Trident Royalties Regulatory News (TRR)

13 September 2022

Trident Royalties Plc

(the "Group", the "Company" or "Trident")

Interim Results

for the six-month period ended 30 June 2022

Trident Royalties Plc (AIM: TRR), the diversified mining royalty company, is pleased to present its interim financial statements to shareholders for the six months ended 30 June 2022.

The Interim Results for the period ended 30 June 2022 are set out below and will shortly be available in full on the Company's website, www.tridentroyalties.com.

Highlights

Adam Davidson, Chief Executive Officer of Trident commented:

"Trident has continued to excel amid a difficult macro-economic environment. The portfolio is performing well, with solid progress made across a number of assets. I am pleased with the acquisitions we made during the period, most notably a portfolio of cash generative gold offtakes which range across a number of jurisdictions, assets and operators.

Looking forward to the second half, Trident is well positioned to continue our record of consistent growth. Our strong balance sheet will enable us to execute more value accretive transactions and further reduce our cost of capital. A final permit decision at the Thacker Pass lithium project is expected during H2, which will transform Trident's anticipated future revenue profile and battery metals exposure. I look forward to updating the market on this and other developments over the coming months."

Competent Person's Statement

The technical information contained in this disclosure has been read and approved by Mr Nick O'Reilly (MSc, DIC, MAusIMM, MIMMM, FGS), who is a qualified geologist and acts as the Competent Person under the AIM Rules - Note for Mining and Oil & Gas Companies. Mr O'Reilly is a Principal Consultant working for Mining Analyst Consulting Ltd which has been retained by Trident to provide technical support.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

** Ends **

Contact details:

Chairman's Statement

Trident has performed well during the period. This has been reflected both in corporate activity and the underlying performance of our portfolio. We continue to deliver on our strategy of building a portfolio which reflects the exposure and balance of global commodity markets.

In January, we completed the acquisition of a portfolio of producing gold offtake streams from Orion Resource Partners for US$69.75 million. This significantly increased the number of producing assets held by Trident, materially improving the Group's cash generation. Solid operational progress across the portfolio has increased our confidence that Trident remains on track to deliver transformational cash generation in the years ahead. The cash gives greater flexibility for the group's corporate activities.

We increased our potential exposure to battery materials through an agreement for a right-to-acquire 50% of a royalty covering the Sonora Lithium Project in Mexico. Alongside our Thacker Pass Lithium royalty, this could deliver exceptional lithium exposure through two world-class assets.

The mining sector again faces considerable headwinds with inflationary pressures on operating and capital costs. Financing projects is difficult, with equity markets reluctant to provide funding and rising interest rates making debt increasingly expensive. This provides opportunity for Trident, as a source of funding for operators, and the royalty model offering investors protection from rising operating and capital costs. 

The Trident management team has a strong track record in securing value-accretive deals, while our robust balance sheet ensures we have the flexibility to move quickly and effectively.

In June, we were pleased to announce the appointment of seasoned mining executive David Reading as a Non-Executive Director, complementing the existing strength of the Board.

I thank the Board and management for their efforts. I also would like to thank our shareholders for their continued support. The momentum of Trident's portfolio and near-term catalysts for growth gives me confidence in its ability to continue to deliver growth, driving strong shareholder returns in the short and long term.

Paul Smith Non-Executive Chairman

13 September 2022

Chief Executive Officer's Statement

The period was a positive one for Trident, with a total of three value-accretive transactions completed alongside strong asset level progress across a number of projects within our growing portfolio. Significantly, four assets entered production or otherwise generated first revenue during the period, marking a significant increase in cash generation for Trident which complements the revenue profile of the recently acquired portfolio of gold offtakes.

Against the backdrop of an increasingly uncertain and challenging macro-environment dominated by significant geopolitical events, the ongoing impacts of the Covid-19 pandemic and significant increases in inflation, the benefits of Trident's royalty model remain clear. Commodities are well known to provide an effective hedge against inflation, with royalty investments structurally superior to equity in resisting the impact of inflation by providing direct exposure to commodity price, without being impacted by increasing operating costs. This is evidenced by our share price increasing by around 30% during the period, whilst exhibiting lower volatility than direct mining equities.

The disruption brought to traditional financial markets by significant global uncertainty provides Trident with additional opportunities to play a larger role in new project financing as traditional debt and equity markets become more difficult to access. Similarly, holders of existing royalties may be more inclined to monetise attractive non-core assets in order to protect against uncertainty, which presents an opportunity to Trident.

Royalty portfolio

Our portfolio of assets has made solid progress throughout the period and serves to highlight the benefits of royalty investments, including:

· The resumption of sales from Trident's royalty tenement at the Koolyanobbing iron ore mine in Australia, as well as the opening of a new deposit within our tenure to capitalise on strong iron ore prices. This led to a material increase in revenue from the asset during Q2.

· The continued advancement of Thacker Pass, which remains a key asset within Trident's portfolio, with the ability to transform our future revenue profile and provide exposure to a tier 1 lithium project. Trident maintains a 60% interest in a gross revenue royalty covering the entire project.

· Following its acquisition of the Rebecca project in late-2021, Ramelius Resources announced a 75km drill program at Rebecca, with initial drilling increasing the Indicated Resource at Rebecca to 1.2Moz of gold.

· Impending first copper cathode production from Moxico Resources' Mimbula operation in Zambia. Mimbula is expected to produce 10,000 tonnes per annum from H2 2022, with a feasibility study for an expansion of this to a combined 50,000 tonne per annum run rate being near completion.

Offtake portfolio

Trident completed the acquisition of a portfolio of gold offtakes in January 2022, the revenue from which is positively impacted by gold price, volatility, and operational performance - all of which are well suited to maximise value in the current environment.

At an asset level, significant progress was observed across the portfolio with first gold produced at Ruby Hill and Santa Luz. Blyvoor continued to ramp-up throughout the period, with both Bonikro and Eagle performing as expected.

Trident added significant value with the restructure of its Premier offtake with Equinox, which included Trident receiving a one-off payment of US$3.7M, as well as securing future guarantees which effectively remove Trident's exposure to construction and ramp-up performance at the Greenstone project which remains covered by the offtake.

Transactions

During the period we acquired the portfolio of cash generative gold offtakes which completed on 11 January 2022. In March, Trident opportunistically acquired an additional cash generative gold offtake covering the Sugar Zone mine in Canada. In addition, we also expanded our interest in battery materials through an agreement for a right-to-acquire 50% of a royalty covering the Sonora Lithium Project in Mexico. Trident now holds interests in two globally significant lithium projects through royalties over Sonora and Thacker Pass.

Outlook

I am pleased with the progress made during the first half, through acquisitions as well as organic asset-level progress across key projects within the portfolio. Current macroeconomic and geopolitical uncertainty will continue to challenge traditional debt and equity markets, providing Trident additional opportunities to undertake value accretive acquisitions as we continue to develop the portfolio with the aim of mirroring the commodity exposure of the global mining sector.

Post-period end, we were pleased to note Lithium Americas' announcement that early works construction is on track to begin at Thacker Pass, and that the feasibility study will be released in late-2022, pending the final outcome from the Federal Record of Decision appeal. We also secured a favourable amendment to our agreement regarding the Sonora Lithium Royalty, allowing Trident a longer period of time in which to exercise the right-to-fund the acquisition of the royalty.

Trident remains actively focused on pursuing opportunities in base and battery metals, as well as in bulk and industrial minerals, but will continue to opportunistically acquire royalties covering "out of cycle" commodities as appropriate. We look forward to reporting on our further progress in due course.

Adam Davidson Chief Executive Officer

13 September 2022

FINANCIAL REVIEW

Overview

Following a highly productive 2021, Trident began 2022 by completing its largest transaction to date acquiring a portfolio of gold offtake contracts for US$69.75m plus costs. The period also saw a further gold offtake acquisition in March for US$3.75m and the realisation of US$3.70m for an amendment to one of the offtake contracts. In addition, Trident invested US$2.50m to secure the right to acquire an indirect royalty over the Sonora lithium project in Mexico. All these transactions were funded from a combination of existing cash, new equity issuance and a new US$40m debt facility with Macquarie Bank - following the redemption of the existing US$10m Tribeca facility. The gold offtakes are materially cash-flowing and alongside Trident's other cash generative assets complement, our longer term development projects such as Thacker Pass and Pukaqaqa.

Acquisitions and disposal

The Group completed the following acquisitions during the period for total consideration of US$74.02m (including costs):

· A portfolio of gold offtake contracts over 7 producing mines in 6 countries for US$69.75m, comprising US$60.0m in cash and US$9.75m in equity; and

· A further gold offtake contract over the Sugar Zone mine in Canada for US$3.75m paid in equity; and

· 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 Royalty over the Sonora Lithium Project in Mexico, through a joint venture company Sonoroy Holdings Limited in which Trident has a 50% shareholding.

· 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$3.70m and the Mercedes mine was removed from its obligations under the contract.

Condensed Consolidated Statement of Financial Position

Following these acquisitions, total net assets increased from US$88.07m at the end of 2021 to US$107.69m as at 30 June 2022.

Intangible assets consist of US$117.71m cost, less US$2.84m amortisation for total net book value of US$114.87m (31 December 2021: US$44.90m) representing the Thacker Pass, Pukaqaqa, Koolyanobbing, Spring Hill, Lincoln Hill, Lake Rebecca and WA exploration projects together with the acquisitions described above.

Royalty financial assets were valued at US$7.38m (31 December 2021: US$7.46m) representing the fair value of the Mimbula copper royalty in Zambia. The royalty financial asset has been designated as fair value through profit and loss with the fair value gains and losses recognised in the 'revaluation of royalty financial assets' line item in the income statement. The asset generated US$1.0m royalty income during the period and a fair value increase of US$0.92m was recognised in the income statement.

Trade and other receivables totalling US$3.85m (31 December 2021: US$1.2m) includes US$0.9m in respect of 2nd quarter 2022 royalty income due from Koolyanobbing and Mimbula received after the period-end. Other receivables also include US$2.50m in respect of the Sonora lithium project described above.

Trade and other payables totalling US$0.21m (31 December 2021: US$1.04m) consisted predominantly of trade payables, social security and taxation and accruals with all amounts within agreed payment terms.

Deferred contingent consideration of US$0.41m (31 December 2021: US$0.44m) represents A$0.60m contingent payment due on the Spring Hill project based on the operator meeting certain production targets. 

Condensed Consolidated Statement of Comprehensive Income and EBITDA

The Group reported a gross profit of US$1.31m (2021: US$0.07m) from reported net revenues of US$3.13m (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$0.92m (2021: US$0.68m) predominantly due to the payment of the minimum payment schedule in lieu of the mine currently not operating and therefore not 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$0.83m (2021: US$0.34m loss) mainly as a result of the strengthening of the US dollar against the Australian dollar. Finance charges totalled US$2.25m including US$1.59m in interest payments and US$0.41m of amortised finance arrangement fees. Loss after taxation was US$0.61m (2021: US$0.93m loss) and basic loss per share of 0.21c (2021: 0.64c).

The Group generated net revenue from its gold offtake contracts of US$2.57m and its Koolyanobbing iron ore asset of US$0.56m (2021: US$0.08m). The amortisation charge was US$1.82m (2021: US$0.01m) and total Group overheads of US$1.82m (2021: US$1.44m) including US$0.43m (2021: $0.17m) non-cash share-based payments and other charges; resulting in an operating loss of US$0.51m (2021: US$1.38m). 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. 

Gross offtake revenue US$201.04m less US$198.46m

Cashflow and Borrowings

Net cash decreased in the period by US$25.48m (2021: US$1.14m increase). Financing inflows were US$32.33m (2021: US$28..28m) from an equity fund raise in January and the new loan facility with Macquarie; of which US$58.47m (2021: US$26.09m) was invested into acquiring those assets noted above, and US$0.73m (2021: US$1.00m used in) was generated from operating activities. The cash figure at 30 June 2022 was US$20.15m (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$0.12m) in respect of tax due. A deferred tax asset was recognised totalling US$1.17m (2021: US$0.35m) 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$0.19m (2021: US$0.13m).

Condensed Consolidated Statement of Comprehensive Income

for the six-months ended 30 June 2022

Condensed Consolidated Statement of Financial Position

As at 30 June 2022

Condensed Consolidated Statement of Changes in Equity

for the six-month period ended 30 June 2022

Condensed Consolidated Statement of Cash Flows

for the six-month period ended 30 June 2022