Trident Royalties Regulatory News (TRR)

5 June 2023

Trident Royalties Plc

("Trident" or the "Company")

2022 Full Year Results

and Notice of Annual General Meeting

Trident Royalties Plc (AIM: TRR, OTCQX: TDTRF), the diversified mining royalty company, today announces its full year results for the year ended 31 December 2022. The Annual Report and Accounts for the year ended 31 December 2022 and Notice of the 2023 Annual General Meeting will be made available to download from the Company's website at www.tridentroyalties.com later today.

These two documents, together with a Form of Proxy, will be mailed to those shareholders who have elected to receive paper copies on 7 June 2023.

The Company's AGM is to be held at 30 Finsbury Square, London, EC2A 1AG on 29 June 2023 at 11:00 a.m.

The Company further announces that with effect from the beginning of the Annual General Meeting on 29 June 2023 Paul Smith has requested to step down as Chairman of the Board, given his other business interests. He is being retained as a special advisor to the Company. Al Gourley will assume the role as Chair of the Board. The Board expresses its thanks to Paul for his significant contribution as Chairman and is pleased that the Company will continue to benefit from his considerable industry experience.

Chairman's Statement

Trident shares saw an increase of 37% during 2022. This increase compared to declines of 32% and 44% for the AIM and the All-Share Mining Index respectively. The outperformance reflected 3 factors; the inherent resilience of the royalty model, the evolution of Trident's portfolio; and further improvements in analyst coverage and our shareholder register.

2022 was light in terms of transactions, which partly reflected the economic backdrop and pressure on commodity prices. Many operators chose to postpone capital raising, in anticipation of improved conditions. We commenced the year with the completion of the gold offtake portfolio acquisition. This transaction materially increased the cash generation from within our portfolio, which in turn enables us to internally fund a larger proportion of future growth.

The sale of our Lake Rebecca royalty to Franco Nevada highlighted several key themes which underpin the reasons for owning Trident Royalties' shares. Firstly, Trident's ability to access world class assets. Secondly, our willingness to lock-in value and recycle capital when we feel this to be in shareholders' best interests. The transaction was at a value which was not reflected in our share price prior to sale. Thirdly, the cash proceeds from the disposal allowed us to renegotiate our debt facility and deliver a significant reduction in our cost of debt.

2022, also saw major improvements in the quality of our register and trading liquidity, which was principally due to management's active engagement with investors.

The Board recognises the importance of cash returns to shareholders. We ourselves are significant shareholders. Many of our major assets are not yet in production and our priority remains to invest in new royalties whilst further reducing our cost of capital. As we add more cash generating assets and our existing portfolio matures, we expect to pay a dividend based on a sustainable percentage of free cash flow.

Trident seeks to invest in royalties or streams where the asset owner runs safe, efficient, cost-effective mines and projects and demonstrates a commitment to the responsible management of their ESG impacts.

Looking forward, our priorities for 2023 are to further reduce our cost of capital (as this directly improves our competitiveness) and deploy capital for value. We are well resourced based on our existing cash on hand and debt facility. We continue to see base and battery metals as most prospective in terms of demand for royalty finance.

2023 is looking more prospective in terms of potential new transactions. The widespread postponement of capital raising by mining companies during 2022 has created a backlog of project funding. The combination of higher interest rates and continued depressed equity prices for mining companies are making royalties an increasingly attractive funding alternative.

With our strong management team and balance sheet, we are well positioned to deploy capital and continue to create shareholder value.

Chief Executive Officer's Statement

2022 has seen Trident's business grow significantly in terms of both revenue, as well as portfolio scale and diversification. The investment strategy that we implemented at the inception of Trident is yielding results and providing a solid foundation for considerable growth over the medium and long term. Importantly, the royalty model has proven to be a resilient investment approach, as highlighted in performance through 2022, a year in which a confluence of inflationary pressures had a significant impact on mine operators' capital and operating costs. As shareholders will be aware, as royalty holders, Trident is largely insulated from these capex overruns and operating margin squeezes, with our portfolio benefitting from exposure to top line revenue.

This strategy delivered for us in 2022 and is expected to continue as we expand and diversify our portfolio, offering shareholders superior returns through commodity cycles. Royalty receipts and offtake revenue for the year increased nearly ninefold to US$13.6 million, reflecting the significant asset-level progress of several of our royalties, in addition to the expansion of our portfolio with new, cash generative and value accretive transactions.

The completion of the acquisition of a portfolio of gold offtakes presented a strong start to 2022. It was our largest transaction to date and increased the number of producing assets in our portfolio significantly. This was a defining moment for Trident, which resulted in an immediate and significant boost to our revenue for the year.

This transactional momentum continued in late-January, as Trident entered into an agreement to acquire, subject to certain conditions and at its election, an indirect 1.5% gross revenue royalty over the Sonora Lithium Project in Mexico. Like the Thacker Pass Lithium Project, over which Trident acquired a gross revenue royalty in 2021, Sonora is a globally significant lithium asset. In the year, Ganfeng announced an expanded planned production profile, with Stage 2 production increasing by 43% to 50,000 tonnes per annum of lithium hydroxide, while noting that early construction works are underway.

Trident's transactional creativity was further evidenced in December with the agreement to sell its pre-production, exploration stage gold royalties over Rebecca, Spring Hill and three other projects to Franco-Nevada in exchange for cash proceeds of up to US$15.55 million. This portfolio of royalties was acquired by Trident for approximately US$6.5 million, representing a return on invested capital of over 140% in approximately two years. Not only was this transaction a clear demonstration of the potential returns from acquiring royalties over quality assets, but it also provided Trident with a significant increase in available capital for future acquisitions at a time of current weakness in traditional debt and equity markets. This disciplined investment approach will continue to define Trident's strategy as it targets accretive opportunities.

The sale of the pre-production gold royalties also precipitated the restructuring of the Group's existing debt facility with Macquarie Bank Limited on more favourable terms, reducing the coupon by up to 2%, deferring principal repayments, and extending the term by one year. This restructuring illustrates the longer-term downward direction of the Group's cost of capital, with the cost of debt nearly halving from the previous year. 

Since the period end, Lithium Americas, the operator of the Thacker Pass Lithium Project, announced its intention to jointly develop the project alongside General Motors, as part of a landmark investment and offtake partnership valued at US$650 million. This is the largest-ever investment by an automaker to produce battery raw materials and is clear evidence of the automotive industry's desire to mitigate concerns relating to critical minerals supply chains over the long-term.

Lithium Americas subsequently announced the positive confirmation of the Record of Decision appeals process which, with all final key Nevada state-level environmental permits received, has allowed the project to move forward in earnest; reporting in early March that construction has commenced ahead of targeted first production in H2 2026.

The recent acquisition of the La Preciosa royalty, provides exposure to an exciting asset, with expected near term cash flows, along with diversifying the portfolio further with the addition of silver.

The numerous asset-level and transactional developments that we have reported during the year have had a marked impact on our value proposition and revenue generation potential. In addition, the board has also assessed additional corporate activities through which to grow the Group. One such undertaking was the decision to cross-trade Trident's shares on the OTCQX post period end. We believe this listing will provide enhanced investor benefits, including easier trading access for investors located in the US, and greater liquidity due to a broader geographic pool of potential investors.

In 2022, we have also been working to evaluate and develop our approach to ESG in order to lay strong foundations for future reporting, increase transparency and performance.

I would like to take this opportunity to thank our shareholders and reiterate my genuine enthusiasm and confidence in both our portfolio and wider investment strategy. 2022 proved to be highly significant for Trident, and I believe this will continue to build throughout 2023 and over the coming years.

Operational Review

Producing Royalties

KOOLYANOBBING IRON ORE PROJECT

Location: Australia

Operator: Mineral Resources Ltd (ASX: MIN)

Commodity: Iron ore

Mine Type: Open pit, Direct Ship Ore

Stage: Production

Royalty: 1.5% Free on Board

Total Reserves & Resources:

9.3Mt @ 59.9% Fe Reserves (Deception Pit)

19.5Mt @59.9% Fe Resources (Deception Pit)

40.8Mt @ 58.2% Fe Reserves (Yilgarn)

108.6Mt @ 56.8% Fe Resources (Yilgarn)

Trident owns a 1.5% Free on Board revenue royalty covering part of the producing Koolyanobbing Iron Ore Operation in Western Australia. The royalty is over tenements which covers part of the Deception Pit and all of the Claw Pit at Koolyanobbing.

The royalty provides Trident with attractive exposure to a significant and growing iron ore asset, operated by an innovative and renowned operator with a strong balance sheet in a worldclass jurisdiction. As a royalty over an operating asset, the royalty provides access to cashflow which will assist in bringing scale and diversification to Trident's growing royalty portfolio.

During the year Trident received US$1.55m (2021: US$0.08m) in royalty income. The significant increase was due to the operator, Mineral Resources, recommencing activity at the Deception Pit and beginning mining operations at the Claw deposit.

MIMBULA COPPER PROJECT

Location: Zambia

Operator: Moxico Resources Plc (private)

Commodity: Copper

Mine Type: Open Pit

Stage: Production

Royalty: Gross Revenue Royalty 1.25%

Total Reserves and Resources

93.7Mt @ 0.97% Total Copper ("TCu") Resources

67.5Mt @ 0.92% TCu Reserves

Trident owns a 1.25% GRR over all copper produced from the Mimbula Mine in Zambia, which is operated by Moxico Resources PLC. The GRR will decrease to 0.3% upon US$5.0m being paid on the royalty, which is expected to occur in Q3 2023, with a subsequent decrease to 0.2% once the royalty has been paid on 575,000 tonnes of copper. In addition, the GRR is subject to a Minimum Payment Schedule in which the higher of the minimum amount, or the GRR amount, are due; specifically:

· Minimum payments of US$375,000 per quarter in 2021;

· Minimum payments of US$500,000 per quarter in 2022; and

· Minimum payments of US$750,000 in each of the first two quarters of 2023.

During the year Trident received US$2.0m (2021: US$1.5m) of payments from Mimbula in line with the minimum payment schedule.

KWALE MINERAL SANDS PROJECT

Location: Kenya

Operator: Base Resources

Commodity: Mineral Sands

Mine Type: Open Pit

Stage: Production

Royalty: 0.25% Free on Board

Total Reserves and Resources

40Mt @ 2.7% Heavy Mineral ("HM") Reserves

205Mt @ 1.7% HM Resources

Trident acquired a 0.25% Free On Board royalty over the Kwale mineral sands project with an effective acquisition date of 1 October 2022. Kwale commenced production in 2013, with operator Base Resources extending the scheduled mine life to the end of 2024. Though a non-material purchase consideration and limited remaining mine life on the current schedule, Trident considers there to be potential for further mine life extensions.

During the year Trident received US$0.06m of payments from Kwale, relating to the Q4 period post-acquisition of the royalty.

LINCOLN GOLD PROJECT

Location: California, USA

Operator: Seduli Holdings Pty (private)

Commodity: Gold

Mine Type: Underground

Stage: Production

Royalty: 1.5% net smelter return royalty (over down dip extension zone)

Total Resource: 958Kt @ 9.29g/t Au for 286koz gold

In 2021, Trident acquired a 1.5% NSR gold royalty covering the entire Lincoln gold project in California. The royalty includes a 5-mile area of interest which spans the majority of the exploration area. The Lincoln Gold Mine is the only permitted project and processing plant on the Californian Mother Lode, providing it with significant leverage to aggressively explore and acquire additional tenure for further upside.

The royalty is fully secured by the project assets and reduces to a 0.75% NSR in perpetuity once the royalty has paid US$3m. The operator, Seduli Holdings Pty, completed its first gold pour in March 2022, however the ramp up did not occur as planned and the operator suspended operations to focus on resource expansion. Trident agreed to revise to provide various waivers in relation to its security position in exchange for the implementation of a minimum payment schedule, which will replace the revenue expected from deferred Stage 1 production. 

During the year Trident received US$0.35m of payments from Lincoln under the minimum payment schedule, relating to the Q3 and Q4 periods.

Royalties Advancing towards Production

THACKER PASS LITHIUM PROJECT

Location: USA

Operator: Lithium Americas Corp.

Commodity: Lithium

Mine Type: Open pit

Stage: Advanced

Royalty: 60% interest in a 1.75% gross revenue royalty (1.05% net to Trident), assuming the buyback is completed, as detailed below

Total Reserves: 3.1 million tonnes of Lithium Carbonate Equivalent ("LCE") at 3,283ppm Li

In 2021 Trident acquired a 60% interest in a GRR over the Thacker Pass Lithium Project for US$28.0 million, with the remaining 40% retained by Orion Resource Partners. 

The project is the largest known lithium reserve and resource in North America and currently contains CIM compliant Mineral Reserves of 3.7Mt LCE, the largest lithium reserve in the United States, with a mine life of 40 years based on Reserves. There is significant additional resource upside to potentially provide further reserve conversion to increase the mine life or support a production expansion leading to increased royalty revenues.

Post year-end, in February 2023, General Motors Co. (NYSE: GM) and Lithium Americas announced their intention to jointly invest to develop Thacker Pass. Under this agreement, General Motors will make a US$650 million equity investment in Lithium Americas. General Motors has also entered into a 10-year offtake agreement, to purchase the Phase 1 production from Thacker Pass. The price within the offtake agreement will be based on an agreed upon price formula linked to prevailing market prices.

The key terms of the royalty are as follows:

· A gross revenue royalty on all mineral products generated at the mine of 8% (4.8% attributable to Trident) until US$22.0m is paid, after which the GRR drops to 4%.

· The GRR may be reduced to 1.75% (1.05% attributable to Trident) at any time by the operator making a one-time payment of US$22.0m (US$13.2m attributable to Trident).

· Trident notes that the PFS assumes the US$22.0m buyback is completed within the first year of operation.

SONORA LITHIUM PROJECT

Location: Lithium

Operator: Ganfeng Lithium

Commodity: Lithium

Mine Type: Open pit

Stage: Advanced

Royalty: 50% interest in a 3.0% indirect gross revenue royalty (1.5% net to Trident)

Total Reserves: 244Mt @ 3,480ppm - 4,515kt LCE

A deposit of US$2.5 million has been paid by Sonoroy Holdings Ltd ("Sonoroy"), a joint venture company in which Trident holds a 50% interest, with the balance to be paid upon completion of the royalty acquisition transaction, pending several issues including a favourable resolution of a dispute between the seller of the royalty and Bacanora. If the dispute is found against the vendor of the royalty, Trident's funding is fully repayable by Sonoroy.

The project currently has Measured & Indicated Resources exceeding 5Mt LCE, and an additional 3.8Mt LCE Inferred Resource. Per the Feasibility Study published by Bacanora Lithium in 2018, the mine is expected to produce 17,500 tpa LCE in Stage 1 and 35,000 tpa at Stage 2. Subsequently, the project was acquired by Ganfeng Lithium which, in its 2022 Interim Report, noted a larger planned production profile relative to the Feasibility Study, increasing Stage 1 to 20,000 tpa of lithium hydroxide, with Stage 2 production increasing by 43% to 50,000 tpa of lithium hydroxide. Construction is underway. The project is also expected to generate potassium sulphate (potash), a high value fertiliser, as a by-product which would be covered by the royalty.

PUKAQAQA COPPER PROJECT

Location: Peru

Operator: Nexa Resources SA (TSX:NEXA)

Commodity: Copper, Molybdenum

Mine Type: Open pit

Stage: Advanced

Royalty (sliding scale NSR): Three royalties

Total Resources: 349.1Mt @ 0.40% Cu

Trident holds a portfolio of three royalties over the Pukaqaqa Copper Project, an advanced stage copper/molybdenum asset located in the Huancavelica region in Peru. The Pukaqaqa Project has NI 43-101 compliant Measured and Indicated Resources of 309m tonnes at 0.41% Cu (approximately 1.26m tonnes of contained copper), with an additional Inferred Resource of 40.1m tonnes at 0.34% Cu (for 136,340 tonnes contained copper and related molybdenum credits).

The project is held by NYSE- and TSX-listed Nexa Resources, an established South America-focused mid-tier producer with six operating base metals mines and three operating smelters in Peru and Brazil. The most recent technical report contemplates an open-pit mining operation to feed a 30,000 tonne-per-day processing plant to produce copper and molybdenum concentrates over an initial 19-year mine life.

LA PRECIOSA SILVER PROJECT

Location: Mexico

Operator: Avino Silver & Gold mines Ltd (TSX:ASM)

Commodity: Silver

Mine Type: Underground

Stage: Advanced

Royalty: 1.25% NSR and 2.00% gross value return royalty

Total Resources: 137Moz Ag Equivalent - Indicated 17.4Mt @ 202 g/t AgEq & Inferred 4.4Mt @ 170 g/t AgEq

Trident holds a 1.25% NSR Royalty over the area covering the Gloria and Abundancia veins and a 2.00% GVR Royalty over the surrounding area. Additionally, Trident is entitled to a milestone payment of US$8.75 million from Avino within 12 months of first production. The milestone payment may be paid up to 50% in shares of Avino.

The project is held by TSX-listed Avino Silver & Gold Mines Ltd, an established silver producer with other assets in Peru. Avino intends to begin processing stockpiled material from La Preciosa in late H2 2023 at its mill, before commencing production from fresh ore in 2024. Avino intends to ramp up annual silver production from La Preciosa to circa 3 million ounces by 2027, increasing to 3.5 million ounces in 2028. With a current total Mineral Resource estimate of 120Moz of silver and 224,000 ounces of gold, La Preciosa is expected to be a long-life asset with further expansion potential.

Royalties Sold During the Year

In December 2022, Trident announced the sale of a portfolio of pre-production, exploration stage gold royalties to Franco-Nevada Corporation for cash proceeds of up to US$15.8 million. The transaction crystallised a return on invested capital of 143%, providing additional capital for redeployment into new transactions.

One early-stage royalty was removed from the portfolio prior to closing and the transactions proceeds were adjusted to be up to US$15.6 million. The sale of this gold portfolio was completed in February 2023.

The royalties sold to Franco-Nevada Corporation were as follows:

Lake Rebecca Gold Royalty

Location: Western Australia

Operator: Ramelius Resources Ltd (ASX: RMS)

Commodity: Gold

Mine Type: Open pit

Stage: Pre-development

Royalty: 1.5% net smelter return royalty

Total Resource: 29.1Mt @ 1.2g/t Au for 1.1Moz

Spring Hill Gold Royalty

Location: Australian Northern Territory

Operator: PC Gold Pty (private)

Commodity: Gold

Mine Type: Open pit

Stage: Pre-development

Royalty: fixed rate A$13.30 per oz (where the gold price is > A$1,500/oz)

Total Resource: 8.8Mt @ 1.26g/t Au for 355koz.

Warrawoona Gold Royalty

Location: Western Australia

Operator: Calidus Resources Ltd (ASX: CAI)

Commodity: Gold

Mine Type: Open pit

Stage: Pre-development

Royalty: 1.5% net smelter return royalty (over down dip extension zone)

Total Resource: 13.6Mt @ 1.2g/t Au for 519koz

Western Australian Gold Royalties

Project: Talga Talga and Bullfinch

Location: Western Australia

Stage: Pre-development

Operator: various

Royalty (NSR): various

Financial Review

During 2022, Trident made significant progress in a number of areas. The newly acquired gold offtake portfolio was integrated effectively and provided a solid cash flow base for the business. The innovative transaction to acquire an option over a royalty on the Sonora lithium project provides exposure to a second high quality lithium asset, complimenting the existing portfolio. The sale of the Australian gold royalty portfolio delivered an over 140% return in approximately 2 years, allowing capital to be recycled into new opportunities.

From a capital structuring perspective 2022 has been a transformational year, with the new US$40.0m debt facility with Macquarie Bank drawn down in January to facilitate the gold offtake portfolio acquisition. In conjunction with the Australian gold royalty sale announced in December, the facility was subsequently extended by a year to December 2025 and the interest coupon was reduced by 2%. Trident ended the year with a diverse portfolio of royalty assets, combined with a strong cash position to pursue future growth opportunities.

Royalty and Offtake Transactions

The Group acquired the following royalties and offtake contracts during the year:

· A portfolio of 7 producing gold offtake contracts from Orion Resource Partners for US$69.75m;

· Gold offtake contract over 50% of the production from the Sugar Zone mine in Canada for US$3.75m;

· The payment of a US$2.5m cash deposit (treated as an interest free loan - in trade and other receivables) to secure the right to acquire an indirect 1.5% Gross Revenue Royalty over the Sonora Lithium Project in Mexico, through a joint venture company Sonoroy Holdings Limited in which Trident has a 50% shareholding; and

· Following the acquisition of the gold offtake portfolio, the Mercedes mine (which was included in one of the offtake contracts) was disposed of by the operator. This triggered a fee payable to Trident of US$3.7m and the Mercedes mine was removed from its obligations under the contract.

In addition, on 9 December 2022 the Group entered into a conditional agreement to sell several pre-production exploration stage gold royalties over assets in Australia for cash proceeds of up to US$15.8 million. A non-material royalty was removed from the transaction consideration reducing the previously announced total consideration from US$15.8 million to US$15.6 million and the transaction completed on 23 February 2023.

Statement of Financial Position

Royalty intangible assets consist of US$116.58m cost, less US$4.86m amortisation and US$6.75m relating to the Australian gold royalties which were reclassified as assets held for sale, resulting in a total net book value of US$104.98m representing the Thacker Pass, Pukaqaqa, Koolyanobbing and Lincoln projects together with the acquisitions described.

Royalty financial instruments were valued at US$7.65m representing the fair value of the Mimbula copper project in Zambia. The royalty financial instrument has been designated as fair value through profit and loss with the fair value gains and losses recognised in 'revaluation of royalty financial assets' line item in the income statement. The value at the beginning of the financial year was US$7.46m, US$2.00m royalty income was received in the year and a fair value increase of US$2.19m was recognised in the income statement.

Trade and other receivables totalling US$12.05m (2021: US$1.21m) includes US$6.41m receivable from Macquarie bank relating to gold offtake trades which settled after the year end, US$0.99m in respect of 4th quarter 2022 royalty income due from Koolyanobbing and Mimbula receivable after the year-end. Other receivables also include US$2.50m in respect of the Sonora lithium project described above.

Trade and other payables totalling US$2.28m (2021: US$1.04m) consisted predominantly of US$1.29m payables relating to the gold received under the offtake contracts, which had been sold but not yet settled with the operators, trade payables, social security and taxation and accruals with all amounts within agreed payment terms.

At the year-end the net gold receivable amount was US$5.12m.

Deferred contingent consideration of US$0.41m represents A$0.60m contingent payment due on the Spring Hill project based on the operator meeting certain production targets. The amount has been treated as due > 1 year representing managements' assessment of when the project will become operational and the targets achieved. The Spring Hill royalty, along with the contingent consideration obligation was sold to Franco Nevada in February 2023.

Total cash at the end of the year was US$16.58m (US$21.70m including the net gold trading receivables) and total debt was US$40.00m.

Total net assets increased to US$104.87m during the year from US$88.07m at 31 December 2021 largely due to the gold offtake portfolio acquisition.

Statement of Comprehensive Income and EBITDA

The Group reported a gross profit of US$2.99m (2021: US$0.06m) from reported net revenues of US$7.85m (2021: US$0.08m). The increase in net revenue was from the new gold offtake contracts acquired in January 2022 and the return of production at the Koolyanobbing royalty tenement. The fair value gain on the Mimbula copper project was US$2.19m (2021: US$1.51m) predominantly due to the payment of the minimum payment schedule in lieu of the mine currently in ramp up and therefore not materially depreciating in value.

A profit on disposal of US$1.86m was made on amendment to one of the gold offtake contracts - with gross proceeds of US$3.70m. The Group made a foreign exchange loss totalling US$1.01m (2021: US$0.52m loss) mainly as a result of the strengthening of the US dollar against the Australian dollar. Finance charges totalled US$6.24m including US$3.77m in interest payments and US$2.47m of amortised finance arrangement fees and other finance charges. Loss after taxation was US$3.68m (2021: US$3.54m loss) and basic loss per share of 1.28c (2021: 2.15c).

The Group generated net revenue from its gold offtake contracts of US$6.07m and its Koolyanobbing iron ore asset of US$1.43m (2021: US$0.08m). The amortisation charge was US$4.86m (2021: US$0.02m) and total Group overheads of US$4.67m (2021: US$3.74m) including US$0.47m (2021: $0.34m) non-cash share-based payments and other charges; resulting in an operating loss of US$1.67m (2021: US$3.68m). The gold offtakes and Koolyanobbing asset are amortised on a units of production basis over the life of the assets depleted.

EBITDA and Adjusted EBITDA

The below table summarises EBITDA and adjusted EBITDA:

The following table shows total royalty receipts for the period for royalty intangible assets, net offtake interests, disposals and financial assets:

* Offtake interests

An offtake contract is a contract pursuant to which the operator agrees to sell, and the purchaser (Trident) agrees to buy, refined gold produced from the mine or mines over which the offtake is granted. The key commercial terms include those relating to the amount of gold to be purchased, the duration of the contract, and the payment terms. Trident has the right to purchase gold at the lowest reference price in a defined quotation period, which is typically 6-8 days. The revenue from these contracts is disclosed net of the purchase costs in the income statement. Net proceeds comprises gross offtake revenue of US$446.1m less purchase costs of US$440.0m.

Cashflow and Borrowings

Net cash decreased in the period by US$29.06m (2021: US$38.46m increase). Financing inflows were US$36.17m (2021: US$70.25m) from an equity fund raise in January and the new loan facility with Macquarie Bank along with the repayment of the Tribeca facility; of which US$60.52m (2021: US$29.07m) was invested into acquiring those assets noted above, and US$3.53m (2021: US$2.93m) was used in operating activities. Note that the reduction in cash and use in operating activities includes a US$5.12m increase in net gold trading receivables, which is a function of the gold offtake trades settling open over the year end with Macquarie Bank. Depending on the timing and settlement of gold trades and the payments to operators this figure fluctuates and can be a receivable or payable item. The Group has a separate US$5.00m short term overdraft facility with Macquarie Bank entered into on 21 March 2022, to provide funding for the gold trading receivable over the 2-day settlement period if required. Given the cash balance on hand throughout 2022 the overdraft facility was not used.

The cash figure (excluding the net gold trading receivable) at 31 December 2022 was US$16.58m (31 December 2021: US$45.64m) with the majority held in US dollars with HSBC Bank plc and Macquarie Bank Limited. On 10 January 2022, Trident entered into a US$40.00m secured loan facility agreement with Macquarie Bank, US$10m of which was used to retire the debt held with a syndicate managed by Tribeca Investment Partners.

Taxation

During the period the Group paid nil (2021: US$0.03m) in respect of tax due. A deferred tax asset was recognised totalling US$2.01m (2021: US$1.04m) primarily in relation to taxable losses incurred in the Australian subsidiary. Given the increase in activity on the Australian royalty tenements these losses are expected to be fully utilised and accordingly have been recognised in full; resulting in a deferred tax credit to the income statement of US$0.68m (2021: US$0.71m).

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2022

Consolidated Statement of Financial Position

As at 31 December 2022

Consolidated Statement of Changes in Equity

For the year ended 31 December 2022

Consolidated Statement of Cash Flows

for the year ended 31 December 2022

Company Statement of Financial Position

As at 31 December 2022

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company Statement of Comprehensive Income. The loss for the Parent Company for the year was US$1.32m (2021: US$0.20m).

Company Statement of Changes in Equity

For the year ended 31 December 2022

Company Statement of Cash Flows

for the year ended 31 December 2022

Notes to the financial statements

1.  GENERAL INFORMATION

Trident Royalties plc is a company incorporated and domiciled in the United Kingdom. The Company is a public limited company, which is listed on AIM of the London Stock Exchange, incorporated and domiciled in England and Wales. The address of the registered office is 6th Floor 60 Gracechurch Street, London, United Kingdom, EC3V 0HR.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. The policies have been consistently applied throughout the year presented, unless otherwise stated.

Basis of preparation

The Group's consolidated financial statements and the Parent Company financial statements have been prepared in accordance with UK-adopted international accounting standards and the requirements of the Companies Act 2006. 

The financial statements have been prepared under the historical cost convention except for financial assets at fair value through profit and loss account and contingent consideration which are measured at fair value. The principal accounting policies adopted are set out below. The Group financial statements are presented in US Dollars ($) and rounded to the nearest thousand.

The preparation of the Group financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are explained below.

Going Concern

The financial position of the Group and cash flows as at 31 December 2022 are set out on pages 55 and 57 of the annual report. The Group meets its day-to-day working capital and other funding requirements with its current cash, raised through equity placings, proceeds from the disposal of assets and revenue from its cash generating royalties. The Group actively manages its financial risks as set out in note 23 and operates Board-approved financial policies, that are designed to ensure that the Group maintains an adequate level of headroom and effectively mitigates financial risks.

On the basis of current financial projections (at least 12 months from the date of approval of the financial statements), the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence, and meet its liabilities as they fall due, for the foreseeable future. Accordingly, the Directors consider it appropriate to adopt the going concern basis in preparing these financial statements.

Standards, interpretations and amendments to published standards not yet effective

The Directors have considered those standards and interpretations, which have not been applied in the financial statements, that are in issue but not yet effective and do not consider that they will have a material impact on the future results of the Group or Company.

Basis of consolidation

The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

At 31 December 2022, the consolidated financial statements combine those of the Company with those of its subsidiaries. Subsidiaries are entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

· The contractual arrangement with the other vote holders of the investee;

· Rights arising from other contractual arrangements; and

· The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the Group financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Investments in subsidiaries are accounted for at cost less impairment within the Company financial statements. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by other members of the Group

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker which is considered to be the Board.

Foreign currency

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.

Exchange gains and losses arising on the retranslation of monetary financial assets are treated as a separate component of the change in fair value and recognised in profit or loss. Exchange gains and losses on non-monetary OCI financial assets form part of the overall gain or loss in OCI recognised in respect of that financial instrument. 

Translation into presentation currency

The Group presents its financial information in US Dollars (US$). The functional currency of all the Company's subsidiaries is US$ except for TRR Services Australia Pty Ltd which has an AUD functional currency.

· Assets and liabilities for each financial reporting date presented (including comparatives) are translated at the closing rate of that financial reporting period.

· Income and expenses for each income statement (including comparatives) is translated at exchange rates at the dates of transactions. For practical reasons, the Company applies average exchange rates for the period.

· All resulting changes are recognised as a separate component of equity.

· Equity items are translated at exchange rates at the dates of transactions.

The following exchange rates were used in the retranslation of these financial statements.

Intangible assets

Royalty arrangements

Royalty arrangements which are identified and classified as intangible assets are initially measured at cost, including any transaction costs, less provision for impairment where required.

Upon commencement of production at the underlying mining operation intangible assets are amortised on a units of production basis matching the depletion of the ore body over the life of the mine. Amortisation rates are adjusted on a prospective basis for all changes to estimates of the life of mine reserves.

Impairment

At each reporting date, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets are impaired. If such an indication is identified, the recoverable amount of the asset is estimated in order to determine the extent of any impairment. The recoverable amount is the higher of fair value (less costs of disposal) and value in use. In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate. If the recoverable amount of the asset is estimated to be less than its carrying value, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is also recognised in the income statement. Should an impairment loss subsequently reverse, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment been recognised. A reversal of an impairment loss is also recognised in the income statement.

Assets held for sale

Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, and the asset is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Investments

Investment in subsidiaries are recorded at cost less provision for impairment.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

Current tax is calculated at the tax rates (and laws) that have been enacted or substantively enacted in the countries in which the Group operates by the Statement of Financial Position date and is based on taxable profit or loss for the year.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit or loss and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. 

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled, or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

Share-based payments

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At each reporting date, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit and loss, with a corresponding adjustment to equity.

Financial Instruments

Financial instruments comprise royalty financial assets, cash and cash equivalents, borrowings, financial assets and liabilities and equity instruments. Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and comprise trade and other receivables and trade and other payables respectively.

Cash and cash equivalents

Cash and cash equivalents comprise cash at hand and current and deposit balances at banks.

Borrowings

Interest bearing debt facilities are initially recognised at fair value, net of directly attributable transaction costs. Transaction costs are recognised in the income statement on a straight-line basis over the term of the facility.

Trade and other receivables

Trade and other receivables are accounted for under IFRS 9 using the expected credit loss model and are initially recognised at fair value and subsequently measured at amortised cost less any allowance for expected credit losses.

Royalty financial assets at fair value through profit and loss

Royalty financial assets are recognised or derecognised on completion date where a purchase or sale of the royalty is under a contract, and are initially measured at fair value, including transaction costs.

All of the Group's royalty financial assets have been designated as at fair value through profit and loss ("FVTPL").

The royalty financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in the 'revaluation of royalty financial assets' line item of the income statement. Fair value is determined in the manner described in note 13.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-looking expected credit loss model. 

Trade and other payables

Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

Warrant liability at fair value through profit and loss

The warrant liability is initially measured at fair value, including transaction costs. The liability is measured at fair value at the end of each reporting period, with any gains or losses recognised as other finance costs in the income statement. Fair value is determined by the calculation described in note 22.

Equity instruments and reserves description

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

Ordinary shares are classified as equity.

Deferred shares are classified as equity but have restricted rights such that they have no economic value.

Share capital account represents the nominal value of the ordinary and deferred shares issued.

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Share based payment reserve represents equity-settled share-based employee remuneration until such share options are exercised.

Foreign exchange reserve represents

· differences arising on the opening net assets retranslation at a closing rate that differs from opening rate; and

· differences arising from retranslating the income statement at exchange rates at the dates of transactions at average rates and assets and liabilities at the closing rate.

Retained earnings include all current and prior period results as disclosed in the Statement of Comprehensive Income.

Revenue recognition

The revenue of the Group comprises mainly royalty income. It is measured at the fair value of the consideration received or receivable after deducting discounts, value added tax and other withholding tax. The royalty income becomes receivable on extraction and sale of the relevant underlying commodity, and by determination of the relevant royalty agreement.

Trident adopts IFRS 15 revenue from contracts with customers ("IFRS 15") - except in the case of the offtake contract revenue. The strict legal interpretation of IFRS 15 deems Trident to be principal in the transaction (and not agent) and accordingly should disclose revenue and costs gross. However, management considers that the substance of these instruments (and revenue and cost) is such that Trident will always sell the gold within the quotation period, does not intend to hold gold for long term trading and will not make a gross loss. As a result of the above judgement, revenue in the income statement is stated net. The gross revenue, and related costs, are disclosed in note 3 - Business and Geographical Reporting.

Interest income is accrued on a time basis, by reference to the carrying value and at the effective interest rate applicable.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The Group's estimate in respect of contingent consideration that may be payable following the acquisition of Royalty Intangible Assets, is capitalised as an asset acquisition cost. The value of the provision is determined by the amounts deemed payable by management at the balance sheet date.

Critical accounting estimates and judgements

The preparation of the financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual results ultimately may differ from these estimates.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting judgements

Classification of royalty arrangements: initial recognition and subsequent measurement

The Directors must decide whether the Group's royalty arrangements should be classified as:

· Intangible assets in accordance with IAS 38 Intangible Assets; or

· Financial assets in accordance with IFRS 9 Financial Instruments

The Directors use the following selection criteria to identify the characteristics which determine which accounting standard to apply to each royalty arrangement:

Type 1 - Intangible assets: Royalties, are mainly classified as intangible assets by the Group. The Group considers the substance of a simple royalty to be economically similar to holding a direct interest in the underlying mineral asset. Existence risk (the commodity physically existing in the quantity demonstrated), production risk (that the operator can achieve production and operate a commercially viable project), timing risk (commencement and quantity produced, determined by the operator) and price risk (returns vary depending on the future commodity price, driven by future supply and demand) are all risks which the Group participates in on a similar basis to an owner of the underlying mineral licence. Furthermore, in a royalty intangible, there is only a right to receive cash to the extent there is production and there are no interest payments, minimum payment obligations or means to enforce production or guarantee repayment. These are accounted for as intangible assets under IAS 38.

Type 2 - Financial royalty assets (royalties with additional financial protection): In certain circumstances where the risk is considered too high, the Group will look to introduce additional protective measures. This has taken the form of minimum payment terms. Once an operation is in production, these mechanisms generally fall away such that the royalty will display identical characteristics and risk profile to the intangible royalties; however, it is the contractual right to enforce the receipt of cash which results in these royalties being accounted for as financial assets under IFRS 9.

Going concern

The Group and Company financial statements have been prepared on a going concern basis as the Directors have assessed the Group's and Company's ability to continue in operational existence for the foreseeable future. The operations are currently being funded through existing cash reserves and royalty income.

The financial statements do not include the adjustments that would result if the Group or Company were not to continue as a going concern. See Going Concern section for more details.

Loans to subsidiaries

Loans to subsidiaries have a carrying value at 31 December 2022 of US$90.6m (2021: US$47.6m). The Directors have assessed the carrying value to be equal to fair value on the basis that the loans will be recovered from the subsidiaries as they generate cash flow from their underlying investments in royalty assets. In the event that the underlying value of the royalty asset becomes impaired, and the loans are not considered to be recoverable, an impairment charge will then be recognised in the Statement of Comprehensive Income.

Key sources of estimation uncertainty

Assessment of fair value of royalty arrangements held at fair value

The Mimbula royalty is held at fair value. Fair value is determined based on discounted cash flow models (and other valuation techniques) using assumptions considered to be reasonable and consistent with those that would be applied by a market participant. The determination of assumptions used in assessing fair values is subjective and the use of different valuation assumptions could have a significant impact on financial results.

In particular, expected future cash flows, which are used in discounted cash flows models, are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including commodity prices, exchange rate changes and reserves and resources and timing/likelihood of mines entering production if not already generating income.

The key assumptions relating to the Group's royalty financial asset classified as fair value through profit or loss is set out in note 13.

Impairment review of intangible assets

Intangible assets are assessed for indicators of impairment at each reporting date with the assessment considering variables such as the production profiles, production commissioning dates where applicable, forecast commodity prices and guidance from the mine operators.

Where indicators are identified, the starting point for the impairment review will be to measure the expected future cash flows expected from the royalty arrangement should the project continue/come into production. A pre-tax nominal discount rate is applied to the future cash flows. The discount rate of each royalty arrangement is specific to the underlying project, making reference to the risk-free rate of return expected on an investment with the same time horizon as the expected mine life, together with the country risk associated with the location of the operation. Changes in discount rate are most sensitive to changes in the risk-free rate, country risk premiums and the expected mine life.

The outcome of this net present value calculation is then risk weighted to reflect management's current assessment of the overall likelihood and timing of each project coming into production and royalty income arising. This assessment is impacted by news flow relating to the underlying operation in the year, in conjunction with management's assessment of the economic viability of the project based on commodity price projections.

Amortisation

The Group's amortisation policy is based on a depletion method using units of production. Management regularly review the life of its assets, the amortisation rates and methodology, and amortisation rates may be adjusted for changes to the estimates.

3.  BUSINESS AND GEOGRAPHICAL REPORTING

The Group's chief operating decision maker is considered to be the Executive Board. The Executive Board evaluates the financial performance of the Group by reference to its diversified portfolio - split between precious, bulk, battery and base metal assets - its reportable segments.

The following individual royalty arrangements are aggregated into the reportable segments:

Precious: Lake Rebecca, Spring Hill, Lincoln Gold Mine, Western Australia gold, Gold Offtake Contracts

Bulk: Koolyanobbing

Battery Metals: Thacker Pass

Base: Mimbula, Pukaqaqa

Below is a summary of the Group's results, assets and liabilities by reportable segment as presented to the Executive Board. Operating profit/(loss) is stated before revaluation of royalty financial instruments, one off costs, finance income and expense foreign exchange gains and taxation.

Segmental information as at 31 December 2022:

As at 31 December 2022 the Group was receiving royalty income from the Gold Offtake portfolio and Lincoln gold (precious segment), Koolyanobbing (bulk segment) and Mimbula (base segment) which is accounted for as a financial asset (see note 13). A fair value gain of US$2.2m (2021: US$1.5m) was recognised in the base segment. US$6.1m of the Precious revenue relates to net proceeds from gold offtake contracts - gross revenue was US$446.1m with US$440.0m costs.

Segmental information as at 31 December 2021:

4.  EXPENSES BY NATURE

5.  AUDITOR REMUNERATION

During the year the Company obtained the following services from the auditor:

Details of the Company's policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than another supplier and how the auditor's independence and objectivity are safeguarded are set out in the Audit Committee Report.

6.  EMPLOYEE BENEFIT EXPENSE

All the wages and salaries were paid to the Directors and senior management. There were no employees in the year other than the Directors and senior management. Further disclosures in respect of Directors' remuneration are included within the Directors' Remuneration Report. The average number of employees (including Directors) during the year was 9 (2021: 8).

7.  FINANCE INCOME

8.  FINANCE EXPENSE

9.  INCOME TAX

The Group is subject to taxation in United Kingdom, USA and Australia with applicable tax rates of 25.00%, 21.00% and 30.00% respectively. The Group does not have any unresolved tax matters or disputes with the tax authorities in the jurisdictions in which it operates.

DEFERRED TAXATION

The following are the deferred tax assets and liabilities recognised by the Group and the movements during the year:

The deferred tax asset predominantly relates to losses incurred in the Australian subsidiary (as partially offset by accelerated capital allowances). Based on forecast future cashflows on those royalty assets held by the Australian subsidiary these losses are expected to be fully utilised, accordingly the deferred tax asset has been recognised in full.

10. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

The weighted average number of shares in issue for the purpose of calculating basic and diluted earnings per share and basic and diluted adjusted earnings per share are as follows: