Exhibit 99.2





















--- CORPORATE & SHAREHOLDER INFORMATION

|STOCK EXCHANGE LISTINGS

Toronto Stock Exchange

TSX: SSL


New York Stock Exchange

NYSE.MKT: SAND


TRANSFER AGENT

Computershare Investor Services

2nd Floor, 510 Burrard Street

Vancouver, British Columbia

V6C 3B9
T604 661 9400


CORPORATE SECRETARY

Christine Gregory


AUDITORS

PricewaterhouseCoopers LLP

PricewaterhouseCoopers Place

Suite 1400, 250 Howe Street

Vancouver, British Columbia

V6C 3S7

T604
806 7000

F604
806 7806 | BOARD
OF DIRECTORS

Andrew T. Swarthout

David Awram

David E. De Witt

John P. A. Budreski

Mary L. Little

Nolan Watson


                           CORPORATE OFFICES

Vancouver Head Office

Suite 1400, 400 Burrard Street

Vancouver, British Columbia

V6C 3A6

T604
689 0234

F606
689 7317

info@sandstormltd.com

www.sandstormgold.com







Toronto Office

Suite 1110, 8 King Street

Toronto, Ontario

M5C 1B5

T416
238 1152
                           

Barbados

10 Graeme Hall

Maxwell, Christ Church

Barbados

BB15050
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------















SECTION
01

02   Company Profile

03A
Message to our Shareholders

06Global
Assets Map

07Board
of Directors

07Management
Team



SECTION
02

08   Management's Discussion & Analysis

09Company
Highlights

11Overview
and Outlook

12Key
Producing Assets

17Other
Producing Assets

18Development
Assets

25Summary
of Annual Results

27Summary
of Quarterly Results

29Quarterly
Commentary



SECTION
03

53   Consolidated Financial Statements

54Financial
Position

55Income
(Loss)

56Comprehensive
Income (Loss)

57Cash
Flows

58Changes
in Equity

59Notes
to the ConsolidatedFinancial Statements





















|Sandstorm Gold Ltd.provides financing to mining companies through stream and royalty agreements. Stream and royalty finance involves Sandstorm
making an upfront payment to a mining partner that is in need of capital to build their mine, refinance their obligations, complete
an acquisition or for various other reasons. In exchange for that upfront payment, Sandstorm receives the right to purchase a percentage
of the gold produced from the mine (in the case of a stream) or a portion of the revenue generated from the mine (in the case of
a royalty). Since 2009, Sandstorm has compiled a portfolio of 142 streams and royalties, of which 21 of the underlying mines are
currently producing. Sandstorm plans to continue growing the company through accretive acquisitions of gold streams and royalties.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------















|A Message to Our

Shareholders






It would be an understatement to say that 2016 was a year of surprises. From referendums, to election results to financial markets, we learned not to underestimate the unexpected.

The gold sector had some surprises of its own during the year with gold price volatility and volatility in gold mining stocks near 5 year highs. Demand for gold, notably in gold ETFs, drove prices above $1,350 per ounce peaking near mid-year, and causing a rapid recovery in gold stocks as well as material in-flows of capital into an industry that had been starved of funds for several years. That the sector was fundamentally undervalued and poised for a lift was widely presumed but the speed and extent of the recovery came as a shock to many. |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|By the beginning of August, the average gold company (as measured by the GDX) was up over 120% and even more significant, the junior gold universe (as measured by the GDXJ) saw average gains of more than 150%. It was a welcome change from the struggle of the previous lean years that required companies to high-grade production, sell assets, cut costs, reduce debt, and shelf projects. The much needed infusion of cash created a dramatic shift as producing mines invested capital into upgrades and repairs, development-stage                                                                                                                                                                                                                                                  | projects began to make meaningful progress towards production and geologists were given a budget to launch aggressive exploration programs after years of idled drills.
                                                                              
                                                                              The effects of a rising gold price and access to capital for mining companies benefitted Sandstorm in several ways. Firstly, the development and exploration activity that ramped up during the year affected dozens of projects over which Sandstorm has a stream or royalty interest. Development stage projects like Aurizona,

















| | Cerro Moro, Coringa, Hugo North Extension to name a few, have gone from limited activity to full blown construction causing us to re-evaluate our future cash flow projections. With regards to exploration specifically, the drill bit added over 84,000 gold equivalent ounces to Sandstorm's credit through successful exploration programs during 2016, more than replacing the approximately 49,700 gold equivalent ounces that we sold during the year. We believe that exploration will continue to replace mined ounces in 2017 as more than 30 properties underlying Sandstorm's streams and royalties have exploration programs planned.
                           
                           Our financial results were also impacted by the upward trending gold price as cash operating margins were at a three year high, just under $1,000 per ounce, in a year where we had record gold equivalent production. That translated into $39 million in cash flow from operations in 2016. One of the key strengths of our business model is that Sandstorm is not required to contribute any additional capital to a project after making an upfront payment to acquire a stream or royalty, so the vast majority of the aforementioned cash flow is being used to grow the business and to add value for shareholders.
                           
                           The rising tides effect was not the only story to play out during 2016 given that the year was bookended by materially lower gold prices, below $1,150 per ounce, which put a damper on the sector's recovery. Companies were struggling to raise capital and share prices were languishing but it was during these times that Sandstorm was able to make meaningful acquisitions, adding 60 royalties to the portfolio. We began the year with an acquisition of a royalty package from Teck Resources, a deal that was transformational for the company. The transaction added 52 royalty assets, many on high quality projects, and our near-term cash flow, medium-term growth pipeline and our long-term optionality dramatically improved.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------















|One of the key themes of our marketing efforts this year has been to draw attention to the optionality or unrecognized value in the Sandstorm portfolio of over 140 streams and royalties. To give you a few examples, there are 15 development-staged projects that are not currently represented in our cash flow projections, several of which we believe will advance towards production in an improved commodity price environment. In addition we have 99 royalties that we own on exploration stage properties, over 25% of which are at an advanced stage. These exploration acorns may be small and insignificant in some cases, but they have the potential to turn into sources of lasting growth and value. Lastly, we have accumulated over 30 right of first refusal and royalty buyback contracts (not included in our stream and royalty count of 142) that in many cases give Sandstorm the perpetual right to acquire new streams and royalties on fixed terms, at our option. Add it all up and there is a significant amount of nascent value represented, and investors are beginning to take notice.
                           
                           

As we move forward, I am excited about our prospects for growth. We have come a long way from our humble origins as a junior streaming company. In 2016, 74% of our gold equivalent production came from operations run by major and mid-tier mining companies (compared to 12% in 2013) and we expect that percentage to rise to 90% in the coming years. We are pursuing large anchor deals to provide near-term, stable cash flow that will add to our already enviable cash flow base, but as we saw during 2016, value will also be created organically through exploration and the development successes on projects that we have a stream or royalty interest in. We also intend to deploy relatively small amounts of capital to our equity/royalty financing strategy that we have used to fund junior companies | and exploration stage projects. We think we can continue uncovering quality projects that are unknown or misunderstood by the market in this way.



Going into 2017, I see the risk reward equation related to Sandstorm as asymmetric. The mines contributing cash flow to the company have survived some challenging years, our growth profile and corporate development pipeline is as robust as it has ever been and we have cash at the ready to repurchase shares of the company during seasons of market weakness. In the coming years I expect there will be several positive surprises for Sandstorm shareholders as the portfolio of streams and royalties that we are building continues to grow and develop.




Nolan Watson


President, CEO and
Founder
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





























| | Management Team

Nolan Watson
FCPA , FCA, CFA
President and CEO



David Awram

B.Sc, Geologist

Sr. Executive

Vice President



Erfan Kazemi
CPA , CA, CFA
Chief Financial Officer



Tom Bruington

P. Eng.,M.Sc.

Executive VP of

Project Evaluation



Keith Laskowski
Mining Geologist, MSc, QP
VP of Technical Services


Adam Spencer
CFA
Sr. VP of Corporate Development





Sandstorm's management team has an optimal balance of deal making and technical expertise. The Company's founders, Nolan Watson and David Awram, have been completing stream and royalty financings for over 12 years. Erfan Kazemi and Adam Spencer round out our senior management team and together the group has executed close to $2.0 billion in transactions.



Our in-house technical team consists of Tom Bruington and Keith Laskowski who individually have over 30 years experience evaluating resource projects and have each worked in or conducted project evaluations in over 60 countries. Needless to say, our technical team has seen it all and they work hard to ensure that Sandstorm invests in quality projects with exploration upside.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

















SANDSTORM
GOLD LTD.



MANAGEMENT’S
DISCUSSION AND ANALYSIS



Annual
2016



For The Year Ended December 31, 2016



This management’s discussion and analysis
(“MD&A”) for Sandstorm Gold Ltd. and its subsidiary entities (“Sandstorm”, “Sandstorm Gold”
or the “Company”) should be read in conjunction with the audited consolidated financial statements of Sandstorm for
the year ended December 31, 2016 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 February 21, 2017 and all figures are stated in U.S. dollars unless otherwise noted.



company
HIGHLIGHTS



Operating Results



| | · | Record Attributable Gold Equivalent ounces sold (as defined hereinafter),
for the three months and year ended December 31, 2016 were 13,245 ounces and 49,731 ounces, respectively, compared with 8,951 ounces
and 45,146 ounces for the comparable periods in 2015.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Revenue for the three months and year ended December 31, 2016 was
$16.5 million and $62.4 million, respectively, compared with $9.9 million and $52.7 million for the comparable periods in 2015.                                                                   
| | · | Cash flows from operating activities for the three months and year
ended December 31, 2016 were $10.1 million and $39.0 million, respectively, compared with $5.0 million and $30.8 million for the
comparable periods in 2015.                                     
| | · | Cost of sales, excluding depletion for the three months and year ended
December 31, 2016 were $3.3 million and $12.8 million, respectively, compared with $2.3 million and $13.6 million for the comparable
periods in 2015.                                        
| | · | Average cash costs for the three months and year ended December 31,
2016 of $2501 and $2581 per Attributable Gold Equivalent ounce, respectively, compared with $2581
and $3001 per Attributable Gold Equivalent ounce for the comparable periods in 2015.          



| | 1) | Refer
                                         to section on non-IFRS and other measures of this MD&A.
| | -- | ------------------------------------------------------------------------------------------------------













Significant Acquisitions



| | · | During the year ended December 31, 2016, the Company acquired a royalty
portfolio consisting of 52 royalties from Teck Resources Limited and its affiliates for consideration of $16.8 million, of which
$1.4 million was paid in cash and $15.4 million in common shares of the Company. The transaction provides asset diversification;
immediate cash flow and significant cash flow growth potential with estimated cash flow of over $10 million per year over the long
term; and strong counterparties including Barrick Gold Corporation, Glencore plc, KGHM Polska Miedz SA, Newmont Mining Corporation
and Kinross Gold Corporation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Available Capital



| | · | Strong balance sheet with over $20 million in cash and when combined
with an undrawn revolving credit facility of $110 million, the Company has over $130 million in available capital to invest in
future Gold Streams.                                                                                                                                                                                   
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | During 2016, Sandstorm recognized a fair value increase of $39 million within the Company’s investment portfolio. 
With over $80 million in investments and loan receivables, the Company is well positioned to add future Gold Streams and royalties
upon the monetization of these balances.                                                                                                             
| | · | On June 1, 2016, Sandstorm amended its revolving credit facility,
extending the term to four years (maturing in July 2020). The revolving credit facility allows the Company to borrow up to $110
million for acquisition purposes, from a syndicate of banks including the Bank of Nova Scotia, Bank of Montreal, National Bank
of Canada and Canadian Imperial Bank of Commerce.                         
| | · | On July 6, 2016, the Company completed an equity financing for aggregate
gross proceeds of $57.5 million. Upon closing of the financing, the majority of the net proceeds were used to reduce the balance
of the Company’s revolving credit facility. As a result, the Company currently has no bank debt and the entire $110 million
revolving credit facility remains available for acquisition purposes.



Other



| | · | On January 26, 2017, Orezone Gold Corporation exercised its option
to repurchase the royalty on the Bomboré gold project for $3.6 million, representing a 20% premium to the original upfront
payment. Sandstorm retains a right of first refusal on any future stream or royalty financings related to the Bomboré gold
project.                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | On
February 1, 2017, Luna Gold announced a merger with JDL Gold Corp, which if completed will create a multi-asset mining company
with over $70 million in cash. This would place the newly merged company in a position to advance the Aurizona gold project wherein
Sandstorm holds a 3% to 5% sliding scale NSR. Concurrent with the closing of the transaction, the term debt facility that is owed
by Luna Gold to Sandstorm, in the amount of $20 million plus accrued interest, is expected to be settled in equity, or a combination
of cash and equity of the newly combined entity.





2







Overview





Sandstorm is a growth-focused company that
seeks to acquire gold and other metals purchase agreements (“Gold Streams” or “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 or at a variable price based on spot, a percentage
of a mine’s gold, silver, or other commodity ("Gold Equivalent")1 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 142 Gold Streams and net smelter returns royalties (“NSR”s),
of which 21 of the underlying mines are producing.







| | 1) | Refer
                                         to section on non-IFRS and other measures of this MD&A.
| | -- | ------------------------------------------------------------------------------------------------------



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 2017 is forecasted to be between 45,000 – 55,000 Attributable Gold Equivalent ounces. The Company is forecasting Attributable
Gold Equivalent production of over 65,000 ounces per annum by 2020.





3







Key
Producing Assets

|                    
|--------------------
|Yamana Silver Stream
|                    

The Company has a silver stream on Yamana Gold
Inc.’s (“Yamana”) gold-silver Cerro Moro project, located in Santa Cruz, Argentina (the “Cerro Morro Project”
or “Cerro Moro”) and an agreement to receive interim silver deliveries during years 2016 to 2018 from a number of Yamana’s
currently operating mines.



Silver deliveries



Under the terms of the Yamana silver stream,
Sandstorm has agreed to purchase, for on-going per ounce cash payments equal to 30% of the spot price of silver, an amount of silver
from Cerro Moro equal to 20% of the silver produced (up to an annual maximum of 1.2 million ounces of silver), until Yamana has
delivered to Sandstorm 7.0 million ounces of silver; then 9% of the silver produced thereafter.



As part of the Yamana silver stream, during
the years 2016 through 2018, Sandstorm has also agreed to purchase, for on-going per ounce cash payments equal to 30% of the spot
price of silver, an amount of silver from:



| | i. | the Minera Florida mine in Chile equal to 38% of the silver produced (up to an annual
                                                               maximum of 200,000 ounces of silver); and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | the Chapada mine in Brazil equal to 52% of the silver produced (up to an annual maximum of
                                                                100,000 ounces of silver).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Downside protection



If by January 1, 2019, the Cerro Moro processing
facility has not averaged 80% of its daily nameplate production capacity over a 30-day period (the "Commencement of Production"),
then Yamana ́s producing El Peñon mine in Chile will provide a 24 month backstop until the Commencement of Production
has begun. During the 24 month backstop, if applicable, Sandstorm will purchase, for on-going per ounce cash payments equal to
30% of the spot price of silver, an amount of silver equal to 16% of El Peñon ́s silver production up to a maximum
of 1.2 million ounces per annum.



About Cerro Moro



The Cerro Moro project is located approximately
70 kilometers southwest of the coastal port city of Puerto Deseado in the Santa Cruz province of Argentina. Cerro Moro contains
a number of high grade epithermal gold and silver deposits, some of which will be mined via open pit and some via underground mining
methods. The current plan indicates average annual production in the first three years of 150,000 ounces of gold and 7.2 million
ounces of silver, with the life of mine annual production averaging approximately 130,000 ounces of gold and 6.4 million ounces
of silver at a throughput of 1,000 tonnes per day.





Following the formal decision to proceed with
the construction of the Cerro Moro mine in 2015, Yamana is progressing well with respect to site construction activities, the
continuation of detailed engineering, as well as the advancement of underground mining in order to gain a better understanding
of in-situ mining conditions.





4







|                     
|---------------------
|Chapada Copper Stream
|                     

The Company has a copper stream on Yamana’s
open pit gold-copper Chapada mine located 270 kilometers northwest of Brasília in Goiás State, Brazil (“Chapada”
or the “Chapada Mine”). Under the terms of the Yamana copper stream, Sandstorm has agreed to purchase, for on-going
per pound cash payments equal to 30% of the spot price of copper, an amount of copper from the Chapada Mine equal to:



| | i. | 4.2% of the copper produced (up to an annual maximum of 3.9 million pounds of copper) until Yamana
has delivered 39 million pounds of copper to Sandstorm (the “First Chapada Delivery Threshold”); then
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | 3.0% of the copper produced until, on a cumulative basis, Yamana has delivered 50 million pounds
of copper to Sandstorm (the “Second Chapada Delivery Threshold”); then
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | 1.5% of the copper produced thereafter, for the life of the mine.
| | ---- | -----------------------------------------------------------------



Downside protection



If Cerro Moro has not achieved the Commencement
of Production and Sandstorm has not received cumulative pre-tax cash flow equal to $70 million from the Yamana silver stream, then
the First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease to be in effect and Sandstorm will continue
to purchase 4.2% of Chapada’s payable copper production (up to an annual maximum of 3.9 million pounds of copper), until
such time as Sandstorm has received cumulative pre-tax cash flow equal to $70 million, or Cerro Moro has achieved the Commencement
of Production.



About Chapada





Chapada has been in production since 2007 and
is a relatively low-cost South American operation. The ore is treated through a flotation plant with capacity of 22 million tonnes
per annum. Yamana has benefitted from significant discoveries at Chapada in the past and in 2016 it announced an updated reserve
statement which increased proven and probable copper mineral reserves to 3.033 billion pounds of copper contained in 520.7 million
tonnes at 0.26% copper (see www.yamana.com for more information on this and recent drill results). Yamana recently announced positive
drill results from its exploration program which is primarily focused on defining and expanding the Sucupira mineral resource immediately
adjacent to the main Chapada pit. In addition, Yamana announced that it has discovered a new continuous, low to moderate grade
copper and gold mineral body above and immediately north of the Sucupira mineral body. The newly discovered Baru target is under
review by mine geologists and engineers for further work, particularly given its proximity to the plant infrastructure.





|                      
|----------------------
|Diavik Diamond Royalty
|                      

The Company has a 1% gross proceeds royalty
based on the production from the Diavik mine located in Lac de Gras, Northwest Territories, Canada (“Diavik” or the
“Diavik Mine”) which is operated by Rio Tinto PLC (“Rio Tinto”).





5







The Diavik Mine is Canada’s largest diamond
mine. The mine began producing diamonds in January 2003, and has since produced more than 100 million carats from three kimberlite
pipes (A154 South, A154 North, and A418). Rio Tinto recently approved the development of an open pit mine on a fourth pipe (A21)
which is targeted for production in 2018. Recent public announcements have indicated that the development of A21 pipe continues
to progress according to plan.



Current activities at the Diavik
Mine include:



| | » | In accordance with the project plan, the completion of the A21 dike construction and the start of dewatering are expected
during calendar 2017.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



|                       
|-----------------------
|Santa Elena Gold Stream
|                       

The Company has a Gold Stream to purchase 20%
of the life of mine gold produced from First Majestic Silver Corp.’s (“First Majestic”) 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 $361
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.



The Santa Elena Mine was successfully transitioned
from an open pit heap leach operation to an underground mining and milling operation and commercial production for the 3,000 tonne
per day processing plant was declared in 2014.



Current activities at the Santa
Elena Mine include:



| | » | First Majestic is continuing the development of the new San Salvador ramp. Once completed, the transportation of ore via
trucks is expected to reduce haulage bottlenecks and increase underground production capacity.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                     
|---------------------
|Black Fox Gold Stream
|                     

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, which includes a portion of Primero’s Pike River concessions, for a per ounce cash payment equal to
the lesser of $531 and the then prevailing market price of gold.



The Black Fox Mine began operating as an open
pit mine in 2009 (depleted in 2015) and transitioned to underground operations in 2011.





6







Current activities at the Black
Fox Mine include:



| | » | Primero recently
                                         announced that (i) it had achieved initial production from the Deep Central Zone and
                                         (ii) recent exploration drilling west of the Deep Central Zone returned positive results.
                                         For more information refer to www.primeromining.com.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                         
|-------------------------
|Bachelor Lake Gold Stream
|                         

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.





The Bachelor Lake Mine is an underground mining
operation with an operating mill and surface infrastructure, which began production in early 2013.





Current activities at the Bachelor
Lake Mine include:



| | » | Metanor recently
                                         released positive drill results from its exploration activities at the Bachelor Lake
                                         Mine and the recently discovered Moroy zone. For more information refer to www.metanor.ca.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                 
|-----------------
|Karma Gold Stream
|                 

The Company has a Gold Stream which entitles
it to purchase 25,000 ounces of gold over a five year period and thereafter 1.625% of the gold produced from Endeavour Mining Corporation
(“Endeavour”)’s, the successor to True Gold Mining Inc., open-pit heap leach Karma gold mine located in Burkina
Faso, West Africa (“Karma” or the “Karma Mine”) 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
Endeavour 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 75% and 25% between Franco-Nevada Corp. and Sandstorm, respectively (together
the “Stream Syndicate”).



During the year ended December 31, 2016, the
Stream Syndicate provided True Gold Mining Inc. with a one-time $5 million increase in funding. In consideration, the Stream Syndicate
will receive, on a gross basis and subject to the on-going per ounce cash payments, eight quarterly deliveries totaling 7,500 ounces
of gold starting in July 2017.



The Karma Mine has five
defined mineral deposits that make up the Karma project with total proven and probable mineral reserves of 949,000 ounces of gold
contained in 33.2 million tonnes at 0.89 grams per tonne (see www.endeavourmining.com). The operators of the Karma Mine
expect to convert resources into reserves through further drilling and studies, in order to extend the mine-life beyond its currently
stated 8.5 year life.





7







Current activities at the Karma
Mine include:



| | » | Endeavour recently announced that commercial production at the Karma Mine had been achieved on October 1, 2016 and that
capacity at the processing plant is expected to increase to 4 million tonnes per annum by the second half of 2017.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | » | A 60,000 meter exploration drilling program, at Kao North, was completed in 2016, the results of which are expected to be
compiled and released in early 2017. A further 30,000 meter drill program is planned in 2017 to drill near-mill target such as
Rambo West and Yabonsgo.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                       
|-----------------------
|Bracemac-McLeod Royalty
|                       

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

|                
|----------------
|Ming Gold Stream
|                

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 2016 metallurgical recoveries, Sandstorm’s 2017 gold purchase entitlement was adjusted
to 32%.



Current activities at the Ming
Mine include:



| | » | By the end of 2017, Rambler expects to implement an expansion to become a 1,250 tonne per day operation.
| | - | --------------------------------------------------------------------------------------------------------





8







Other
Producing Assets

|                
|----------------
|Emigrant Springs
|                

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 that
has been in production since the third quarter of 2012.

|                  
|------------------
|Gualcamayo Royalty
|                  

The Company has a 1% NSR on the Gualcamayo
gold mine (the “Gualcamayo Mine”) which is located in San Juan province, Argentina and owned and operated by 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. Yamana recently announced exploration success in Cerro Condor
and Potenciales which, Yamana believes, provides support for extending the life of the open pit.

|                            
|----------------------------
|Mine Waste Solutions Royalty
|                            

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 re-processes multiple tailings dumps in the area through three production modules, the last of which was commissioned
in 2011.

|                  
|------------------
|San Andres Royalty
|                  

The Company has a 1.5% NSR on the San Andres
mine (the “San Andres Mine”) which is located in La Únion, Honduras and is 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.



Development
Assets

|                     
|---------------------
|Aurizona Gold Royalty
|                     

The Company has a 3% – 5%
sliding scale NSR on the production from Luna Gold Corp.’s (“Luna”) open-pit Aurizona mine, located in Brazil
(“Aurizona” or the “Aurizona Mine”). At gold prices less than or equal to $1,500 per ounce, the royalty
is a 3% NSR. In addition, Sandstorm holds a 2% NSR on Luna’s 190,073 hectares of greenfields exploration ground. At any
time prior to the commencement of commercial production, Luna has the ability to purchase one-half of the greenfields NSR for
a cash payment of $10 million.





9







A recent Aurizona pre-feasibility
study included proven and probable mineral reserves of 969,000 ounces of gold (contained in 18.6 million tonnes at 1.62 grams
per tonne gold - for more information see www.lunagold.com). It was also recently announced that Luna had entered into an exploration
agreement with AngloGold covering the greenfields exploration property. Sandstorm holds a right of first refusal on any future
streams or royalties on the Aurizona project and greenfields property.





Luna recently announced a merger with JDL Gold
Corp, which if completed would create a multi-asset mining company with over $70 million in cash.



|                                         
|-----------------------------------------
|Hugo North Extension & Heruga Gold Stream
|                                         

On March 1, 2016, Sandstorm amended its Gold
Stream with Entrée Gold Inc. (“Entrée”) such that the Company will now purchase an amount equal to 5.62%
and 4.26% 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 amended its copper stream such that the Company will now purchase an amount equal to 0.42% 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. In consideration for the amendment and during the year ended December 31, 2016, Sandstorm received consideration
of $7.0 million (of which $5.5 million was paid in cash and $1.5 million was received by way of Entrée common shares).



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



The 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.
The 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 Ltd. (“Turquoise Hill”) 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.



Entrée recently announced that an Oyu
Tolgoi underground mine development and financing plan had been signed by the Government of Mongolia, Entrée's joint venture
partner, Oyu Tolgoi LLC, Turquoise Hill and Rio Tinto. The plan provides a path forward to the eventual restart of underground
development, including Lift 1 of the Hugo North Extension. Entrée’s joint venture partner, recently announced that
it had signed a $4.4 billion finance facility for underground mine development at the Oyu Tolgoi project. The facility is being
provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada,
the United States and Australia, along with 15 commercial banks. Recently, Turquoise Hill and Rio Tinto formally announced their
intent to proceed with the re-start of the Oyu Tolgoi underground development, including plans for the Hugo North Extension. In
October 2016, Turquoise Hill released a technical report on the Oyu Tolgoi deposits including Hugo North Extension and Heruga deposits.
This represents the first time since 2010 that investors have had access to an early stage economic analysis of these deposits.





10







|                 
|-----------------
|Hot Maden Royalty
|                 

On January 19, 2016, the Company acquired a
2% NSR on the Hot Maden gold-copper project which is located in the Artvin Province, northeastern Turkey (the “Hot Maden
Project”). The project is co-owned by Mariana Resources Ltd. and its Turkish partner, Lidya Madencilik Sanayi ve Ticaret
A.S., which owns a 70% interest in the project.

|                     
|---------------------
|Hackett River Royalty
|                     

On January 19, 2016, the Company acquired a
2% NSR on the Hackett River property located in Nunavut, Canada (the “Hackett River Project” or “Hackett River”)
which is owned by a subsidiary of Glencore.





Hackett River is a silver-rich volcanogenic
massive sulphide project and is one of the largest undeveloped projects of its kind. The property is made up of four massive sulphide
deposits that occur over a 6.6 kilometer strike length. A preliminary economic assessment updated in 2010 evaluated a possible
large-scale open pit and underground operation, processing up to 17,000 tonnes per day. The most recent technical report, completed
in 2013, reported 25.0 million tonnes of Indicated Resources containing 4.2% zinc and 130.0 grams per tonne silver plus 57.0 million
tonnes of Inferred Resources with 3.0% zinc and 100.0 grams per tonne silver. For more information refer to the technical reports
dated July 26, 2010 and July 31, 2013 under Sabina Gold & Silver Corp’s profile on www.sedar.com.

|                  
|------------------
|Lobo-Marte Royalty
|                  

On January 19, 2016, the Company acquired a
1.05% NSR on production from the Lobo-Marte project located in the Maricunga gold district of Chile (the “Lobo-Marte Project”
or “Lobo-Marte”) which is owned by Kinross Gold Corp. (“Kinross”).



Kinross completed a pre-feasibility
study at Lobo-Marte that contemplated an open-pit/ heap-leach operation. As a result of changes in the plan of operations and
other factors, Kinross withdrew its previously submitted permit application. Future development and operations at Lobo-Marte will
require the re-initiation of the permitting process. For more information refer to www.kinross.com.

|                          
|--------------------------
|Agi Dagi & Kirazli Royalty
|                          

On January 19, 2016, the Company acquired a
$10/ounce royalty based on the production from the Agi Dagi and the Kirazli gold development projects located in the Çanakkale
Province of northwestern Turkey (“Agi Dagi” and “Kirazli”, respectively) which are both owned by Alamos
Gold Inc. (“Alamos Gold”). The royalty is payable by Newmont and is subject to a maximum of 600,000 ounces from Agi
Dagi and a maximum of 250,000 ounces from Kirazli.





A 2012 pre-feasibility study on Agi Dagi and
a 2017 feasibility study on Kirazli contemplated both projects as stand-alone open-pit, heap-leach operations. Under the study,
Agi Dagi is expected to produce an average of 143,000 ounces of gold per year over a 7 year mine life while Kirazli is expected
to produce an average of 104,000 ounces of gold per year over a 5 year mine life. For more information refer to www.alamosgold.com.





11







|                     
|---------------------
|Prairie Creek Royalty
|                     



The Company has a 1.2% NSR on the Prairie Creek
project (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 7.6 million tonnes grading 8.9% zinc, 127.6 grams per tonne silver
and 8.3% lead. Canadian Zinc entered into sale agreements with both Boliden and Korea Zinc for the sale of the zinc and lead concentrates
produced at the Prairie Creek mine. This represents a significant step forward in the development of the mine. For more information
refer to www.canadianzinc.com.

|                    
|--------------------
|Mt. Hamilton Royalty
|                    

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 owned by Waterton Precious Metals Fund II Cayman, LP (“Waterton”).



Sandstorm holds a right of first refusal on
any future royalty or gold stream financing for the Mt. Hamilton Project.



Acquisition



Teck Royalty Package



During the year ended December 31, 2016, the
Company acquired a royalty portfolio consisting of 52 royalties from Teck Resources Limited and its affiliates (“Teck”).
The portfolio was acquired for consideration of $16.8 million, of which $1.4 million was paid in cash and $15.4 million in common
shares. The portfolio provides:



|Asset Diversification:                  | the royalty package consists of assets in North America (32), Asia (10), South America (7) and Europe (3) and includes producing assets (4), development-stage projects (8), advanced exploration-stage projects (7) and exploration-stage properties (33);
|--------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                        |                                                                                                                                                                                                                                                            
|Significant Cash Flow Growth Potential: | the Company has estimated over $10 million in cash flow per year over the long term;                                                                                                                                                                       
|                                        |                                                                                                                                                                                                                                                            
|Strong Counterparties:                  | royalty counterparties include Barrick Gold Corporation, Glencore plc, KGHM Polska Miedz SA, Newmont Mining Corporation and Kinross Gold Corporation; and                                                                                                  
|                                        |                                                                                                                                                                                                                                                            
|Long-term Optionality:                  | over two dozen royalties on exploration-stage properties, several of which are undergoing active exploration programs.                                                                                                                                     





12







Revolving
credit facility



On June 1, 2016, Sandstorm amended its revolving
credit agreement (the “Revolving Facility”), extending the term to four years (maturing in July 2020). The Revolving
Facility allows the Company to borrow up to $110 million for acquisition purposes, from a syndicate of banks including the Bank
of Nova Scotia, Bank of Montreal, National Bank of Canada and Canadian Imperial Bank of Commerce. As part of the amendment, the
Company improved its leverage ratio covenant such that it is now required to maintain a leverage ratio (defined as net debt divided
by EBITDA) of less than or equal to 4.00:1 for calendar 2016 and calendar 2017; 3.50:1 for calendar 2018; and 2.75:1 for the remainder
of the life of the Revolving Facility. As at December 31, 2016, the Company had not drawn down on its credit facility and therefore,
the full balance remains available for future acquisitions.



Equity
Financing



On July 6, 2016 the Company completed a public
offering of 12,921,400 common shares at a price of $4.45 per common share, for gross proceeds of $57.5 million. In connection with
the offering, the Company paid agent fees of $2.9 million, representing 5% of the gross proceeds. Upon closing of the equity financing,
the majority of the net proceeds were used to reduce the balance of the Company’s Revolving Facility.



NORMAL
COURSE ISSUER BID



Under the Company’s normal course issuer
bid (“NCIB”), the Company is able until April 3, 2017, to purchase up to 6,896,539 common shares. The NCIB provides
the Company with the option to purchase its common shares from time to time.



Impairments





While assessing whether any indications of
impairment exist for mineral properties and royalties, consideration is given to both external and internal sources of information.
The lack of progress with respect to the advancement of some of the properties which Sandstorm holds royalties on within Sandstorm’s
mineral interest portfolio and other factors, prompted the Company to evaluate its investment in these specific assets. As a result
of its review, the Company, during the year ended December 31, 2016, recorded an impairment charge of $2.5 million for these specifically
identified mineral royalties.



Subsequent
events



On January 26, 2017, Orezone Gold Corporation
exercised its option to repurchase the royalty on the Bomboré gold project for $3.6 million, representing a 20% premium
to the original upfront payment. Sandstorm retains a right of first refusal on any future stream or royalty financings related
to the Bomboré gold project.



On February 1, 2017, Luna announced a merger
with JDL Gold Corp, which if completed will create a multi-asset mining company with over $70 million in cash. This would place
the newly merged company in a position to advance the Aurizona gold project wherein Sandstorm holds a 3% to 5% sliding scale NSR.
Concurrent with the closing of the transaction, the term debt facility that is owed by Luna to Sandstorm, in the amount of $20
million plus accrued interest, is expected to be settled in equity, or a combination of cash and equity of the newly combined
entity. Sandstorm will continue to hold the $30 million convertible debt facility that is due from Luna.





13







SUMMARY OF
RESULTS







Attributable
Gold Equivalent Ounces Revenue in $000's average realized gold price 2012
2013 2014 2015 2016 49,731 44,821 45,146 42,709 33,514 62,371 52,663
56,494 59,836 55,943 $1,167 $1,254 $1,669 $1,401 $1,260 Summary of Results





14







SUMMARY OF ANNUAL RESULTS



Year Ended



|In $000s                                            |  | Dec. 31, 2016 |         |  | Dec. 31, 2015 |   |         | Dec. 31, 2014 | 
|--------------------------------------------------- |  | ------------- | ------- |  | ------------- | - | ------- | ------------- | 
|Total revenue                                       |  | $             | 62,371  |  |               | $ | 52,663  |               | 
|Attributable Gold Equivalent ounces sold1           |  |               | 49,731  |  |               |   | 45,146  |               | 
|Sales                                               |  | $             | 41,634  |  |               | $ | 38,585  |               | 
|Royalty revenue                                     |  |               | 20,737  |  |               |   | 14,078  |               | 
|Average realized gold price per attributable ounce1 |  |               | 1,254   |  |               |   | 1,167   |               | 
|Average cash cost per attributable ounce1           |  |               | 258     |  |               |   | 300     |               | 
|Cash flows from operating activities                |  |               | 38,991  |  |               |   | 30,819  |               | 
|Net income (loss)                                   |  |               | 25,254  |  |               |   | (43,056 | )             | 
|Basic income (loss) per share                       |  |               | 0.18    |  |               |   | (0.36   | )             | 
|Diluted income  (loss) per share                    |  |               | 0.17    |  |               |   | (0.36   | )             | 
|Total assets                                        |  |               | 534,882 |  |               |   | 496,873 |               | 
|Total long-term liabilities                         |  |               | 3,288   |  |               |   | 86,779  |               | 



| | 1) | Refer
                                         to section on non-IFRS and other measures of this MD&A.
| | -- | ------------------------------------------------------------------------------------------------------







Attributable
Gold Equivalent Ounces Soldby asset Sales & Royalty Revenuesby region Sales & Royalty Revenuesby
metal Bachelor Lake Black Fox Chapada Diavik Ming Karma Santa Elena Other Royalties Yamana silver stream 73%Precious Metals
9%Diamonds 18%Base Metals and Other 29%North America excl. Canada18%South America 8%Australia
and West Africa 45%Canada For the YEAR ended DECEMBER 31, 2016





The Company’s operating segments for the
year ended
December 31, 2016 are summarized in the table below:



|In $000s             |  | Attributable Gold Equivalent ounces sold |        |  | Sales and royalty revenues |   |        | Cost
                                         of sales,
                                         excluding 
depletion |  |   | Depletion |  |  | Impairment of Mineral, royalty and other interests |        |  | Income (loss) before taxes |   |       | Cash flow from operations | 
|-------------------- |  | ---------------------------------------- | ------ |  | -------------------------- | - | ------ | --------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  |  | -------------------------------------------------- | ------ |  | -------------------------- | - | ----- | ------------------------- | 
|Bachelor Lake        |  |                                          | 7,358  |  |                            | $ | 9,183  |                                                                                                                       |  | $ | 3,494     |  |  | $                                                  | 4,411  |  |                            | $ | -     |                           | 
|Black Fox            |  |                                          | 4,500  |  |                            |   | 5,617  |                                                                                                                       |  |   | 2,354     |  |  |                                                    | 2,011  |  |                            |   | -     |                           | 
|Chapada              |  |                                          | 4,839  |  |                            |   | 6,075  |                                                                                                                       |  |   | 1,843     |  |  |                                                    | 2,737  |  |                            |   | -     |                           | 
|Diavik               |  |                                          | 4,669  |  |                            |   | 5,856  |                                                                                                                       |  |   | -         |  |  |                                                    | 5,519  |  |                            |   | -     |                           | 
|Karma                |  |                                          | 3,334  |  |                            |   | 4,272  |                                                                                                                       |  |   | 860       |  |  |                                                    | 2,095  |  |                            |   | -     |                           | 
|Ming                 |  |                                          | 1,586  |  |                            |   | 2,025  |                                                                                                                       |  |   | -         |  |  |                                                    | 792    |  |                            |   | -     |                           | 
|Santa Elena          |  |                                          | 9,419  |  |                            |   | 11,772 |                                                                                                                       |  |   | 3,385     |  |  |                                                    | 2,001  |  |                            |   | -     |                           | 
|Yamana silver stream |  |                                          | 2,323  |  |                            |   | 2,926  |                                                                                                                       |  |   | 876       |  |  |                                                    | 1,427  |  |                            |   | -     |                           | 
|Other Royalties      |  |                                          | 11,522 |  |                            |   | 14,419 |                                                                                                                       |  |   | 4         |  |  |                                                    | 6,592  |  |                            |   | 2,507 |                           | 
|Other                |  |                                          | 181    |  |                            |   | 226    |                                                                                                                       |  |   | 18        |  |  |                                                    | 69     |  |                            |   | -     |                           | 
|Corporate            |  |                                          | -      |  |                            |   | -      |                                                                                                                       |  |   | -         |  |  |                                                    | -      |  |                            |   | -     |                           | 
|Consolidated         |  |                                          | 49,731 |  |                            | $ | 62,371 |                                                                                                                       |  | $ | 12,834    |  |  | $                                                  | 27,654 |  |                            | $ | 2,507 |                           | 





15







The Company’s operating segments for the
year ended
December 31, 2015 are summarized in the table below:



|In $000s        |  | Attributable Gold Equivalent ounces sold |        |  | Sales and royalty revenues |   |        | Cost of sales, excluding depletion |  |   | Depletion |  |  | Impairment of Mineral, royalty and other interests |        |  | Income (loss) before taxes |   |        | Cash flow from operations | 
|--------------- |  | ---------------------------------------- | ------ |  | -------------------------- | - | ------ | ---------------------------------- |  | - | --------- |  |  | -------------------------------------------------- | ------ |  | -------------------------- | - | ------ | ------------------------- | 
|Aurizona        |  |                                          | 9,061  |  |                            | $ | 10,773 |                                    |  | $ | 3,690     |  |  | $                                                  | 1,072  |  |                            | $ | -      |                           | 
|Bachelor Lake   |  |                                          | 7,101  |  |                            |   | 8,285  |                                    |  |   | 3,550     |  |  |                                                    | 4,220  |  |                            |   | -      |                           | 
|Black Fox       |  |                                          | 5,891  |  |                            |   | 6,856  |                                    |  |   | 3,041     |  |  |                                                    | 4,281  |  |                            |   | -      |                           | 
|Diavik          |  |                                          | 4,863  |  |                            |   | 5,656  |                                    |  |   | -         |  |  |                                                    | 6,273  |  |                            |   | -      |                           | 
|Ming            |  |                                          | 1,651  |  |                            |   | 1,855  |                                    |  |   | -         |  |  |                                                    | 1,994  |  |                            |   | -      |                           | 
|Santa Elena     |  |                                          | 9,171  |  |                            |   | 10,640 |                                    |  |   | 3,266     |  |  |                                                    | 6,115  |  |                            |   | -      |                           | 
|Other Royalties |  |                                          | 7,242  |  |                            |   | 8,422  |                                    |  |   | -         |  |  |                                                    | 11,292 |  |                            |   | 18,322 |                           | 
|Other           |  |                                          | 166    |  |                            |   | 176    |                                    |  |   | 19        |  |  |                                                    | 65     |  |                            |   | 3,323  |                           | 
|Corporate       |  |                                          | -      |  |                            |   | -      |                                    |  |   | -         |  |  |                                                    | -      |  |                            |   | -      |                           | 
|Consolidated    |  |                                          | 45,146 |  |                            | $ | 52,663 |                                    |  | $ | 13,566    |  |  | $                                                  | 35,312 |  |                            | $ | 21,645 |                           | 





16







SUMMARY
OF QUARTERLY RESULTS



Quarters Ended



|In $000s                                            |  | Dec. 31, 2016 |         |   | Sep. 30, 2016 |   |         | Jun. 30, 2016 |  |   | Mar. 31, 2016 | 
|--------------------------------------------------- |  | ------------- | ------- | - | ------------- | - | ------- | ------------- |  | - | ------------- | 
|Total revenue                                       |  | $             | 16,463  |   |               | $ | 16,815  |               |  | $ | 15,709        | 
|Attributable Gold Equivalent ounces sold1           |  |               | 13,245  |   |               |   | 12,588  |               |  |   | 12,517        | 
|Sales                                               |  | $             | 10,970  |   |               | $ | 11,302  |               |  | $ | 10,858        | 
|Royalty revenue                                     |  |               | 5,493   |   |               |   | 5,513   |               |  |   | 4,851         | 
|Average realized gold price per attributable ounce1 |  |               | 1,243   |   |               |   | 1,336   |               |  |   | 1,255         | 
|Average cash cost per attributable ounce1           |  |               | 250     |   |               |   | 255     |               |  |   | 261           | 
|Cash flows from operating activities                |  |               | 10,058  |   |               |   | 10,313  |               |  |   | 8,935         | 
|Net (loss) income                                   |  |               | (19     | ) |               |   | 6,915   |               |  |   | 5,199         | 
|Basic (loss) income per share                       |  |               | (0.00   | ) |               |   | 0.05    |               |  |   | 0.04          | 
|Diluted (loss) income per share                     |  |               | (0.00   | ) |               |   | 0.04    |               |  |   | 0.04          | 
|Total assets                                        |  |               | 534,882 |   |               |   | 540,419 |               |  |   | 525,353       | 
|Total long-term liabilities                         |  |               | 3,288   |   |               |   | 3,320   |               |  |   | 62,854        | 



|In $000s                                            |  | Dec. 31, 2015 |         |   | Sep. 30, 2015 |   |         | Jun. 30, 2015 |  |   | Mar. 31, 2015 |  
|--------------------------------------------------- |  | ------------- | ------- | - | ------------- | - | ------- | ------------- |  | - | ------------- | -
|Total revenue                                       |  | $             | 9,863   |   |               | $ | 12,086  |               |  | $ | 15,429        |  
|Attributable Gold Equivalent ounces sold1           |  |               | 8,951   |   |               |   | 10,834  |               |  |   | 12,901        |  
|Sales                                               |  | $             | 6,604   |   |               | $ | 9,055   |               |  | $ | 11,360        |  
|Royalty revenue                                     |  |               | 3,259   |   |               |   | 3,031   |               |  |   | 4,069         |  
|Average realized gold price per attributable ounce1 |  |               | 1,102   |   |               |   | 1,116   |               |  |   | 1,196         |  
|Average cash cost per attributable ounce1           |  |               | 258     |   |               |   | 307     |               |  |   | 304           |  
|Cash flows from operating activities                |  |               | 4,987   |   |               |   | 8,234   |               |  |   | 9,479         |  
|Net (loss) income                                   |  |               | (24,960 | ) |               |   | (5,470  | )             |  |   | (13,451       | )
|Basic (loss) income per share                       |  |               | (0.20   | ) |               |   | (0.05   | )             |  |   | (0.11         | )
|Diluted (loss) income per share                     |  |               | (0.20   | ) |               |   | (0.05   | )             |  |   | (0.11         | )
|Total assets                                        |  |               | 496,873 |   |               |   | 408,170 |               |  |   | 415,944       |  
|Total long-term liabilities                         |  |               | 86,779  |   |               |   | 4,768   |               |  |   | 5,316         |  



| | 1) | Refer
                                         to section on non-IFRS and other measures of this MD&A.
| | -- | ------------------------------------------------------------------------------------------------------



17







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 commodities, as well as acquisitions
of Streams 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, 2016 are summarized in the table below:



|In $000s             |  | Attributable Gold Equivalent ounces sold |        |  | Sales and royalty revenues |   |        | Cost of sales, excluding depletion |  |   | Depletion |  |  | Impairment of Mineral, royalty and other interests |       |  | Income (loss) before taxes |   |   | Cash flow from operations | 
|-------------------- |  | ---------------------------------------- | ------ |  | -------------------------- | - | ------ | ---------------------------------- |  | - | --------- |  |  | -------------------------------------------------- | ----- |  | -------------------------- | - | - | ------------------------- | 
|Bachelor Lake        |  |                                          | 1,920  |  |                            | $ | 2,364  |                                    |  | $ | 907       |  |  | $                                                  | 1,552 |  |                            | $ | - |                           | 
|Black Fox            |  |                                          | 1,270  |  |                            |   | 1,595  |                                    |  |   | 666       |  |  |                                                    | 568   |  |                            |   | - |                           | 
|Chapada              |  |                                          | 1,725  |  |                            |   | 2,144  |                                    |  |   | 651       |  |  |                                                    | 917   |  |                            |   | - |                           | 
|Diavik               |  |                                          | 935    |  |                            |   | 1,161  |                                    |  |   | -         |  |  |                                                    | 1,573 |  |                            |   | - |                           | 
|Karma                |  |                                          | 833    |  |                            |   | 1,053  |                                    |  |   | 216       |  |  |                                                    | 524   |  |                            |   | - |                           | 
|Ming                 |  |                                          | 684    |  |                            |   | 855    |                                    |  |   | -         |  |  |                                                    | 405   |  |                            |   | - |                           | 
|Santa Elena          |  |                                          | 1,638  |  |                            |   | 2,018  |                                    |  |   | 591       |  |  |                                                    | 302   |  |                            |   | - |                           | 
|Yamana silver stream |  |                                          | 716    |  |                            |   | 889    |                                    |  |   | 267       |  |  |                                                    | 436   |  |                            |   | - |                           | 
|Other Royalties      |  |                                          | 3,381  |  |                            |   | 4,203  |                                    |  |   | 4         |  |  |                                                    | 1,572 |  |                            |   | - |                           | 
|Other                |  |                                          | 143    |  |                            |   | 181    |                                    |  |   | 14        |  |  |                                                    | 54    |  |                            |   | - |                           | 
|Corporate            |  |                                          | -      |  |                            |   | -      |                                    |  |   | -         |  |  |                                                    | -     |  |                            |   | - |                           | 
|Consolidated         |  |                                          | 13,245 |  |                            | $ | 16,463 |                                    |  | $ | 3,316     |  |  | $                                                  | 7,903 |  |                            | $ | - |                           | 



The Company’s operating segments for the
three months ended

December 31, 2015 are summarized in the table below:



|In $000s        |  | Attributable Gold Equivalent ounces sold |       |  | Sales and royalty revenues |   |       | Cost of sales, excluding depletion |  |   | Depletion |  |  | Impairment of Mineral, royalty and other interests |       |  | Income (loss) before taxes |   |        | Cash flow from operations | 
|--------------- |  | ---------------------------------------- | ----- |  | -------------------------- | - | ----- | ---------------------------------- |  | - | --------- |  |  | -------------------------------------------------- | ----- |  | -------------------------- | - | ------ | ------------------------- | 
|Aurizona        |  |                                          | 501   |  |                            | $ | 579   |                                    |  | $ | 204       |  |  | $                                                  | 59    |  |                            | $ | -      |                           | 
|Bachelor Lake   |  |                                          | 1,383 |  |                            |   | 1,523 |                                    |  |   | 692       |  |  |                                                    | 822   |  |                            |   | -      |                           | 
|Black Fox       |  |                                          | 1,274 |  |                            |   | 1,409 |                                    |  |   | 660       |  |  |                                                    | 908   |  |                            |   | -      |                           | 
|Diavik          |  |                                          | 1,067 |  |                            |   | 1,176 |                                    |  |   | -         |  |  |                                                    | 1,808 |  |                            |   | -      |                           | 
|Ming            |  |                                          | 608   |  |                            |   | 645   |                                    |  |   | -         |  |  |                                                    | 749   |  |                            |   | -      |                           | 
|Santa Elena     |  |                                          | 2,062 |  |                            |   | 2,270 |                                    |  |   | 736       |  |  |                                                    | 1,314 |  |                            |   | -      |                           | 
|Other Royalties |  |                                          | 1,890 |  |                            |   | 2,083 |                                    |  |   | -         |  |  |                                                    | 2,512 |  |                            |   | 18,322 |                           | 
|Other           |  |                                          | 166   |  |                            |   | 178   |                                    |  |   | 17        |  |  |                                                    | 65    |  |                            |   | -      |                           | 
|Corporate       |  |                                          | -     |  |                            |   | -     |                                    |  |   | -         |  |  |                                                    | -     |  |                            |   | -      |                           | 
|Consolidated    |  |                                          | 8,951 |  |                            | $ | 9,863 |                                    |  | $ | 2,309     |  |  | $                                                  | 8,237 |  |                            | $ | 18,322 |                           | 





18











MD&A 2016
Annual ReportSandstorm Gold Ltd.Attributable Gold Equivalent Ounces Sold by asset Sales & Royalty Revenuesby region Sales & Royalty Revenuesby metal Bachelor Lake Black Fox Chapada Diavik Ming Karma Santa Elena Other
Royalties Yamana silver stream 68%Precious Metals 7%Diamonds 25% Base Metals and Other 20%North
America excl. Canada23% South America 9% Australia and West Africa 48%Canada







THREE
MONTHS ENDED December 31, 2016
COMPARED TO THE THREE MONTHS ENDED December 31, 2015



For the three months ended December 31, 2016,
net loss and cash flow from operations were $0.0 million and $10.1 million, respectively, compared with net loss and cash flow
from operations of $25.0 million and $5.0 million for the comparable period in 2015. The change is attributable to certain items
recognized during the three months ended December 31, 2015 which did not occur during the three months ended December 31, 2016
including (i) a $18.3 million non-cash impairment charge relating to the Company’s mineral interests with respect to the
Serra Pelada project, the Emigrant Springs Mine and MWS; and (ii) a $6.5 million non-cash loss on the revaluation of the Company’s
investments.



For the three months ended December 31, 2016,
revenue was $16.5 million compared with $9.9 million for the comparable period in 2015. The increase is largely attributed to a
number of factors including:



| | · | 13% increase in the average realized selling price of gold; and                
| | - | -------------------------------------------------------------------------------
| | · | 48% increase in the number of Attributable Gold Equivalent ounces
sold, due to:



| | i. | An additional 2,441 Attributable Gold Equivalent ounces sold from the Company’s recently
acquired Yamana silver stream and Chapada copper stream;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | An increase of 79% in Attributable Gold Equivalent ounces sold from the Company’s other
royalties portfolio largely related to recent asset acquisitions including the Teck royalty package;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | An additional 833 gold ounces sold from the Karma Mine which announced its first gold production
in April 2016;
| | ---- | ---------------------------------------------------------------------------------------------------------------



| | iv. | An increase of 39% in gold ounces sold from the Bachelor Lake Mine largely related to higher feed grade;
| | --- | --------------------------------------------------------------------------------------------------------



Partially offset by:



| | v. | A decrease of 501 gold ounces sold from the Aurizona Mine as Luna has finished processing ore
from the stockpile and ceased mining operations; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | A 21% decrease in gold ounces sold from the Santa Elena primarily related to the timing of shipments
whereby 573 ounces were received by December 31, 2016, but were sold subsequent to quarter end.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





19







Year
ENDED December 31, 2016
COMPARED TO THE Year ENDED December 31, 2015



For the year ended December 31, 2016, net income
and cash flow from operations were $25.3 million and $39.0 million, respectively, compared with net loss and cash flow from operations
of $43.1 million and $30.8 million for the comparable period in 2015. The changes are attributable to a combination of factors
including:



| | · | A $22.1 million gain on the revaluation of the Company’s investments
primarily driven by the change in fair value of the Luna convertible debenture and Luna warrants;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | A $7.7 million decrease in depletion expense largely driven by a resetting
of the number of ounces in the depletable base due to various factors including the conversion of exploration upside into resources
and reserves;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | · | Certain items recognized during the year ended December 31, 2015 did
not occur during the year ended December 31, 2016 including (i) a $8.1 million non-cash income tax expense primarily related to
a reduction of the Company’s deferred income tax asset arising from taxable income previously attributed to its Barbadian
subsidiary; (ii) a $21.6 million non-cash impairment charge relating to the Company’s mineral interests with respect to the
Serra Pelada project, the Emigrant Springs Mine, MWS and the Santa Fe Gold Stream; partially offset by (i) a $5.0 million gain
on the settlement of mineral interests largely driven by the Luna Gold Stream and loan restructuring; and (ii) a foreign exchange
gain of $1.5 million largely driven by fluctuations in the foreign exchange rate;



Partially offset by:



| | · | A $2.5 million non-cash impairment charge relating to certain of the
Company’s mineral royalties; and                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | A $2.4 million increase in finance expense and other as the Company
drew on its Revolving Facility in October 2015 and subsequently repaid the full balance in the third quarter of 2016.



For the year ended December 31, 2016, revenue
was $62.4 million compared with $52.7 million for the comparable period in 2015. The increase is largely attributed to a number
of factors including:



| | · | 7% increase in the average realized selling price of gold; and                 
| | - | -------------------------------------------------------------------------------
| | · | 10% increase in the number of Attributable Gold Equivalent ounces
sold, due to:



| | i. | An additional 7,162 Attributable Gold Equivalent ounces were sold from the Company’s recently
acquired Yamana silver stream and Chapada copper stream;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | An additional 3,334 gold ounces sold from the Karma Mine which announced its first gold production
in April 2016;
| | --- | -----------------------------------------------------------------------------------------------------------------



| | iii. | An increase of 59% in Attributable Gold Equivalent ounces sold from the Company’s other
royalties portfolio partly related to recent asset acquisitions including the Teck royalty package;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Partially offset by:





20







| | iv. | A decrease of 9,061 gold ounces sold from the Aurizona Mine as Luna has finished processing ore
from the stockpile and ceased mining operations; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | A 24% decrease in gold ounces sold from the Black Fox Mine primarily related to the timing of
shipments whereby 597 ounces were received by December 31, 2016, but were sold subsequent to year end.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



THREE
MONTHS ENDED December 31, 2016
COMPARED TO THE other quarters presented



When comparing net loss of $0.0 million and
cash flow from operations of $10.1 million for the three months ended December 31, 2016 with net income/loss and operating cash
flow for the remaining quarters, the following items impact comparability of analysis:



| | · | The Company recognized gains and losses with respect to the revaluation
of its investments, which were primarily driven by changes in the fair value of the Luna Gold Corp. convertible debenture. In the
first three quarters of 2016, these gains amounted to $13.4 million, $6.0 million and $5.8 million, respectively and in the fourth
quarter of 2016 the Company recognized a loss of $3.1 million;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | An $8.1 million non-cash income tax expense related to a reduction
of the Company’s deferred income tax asset relating to taxable income previously attributed to its Barbadian subsidiary which
was recorded during the three months ended June 30, 2015;                                                                                                                                                 
| | · | An $18.3 million non-cash impairment charge relating to the Company’s
mineral interests with respect to the Serra Pelada project, the Emigrant Springs Mine and MWS which was recognized during the three
months ended December 31, 2015;                                                                                                                                                                  
| | · | A $4.3 million gain on the settlement of the Luna Gold Stream and
loan which was recognized during the three months ended June 30, 2015;                                                                                                                                                                                                                                                                   
| | · | A $3.3 million non-cash impairment relating to the Santa Fe Gold Stream
recognized during the three months ended June 30, 2015;                                                                                                                                                                                                                                                                            
| | · | A general decrease in administration expenses when compared to previous
quarters primarily driven by (i) the implementation of cost reduction programs when the Company acquired 100% of the common shares
of Premier Royalty Inc. and (ii) the elimination of duplicated costs that were previously being consolidated; and                                                                               
| | · | Overall, Gold Attributable Equivalent ounces sold have increased over
the course of the last three years as a result of the acquisition of various assets including: (i) the Diavik royalty which was
acquired during the three months ended March 31, 2015; and (ii) the Yamana silver stream and copper stream which were acquired
in the three months ended December 31, 2015.                          





21







Change
in Total Assets



Total assets decreased by $5.5 million from
September 30, 2016 to December 31, 2016 primarily resulting from depletion expense and a decrease in the value of the Company’s
investments; partially offset by operating cash flow. Total assets increased by $15.1 million from June 30, 2016 to September 30,
2016 primarily resulting from operating cash flow and an increase in the value of the Company’s investments; partially offset
by depletion expense. Total assets decreased by $5.8 million from March 31, 2016 to June 30, 2016 primarily resulting from depletion
expense; partially offset by an increase in the value of the Company’s investments. Total assets increased by $34.3 million
from December 31, 2015 to March 31, 2016 primarily resulting from the acquisition of the Teck royalty package and an increase in
the fair value of the Company’s investments, partially offset by depletion expense and a non-cash impairment charge on certain
mineral interests. Total assets increased by $88.7 million from September 30, 2015 to December 31, 2015 primarily resulting from
the acquisition of the Yamana silver stream and copper stream which were largely funded by utilizing the Company’s Revolving
Facility; the increase was partially offset by depletion expense and a non-cash impairment charge on certain mineral interests.
Total assets decreased by $7.8 million from June 30, 2015 to September 30, 2015 primarily resulting from depletion expense, which
was partially offset by cash flows from operating activities. Total assets decreased by $9.2 million from March 31, 2015 to June
30, 2015 primarily resulting from (i) the reduction of the Company’s deferred tax assets; and (ii) depletion expense; partially
offset by operating cash flow.



Non-IFRS
and other Measures





The Company has included, throughout this document, certain performance measures, including (i) average
cash cost per attributable ounce and (ii) average realized gold price per attributable ounce. 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. These non-IFRS measures do not have any standardized meaning prescribed by IFRS,
and other companies may calculate these measures differently.



| | i. | Average cash cost per attributable 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 streaming
companies in the precious metals mining industry who present results on a similar basis. Figure 1.1 provides a reconciliation
of average cash cost of gold on a per ounce basis.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Figure 1.1



|                                                   |  | 3 Months Ended Dec. 31, 2016 |        |  | 3 Months Ended Dec. 31, 2015 |   |       | Year Ended Dec. 31, 2016 |  |   | Year Ended Dec. 31, 2015 | 
|-------------------------------------------------- |  | ---------------------------- | ------ |  | ---------------------------- | - | ----- | ------------------------ |  | - | ------------------------ | 
|Cost of Sales, excluding depletion1                |  | $                            | 3,316  |  |                              | $ | 2,309 |                          |  | $ | 12,834                   | 
|                                                   |  |                              |        |  |                              |   |       |                          |  |   |                          | 
|Cash cost of sales is comprised of:                |  |                              |        |  |                              |   |       |                          |  |   |                          | 
|Total cash cost of gold sold                       |  | $                            | 3,316  |  |                              | $ | 2,309 |                          |  | $ | 12,834                   | 
|Divided by:                                        |  |                              |        |  |                              |   |       |                          |  |   |                          | 
|Total Attributable Gold Equivalent ounces sold2    |  |                              | 13,245 |  |                              |   | 8,951 |                          |  |   | 49,731                   | 
|Equals:                                            |  |                              |        |  |                              |   |       |                          |  |   |                          | 
|Average cash cost of gold (per attributable ounce) |  | $                            | 250    |  |                              | $ | 258   |                          |  | $ | 258                      | 





| | 1) | Cost
                                         of Sales, excluding depletion, includes cash payments made for Gold Equivalent ounces
                                         associated with commodity streams.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







22







| | 2) | The
                                         Company’s royalty and other commodity stream income is converted to an Attributable
                                         Gold Equivalent ounce basis by dividing the royalty and other commodity 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. | Average realized gold price per attributable 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 streaming companies in the precious metals mining industry that present results on a similar basis. Figure 1.2
                                                                 provides a reconciliation of average realized gold price per ounce.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Figure 1.2



|                                                   |  | 3 Months Ended Dec. 31, 2016 |        |  | 3 Months Ended Dec. 31, 2015 |   |       | Year Ended Dec. 31, 2016 |  |   | Year Ended Dec. 31, 2015 | 
|-------------------------------------------------- |  | ---------------------------- | ------ |  | ---------------------------- | - | ----- | ------------------------ |  | - | ------------------------ | 
|Total Revenue                                      |  | $                            | 16,463 |  |                              | $ | 9,863 |                          |  | $ | 62,371                   | 
|                                                   |  |                              |        |  |                              |   |       |                          |  |   |                          | 
|Divided by:                                        |  |                              |        |  |                              |   |       |                          |  |   |                          | 
|Total Attributable Gold Equivalent ounces sold     |  |                              | 13,245 |  |                              |   | 8,951 |                          |  |   | 49,731                   | 
|Equals:                                            |  |                              |        |  |                              |   |       |                          |  |   |                          | 
|Average realized gold price per attributable ounce |  | $                            | 1,243  |  |                              | $ | 1,102 |                          |  | $ | 1,254                    | 





23







Liquidity
and Capital Resources



As of December 31, 2016, the Company had cash
and cash equivalents of $21.4 million (December 31, 2015 – $5.3 million) and a working capital of $23.8 million
(December 31, 2015 – $1.8 million). On July 6, 2016, the Company completed a public financing resulting in gross proceeds
of $57.5 million. Upon closing of the financing, the majority of the net proceeds were used to reduce the balance of the Company’s
Revolving Facility. As a result, the Company currently has no bank debt and the entire $110 million revolving credit facility remains
available for acquisition purposes.



During the year ended December 31, 2016, the
Company generated cash flows from operating activities of $39.0 million compared with $30.8 million during the comparable period
in 2015, with the increase being primarily attributable to both an increase in the average realized selling price of gold and an
increase in Attributable Gold Equivalent ounces sold.



During the year ended December 31, 2016, the
Company had net cash inflows from investing activities of $3.8 million which were primarily the result of: (i) $18.4 million cash
inflow largely consisting of the disposition of a portion of the Company’s investments and the receipt of $5.5 million related
to the Company’s amendment of the Entrée commodity streams; and (ii) the repayment of a $3.0 million loan; which were
partially offset by (i) the acquisition of investments and other assets; (ii) the payment of $4.0 million and $5.2 million in connection
with the Yamana commodity streams and the Karma Gold Stream, respectively; and (iii) a $1.4 million payment related to the Teck
transaction. During the year ended December 31, 2015, the Company had cash outflows from investing activities of $221.4 million,
which were primarily the result of: (i) the payment of $148 million to Yamana in connection with the Yamana commodity streams;
(ii) the payment of $52.5 million to IAMGOLD Corporation in connection with the Diavik royalty and $3.0 million to Orezone Gold
Corporation in connection with the Bomboré royalty; (iii) a $6.7 million upfront payment related to the Karma Gold Stream;
(iv) a loan of $2.0 million and (v) the acquisition of investments and other assets; partially offset by (i) the receipt of $7
million as a result of the Doray Minerals Limited Gold Stream settlement agreement and (ii) the proceeds from the sale of other investments.



During the year ended December 31, 2016, the Company had net cash outflows from financing activities of
$26.9 million largely related to $83.5 million in the net repayment of debt under the Company’s Revolving Facility; partially
offset by (i) $57.5 million raised in gross proceeds from the Company’s July 2016 equity financing and (ii) $5.5 million
in proceeds from the exercise of stock options. During the year ended December 31, 2015, the Company had net cash inflows from
financing activities of $107.5 million largely related to: (i) drawing $110 million under the Company’s Revolving Facility
to finance the Yamana commodity streams; and (ii) $28.8 million raised in gross proceeds from the Company’s November 2015
equity financing; which were partially offset by (i) the repayment of $26.5 million under the Company’s Revolving Facility;
(ii) share issuance and deferred financing costs of $3.1 million; and (iii) $1.7 million in the redemption of the Company’s
common shares under the NCIB.





24







Contractual
Obligations



In connection with its commodity
streams, the Company has committed to purchase the following:



|Stream               |  | % of Life of Mine Goldor Relevant Commodity5,6,7,8,9                 |  | Per Ounce Cash Payment:lesser of amount below and the then
prevailing market price of commodity
(unless otherwise noted)1, 2, 3, 4
|-------------------- |  | -------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Bachelor Lake        |  | 20%                                                                  |  | $500                                                                                                                              
|Black Fox            |  | 8%                                                                   |  | $531                                                                                                                              
|Chapada              |  | 4.2%                                                                 |  | 30% of copper spot price                                                                                                          
|Entrée Gold          |  | 5.62% on Hugo North Extension and 4.26% on Heruga                    |  | $220                                                                                                                              
|Karma                |  | 26,875 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%                                                                  |  | $361                                                                                                                              
|Yamana silver stream |  | Varies                                                               |  | 30% of silver spot price                                                                                                          



| | 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 5.62% on Hugo North Extension
                                         and 4.26% 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 $361 and the then prevailing market price of gold for the open-pit
                                         mine and (ii) the lesser of $361 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 5.62% on Hugo
                                         North Extension and 4.26% 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 8.43% on Hugo
                                         North Extension and 6.39% 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 0.42% 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 0.62% 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 8) | For
                                         the Chapada copper stream, the Company has committed to purchase an amount equal to 4.2%
                                         of the copper produced (up to an annual maximum of 3.9 million pounds of copper) until
                                         Yamana has delivered 39 million pounds of copper to Sandstorm; then 3.0% of the copper
                                         produced until, on a cumulative basis, Yamana has delivered 50 million pounds of copper
                                         to Sandstorm; then 1.5% of the copper produced thereafter, for the life of the mine.
                                         If Cerro Moro has not achieved the Commencement of Production and Sandstorm has not received
                                         cumulative pre-tax cash flow equal to $70 million from the Yamana silver stream, then
                                         the First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease
                                         to be in effect and Sandstorm will continue to purchase 4.2% of Chapada’s payable
                                         copper production (up to an annual maximum of 3.9 million pounds of copper), until such
                                         time as Sandstorm has received cumulative pre-tax cash flow equal to $70 million, or
                                         Cerro Moro has achieved the Commencement of Production.
| | 9) | Under
                                         the terms of the Yamana silver stream, Sandstorm has agreed to purchase an amount of
                                         silver from Cerro Moro equal to 20% of the silver produced (up to an annual maximum of
                                         1.2 million ounces of silver), until Yamana has delivered to Sandstorm 7.0 million ounces
                                         of silver; then 9.0% of the silver produced thereafter. As part of the Yamana silver
                                         stream, during the year 2016 through 2018, Sandstorm has also agreed to purchase an amount
                                         of silver from: (i) the Minera Florida mine in Chile equal to 38% of the silver produced
                                         (up to an annual maximum of 200,000 ounces of silver); and (ii) the Chapada mine in Brazil
                                         equal to 52% of the silver produced (up to an annual maximum of 100,000 ounces of silver).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     





25







Share
Capital



As of February 21, 2017, the Company had 151,931,282
common shares outstanding. As disclosed previously, the funds from the issuance of share capital have been used to finance the
acquisition of Gold Streams and royalties (recent acquisitions are described earlier in greater detail), with the net proceeds
of the 2015 and 2016 equity financings used to reduce the balance of the Company’s Revolving Facility.



A summary of the Company’s
share purchase options
as of February 21, 2017 are as follows:



|Number
    outstanding |  | Vested    |  | Exercise
    Price per Share |       |  | Expiry Date
|---------------------- |  | --------- |  | ---------------------------- | ----- |  | -----------
|27,000                 |  | 27,000    |  | C$                           | 18.33 |  |            
|5,850                  |  | 5,850     |  |                              | 18.33 |  |            
|402,133                |  | 402,133   |  |                              | 16.35 |  |            
|150,000                |  | 150,000   |  |                              | 11.78 |  |            
|10,875                 |  | 10,875    |  |                              | 11.31 |  |            
|3,625                  |  | 3,625     |  |                              | 10.62 |  |            
|12,375                 |  | 12,375    |  |                              | 8.89  |  |            
|25,000                 |  | 16,667    |  |                              | 6.03  |  |            
|2,976,072              |  | 1,730,258 |  |                              | 2.93  |  |            
|1,084,000              |  | 361,338   |  |                              | 3.60  |  |            
|200,000                |  | 66,667    |  |                              | 3.64  |  |            
|1,336,000              |  | -         |  |                              | 4.96  |  |            
|2,250                  |  | 2,250     |  |                              | 15.00 |  |            
|6,235,180              |  | 2,789,038 |  | C$                           | 5.72  |  |            



A summary of the Company’s
warrants
as of February 21, 2017 are as follows:



|Number outstanding |  | Exercise Price per Share |       |  | Expiry Date
|------------------ |  | ------------------------ | ----- |  | -----------
|5,002,500          |  | $                        | 14.00 |  |            
|3,000,000          |  | $                        | 4.50  |  |            
|15,000,000         |  | $                        | 3.50  |  |            
|5,043,900          |  | $                        | 4.00  |  |            
|28,046,400         |  |                          |       |  |            



The Company has 1,944,818 Restricted Share Rights
(“RSRs”) outstanding as at February 21, 2017.





26







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 Dec. 31, 2016 |       |  | Year Ended Dec. 31, 2015 |  
|----------------------------------------- |  | ------------------------ | ----- |  | ------------------------ | -
|Employee salaries and benefits            |  | $                        | 1,699 |  |                          | $
|Share-based payments                      |  |                          | 2,041 |  |                          |  
|Total key management compensation expense |  | $                        | 3,740 |  |                          | $



Financial
Instruments



The fair value of the Company's 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, 2016. 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, loan receivable, and receivables and other in the ordinary course of business.
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 loan receivable and convertible debenture due from Luna 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, 2016 a 10% increase (decrease) of the value of the Canadian dollar relative
to the United States dollar would increase (decrease) net income by $1 million and other comprehensive income by $2 million, respectively.





27







Other Risks



Sandstorm holds common shares, convertible debentures,
and warrants of other companies with a combined fair market value as at December 31, 2016 of $61.3 million (December 31, 2015 – $26.6
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 exposed to equity price risk as a result
of holding long-term investments in other mining companies. The Company does not actively trade these investments. Based on the
Company's long-term investments held as at December 31, 2016 a 10% increase (decrease) in the equity prices of these investments
would increase (decrease) net income by $1.2 million and other comprehensive income by $2.9 million.



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 30, 2016, which is available on www.sedar.com.



Risks Relating To Mineral Projects



To the extent that they relate to the production
of gold or applicable commodity from, or the operation of, the Chapada Mine, the Cerro Moro Project, the Diavik Mine, the Aurizona
Mine, the Santa Elena Mine, the Karma Project, the Ming Mine, the Black Fox Mine, the Bachelor Lake Mine, the Hugo North Extension
and Heruga deposits, the Mt. Hamilton Project, the Gualcamayo Mine, the Emigrant Springs Mine, MWS, the San Andres Mine, the Prairie
Creek Project, the Bracemac-McLeod Mine, the Hot Maden Project, the Hackett River Project, the Lobo-Marte Project, Agi Dagi and
Kirazli or other royalties or commodity streams 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, other commodities or receive royalties, if no gold or applicable commodity is produced from the
Mines.





28







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 or other 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 or other 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,
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.





29







International Operations



The Chapada Mine and the Aurizona 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 Gualcamayo Mine and the Cerro Moro Project is located in Argentina, MWS is located in South Africa,
the Hugo North Extension and Heruga projects are located in Mongolia, the Karma Project is located in Burkina Faso, the San Andres
Mine is located in Honduras, the Hot Maden Project, Agi Dagi and Kirazli are located in Turkey, the Lobo-Marte Project is located
in Chile, and each of the Diavik Mine, the Ming Mine, the Black Fox Mine, Bachelor Lake Mine, Prairie Creek Project, the Hackett
River 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, Burkina Faso,
Argentina, Honduras, French Guiana, Chile, Turkey 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. 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.





30







Income Taxes



The Company has a subsidiary in Barbados, Sandstorm
Gold (Barbados) 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 audited by the Canada Revenue Agency, and should such transactions be audited, no
assurances can be given that the tax matters will be resolved favorably. The Company’s commodity streams and royalties in
connection with Chapada, Cerro Moro, Diavik, Black Fox, Ming, Hugo North Extension and Heruga, MWS, Bachelor Lake, Mt. Hamilton,
Prairie Creek, San Andres, Hot Maden Project, Hackett River Project, Lobo-Marte Project, Agi Dagi, Kirazli and Bracemac-McLeod
transactions have been entered into directly by Canadian based subsidiaries and will therefore, be subject to Canadian, and/or
U.S./international taxation, as the case may be. The Gualcamayo NSR was entered into through an Argentinian subsidiary and therefore,
may be 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 and Silver 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 and silver. The
price of gold and silver 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 and silver 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 and silver producing countries throughout
the world. In the event that the prevailing market price of gold is less than $531 per ounce in the case of the Black Fox Gold
Stream, $500 per ounce in the case of the Bachelor Lake Gold Stream, $361 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 or silver price drops below the cost of producing gold or silver at the Mines, then the Mines may not
produce any gold or silver. As a result, the Company will not be entitled to purchase any gold or silver.



Diamond Prices and Demand for Diamonds



The price of the common shares, warrants, and
the Company’s financial results may be significantly adversely affected by a decline in the price and demand for diamonds.
Diamond prices fluctuate and are affected by numerous factors beyond the control of the Company, including worldwide economic trends,
worldwide levels of diamond discovery and production, and the level of demand for, and discretionary spending on, luxury goods
such as diamonds. Low or negative growth in the worldwide economy, renewed or additional credit market disruptions, natural disasters
or the occurrence of terrorist attacks or similar activities creating disruptions in economic growth could result in decreased
demand for luxury goods such as diamonds, thereby negatively affecting the price of diamonds. Similarly, a substantial increase
in the worldwide level of diamond production or the release of stocks held back during recent periods of lower demand could also
negatively affect the price of diamonds. In each case, such developments could have a material adverse effect on the Company’s
results of operations.





31







Copper 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 copper. Copper prices
fluctuate widely and are affected by numerous factors beyond the Company’s control, including global supply and demand, expectations
with respect to the rate of inflation, the exchange rates of the U.S. dollar to other currencies, interest rates, forward selling
by producers, central bank sales and purchases, production and cost levels in major producing regions, global or regional political,
economic or financial situations and a number of other factors. Furthermore, if the copper price drops below the cost of producing
copper at the Mines, then the Mines may not produce any copper. As a result, the Company will not be entitled to purchase any copper.



Solvency Risk of Counterparties



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.



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 2016 annual consolidated financial statements
describes all of the significant accounting policies as well as the significant judgments 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.





32







As at the end of the period covered by this
Management’s Discussion and Analysis, management of the Company, with the participation of the Chief Executive Officer and
the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as required
by National Instrument 52-109 in Canada (“NI 52-109”) and under the Securities Exchange Act of 1934, as amended, in
the United States. 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 December 31, 2016, the disclosure controls and procedures (as defined in Rule 13(a) – 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 annual and 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 National
Instrument 52-109 in Canada (“NI 52-109”) and under the Securities Exchange Act of 1934, as amended, in the United
States. 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 as issued by the IASB.



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;                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | 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.





33







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. In connection with the assessment of
effectiveness of the Company's internal control over financial reporting as of December 31, 2015, a material weakness was identified
relating to the review control over the impairment of long-lived assets. Since then, the Company successfully implemented a remediation
plan whereby it hired additional resources to assist in the documentation and review of internal controls and in particular, enhanced
accounting processes and controls to prevent or detect errors over impairments of long-lived assets. Management assessed the effectiveness
of the Company's internal control over financial reporting as of December 31, 2016 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, 2016, the Company's internal control over financial
reporting is effective and no material weaknesses were identified.



Changes in Internal Controls



During the year ended December 31, 2016, management
remediated the previously identified material weakness in the Company’s internal control over financial reporting. Except
for the remediation efforts described above, there were no other changes in internal controls of the Company during the year ended
December 31, 2016 that has materially affected, or is likely to materially affect, the Company’s internal control over financial
reporting.



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 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 it is not yet effective. Pronouncements that are not applicable to the Company have been excluded from this note.





34







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 January 1, 2018 for public entities with early application 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.



35







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; the Chapada Mine, the Cerro Moro Project, the Ming
Mine, 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, the Diavik Mine, the Mt. Hamilton mine, the Prairie
Creek Project, the San Andres Mine, the Hot Maden Project, the Hackett River Project, the Lobo-Marte Project, Agi Dagi and Kirazli
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, 2015 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 Gold Streams and royalties as well as its future
outlook, the mineral reserve and mineral resource estimates for each of the Chapada Mine, the Cerro Moro Project, the Diavik Mine,
the Aurizona Mine, the Gualcamayo Mine, the Emigrant Springs Mine, MWS, the Santa Elena Mine, the Ming Mine, the Black Fox Mine,
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 Hot Maden Project, the Hackett River
Project, the Lobo-Marte Project, Agi Dagi and Kirazli 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, other commodity or receive royalties from, 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.



36







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 PricewaterhouseCoopers LLP, Chartered Professional 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.
PricewaterhouseCoopers LLP have full and free access to the Audit Committee.



|“Nolan Watson”                      | “Erfan Kazemi”         
|----------------------------------- | -----------------------
|President & Chief Executive Officer | Chief Financial Officer



February 21, 2017



37







Independent
Auditor’s Report



To theShareholders of Sandstorm Gold Ltd.



We have completed an integrated audit of Sandstorm Gold
Ltd. and its subsidiaries’ 2016 consolidated financial statements and their internal control over financialreporting
as at December 31, 2016. Our opinions, based on our audits are presented below.



Report on the consolidated financial
statements





We have audited the accompanying consolidated
financial statements of SandstormGold Ltd. and its subsidiaries’, which comprise the consolidated
statement of financial position as at December 31, 2016 and the consolidated statement of income (loss), consolidated statement
of comprehensive income (loss), consolidated statement of cash flows and consolidated statement of changes in equity for the year
then ended, and the related notes, which comprise 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 financialstatements 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 plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.



An audit involves performing procedures
to obtain audit evidence, on a test basis, 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 company’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 principles and 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 on the consolidated financialstatements.





38







Opinion





In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of Sandstorm Gold Ltd. and its subsidiaries as at
December 31, 2016 and their financial performance and their cash flows for the year then ended in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board.



Other matter



The financial statements of Sandstorm Gold Ltd.
and its subsidiaries’ for the year ended December 31, 2015, were audited by another auditor who expressed an unmodified opinion
on those statements on March 30, 2016.



Report on internal control over financial
reporting



We have also audited Sandstorm Gold Ltd. and
its subsidiaries’ internal control over financial reporting as at December 31, 2016, based on criteria established in Internal
Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



Management’s responsibility for internal
control over financial reporting



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.



Auditor’s responsibility



Our responsibility is to express an opinion
on the company’s internal control over financial reporting based on our audit. We conducted our audit of internal control
over financial reporting 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.



An audit of internal control over financial
reporting includes 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 consider necessary in the circumstances.



We believe that our audit provides a reasonable
basis for our audit opinion on the company’s internal control over financial reporting.





39







Definition of internal control over financial
reporting



A company’s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) 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.



Inherent limitations



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree
of compliance with the policies or procedures may deteriorate.



Opinion



In our opinion,Sandstorm
Gold Ltd. and its subsidiaries maintained, in all material respects, effective internal control over
financial reporting as at December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued
by COSO.





/S/ PricewaterhouseCoopers LLP



Chartered Professional Accountants

Vancouver, British Columbia

February 21, 2017



40







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 statement
of financial position as at December 31, 2015, and the consolidated statement of loss, consolidated statement of comprehensive
loss, consolidated statement of changes in equity, and consolidated statement of cash flows for the year 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 audit. We conducted our audit 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 audit 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, 2015, and their financial performance and their cash flows for the year then endedin accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board.





/S/ Deloitte LLP



Chartered Professional Accountants

March 30, 2016

Vancouver, Canada





41







SANDSTORM
GOLD LTD.



CONSOLIDATED FINANCIAL STATEMENTS



Annual 2016



42







|Consolidated
Statements of Financial Position | Expressed in U.S. dollars ($000s)
|--------------------------------------------- | ---------------------------------



|ASSETS                               |  | Note |  | December 31, 2016 |         |   | December 31, 2015 |  
|------------------------------------ |  | ---- |  | ----------------- | ------- | - | ----------------- | -
|Current                              |  |      |  |                   |         |   |                   |  
|Cash and cash equivalents            |  |      |  | $                 | 21,434  |   |                   | $
|Trade receivables and other          |  |      |  |                   | 6,663   |   |                   |  
|                                     |  |      |  | $                 | 28,097  |   |                   | $
|Non-current                          |  |      |  |                   |         |   |                   |  
|Mineral, royalty and other interests |  | 6    |  | $                 | 402,785 |   |                   | $
|Investments                          |  | 7    |  |                   | 61,293  |   |                   |  
|Deferred financing costs             |  | 8    |  |                   | 1,935   |   |                   |  
|Loans receivable                     |  | 6(b) |  |                   | 23,357  |   |                   |  
|Deferred income tax assets           |  | 10   |  |                   | 16,934  |   |                   |  
|Receivables and other                |  |      |  |                   | 481     |   |                   |  
|Total assets                         |  |      |  | $                 | 534,882 |   |                   | $
|                                     |  |      |  |                   |         |   |                   |  
|LIABILITIES                          |  |      |  |                   |         |   |                   |  
|Current                              |  |      |  |                   |         |   |                   |  
|Trade and other payables             |  |      |  | $                 | 4,289   |   |                   | $
|                                     |  |      |  |                   |         |   |                   |  
|Non-current                          |  |      |  |                   |         |   |                   |  
|Bank debt                            |  | 8    |  |                   | -       |   |                   |  
|Deferred income tax liabilities      |  | 10   |  |                   | 3,288   |   |                   |  
|                                     |  |      |  | $                 | 3,288   |   |                   | $
|                                     |  |      |  | $                 | 7,577   |   |                   | $
|                                     |  |      |  |                   |         |   |                   |  
|EQUITY                               |  |      |  |                   |         |   |                   |  
|Share capital                        |  | 9    |  | $                 | 573,085 |   |                   | $
|Reserves                             |  | 9    |  |                   | 23,915  |   |                   |  
|Deficit                              |  |      |  |                   | (35,672 | ) |                   |  
|Accumulated other comprehensive loss |  |      |  |                   | (34,023 | ) |                   |  
|                                     |  |      |  | $                 | 527,305 |   |                   | $
|Total liabilities and equity         |  |      |  | $                 | 534,882 |   |                   | $



Contractual obligations
(Note 14)

Subsequent events (Note
16)



ON BEHALF OF THE BOARD:



|“Nolan Watson”, Director | “David DeWitt”, Director
|------------------------ | ------------------------



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



43







|Consolidated Statements of Income (Loss) | Expressed in U.S. dollars ($000s)
|---------------------------------------- | ---------------------------------



|                                                                                                                         |  | Note  |  | Year Ended December 31, 2016 |             |   | Year Ended December 31, 2015 |  
|------------------------------------------------------------------------------------------------------------------------ |  | ----- |  | ---------------------------- | ----------- | - | ---------------------------- | -
|Sales                                                                                                                    |  | 15    |  | $                            | 41,634      |   |                              | $
|Royalty revenue                                                                                                          |  | 15    |  |                              | 20,737      |   |                              |  
|                                                                                                                         |  |       |  | $                            | 62,371      |   |                              | $
|                                                                                                                         |  |       |  |                              |             |   |                              |  
|Cost of sales, excluding depletion                                                                                       |  |       |  | $                            | 12,834      |   |                              | $
|Depletion                                                                                                                |  |       |  |                              | 27,654      |   |                              |  
|Total cost of sales                                                                                                      |  |       |  | $                            | 40,488      |   |                              | $
|                                                                                                                         |  |       |  |                              |             |   |                              |  
|Gross Profit                                                                                                             |  |       |  | $                            | 21,883      |   |                              | $
|                                                                                                                         |  |       |  |                              |             |   |                              |  
|Expenses and other (income)                                                                                              |  |       |  |                              |             |   |                              |  
|·Administration expenses1                                                                                                |  | 11    |  | $                            | 5,031       |   |                              | $
|·Project evaluation1                                                                                                     |  |       |  |                              | 5,064       |   |                              |  
|·Foreign exchange loss (gain)                                                                                            |  |       |  |                              | 87          |   |                              |  
|·(Gain) loss on revaluation of investments                                                                               |  | 7     |  |                              | (22,093     | ) |                              |  
|·Finance income                                                                                                          |  |       |  |                              | (2,598      | ) |                              |  
|·Finance expenses and other                                                                                              |  |       |  |                              | 4,100       |   |                              |  
|·Gain on restructuring of mineral interest                                                                               |  |       |  |                              | -           |   |                              |  
|·Mineral, royalty and other interests impairments                                                                        |  | 6 (c) |  |                              | 2,507       |   |                              |  
|Income (loss) before taxes                                                                                               |  |       |  | $                            | 29,785      |   |                              | $
|                                                                                                                         |  |       |  |                              |             |   |                              |  
|Current income tax expense                                                                                               |  | 10    |  | $                            | 306         |   |                              | $
|Deferred income tax expense                                                                                              |  | 10    |  |                              | 4,225       |   |                              |  
|                                                                                                                         |  |       |  |                              | 4,531       |   |                              |  
|Net income (loss) for the year                                                                                           |  |       |  | $                            | 25,254      |   |                              | $
|                                                                                                                         |  |       |  |                              |             |   |                              |  
|Basic earnings (loss) per share                                                                                          |  |       |  | $                            | 0.18        |   |                              | $
|Diluted earnings (loss) per share                                                                                        |  |       |  | $                            | 0.17        |   |                              | $
|                                                                                                                         |  |       |  |                              |             |   |                              |  
|Weighted average number of common shares outstanding                                                                     |  |       |  |                              |             |   |                              |  
|·Basic                                                                                                                   |  | 9 (e) |  |                              | 144,159,678 |   |                              |  
|·Diluted                                                                                                                 |  | 9 (e) |  |                              | 149,961,923 |   |                              |  
|1Equity settled stock based compensation (a non-cash item) is included in administration
expenses and project evaluation |  |       |  | $                            | 3,106       |   |                              | $



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



44







|Consolidated Statements of Comprehensive Income (Loss) | Expressed in U.S. dollars ($000s)
|------------------------------------------------------ | ---------------------------------



|                                                                                 |  | Note |  | Year Ended December 31, 2016 |        |  | Year Ended December 31, 2015 |  
|-------------------------------------------------------------------------------- |  | ---- |  | ---------------------------- | ------ |  | ---------------------------- | -
|Net income (loss) for the year                                                   |  |      |  | $                            | 25,254 |  |                              | $
|                                                                                 |  |      |  |                              |        |  |                              |  
|Other comprehensive income (loss) for the year                                   |  |      |  |                              |        |  |                              |  
|Items that may subsequently be re-classified to net income (loss):               |  |      |  |                              |        |  |                              |  
|·Currency translation differences                                                |  |      |  | $                            | 121    |  |                              | $
|Items that will not subsequently be re-classified to net income (loss):          |  |      |  |                              |        |  |                              |  
|·Gain (loss) on investments, including a tax recovery of $514 (Prior year – nil) |  | 7    |  |                              | 17,416 |  |                              |  
|Total other comprehensive income (loss) for the year                             |  |      |  | $                            | 17,537 |  |                              | $
|Total comprehensive income (loss) for the year                                   |  |      |  | $                            | 42,791 |  |                              | $



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



45







|Consolidated Statements of Cash Flows | Expressed in U.S. dollars ($000s)
|------------------------------------- | ---------------------------------



|Cash flow from (used in):                                                                        |  | Note  |  | Year Ended December 31, 2016 |         |   | Year Ended December 31, 2015 |  
|------------------------------------------------------------------------------------------------ |  | ----- |  | ---------------------------- | ------- | - | ---------------------------- | -
|Operating activities                                                                             |  |       |  |                              |         |   |                              |  
|·Net income (loss) for the year                                                                  |  |       |  | $                            | 25,254  |   |                              | $
|Items not affecting cash:                                                                        |  |       |  |                              |         |   |                              |  
|·Depletion and depreciation and financing amortization                                           |  |       |  |                              | 28,489  |   |                              |  
|·Mineral, royalty and other interests impairments                                                |  | 6 (c) |  |                              | 2,507   |   |                              |  
|·Deferred income tax expense                                                                     |  | 10    |  |                              | 4,225   |   |                              |  
|·Share-based payment                                                                             |  |       |  |                              | 3,106   |   |                              |  
|·(Gain) loss on revaluation of investments                                                       |  |       |  |                              | (22,093 | ) |                              |  
|·Unrealized foreign exchange loss (gain)                                                         |  |       |  |                              | -       |   |                              |  
|·Interest on loan receivable                                                                     |  |       |  |                              | (1,528  | ) |                              |  
|·Loss (gain) on restructuring of mineral interest and loan receivable and other                  |  |       |  |                              | 655     |   |                              |  
|·Changes in non-cash working capital                                                             |  | 12    |  |                              | (1,624  | ) |                              |  
|                                                                                                 |  |       |  | $                            | 38,991  |   |                              | $
|Investing activities                                                                             |  |       |  |                              |         |   |                              |  
|·Acquisition of mineral, royalty and other interests                                             |  | 6 (b) |  | $                            | (10,806 | ) |                              | $
|·Acquisition of investments and other assets                                                     |  | 7     |  |                              | (5,731  | ) |                              |  
|·Proceeds from disposition of mineral, royalty and other interests, investments and other assets |  |       |  |                              | 18,391  |   |                              |  
|·Loan issuance                                                                                   |  |       |  |                              | (1,000  | ) |                              |  
|·Loan repayment                                                                                  |  |       |  |                              | 2,993   |   |                              |  
|·Acquisition of Gold Royalties Corp., net of cash acquired of $1.3M                              |  |       |  |                              | -       |   |                              |  
|                                                                                                 |  |       |  | $                            | 3,847   |   |                              | $
|Financing activities                                                                             |  |       |  |                              |         |   |                              |  
|·Bank debt drawn                                                                                 |  | 8     |  | $                            | 5,000   |   |                              | $
|·Bank debt repaid                                                                                |  | 8     |  | $                            | (88,500 | ) |                              | $
|·Proceeds on exercise of warrants and options                                                    |  | 9     |  |                              | 5,455   |   |                              |  
|·Proceeds from issuance of common shares net of financing costs                                  |  | 9     |  |                              | 53,453  |   |                              |  
|·Acquisition and cancellation of common shares (normal course issuer bid) and other              |  | 9     |  |                              | (2,280  | ) |                              |  
|                                                                                                 |  |       |  | $                            | (26,872 | ) |                              | $
|                                                                                                 |  |       |  |                              |         |   |                              |  
|Effect of exchange rate changes on cash and cash equivalents                                     |  |       |  | $                            | 122     |   |                              | $
|Net increase (decrease)  in cash and cash equivalents                                            |  |       |  |                              | 16,088  |   |                              |  
|Cash and cash equivalents – beginning of the year                                                |  |       |  |                              | 5,346   |   |                              |  
|Cash and cash equivalents – end of the year                                                      |  |       |  | $                            | 21,434  |   |                              | $



Supplemental cash flow
information (note 12)



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



46







|Consolidated Statements of Changes in Equity | Expressed in U.S. dollars ($000s)
|-------------------------------------------- | ---------------------------------



|                                                                                       |  |       |  | Share Capital |             |   | Reserves |   |         |               |  |   |                         |   |  |         |       
|-------------------------------------------------------------------------------------- |  | ----- |  | ------------- | ----------- | - | -------- | - | ------- | ------------- |  | - | ----------------------- | - |  | ------- | ------
|                                                                                       |  | Note  |  | Number        |             |   | Amount   |   |         | Share Options |  |   | Share Purchase Warrants |   |  | Deficit |       
|At January 1, 2015                                                                     |  |       |  |               | 117,478,182 |   |          | $ | 456,670 |               |  | $ | 9,015                   |   |  | $       | 12,117
|Shares issued                                                                          |  |       |  |               | 10,087,800  |   |          |   | 27,136  |               |  |   | -                       |   |  |         | 1,614 
|Options exercised                                                                      |  | 9 (b) |  |               | 155,000     |   |          |   | 684     |               |  |   | (170                    | ) |  |         | -     
|Vesting of restricted stock rights                                                     |  |       |  |               | 77,138      |   |          |   | 725     |               |  |   | (725                    | ) |  |         | -     
|Expiration of unexercised warrants                                                     |  |       |  |               | -           |   |          |   | 4,388   |               |  |   | -                       |   |  |         | (4,388
|Acquisition and cancellation of common shares (normal
    course issuer bid) and other |  | 9 (a) |  |               | (518,123    | ) |          |   | (1,708  | )             |  |   | (475                    | ) |  |         | -     
|Issuance of warrants                                                                   |  |       |  |               | -           |   |          |   | -       |               |  |   | -                       |   |  |         | 3,674 
|Share issuance costs (net of deferred tax of $1.0
    million)                         |  |       |  |               | -           |   |          |   | (1,561  | )             |  |   | -                       |   |  |         | -     
|Shares issued on acquisition of Gold Royalties Corporation
    and other               |  |       |  |               | 1,600,317   |   |          |   | 5,435   |               |  |   | -                       |   |  |         | -     
|Share based payment                                                                    |  |       |  |               | -           |   |          |   | -       |               |  |   | 2,706                   |   |  |         | -     
|Total Comprehensive loss for the year                                                  |  |       |  |               | -           |   |          |   | -       |               |  |   | -                       |   |  |         | -     
|At December 31, 2015                                                                   |  |       |  |               | 128,880,314 |   |          | $ | 491,769 |               |  | $ | 10,351                  |   |  | $       | 13,017
|Shares Issued                                                                          |  |       |  |               | 12,921,400  |   |          |   | 57,500  |               |  |   | -                       |   |  |         | -     
|Options exercised                                                                      |  | 9 (b) |  |               | 1,516,402   |   |          |   | 7,609   |               |  |   | (2,199                  | ) |  |         | -     
|Vesting of restricted stock rights                                                     |  |       |  |               | 79,858      |   |          |   | 360     |               |  |   | (360                    | ) |  |         | -     
|Acquisition and cancellation of common shares (normal
    course issuer bid)           |  | 9 (a) |  |               | (619,999    | ) |          |   | (2,280  | )             |  |   | -                       |   |  |         | -     
|Share issuance costs (net of deferred tax of $986)                                     |  | 9 (a) |  |               | -           |   |          |   | (2,807  | )             |  |   | -                       |   |  |         | -     
|Shares issued for acquisition of royalties and other                                   |  | 6 (b) |  |               | 9,153,307   |   |          |   | 20,934  |               |  |   | -                       |   |  |         | -     
|Share based payment                                                                    |  |       |  |               | -           |   |          |   | -       |               |  |   | 3,106                   |   |  |         | -     
|Total Comprehensive income for the year                                                |  |       |  |               | -           |   |          |   | -       |               |  |   | -                       |   |  |         | -     
|At December 31, 2016                                                                   |  |       |  |               | 151,931,282 |   |          | $ | 573,085 |               |  | $ | 10,898                  |   |  | $       | 13,017



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





47







Notes to the Consolidated
Financial Statements

December 31, 2016



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 (collectively
"Sandstorm", “Sandstorm Gold” or the "Company") is a resource-based company that seeks to acquire
gold and other metals purchase agreements (“Gold Streams” or “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 or
royalty, Sandstorm receives the right to purchase, at a fixed price per unit or at a variable price based on spot, a percentage
of a mine’s production for the life of the mine (in the case of a stream) or a portion of the revenue generated from the
mine (in the case of a royalty).



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 February 21, 2017.



| | 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.





48







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



These consolidated financial statements
include the accounts of the Company and its subsidiaries (all wholly owned) Sandstorm Gold (Barbados) Limited, Sandstorm Gold (Canada)
Holdings Ltd., Bridgeport Gold Inc., Inversiones Mineras Australes Holdings (BVI) Inc., Inversiones Mineras Australes S.A., Premier
Royalty U.S.A. Inc., SA Targeted Investing Corp., 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 is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity.



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 retrospective
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.





49







| | F. | Mineral, royalty and other interests
| | -- | ------------------------------------



Mineral, royalty and other interests
consist of acquired royalty interests and stream metal purchase agreements. These interests are recorded at cost and capitalized
as tangible assets with finite lives. They are subsequently measured at cost less accumulated depletion and accumulated impairment
losses, if any. Project evaluation costs that are not related to a specific agreement are expensed in the period incurred.



Producing mineral, royalty and other
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.



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 asset is accounted for in accordance with IAS16, Property, Plant and Equipment.



| | G. | Impairment of Mineral, royalty and other 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 of disposal 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 and the
portion of resources expected to be classified as mineral reserves. Estimated sales prices are determined by reference to an average
of long-term metal price forecasts by analysts and management’s expectations. 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 comprises of revenue earned
in the period from royalty and mineral stream interests. Revenue is measured at the fair value of the consideration received or
receivable when management can reliably estimate the amount, pursuant to the terms of the royalty and/or stream agreements. In
some instances, the Company will not have access to sufficient information to make a reasonable estimate of revenue and, accordingly,
revenue recognition is deferred until management can make a reasonable estimate. Differences between estimates and actual amounts
are adjusted and recorded in the period that the actual amounts are known.





50







For royalty interests, revenue recognition
generally occurs in the month of production from the royalty property. For stream agreements, revenue recognition occurs when the
relevant commodity received from the stream operator is physically delivered and then sold by the Company to its third party customers.



Under the terms of certain royalty
agreements, revenue 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 at each reporting
period and other adjustments are recorded on final settlement and are offset against revenue when incurred.



| | 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 (Barbados) Limited, Sandstorm Gold (Canada) Ltd., Bridgeport Gold Inc., Inversiones Mineras Australes Holdings (BVI)
Inc., Premier Royalty U.S.A. Inc., SA Targeted Investing Corp., 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 Inversiones Mineras Australes
S.A., the functional currency of this subsidiary is the Argentine Peso. To translate 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 average exchange rates during the period. 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’s financial instruments
consist of cash and cash equivalents, trade receivables and other, investments, loans receivable, trade and other payables, commodity
price derivatives and bank debt. All financial instruments are initially recorded at fair value and designated as follows:



Cash and cash equivalents, trade
receivables and other, and loans receivable are classified as financial assets at amortized cost and trade and other payables and
bank debt are classified as financial liabilities at amortized cost. Both financial assets at amortized cost and financial liabilities
at amortized cost are measured at amortized cost using the effective interest method.



Investments in common shares are
held for long-term strategic purposes and not for trading. Upon the adoption of IFRS 9, the company made an irrevocable election
to designate these investments as fair value through other comprehensive income (“FVTOCI”) in order to provide a more
meaningful presentation based on management’s intention, rather than reflecting changes in fair value in net income. Such
investments 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 other comprehensive income under the classification of gain (loss) on revaluation of investments.
Cumulative gains and losses are not subsequently reclassified to profit or loss.





51







Investments in warrants, convertible
debt instruments, and forward contracts are classified as fair value through profit or loss (“FVTPL”). These warrants,
convertible debt instruments and forward contracts 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 gain (loss) on revaluation
of investments.



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, FVTOCI 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. On derecognition, the difference between the carrying amount (measured at
the date of derecognition) and the consideration received (including any new asset obtained less any new liability obtained) is
recognized in profit or loss.



| | K. | Inventory
| | -- | ---------



When refined gold or the applicable
commodity, under the Gold Stream, is delivered to the Company, it is recorded as inventory. The amount recognized as inventory
includes both the cash payment and the related depletion associated with that commodity.



| | L. | 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.



| | M. | 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.



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 for utilization.





52







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.



| | N. | 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. Upon exercise, the original
consideration is reallocated from share purchase warrants reserve to issued share capital along with the associated exercise price.
Original consideration associated with expired share purchase warrants is reallocated to issued share capital.



| | O. | 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.



| | P. | Share Based Payments
| | -- | --------------------



The Company recognizes share 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).





53







The BSM requires management to estimate
the expected volatility and expected 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 number of equity instruments expected to vest is
estimated using historical forfeiture data.



| | Q. | 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.



| | R. | 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. The Company’s operating
segments are components of the Company’s business for which discrete financial information is available and which 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.



| | 3. | FUTURE
                                         CHANGES IN ACCOUNTING POLICIES
| | -- | ------------------------------------------------------------------------------



The IASB has issued the following
new standard but it 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 January 1, 2018 for public entities with early application permitted. Entities have the option
of using either a full retrospective or a modified retrospective approach to adopt the guidance. The Company has completed a preliminary
analysis and is assessing the impact of this standard.





54







| | 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.



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



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



The Company’s business is the
acquisition of Gold Streams and royalties. Each mineral, royalty and other interest agreement has its own unique terms and judgement
is required to assess the appropriate accounting treatment.



Mineral, royalty and other interests
are a significant class of assets of the Company, with a carrying value of $402.8 million at December 31, 2016 (2015: $414.4 million).
This amount represents the capitalized expenditures related to the acquisition of the metal 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 metal 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 metal 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 requires 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 the carrying value of the Company’s mineral,
royalty and other interests and depletion charges.



The Company’s mineral and royalty
interests are depleted on a units-of-production 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 and resources to be converted into reserves. Changes to depletion
rates are accounted for prospectively.





55







| | B. | Investments
| | -- | -----------



In the normal course of operations,
the Company invests in equity interests of other entities. In such circumstances, management considers whether the facts and circumstances
pertaining to each such investment result in the Company obtaining control, joint control or significant influence over the investee
entity. In some cases, the determination of whether or not the Company controls, jointly controls or significantly influences the
investee entities requires the application of significant management judgment to consider individually and collectively such factors
as:



| | · | The purpose and design of the investee entity.                                                                                                                                                                                                                                                                                     
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | The ability to exercise power, through substantive rights, over the
activities of the investee entity that significantly affect its returns.                                                                                                                                                                                       
| | · | The size of the company’s equity ownership and voting rights,
including potential voting rights.                                                                                                                                                                                                                                   
| | · | The size and dispersion of other voting interests, including the existence
of voting blocks.                                                                                                                                                                                                                                       
| | · | Other investments in or relationships with the investee entity including,
but not limited to, current or possible board representation, royalty and/or stream investments, loans and other types of financial
support, material transactions with the investee entity, interchange of managerial personnel or consulting positions.
| | · | Other relevant and pertinent factors.                                                                                                                                                                                                                                                                                              



If it is determined that the Company
neither has control, joint control or significant influence over an investee entity, the Company accounts for the corresponding
investment in equity interest at fair value through other comprehensive income as further described in note 2.



| | C. | Income Taxes
| | -- | ------------



The interpretation of existing tax
laws or regulations in Canada, Barbados, the United States of America, Australia, Argentina, Chile 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.



| | D. | Impairment of Assets
| | -- | --------------------



Assessment of impairment of mineral,
royalty and other interests requires the use of judgments, assumptions and estimates when assessing whether there are any indicators
that could give rise to the requirement to conduct a formal impairment test as well as in the assessment of fair values.





56







Under the Fair Value 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 determining the fair value attributable 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 14 to the financial statements.



During the year ended December 31,
2016, the Company recorded an impairment charge of $2.5 million ($21.6 million- year ended December 31, 2015).



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



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



The Company manages its capital such
that it endeavors 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 $527.3 million ($402.7 million – December 31, 2015)
of equity attributable to common shareholders, comprising of issued capital (note 9), accumulated reserves 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 8). The Company is in compliance with the debt covenants described in note 8 as at December
31, 2016.



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



The fair value hierarchy establishes
three levels to classify fair value measurements based upon the observability of significant inputs used in the valuation techniques.
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.





57







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, 2016 and December 31, 2015. 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.



As at December 31 2016:



|In $000s              |  | Total |        |  | Quoted prices in active markets for identical assets (Level 1) |   |        | Significant other observable inputs (Level 2) |  |   | Unobservable inputs (Level 3) | 
|--------------------- |  | ----- | ------ |  | -------------------------------------------------------------- | - | ------ | --------------------------------------------- |  | - | ----------------------------- | 
|Long-term investments |  |       |        |  |                                                                |   |        |                                               |  |   |                               | 
|·common shares held   |  | $     | 28,850 |  |                                                                | $ | 28,850 |                                               |  | $ | -                             | 
|·warrants             |  |       | 3,404  |  |                                                                |   | -      |                                               |  |   | 3,404                         | 
|·convertible debt     |  |       | 29,039 |  |                                                                |   | -      |                                               |  |   | 29,039                        | 
|                      |  | $     | 61,293 |  |                                                                | $ | 28,850 |                                               |  | $ | 32,443                        | 



As at December 31 2015:



|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   |  | $     | 14,990 |  |                                                               | $ | 14,990 |                                               |  | $ | -                             | 
|·warrants             |  |       | 35     |  |                                                               |   | -      |                                               |  |   | 35                            | 
|·convertible debt     |  |       | 11,555 |  |                                                               |   | -      |                                               |  |   | 11,555                        | 
|                      |  | $     | 26,580 |  |                                                               | $ | 14,990 |                                               |  | $ | 11,590                        | 



The fair value of the Company's financial
instruments which include cash and cash equivalents, trade receivables and other, loans receivable, receivables and other, forward
purchase contracts and trade and other payables approximate their carrying values at December 31, 2016.





58







| | 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’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. In order to mitigate its exposure to credit risk, the Company
closely monitors its financial assets and maintains its cash deposits in several high-quality financial institutions. The Company’s
loan receivable and convertible debenture due from Luna Gold Corp. ("Luna") are subject to Luna’s credit risk and
the Company’s ability to realize on its security. Refer to note 16 – Subsequent Events of the Financial Statements
for additional information.



| | 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, 2016 a 10% increase (decrease) of the value of the Canadian dollar relative to the United States dollar
would increase (decrease) net income by $1 million and other comprehensive income by $2 million, respectively.



| | E. | Liquidity Risk
| | -- | --------------



The Company has in place a planning
and budgeting process to help determine the funds required to support the Company’s normal operating requirements on an ongoing
basis. In managing liquidity risk, the Company takes into account the available undrawn available balance on its Revolving Facility,
anticipated cash flows from operations and its holding of cash and cash equivalents. As at December 31, 2016, the Company had cash
and cash equivalents of $21.4 million (December 31, 2015 – $5.3 million). Sandstorm holds common shares, convertible debentures,
and warrants of other companies with a combined fair market value as at December 31, 2016, of $61.3 million (December 31, 2015–$26.6
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.



| | F. | Other Price Risk
| | -- | ----------------



The company is exposed to equity
price risk as a result of holding long-term investments in other mining companies. The Company does not actively trade these investments.
The equity prices of long term investments are impacted by various underlying factors including commodity prices. Based on the
Company's long-term investments held as at December 31, 2016 a 10% increase (decrease) in the equity prices of these investments
would increase (decrease) net income by $1.2 million and other comprehensive income $2.9 million.





59







| | 6. | Mineral,
                                         Royalty and other Interests
| | -- | -----------------------------------------------------------------------------



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



As of and for the year ended December 31, 2016:



|                                    |  |     |  | Cost    |         |  | Accumulated
    Depletion |   |        |        | 
|----------------------------------- |  | --- |  | ------- | ------- |  | ------------------------- | - | ------ | ------ | 
|In $000s                            |  |     |  | Opening |         |  | Additions
    (disposals) |   |        | Ending | 
|Aurizona                            |  | BRA |  | $       | 11,000  |  |                           | $ | 33     |        | 
|Bachelor Lake                       |  | CAN |  |         | 22,671  |  |                           |   | 1,301  |        | 
|Black Fox                           |  | CAN |  |         | 37,758  |  |                           |   | 3      |        | 
|Chapada                             |  | BRA |  |         | 69,520  |  |                           |   | 8      |        | 
|Diavik Mine                         |  | CAN |  |         | 53,111  |  |                           |   | -      |        | 
|Hugo North Extension
    and Heruga |  | MNG |  |         | 42,493  |  |                           |   | (7,142 | )      | 
|Karma Gold Project                  |  | BFA |  |         | 21,174  |  |                           |   | 5,115  |        | 
|Ming                                |  | CAN |  |         | 20,068  |  |                           |   | -      |        | 
|Santa Elena                         |  | MEX |  |         | 23,342  |  |                           |   | -      |        | 
|Yamana silver stream                |  | ARG |  |         | 74,229  |  |                           |   | 5      |        | 
|Royalties1                          |  |     |  |         | 206,724 |  |                           |   | 21,191 |        | 
|Other2                              |  |     |  |         | 11,339  |  |                           |   | (614   | )      | 
|Total3                              |  |     |  | $       | 593,429 |  |                           | $ | 19,900 |        | 



| | 1) | Includes
                                         Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Serra
                                         Pelada, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Sao Francisco,
                                         Thunder Creek, Bomboré, the Early Gold Deposit, Hot Maden, Hackett River, Lobo-Marte,
                                         Agi Dagi & Kirazli, Forrestania and others.                                                                                                                                                                       
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2) | Includes
                                         JDL Stream and other.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 3) | Total
                                         Mineral, royalty and other interests includes $99.7 million of assets located in Canada,
                                         $95.2 million in Argentina, $85.4 million in Brazil, $36.6 million in Mongolia, $26.8
                                         million in Burkina Faso, $21.4 million in the United States, $10.3 million in Turkey,
                                         $4.1 million in South Africa, $4.0 million in Mexico, $5.2 million in French Guiana,
                                         $4.9 million in Peru, $3.3 million in Australia and $5.9 million in other countries.



60







As of and for the year ended December 31, 2015:



|                                    |  |     |  | Cost    |         |  | Accumulated
    Depletion |   |         |                               | 
|----------------------------------- |  | --- |  | ------- | ------- |  | ------------------------- | - | ------- | ----------------------------- | 
|In $000s                            |  |     |  | Opening |         |  | Additions
    (disposals) |   |         | Foreign
exchange
 translation | 
|Aurizona                            |  | BRA |  | $       | 27,358  |  |                           | $ | (16,358 | )                             | 
|Bachelor Lake                       |  | CAN |  |         | 22,671  |  |                           |   | -       |                               | 
|Black Fox                           |  | CAN |  |         | 37,758  |  |                           |   | -       |                               | 
|Chapada                             |  | BRA |  |         | -       |  |                           |   | 69,520  |                               | 
|Diavik Mine                         |  | CAN |  |         | -       |  |                           |   | 53,111  |                               | 
|Hugo North Extension
    and Heruga |  | MNG |  |         | 42,493  |  |                           |   | -       |                               | 
|Karma Gold Project                  |  | BFA |  |         | 14,456  |  |                           |   | 6,718   |                               | 
|Ming                                |  | CAN |  |         | 20,068  |  |                           |   | -       |                               | 
|Santa Elena                         |  | MEX |  |         | 23,342  |  |                           |   | -       |                               | 
|Yamana silver stream                |  | ARG |  |         | -       |  |                           |   | 74,229  |                               | 
|Royalties1                          |  |     |  |         | 189,970 |  |                           |   | 19,348  |                               | 
|Other2                              |  |     |  |         | 12,393  |  |                           |   | (1,054  | )                             | 
|Total3                              |  |     |  | $       | 390,509 |  |                           | $ | 205,514 |                               | 



| | 1) | Includes
                                         Bracemac-McLeod, Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Serra
                                         Pelada, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, Sao Francisco,
                                         Thunder Creek, Bomboré, the Gold Royalties Corporation royalty portfolio and the
                                         Early Gold Deposit.                                                                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2) | Includes
                                         Summit, JDL Stream and other.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 3) | Total
                                         Mineral, royalty and other interests royalties includes $111.3 million of assets located
                                         in Canada, $88.1 million in Brazil, $98.1 million in Argentina, $42.5 million in Mongolia,
                                         $21.8 million in the United States, $24.3 million in Burkina Faso, $6.1 million in Mexico,
                                         $6.9 million in South Africa, $5.1 million in French Guiana, $3.1 million in Honduras,
                                         $1.0 million in Ghana, and $6.1 million in other South American countries.



| | B. | Significant Acquisitions and Other Transactions
| | -- | -----------------------------------------------



During the year ended December
31, 2016:



ACQUISITION | Royalty
Portfolio



During the year ended December 31,
2016, the Company acquired a royalty portfolio consisting of 52 royalties from Teck Resources Limited and its affiliates. The portfolio
was acquired for consideration of $16.8 million, of which $1.4 million was paid in cash and $15.4 million in common shares of the
Company.



UPDATE | Hugo
North Extension and Heruga Gold Stream



On March 1, 2016, Sandstorm amended
its Gold Stream with Entrée Gold Inc. (“Entrée”) such that the Company will now purchase an amount equal
to 5.62% and 4.26% 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 amended its copper stream such that the Company will now purchase an amount equal to 0.42% 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. In consideration for the amendment Sandstorm received consideration of $7.0 million (of which $5.5 million
was paid in cash and $1.5 million was received by way of Entrée common shares), which the Company recognized as a disposal
of mineral interest.





61







During the year ended December
31, 2015:



ACQUISITION | Yamana
Streams



Silver Stream



On October 27, 2015, the Company
acquired a silver stream on Yamana Gold Inc.’s (“Yamana”) gold-silver Cerro Moro project, located in Santa Cruz,
Argentina (the “Cerro Morro Project” or “Cerro Moro”) and interim silver deliveries during years 2016 to
2018 from a number of Yamana’s currently operating mines.



In acquiring the Yamana silver stream,
the Chapada copper stream (refer to Chapada copper stream section) and a potential Gold Stream on the Agua Rica project, the Company
agreed to upfront consideration consisting of a cash payment of $152 million, of which $148 million was paid in 2015 and $4 million
was paid in April 2016, and 15 million Sandstorm warrants. The warrants have a 5 year term, a strike price of $3.50 per Sandstorm
common share and became exercisable in 2016 based upon the achievement of specific milestones with respect to the construction
of the Cerro Moro mine.



Under the terms of the Yamana silver
stream, Sandstorm has agreed to purchase, for on-going per ounce cash payments equal to 30% of the spot price of silver, an amount
of silver from Cerro Moro equal to 20% of the silver produced (up to an annual maximum of 1.2 million ounces of silver), until
Yamana has delivered to Sandstorm 7.0 million ounces of silver, then 9.0% of the silver produced thereafter.



As part of the Yamana silver stream,
during the year 2016 through 2018, Sandstorm has also agreed to purchase, for on-going per ounce cash payment equal to 30% of the
spot price of silver, an amount of silver from:



| | i. | the Minera Florida mine in Chile equal to 38% of the silver produced (up to an annual maximum
of 200,000 ounces of silver); and
| | -- | -------------------------------------------------------------------------------------------------------------------------------



| | ii. | the Chapada mine in Brazil equal to 52% of the silver produced (up to an annual maximum of 100,000
ounces of silver).
| | --- | ---------------------------------------------------------------------------------------------------------------------



If by January 1, 2019, the Cerro
Moro processing facility has not averaged 80% of its daily nameplate production capacity over a 30-day period (the "Commencement
of Production"), then Yamana ́s producing El Peñon mine in Chile will provide a 24 month backstop until the Commencement
of Production has begun. During the 24 month backstop, if applicable, Sandstorm will purchase, for on-going per ounce cash payments
equal to 30% of the spot price of silver, an amount of silver equal to 16% of El Peñon ́s silver production up to a
maximum of 1.2 million ounces per annum.





62







Copper Stream



On October 27, 2015, the Company
acquired a copper stream on Yamana’s open pit gold-copper Chapada mine located 270 kilometres northwest of Brasília
in Goiás state, Brazil (“Chapada” or the “Chapada Mine”). Under the terms of the Yamana copper stream,
Sandstorm has agreed to purchase, for on-going per pound cash payments equal to 30% of the spot price of copper, an amount of copper
from the Chapada Mine equal to:



| | i. | 4.2% of the copper produced (up to an annual maximum of 3.9 million pounds of copper) until Yamana
has delivered 39 million pounds of copper to Sandstorm (the “First Chapada Delivery Threshold”); then
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | 3.0% of the copper produced until, on a cumulative basis, Yamana has delivered 50 million pounds
of copper to Sandstorm (the “Second Chapada Delivery Threshold”); then
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | 1.5% of the copper produced thereafter, for the life of the mine.
| | ---- | -----------------------------------------------------------------



If Cerro Moro has not achieved the
Commencement of Production and Sandstorm has not received cumulative pre-tax cash flow equal to $70 million from the Yamana silver
stream, then the First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease to be in effect and Sandstorm
will continue to purchase 4.2% of Chapada’s payable copper production (up to an annual maximum of 3.9 million pounds of copper),
until the earlier of Sandstorm having received cumulative pre-tax cash flow equal to $70 million, or Cerro Moro having achieved
the Commencement of Production.



In assessing the fair value of the
Yamana Silver, Copper and Early Gold Deposit, the Company utilized a discounted cash flow analysis using discount rates from 3.5%
to 5.0% and analyst price projections. The excess of the fair value of the Yamana Silver, Copper and Early Gold Deposit of $155.1
million and the total cash consideration of $152.0 million of $3.1 million was ascribed to the 15 million warrants issued to Yamana
as consideration for the transaction.



ACQUISITION | Diavik
Royalty



In March 2015, the Company acquired
a 1% gross proceeds royalty based on the production from the Diavik mine located in Lac de Gras, Northwest Territories, Canada
(“Diavik” or the “Diavik Mine”) which is operated by Rio Tinto PLC (“Rio Tinto”).



For consideration, the Company paid
$52.5 million in cash and 3 million warrants of Sandstorm to IAMGOLD Corporation (the owner of the 1% royalty). The warrants have
a strike price of $4.50 per Sandstorm common share, an expiration date of March 23, 2020 and will only be exercisable following
initial production from the Diavik Mine’s A21 pipe.



In assessing the fair value of the
Diavik royalty, the Company utilized a discounted cash flow analysis using a 7% discount rate and analyst price projections. The
excess of the fair value of the Diavik royalty of $53.1 million and the total cash consideration of $52.5 million being $0.6 million
was ascribed to the 3 million warrants issued to IAMGOLD Corporation as consideration for the transaction.





63







UPDATE | Aurizona
Mine



The Company has a 3%–5% sliding
scale NSR on the production from Luna Gold Corp.’s (“Luna”) open-pit Aurizona mine, located in Brazil (the “Aurizona
Mine”). At gold prices less than or equal to $1,500 per ounce, the royalty is a 3% NSR. In addition, Sandstorm holds a 2%
NSR on Luna’s 190,073 hectares of greenfields exploration ground. At any time prior to the commencement of commercial production,
Luna has the ability to purchase one-half of the greenfields NSR for a cash payment of $10 million.



On June 30, 2015, the Company restructured
its previously existing Gold Stream and loan agreement with Luna (the “Restructuring”). Under the terms of the Restructuring,
the Gold Stream was terminated and replaced by two net smelter return royalties (“NSR”) and a convertible debenture.



The convertible debenture is a $30
million instrument bearing interest at a rate of 5% per annum (the “Debenture”). The Debenture is payable in three
equal annual tranches of $10 million plus accrued interest beginning June 30, 2018. Luna will have the right to convert principal
and interest owing under the Debenture into common shares of Luna, so long as Sandstorm does not own more than 20% of the outstanding
common shares of Luna. The quantum of shares upon conversion will be dependent on a 20 day volume weighted average price (“VWAP”)
and if the VWAP is less than C$0.10 per share, the shares will be deemed to have been issued at C$0.10 per share. The Debenture
is included in investments (note 7).



Under the loan amendment, the maturity
date of the existing $20 million Luna loan was extended from June 30, 2017 to June 30, 2021 and the interest rate was revised to
5% per annum, payable in cash on the maturity date. In the event that Luna is in default, the applicable rate of interest will
increase to 10% per annum. The fair value of the loan was determined by utilizing a cash flow model incorporating the contractual
cash flows and a 7% discount rate.



The fair value of the two NSRs was
determined using a discounted cash flow model to estimate the fair value less costs to sell. Key assumptions incorporated into
the cash flow model included the estimated long-term price of gold of $1,150, annual production volumes at the Aurizona Mine of
up to 80,000 ounces of gold for an estimated 7 to 10 year mine life and a 5% discount rate. The fair value of the Debenture was
determined using a discounted cash flow model incorporating the contractual cash flows of the Debenture, a 9% discount rate and
an option pricing model to value the prepayment and convertibility feature embedded in the Debenture. Key assumptions in the option
pricing model included an exercise price of $0.10 per share, a volatility rate of 45%, a term of 5 years and an interest free rate
of 1.3%. The resulting fair value of the Debenture and two NSRs was $13 million and $11 million, respectively.



The Company recognized a gain of
$4.3 million arising from the difference between the fair value of the Debenture and the two NSRs and the carrying value of the
Aurizona mineral interest.





64







UPDATE | Deflector Mine



As contemplated in the Deflector
gold purchase agreement, the Company provided notice to Doray Minerals Ltd. that it was requesting back the $6.0 million the Company
had advanced under the purchase agreement. As part of a settlement agreement, the Company received $7.0 million in June 2015. The
difference between the $7.0 million received and the carrying value of the Deflector mineral interest of $6.3 million was recognized
in other income. As a result of the settlement, both parties’ obligations were extinguished under the gold purchase agreement.



| | C. | Impairments
| | -- | -----------





During the year ended
December 31, 2016:





While assessing whether any indications
of impairment exist for mineral properties, consideration is given to both external and internal sources of information. The lack
of progress with respect to the advancement of some of the properties which Sandstorm holds royalties on within Sandstorm’s
mineral interest portfolio, prompted the Company to evaluate its investment in these specific assets. As part of assessment, the
Company recorded an impairment charge of $1.4 million for the full balance of those royalties that were specifically identified
as lacking significant progress. The recoverable amount of the assets, for impairment assessment purposes, was determined using
the fair value less costs of disposal method and considered whether the mining operator had dropped certain mineral claims. Key
assumptions used in the analysis to determine fair value included a liquidation scenario and management’s best estimates
of the value of the underlying royalty assets. In addition to these impairments, the Company recorded an additional impairment
charge of $1.1 million relating to other royalties within the Company’s royalty portfolio. This impairment charge was prompted
by changes in the underlying operations of the assets including estimated production. The recoverable amount of the assets, for
impairment assessment purposes, was determined using the fair value less costs of disposal method. Key assumptions used in the
discounted cash flow analysis to determine fair value included a long term gold price of $1,300 and a 4% discount rate.



During the year ended
December 31, 2015:



As a result of a decline in the Company’s
market capitalization during the year ended December 31, 2015, the Company performed an impairment analysis of the Company’s
mineral interests. As part of this and other assessments, the Company recognized the following impairments:



Serra Pelada



As a result of the lack of progress
at the Serra Pelada project, the Company recorded an impairment charge of $10.1 million with respect to its interest in the mineral
interest resulting in a $nil balance as at December 31, 2015. The recoverable amount of the asset was determined for impairment
purposes using management’s best estimate of the fair value of the underlying assets and Sandstorm’s ability to realize
on those assets during an insolvency proceeding.



Emigrant
Springs



As a result of the impairment assessment,
the Company recognized an impairment charge of $5.8 million with respect to its mineral interest in the Emigrant Springs mine.
The recoverable amount of $5.3 million 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 a long term gold price of $1,200
and an estimated 4 year mine life and a 5% discount rate.





65







Mine Waste Solutions



As a result of the impairment assessment,
the Company recognized an impairment charge of $2.4 million with respect to its mineral interest in the Mine Waste Solutions project.
The recoverable amount of $6.9 million 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 a long term gold price of $1,200
and an estimated 8 year mine life and a 5% discount rate.



Summit



The lack of progress with respect
to Santa Fe Gold Corp. raising additional capital to satisfy the terms and conditions of the negotiated restructuring of its senior
secured indebtedness prompted the Company to evaluate its investment in the Summit mine Gold Stream. The recoverable amount of
the asset, for impairment assessment purposes, was determined using a liquidation scenario to estimate the fair value less costs
to sell. Key assumptions used in the analysis to determine fair value included management’s best estimates of the value of
the underlying assets and Sandstorm’s ability to realize on these assets during an insolvency proceeding. As a result of
its review, the Company, during the year ended December 31, 2015, recorded an impairment charge of $3.3 million for the full balance
of the mineral interest.



| | 7. | Investments
| | -- | -----------



As of and for the year ended
December 31, 2016:



|In $000s                      |  | Fair Value Jan. 1, 2016 |        |  | Net Additions (Disposals) Dec. 31, 2016 |   |        | Fair Value Adjustment Dec. 31, 2016 |  |   | Fair Value Dec. 31, 2016 | 
|----------------------------- |  | ----------------------- | ------ |  | --------------------------------------- | - | ------ | ----------------------------------- |  | - | ------------------------ | 
|Common shares1                |  | $                       | 14,990 |  |                                         | $ | (3,042 | )                                   |  | $ | 16,902                   | 
|Warrants2                     |  |                         | 35     |  |                                         |   | (1,240 | )                                   |  |   | 4,609                    | 
|Convertible debt instruments2 |  |                         | 11,555 |  |                                         |   | -      |                                     |  |   | 17,484                   | 
|Total                         |  | $                       | 26,580 |  |                                         | $ | (4,282 | )                                   |  | $ | 38,995                   | 



| | 1) | Fair
value adjustment recorded within Other Comprehensive Income  (loss) for the year                        
| | -- | -------------------------------------------------------------------------------------------------------------
| | 2) | Fair
                                         value adjustment recorded within Net Income (loss) for the year



During the year ended December 31,
2016 the Company disposed of common shares of AuRico Metals Inc. for total consideration of $10.4 million and recognized a fair
value adjustment in other comprehensive income of $2.0 million on these shares.



As of and for the year ended
December 31, 2015:



|In $000s                      |  | Fair Value Jan. 1, 2015 |        |  | Net Additions (Disposals) Dec. 31, 2015 |   |        | Fair Value Adjustment Dec. 31, 2015 |  |   | Fair Value Dec. 31, 2015 |  
|----------------------------- |  | ----------------------- | ------ |  | --------------------------------------- | - | ------ | ----------------------------------- |  | - | ------------------------ | -
|Common shares1                |  | $                       | 14,254 |  |                                         | $ | 8,243  |                                     |  | $ | (7,507                   | )
|Warrants2                     |  |                         | 70     |  |                                         |   | 438    |                                     |  |   | (473                     | )
|Convertible debt instruments2 |  |                         | 9,665  |  |                                         |   | 13,880 |                                     |  |   | (11,990                  | )
|Total                         |  | $                       | 23,989 |  |                                         | $ | 22,561 |                                     |  | $ | (19,970                  | )



| | 1) | Fair
value adjustment recorded within Other Comprehensive (loss) Income for the year                         
| | -- | -------------------------------------------------------------------------------------------------------------
| | 2) | Fair
                                         value adjustment recorded within Net (Loss) income for the year





66







| | 8. | REvolving FAcility and deferred financing
                                         costs
| | -- | ----------------------------------------------------------------------------------------



On June 1, 2016,
the Company amended its revolving credit agreement, extending the term to four years, maturing in July 2020 (“Revolving Facility”).
The Revolving Facility allows the Company to borrow up to $110 million for acquisition purposes from a syndicate of banks including
the Bank of Nova Scotia, Bank of Montreal, National Bank of Canada and Canadian Imperial Bank of Commerce. The amounts drawn on
the Revolving Facility remain subject to interest at LIBOR plus 3.00% – 4.25% per annum, and the undrawn portion
of the Revolving Facility 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 a leverage ratio of net debt divided by EBITDA (as defined in the credit facility
agreement) of less than or equal to 4.00:1 for calendar 2016 and calendar 2017; 3.50:1 for calendar 2018; and 2.75:1 for the remainder
of the life of the Revolving Facility. 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 Facility is secured
against the Company’s assets, including the Company’s mineral interests and royalties and investments.



As of December
31, 2016, the Company was in compliance with the covenants and the balance of the Revolving Facility was nil.



Deferred financing
costs are amortized on a straight-line basis over the term of the Revolving Facility as presented below:



As of December 31, 2016:



|In $000s            |  | Opening Cost |       |  | Additions |   |     | Accumulated Amortization |  |   | Carrying Amount |  
|------------------- |  | ------------ | ----- |  | --------- | - | --- | ------------------------ |  | - | --------------- | -
|Debt issuance costs |  | $            | 3,933 |  |           | $ | 320 |                          |  | $ | (2,318          | )



As of December 31, 2015:



|In $000s            |  | Opening Cost |       |  | Additions |   |     | Accumulated Amortization |  |   | Carrying Amount |  
|------------------- |  | ------------ | ----- |  | --------- | - | --- | ------------------------ |  | - | --------------- | -
|Debt issuance costs |  | $            | 3,377 |  |           | $ | 556 |                          |  | $ | (1,713          | )





67







| | 9. | Share Capital and Reserves
| | -- | --------------------------



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



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



On July 6, 2016 the Company completed
a public offering of 12,921,400 common shares at a price of $4.45 per common share, for gross proceeds of $57.5 million. In connection
with the offering, the Company paid agent fees of $2.9 million, representing 5% of the gross proceeds. Upon closing of the equity
financing, the majority of the net proceeds were used to reduce the balance of the Company’s Revolving Facility.



Under the Company’s normal
course issuer bid (“NCIB”), the Company is able until April 3, 2017, to purchase up to 6,896,539 common shares. The
NCIB provides the Company with the option to purchase its common shares from time to time.



During the year ended December 31,
2016 and pursuant to the NCIB, the Company purchased and cancelled an aggregate of 619,999 common shares.



| | 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 8.5% of the Company’s issued common
shares as at the date of the grant.





During the year ended December 31,
2016, the Company issued 1,336,000 options with a weighted average exercise price of C$4.96 and a fair value of $1.7 million or
$1.27 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$4.96, expected volatility of 49%, risk-free interest rate
of 0.76 % and expected life of 3 years. Expected volatility is determined by considering the trailing 3 year historic average
share price volatility of the Company and similar companies in the same industry and business model.



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, 2014                    |  |                   | 6,852,607  |   |                                      | 
|Granted                                                     |  |                   | 1,284,000  |   |                                      | 
|Addition of outstanding Gold Royalties’ Corporation options |  |                   | 47,475     |   |                                      | 
|Exercised                                                   |  |                   | (155,000   | ) |                                      | 
|Forfeited                                                   |  |                   | (1,173,500 | ) |                                      | 
|Options outstanding at December 31, 2015                    |  |                   | 6,855,582  |   |                                      | 
|Granted                                                     |  |                   | 1,336,000  |   |                                      | 
|Exercised                                                   |  |                   | (1,516,402 | ) |                                      | 
|Expired unexercised                                         |  |                   | (440,000   | ) |                                      | 
|Options outstanding at December 31, 2016                    |  |                   | 6,235,180  |   |                                      | 





68







The
weighted-average share price at the time of exercise for the year ended December 31, 2016 was C$7.16 per
share (C$3.78 – year ended December 31, 2015). The weighted average remaining contractual life of the options for the year
ended December 31, 2016 was 3.35 years (3.38 years – year ended December 31, 2015).



A summary of the Company’s
share purchase options

as of December 31, 2016 is as follows:



|Number outstanding |  | Exercisable |  |  | Exercise Price per Share |       |  | Expiry Date
|------------------ |  | ----------- |  |  | ------------------------ | ----- |  | -----------
|27,000             |  | 27,000      |  |  | C$                       | 18.33 |  |            
|5,850              |  | 5,850       |  |  |                          | 18.33 |  |            
|402,133            |  | 402,133     |  |  |                          | 16.35 |  |            
|150,000            |  | 150,000     |  |  |                          | 11.78 |  |            
|10,875             |  | 10,875      |  |  |                          | 11.31 |  |            
|3,625              |  | 3,625       |  |  |                          | 10.62 |  |            
|12,375             |  | 12,375      |  |  |                          | 8.89  |  |            
|25,000             |  | 16,667      |  |  |                          | 6.03  |  |            
|2,976,072          |  | 1,730,258   |  |  |                          | 2.93  |  |            
|1,084,000          |  | 361,338     |  |  |                          | 3.60  |  |            
|200,000            |  | 66,667      |  |  |                          | 3.64  |  |            
|1,336,000          |  | -           |  |  |                          | 4.96  |  |            
|2,250              |  | 2,250       |  |  |                          | 15.00 |  |            
|6,235,180          |  | 2,789,038   |  |  | C$                       | 5.72  |  |            





69







| | C. | Share Purchase Warrants
| | -- | -----------------------



A summary of the Company’s
warrants and the changes

for the period are as follows:



|                                                |  | Number of Warrants |             |   | Shares to be Issued Upon Exercise of the Warrants | 
|----------------------------------------------- |  | ------------------ | ----------- | - | ------------------------------------------------- | 
|Warrants outstanding at December 31, 2014       |  |                    | 25,769,272  |   |                                                   | 
|Addition of Gold Royalties Corporation warrants |  |                    | 368,038     |   |                                                   | 
|Issued                                          |  |                    | 23,043,900  |   |                                                   | 
|Expired unexercised                             |  |                    | (19,874,037 | ) |                                                   | 
|Warrants outstanding at December 31, 2015       |  |                    | 29,307,173  |   |                                                   | 
|Expired unexercised                             |  |                    | (1,256,662  | ) |                                                   | 
|Exercised                                       |  |                    | (4,111      | ) |                                                   | 
|Warrants outstanding at December 31, 2016       |  |                    | 28,046,400  |   |                                                   | 



A summary of the Company’s
warrants

as of December 31, 2016 are as follows:



|Number outstanding |  | Exercise Price per Share |       |  | Expiry Date
|------------------ |  | ------------------------ | ----- |  | -----------
|5,002,500          |  | $                        | 14.00 |  |            
|3,000,000          |  | $                        | 4.50  |  |            
|15,000,000         |  | $                        | 3.50  |  |            
|5,043,900          |  | $                        | 4.00  |  |            
|28,046,400         |  |                          |       |  |            



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



The Company has 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 restricted share rights (“RSR”).



During the year ended December 31,
2016, the Company granted 628,000 RSRs with a fair value of $2.4 million, a three year vesting term, and a weighted average grant
date fair value of $3.80 per unit. As at December 31, 2016, the Company had 1,944,818 RSRs outstanding.





70







| | E. | Diluted Earnings Per Share
| | -- | --------------------------



Diluted earnings per share
is calculated
based on the following:



|In $000s                                         |  | Year Ended December 31, 2016 |             |  | Year Ended December 31, 2015 |  
|------------------------------------------------ |  | ---------------------------- | ----------- |  | ---------------------------- | -
|Net income (loss)                                |  | $                            | 25,254      |  |                              | $
|                                                 |  |                              |             |  |                              |  
|Basic weighted average number of shares          |  |                              | 144,159,678 |  |                              |  
|Basic earnings (loss) per share                  |  | $                            | 0.18        |  |                              | $
|                                                 |  |                              |             |  |                              |  
|Effect of dilutive securities                    |  |                              |             |  |                              |  
|·Stock
options                                   |  |                              | 1,903,699   |  |                              |  
|·Warrants                                        |  |                              | 2,709,987   |  |                              |  
|·Restricted
share rights                         |  |                              | 1,188,559   |  |                              |  
|Diluted weighted average number of common shares |  |                              | 149,961,923 |  |                              |  
|Diluted earnings (loss) per share                |  | $                            | 0.17        |  |                              | $



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$5.55 during the year ended December 31, 2016 (December 31, 2015 — C$4.43)
or because a performance obligation had not been met as at December 31, 2016. The Company had a net loss for the year ended December
31, 2015; 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 as they would have been dilutive.



|              |  | Year Ended December 31, 2016 |           |  | Year Ended December 31, 2015 | 
|------------- |  | ---------------------------- | --------- |  | ---------------------------- | 
|Stock Options |  |                              | 1,213,208 |  |                              | 
|Warrants      |  |                              | 8,064,894 |  |                              | 
|RSRs          |  |                              | -         |  |                              | 





71







| | 10. | Income Taxes
| | --- | ------------





The income tax expense differs from
the amount that would result from applying the federal and provincial income tax rate to the net income (loss) before income taxes.



These differences result from
the following items:



|In $000s                                                                                  |  | Year Ended December 31, 2016 |        |   | Year Ended December 31, 2015 |  
|----------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---------------------------- | -
|Income (loss) before income taxes                                                         |  | $                            | 29,785 |   |                              | $
|Canadian federal and provincial income tax rates                                          |  |                              | 26.0   | % |                              |  
|Income tax expense (recovery) based on the above rates                                    |  | $                            | 7,744  |   |                              | $
|Increase (decrease) due to:                                                               |  |                              |        |   |                              |  
|·Non-deductible
expenses and permanent differences                                        |  | $                            | 815    |   |                              | $
|·Change
in deductible differences                                                         |  |                              | -      |   |                              |  
|·Change
in unrecognized temporary differences                                             |  |                              | (1,261 | ) |                              |  
|·Non-taxable
portion of capital gain                                                      |  |                              | (3,244 | ) |                              |  
|·Change
in deferred taxes related to attributing taxable income from Barbadian subsidiary |  |                              | -      |   |                              |  
|·Difference
between statutory and foreign tax rates                                       |  |                              | -      |   |                              |  
|·Other                                                                                    |  |                              | 477    |   |                              |  
|Income tax expense                                                                        |  | $                            | 4,531  |   |                              | $



As a result of an ongoing assessment
of the Company’s assets held in foreign subsidiaries, during the year ended December 31, 2015, the Company recognized a reduction
of its deferred income tax assets relating to taxable income previously attributed to its Barbadian subsidiary. A corresponding
non-cash income tax expense of $8.1 million was accordingly recognized. The assessment is complex in nature, and the reduction
and corresponding expense represent management estimates. The Company’s international transactions have not been audited
by the Canada Revenue Agency, and should such transactions be audited no assurances can be given that the tax authority will concur
with management’s estimates.



The deferred tax assets and
liabilities are shown below:



|In $000s                                |  | As at December 31, 2016 |         |   | As at December 31, 2015 |  
|--------------------------------------- |  | ----------------------- | ------- | - | ----------------------- | -
|Deferred Income Tax Assets              |  |                         |         |   |                         |  
|»  Non-capital losses                   |  | $                       | 31,410  |   |                         | $
|»  Share issue costs and other          |  |                         | 1,906   |   |                         |  
|»  Mineral, royalty and other interests |  |                         | (16,382 | ) |                         |  
|Total deferred income tax assets        |  | $                       | 16,934  |   |                         | $
|Deferred Income Tax Liabilities         |  |                         |         |   |                         |  
|»  Mineral, royalty and other interests |  | $                       | (3,288  | ) |                         | $
|Total deferred income tax liabilities   |  | $                       | (3,288  | ) |                         | $
|Total deferred income tax asset, net    |  | $                       | 13,646  |   |                         | $



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. The Company recognized deferred tax assets
in respect of tax losses as at December 31, 2016 of $120.8 million (2015: $122.4 million) as it is probable that there will be
future taxable profits to recover the deferred tax assets.





72







Movement in net deferred income
taxes:



|In $000s                                                     |  | Year Ended December 31, 2016 |        |   | Year Ended December 31, 2015 |  
|------------------------------------------------------------ |  | ---------------------------- | ------ | - | ---------------------------- | -
|Balance, beginning of the year                               |  | $                            | 16,371 |   |                              | $
|Recognized in net income (loss) for the year                 |  |                              | (4,225 | ) |                              |  
|Recognized in equity                                         |  |                              | 986    |   |                              |  
|Recognized in other comprehensive income (loss) for the year |  |                              | 514    |   |                              |  
|Recognition and movement of purchase price allocation        |  |                              | -      |   |                              |  
|Currency translation differences                             |  |                              | -      |   |                              |  
|Balance, end of year                                         |  | $                            | 13,646 |   |                              | $



The Company has deductible unused
tax losses expiring as follows:



|In $000s                        |  | Location |  | Amount |         |  | Expiration
|------------------------------- |  | -------- |  | ------ | ------- |  | ----------
|Non-capital loss carry-forwards |  | Canada   |  | $      | 120,808 |  |           
|                                |  |          |  |        |         |  |           



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, 2016 are $27.9 million (2015: $48.7 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.



| | 11. | Administration Expenses
| | --- | -----------------------



The administration expenses
for the Company are as follows:



|In $000s                                                     |  | Year Ended December 31, 2016 |       |  | Year Ended December 31, 2015 |  
|------------------------------------------------------------ |  | ---------------------------- | ----- |  | ---------------------------- | -
|Corporate administration                                     |  | $                            | 1,275 |  |                              | $
|Employee benefits and salaries                               |  |                              | 1,570 |  |                              |  
|Professional fees                                            |  |                              | 819   |  |                              |  
|Depreciation                                                 |  |                              | 231   |  |                              |  
|Administration expenses before share based compensation      |  | $                            | 3,895 |  |                              | $
|                                                             |  |                              |       |  |                              |  
|Equity settled share based compensation (a non-cash expense) |  |                              | 1,136 |  |                              |  
|Total administration expenses                                |  | $                            | 5,031 |  |                              | $





73







| | 12. | Supplemental Cash Flow Information
| | --- | ----------------------------------



|In $000s                                                                                         |  | Year Ended December 31, 2016 |        |   | Year Ended December 31, 2015 |  
|------------------------------------------------------------------------------------------------ |  | ---------------------------- | ------ | - | ---------------------------- | -
|Change in non-cash working capital:                                                              |  |                              |        |   |                              |  
|·Trade
receivables and other                                                                     |  | $                            | (1,847 | ) |                              | $
|·Trade
and other payables                                                                        |  |                              | 223    |   |                              |  
|Net (decrease) increase in cash                                                                  |  | $                            | (1,624 | ) |                              | $
|Significant non-cash transactions:                                                               |  |                              |        |   |                              |  
|·Shares
and warrants issued for acquisition of mineral, royalty and other interests (note 6 (b)) |  | $                            | 20,892 |   |                              | $
|·Restructuring
of mineral interest and loan receivable                                           |  |                              | -      |   |                              |  
|·Issuance
of common shares for Gold Royalties Corporation acquisition and other                  |  |                              | -      |   |                              |  



| | 13. | 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, 2016 |       |  | Year Ended December 31, 2015 |  
|----------------------------------------- |  | ---------------------------- | ----- |  | ---------------------------- | -
|Employee salaries and benefits            |  | $                            | 1,699 |  |                              | $
|Share-based payments                      |  |                              | 2,041 |  |                              |  
|Total key management compensation expense |  | $                            | 3,740 |  |                              | $





74







| | 14. | Contractual Obligations
| | --- | -----------------------



In connection with its commodity streams, the Company has committed to purchase the following:



|Streams              |  | % of Life of Mine Gold or Relevant Commodity 5,6,7,8,9                   |  | Per Ounce Cash Payment: lesser of amount below and the then
prevailing market price of commodity
(unless otherwise noted) 1, 2, 3,
    4
|-------------------- |  | ------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------
|Bachelor Lake        |  | 20%                                                                      |  | $500                                                                                                                                    
|Black Fox            |  | 8%                                                                       |  | $524                                                                                                                                    
|Chapada              |  | 4.2%                                                                     |  | 30% of copper spot price                                                                                                                
|Entrée Gold          |  | 5.62% on Hugo North Extension and 4.26% on Heruga                        |  | $220                                                                                                                                    
|Karma                |  | 26,875 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%                                                                      |  | $361                                                                                                                                    
|Yamana silver stream |  | Varies                                                                   |  | 30% of silver spot price                                                                                                                



| | 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 5.62% on Hugo North Extension
                                         and 4.26% 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 $361 and the then prevailing market price of gold for the open-pit
                                         mine and (ii) the lesser of $361 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 5.62% on Hugo
                                         North Extension and 4.26% 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 8.43% on Hugo
                                         North Extension and 6.39% 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 0.42% 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 0.62% 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 8) | For
                                         the Chapada copper stream, the Company has committed to purchase an amount equal to 4.2%
                                         of the copper produced (up to an annual maximum of 3.9 million pounds of copper) until
                                         Yamana has delivered 39 million pounds of copper to Sandstorm; then 3.0% of the copper
                                         produced until, on a cumulative basis, Yamana has delivered 50 million pounds of copper
                                         to Sandstorm; then 1.5% of the copper produced thereafter, for the life of the mine.
                                         If Cerro Moro has not achieved the Commencement of Production and Sandstorm has not received
                                         cumulative pre-tax cash flow equal to $70 million from the Yamana silver stream, then
                                         the First Chapada Delivery Threshold and the Second Chapada Delivery Threshold will cease
                                         to be in effect and Sandstorm will continue to purchase 4.2% of Chapada’s payable
                                         copper production (up to an annual maximum of 3.9 million pounds of copper), until such
                                         time as Sandstorm has received cumulative pre-tax cash flow equal to $70 million, or
                                         Cerro Moro has achieved the Commencement of Production.
| | 9) | Under
                                         the terms of the Yamana silver stream, Sandstorm has agreed to purchase an amount of
                                         silver from Cerro Moro equal to 20% of the silver produced (up to an annual maximum of
                                         1.2 million ounces of silver), until Yamana has delivered to Sandstorm 7.0 million ounces
                                         of silver; then 9.0% of the silver produced thereafter. As part of the Yamana silver
                                         stream, during the year 2016 through 2018, Sandstorm has also agreed to purchase an amount
                                         of silver from: (i) the Minera Florida mine in Chile equal to 38% of the silver produced
                                         (up to an annual maximum of 200,000 ounces of silver); and (ii) the Chapada mine in Brazil
                                         equal to 52% of the silver produced (up to an annual maximum of 100,000 ounces of silver).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| | 15. | 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:





75







For the year ended December
31, 2016



|In $000s                        |  | Sales |        |  | Royalty
revenue |   |        | Cost
of sales,excluding
 depletion |  |   | Depletion |  |  | Impairment of Mineral,
royalty and
other interests |        |  | Income (loss)
before taxes |   |       | Cash from operations | 
|------------------------------- |  | ----- | ------ |  | --------------- | - | ------ | ---------------------------------- |  | - | --------- |  |  | -------------------------------------------------- | ------ |  | -------------------------- | - | ----- | -------------------- | 
|Bachelor Lake, Canada           |  | $     | 8,721  |  |                 | $ | 462    |                                    |  | $ | 3,494     |  |  | $                                                  | 4,411  |  |                            | $ | -     |                      | 
|Black Fox, Canada               |  |       | 5,617  |  |                 |   | -      |                                    |  |   | 2,354     |  |  |                                                    | 2,011  |  |                            |   | -     |                      | 
|Chapada, Brazil                 |  |       | 6,075  |  |                 |   | -      |                                    |  |   | 1,843     |  |  |                                                    | 2,737  |  |                            |   | -     |                      | 
|Diavik, Canada                  |  |       | -      |  |                 |   | 5,856  |                                    |  |   | -         |  |  |                                                    | 5,519  |  |                            |   | -     |                      | 
|Karma, Burkina Faso             |  |       | 4,272  |  |                 |   | -      |                                    |  |   | 860       |  |  |                                                    | 2,095  |  |                            |   | -     |                      | 
|Ming, Canada                    |  |       | 2,025  |  |                 |   | -      |                                    |  |   | -         |  |  |                                                    | 792    |  |                            |   | -     |                      | 
|Santa Elena, Mexico             |  |       | 11,772 |  |                 |   | -      |                                    |  |   | 3,385     |  |  |                                                    | 2,001  |  |                            |   | -     |                      | 
|Yamana silver stream, Argentina |  |       | 2,926  |  |                 |   | -      |                                    |  |   | 876       |  |  |                                                    | 1,427  |  |                            |   | -     |                      | 
|Other Royalties1                |  |       | -      |  |                 |   | 14,419 |                                    |  |   | 4         |  |  |                                                    | 6,592  |  |                            |   | 2,507 |                      | 
|Other                           |  |       | 226    |  |                 |   | -      |                                    |  |   | 18        |  |  |                                                    | 69     |  |                            |   | -     |                      | 
|Corporate                       |  |       | -      |  |                 |   | -      |                                    |  |   | -         |  |  |                                                    | -      |  |                            |   | -     |                      | 
|Consolidated                    |  | $     | 41,634 |  |                 | $ | 20,737 |                                    |  | $ | 12,834    |  |  | $                                                  | 27,654 |  |                            | $ | 2,507 |                      | 



| | 1) | Where
                                         a mineral interest represents less than 10% of the Company’s sales, gross margin
                                         or aggregate asset book value and represents a royalty on gold, silver or other metal,
                                         the Royalty interest has been summarized under Other Royalties. Other Royalties includes
                                         royalty revenue from Bracemac-McLeod, Gualcamayo, Emigrant Springs, Mine Waste Solutions,
                                         San Andres, Thunder Creek, Copper Mountain, Forrestania and Sheerness. Includes royalty
                                         revenue from royalty interests located in Canada of $5.6 million, in the United States
                                         of $2.5 million, in South America of $5.6 million and other of $0.7 million.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the year ended December
31, 2015



|In $000s              |  | Sales |        |  | Royalty
revenue |   |        | Cost
of sales,excludingdepletion |  |   | Depletion |  |  | Impairment of Mineral,
royalty and
other
interests |        |  | Income (loss)
before taxes |   |        | Cash from operations | 
|--------------------- |  | ----- | ------ |  | --------------- | - | ------ | -------------------------------- |  | - | --------- |  |  | -------------------------------------------------- | ------ |  | -------------------------- | - | ------ | -------------------- | 
|Aurizona, Brazil      |  | $     | 10,773 |  |                 | $ | -      |                                  |  | $ | 3,690     |  |  | $                                                  | 1,072  |  |                            | $ | -      |                      | 
|Bachelor Lake, Canada |  |       | 8,285  |  |                 |   | -      |                                  |  |   | 3,550     |  |  |                                                    | 4,220  |  |                            |   | -      |                      | 
|Black Fox, Canada     |  |       | 6,856  |  |                 |   | -      |                                  |  |   | 3,041     |  |  |                                                    | 4,281  |  |                            |   | -      |                      | 
|Diavik, Canada        |  |       | -      |  |                 |   | 5,656  |                                  |  |   | -         |  |  |                                                    | 6,273  |  |                            |   | -      |                      | 
|Ming, Canada          |  |       | 1,855  |  |                 |   | -      |                                  |  |   | -         |  |  |                                                    | 1,994  |  |                            |   | -      |                      | 
|Santa Elena, Mexico   |  |       | 10,640 |  |                 |   | -      |                                  |  |   | 3,266     |  |  |                                                    | 6,115  |  |                            |   | -      |                      | 
|Other Royalties1      |  |       | -      |  |                 |   | 8,422  |                                  |  |   | -         |  |  |                                                    | 11,292 |  |                            |   | 18,322 |                      | 
|Other                 |  |       | 176    |  |                 |   | -      |                                  |  |   | 19        |  |  |                                                    | 65     |  |                            |   | 3,323  |                      | 
|Corporate             |  |       | -      |  |                 |   | -      |                                  |  |   | -         |  |  |                                                    | -      |  |                            |   | -      |                      | 
|Consolidated          |  | $     | 38,585 |  |                 | $ | 14,078 |                                  |  | $ | 13,566    |  |  | $                                                  | 35,312 |  |                            | $ | 21,645 |                      | 



| | 1) | Where
a mineral interest represents less than 10% of the Company’s sales, gross margin or aggregate asset book value and represents
a royalty on gold, silver or other metal, the Royalty interest has been summarized under Other Royalties. Other royalties includes
royalty revenue from Bracemac-McLeod, Gualcamayo, Emigrant Springs, Mine Waste Solutions, San Andres, and Thunder Creek. Includes
royalty revenue from royalty interests located in Canada of $0.7 million, in the United States of $0.5 million, and other of $0.5
million.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





76







Total assets as of:



|In $000s             |  | December 31, 20161 |         |  | December 31, 20151 |  
|-------------------- |  | ------------------ | ------- |  | ------------------ | -
|Aurizona             |  | $                  | 10,723  |  |                    | $
|Bachelor Lake        |  |                    | 5,268   |  |                    |  
|Black Fox            |  |                    | 13,946  |  |                    |  
|Chapada              |  |                    | 66,791  |  |                    |  
|Diavik Mine          |  |                    | 42,450  |  |                    |  
|Entrée               |  |                    | 35,351  |  |                    |  
|Karma                |  |                    | 24,389  |  |                    |  
|Ming                 |  |                    | 11,653  |  |                    |  
|Santa Elena          |  |                    | 4,345   |  |                    |  
|Yamana silver stream |  |                    | 72,807  |  |                    |  
|Other Royalties 2    |  |                    | 114,662 |  |                    |  
|Other 3              |  |                    | 6,190   |  |                    |  
|Corporate            |  |                    | 126,307 |  |                    |  
|Consolidated         |  | $                  | 534,882 |  |                    | $



| | 1) | Includes
                                         related accounts receivables in relation to the respective properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2) | Where
                                         a mineral interest represents less than 10% of the Company’s sales, gross margin
                                         or aggregate asset book value and represents a royalty on gold, silver or other metal,
                                         the Royalty interest has been summarized under Other Royalties. Includes Bracemac-McLeod,
                                         Coringa, Mt. Hamilton, Paul Isnard, Prairie Creek, Ann Mason, Gualcamayo, Emigrant Springs,
                                         Mine Waste Solutions, San Andres, Sao Francisco, Sao Vicente, Thunder Creek, Bomboré,
                                         Hot Maden, Hackett River, Lobo-Marte, Agi Dagi & Kirazli and other.
| | 3) | Includes
                                         JDL Stream and other.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



| | 16. | Subsequent Events
| | --- | -----------------



On January 26, 2017, Orezone Gold
Corporation exercised its option to repurchase the royalty on the Bomboré gold project for $3.6 million, representing a
20% premium to the original upfront payment.



On February 1, 2017, Luna announced
a merger with JDL Gold Corp. Concurrent with the closing of the transaction, which is anticipated to be in March 2017, the term
debt facility that is owed by Luna to Sandstorm, in the amount of $20 million plus accrued interest, is expected to be settled
in equity, or a combination of cash and equity of the newly combined entity. Sandstorm will continue to hold the $30 million convertible
debenture that is due from Luna.



77