July 14, 2011 / 1:17 PM / 6 years ago

UPDATE 2-Sandstorm Gold gains as Silvercrest's mine starts production

* Sandstorm to get 20 pct of gold output under purchase deal

* Gold output at Santa Elena mine was 5,476 ounces for April, May, June

* Sandstorm shares rise 11 pct to year high

* Silvercrest shares jump 12 pct (Adds details on mine potential, updates shares)

July 14 (Reuters) - Sandstorm Gold said it will get a 20 percent share from Silvercrest Mines’ Santa Elena mine output, where commercial production has begun, sending the companies’ shares up over 10 percent.

The Sonora, Mexico-based mine produced 5,476 ounces of gold for the months of April, May and June.

Vancouver-based Sandstorm is entitled to buy 20 percent of the gold produced at the mine at a price of $350 per ounce, or the then prevailing market price, whichever is lower.

Silvercrest plans to construct a new processing facility that would increase the daily throughput at Santa Elena to 3,500 tonnes per day, Sandstorm said in a statement.

On Wednesday, Sandstorm signed a deal with Donner Metals Ltd for a share in the gold output at Donner’s property in Quebec.

Shares of Sandstorm rose 11 percent to a year high of C$1.53 on Thursday, but shed some of the gains later and were up 7 cents at C$1.45 in late morning trade on the Toronto Venture Exchange. Silvercrest shares rose 12 percent to C$1.83. (Reporting by Amruta Sabnis and Gowri Jayakumar in Bangalore; Editing by Gopakumar Warrier)

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