Option”) in exchange for eight quarterly deliveries totaling
30,000 ounces of gold, or the pro-rata portion of the amount drawn thereunder, starting 18 months from when the first tranche
under the Increase Option is drawn down.

The Karma
Project has five defined mineral deposits that make up the Karma Project with probable mineral reserves of 949,000 ounces of gold.
The mine is expected to produce an average of 97,000 ounces of gold per year over 8.5 years. The mining operation is planned to
employ conventional truck and shovel methods. True Gold announced that all required permits are in place to fully develop the
five deposits within the current Karma plan.

Currently,
True Gold is working closely with all levels of government and local groups in addressing recent demonstrations at the mine site.
During this period, the company is taking steps to limit its capital expenditures, reducing employees, deferring payments, and
holding materials and equipment in supplier inventory. True Gold is finalizing a plan to enable an efficient restart of operations
at the mine and is currently assessing the potential impact of these events on the project timeline.

HUGO NORTH EXTENSION & HERUGA STREAM
Entrée Gold Inc.

Sandstorm
has a Gold Stream with Entrée Gold Inc. (“Entrée”) to purchase an amount equal to 33.8% and 25.7% of
Entrée’s 20% share of the gold and silver by-products produced from the Hugo North Extension and Heruga deposits
located in Mongolia, (the “Hugo North Extension” and “Heruga”, respectively) for per ounce cash payments
equal to the lesser of $220 per ounce of gold and $5 per ounce of silver and the then prevailing market price of gold and silver,
respectively. Additionally, Sandstorm has a copper stream to purchase an amount equal to 2.5% of Entrée’s 20% share
of the copper produced from Hugo North Extension and Heruga for per pound cash payments equal to the lesser of $0.50 per pound
of copper and the then prevailing market price of copper.

8







The Company
is not required to contribute any further capital, exploration, or operating expenditures to Entrée.

Hugo North
Extension is a rich copper-gold porphyry deposit and Heruga is a copper-gold-molybdenum porphyry deposit. Both projects are located
in the South Gobi desert of Mongolia, approximately 570 kilometers south of the capital city of Ulaanbaatar and 80 kilometers
north of the border with China. Hugo North Extension and Heruga are part of the Oyu Tolgoi mining complex and are managed by Oyu
Tolgoi LLC, a subsidiary of Turquoise Hill Resources and the Government of Mongolia, and its project manager Rio Tinto PLC. Entrée
retains a 20% interest in the resource deposits of the Hugo North Extension and Heruga.

BOMBORÉ ROYALTY
Orezone Gold Corp.

Subsequent
to year end, the Company acquired a 0.45% NSR on the Bomboré gold project (“Bomboré” or “Bomboré
Project”) located in Burkina Faso, West Africa and owned by Orezone Gold Corp. (“Orezone”) for consideration
of $3.0 million (“Upfront Royalty”). In addition, Sandstorm has committed to providing up to an additional $5.0 million
in royalty financing (remittable in cash and/or shares, subject to certain conditions) to Orezone on a drawdown basis until January
27, 2017 (the “Standby Royalty”). The Standby Royalty, if fully exercised, would result in the granting of an additional
0.75% NSR. Orezone has granted Sandstorm a right of first refusal on any future stream or royalty financings related to the Bomboré
Project until 36 months following the achievement of commercial production at the mine. Orezone has the option to repurchase the
Upfront Royalty from Sandstorm for a period of 36 months, at a premium of 10% per year up to a maximum of 30%. The Standby Royalty
can also be repurchased at a premium of 10% per year if Orezone completes a gold stream financing and Sandstorm participates for
no less than $30 million.

Orezone's
168 km2 Bomboré project is the largest undeveloped oxide gold deposit in Burkina Faso, containing 4.6 million
ounces of measured and indicated gold resources (2.0 million ounces of oxide resources and 2.6 million ounces of sulfide resources).

PRAIRIE CREEK ROYALTY
Canadian Zinc Corp.

The Company
has a 1.2% NSR on the Prairie Creek project (“Prairie Creek” or the “Prairie Creek Project”) located in
the Northwest Territories, Canada and owned by Canadian Zinc Corporation (“Canadian Zinc”). The Prairie Creek Project
is a zinc, silver and lead project that is 100%-owned by Canadian Zinc and currently reports a proven and probable mineral reserve
of 5.2 million tonnes grading 9.4% zinc, 151 grams per tonne silver and 9.5% lead.

Sandstorm
has granted Canadian Zinc an option, exercisable prior to November 30, 2015, to repurchase the NSR for $10.0 million provided
that Canadian Zinc enters into a commodity stream with Sandstorm that has an upfront deposit of no less than $90 million. In addition,
Canadian Zinc has provided Sandstorm with a right of first refusal on any future royalty or commodity stream financing for the
Prairie Creek Project.



9







MT. HAMILTON ROYALTY
Solitario Exploration & Royalty Corp.

The Company
has a 2.4% NSR on the Mt. Hamilton gold project (the "Mt. Hamilton Project"). The Mt. Hamilton 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. (“Solitario”) and 20% owned by Ely Gold & Minerals Inc.

MH-LLC
has provided Sandstorm with a right of first refusal on any future royalty or gold stream financing for the Mt. Hamilton Project.

DEFLECTOR GOLD STREAM
Doray Minerals Ltd.

The Company
has a Gold Stream to purchase 2.6% of the life of mine gold produced from Doray Minerals Ltd.’s (“Doray”) open
pit Deflector project, located in Western Australia (the “Deflector Project”) for a per ounce cash payment equal to
the lesser of $500 and the then prevailing market price of gold.

The Deflector
Project is a high-grade gold and copper deposit located in the South Murchison, Western Australia. A definitive feasibility study
completed in October 2012 projects 55,000 ounces of annual gold production from the Deflector Project over a 7.5 year mine life.
Production is anticipated to begin from an open pit operation and expand underground, with ore from both the open pit and underground
being processed through the existing Gullewa processing facility.



Acquisition

Sandstorm
Metals & Energy Ltd.

On May
29, 2014, the Company closed its previously announced plan of arrangement (“Arrangement Agreement”) pursuant to which
it acquired 100% of the outstanding common shares of Sandstorm Metals & Energy Ltd. (“Sandstorm Metals & Energy”).

As contemplated
in the Arrangement Agreement, the shareholders of Sandstorm Metals & Energy, other than Sandstorm Gold, received common shares
of Sandstorm Gold (the “Sandstorm Gold Shares”) on the basis of 0.178 of a Sandstorm Gold Share plus C$0.35 of cash
for each Sandstorm Metals & Energy common share held.

The acquisition
allows management to focus all of its future time and attention on acquiring Gold Streams and royalties. The acquisition of Sandstorm
Metals & Energy also provides Sandstorm Gold shareholders with annual royalty revenue from operating mines as well as royalties
on advanced exploration and development assets including Canadian Zinc’s Prairie Creek Project and Entrée’s
Hugo North Extension and Heruga deposits. In addition, the Company expects to be able to benefit from the use of Sandstorm Metals
& Energy’s non-capital loss carry forwards for tax purposes.

10







Business
Combination

In accordance
with IFRS 3 – Business Combinations, the total consideration of $43.8 million, consisting of: (i) $10.3 million cash; (ii)
$30.1 million representing the value of the Sandstorm Gold common shares issued (based on the May 29, 2014 closing price); and
(iii) $3.4 million of Sandstorm Metals & Energy common shares previously owned by the Company and other consideration was
allocated to the identifiable assets acquired and liabilities assumed as follows:



|Acquisition  price:                                                 |  
|------------------------------------------------------------------- | -
|Sandstorm
    Gold common shares issued                             | $
|Sandstorm
    Metals & Energy common shares owned by Sandstorm Gold |  
|Cash
    paid                                                       |  
|Conversion
    of previously issued Sandstorm Metals & Energy RSUs  |  
|                                                                    | $
|                                                                    |  
|Allocation
    of acquisition costs:                                |  
|Cash
    and cash equivalents                                       | $
|Trade
    receivables and other                                     |  
|Mineral
    interests and royalties                                 |  
|Investments                                                         |  
|Deferred
    income tax assets                                      |  
|Other                                                               |  
|Trade
    and other payables                                        |  
|Promissory
    note                                                 |  
|Gain
    on bargain purchase                                        |  
|                                                                    | $



Sandstorm
Gold has estimated the fair value of the assets acquired to be equal to their carrying value except for certain trade receivables
and other balances and the mineral interest and royalties which were estimated to have a fair value of $0.9 million and $29.8
million, respectively. The excess of the total fair value of the identifiable assets acquired and the liabilities assumed over
the total consideration has been recorded as a gain on bargain purchase of $2.6 million.



11





Gold
Royalties Corp.

On February
18, 2015, the Company entered into a definitive arrangement agreement with Gold Royalties Corp. (“Gold Royalties”)
pursuant to which Sandstorm Gold would acquire all of the issued and outstanding shares (the “Gold Royalties Shares”)
of Gold Royalties. The transaction will be implemented by way of a statutory plan of arrangement (the “Arrangement”)
and is subject to court, shareholder and regulatory approvals. Upon completion of the Arrangement, Sandstorm Gold will issue to
each holder of a Gold Royalties Share 0.045 of a common share of Sandstorm Gold.

Gold Royalties
has approximately C$2 million in cash and a portfolio of 18 royalties on 12 mining projects located in Canada, including one royalty
that is generating cash flow from gold production. Upon the closing of the Arrangement, Sandstorm will have a portfolio of 10
streams and 58 royalties.

Revolving
credit facility

On July
17, 2014, the Company amended its revolving credit agreement, extending the term to five years (the “Revolving Loan”).
The Revolving Loan allows the Company to borrow up to $100 million, for acquisition purposes, from a syndicate of banks including
the Bank of Nova Scotia, Bank of Montreal and National Bank of Canada. The amounts drawn on the Revolving Loan remain subject
to interest at LIBOR plus 3.00% – 4.25% per annum, and the undrawn portion of the Revolving Loan remains subject
to a standby fee of 0.75% – 1.05% per annum, dependent on the Company’s leverage ratio. As at December
31, 2014, the Company had not drawn down on its credit facility and therefore, the full balance remains available for future acquisitions.



Normal
course Issuer bid

On
December 15, 2014, the Company announced that it intended to proceed with a normal course issuer bid (“NCIB”). Under
the NCIB, the Company may, until December 16, 2015, purchase up to 5,882,879 common shares, representing 5% of the Company’s
issued and outstanding common shares of 117,657,587 as of December 11, 2014. The NCIB provides the Company with the option to
purchase its common shares from time to time when the Company’s management believes that the Common Shares are undervalued
by the market.

Pursuant
to the NCIB, the Company purchased an aggregate of 222,090 common shares in December 2014 at an average price of C$3.56 per common
share. These shares were returned to treasury for cancellation on December 31, 2014.





12







SUMMARY
OF ANNUAL RESULTS

Year
Ended

|In
    $000s                                                   |   | December
    31, 2014 |   | December
    31, 2013 |   | December
    31, 2012
|-------------------------------------------------------------- | - | --------------------- | - | --------------------- | - | ---------------------
|Total
    revenue                                              | $ | 56,494                | $ | 59,836                | $ | 55,943               
|Attributable
Gold Equivalent ounces sold 1                     |   | 44,821                |   | 42,709                |   | 33,514               
|Gold
    sales                                                 | $ | 43,690                |   | 50,644                | $ | 55,943               
|Royalty
    revenue                                            |   | 12,804                |   | 9,192                 |   | -                    
|Average
    realized gold price per attributable ounce 1       |   | 1,260                 |   | 1,401                 |   | 1,669                
|Average
    cash cost per attributable ounce 1                 |   | 321                   |   | 356                   |   | 356                  
|Cash
    flow from operations                                  |   | 35,224                |   | 32,217                |   | 37,624               
|Cash
    flow from operations per share (basic) 1              |   | 0.31                  |   | 0.34                  |   | 0.50                 
|Cash
    flow from operations per share (diluted) 1            |   | 0.29                  |   | 0.31                  |   | 0.44                 
|Net
    income (loss) attributable toshareholders of Sandstorm |   | 11,515                |   | (73,752)              |   | 21,927               
|Net
    income (loss)                                          |   | 11,515                |   | (74,629)              |   | 21,927               
|Basic
    income (loss) per share                              |   | 0.10                  |   | (0.78)                |   | 0.29                 
|Diluted
    income per share                                   |   | 0.09                  |   | (0.78)                |   | 0.25                 
|Total
    assets                                               |   | 431,070               |   | 379,703               |   | 341,427              
|Total
    long-term liabilities                                |   | 5,892                 |   | 6,134                 | $ | -                    

| | 1. | See
                                         non-IFRS measures section below.
| | -- | -----------------------------------------------------------------------------

13







The Company’s
operating segments for the year ended
December 31, 2014 are summarized in the table below:

|In
    $000s      | Attributable
    
ounces sold | Sales
    and 
royalty 
revenues | Cost
    of sales
    (excluding
 depletion) | Depletion | Impairment
    of mineral  
interest | Income
    (loss)
    before taxes | Cash
    flow
    from operations
|----------------- | ----------------------------- | -------------------------------- | -------------------------------------------- | --------- | ------------------------------------ | ---------------------------------- | ---------------------------------
|Aurizona          | 12,361                        | $                                | 15,527                                       | $         | 4,986                                | $                                  | 1,463                            
|Bachelor
    Lake | 9,324                         |                                  | 11,899                                       |           | 4,662                                |                                    | 5,541                            
|Black
    Fox     | 5,487                         |                                  | 6,889                                        |           | 2,790                                |                                    | 3,920                            
|Ming              | 1,964                         |                                  | 2,459                                        |           | -                                    |                                    | 1,611                            
|Santa
    Elena   | 5,516                         |                                  | 6,916                                        |           | 1,945                                |                                    | 3,359                            
|Royalties         | 10,169                        |                                  | 12,804                                       |           | -                                    |                                    | 12,019                           
|Corporate         | -                             |                                  | -                                            |           | -                                    |                                    | -                                
|Consolidated      | 44,821                        | $                                | 56,494                                       | $         | 14,383                               | $                                  | 27,913                           



The Company’s
operating segments for the year ended
December 31, 2013 are summarized in the table below:

|In
    $000s      | Attributable
    
ounces sold | Sales
    and 
royalty revenues | Cost
    of sales
    (excluding
 depletion) | Depletion | Impairment
    of mineral  
interest | Income(loss)
    before taxes | Cash
    flow
    from operations
|----------------- | ----------------------------- | ------------------------------- | -------------------------------------------- | --------- | ------------------------------------ | ----------------------------- | ---------------------------------
|Aurizona          | 13,678                        | $                               | 19,264                                       | $         | 5,471                                | $                             | 1,267                            
|Bachelor
    Lake | 7,172                         |                                 | 10,239                                       |           | 3,586                                |                               | 4,315                            
|Black
    Fox     | 7,925                         |                                 | 11,322                                       |           | 3,997                                |                               | 5,645                            
|Ming              | 1,274                         |                                 | 1,667                                        |           | -                                    |                               | 872                              
|Santa
    Elena   | 6,097                         |                                 | 8,444                                        |           | 2,131                                |                               | 3,324                            
|Serra
    Pelada  | -                             |                                 | -                                            |           | -                                    |                               | -                                
|Royalties         | 6,563                         |                                 | 8,900                                        |           | -                                    |                               | 8,515                            
|Corporate         | -                             |                                 | -                                            |           | -                                    |                               | -                                
|Consolidated      | 42,709                        | $                               | 59,836                                       | $         | 15,185                               | $                             | 23,938                           



14







SUMMARY
OF QUARTERLY RESULTS

(in
accordance with IFRS)

Quarters
Ended

|In
    $000s                                                   |   | Dec.
    31, 2014 |   | Sep.
    30, 2014 |   | Jun.
    30, 2014 |   | Mar.
    31, 2014
|-------------------------------------------------------------- | - | ----------------- | - | ----------------- | - | ----------------- | - | -----------------
|Total
    revenue                                              | $ | 12,488            | $ | 15,559            | $ | 13,153            | $ | 15,295           
|Attributable
Gold Equivalent ounces sold 1                     |   | 10,424            |   | 12,282            |   | 10,149            |   | 11,966           
|Gold
    sales                                                 | $ | 9,463             | $ | 11,571            |   | 9,724             | $ | 12,932           
|Royalty
    revenue                                            |   | 3,025             |   | 3,988             |   | 3,429             |   | 2,363            
|Average
    realized gold price per attributable ounce 1       |   | 1,198             |   | 1,267             |   | 1,296             |   | 1,278            
|Average
    cash cost per attributable ounce 1                 |   | 308               |   | 308               |   | 310               |   | 355              
|Cash
    flow from operations                                  |   | 8,854             |   | 9,962             |   | 9,383             |   | 7,025            
|Cash
    flow from operations per share (basic) 1              |   | 0.08              |   | 0.08              |   | 0.08              |   | 0.07             
|Cash
    flow from operations per share (diluted) 1            |   | 0.07              |   | 0.08              |   | 0.08              |   | 0.06             
|Net
    income (loss) attributable toshareholders of Sandstorm |   | 2,608             |   | 2,076             |   | 3,039             |   | 3,792            
|Net
    income (loss)                                          |   | 2,608             |   | 2,076             |   | 3,039             |   | 3,792            
|Basic
    income (loss) per share                              |   | 0.02              |   | 0.02              |   | 0.03              |   | 0.04             
|Diluted
    income per share                                   |   | 0.02              |   | 0.02              |   | 0.03              |   | 0.03             
|Total
    assets                                               |   | 431,070           |   | 445,368           |   | 456,050           |   | 400,299          
|Total
    long-term liabilities                                | $ | 5,892             | $ | 6,161             |   | 5,922             | $ | 5,837            



|In
    $000s                                                   |   | Dec.
    31, 2013 |   | Sep.
    30, 2013 |   | Jun.
    30, 2013 |   | Mar.
    31, 2013
|-------------------------------------------------------------- | - | ----------------- | - | ----------------- | - | ----------------- | - | -----------------
|Total
    revenue                                              | $ | 15,767            | $ | 15,352            | $ | 13,353            | $ | 15,364           
|Attributable
Gold Equivalent ounces sold 1                     |   | 12,415            |   | 11,595            |   | 9,430             |   | 9,396            
|Gold
    sales                                                 | $ | 13,360            | $ | 12,671            | $ | 10,582            | $ | 14,031           
|Royalty
    revenue                                            |   | 2,407             |   | 2,681             |   | 2,771             |   | 1,333            
|Average
    realized gold price per attributable ounce 1       |   | 1,270             |   | 1,324             |   | 1,416             |   | 1,635            
|Average
    cash cost per attributable ounce 1                 |   | 345               |   | 355               |   | 330               |   | 390              
|Cash
    flow from operations                                  |   | 8,138             |   | 8,577             |   | 8,539             |   | 6,963            
|Cash
    flow from operations per share (basic) 1              |   | 0.08              |   | 0.09              |   | 0.09              |   | 0.08             
|Cash
    flow from operations per share (diluted) 1            |   | 0.08              |   | 0.08              |   | 0.08              |   | 0.07             
|Net
    income (loss) attributable toshareholders of Sandstorm |   | (39,863)          |   | (1,446)           |   | (14,975)          |   | (17,468)         
|Net
    income (loss)                                          |   | (39,863)          |   | (1,917)           |   | (15,228)          |   | (17,621)         
|                                                              

15





|Basic
    income (loss) per share |   | (0.40)  |   | (0.02)  |   | (0.16)  |   | (0.19) 
|--------------------------------- | - | ------- | - | ------- | - | ------- | - | -------
|Diluted
    income per share      |   | (0.40)  |   | (0.02)  |   | (0.16)  |   | (0.19) 
|Total
    assets 2                |   | 379,703 |   | 420,623 |   | 418,206 |   | 445,476
|Total
    long-term liabilities   | $ | 6,134   | $ | 6,848   | $ | 8,113   | $ | 9,622  

| | 1. | See
                                         non-IFRS measures section below.
| | -- | -----------------------------------------------------------------------------



Changes
in sales, net income and cash flow from operations from quarter to quarter are affected primarily by fluctuations in production
at the mines, the timing of shipments, changes in the price of gold, as well as acquisitions of Gold Stream and royalty agreements
and the commencement of operations of mines under construction. For more information refer to the quarterly commentary discussed
below.



The Company’s
operating segments for the three months ended
December 31, 2014 are summarized in the table below:

|In
    $000s      | Attributable
    
ounces sold | Sales
    and 
royalty 
revenues | Cost
    of sales
    (excluding 
    depletion) | Depletion | Impairment
    of mineral  
    interest | Income
    (loss)
    before taxes | Cash
    flow
    from operations
|----------------- | ----------------------------- | -------------------------------- | ------------------------------------------------ | --------- | ---------------------------------------- | ---------------------------------- | ---------------------------------
|Aurizona          | 3,047                         | $                                | 3,682                                            | $         | 1,231                                    | $                                  | 361                              
|Bachelor
    Lake | 1,682                         |                                  | 2,021                                            |           | 841                                      |                                    | 1,000                            
|Black
    Fox     | 1,148                         |                                  | 1,354                                            |           | 584                                      |                                    | 820                              
|Ming              | 448                           |                                  | 526                                              |           | -                                        |                                    | 357                              
|Santa
    Elena   | 1,574                         |                                  | 1,880                                            |           | 556                                      |                                    | 961                              
|Royalties         | 2,525                         |                                  | 3,025                                            |           | -                                        |                                    | 3,405                            
|Corporate         | -                             |                                  | -                                                |           | -                                        |                                    | -                                
|Consolidated      | 10,424                        | $                                | 12,488                                           | $         | 3,212                                    | $                                  | 6,904                            



16







THREE
MONTHS ENDED December 31, 2014
COMPARED TO THE THREE MONTHS ENDED December 31, 2013

For the
three months ended December 31, 2014, net income and cash flow from operations were $2.6 million and $8.9 million, respectively,
compared with net loss and cash flow from operations of $39.9 million and $8.1 million for the comparable period in 2013. The
change is attributable to a combination of factors including:

| | · | A
                                         $2.4 million decrease in administration expenses largely driven by a combination of non-recurring
                                         severance related costs recorded during the three months ended December 31, 2013 and
                                         an overall reduction in salary compensation as part of a cost reduction program;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         number of non-recurring items recorded during the three months ended December 31, 2013,
                                         including a non-cash impairment charge of $52.2 million relating to the Serra Pelada
                                         Gold Stream which was partially offset by a $13.3 million income tax recovery primarily
                                         related to the non-cash impairment charge recognized on the Serra Pelada Gold Stream;
                                         partially offset by
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         $0.4 million increase in project evaluation costs resulting from increased corporate
                                         activity.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the
three months ended December 31, 2014, revenue was $12.5 million compared with $15.8 million for the comparable period in 2013.
The decrease is largely attributable to a number of factors including:

| | · | 6%
                                         decrease in the average realized selling price of gold; and
| | - | -------------------------------------------------------------------------------------------------------

| | · | 16%
                                         decrease in the number of Attributable Gold Equivalent ounces sold, due to:
| | - | ------------------------------------------------------------------------------------------------------------------------

|i. |  | 35% decrease in gold ounces sold from the Black Fox Mine
primarily driven from insufficient underground development resulting in lower production during the three months ended December
31, 2014. Primero, the new owner/operator of the mine, intends on making greater investments in underground development in an
effort to improve mining and processing targets going forward;
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ii. |  | 36% decrease in gold ounces sold from the Bachelor Lake
Mine primarily related to the mine experiencing lower feed grade largely driven by higher than expected dilution from three specific
stopes.  These three stopes were adjacent to openings already mined.  These old workplaces were outside the mineralized
structure and when the stopes were blasted, some of the non-mineralized sections associated with the old workings fell and contaminated
the ore grade.  Metanor considers this occurrence to be isolated and expects grades to increase in the coming months; partially
offset by
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|iii. |  | An additional 633 Attributable Gold Equivalent ounces
                                                                                                                arising from the Company’s royalty portfolio largely attributed to the acquisition of Sandstorm Metals & Energy and
                                                                                                                the ramp up of underlying assets.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Year
ENDED December 31, 2014
COMPARED TO THE Year ENDED December 31, 2013

For the
year ended December 31, 2014, net income and cash flow from operations were $11.5 million and $35.2 million, respectively, compared
with net loss and cash flow from operations of $74.6 million and $32.2 million for the comparable year in 2013. The increase in
net income and cash flow from operations is attributable to a combination of factors including:

| | · | A
                                         $6.7 million decrease in administration expenses largely driven by (i) a $2.0 million
                                         decrease in corporate administration costs primarily attributed to the Company’s
                                         implementation of a cost reduction program; (ii) a $2.0 million decrease in share based
                                         compensation expense as a result of a reduction in the number of stock based compensation
                                         granted to employees; and (iii) non-recurring severance costs of $1.4 million which was
                                         recognized during the year ended December 31, 2013;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17





| | · | A
                                         $1.2 million decrease in project evaluation expenses largely driven by the implementation
                                         of cost reduction initiatives;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         one-time gain of $2.6 million recognized on the acquisition of Sandstorm Metals &
                                         Energy;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         foreign exchange gain of $2.1 million largely driven by the consolidation of subsidiary
                                         entities with a different functional currency than the parent entity; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         number of non-recurring items recorded during the year ended December 31, 2013, including
                                         (i) a non-cash impairment charge of $52.2 million relating to the Serra Pelada Gold Stream;
                                         (ii) a non-cash impairment charge of $35.8 million on goodwill arising from the Premier
                                         Royalty business combination; (iii) a non-cash impairment charge of $3.2 million arising
                                         from the conversion of the Company’s Bracemac-McLeod Gold Stream into a NSR; and
                                         (iv) a $2.6 million non-cash loss primarily driven by the revaluation of the Company’s
                                         investments in Premier Royalty’s warrants; partially offset by
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         number non-recurring tax items recognized during the year ended December 31, 2013 which
                                         contributed to a $14.5 million income tax recovery which was largely related to the non-cash
                                         impairment charge recognized on the Serra Pelada Gold Stream;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         non-cash impairment charge of $1.2 million relating the Company’s Bracemac-McLeod
                                         royalty recognized during the year ended December 31, 2014; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         $4.0 million increase in depletion expense largely driven by an increase in gold ounces
                                         sold and an increase in the Attributable Gold Equivalent ounces sold relating to the
                                         Company’s royalty portfolio.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the
year ended December 31, 2014, revenue was $56.5 million compared with $59.8 million for the comparable year in 2013. The decrease
is largely attributed to a number of factors including:

| | · | 10%
                                         decrease in the average realized selling price of gold; partially offset by
| | - | ------------------------------------------------------------------------------------------------------------------------

| | · | 5%
                                         increase in the number of Attributable Gold Equivalent ounces sold, due to:
| | - | -----------------------------------------------------------------------------------------------------------------------

|i. |  | An additional 2,152 gold ounces sold from the Bachelor
Lake Mine primarily related to the mine recently reaching commercial production and the continued ramp up of operations;
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ii. |  | 55% increase in royalty based Attributable Gold Equivalent
ounces primarily related to the acquisition of both Premier Royalty and Sandstorm Metals & Energy’s portfolio of royalties;
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|iii. |  | 54% increase in gold ounces sold from Ming Mine primarily
related to Sandstorm’s gold purchase entitlement increasing to 33% for the 2014 fiscal year (which resulted from low metallurgical
recoveries obtained in 2013 triggering contract safeguards); partially offset by
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|iv. |  | 31% decrease in gold ounces sold from the Black Fox Mine
largely driven from insufficient underground development resulting in lower production during the year ended December 31, 2014.
Primero, the new owner/operator of the mine, intends on making greater investments in underground development in an effort to
improve mining and processing targets going forward; and
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|v. |  | 10% decrease in gold ounces sold from the Aurizona Mine
as Luna experienced above average rainfall during the second quarter of 2014 which negatively impacted Luna’s ability to
access ore in the pit.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18







Three
MONTHS ENDED December 31, 2014
COMPARED TO THE Remaining Quarters

When comparing
net income of $2.6 million and cash flow from operations of $8.9 million for the three months ended December 31, 2014 with net
income and operating cash flow for the remaining quarters, the following items impact comparability of analysis:

| | · | A
                                         one-time gain of $2.6 million recognized on the acquisition of Sandstorm Metals &
                                         Energy which was recorded during the three months ended June 30, 2014;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         non-cash impairment charge of $1.2 million relating the Company’s Bracemac-McLeod
                                         royalty recognized during the three months ended June 30, 2014;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         non-cash impairment charge of $52.2 million and a corresponding $13.3 million tax recovery
                                         relating to the Serra Pelada Gold Stream recognized during the three months ended December
                                         31, 2013;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         non-cash goodwill impairment charge of $19.9 million and $15.9 million arising from the
                                         Premier Royalty business combination during the three months ended March 31, 2013 and
                                         three months ended June 30, 2013, respectively;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         non-cash impairment charge of $3.2 million arising from the conversion of the Company’s
                                         Bracemac-McLeod Gold Stream into a NSR recognized during the three months ended September
                                         30, 2013;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | An
                                         increase in administration expenses during the year ended December 31, 2013 largely driven
                                         by the requirement to consolidate 100% of Premier Royalty’s administration expenses
                                         as a result of the business combination and increased corporate activity;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | As
                                         a result of consolidating Premier Royalty’s financial results, the Company began
                                         recognizing royalty revenue in the first quarter of 2013;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Overall,
                                         Gold Attributable Equivalent ounces sold have increased over the course of the last three
                                         years as (i) the Aurizona Mine and the Santa Elena Mine began initial production late
                                         in 2010; (ii) the Company began purchasing gold from the Black Fox Mine in 2011; (iii)
                                         the Ming Mine began mining and processing ore from the high grade gold 1806 zone in 2012;
                                         and (iv) the Bachelor Lake Mine began producing from its bulk sample in 2012.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Change
in Total Assets

Total
assets increased by $51.4 million from December 31, 2013 to December 31, 2014 primarily resulting from (i) the assets acquired
from the Sandstorm Metals & Energy business combination; (ii) operating cash flows and (iii) the exercise of warrants; which
were partially offset by (i) depletion expense; (ii) a decline in the fair value of investments; and (iii) by a non-cash impairment
charge on the Bracemac-McLeod royalty. The Company’s total assets increased by $38.3 million from December 31, 2012 to December
31, 2013 primarily resulting from (i) the assets acquired in the Premier Royalty business combination and (ii) operating cash
flows; which were partially offset by (i) the non-cash impairments described earlier and (ii) depletion expense.



19







Non-IFRS
Measures

The Company
has included, throughout this document, certain non-IFRS performance measures, including (i) average cash cost per attributable
ounce; (ii) cash flow from operations per share (basic and diluted); and (iii) average realized gold price per attributable ounce.

|i. |  | Average cash cost per ounce is calculated by dividing the
Company’s cost of sales (excluding depletion) by the number of Attributable Gold Equivalent ounces sold. The Company presents
average cash cost per ounce as it believes that certain investors use this information to evaluate the Company’s performance
in comparison to other companies in the precious metals mining industry who present results on a similar basis. Figure 1.1provides a reconciliation of average cash cost of gold on a per ounce basis.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Figure
1.1





|                                                   | Three Months Ended | Year Ended   
|-------------------------------------------------- | ------------------ | -------------
|                                                   | Dec. 31, 2014      | Dec. 31, 2013
|Cost of Sales (excluding depletion)                | $                  | 3,212        
|                                                   |                    |              
|Cash cost of sales is comprised of:                |                    |              
|Total cash cost of gold sold                       | $                  | 3,212        
|Divided by:                                        |                    |              
|Total Attributable Gold Equivalent ounces sold 1   |                    | 10,424       
|Equals:                                            |                    |              
|Average cash cost of gold (per attributable ounce) | $                  | 308          

|1. | The
                                         Company’s royalty income is converted to an Attributable Gold Equivalent ounce
                                         basis by dividing the royalty income for that period by the average realized gold price
                                         per ounce from the Company’s Gold Streams for the same respective period. These
                                         Attributable Gold Equivalent ounces when combined with the gold ounces sold from the
                                         Company’s Gold Streams equal total Attributable Gold Equivalent ounces sold.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. |  | Cash flows from operations per share (basic and diluted)
is calculated by dividing cash generated by operating activities by the weighted average number of shares outstanding (basic and
diluted). The Company presents operating cash flows per share as it believes that certain investors use this information to evaluate
the Company’s performance in comparison to other companies in the precious metals mining industry that present results on
a similar basis. Figure 1.2provides a reconciliation of cash flow from operations per share (basic and diluted).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20









Figure
1.2

|                                                            | Three
    Months Ended | Year
    Ended   
|----------------------------------------------------------- | ---------------------- | -----------------
|                                                            | Dec.
    31, 2014      | Dec.
    31, 2013
|Cash
    generated by operating activities                  | $                      | 8,854            
|                                                            |                        |                  
|Divided
    by:                                             |                        |                  
|Basic
    weighted average number of shares outstanding     |                        | 117,833,349      
|Diluted
    weighted average number of shares outstanding 1 |                        | 118,469,499      
|Equals:                                                     |                        |                  
|Operating
    cash flow per share - basic                   | $                      | 0.08             
|Operating
    cash flow per share - diluted                 | $                      | 0.07             

|1. | The
                                         diluted weighted average number of shares includes stock options and share purchase warrants
                                         that would have been dilutive if the Company had positive net income for the period.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



iii.Average realized gold price per ounce is calculated by dividing the Company’s sales by the number of Attributable
Gold Equivalent ounces sold. The Company presents average realized gold price per attributable ounce as it believes that certain
investors use this information to evaluate the Company’s performance in comparison to other companies in the precious metals
mining industry that present results on a similar basis. Figure 1.3 provides a reconciliation of average realized gold
price per ounce.



Figure
1.3

|                                                       | Three
    Months Ended | Year
    Ended   
|------------------------------------------------------ | ---------------------- | -----------------
|                                                       | Dec.
    31, 2014      | Dec.
    31, 2013
|Total
    revenue                                      | $                      | 12,488           
|                                                       |                        |                  
|Divided
    by:                                        |                        |                  
|Total
    Attributable Gold Equivalent ounces sold     |                        | 10,424           
|Equals:                                                |                        |                  
|Average
    realized gold price per attributable ounce | $                      | 1,198            



The Company
has also used the non-IFRS measure of operating cash flows excluding changes in non-cash working capital. This measure is calculated
by adding back the decrease in changes in non-cash working capital to cash generated by operating activities. These non-IFRS measures
do not have any standardized meaning prescribed by IFRS, and other companies may calculate these measures differently.

The presentation
of these non-IFRS measures is intended to provide additional information and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with IFRS.



21







Liquidity
and Capital Resources

As of
December 31, 2014, the Company had cash and cash equivalents of $90.2 million (December 31, 2013 – $98.9 million)
and working capital of $89.3 million (December 31, 2013 – $98.1 million). The Company invests surplus cash
in short-term, high credit quality, money market instruments. As described earlier, the Company has an additional $100.0 million
available under its revolving bank debt facility. In the opinion of management, cash flows, cash balances and available credit
facilities are sufficient to support the Company’s normal operating requirements on an ongoing basis.

During
the year ended December 31, 2014, the Company generated operating cash flows of $35.2 million compared with $32.2 million during
the comparable year in 2013, with the increase being primarily attributable to (i) an increase in Attributable Gold Equivalent
ounces sold; and (ii) a decrease in administration expenses; which was partially offset by a decrease in the average realized
selling price of gold.

During
the year ended December 31, 2014, the Company had cash outflows from investing activities of $74.6 million, which were
primarily the result of (i) Sandstorm exercising the Santa Elena underground mine option by making an upfront payment of
$10.0 million; (ii) the acquisition of Sandstorm Metals & Energy; (iii) a $10.0 million loan to Luna for its use towards
the phase 1 expansion; (iv) the $14.4 million upfront payment related to the Karma Gold Stream; (v) the acquisition of
investments totaling $27.5 million; and (vi) providing a $2.9 million loan. During the year ended December 31, 2013, the
Company had net cash outflows of $67.4 million largely attributable to (i) the acquisition of the Entrée Gold Stream;
(ii) a $10 million loan to Luna to be used towards the phase 1 expansion and exploration activities; and (iii) the upfront
payments of $5.0 million to Columbus Gold Corp. and $3.2 million to Canadian Zinc in connection with their respective
royalties; partially offset by (i) the receipt of a $15.0 million payment in connection with the Serra Pelada back-to-back
agreement with Sandstorm Metals & Energy; and (ii) the Premier Royalty cash obtained in the acquisition of Premier
Royalty, offset by the cash used by Sandstorm in the making of the Premier Royalty acquisition.

During
the year ended December 31, 2014, the Company had net cash inflows from financing activities of $32.1 million, which were primarily
comprised of the proceeds from the exercise of warrants partially offset by deferred financing costs and the redemption of the
Company’s common shares under the NCIB. During the year ended December 31, 2013, the Company had net cash inflows from financing
activities of $9.6 million, which were primarily comprised of $11.4 million in proceeds from the exercise of warrants and options,
partially offset by deferred financing costs.



22







Contractual
Obligations

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

|Gold
    Stream   | %
    of Life of Mine Gold 5,6,7                                         | Per
    Ounce Cash Payment:
    lesser of amount below and the then prevailing market price of gold 1, 2, 3, 4
|----------------- | ------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------
|Aurizona          | 17%                                                                      | $408                                                                                                          
|Bachelor
    Lake | 20%                                                                      | $500                                                                                                          
|Black
    Fox     | 8%                                                                       | $518                                                                                                          
|Deflector         | 2.6%                                                                     | $500                                                                                                          
|Entrée
    Gold   | 6.76%
    on Hugo North Extension and 5.14% on Heruga                    | $220                                                                                                          
|Karma             | 25,000
    ounces over 5 years and 1.625% thereafter                     | 20%
    of gold spot price                                                                                    
|Ming              | 25%
    of the first 175,000 ounces of gold produced, and 12% thereafter | $nil                                                                                                          
|Santa
    Elena   | 20%                                                                      | $354                                                                                                          
|Summit            | 50%
    of the first 10,000 ounces of gold produced, and 22% thereafter  | $400                                                                                                          

| | 1. | Subject
                                         to an annual inflationary adjustment except for Ming
| | -- | -----------------------------------------------------------------------------------------------------

| | 2. | For
                                         the Entrée Gold Stream, after approximately 8.6 million ounces of gold have been
                                         produced from the joint venture property, the price increases to $500 per gold ounce.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | For
                                         the Entrée Silver Stream, percentage of life of mine is 6.76% on Hugo North Extension
                                         and 5.14% on Heruga which the Company can purchase for the lesser of the prevailing market
                                         price and $5 per ounce of silver until 40.3 million ounces of silver have been produced
                                         from the entire joint venture property. Thereafter, the purchase price will increase
                                         to the lesser of the prevailing market price and $10 per ounce of silver.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | For
                                         the Santa Elena Gold Stream, the Company can purchase for a per ounce cash payment equal
                                         to (i) the lesser of $354 and the then prevailing market price of gold for the open-pit
                                         mine and (ii) the lesser of $354 and the then prevailing market price of gold until 50,000
                                         ounces of gold have been delivered to Sandstorm (inclusive of ounces already received
                                         from open-pit production), at which time the on-going per ounce payments will increase
                                         to the lesser of $450 and the then prevailing market price of gold for the underground
                                         mine.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | For
                                         the Entrée Gold and Silver Stream, percentage of life of mine is 6.76% on Hugo
                                         North Extension and 5.14% on Heruga if the minerals produced are contained below 560
                                         metres in depth.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | For
                                         the Entrée Gold and Silver Stream, percentage of life of mine is 10.15% on Hugo
                                         North Extension and 7.7% on Heruga if the minerals produced are contained above 560 metres
                                         in depth.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | For the Entrée copper stream, the Company has committed to purchase an amount equal to 0.5% of the copper produced from
the Hugo North Extension and Heruga deposits. If the minerals produced are contained above 560 metres in depth, then the commitment
increases to 0.75% for both the Hugo North Extension and Heruga deposits. Sandstorm will make ongoing per pound cash payments
equal to the lesser of $0.50 and the then prevailing market price of copper, until 9.1 billion pounds of copper have been produced
from the entire joint venture property. Thereafter, the on-going per pound payments will increase to the lesser of $1.10 and the
then prevailing market price of copper.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As at
December 31, 2014, the Company had paid $6.2 million and will contribute another $3.8 million in capital towards the phase 1 expansion
at Luna's Aurizona Mine. Sandstorm’s contribution will be equal to 17% of the capital costs incurred by Luna towards the
phase 1 Expansion to a maximum contribution of $10.0 million.

In connection
with the Karma Gold Stream, the Company has agreed, subject to certain financing conditions, to provide remaining upfront payments
totaling $10.6 million. In addition, the Stream Syndicate has provided True Gold with an 18 month option to increase funding by
up to $20 million whereby Sandstorm’s commitment would be 25% of the increase.

In connection
with the Bomboré royalty, Sandstorm has committed to providing an additional $5.0 million in royalty financing (remittable
in cash and/or shares, subject to certain conditions) to Orezone on a draw down basis until January 27, 2017.

23







Share
Capital

As of
March 17, 2015, the Company had 117,478,182 common shares outstanding. As disclosed previously, all funds from the issuance of share capital have been and continue to be used to
finance the acquisition of Gold Streams and royalties (recent acquisitions are described earlier in greater detail).

A summary
of the Company’s share purchase options as of March 17, 2015
are as follows:

|Number
    outstanding | Exercisable | Exercise
    Price per Share (C$) | Expiry
    Date      
|---------------------- | ----------- | --------------------------------- | ---------------------
|20,000                 | 20,000      | $3.35                             | May
    19, 2015     
|1,308,500              | 1,308,500   | $3.40                             | November
    26, 2015
|66,000                 | 66,000      | $6.30                             | August
    25, 2016  
|1,129,000              | 1,129,000   | $6.35                             | November
    25, 2016
|402,133                | 402,133     | $16.35                            | December
    11, 2017
|150,000                | 100,002     | $11.78                            | December
    21, 2017
|10,875                 | 10,875      | $11.31                            | February
    19, 2018
|3,625                  | 3,625       | $10.62                            | March
    1, 2018    
|25,000                 | -           | $6.03                             | May
    16, 2019     
|3,737,474              | -           | $2.93                             | November
    13, 2019
|6,852,607              | 3,040,135   | 6.58                              |                      



A summary
of the Company’s warrants as of March 17, 2015 are as follows:

|Number
    of
    Warrants on a
    Pre-consolidated
    Basis | Pre-Consolidated
    Exercise Price
    Per Warrant | Number
    of
 Warrants on a
 Post-Consolidated
 Basis | Post-Consolidated

    Exercise Price Per
 Warrant | Shares
    to be
 Issued Upon
 Exercise of the
 Warrants | Adjusted

    Exercise
 Price Per
 Share | Expiry
    Date
|-------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------------ | -------------------------------------------------- | -------------------------------------------------------- | ---------------------------------------- | ---------------
|SSL.WT.A                                                       | 19,429,649                                          | $1.00                                                  | -                                                  | -                                                        | 3,885,930                                | $5.00          
|                                                               | -                                                   | -                                                      | 1,155,873                                          | C$13.79                                                  | 1,155,873                                | C$13.79        
|                                                               | -                                                   | -                                                      | 72,500                                             | C$17.24                                                  | 72,500                                   | C$17.24        
|SSL.WT.B                                                       | -                                                   | -                                                      | 5,002,500                                          | $14.00                                                   | 5,002,500                                | $14.00         
|                                                               | 19,429,649                                          |                                                        | 6,230,873                                          |                                                          | 10,116,803                               |                

| | 1. | On
                                         May 9, 2012, the Company completed a five-for-one consolidation (the “Consolidation”)
                                         of the Company's common shares; however, the Company's listed warrants were not consolidated.
                                         Following the Consolidation, 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 $5.00.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company
has 578,334 Restricted Share Rights (“RSRs”) outstanding as at March 17, 2015.



24







Key
Management Personnel Compensation

The remuneration
of directors and those persons having authority and responsibility for planning, directing and controlling activities of the Company
are as follows:

|                                                                                      | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
|------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------
|Short-term
    employee salaries and benefits                                         | $                                    | 1,921                               
|Share-based
    payments                                                              |                                      | 1,736                               
|Accelerated
    share-based payments arising on termination and other severance costs |                                      | -                                   
|Total
    key management compensation expense                                         | $                                    | 3,657                               





Financial
Instruments

The
Company’s financial instruments consist of cash and cash equivalents, trade receivables and other, investments, loan receivable,
receivables and other and trade and other payables. All financial instruments are initially recorded at fair value.

Credit
Risk

The Company’s credit risk is limited to cash and cash equivalents, trade receivables and other, loans
receivable, and receivables and other in the ordinary course of business. The Company sells gold exclusively to large corporations
with strong credit ratings. The Company’s trade receivables and other is subject to the credit risk of the counterparties
who own and operate the mines underlying Sandstorm’s royalty portfolio. The Company’s $20.0 million loan to Luna and
accrued interest is subject to Luna’s credit risk and the Company’s ability to realize on its security.

Currency
Risk

Financial
instruments that impact the Company’s net income (loss) or other comprehensive income (loss) due to currency fluctuations
include: cash and cash equivalents, trade receivables and other, investments and trade and other payables denominated in Canadian
dollars. Based on the Company's Canadian dollar denominated monetary assets and monetary liabilities at December 31, 2014, a 10%
increase (decrease) of the value of the Canadian dollar relative to the United States dollar would increase (decrease) net income
(loss) by $0.3 million and other comprehensive income (loss) by $1.4 million, respectively.

Other
Risks

Sandstorm
holds common shares, convertible debentures, and warrants of other companies with a combined market value as at December 31, 2014,
of $24.0 million (December 31, 2013 - $13.0 million). The daily exchange traded volume of these shares, including the shares underlying
the warrants, may not be sufficient for the Company to liquidate its position in a short period of time without potentially affecting
the market value of the shares. The Company is subject to default risk with respect to any debt instruments. The Company is not
subject to significant interest rate or other price risks and the Company’s exposure to these risks has not changed significantly
from the prior year.



25







Risks
to Sandstorm

The
primary risk factors affecting the Company are set forth below. For additional discussion of risk factors, please refer to the
Company’s annual information form dated March 17, 2015, which is available on www.sedar.com.

Risks
Relating To Mineral Projects

To the
extent that they relate to the production of gold from, or the operation of, the Aurizona Mine, the Serra Pelada Mine, the Santa
Elena Mine, the Karma Project, the Deflector Project, the Ming Mine, the Black Fox Mine, the Bachelor Lake Mine, the Hugo North
Extension and Heruga projects, the Mt. Hamilton Project, the Gualcamayo Mine, the Emigrant Springs Mine, MWS, the San Andres Mine,
the Bomboré Project, the Prairie Creek Project, the Bracemac-McLeod Mine or other royalties in Sandstorm’s portfolio
(the “Mines”), the Company will be subject to the risk factors applicable to the operators of such Mines. Whether
the Mines will be commercially viable depends on a number of factors, including cash costs associated with extraction and processing,
the particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as metal prices which are
highly cyclical and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of minerals and environmental protection. The Mines are also subject to other risks that could lead to
their shutdown and closure including flooding and weather related events, the failure to receive permits or having existing permits
revoked, collapse of mining infrastructure including tailings pond, as well as community or social related issues. The exact effect
of these factors cannot be accurately predicted, but the combination of these factors may result in the Mines becoming uneconomic
resulting in their shutdown and closure. The Company is not entitled to purchase gold if no gold is produced from the Mines.

No
Control Over Mining Operations

The Company
has no contractual rights relating to the operation or development of the Mines. Except for any payments which may be payable
in accordance with applicable completion guarantees or cash flow guarantees, the Company will not be entitled to any material
compensation if these mining operations do not meet their forecasted gold production targets in any specified period or if the
Mines shut down or discontinue their operations on a temporary or permanent basis. The Mines may not commence commercial production
within the time frames anticipated, if at all, and there can be no assurance that the gold production from such properties will
ultimately meet forecasts or targets. At any time, any of the operators of the Mines or their successors may decide to suspend
or discontinue operations. The Company is subject to the risk that the Mines shut down on a temporary or permanent basis due to
issues including, but not limited to economics, lack of financial capital, floods, fire, mechanical malfunctions, social unrest,
expropriation and other risks. There are no guarantees the Mines will achieve commercial production, ramp-up targets or complete
expansion plans. These issues are common in the mining industry and can occur frequently.

Government
Regulations

The Mines
are subject to various foreign laws and regulations governing prospecting, exploration, development, production, exports, taxes,
labour standards, waste disposal, protection and remediation of the environment, reclamation, historic and cultural resources
preservation, mine safety and occupation health, handling, storage and transportation of hazardous substances and other matters.
It is possible that the risks of expropriation, cancellation or dispute of licenses could result in substantial costs, losses
and liabilities in the future. The costs of discovering,

26





evaluating,
planning, designing, developing, constructing, operating and closing the Mines in compliance with such laws and regulations are
significant. It is possible that the costs and delays associated with compliance of such laws and regulations could become such
that the owners or operators of the Mines would not proceed with the development of or continue to operate the Mines. Moreover,
it is possible that future regulatory developments, such as increasingly strict environmental protection laws, regulations and
enforcement policies thereunder, and claims for damages to property and persons resulting from the Mines could result in substantial
costs and liabilities in the future.

International
Operations

The
Aurizona Mine and the Serra Pelada Mine are located in Brazil, the Santa Elena Mine is located in Mexico, the
Emigrant Springs Mine and the Mt. Hamilton Project are located in the United States of America, the Deflector Project is
located in Australia, the Gualcamayo Mine is located in Argentina, MWS is located in South Africa, the Hugo North Extension
and Heruga projects are located in Mongolia, the Karma Project and Bomboré Project are located in Burkina Faso, the
San Andres Mine is located in Honduras and each of the Ming Mine, the Black Fox Mine, Bachelor Lake Mine, Prairie Creek
Project and the Bracemac-McLeod Mine are located in Canada and as such, the Mines are exposed to various levels of political,
economic and other risks and uncertainties. These risks and uncertainties include, but are not limited to, terrorism, hostage
taking, military repression, crime, political instability, currency controls, extreme fluctuations in currency exchange
rates, high rates of inflation, labour unrest, the risks of war or civil unrest, expropriation and nationalization,
renegotiation or nullification of existing concessions, licenses, permits, approvals and contracts, illegal mining, changes
in taxation policies, restrictions on foreign exchange and repatriation, and changing political conditions, and governmental
regulations. Changes, if any, in mining or investment policies or shifts in political attitude in Mexico, Brazil, Mongolia,
the United States of America, Australia, Burkina Faso, Argentina, Honduras, French Guiana or Canada may adversely affect the
operations or profitability of the Mines in these countries. Operations may be affected in varying degrees by government
regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency
remittance, income taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation,
land use, land claims of local people, water use, mine safety and the rewarding of contracts to local contractors or require
foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Any changes or unfavorable
assessments with respect to (i) the validity, ownership or existence of the Entrée concessions; as well as (ii) the
validity or enforceability of Entrée’s joint venture agreement with Oyu Tolgoi LLC may adversely affect the
Company’s profitability or profits realized under the Entrée Gold Stream. The Serra Pelada royalty cash flow or
profitability may be adversely impacted if the Cooperative de Mineracao dos Garimpeiros de Serra Pelada, which hold a 25%
interest in the Serra Pelada Mine, continue to take unfavorable actions. In addition, Colossus’ Brazilian subsidiary
has payables in excess of $30 million and accordingly, there is a risk that they may be unable to repay their debts,
resulting in insolvency and loss any rights to the Serra Pelada Mine. Moreover, there is no certainty that the Karma Project
will achieve its intended production and/or construction timeline, if ever. A failure to comply strictly with applicable
laws, regulations and local practices relating to mineral right applications and tenure, could result in loss, reduction or
expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with
carried or other interests. The occurrence of these various factors and uncertainties cannot be accurately predicted and
could have an adverse effect on the Mines.

27







Income
Taxes

The Company
has a subsidiary in Barbados, Sandstorm Gold Bank Limited, which entered into Gold Streams in connection with the Aurizona, Karma,
and Santa Elena transactions. No assurance can be given that new taxation rules will not be enacted or that existing rules will
not be applied in a manner which could result in the Company’s past and future profits being subject to increased levels
of income tax. The Company’s international transactions have not yet been reviewed by the Canada Revenue Agency, and should
such transactions be reviewed no assurances can be given that the tax matters will be resolved favorably. The Company’s
Gold Streams and royalties in connection with Serra Pelada, Black Fox, Ming, Deflector, Hugo North Extension and Heruga, MWS, Bachelor
Lake, Mt. Hamilton, Prairie Creek, San Andres and Bracemac-McLeod transactions have been entered into directly by Canadian based
subsidiaries and will therefore, be subject to Canadian, and/or U.S. taxation, as the case may be. The Gualcamayo NSR was entered
into through an Argentinian subsidiary and therefore, may subject to Canadian, and/or Argentinian taxation, as the case may be.
The Emigrant Springs NSR was entered into through a US subsidiary and therefore, may be subject to Canadian, and/or US taxation,
as the case may be.

Gold
Prices

The price
of the common shares, warrants, and the Company’s financial results may be significantly adversely affected by a decline
in the price of gold. The price of gold fluctuates widely, especially in recent years, and is affected by numerous factors beyond
the Company’s control, including but not limited to, the sale or purchase of gold by various central banks and financial
institutions, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the U.S. dollar and foreign
currencies, global and regional supply and demand, and the political and economic conditions of major gold-producing countries
throughout the world. In the event that the prevailing market price of gold is less than $518 per ounce in the case of the Black
Fox Gold Stream, $500 per ounce in the case of the Bachelor Lake Gold Stream, $500 per ounce in the case of Deflector Gold Stream,
$408 per ounce in the case of the Aurizona Gold Stream, $354 or $450 per ounce in the case of the Santa Elena Gold Stream, and
$220 per ounce in the case of the Hugo North Extension and Heruga Gold Stream, the purchase price will be the then prevailing
market price per ounce of gold and the Company will not generate positive cash flow or earnings on those Gold Streams. Furthermore,
if the gold price drops below the cost of producing gold at the Mines, then the Mines may not produce any gold. As a result, the
Company will not be entitled to purchase any gold.

Solvency
Risk

The price
of the common shares and the Company’s financial results may be significantly affected by the Mines operators’ ability
to continue as a going concern and have access to capital. The lack of access to capital could result in these companies entering
bankruptcy proceedings and as a result, Sandstorm may not be able to realize any value from its respective streams or royalties.



28







Other

Critical
Accounting Estimates

The
preparation of consolidated financial statements in conformity with IFRS requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the
date of the consolidated financial statements, and the reported amounts of revenues and expenditures during the periods
presented. Notes 2 and 4 of the Company’s 2014 annual consolidated financial statements describes all of the
significant accounting policies as well as the significant judgment and estimates.

Disclosure
Controls and Procedures

Disclosure
controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to
senior management, including the Company’s Chief Executive Officer and the Chief Financial Officer, on a timely basis so
that appropriate decisions can be made regarding public disclosure. The Company’s system of disclosure controls and procedures
includes, but is not limited to, the Disclosure Policy, the Code of Conduct, the Stock Trading Policy, Corporate Governance, the
effective functioning of the Audit Committee and procedures in place to systematically identify matters warranting consideration
of disclosure by the Audit Committee.

As
at the end of the period covered by this Management’s Discussion and Analysis, management of the Company, with the participation
of Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls
and procedures as required by applicable rules of the Canadian Securities Administrators (or Canadian securities regulatory authorities).
The evaluation included documentation review, enquiries and other procedures considered by management to be appropriate in the
circumstances. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of
the end of the period covered by this management’s discussion and analysis, the disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective to provide reasonable assurance that information required
to be disclosed in the Company’s interim filings and other reports filed or submitted under applicable securities laws,
is recorded, processed, summarized and reported within time periods specified by those laws and that material information is accumulated
and communicated to management of the Company, including the Chief Executive Officer and the Chief Financial Officer, as appropriate
to allow timely decisions regarding required disclosure.

Management’s
Report on Internal Control Over Financial Reporting

Management
of the Company is responsible for establishing and maintaining effective internal control over financial reporting as such term
is defined in the rules of the United States Securities and Exchange Commission and the Canadian Securities Administrators. The
Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability
of the Company’s financial reporting for external purposes in accordance with IFRS. The Company’s internal control
over financial reporting includes:

-
maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets
of the company;

29







-
providing reasonable assurance that transactions are recorded as necessary for preparation of the consolidated financial statements
in accordance with IFRS as issued by the IASB;

-
providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the
directors of the Company; and

-
providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material
effect on the Company’s consolidated financial statements would be prevented or detected on a timely basis.

The
Company’s internal control over financial reporting may not prevent or detect all misstatements because of inherent limitations.
Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because changes in conditions or deterioration in the degree of compliance with the Company’s policies and procedures.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2014 based
on the criteria set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded that, as of December 31, 2014,
the Company's internal control over financial reporting is effective and no material weaknesses were identified. The Company has
certified the above in its annual filings with both the U.S. Securities and Exchange Commission on Form 40-F as required by the
United States Sarbanes-Oxley Act and with Canadian securities regulatory authorities.

Deloitte
LLP, the Company's Independent Registered Public Accounting Firm, have audited the annual consolidated financial statements of
the Company for the year ended December 31, 2014, and have also issued a report on the internal controls over financial reporting
based on the criteria established in the Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

Changes
in Internal Controls

During
the year ended December 31, 2014, there has been no change in the Company’s internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.





30







Limitations
of Controls and Procedures

The Company’s
management, including the Chief Executive Officer and the Chief Financial Officer, believe that any disclosure controls and procedures
or internal controls over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by
the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design
of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly,
because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not
be detected.

Future
changes in accounting policies

The
IASB has issued the following new standard but is not yet effective. Pronouncements that are not applicable to the Company have
been excluded from this note.

IFRS 15
Revenue from Contracts with Customers - The final standard on revenue from contracts with customers was issued on May 28,
2014 and is effective for annual reporting periods beginning after December 15, 2016 for public entities with early application
not permitted. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the
guidance. The Company is assessing the impact of this Standard

31







FORWARD
LOOKING STATEMENTS

This
MD&A and any exhibits attached hereto and incorporated herein, if any, contain “forward-looking statements”, within
the meaning of the U.S. Securities Act of 1933, as amended, the U.S. Securities exchange Act of 1934, as amended, the United States
Private Securities Litigation Reform Act of 1995, and applicable Canadian and other securities legislation, concerning the business,
operations and financial performance and condition of Sandstorm. Forward-looking information is provided as of the date of this
MD&A and Sandstorm does not intend, and does not assume any obligation, to update this forward-looking information, except
as required by law.

Generally,
forward-looking information can be identified by the use of forward-looking terminology such as “plans”,
“expects” or “does not expect”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”
or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that
certain actions, events or results “may”, “could”, “would”, “might” or
“will be taken”, “occur” or “be achieved”. Forward-looking information is based on
reasonable assumptions that have been made by Sandstorm as at the date of such information and is subject to known and
unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or
achievements of Sandstorm to be materially different from those expressed or implied by such forward-looking information,
including but not limited to: the impact of general business and economic conditions; delays in the construction of the Serra
Pelada Mine, Ming Mine, the Deflector Project, the Gualcamayo Mine, the Karma Project, the Emigrant Springs Mine, MWS, the
Hugo North Extension and Heruga deposits, the mines underlying the Sandstorm portfolio of royalties, the Bachelor Lake Mine,
Mt. Hamilton mine, the Prairie Creek Project, the San Andres Mine, the Bomboré Project or the Bracemac-McLeod Mine;
the absence of control over mining operations from which Sandstorm will purchase gold and risks related to those mining
operations, including risks related to international operations, government and environmental regulation, actual results of
current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be
refined; problems inherent to the marketability of minerals; industry conditions, including fluctuations in the price of
metals, fluctuations in foreign exchange rates and fluctuations in interest rates; government entities interpreting existing
tax legislation or enacting new tax legislation in a way which adversely affects Sandstorm; stock market volatility;
competition; as well as those factors discussed in the section entitled “Risks to Sandstorm” herein and those
risks described in the section entitled “Risk Factors” contained in Sandstorm’s most recent Annual
Information Form for the year ended December 31, 2014 available at www.sedar.com and www.sec.gov and incorporated by
reference herein.

Forward-looking
information in this MD&A includes, among other things, disclosure regarding: Sandstorm’s existing 10 Gold Streams and
56 royalties as well as its future outlook, the mineral reserve and mineral resource estimates for each of the Aurizona Mine,
the Serra Pelada Mine, the Gualcamayo Mine, the Emigrant Springs Mine, MWS, the Santa Elena Mine, the Ming Mine, the Black Fox
Mine, the Deflector Project, the Hugo North Extension and Heruga deposits, the Karma Project, the mines underlying the Sandstorm
portfolio of royalties, the Bachelor Lake Mine, the Mt. Hamilton Mine, the Prairie Creek Project, the San Andres Mine, the Bomboré
Project and the Bracemac-McLeod Mine. Forward-looking information is based on assumptions management believes to be reasonable,
including but not limited to the continued operation of the mining operations from which Sandstorm will purchase gold, no material
adverse change in the market price of commodities, that the mining operations will operate in accordance with their public statements
and achieve their stated production outcomes, and such other assumptions and factors as set out therein.

Although
Sandstorm has attempted to identify important factors that could cause actual actions, events or results to differ materially
from those contained in forward-looking information, there may be other factors that cause actions, events or results not to be
as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results
and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue
reliance on forward-looking information.

32







MANAGEMENT'S
RESPONSIBILITY FOR FINANCIAL REPORTING



The accompanying
consolidated financial statements of Sandstorm Gold Ltd. and all the information in this annual report are the responsibility
of management and have been approved by the Board of Directors.

The consolidated
financial statements have been prepared by management on a going concern basis in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). When alternative
accounting methods exist, management has chosen those it deems most appropriate in the circumstances. Financial statements are
not exact since they include certain amounts based on estimates and judgments. Management has determined such amounts on a reasonable
basis in order to ensure that the financial statements are presented fairly, in all material respects. Management has prepared
the financial information presented elsewhere in the annual report and has ensured that it is consistent with that in the financial
statements.

Sandstorm
Gold Ltd. maintains systems of internal accounting and administrative controls in order to provide, on a reasonable basis, assurance
that the financial information is relevant, reliable and accurate and that the Company's assets are appropriately accounted for
and adequately safeguarded.

The Board
of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately
responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through
its Audit Committee.

The
Audit Committee is appointed by the Board, and all of its members are independent directors. The Committee meets at least four
times a year with management, as well as the external auditors, to discuss internal controls over the financial reporting process,
auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities,
and to review the quarterly and the annual reports, the financial statements and the external auditors' report. The Committee
reports its findings to the Board for consideration when approving the financial statements for issuance to the shareholders.
The Committee also considers, for review by the Board and approval by the shareholders, the engagement or reappointment of the
external auditors. The consolidated financial statements have been audited by Deloitte LLP, Chartered Accountants, in accordance
with Canadian generally accepted auditing standards and standards of the Public Company Accounting Oversight Board (United States)
on behalf of the shareholders. Deloitte LLP have full and free access to the Audit Committee.





|“Nolan Watson”                      | “Erfan Kazemi”         
|----------------------------------- | -----------------------
|President & Chief Executive Officer | Chief Financial Officer
|                                    |                        
|March 17, 2015                      |                        





33







Report
of Independent Registered Public Accounting Firm



To the
Board of Directors and Shareholders of Sandstorm Gold Ltd.



We
have audited the accompanying consolidated financial statements of Sandstorm Gold Ltd. and subsidiaries (the
“Company”), which comprise the consolidated statements of financial position as at December 31, 2014 and December
31, 2013, and the consolidated statements of income(loss), comprehensive income (loss), changes in equity, and cash
flows for the years then ended, and a summary of significant accounting policies and other explanatory
information.

Management's
Responsibility for the Consolidated Financial Statements

Management
is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.

Auditor's
Responsibility

Our responsibility
is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance
with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.

An audit
involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements.

We believe
that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Sandstorm Gold
Ltd. and subsidiaries as at December 31, 2014 and December 31, 2013, and their financial performance and their cash flows for
the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board.

34







Other
Matter

We have
also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s
internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control —
Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated March 17, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/S/ Deloitte
LLP

Chartered
Accountants
March 17, 2015
Vancouver, Canada



35







Report
of Independent Registered Public Accounting Firm



To the
Board of Directors and Shareholders of Sandstorm Gold Ltd.



We have
audited the internal control over financial reporting of Sandstorm Gold Ltd. and subsidiaries (the “Company”) as of
December 31, 2014, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted
our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of,
the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board. A company's internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect
on the financial statements.



36







Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections
of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk
that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December
31, 2014, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

We have
also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2014 of the Company
and our report dated March 17, 2015 expressed an unmodified opinion on those financial statements.

/S/ Deloitte
LLP

Chartered
Accountants
March 17, 2015
Vancouver, Canada







37













SANDSTORM
GOLD LTD.

CONSOLIDATED
FINANCIAL STATEMENTS

Annual
2014

38





CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION

|Expressed
    in U.S. dollars ($000s)                 | Note | December
    31, 2014 | December
    31, 2013
|----------------------------------------------------- | ---- | --------------------- | ---------------------
|ASSETS                                                |      |                       |                      
|Current                                               |      |                       |                      
|Cash
    and cash equivalents                         |      | $                     | 90,224               
|Trade
    receivables and other                       |      |                       | 2,746                
|                                                      |      | $                     | 92,970               
|Non-current                                           |      |                       |                      
|Mineral
    interests and royalties                   | 7    |                       | 261,882              
|Investments                                           | 8    |                       | 23,989               
|Deferred
    financing costs                          | 9    |                       | 2,138                
|Loan
    receivable                                   | 7    |                       | 21,155               
|Deferred
    income tax assets                        | 11   |                       | 27,600               
|Receivables
    and other                             |      |                       | 1,336                
|Total
    assets                                      |      | $                     | 431,070              
|                                                      |      |                       |                      
|LIABILITIES                                           |      |                       |                      
|Current                                               |      |                       |                      
|Trade
    and other payables                          |      | $                     | 3,631                
|Common
    share purchase warrants -  Premier Royalty |      |                       | -                    
|                                                      |      | $                     | 3,631                
|Non-current                                           |      |                       |                      
|Deferred
    income tax liability                     | 11   |                       | 5,892                
|                                                      |      | $                     | 9,523                
|                                                      |      |                       |                      
|EQUITY                                                |      |                       |                      
|Share
    capital                                     | 10   | $                     | 456,670              
|Reserves                                              | 10   |                       | 21,132               
|Deficit                                               |      |                       | (17,870)             
|Accumulated
    other comprehensive loss              |      |                       | (38,385)             
|                                                      |      | $                     | 421,547              
|Total
    liabilities and equity                      |      | $                     | 431,070              

Contractual
obligations (Note 15)

Subsequent
events (Note 17)





|ON
        BEHALF OF THE BOARD: “Nolan Watson”, Director “David DeWitt”, Director
|---------------------------------------------------------------------------------



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

39







CONSOLIDATED
STATEMENTS OF INCOME (Loss)

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



|                                                                                                  | Note       | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
|------------------------------------------------------------------------------------------------- | ---------- | ------------------------------------ | ------------------------------------
|Sales                                                                                             | 16         | $                                    | 43,690                              
|Royalty
    revenue                                                                               | 16         |                                      | 12,804                              
|                                                                                                  |            | $                                    | 56,494                              
|                                                                                                  |            |                                      |                                     
|Cost
    of sales, excluding depletion                                                            |            |                                      | 14,383                              
|Depletion                                                                                         |            |                                      | 27,913                              
|Total
    cost of sales                                                                           |            | $                                    | 42,296                              
|                                                                                                  |            |                                      |                                     
|Gross
    profit                                                                                  |            |                                      | 14,198                              
|                                                                                                  |            |                                      |                                     
|Expenses
    and other (income)                                                                   |            |                                      |                                     
|Administration
    expenses 1                                                                     | 12         |                                      | 6,984                               
|Project
    evaluation                                                                            |            |                                      | 688                                 
|Foreign
    exchange (gain) loss                                                                  |            |                                      | (2,091)                             
|Loss
    on revaluation of investments                                                            | 8          |                                      | 951                                 
|Finance
    income                                                                                |            |                                      | (1,596)                             
|Finance
    expense                                                                               |            |                                      | 1,321                               
|Other
    expenses                                                                                |            |                                      | 25                                  
|Gain
    on bargain purchase                                                                      | 6
    (a)  |                                      | (2,565)                             
|Mineral
    interest impairment                                                                   | 7          |                                      | 1,215                               
|Goodwill
    impairment                                                                           | 6
    (b)  |                                      | -                                   
|Income
    (loss) before taxes                                                                    |            | $                                    | 9,266                               
|                                                                                                  |            |                                      |                                     
|Income
    tax recovery                                                                           | 11         |                                      | (2,249)                             
|Net
    income (loss) for the year                                                                |            | $                                    | 11,515                              
|                                                                                                  |            |                                      |                                     
|Net
    income  (loss)  attributable to                                                           |            |                                      |                                     
|Shareholders
    of Sandstorm Gold Ltd.                                                           |            |                                      | 11,515                              
|Non-controlling
    interests                                                                     |            |                                      | -                                   
|Net
    income (loss) for the year                                                                |            |                                      | 11,515                              
|                                                                                                  |            |                                      |                                     
|Basic
    earnings (loss) per share                                                               |            | $                                    | 0.10                                
|Diluted
    earnings (loss) per share                                                             |            | $                                    | 0.09                                
|                                                                                                  |            |                                      |                                     
|Weighted
    average number of
    common shares outstanding                                      |            |                                      |                                     
|Basic                                                                                             | 10
    (e) |                                      | 112,852,945                         
|Diluted                                                                                           | 10
    (e) |                                      | 121,398,498                         
|1Equity settled stock based compensation (a non-cash item) is included in administration expenses |            |                                      | 2,096                               

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

40





CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (loss)

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

|                                                                          | Note | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
|------------------------------------------------------------------------- | ---- | ------------------------------------ | ------------------------------------
|Net
    income (loss) for the year                                        |      | $                                    | 11,515                              
|                                                                          |      |                                      |                                     
|Other
    comprehensive loss for the year                                 |      |                                      |                                     
|Items
    that may subsequently bereclassified to net income (loss):      |      |                                      |                                     
|Currency
    translation differences                                      |      |                                      | (6,727)                             
|Items
    that will not subsequently bereclassified to net income (loss): |      |                                      |                                     
|Unrealized
    loss on investments                                        | 8    |                                      | (19,909)                            
|Total
    other comprehensive loss for the year                           |      |                                      | (26,636)                            
|Total
    comprehensive loss for the year                                 |      | $                                    | (15,121)                            
|                                                                          |      |                                      |                                     
|Total
    other comprehensive loss attributable to:                       |      |                                      |                                     
|Shareholders
    of Sandstorm Gold Ltd.                                   |      |                                      | (26,636)                            
|Non-controlling
    interests                                             |      |                                      | -                                   
|                                                                          |      | $                                    | (26,636)                            
|                                                                          |      |                                      |                                     
|Total
    comprehensive loss attributable to:                             |      |                                      |                                     
|Shareholders
    of Sandstorm Gold Ltd.                                   |      |                                      | (15,121)                            
|Non-controlling
    interests                                             |      |                                      | -                                   
|Total
    comprehensive loss for the year                                 |      | $                                    | (15,121)                            



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







41







CONSOLIDATED
STATEMENTS OF CASH FLOWS

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

|Cash
    flow from (used in):                                                    | Note      | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
|-------------------------------------------------------------------------------- | --------- | ------------------------------------ | ------------------------------------
|Operating
    activities                                                         |           |                                      |                                     
|Net
    income (loss) for the year                                               |           | $                                    | 11,515                              
|Items
    not affecting cash:                                                    |           |                                      |                                     
|»
    Goodwill impairment                                                        |           |                                      | -                                   
|»
    Gain on bargain purchase                                                   |           |                                      | (2,565)                             
|»
    Mineral interest impairment                                                |           |                                      | 1,215                               
|»
    Depletion and depreciation and financing amortization                      |           |                                      | 28,579                              
|»
    Deferred income tax recovery                                               |           |                                      | (3,321)                             
|»
    Share-based payment                                                        |           |                                      | 2,096                               
|»
    Loss on revaluation of investments                                         | 8         |                                      | 951                                 
|»
    Unrealized foreign exchange (gain) loss                                    |           |                                      | (2,231)                             
|»
    Interest on loan receivable                                                |           |                                      | (853)                               
|Changes
    in non-cash working capital                                          | 13        |                                      | (162)                               
|                                                                                 |           | $                                    | 35,224                              
|Investing
    activities                                                         |           |                                      |                                     
|Acquisition
    of mineral interests and royalties                               | 7         |                                      | (27,907)                            
|Acquisition
    of investments and other assets                                  | 8         |                                      | (27,508)                            
|Funds
    received from promissory note                                          |           |                                      | -                                   
|Loan
    issuance                                                                | 7         |                                      | (12,893)                            
|Proceeds
    on disposal of investments                                          |           |                                      | -                                   
|Acquisition
    of Sandstorm Metals & Energy Ltd., net of cash acquired of $4.1M | 6         |                                      | (6,242)                             
|Acquisition
    of Premier Royalty,net of cash acquired of $39.9M                |           |                                      | -                                   
|                                                                                 |           | $                                    | (74,550)                            
|Financing
    activities                                                         |           |                                      |                                     
|Proceeds
    on exercise of warrants and options                                 |           |                                      | 34,937                              
|Redemption
    of common share purchase warrants – Premier Royalty               | 10        |                                      | (1,164)                             
|Share
    issue and deferred financing costs                                     | 9,
    10 |                                      | (985)                               
|Redemption
    of common shares  (normal course issuer bid)                      |           |                                      | (682)                               
|                                                                                 |           | $                                    | 32,106                              
|Effect
    of exchange rate changes on cash                                      |           |                                      | (1,492)                             
|Net
    decrease in cash and cash equivalents                                    |           | $                                    | (8,712)                             
|Cash
    and cash equivalents – beginning of the year                            |           |                                      | 98,936                              
|Cash
    and cash equivalents – end of the year                                  |           | $                                    | 90,224                              
|                                                                                 |           |                                      |                                     
|Cash
    and cash equivalents, at the end of the period                          |           |                                      |                                     
|Cash
    at bank                                                                 |           | $                                    | 20,647                              
|Short-term
    deposit                                                           |           | $                                    | 69,577                              

Supplemental
cash flow information (note 13)



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



42







CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY



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

|                                                                   |            | Share
    Capital | Reserves |                    |                        |                                 |                                                |                              |       |          |  
|------------------------------------------------------------------ | ---------- | ----------------- | -------- | ------------------ | ---------------------- | ------------------------------- | ---------------------------------------------- | ---------------------------- | ----- | -------- | -
|                                                                   | Note       | Number            | Amount   | Share
    
Options | SharePurchase Warrants | Retained
    Earnings (Deficit) | AccumulatedOther Compre- hensive Income (Loss) | Non-controlling
    interest | Total
|At
    January 1, 2013                                             |            | 86,009,888        | $        | 281,495            | $                      | 4,139                           | $                                              | 22,713                       | $     | 27,669   | $
|Shares
    issued on exercise of warrants                          | 10
    (c) | 3,753,029         |          | 13,868             |                        | -                               |                                                | (2,608)                      |       | -        |  
|Options
    exercised                                              | 10
    (b) | 36,500            |          | 130                | (8)                    |                                 |                                                | -                            |       | -        |  
|Special
    Warrants issued on acquisition of Premier Royalty      |            | -                 |          | -                  |                        | -                               |                                                | 64,394                       |       | -        |  
|Shares
    issued on exercise of Special Warrants                  |            | 5,604,278         |          | 64,394             |                        | -                               |                                                | (64,394)                     |       | -        |  
|Dilution
    of controlling interest in Premier Royalty            |            | -                 |          | -                  |                        | -                               |                                                | -                            |       | -        |  
|Acquisition
    of non-controlling interest of Premier Royalty     |            | 4,618,109         |          | 23,256             |                        | -                               |                                                | -                            |       | 16,698   |  
|Share
    issue costs(net of tax of $259)                          |            | -                 |          | (135)              |                        | -                               |                                                | -                            |       | -        |  
|Vesting
    of restricted stock rights                             |            | 6,334             |          | 74                 |                        | (74)                            |                                                | -                            |       | -        |  
|Share
    based payment                                            |            | -                 |          | -                  |                        | 4,026                           |                                                | -                            |       | -        |  
|Net
    loss                                                       |            | -                 |          | -                  |                        | -                               |                                                | -                            |       | (73,752) |  
|Other
    comprehensive loss                                       |            | -                 |          | -                  |                        | -                               |                                                | -                            |       | -        |  
|At
    December 31, 2013                                           |            | 100,028,138       | $        | 383,082            | $                      | 8,083                           | $                                              | 20,105                       | $     | (29,385) | $
|Shares
    issued on exercise of warrants                          | 10
    (c) | 11,041,020        |          | 41,013             |                        | -                               |                                                | (7,796)                      |       | -        |  
|Options
    exercised                                              | 10
    (b) | 862,000           |          | 2,291              |                        | (570)                           |                                                | -                            |       | -        |  
|Share
    issue costs                                              |            | -                 |          | (27)               |                        | -                               |                                                | -                            |       | -        |  
|Expiration
    of unexercised warrants                             |            | -                 |          | 192                |                        | -                               |                                                | (192)                        |       | -        |  
|Shares
    issued on acquisition of Sandstorm Metals & Energy Ltd. | 6          | 5,698,216         |          | 30,078             |                        | -                               |                                                | -                            |       | -        |  
|Issuance
    of replacement equity awards                          | 10
    (d) | -                 |          | -                  |                        | 129                             |                                                | -                            |       | -        |  
|Vesting
    of restricted stock rights                             |            | 70,898            |          | 723                |                        | (723)                           |                                                |                              |       |          |  
|Redemption
    of common shares  (normal course issuer bid)        | 10
    (a) | (222,090)         |          | (682)              |                        | -                               |                                                | -                            |       |          | -
|Share
    based payment                                            |            | -                 |          | -                  |                        | 2,096                           |                                                | -                            |       | -        |  
|Net
    income for the period                                      |            | -                 |          | -                  |                        | -                               |                                                | -                            |       | 11,515   |  
|Other
    comprehensive loss                                       |            | -                 |          | -                  |                        | -                               |                                                | -                            |       | -        |  
|At
    December 31, 2014                                           |            | 117,478,182       | $        | 456,670            | $                      | 9,015                           | $                                              | 12,117                       | $     | (17,870) | $





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





43







Notes
To The Consolidated Financial Statements

December
31, 2014

Expressed
in U.S. dollars



| | 1. | Nature Of Operations
| | -- | --------------------

Sandstorm
Gold Ltd. was incorporated under the Business Corporations Act of British Columbia on March 23, 2007. Sandstorm Gold Ltd. and
its subsidiary entities ("Sandstorm" or the "Company") is a resource-based company that seeks to acquire gold
and other precious metal purchase agreements (“Gold Streams”) and royalties from companies that have advanced stage
development projects or operating mines. In return for making an 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
consolidated financial statements were authorized for issue by the Board of Directors of the Company on March 17, 2015.



| | 2. | Summary of Significant Accounting Policies
| | -- | ------------------------------------------

| | A. | Statement of Compliance
| | -- | -----------------------

These
consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

| | B. | Basis of Presentation
| | -- | ---------------------

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

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



| | C. | Principles of Consolidation
| | -- | ---------------------------

These
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Sandstorm Gold Bank Limited, Sandstorm Gold (Canada) Holdings Ltd., Whirlwind Capital Ltd., Bridgeport Gold Inc., Inversiones Mineras Australes Holdings
(BVI) Inc., Inversiones Mineras Australes S.A., Premier Royalty Inc., Premier Royalty U.S.A. Inc., Sandstorm Metals & Energy
Ltd., Sandstorm Metals & Energy (Canada) Holdings Ltd, Sandstorm Metals & Energy (Canada) Ltd. and Sandstorm Metals &
Energy (US) Inc. Subsidiaries are fully consolidated from the date the Company obtains control, and continue to be consolidated
until the date that control ceases. Control is achieved when the Company has the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities.

44







All
intercompany balances, transactions, revenues and expenses have been eliminated on consolidation.

| | D. | Business Combinations
| | -- | ---------------------

On
the acquisition of a business, the acquisition method of accounting is used, whereby the purchase consideration is allocated to
the identifiable assets and liabilities on the basis of fair value at the date of acquisition. Provisional fair values allocated
at a reporting date are finalized as soon as the relevant information is available, within a period not to exceed twelve months
from the acquisition date with retroactive restatement of the impact of adjustments to those provisional fair values effective
as at the acquisition date. Incremental costs related to acquisitions are expensed as incurred.

When
the amount of purchase consideration is contingent on future events, the initial cost of the acquisition recorded includes an
estimate of the fair value of the contingent amounts expected to be payable in the future. When the fair value of contingent consideration
as at the date of acquisition is finalized before the purchase price allocation is finalized, the adjustment is allocated to the
identifiable assets and liabilities acquired. Subsequent changes to the estimated fair value of contingent consideration are recorded
in the consolidated statement of income (loss).

When
the cost of the acquisition exceeds the fair values of the identifiable net assets acquired, the difference is recorded as goodwill.
If the fair value attributable to the Company’s share of the identifiable net assets exceeds the cost of acquisition, the
difference is recognized as a gain in the consolidated statement of income (loss).

Non-controlling
interests represent the fair value of net assets in subsidiaries, as at the date of acquisition, which are not held by the Company
and are presented in the equity section of the consolidated statement of financial position.

| | E. | Goodwill
| | -- | --------

The
Company allocates goodwill arising from business combinations to each cash-generating unit or group of cash-generating units that
are expected to receive the benefits from the business combination. Irrespective of any indication of impairment, the recoverable
amount of the cash-generating unit or group of cash-generating units to which goodwill has been allocated is tested annually for
impairment and when there is an indication that the goodwill may be impaired. Any impairment is recognized as an expense immediately.
Any impairment of goodwill is not subsequently reversed.

| | F. | Mineral Interest and Royalties
| | -- | ------------------------------

Agreements
for which settlements are called for in gold, the amount of which is based on production at the mines and capitalized on a property
by property basis, are recorded at cost less accumulated depletion and impairment loss, if any. Project evaluation costs that
are not related to a specific agreement are expensed in the period incurred.

45







Producing
mineral interests are depleted using the units-of-production method over the life of the property to which the interest relates,
which is estimated using available information of proven and probable reserves and the portion of resources expected to be classified
as mineral reserves at the mine corresponding to the specific agreement. For those mineral interests that have commenced production,
all costs associated with mineral interests are depleted and no amounts would remain classified as non-depletable.

The
acquisition costs of acquired resources and exploration potential is recorded as an asset (non-depletable interest) on the acquisition
date. The value of the exploration potential is classified as non-depletable and accounted for in accordance with IFRS 6, Exploration
and Evaluation of Mineral Resources until such time as the technical feasibility and commercial viability have been established
at which point the value of the exploration potential is classified as either depletable or non-depletable in accordance with
IAS16, Property, Plant and Equipment.

| | G. | Impairment of Mineral Interests
| | -- | -------------------------------

Evaluation
of the carrying values of each mineral property is undertaken when events or changes in circumstances indicate that the carrying
values may not be recoverable. If any indication of impairment exists, the recoverable amount is estimated to determine the extent
of any impairment loss. The recoverable amount is the higher of the fair value less costs to sell and value in use. Estimated
values in use are calculated using estimated production, sales prices, and a discount rate. Estimated production is determined
using current reserves compiled by qualified persons. Estimated sales prices are determined using an average of long-term metal
price forecasts by analysts. The discount rate is estimated using the average discount rate used by analysts to value precious
metal royalty companies. If it is determined that the recoverable amount is less than the carrying value then an impairment is
recorded with a charge to net income (loss).

An
assessment is made at each reporting period if there is any indication that a previous impairment loss may no longer exist or
has decreased. If indications are present, the carrying amount of the mineral interest is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount net of depletion that would
have been determined had no impairment loss been recognized for the mineral interest in previous periods.

| | H. | Revenue Recognition
| | -- | -------------------

Revenue from the
sale of precious metals is recognized when persuasive evidence of an arrangement exists, title and risk passes to the buyer, collection
is reasonably assured and the price is reasonably determinable. Selling prices are determined at the point revenue is recognized
by reference to active and freely traded commodity markets, for example the London Bullion Market for commodities, in an identical
form to the product sold. Revenue from the sale of gold may be subject to adjustment upon final settlement of estimated metal
prices, weights, and assays. Provisionally-priced revenues are initially recognized based on forward prices. Adjustments to revenue
from metal prices are recorded monthly and other adjustments are recorded on final settlement and are offset against revenue when
incurred.

46







Royalty
revenue is recognized based upon amounts contractually due pursuant to the underlying royalty agreement. Specifically, revenue
is recognized in accordance with the terms of the underlying royalty agreements subject to (i) the pervasive evidence of the existence
of the arrangements; (ii) the risks and rewards having been transferred; (iii) the royalty being fixed or determinable; and (iv)
the collectability of the royalty being reasonably assured.

| | I. | Foreign Currency Translation
| | -- | ----------------------------

The
functional currency of the Company and its subsidiaries is the principal currency of the economic environment in which they operate.
For the Company and its subsidiaries Sandstorm Gold Bank Limited, Sandstorm Gold (Canada) Ltd., Whirlwind Capital Ltd.,
Bridgeport Gold Inc., Inversiones Mineras Australes Holdings (BVI) Inc., Premier Royalty U.S.A. Inc., Sandstorm Metals & Energy
Ltd., Sandstorm Metals & Energy (Canada) Holdings Ltd, Sandstorm Metals & Energy (Canada) Ltd. and Sandstorm Metals &
Energy (US) Inc. the functional currency is the U.S. dollar.

For
Premier Royalty Inc. and Inversiones Mineras Australes S.A., the functional currencies of these subsidiaries are the Canadian
dollar and Argentine Peso, respectively. To translate Premier Royalty Inc. and Inversiones Mineras Australes S.A. to the presentation
currency of the U.S. dollar, all assets and liabilities are translated using the exchange rate as of the reporting date and all
income and expenses are translated using the exchange rate at the dates of transactions. All resulting exchange differences are
recognized in Other comprehensive  income (loss).

Transactions
in foreign currencies are initially recorded in the entity’s functional currency as the rate on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated using the closing rate as at the reporting date.

| | J. | Financial Instruments
| | -- | ---------------------

The
Company has adopted IFRS 9, Financial Instruments, effective January 1, 2010. The Company’s financial instruments consist
of cash and cash equivalents, trade receivables and other, investments, loan receivable, and trade and other payables. All financial
instruments are initially recorded at fair value and designated as follows:

Investments
in common shares held are classified as fair value through other comprehensive income (“FVTOCI”), as these are held
for long-term strategic purposes and provide a more meaningful presentation based on management’s intention, rather than
reflecting changes in fair value in net income. Cash and cash equivalents, trade receivables and other, and loans receivable are
classified as financial assets at amortized cost and trade and other payables are classified as other financial liabilities and
these are measured at amortized cost using the effective interest method.

Investments
in warrants and convertible debt instruments are classified as fair value through profit or loss (“FVTPL”). These
warrants and convertible debt instruments are measured at fair value at the end of each reporting period, with any gains or losses
arising on re-measurement recognized as a component of net income (loss) under the classification of loss on revaluation of investments.

47







Transaction
costs on initial recognition of financial instruments classified as FVTPL are expensed as incurred. Transaction costs incurred
on initial recognition of financial instruments classified as loans and receivables and other financial liabilities are recognized
at their fair value amount and offset against the related loans and receivables or capitalized when appropriate.

Financial
assets are derecognized when the contractual rights to the cash flows from the asset expire. Financial liabilities are derecognized
only when the Company’s obligations are discharged, cancelled or they expire. All gains and losses as a result of changes
in fair value for FVTPL financial instruments are included in net income (loss) in the period they occur.

Common share
purchase warrants, which provide the holder the right to settle in cash, are considered derivative instruments. As such, they
are classified as financial liabilities measured at FVTPL and are re-measured at fair value at the end of each reporting
period with all changes being recognized as a component net income(loss) under the classification of loss on revaluation of
investments.

| | K. | Impairment of Financial Assets
| | -- | ------------------------------

The
Company assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial
assets is impaired. Financial assets are considered to be impaired if objective evidence indicates that a change in the market,
economic or legal environment in which the Company invested has had a negative effect on the estimated future cash flows of that
asset. An impairment loss for a financial asset measured at amortized cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows discounted at the original effective interest rates. Impairment
losses are recognized in profit and loss. For financial assets measured at amortized cost, any reversal of impairment is recognized
in profit and loss.

| | L. | Inventory
| | -- | ---------

Inventory
is valued at the lower of specifically identifiable cost and net realizable value. Costs included are the agreed upon purchase
price under the Gold Stream and depletion of the applicable mineral interest.

| | M. | Cash and Cash Equivalents
| | -- | -------------------------

Cash
and cash equivalents include cash on account, demand deposits and money market investments with maturities from the date of acquisition
of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant changes in value.

| | N. | Income Taxes
| | -- | ------------

Current
income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities.
The tax rates and tax laws used are those that are substantively enacted at the reporting date.

48







Deferred
income taxes are provided using the liability method on temporary differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for accounting. The change in the net deferred income tax asset or liability is included
in income except for deferred income tax relating to equity items which is recognized directly in equity. The income tax effects
of differences in the periods when revenue and expenses are recognized in accordance with Company accounting practices, and the
periods they are recognized for income tax purposes are reflected as deferred income tax assets or liabilities. Deferred income
tax assets and liabilities are measured using the substantively enacted statutory income tax rates which are expected to apply
to taxable income in the years in which the assets are realized or the liabilities settled. A deferred tax asset is recognized
for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable
profits will be available against which they can be utilized.

Deferred
income tax assets and liabilities are offset only if a legally enforceable right exists to offset current tax assets against liabilities
and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity
and are intended to be settled on a net basis.

The
determination of current and deferred taxes requires interpretations of tax legislation, estimates of expected timing of reversal
of deferred tax assets and liabilities, and estimates of future earnings.

| | O. | Share Capital and Share Purchase
                                         Warrants
| | -- | ----------------------------------------------------------------------------------

The
proceeds from the issue of units are allocated between common shares and share purchase warrants with an exercise price denominated
in U.S. dollars on a pro-rata basis based on relative fair values at the date of issuance. The fair value of common shares is
based on the market closing price on the date the units are issued and the fair value of share purchase warrants is determined
using the quoted market price or if the warrants are not traded, using the Black-Scholes Model (“BSM”) as of the date
of issuance. Equity instruments issued to agents as financing costs are measured at their fair value at the date the services
were provided.

| | P. | Earnings Per Share
| | -- | ------------------

Basic
earnings per share is computed by dividing the net income available to common shareholders by the weighted average number of common
shares issued and outstanding during the period. Diluted earnings per share is calculated assuming that outstanding share options
and share purchase warrants, with an average market price that exceeds the average exercise prices of the options and warrants
for the year, are exercised and the proceeds are used to repurchase shares of the Company at the average market price of the common
shares for the year.

| | Q. | Share Based Payments
| | -- | --------------------

The
Company recognizes a stock based compensation expense for all share purchase options and restricted share rights (“RSR’s”)
awarded to employees, officers and directors based on the fair values of the share purchase options and RSRs at the date of grant.
The fair values of share purchase options and RSRs at the date of grant are expensed over the vesting periods of the share purchase
options and RSRs, respectively, with a corresponding increase to equity. The fair value of share purchase options is determined
using the BSM with market related inputs as of the date of grant. Share purchase options with graded vesting schedules are accounted
for as separate grants with different vesting periods and fair values. The fair value of RSRs is the market value of the underlying
shares at the date of grant. At the end of each reporting period, the Company re-assesses its estimates of the number of awards
that are expected to vest and recognizes the impact of any revisions to this estimate in the consolidated statement of income
(loss).

49







The
BSM requires management to estimate the expected volatility and term of the equity instrument, the risk-free rate of return over
the term, expected dividends, and the number of equity instruments expected to ultimately vest. Volatility is estimated using
the historical stock price of the Company, the expected term is estimated using historical exercise data, and the expected number
of equity instruments expected to vest is estimated using historical forfeiture data.

| | R. | Related Party Transactions
| | -- | --------------------------

Parties
are considered related if one party has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Parties are also considered related if they are subject
to common control or significant influence. A transaction is considered a related party transaction when there is a transfer of
resources or obligations between related parties.

| | S. | Segment Reporting
| | -- | -----------------

An
operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur
expenses. All operating segments’ results are reviewed regularly by the Company’s Chief Executive Officer to make
decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information
is available.



| | 3. | Future changes in accounting policies
| | -- | -------------------------------------

The
IASB has issued the following new standard but is not yet effective. Pronouncements that are not applicable to the Company have
been excluded from this note.

| | a. | IFRS
                                         15 Revenue from Contracts with Customers - The final standard on revenue from
                                         contracts with customers was issued on May 28, 2014 and is effective for annual reporting
                                         periods beginning after December 15, 2016 for public entities with early application
                                         not permitted. Entities have the option of using either a full retrospective or a modified
                                         retrospective approach to adopt the guidance. The Company is assessing the impact of
                                         this Standard.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | Key Sources of Estimation Uncertainty
                                         and Critical Accounting Judgments
| | -- | ----------------------------------------------------------------------------------------------------------------

The
preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the
consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions
are continuously evaluated and are based on management’s experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.

50







Information
about significant areas of estimation uncertainty and judgments made by management in preparing the consolidated financial statements
are described below.

| | A. | Accounting For Mineral Interests
| | -- | --------------------------------

The
Company’s business is the acquisition of Gold Streams and royalties. Management accounts for these agreements as mineral
interests as they consider the associated mining risks when evaluating the assets to be acquired and assessing the mineral interests
over the life of the related mine.

| | B. | Investment
| | -- | ----------

The
Company’s investment in the common shares of Luna are classified as fair value through other comprehensive income (loss),
rather than an investment in an associate. The Company’s determination that it does not have significant influence over
Luna Gold has been based on a number of factors, including, but not limited to: (i) in the event of a Luna shareholder’s
vote, Sandstorm’s voting shares may be excluded for the purposes of any minority shareholder approval requirements depending
on the nature of a future restructuring transaction; (ii) Sandstorm does not participate in Luna’s policy-making decisions;
(iii) there is no interchange of management personnel; and (iv) there is no provision of essential technical information between
the two entities.

| | C. | Attributable Reserve and Resource
                                         Estimates
| | -- | ------------------------------------------------------------------------------------



Mineral
Interests are a significant asset of the Company, with a carrying value of $261.9 million at December 31, 2014 (2013: $237.9 million).
This amount represents the capitalized expenditures related to the acquisition of the gold interests net of accumulated depletion
and any impairments. The Company estimates the reserves and resources relating to each agreement. Reserves are estimates of the
amount of gold that can be economically and legally extracted from the mining properties at which the Company has precious metal
purchase agreements, adjusted where applicable to reflect the Company’s percentage entitlement to gold produced from such
mines. The Company estimates its reserves and resources based on information compiled by appropriately qualified persons relating
to the geological data on the size, depth and shape of the ore body, and require complex geological judgments to interpret the
data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices,
future capital requirements, and production costs along with geological assumptions and judgments made in estimating the size
and grade of the ore body. Changes in the reserve or resource estimates may impact upon the carrying value of the Company’s
gold interests and depletion charges.

| | D. | Depletion
| | -- | ---------

The
Company’s mineral and royalty interests are depleted on a units-of-sale basis, with estimated recoverable reserves and resources
being used to determine the depletion rate for each of the Company’s mineral and royalty interests. These calculations require
the use of estimates and assumptions, including the amount of recoverable reserves. Changes in the estimated recoverable reserves,
resources or exploration potential will directly impact the depletion rate used. Changes to depletion rates are accounted for
prospectively.

| | E. | Income Taxes
| | -- | ------------

The
interpretation of existing tax laws or regulations in Canada, Barbados, the United States of America, Australia, Argentina or
any of the countries in which the mining operations are located or to which shipments of gold are made requires the use of judgment.
Differing interpretation of these laws or regulations could result in an increase in the Company’s taxes, or other governmental
charges, duties or impositions. In addition, the recoverability of deferred income tax assets, including expected periods of reversal
of temporary differences and expectations of future taxable income, are assessed by management at the end of each reporting period
and adjusted, as necessary, on a prospective basis.

51







| | F. | Impairment of Assets
| | -- | --------------------

Management
considers each mineral and royalty interest to be a separate cash generating unit, which is the lowest level for which cash inflows
are largely independent of those of other assets. At the end of each reporting period, the Company reviews the carrying amounts
of each mineral and royalty interest to determine whether there is any indication that those mineral and royalty interests have
suffered an impairment loss. If such an indication exists, the recoverable amount of the mineral and royalty interest is estimated
in order to determine the extent of the impairment (if any). The recoverable amount of each mineral and royalty interest is the
higher of fair value less costs to sell (“Fair Value approach”) and value in use (“Value-in-use approach”).

Under
the Fair Value approach, the net asset value (“NAV”) methodology is used to determine the fair value that could be
received from each mineral and royalty interest in an arm’s length transaction at the measurement date. NAV is estimated
by using an appropriate discount rate to calculate the present value of expected future cash flows associated with each mineral
category, and, or, if appropriate, a liquidation scenario of the underlying assets with reference to external publications. The
values are adjusted for each mineral category dependent on the likelihood of conversion from resources to reserves. A market multiple
is applied to the NAV computed in order to assess the estimated fair value. Gold Stream and precious metal companies typically
trade at a market capitalization that is based on a multiple of their underlying NAV. Consequently, a market participant would
generally apply a NAV multiple when estimating the fair value of a mineral and royalty interest.

Under
the Value-in-use approach, the net present value (“NPV”) methodology is used. NPV is estimated by using a discount
rate to calculate the present value of expected future cash flows. The discount rate is based on the Company’s weighted
average cost of capital, adjusted for various risks. The expected future cash flows are management’s best estimates of expected
future revenues and costs. Under each method, expected future revenues reflect the estimated future production for each mine at
which the Company has a Gold Stream or royalty based on detailed life of mine plans received from each of the partners. Included
in these forecasts is the production of mineral resources that do not currently qualify for inclusion in proven and probable ore
reserves where there is a high degree of confidence in its economic extraction. This is consistent with the methodology that is
used to measure value beyond proven and probable reserves when allocating the purchase price to acquired mineral and royalty interests.
Expected future revenues also reflect management’s estimated long term metal prices, which are determined based on current
prices, forward pricing curves and forecasts of expected long-term metal prices prepared by analysts. These estimates often differ
from current price levels, but are consistent with how a market participant would assess future long-term metal prices. Estimated
future cash costs are fixed based on the terms of each Gold Stream or royalty, as disclosed in note 15 to the financial statements.

If
the carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired and an impairment charge is
reflected as a component of net income (loss) so as to reduce the carrying amount to its recoverable value. A previously
recognized impairment charge is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment charge was recognized. If this is the case, the carrying amount of the asset is increased
to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depletion,
had no impairment charge been recognized for the asset in prior years. Such reversal is reflected as a component of net income(loss).
For further information refer to discussion on Luna under note 7 below.

52







At
December 31, 2014, the Company recorded an impairment charge of $1.2 million ($55.4 million- year ended December 31, 2013).



| | 5. | Financial Instruments
| | -- | ---------------------

| | A. | Capital Risk Management
| | -- | -----------------------

The
Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to
stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of $421.6
million ($370.1 million – December 31, 2013) of equity attributable to common shareholders, comprising of issued
capital (note 10), accumulated reserves (note 10) and deficit. The Company was  not subject to any externally imposed capital
requirements with the exception of complying with certain covenants under the credit agreement governing bank debt (note 9).
The Company is in compliance with the debt covenants described in note 9 as at December 31, 2014.

| | B. | Fair Value Estimation
| | -- | ---------------------

The
fair value hierarchy establishes three levels to classify the inputs of valuation techniques used to measure fair value. The three
levels of the fair value hierarchy are described below:

Level
1| Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities. Investments in common shares and warrants held that have direct listings on an exchange are classified
as Level 1.

Level
2 | Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets,
or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liabilities. Investments
in warrants and convertible debt instruments held that are not listed on an exchange are classified as Level 2.

Level
3 | Prices or valuation techniques that require inputs that are both significant to fair value measurement and unobservable
(supported by little or no market activity).

The
following table sets forth the Company's financial assets and liabilities measured at fair value on a recurring basis by level
within the fair value hierarchy as at December 31, 2014. As required by IFRS 13, assets and liabilities are classified in their
entirety based on the lowest level of input that is significant to the fair value measurement.



|In
    $000s                                  | Total | Quoted
    prices in active markets for identical assets
    (Level1) | Significant
    other
    observable inputs
    (Level 2) | Unobservable
    inputs
    (Level 3)
|--------------------------------------------- | ----- | --------------------------------------------------------------------- | --------------------------------------------------------- | -------------------------------------
|Long-term
    investments– common shares held | $     | 14,254                                                                | $                                                         | 14,254                               
|Long-term
    investments– convertible debt   |       | 9,735                                                                 |                                                           | -                                    
|                                              | $     | 23,989                                                                | $                                                         | 14,254                               



53







The
fair value of the Company's other financial instruments which include cash and cash equivalents, trade receivables and other,
loans receivable, receivables and other and trade and other payables approximate their carrying values at December 31, 2014.

| | C. | Credit Risk
| | -- | -----------

The
Company’s credit risk is limited to cash and cash equivalents, trade receivables and other, loans receivable, and receivables
and other in the ordinary course of business. The Company sells gold exclusively to large corporations with strong credit ratings.
The Company’s trade receivables and other is subject to the credit risk of the counterparties who own and operate the mines
underlying Sandstorm’s royalty portfolio. The Company’s $20.0 million loan to Luna and accrued interest is subject
to Luna’s credit risk and the Company’s ability to realize on its security.

| | D. | Currency Risk
| | -- | -------------

Financial
instruments that impact the Company’s net income (loss) or other comprehensive income (loss) due to currency fluctuations
include: cash and cash equivalents, trade receivables and other, investments and trade and other payables denominated in Canadian
dollars. Based on the Company's Canadian dollar denominated monetary assets and monetary liabilities at December 31, 2014, a 10%
increase (decrease) of the value of the Canadian dollar relative to the United States dollar would increase (decrease) net income
(loss) by $0.3 million and other comprehensive income (loss) by $1.4 million, respectively.



| | 6. | Business combinations
| | -- | ---------------------

| | A. | Acquisition of Sandstorm Metals
                                         & Energy Ltd.
| | -- | --------------------------------------------------------------------------------------

On
May 29, 2014, the Company closed its previously announced plan of arrangement (“Arrangement Agreement”) pursuant to
which it acquired 100% of the outstanding common shares of Sandstorm Metals & Energy Ltd. (“Sandstorm Metals & Energy”).

As
contemplated in the Arrangement Agreement, the shareholders of Sandstorm Metals & Energy, other than Sandstorm Gold, received
common shares of Sandstorm Gold (the “Sandstorm Gold Shares”) on the basis of 0.178 of a Sandstorm Gold Share plus
C$0.35 of cash for each Sandstorm Metals & Energy common share held.

In
accordance with IFRS 3 – Business Combinations, the total consideration of $43.8 million, consisting of: (i) $10.3 million
cash; (ii) $30.1 million representing the value of the Sandstorm Gold common shares issued (based on the May 29, 2014 closing
price); and (iii) $3.4 million of Sandstorm Metals & Energy common shares previously owned by the Company and other consideration
was allocated to the identifiable assets acquired and liabilities assumed as follows:

54









|Acquisition  price:                                                 |  
|------------------------------------------------------------------- | -
|Sandstorm
    Gold common shares issued                             | $
|Sandstorm
    Metals & Energy common shares owned by Sandstorm Gold |  
|Cash
    paid                                                       |  
|Conversion
    of previously issued Sandstorm Metals & Energy RSUs  |  
|                                                                    | $
|                                                                    |  
|Allocation
    of acquisition costs:                                |  
|Cash
    and cash equivalents                                       | $
|Trade
    receivables and other                                     |  
|Mineral
    interests and royalties                                 |  
|Investments                                                         |  
|Deferred
    income tax assets                                      |  
|Other                                                               |  
|Trade
    and other payables                                        |  
|Promissory
    note                                                 |  
|Gain
    on bargain purchase                                        |  
|                                                                    | $



Sandstorm
Gold has estimated the fair value of the assets acquired to be equal to their carrying value except for certain trade receivables
and other balances and the mineral interest and royalties which were estimated to have a fair value of $0.9 million and $29.8
million respectively. An income approach (being the net present value of expected future cash flows) was used to determine the
fair values of the royalty interests in mineral properties. Estimates of future cash flows are based on estimated future revenues
and expected conversions of resources to reserves at each of the mineral properties. The excess of the total fair value of the
identifiable assets acquired and the liabilities assumed over the total consideration has been recorded as a gain on bargain purchase
of $2.6 million.

Included in total revenue and net income for the year ended December 31, 2014 is $2.5 million and $1.9 million,
respectively, attributable to the results of Sandstorm Metals & Energy from the date of acquisition. Had the acquisition of
Sandstorm Metals & Energy been effected on January 1, 2014, the consolidated revenue and net income for the year ended December
31, 2014 would have been $58.0 million and $7.9 million, respectively. The Company considers these “pro-forma” numbers
to represent an approximate measure of the performance of the combined group on an annualized basis and to provide a reference
point for comparison to future periods.

55







The
acquisition allows management to focus all of its future time and attention on acquiring Gold Streams and royalties. The acquisition
of Sandstorm Metals & Energy also provides Sandstorm Gold shareholders with annual royalty revenue from operating mines as
well as royalties on advanced exploration and development assets including Canadian Zinc’s Prairie Creek Project and Entrée’s
Hugo North Extension and Heruga deposits. The acquisition resulted in a gain on bargain purchase as the Company has recognized
the benefit of Sandstorm Metals & Energy’s non-capital loss carry forwards available for tax purposes.

B.Acquisition of Premier Royalty Inc.

During
the year ended December 31, 2013 and through a series of transactions, the Company acquired 100% of the common shares of Premier
Royalty Inc. (“Premier Royalty”).

The
Company initially acquired a controlling position in Premier Royalty in January 2013, when the Company acquired 46.7 million common
shares and 7.0 million warrants of Premier Royalty or 59.9% of the then currently issued and outstanding shares. In acquiring
this initial position, the Company entered into a share purchase agreement (the “Agreement”) with Premier Gold Mines
Ltd. (“Premier Gold”). Pursuant to the terms of the Agreement, Sandstorm issued Premier Gold 5.6 million special warrants
(“Special Warrants”) each being exercisable into one common share of Sandstorm for no additional consideration. As
at December 31, 2013, Premier Gold had exercised all of the Special Warrants.

Subsequently,
on October 4, 2013, the Company closed an arrangement agreement (the “Premier Arrangement Agreement”) whereby Sandstorm
acquired the remaining common shares of Premier Royalty which combined with its existing position resulted in Sandstorm owning
100% of the outstanding common shares of Premier Royalty. Under the Premier Arrangement Agreement, Premier Royalty shareholders
received common shares of Sandstorm (the “Sandstorm Shares”) on the basis of 0.145 of a Sandstorm Share for each Premier
Royalty common share held, or 4,618,109 shares to the shareholders of Premier Royalty for a total value of approximately of $23.3
million (the “Additional Consideration”). As the Company consolidated the operations of Premier Royalty from the date
of its original acquisition on January 30, 2013, the difference between the Additional Consideration of $23.3 million and the
non-controlling interest resulted in an increase to equity of $16.7 million.

As
a result of acquiring a controlling interest in Premier Royalty, the transaction was accounted for as a business combination.
As such, the Company consolidated all the operating results of Premier Royalty from the acquisition date (January 30, 2013) and
these consolidated financial statements include the results for both companies.

In
accordance with IFRS 3 – Business Combinations, the initial consideration of $90.2 million for a 59.9% controlling interest,
consisting of (i) $25.8 million cash and (ii) $64.4 million representing the fair value of the Special Warrants, was allocated
to the identifiable assets acquired, liabilities assumed and non-controlling interest as follows:

|Purchase
    price:                          |   | January
    30, 2013
|-------------------------------------------- | - | --------------------
|Fair
    value of 5,604,277 Special Warrants | $ | 64,394              
|Cash
    paid                                |   | 25,812              
|                                             | $ | 90,206              



56









|                                                   |   |         
|-------------------------------------------------- | - | --------
|Allocation
    of purchase price:                  |   |         
|Cash                                               | $ | 39,911  
|Accounts
    receivable and other                  |   | 2,282   
|Royalty
    interests in mineral properties        |   | 61,596  
|Premier
    Royalty common share purchase warrants |   | 877     
|Goodwill                                           |   | 36,813  
|Accounts
    payable and accruals                  |   | (1,298) 
|Redeemable
    warrants                            |   | (1,130) 
|Deferred
    income tax liability                  |   | (8,871) 
|Non-controlling
    interest                       |   | (39,974)
|                                                   | $ | 90,206  



An
income approach (being the net present value of expected future cash flows) was used to determine the fair values of the royalty
interests in mineral properties. Estimates of future cash flows are based on estimated future revenues and expected conversions
of resources to reserves at each of the mineral properties. The excess of the total consideration transferred and the non-controlling
interest over the identifiable assets acquired and the liabilities assumed has been recorded as goodwill. The non-controlling
interest was measured as the non-controlling interests’ proportionate share of Premier’s net identifiable assets.

Goodwill
arose on the acquisition of Premier Royalty because the cost of the combination included a control premium. In addition, the consideration
paid for the combination effectively included amounts in relation to the benefit of expected synergies and an assembled workforce.
These benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable
intangible assets. None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.

Included
in net loss for the year ended December 31, 2013 is $39.1 million loss attributable to the results of the operations of Premier
Royalty. Had the acquisition of Premier Royalty been effected at January 1, 2013, the royalty revenue of the Company would have
been $9.5 million and the net loss for the year would have been $74.4 million. The Company considers these “pro-forma”
numbers to represent an approximate measure of the performance of the combined group on an annualized basis and to provide a reference
point for comparison to future periods.

As
a result of obtaining 100% of the common shares of Premier Royalty, Sandstorm added a number of royalty assets to its portfolio
along with over $30.0 million in cash.

Goodwill
impairment

In
2013, the Company completed its annual impairment test for the goodwill which arose on the purchase of a controlling interest
in Premier Royalty in March 2013 and in subsequent quarters identified impairment indicators and concluded the carrying value
of the net assets acquired exceeded the recoverable amount. The recoverable amount was determined by the fair value less costs
of disposal method, using quoted market prices for the common shares of Premier Royalty. The Company recognized a total impairment
charge of $35.8 million during the year ended December 31, 2013.

57











| | 7. | Mineral Interests and Royalties
| | -- | -------------------------------

| | A. | Carrying Amount
| | -- | ---------------

As of
and for the year ended December 31, 2014



|                                              | Cost    | Accumulated
    Depletion |                                 
|--------------------------------------------- | ------- | ------------------------- | --------------------------------
|In
    $000s                                  | Opening | Additions
    (disposals) | Foreign
    exchange translation
|Aurizona,
    Brazil                          | 25,820  | 1,538                     | -                               
|Bachelor
    Lake, Canada                     | 22,671  | -                         | -                               
|Black
    Fox, Canada                         | 37,758  | -                         | -                               
|Hugo
    North Extension and Heruga, Mongolia | 37,580  | 4,913                     | -                               
|Karma
    Gold Project, Burkina Faso          | -       | 14,456                    |                                 
|Ming,
    Canada                              | 20,068  | -                         | -                               
|Santa
    Elena, Mexico                       | 13,342  | 10,000                    | -                               
|Royalties1                                    | 169,855 | 23,505                    | (3,390)                         
|Other
    2                                   | 10,345  | 2,048                     | -                               
|Total                                         | 337,439 | 56,460                    | (3,390)                         

| | 1 | Includes Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Serra Pelada, Gualcamayo, Emigrant Springs,
Mine Waste Solutions, San Andres, San Francisco, Sao Vicente, and Thunder Creek.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2 | Includes Deflector and Summit.                                                                                                                                                                                      



58







As of
and for the year ended December 31, 2013



|                                          | Cost    | Accumulated Depletion |                              
|----------------------------------------- | ------- | --------------------- | -----------------------------
|In $000s                                  | Opening | Additions             | Foreign exchange
 translation
|Aurizona, Brazil                          | 21,500  | 4,320                 | -                            
|Bachelor Lake, Canada                     | 22,171  | 500                   | -                            
|Black Fox, Canada                         | 37,758  | -                     | -                            
|Hugo North Extension and Heruga, Mongolia | -       | 37,580                | -                            
|Ming, Canada                              | 20,068  | -                     | -                            
|Santa Elena, Mexico                       | 13,342  | -                     | -                            
|Royalties1                                | 86,154  | 86,131                | (2,430)                      
|Other 2                                   | 4,277   | 6,068                 |                              
|Total                                     | 205,270 | 134,599               | (2,430)                      

| | 1 | Includes Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Serra Pelada, Gualcamayo, Emigrant Springs,
Mine Waste Solutions, San Andres, San Francisco, Sao Vicente, and Thunder Creek.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2 | Includes Deflector and Summit.                                                                                                                                                                                      



| | B. | Acquisitions and Update
| | -- | -----------------------

ACQUISITION | Santa
Elena

The
Company has a Gold Stream to purchase 20% of the life of mine gold produced from SilverCrest Mines Inc.’s (“SilverCrest”)
open-pit and underground Santa Elena mine, located in Mexico (the “Santa Elena Mine”), for a per ounce cash payment
equal to the lesser of $354 and the then prevailing market price of gold until 50,000 ounces of gold have been delivered to Sandstorm,
at which time the on-going per ounce payments will increase to the lesser of $450 and the then prevailing market price of gold.

59







During
the year ended December 31, 2014, the Company received official notification of SilverCrest’s intention to develop an underground
mine and milling operation. As contemplated in the original purchase agreement, Sandstorm exercised its option to purchase an
amount equal to 20% of the gold produced from the Santa Elena underground mine. In consideration, Sandstorm made an upfront payment
of $10.0 million during the year ended December 31, 2014.



ACQUISITION | Karma
Project

On
August 11, 2014, Sandstorm entered into a Gold Stream agreement which entitles the Company to purchase 25,000 ounces of gold over
a five year period and thereafter 1.625% of the gold produced from True Gold Mining Inc.’s (“True Gold”) open-pit
heap leach Karma gold mine located in Burkina Faso, West Africa (“Karma” or the “Karma Project”) for on-going
per ounce cash payment equal to 20% of the spot price of the gold.

The
Gold Stream, which on a gross basis requires True Gold to deliver 100,000 ounces of gold over a five year period starting March
31, 2016 and thereafter 6.5% of the equivalent gold production at the Karma Project, is being syndicated between Franco-Nevada
Corp. (“Franco-Nevada”) and Sandstorm (the “Stream Syndicate”). Franco-Nevada will be providing 75% of
the funding and Sandstorm will be providing the remaining 25% of the funding. In consideration for acquiring the Gold Stream,
the Stream Syndicate will make a payment of $100 million. During the year ended December 31, 2014, Sandstorm remitted $14.4 million
of its commitment to fund $25 million of the upfront payment. In addition, the Stream Syndicate has provided True Gold with an
18 month option to increase funding by up to $20 million (the “Increase Option”) in exchange for eight quarterly deliveries
totaling 30,000 ounces of gold, or the pro-rata portion of the amount drawn thereunder, starting 18 months from when the first
tranche under the Increase Option is drawn down.



UPDATE | Aurizona
Mine

In
accordance with its previously announced commitment, the Company remitted a $20.0 million loan to Luna Gold Corp. (“Luna”)
(whereby $10.0 million was advanced in 2013 and the remaining $10.0 million commitment was remitted in April 2014). The non-revolving
loan is subject to interest at a rate of 12% per annum, subject to certain conditions, and will mature on June 30, 2017.

Luna
recently announced that, starting in February 2015, it plans on reducing its mining activity. Once it has processed its stockpile,
it is expected that Luna will cease mining operations for the remainder of 2015. Given Luna’s current financial situation,
it will likely need additional capital to continue its mining operations, meet its financial obligations and remain solvent. There
can be no assurances that Luna will have access to the capital necessary to meet these requirements. The Company is currently
in discussions to renegotiate the Luna Gold Stream; however, there can be no assurances that these discussions will come to fruition
or that a restructuring will be favorable to the Company. As a result of these events, Sandstorm assessed the carrying value of
its mineral interest in Luna and the carrying value of the loan. As a result of this assessment, the Company determined that no
impairment was warranted. The assessment considered a discounted cash flow calculation to estimate the fair value less costs to
sell. Key assumptions used in the cash flow forecast to determine the fair value included the long term price of gold ranging
from $1,200 -$1,250 per ounce of gold, annual production volumes from 40,000 - 80,000 ounces of gold, an estimated 10 year mine
life and a 5% discount rate.

60









UPDATE | 
Royalties (Bracemac-McLeod)

As
a part of the fair value assessment of Sandstorm Metals & Energy’s assets for the purpose of the business
combination (note 6(a)), the Company reviewed the fair value of the Bracemac-McLeod Royalty. As result of this assessment,
the Company recorded an impairment charge of $1.2 million during the year ended December  31, 2014. The
recoverable amount of $3.4 million relating to Sandstorm Gold’s portion of the NSR, for impairment assessment purposes,
was determined using a discounted cash flow calculation to estimate the fair value less costs to sell. Key assumptions used
in the cash flow forecast to determine the fair value included the prices of certain minerals with long term price
projections of $0.85 and $2.75 for Zinc and Copper, respectively, annual production volumes at the Bracemac-McLeod Mine of up
to one million tonnes of ore for an estimated 3 to 5 year mine life and a 7% discount rate.



| | 8. | Investments
| | -- | -----------

As
of and for the year ended December 31, 2014:

| | In
    $000s                    | Fair
    Value
    January 1, 2014 | Net
    Additions (Disposals)December 31, 2014 | Fair
    Value AdjustmentDecember 31, 2014 | Fair
    Value
    December 31, 2014
| | ------------------------------- | ---------------------------------- | ---------------------------------------------- | ------------------------------------------ | ------------------------------------
| | Common
    shares               | $                                  | 8,804                                          | $                                          | 25,359                              
| | Convertible
    debt instrument |                                    | 4,185                                          |                                            | 6,501                               
| | Total                           | $                                  | 12,989                                         | $                                          | 31,860                              
| |                                 |                                    |                                                |                                            |                                     



During
the year ended December 31, 2014, the Company participated in a Luna non-brokered private placement (the “Placement”). The
Placement involved Sandstorm acquiring 19.5 million common shares of Luna at a price of C$1.02. When combined with the 8.5 million
shares of Luna already owned by the Company, Sandstorm owns approximately 19.8% of Luna’s issued and outstanding shares.



As
of and for the year ended December 31, 2013:

| | In
    $000s                    | Fair
    Value
    January 1, 2013 | Net
    Additions (Disposals)December 31, 2013 | Fair
    Value AdjustmentDecember 31, 2013 | Fair
    Value
    December 31, 2013
| | ------------------------------- | ---------------------------------- | ---------------------------------------------- | ------------------------------------------ | ------------------------------------
| | Common
    shares               | $                                  | 2,518                                          | $                                          | 14,224                              
| | Warrants                        |                                    | 472                                            |                                            | 833                                 
| | Convertible
    debt instrument |                                    | 4,552                                          |                                            | 865                                 
| | Total                           | $                                  | 7,542                                          | $                                          | 15,922                              
| |                                 |                                    |                                                |                                            |                                     



61









| | 9. | revolving loan and deferred financing
                                         costs
| | -- | ------------------------------------------------------------------------------------

On
July 17, 2014, the Company amended its revolving credit agreement, extending the term to five years (the “Revolving Loan”).
The Revolving Loan allows the Company to borrow up to $100 million, for acquisition purposes, from a syndicate of banks including
the Bank of Nova Scotia, Bank of Montreal and National Bank of Canada. The amounts drawn on the Revolving Loan remain subject
to interest at LIBOR plus 3.00% – 4.25% per annum, and the undrawn portion of the Revolving Loan remains subject
to a standby fee of 0.75% – 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 3.50:1, 2.50:1, 2.00:1 and 2.00:1 for the first two years, third year, fourth year and
fifth year of the Revolving Loan, respectively. The Company is further required to maintain a tangible net worth greater than
the aggregate of $109.7 million and 50% of positive net income for each fiscal quarter after September 30, 2012. The
Revolving Loan is secured against the Company’s assets, including the Company’s  mineral interests and royalties
and investments.



As
of December 31, 2014, the Company was in compliance with the covenants of the revolving credit agreement and had not drawn down
on its credit facility. Therefore, the full balance remains available for future acquisitions.



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



As
of December 31, 2014:

| | In
    $000s            | Cost | Additions | Accumulated
    Amortization | Carrying
    Amount
| | ----------------------- | ---- | --------- | ---------------------------- | -------------------
| | Debt
    issuance costs | $    | 2,392     | $                            | 985                



As
of December 31, 2013:

| | In
    $000s            | Cost | Additions | Accumulated
    Amortization | Carrying
    Amount
| | ----------------------- | ---- | --------- | ---------------------------- | -------------------
| | Debt
    issuance costs | $    | 910       | $                            | 1,482              





62









| | 10. | Share Capital and Reserves
| | --- | --------------------------

| | A. | Shares Issued
| | -- | -------------

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

On
December 15, 2014, the Company announced that it intended to proceed with a normal course issuer bid (“NCIB”). Under
the NCIB, the Company may, until December 16, 2015, purchase up to 5,882,879 common shares, representing 5% of the Company’s
issued and outstanding common shares of 117,657,587 as of December 11, 2014. The NCIB provides the Company with the option to
purchase its common shares from time to time when the Company’s management believes that the Common Shares are undervalued
by the market.

Pursuant
to the NCIB, the Company purchased an aggregate of 222,090 common shares in December 2014 at an average price of C$3.56 per common
share. These shares were returned to treasury for cancellation on December 31, 2014.

| | B. | Stock Options of the Company
| | -- | ----------------------------

The
Company has an incentive stock option plan (the “Option Plan”) whereby the Company may grant share 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
permits the issuance of options which, together with the Company's other share compensation arrangements, may not exceed 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:

|                                                      | Number
    of Options | Weighted
    Average Exercise Price (C$)
|----------------------------------------------------- | --------------------- | ----------------------------------------
|Options
    outstanding at December 31, 2012          | 3,607,000             | 4.47                                    
|Exercised                                             | (36,500)              | 3.40                                    
|Addition
    of outstanding Premier Royalty Options 1 | 416,633               | 16.17                                   
|Options
    outstanding at December 31, 2013          | 3,987,133             | 5.70                                    
|Granted                                               | 3,762,474             | 2.95                                    
|Exercised                                             | (862,000)             | 2.25                                    
|Forfeited                                             | (35,000)              | (6.31)                                  
|Options
    outstanding at December 31, 2014          | 6,852,607             | 4.69                                    

| | 1 | The number of options and exercise price
                                                                                                                                                           reflects the exchange ratio of one Premier Royalty share for 0.145 of a Sandstorm share (note 6 (b)).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



63







A
summary of the Company’s share purchase options as of December 31, 2014 is as follows:

|Number
    outstanding | Exercisable | Exercise
    Price per Share (C$) | Expiry
    Date      
|---------------------- | ----------- | --------------------------------- | ---------------------
|20,000                 | 20,000      | $3.35                             | May
    19, 2015     
|1,308,500              | 1,308,500   | $3.40                             | November
    26, 2015
|66,000                 | 66,000      | $6.30                             | August
    25, 2016  
|1,129,000              | 1,129,000   | $6.35                             | November
    25, 2016
|402,133                | 402,133     | $16.35                            | December
    11, 2017
|150,000                | 100,002     | $11.78                            | December
    21, 2017
|10,875                 | 10,875      | $11.31                            | February
    19, 2018
|3,625                  | 3,625       | $10.62                            | March
    1, 2018    
|25,000                 | -           | $6.03                             | May
    16, 2019     
|3,737,474              | -           | $2.93                             | November
    13, 2019
|6,852,607              | 3,040,135   | 6.58                              |                      



The
weighted-average share price at the date of exercise for the year ended December 31, 2014 was C$7.06 (C$7.40 – year
ended December 31, 2013). The weighted average remaining contractual life of the options for the year ended December 31, 2014
was 3.43 years (2.17 years – year ended December 31, 2013).

During
the year ended December 31, 2014, the Company issued 3,762,474 options with a weighted average exercise price of C$2.95 and a
fair value of $3.0 million or $0.79 per option. The fair value of the options granted was determined using a Black-Scholes model
using the following weighted average assumptions: grant date share price and exercise price of C$2.95, expected volatility of
43%, risk-free interest rate of 1.02% and expected life of 3  years.

| | 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
    Pre-Consolidated Basis | Shares
    to be Issued Upon Exercise of the Warrants
|------------------------------------------------------ | ------------------------------------------------------ | -----------------------------------------------------
|Warrants
    outstanding at December 31, 2012          | 99,786,771                                             | 23,959,354                                           
|Exercised                                              | (18,765,151)                                           | (3,753,029)                                          
|Addition
    of outstanding Premier Royalty Warrants 1 | 2,283,770                                              | 2,283,770                                            
|Warrants
    outstanding at December 31, 2013          | 83,305,390                                             | 22,490,095                                           
|Exercised                                              | (55,205,100)                                           | (11,041,020)                                         
|Expired
    unexercised                                | (2,331,018)                                            | (1,223,522)                                          
|Warrants
    outstanding at December 31, 2014          | 25,769,272                                             | 10,225,553                                           

1The number of options and exercise price reflects the exchange ratio of
one Premier Royalty share for 0.145 of a Sandstorm share 
(note 6 (b)).



64







A
summary of the Company’s warrants as of December 31, 2014 are as follows:

|Number
    of
    Warrants on a
    Pre-consolidated
    Basis | Pre-Consolidated

    Exercise Price
    Per Warrant | Number
    of
 Warrants on a
 Post-Consolidated
 Basis | Post-Consolidated

    Exercise Price Per
 Warrant | Shares
    to be
 Issued Upon
 Exercise of the
 Warrants | Adjusted

    Exercise
 Price Per
 Share | Expiry
    Date
|-------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------------ | -------------------------------------------------- | -------------------------------------------------------- | ---------------------------------------- | ---------------
|                                                               | -                                                    | -                                                      | 108,750                                            | $13.79                                                   | 108,750                                  | $13.79         
|SSL.WT.A                                                       | 19,429,649                                           | $1.00                                                  | -                                                  | -                                                        | 3,885,930                                | $5.00          
|                                                               | -                                                    | -                                                      | 1,155,873                                          | $13.79                                                   | 1,155,873                                | $13.79         
|                                                               | -                                                    | -                                                      | 72,500                                             | $17.24                                                   | 72,500                                   | $17.24         
|SSL.WT.B                                                       | -                                                    | -                                                      | 5,002,500                                          | $14.00                                                   | 5,002,500                                | $14.00         
|                                                               | 19,429,649                                           |                                                        | 6,339,623                                          |                                                          | 10,225,553                               |                



| | D. | Restricted Share Rights
| | -- | -----------------------

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 permits the issuance of up to a maximum of 2,800,000 RSRs.

During
the year ended December 31, 2014, the Company granted 136,500 RSRs with a fair value of $0.4 million, a three year vesting term,
and a weighted average grant date fair value of C$3.48 per unit.

During
the year ended December 31, 2013, the Company granted 141,600 RSRs with a fair value of $0.7 million, a three to five year vesting
term, and a weighted average grant date fair value of C$4.93 per unit.

As
contemplated in the Arrangement Agreement (note 6), each holder of a Sandstorm Metals & Energy restricted share right exchanged
for such number of Sandstorm Gold RSRs as to have an equal fair market value immediately following the consummation of the Arrangement
Agreement. As such, the Company granted 49,467 RSRs with a fair value of $0.3 million, with a 1 to 2 year vesting term, and a
weighted average grant date fair value of C$5.66 per unit. As part of the Arrangement Agreement, Sandstorm Metals & Energy
entered into stock option cancellation agreements with the Sandstorm Metals & Energy Option holders whereby all outstanding
Sandstorm Metals & Energy Options were canceled upon approval and consummation of the Arrangement Agreement.

| | E. | Diluted Earnings (Loss) Per Share
| | -- | ---------------------------------

Diluted
earnings (loss) per share is calculated based on the following:

65







|In
    $000s                                                    | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
|--------------------------------------------------------------- | ------------------------------------ | ------------------------------------
|Net
    income (loss) attributable to Shareholders of Sandstorm | $                                    | 11,515                              
|                                                                |                                      |                                     
|Basic
    weighted average number of shares 1                   |                                      | 112,852,945                         
|Effect
    of dilutive securities                               |                                      |                                     
|Stock
    options                                               |                                      | 2,878,297                           
|Warrants                                                        |                                      | 5,553,482                           
|Restricted
    share rights                                     |                                      | 113,774                             
|Diluted
    weighted average number of common shares            |                                      | 121,398,498                         

1.
The basic weighted average number of shares outstanding for the year ended December 31, 2013 includes the issued Special Warrants
from the date of issuance  (note 6 (b)).



The
following table lists the number of stock options, warrants and RSRs excluded from the computation of diluted earnings per share
because the exercise prices exceeded the average market value of the common shares of C$5.61 during the year ended December 31,
2014. For the comparative year ending December 31, 2013, the Company was in a net loss position; however, the following lists
the stock options and share purchase warrants that would have been included in the computation of diluted weighted average number
of common shares if the Company had net earnings for the year ended December 31, 2013 as they would have been dilutive:



| |                   | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
| | ----------------- | ------------------------------------ | ------------------------------------
| | Stock
    Options | 1,796,633                            | 1,517,224                           
| | Warrants          | 7,286,270                            | 8,685,443                           
| | RSRs              | 434,853                              | 1,934                               



| | 11. | Income Taxes
| | --- | ------------

Income
tax recognized in net income (loss) is comprised of the following:



|In
    $000s                                                    | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
|--------------------------------------------------------------- | ------------------------------------ | ------------------------------------
|Current
    income tax expense related to foreign jurisdictions | $                                    | 1,062                               
|Deferred
    income tax recovery                                |                                      | (3,311)                             
|Income
    tax recovery                                         | $                                    | (2,249)                             





















The
income tax recovery 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:

66







| | In
    $000s                                                                                                                        | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
| | ----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------
| | Income
    (loss) before income taxes                                                                                               | $                                    | 9,266                               
| | Canadian
    federal and provincial income tax rates                                                                                |                                      | 26.0%                               
| | Income
    tax expense (recovery) based on the above rates                                                                          | $                                    | 2,409                               
| | Increase
    (decrease) due to:                                                                                                     |                                      |                                     
| | Non-deductible
    expenses                                                                                                         |                                      | 548                                 
| | Permanent
    difference for goodwill impairment                                                                                    |                                      | -                                   
| | Permanent
    difference for gain on bargain purchase                                                                               |                                      | (667)                               
| | Difference
    between statutory and foreign tax rates                                                                              |                                      | (1,822)                             
| | Previously
    unrecognized and unused tax losses and deductible temporary differences now recognized as deferred income tax assets |                                      | (1,516)                             
| | Other                                                                                                                               |                                      | (1,201)                             
| | Income
    tax recovery                                                                                                             | $                                    | (2,249)                             



The
deferred tax assets and liabilities for the year ended December 31, 2014 are shown below:

| | In
    $000s                              | As
    at December 31, 2014 | As
    at December 31, 2013
| | ----------------------------------------- | --------------------------- | ---------------------------
| | Deferred
    Income Tax Assets            |                             |                            
| | »  Non-capital
    losses                 |                             | 37,269                     
| | »
     Share issue costs                  |                             | 875                        
| | »
     Mineral interests and royalties    |                             | (10,544)                   
| | Total
    deferred income tax assets      |                             | 27,600                     
| | Deferred
    Income Tax Liabilities       |                             |                            
| | »
     Mineral interest and royalties     |                             | 5,892                      
| | Total
    deferred income tax liabilities |                             | 5,892                      
| | Total
    deferred income tax asset, net  |                             | 21,708                     

Deferred
tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority and the
Company has the legal right and intent to offset. Non-capital losses have been recognized as a deferred income tax asset to
the extent there will be future taxable income against which the Company can utilize the benefit prior to their expiration.

Movement
in net deferred income taxes:

| | In
    $000s                                                       | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
| | ------------------------------------------------------------------ | ------------------------------------ | ------------------------------------
| | Balance, beginning of the year                                     | $                                    | 8,280                               
| | Recognized
    in net income (loss) for the year                   |                                      | 3,311                               
| | Recognized
    in equity                                           |                                      | -                                   
| | Recognition
    and movement of purchase price allocation (note 6) |                                      | 9,616                               
| | Currency
    translation differences                               |                                      | 501                                 
| | Balance,
    end of year                                           |                                      | 21,708                              



The
Company has deductible unused tax losses expiring as follows:

| | In
    $000s                        | Location |   | Amount  | Expiration
| | ----------------------------------- | -------- | - | ------- | ----------
| | Non-capital
    loss carry-forwards | Canada   | $ | 144,101 | 2028-2034 
| |                                     |          |   |         |           

The
aggregate amount of deductible temporary differences associated with capital losses and other items, for which
deferred income tax assets have not been recognized as at December 31, 2014 are  $39.5 million (2013: $37.7 million). No
deferred tax asset is recognized in respect of these items because it is not probable that future taxable capital gains or
taxable income will be available against which the Company can utilize the benefit.





67









| | 12. | Administration Expenses
| | --- | -----------------------

The
administration expenses for the Company are as follows:

| | In
    $000s                                                                         | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
| | ------------------------------------------------------------------------------------ | ------------------------------------ | ------------------------------------
| | Corporate
    administration                                                         | $                                    | 1,246                               
| | Employee
    benefits and salaries                                                   |                                      | 2,738                               
| | Professional
    fees                                                                |                                      | 715                                 
| | Severance                                                                            |                                      | -                                   
| | Depreciation                                                                         |                                      | 189                                 
| | Administration
    expenses before share based compensation                          | $                                    | 4,888                               
| |                                                                                      |                                      |                                     
| | Equity
    settled share based compensation (a non-cash expense)                     |                                      | 2,096                               
| | Accelerated
    share-based payments arising on
    termination (a non-cash expense) |                                      | -                                   
| | Total
    administration expenses                                                    | $                                    | 6,984                               





| | 13. | Supplemental Cash Flow Information
| | --- | ----------------------------------

| | In
    $000s                                                                                        | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
| | --------------------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------
| | Change
    in non-cash working capital:                                                             |                                      |                                     
| | Trade
    receivables and other                                                                     | $                                    | (65)                                
| | Trade
    and other payables                                                                        |                                      | (97)                                
| | Net
    decrease in cash                                                                            | $                                    | (162)                               
| | Significant
    non-cash transactions:                                                              |                                      |                                     
| | Exchange
of mineral interest and corresponding reduction of promissory note                         | $                                    | 1,550                               
| | Issuance
    of Special Warrants of the Company
    for acquisition of Premier Royalty (note 6 (b)) | $                                    | -                                   





68







| | 14. | Key Management Compensation
| | --- | ---------------------------

The
remuneration of directors and those persons having authority and responsibility for planning, directing and controlling activities
of the Company are as follows:

| | In
    $000s                                                                          | Year
    Ended
    December 31, 2014 | Year
    Ended
    December 31, 2013
| | ------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------
| | Short-term
    employee salaries and benefits                                         | $                                    | 1,921                               
| | Share-based
    payments                                                              | $                                    | 1,736                               
| | Accelerated
    share-based payments arising on termination and other severance costs |                                      | -                                   
| | Total
    key management compensation expense                                         | $                                    | 3,657                               





| | 15. | Contractual Obligations
| | --- | -----------------------

Gold
Streams

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

| | Gold
    Stream   | %
    of life of mine gold 5,6,7                                         | Per
    ounce cash payment:
    lesser of amount below and the then prevailing market price of gold 1, 2, 3, 4
| | ----------------- | ------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------
| | Aurizona          | 17%                                                                      | $404                                                                                                          
| | Bachelor
    Lake | 20%                                                                      | $500                                                                                                          
| | Black
    Fox     | 8%                                                                       | $509                                                                                                          
| | Deflector         | 2.6%                                                                     | $500                                                                                                          
| | Entrée
    Gold   | 6.76%
    on Hugo North Extension and 5.14% on Heruga                    | $220                                                                                                          
| | Karma             | 25,000
    ounces over 5 years and 1.625% thereafter                     | 20%
    of gold spot price                                                                                    
| | Ming              | 25%
    of the first 175,000 ounces of gold produced, and 12% thereafter | $nil                                                                                                          
| | Santa
    Elena   | 20%                                                                      | $354                                                                                                          
| | Summit            | 50%
    of the first 10,000 ounces of gold produced, and 22% thereafter  | $400                                                                                                          

| | 1. | Subject
                                         to an annual inflationary adjustment except for Ming.
| | -- | ------------------------------------------------------------------------------------------------------

| | 2. | For
                                         the Entrée Gold Stream, after approximately 8.6 million ounces of gold have been
                                         produced from the joint venture property, the price increases to $500 per gold ounce.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | For
                                         the Entrée Silver Stream, percentage of life of mine is 6.76% on Hugo North Extension
                                         and 5.14% on Heruga which the Company can purchase for the lesser of the prevailing market
                                         price and $5 per ounce of silver until 40.3 million ounces of silver have been produced
                                         from the entire joint venture property. Thereafter, the purchase price will increase
                                         to the lesser of the prevailing market price and $10 per ounce of silver.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

69





| | 4. | For
                                         the Santa Elena Gold Stream, the Company can purchase for a per ounce cash payment equal
                                         to (i) the lesser of $354 and the then prevailing market price of gold for the open-pit
                                         mine and (ii) the lesser of $354 and the then prevailing market price of gold until 50,000
                                         ounces of gold have been delivered to Sandstorm (inclusive of ounces already received
                                         from open-pit production), at which time the on-going per ounce payments will increase
                                         to the lesser of $450 and the then prevailing market price of gold for the underground
                                         mine.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | For
                                         the Entrée Gold and Silver Stream, percentage of life of mine is 6.77% on Hugo
                                         North Extension and 5.13% on Heruga if the minerals produced are contained below 560
                                         metres in depth.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | For
                                         the Entrée Gold and Silver Stream, percentage of life of mine is 10.15% on Hugo
                                         North Extension and 7.7% on Heruga if the minerals produced are contained above 560 metres
                                         in depth.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7. | For
                                         the Entrée copper stream, the Company has committed to purchase an amount equal
                                         to 0.5% of the copper produced from the Hugo North Extension and Heruga deposits. If
                                         the minerals produced are contained above 560 metres in depth, then the commitment increases
                                         to 0.75% for both the Hugo North Extension and Heruga deposits. Sandstorm will make ongoing
                                         per pound cash payments equal to the lesser of $0.50 and the then prevailing market price
                                         of copper, until 9.1 billion pounds of copper have been produced from the entire joint
                                         venture property. Thereafter, the on-going per pound payments will increase to the lesser
                                         of $1.10 and the then prevailing market price of copper.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As
at December 31, 2014, the Company had paid $6.2 million and will contribute another $3.8 million in capital towards the Phase
1 Expansion at Luna's Aurizona Mine. Sandstorm’s contribution will be equal to 17% of the capital costs incurred by Luna
towards the Phase 1 Expansion to a maximum contribution of $10.0 million.

In
connection with the Karma Gold Stream, the Company has agreed, subject to certain financing conditions, to provide remaining upfront
payments totaling $10.6 million. In addition, the Stream Syndicate has provided True Gold with an 18 month option to increase
funding by up to $20.0 million whereby Sandstorm’s commitment would be 25% of the increase.



| | 16. | Segmented Information
| | --- | ---------------------

The
Company’s reportable operating segments, which are components of the Company’s business where separate financial information
is available and which are evaluated on a regular basis by the Company’s Chief Executive Officer, who is the Company’s
chief operating decision maker, for the purpose of assessing performance, are summarized in the tables below:

70









For
the year ended December 31, 2014

| | In
    $000s              | Sales | Royalty

    revenue | Cost
    of sales
    (excluding
 depletion) | Depletion | Impairment
    of mineral
 interests | Income (loss)
 before taxes | Cash
    from
    operations
| | ------------------------- | ----- | -------------------- | -------------------------------------------- | --------- | ------------------------------------ | --------------------------- | ----------------------------
| | Aurizona,
    Brazil      | $     | 15,527               | $                                            | -         | $                                    | 4,986                       | $                           
| | Bachelor
    Lake, Canada |       | 11,899               |                                              | -         |                                      | 4,662                       |                             
| | Black
    Fox, Canada     |       | 6,889                |                                              | -         |                                      | 2,790                       |                             
| | Ming,
    Canada          |       | 2,459                |                                              | -         |                                      | -                           |                             
| | Santa
    Elena, Mexico   |       | 6,916                |                                              | -         |                                      | 1,945                       |                             
| | Royalties
    1           |       | -                    |                                              | 12,804    |                                      | -                           |                             
| | Corporate                 |       | -                    |                                              | -         |                                      | -                           |                             
| | Consolidated              | $     | 43,690               | $                                            | 12,804    | $                                    | 14,383                      | $                           

1Includes Bracemac-McLeod, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres,
San Francisco, Sao Vicente, and Thunder Creek.



For
the year ended December 31, 2013

| | In
    $000s              | Sales | Royalty
    revenue | Cost
    of sales
    (excluding
 depletion) | Depletion | Impairment
    of
 mineral
 interests  and
 goodwill | Income (loss)
    before taxes | Cash
    from
    operations
| | ------------------------- | ----- | ------------------- | -------------------------------------------- | --------- | ---------------------------------------------------- | ------------------------------ | ----------------------------
| | Aurizona,
    Brazil      | $     | 19,264              | $                                            | -         | $                                                    | 5,471                          | $                           
| | Bachelor
    Lake, Canada |       | 9,947               |                                              | 292       |                                                      | 3,586                          |                             
| | Black
    Fox, Canada     |       | 11,322              |                                              | -         |                                                      | 3,997                          |                             
| | Ming,
    Canada          |       | 1,667               |                                              | -         |                                                      | -                              |                             
| | Santa
    Elena, Mexico   |       | 8,444               |                                              | -         |                                                      | 2,131                          |                             
| | Serra
    Pelada, Brazil  |       | -                   |                                              | -         |                                                      | -                              |                             
| | Royalties
    1           |       | -                   |                                              | 8,900     |                                                      | -                              |                             
| | Corporate                 |       | -                   |                                              | -         |                                                      | -                              |                             
| | Consolidated              | $     | 50,644              | $                                            | 9,192     | $                                                    | 15,185                         | $                           

1Includes Bracemac-McLeod, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres,
San Francisco, Sao Vicente, and Thunder Creek.



71







Total
assets as of:

| | In
    $000s      | December  31,
    2014 | December
    31, 2013
| | ----------------- | ---------------------- | ---------------------
| | Aurizona          | $                      | 21,602               
| | Bachelor
    Lake |                        | 12,213               
| | Black
    Fox     |                        | 19,922               
| | Entrée            |                        | 42,493               
| | Karma             |                        | 14,456               
| | Ming              |                        | 14,440               
| | Santa
    Elena   |                        | 12,255               
| | Royalties
    1   |                        | 150,120              
| | Other
    2       |                        | 11,438               
| | Corporate         |                        | 132,131              
| | Consolidated      | $                      | 431,070              

| | 1 | Includes
                                         Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Serra
                                         Pelada, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, San Francisco,
                                         Sao Vicente, and Thunder Creek.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2 | Includes
                                         Deflector and Summit.
| | - | -----------------------------------------------------------------------







| | 17. | Subsequent events
| | --- | -----------------



| | A. | Bomboré Royalty
| | -- | ---------------

Subsequent
to year end, the Company acquired a 0.45% NSR on the Bomboré gold project (“Bomboré” or “Bomboré
Project”) located in Burkina Faso, West Africa and owned by Orezone Gold Corp. (“Orezone”) for consideration
of $3.0 million (“Upfront Royalty”). In addition, Sandstorm has committed to providing up to an additional $5.0 million
in royalty financing (remittable in cash and/or shares, subject to certain conditions) to Orezone on a drawdown basis until January
27, 2017 (the “Standby Royalty”). The Standby Royalty, if fully exercised, would result in the granting of an additional
0.75% NSR. Orezone has granted Sandstorm a right of first refusal on any future stream or royalty financings related to the Bomboré
Project until 36 months following the achievement of commercial production at the mine. Orezone has the option to repurchase the
Upfront Royalty from Sandstorm for a period of 36 months, at a premium of 10% per year up to a maximum of 30%. The Standby Royalty
can also be repurchased at a premium of 10% per year if Orezone completes a gold stream financing and Sandstorm participates for
no less than $30 million.

| | B. | Gold Royalties
| | -- | --------------

On
February 18, 2015, the Company entered into a definitive arrangement agreement with Gold Royalties Corp. (“Gold Royalties”)
pursuant to which Sandstorm Gold would acquire all of the issued and outstanding shares (the “Gold Royalties Shares”)
of Gold Royalties. The transaction will be implemented by way of a statutory plan of arrangement (the “Arrangement”)
and is subject to court, shareholder and regulatory approvals. Upon completion of the Arrangement, Sandstorm Gold will issue to
each holder of a Gold Royalties Share 0.045 of a common share of Sandstorm Gold.