Last checked at 23 Feb 2023 15:14
23 February 2023
Trident Royalties Plc
("Trident" or the "Company")
Portfolio Update: Thacker Pass Lithium Royalty
Trident Royalties Plc (AIM:TRR), the diversified mining royalty company, is pleased to note a recent update on the Thacker Pass lithium project ("Thacker Pass" or the "Project"), in Nevada, by the project operator, Lithium Americas Corp. ("LAC")1.
On 22 February 2023, LAC announced it had received a letter of Substantial Completion from the U.S Department of Energy ("DOE") Loan Programs Office for its application to support the financing of Thacker Pass. The Letter of Substantial Completion determines that LAC's application for the DOE's Advanced Technology Vehicles Manufacuring Loan Program ("ATVM Loan Program") contains all the information necessary to conduct an eligibility assessment and can commence the process to engage in confirmatory due diligence and term sheet negotiation.
The Letter of Substantial Completion follows LAC's April 2022 application for the DOE ATVM Loan Program. If LAC is offered a loan by DOE, it expects funding from the ATVM Loan Program to provide up to 75% of Thacker Pass' total capital costs for construction. Relevant development costs incurred by the Project may qualify as eligible costs under the ATVM Loan Program as of 31 January 2023. DOE's invitation to enter into due diligence is not an assurance that DOE will offer a term sheet to the applicant, or that the terms and conditions of a term sheet will be consistent with terms proposed by the applicant. The foregoing matters are wholly dependent on the results of DOE advanced due diligence and DOE's determination whether to proceed.
On 31 January 2023, LAC entered into a binding supply agreement with General Motors Co. (NYSE: GM) ("GM") where GM will receive exclusive access to Phase 1 production for 10 years from the commencement of Phase 1 production, with the option for GM to extend by an additional five years under the same terms as the initial term. GM will also have a right of first offer on the offtake of Thacker Pass' Phase 2 production2. Lithium carbonate from Thacker Pass will be used in GM's proprietary Ultium battery cells. In connection with the supply agreement, GM agreed to a strategic investment of $650 million of equity in two tranches. The initial $320 million investment tranche closed on 16 February 2023 and the LAC expects the second $330 million investment tranche to close following the LAC's contemplated separation of its U.S. and Argentine businesses in the second half of 2023 and the satisfaction of certain conditions precedent to such closing.
With the expected funding from the ATVM Loan Program, in combination with GM's $650 million equity investment and cash on hand, LAC expects to have secured the necessary funding to substantially de-risk Thacker Pass Phase 1 construction.
Trident holds a 60% interest in a gross revenue royalty over the entirety of Thacker Pass. Assuming LAC exercises the partial royalty buy-back (US$13.2 million attributable to Trident), then Trident will retain the equivalent of a (net) 1.05% gross revenue royalty. At current lithium spot price of approximately US$54,000 per tonne LCE, once at full production, the (post-buyback) royalty will generate over US$45 million per year to Trident.
Jonathan Evans, President and CEO of LAC, commented for the purposes of their announcement1:
"We applaud the Biden Administration for their efforts to date and support to secure a domestic supply chain of critical minerals to strengthen our national security, our economy and our commitment to sustainability.
"We are pleased to have the support of both GM and the DOE to accelerate the energy transition while spurring job creation and economic growth in America. Over the past months, we have achieved major milestones that allow us to commence construction and begin ordering long-lead equipment at Thacker Pass, putting into motion a solid foundation for a domestic lithium supply chain for electric vehicles."
Adam Davidson, Chief Executive Officer of Trident commented:
"This is another very positive step forward for Thacker Pass. The news from LAC in recent weeks of General Motor's strategic $650 million equity investment, followed in quick succession with the ruling from the Federal Court that there is no impediment to commencing construction, are critical milestones for the Project. This recent support from DOE further endorses the potential of Thacker Pass as a long life mine with significant strategic importance in the context of the United States' transition to net zero."
References
1 Source: Lithium Americas Corp TSX announcement: Lithium Americas receives Letter of Substantial Completion for Application to US DOE ATVM Loan Program 22 February 2023:
(https://www.lithiumamericas.com/news/lithium-americas-receives-letter-of-substantial-completion-for-application-to-us-doe-atvm-loan-program)
2 Source: Lithium Americas Corp announcement dated 31 January 2023:
(https://www.lithiumamericas.com/news/lithium-americas-provides-general-motors-transaction-details-and-update-on-construction-plan-for-thacker-pass )
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Contact details:
Trident Royalties Plc Adam Davidson / Richard Hughes | www.tridentroyalties.com +1 (757) 208-5171 / +44 7967 589997 |
Grant Thornton (Nominated Adviser) Colin Aaronson / Samantha Harrison / Samuel Littler | www.grantthornton.co.uk +44 020 7383 5100 |
Stifel Nicolaus Europe Limited (Joint Broker) Callum Stewart / Ashton Clanfield | www.stifelinstitutional.com +44 20 7710 7600 |
Liberum Capital Limited (Joint Broker) Scott Mathieson / Cara Murphy | www.liberum.com +44 20 3100 2184 |
Tamesis Partners LLP (Joint Broker) Richard Greenfield | www.tamesispartners.com +44 20 3882 2868 |
St Brides Partners Ltd (Financial PR & IR) Susie Geliher / Catherine Leftley | www.stbridespartners.co.uk +44 20 7236 1177 |
About Trident
Trident is a growth-focused diversified mining royalty and streaming company, providing investors with exposure to a mix of base battery, precious, and bulk metals.
Key highlights of Trident's strategy include:
· | Building upon a royalty and streaming portfolio which broadly mirrors the commodity exposure of the global mining sector (excluding fossil fuels) with a bias towards production or near-production assets, differentiating Trident from the majority of peers which are exclusively, or heavily weighted, to precious metals;
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· | Acquiring royalties and streams in resource-friendly jurisdictions worldwide, while most competitors have portfolios focused on North and South America;
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· | Targeting attractive small-to-mid size transactions which are often ignored in a sector dominated by large players;
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· | Active deal-sourcing which, in addition to writing new royalties and streams, will focus on the acquisition of assets held by natural sellers such as: closed-end funds, prospect generators, junior and mid-tier miners holding royalties as non-core assets, and counterparties seeking to monetise packages of royalties and streams which are otherwise undervalued by the market;
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· | Maintaining a low-overhead model which is capable of supporting a larger scale business without a commensurate increase in operating costs; and
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· | Leveraging the experience of management, the board of directors, and Trident's adviser team, all of whom have deep industry connections and strong transactional experience across multiple commodities and jurisdictions. |
The acquisition and aggregation of individual royalties and streams is expected to deliver strong returns for shareholders as assets are acquired on terms reflective of single asset risk compared with the lower risk profile of a diversified, larger scale portfolio. Further value is expected to be delivered by the introduction of conservative levels of leverage through debt. Once scale has been achieved, strong cash generation is expected to support an attractive dividend policy, providing investors with a desirable mix of inflation protection, growth and income.
Forward-looking Statements
This news release contains forward‐looking information. The statements are based on reasonable assumptions and expectations of management and Trident provides no assurance that actual events will meet management's expectations. In certain cases, forward‐looking information may be identified by such terms as "anticipates", "believes", "could", "estimates", "expects", "may", "shall", "will", or "would". Although Trident believes the expectations expressed in such forward‐looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those projected. Mining exploration and development is an inherently risky business. In addition, factors that could cause actual events to differ materially from the forward-looking information stated herein include any factors which affect decisions to pursue mineral exploration on the relevant property and the ultimate exercise of option rights, which may include changes in market conditions, changes in metal prices, general economic and political conditions, environmental risks, and community and non-governmental actions. Such factors will also affect whether Trident will ultimately receive the benefits anticipated pursuant to relevant agreements. This list is not exhaustive of the factors that may affect any of the forward‐looking statements. These and other factors should be considered carefully and readers should not place undue reliance on forward-looking information.
Third Party Information
As a royalty and streaming company, Trident often has limited, if any, access to non-public scientific and technical information in respect of the properties underlying its portfolio of royalties and investments, or such information is subject to confidentiality provisions. As such, in preparing this announcement, the Company often largely relies upon information provided by or the public disclosures of the owners and operators of the properties underlying its portfolio of royalties, as available at the date of this announcement.