Last checked at 30 Jan 2023 07:00
30 January 2023
Trident Royalties Plc
("Trident" or the "Company")
Q4 2022 Activities Update
Trident Royalties Plc (AIM: TRR), the diversified mining royalty company, is pleased to provide an update on its activities during the quarter ended 31 December 2022.
HIGHLIGHTS
Q4 royalty receipts & cash position
· Record quarterly receipts of US$3.5 million from exposure to gold, copper, mineral sands, and iron ore. A quarter-on-quarter increase of 46% and ninefold increase over Q4 2021.
· Total 2022 royalty receipts of US$13.8 million, a nearly eightfold increase over 2021.
Royalty / Stream | Q4 2022 (US$) | Q3 2022 (US$) | Q4 2021 (US$) |
Koolyanobbing iron ore royalty | 532,573 | 406,963 | - |
Mimbula copper royalty | 500,000 | 500,000 | 375,000 |
Lincoln gold royalty | 173,500 | 173,500 | - |
Gold offtakes portfolio | 2,228,886 | 1,308,176 | - |
Kwale mineral sands royalty | 61,074 | - | - |
Total* | 3,496,033 | 2,388,639 | 375,000 |
*Reserve Bank of Australia for 30 December 2022 (0.6775) and 30 September 2022 (0.6502)
· Cash of US$21.8 million as of 27 January 2023, providing a strong platform for further acquisitions. This cash balance includes revenue from the gold offtake streams, but does not include Q4 royalty receipts.
· Cash position will increase further upon completion of the sale of a portfolio of pre-production gold royalties to Franco-Nevada Corporation for cash proceeds of up to US$15.8 million.1 The transaction crystallised a return on invested capital of 143%, while bringing Trident's portfolio gold allocation in line with longer term expectations and providing additional capital for redeployment.
Transactions & portfolio asset-level progress
· Post-quarter end, Trident acquired a 0.25% Free On Board ("FOB") royalty over the Kwale mineral sands project in Kenya, with an effective date of 1 October 2022. Kwale commenced production in 2013, with operator Base Resources recently 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 the prospects of further mine life extensions to be positive.
· Following an oral hearing held by the US District Court of Nevada on 5 January 2023 for the appeal of the issuance of the Record of Decision for the Thacker Pass Lithium Project, the Court reaffirmed no additional hearings or briefings are required and it expects to issue a decision in the "next couple of months".2
· Ganfeng Lithium confirmed that the Sonora Lithium Project is under construction while noting that planned Stage 2 production increased by 43% to 50,000 tonnes per annum of lithium hydroxide.3 The final appeal challenging the validity of the royalty was held on 13 January 2023, with a decision expected in the coming months.
Adam Davidson, Chief Executive Officer of Trident commented:
"Trident has continued to generate good momentum over the past 12 months, and we finished 2022 with our best operational quarter since inception. Q4 2022 saw record royalty receipts of $3.5 million, 46% higher than the previous quarter and a ninefold year-on-year increase.
There has also been significant progress across the portfolio. Mimbula continues to develop into a meaningful copper operation, recently producing first cathode and with the operator raising in excess of US$135m across 2022 to support development and future expansion plans. Legal hearings for appeals at both Thacker Pass and Sonora were held in early January, with decisions expected in the coming months. We remain encouraged by progress at both, which moves us towards achieving meaningful battery metal exposure and transforming the portfolio and future cashflows.
The disposal of several pre-production gold royalties to Franco-Nevada crystallises significant value for our shareholders and by further strengthening the balance sheet, enables us to take advantage of opportunities as they arise. Commodity demand requires capital investment, and with traditional equity and debt markets currently unfavourable to many operators, royalties are likely to fill part of this funding gap. Having built a very strong balance sheet over the past year, Trident is well placed to be part of this. We have a solid core portfolio and are assessing a wide range of opportunities. We look forward to reporting on progress during what is likely to be a key year for the Company."
Royalty Portfolio Update:
Gold Royalties Sale Transaction1
· Following completion of a competitive sales process, Trident agreed to sell its pre-production gold royalties over Rebecca, Spring Hill, and four other projects acquired as a portfolio from Talga Group to Franco-Nevada Corporation in exchange for cash proceeds of up to US$15.8 million.
· The Royalties were acquired by Trident for approximately US$6.5 million, representing a return on invested capital of 143% in approximately two years.
· US$14.55 million of the consideration is payable immediately upon completion and US$1.25 million is to be paid upon first production from the Rebecca Gold Project.
· Reflecting the value unlocked by the transaction, and subject to its completion, Macquarie has agreed to restructure Trident's existing US$40 million debt facility, to include a 2% reduction in coupon (reducing debt service costs by up to US$800,000 per year), deferral of scheduled quarterly payments, and a one-year extension of the loan term. Trident expects to complete the transaction in Q1 2023.
Mimbula Copper Project4
· Moxico Resources PLC successfully produced first copper cathode from the Mimbula Copper Project in Zambia at its 10,000 tonne per annum ("tpa") copper cathode Phase 1 operation. In H2 2022, a Bankable Feasibility Study was completed contemplating an expansion to 56,000 tpa copper cathode production (Phase 2). Moxico raised total gross proceeds of US$135 million in 2022 to progress development of the project.
Thacker Pass Lithium Project6
· Pending confirmation of the Record of Decision, Lithium Americas Corp. noted during the quarter: "As we await a ruling by the Federal Court, we are moving ahead with all areas required to support construction, including final selection of an EPCM contractor, evaluating partnership and supply agreements, as well as progressing our application with the US Department of Energy loan program." Subsequent to quarter end, Lithium Americas Corp. announced that it has awarded the Engineering, Procurement and Construction Management ("EPCM") contract for construction of Thacker Pass to Bechtel, an industry-leading construction and engineering firm.
Sonora Lithium Project3,5
· Ganfeng Lithium, operator of the Sonora Lithium Project, highlighted that the project is under construction, which it intends to accelerate. In addition, Ganfeng increased the planned production rate by 43% relative to the previous Feasibility Study published by Bacanora Lithium, with potential Stage 2 production increasing to 50,000 tpa of lithium hydroxide.
· The final appeal challenging the validity of the royalty occurred on 13 January 2023, following a 2021 judgement by the Court of Queen's Bench of Alberta which ruled in the royalty holder's favour on the basis that the challenge was time-barred. Trident expects a decision in the coming months and retains the right and option to crystalise its 50% interest in the royalty (equal to a 1.5% gross revenue royalty attributable to Trident) in consideration of a further US$23.5 million.
Koolyanobbing Iron Ore Project
· Trident's quarterly royalty payment benefited from a 19% increase in production tonnage from the royalty zone, coupled with higher iron ore prices, but this was somewhat offset by a decrease in the Australian dollar exchange rate.
Offtakes Portfolio Update:
Gold Deliveries
· Gold deliveries increased by 12% during the quarter, from 65,865 ounces in Q3 to 74,085 ounces in Q4 on strong year-end volumes, while the gold spot price also increased by US$152 per ounce over the course of Q4, positively impacting margins. Gold volatility, as measured by the average 7-day volatility of the LBMA PM Gold Fix7 over the quarter, increased by 20% relative to the previous quarter, further improving revenue.
Equinox Gold Santa Luz Offtake8
· Equinox Gold Corp., operator of the Santa Luz gold mine, announced that commercial production was achieved on 1 October 2022, with production to grow to 100,000 ounces of average annual gold production.
Equinox Gold Los Filos Offtake9,10
· Equinox Gold, operator of the Los Filos gold mine complex, announced an updated Feasibility Study for a production expansion. While Equinox has not yet approved the expansion, the study noted peak gold production averaging 360,000 ounces per year from 2025-2030. By comparison, 2022 gold production at Los Filos was 133,723 ounces.
References
1: Source: Trident Royalties announcement dated 9 December 2022
( https://polaris.brighterir.com/public/trident/news/rns/story/w31243x )
2: Source: Trident Royalties announcement dated 9 January 2023
( https://polaris.brighterir.com/public/trident/news/rns/story/xel0mjr )
3: Source: Trident Royalties announcement dated 24 October 2022
( https://polaris.brighterir.com/public/trident/news/rns/story/xo1pnmr )
4: Source: Trident Royalties announcement dated 27 October 2022
( https://polaris.brighterir.com/public/trident/news/rns/story/r79pyjx )
5. Source: Trident Royalties announcement dated 27 January 2022
( https://polaris.brighterir.com/public/trident/news/rns/story/x2kjzlx )
6. Source: Trident Royalties announcement dated 10 October 2022
( https://polaris.brighterir.com/public/trident/news/rns/story/xegl62w )
7. London Bullion Market Association
( https://www.lbma.org.uk/prices-and-data/precious-metal-prices#/ )
8. Source: Equinox Gold announcement dated 4 October 2022
( https://equinoxgold.com/news/equinox-gold-announces-commercial-production-at-the-santa-luz-gold-mine )
9. Source: Trident Royalties announcement dated 21 October 2022
( https://polaris.brighterir.com/public/trident/news/rns/story/x87125w )
10. Source: Equinox Gold announcement dated 11 January 2023
( https://equinoxgold.com/news/equinox-gold-reports-150439-ounces-of-gold-produced-in-fourth-quarter-532319-ounces-of-gold-produced-in-2022 )
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:
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.