Last checked at 9 Dec 2022 07:00
9 December 2022
Trident Royalties Plc
("Trident" or the "Company")
Sale of Gold Royalties to Franco-Nevada, delivering 2.4x return,
Debt restructure enabling lower cost of capital
Trident Royalties Plc (AIM: TRR), the diversified mining royalty company, is pleased to announce that it has entered into an agreement with Franco-Nevada Corporation (TSX, NYSE: FNV) ("Franco-Nevada") for the sale of several pre-production gold royalties (the "Royalties") for cash proceeds of up to US$15.8 million (the "Transaction"). The Transaction allows Trident to realize a significant return on its initial investment, while rightsizing the gold exposure within its portfolio and further strengthening the Company's balance sheet for subsequent acquisitions.
In parallel with the Transaction, Trident has also restructured its existing debt facility with Macquarie Bank Limited ("Macquarie") on more favourable terms, reducing the coupon by up to 2%, deferring principal repayments, and extending the term by one year8 (the "Debt Restructuring").
TRANSACTION HIGHLIGHTS
· Trident has agreed to sell its pre-production gold royalties over Rebecca1, Spring Hill2, and four other projects acquired as a portfolio from Talga Resources3 to Franco-Nevada in exchange for cash proceeds of up to US$15.8 million.
§ The Royalties were acquired by Trident for approximately US$6.5 million4, representing a return on invested capital of 143% in approximately 2 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 Project5.
· The Transaction will result in Trident holding estimated pro forma cash of approximately US$35 million6, placing the Company in a strong position to pursue new opportunities and capitalise on current weakness in traditional debt and equity markets, particularly in non-precious metals commodities.
· Whilst Trident remains focused on accretively growing the business, the Transaction highlights the Company's willingness to exit assets where substantial gains can be realised, enabling cash to be redeployed for stronger future returns.
· The Transaction also brings Trident's portfolio allocation for gold into line with longer term expectations following the acquisition of the gold offtake portfolio in January of this year.
· The Debt Restructuring illustrates the longer-term downward direction of the Company's cost of capital, with the cost of debt nearly halving from one year ago9.
· The Transaction and Debt Restructuring provide Trident with access to capital from non-equity sources as the Company continues to guard against unnecessary dilution ahead of expected valuation catalysts, particularly de-risking events in respect to its lithium portfolio and ongoing growth from its gold offtake portfolio.
RESTRUCTED DEBT FACILITY
Reflecting the value unlocked by the Transaction, and subject to its completion, Macquarie has agreed to restructure Trident's existing US$40m debt facility7, to include:
· 2% reduction in coupon (dependant on maintaining leverage ratio)8, reducing debt service costs by up to US$800,000 per year.
· Extension of the loan term by one year, to December 2025.
· Deferral of scheduled quarterly payments until June 2024.
In lieu of a cash restructuring fee, the Company has agreed to an extension of the term of the warrants held by Macquarie by 12-months.
Adam Davidson, Chief Executive Officer of Trident commented:
"We are delighted to have created this opportunity to realize significant value for our shareholders. Whilst Trident is actively seeking to accretively grow the portfolio, the Transaction highlights the Company's differentiated approach to value generation by acquiring royalties at an attractive entry value and opportunistically monetizing following growth in the underlying assets. This transaction has enabled us to deliver a return of 143% in approximately two years since acquiring the royalties, allowing Trident to recycle capital for further investments and reducing reliance on capital markets.
We are pleased to have the support of Macquarie who, against the backdrop of rising global interest rates, has reduced Trident's cost of capital and provided further flexibility to support future acquisitions. Trident remains committed to driving down our cost of capital as we mature and see the restructure of our debt facility as another step in this process, with Trident's cost of debt nearly halving in less than one year.
The combination of this transaction and the debt restructuring creates an even stronger platform to support Trident's future growth. Access to traditional debt and equity markets remains challenging for mining companies and provides significant opportunity for Trident to deploy capital. This is reflected in the quality of our pipeline of opportunities, which we look forward to executing upon alongside ongoing positive developments within our existing portfolio."
THE TRANSACTION
Completion of the Transaction is to occur within 90 days of signing of the Sales and Purchase Agreement, unless extended by mutual agreement of the parties. Completion is subject to satisfaction of several conditions precedent. The Debt Restructuring is subject to completion of the Transaction and will take effect from completion.
Canadian Imperial Bank of Commerce, London Branch ("CIBC") acted as financial advisor to the Company on the Transaction.
References
1: Source: Trident Royalties announcement dated 29 October 2020
( https://polaris.brighterir.com/public/trident/news/rns/story/rdz64pw )
2: Source: Trident Royalties announcement dated 17 November 2020
( https://polaris.brighterir.com/public/trident/news/rns/story/x5op59r )
3: Source: Trident Royalties announcement dated 30 March 2021
( https://polaris.brighterir.com/public/trident/news/rns/story/xeqjp2x )
4: Source: Reserve Bank of Australia foreign exchange rates used for AUD royalty acquisitions, with dates for completion being 30 March 2021, 17 November 2020, and 29 October 2020
5: Long-stop date of 31 December 2028 for commercial production at the Rebecca Gold Project, with US$1.25 million paid upon first royalty receipt by Franco-Nevada and commencement of commercial production at Rebecca.
6: Excludes the US$1.25 million payable on first production at the Rebecca Gold Project
7: Source: Trident Royalties announcement dated 13 December 2021
( https://polaris.brighterir.com/public/trident/news/rns/story/x52139x )
8: Key Debt Terms:
Coupon: 5.75% + SOFR when leverage ratio is 2.0x
Tenor: Maturity date of the facility extended to 31 December 2025
Repayment Schedule: Scheduled US$2.5m quarterly repayments to deferred to June 2024
Warrants: New expiry date of 11 January 2026
9: Debt Terms as of one year ago being a coupon of 10% + LIBOR
( https://polaris.brighterir.com/public/trident/news/rns/story/rg7093r )
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 |
CIBC (Financial Advisor) Oliver Ward / Scott Fisher / Dhaval Desai | www.cibccm.com +44 20 7234 6000 |
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 / Varun Talwar / Ashton Clanfield | www.stifelinstitutional.com +44 20 7710 7600 |
Tamesis Partners LLP (Joint Broker) Richard Greenfield | www.tamesispartners.com +44 20 3882 2868 |
Liberum Capital Limited (Joint Broker) Scott Mathieson / Cara Murphy | www.liberum.com +44 20 3100 2184 |
Hudson Sandler Investor Relations: John Smelt Public Relations: Charlie Jack / Harry Griffiths | Trident@hudsonsandler.com +44 207 796 4133 |
About Franco-Nevada Corporation
Franco-Nevada is the leading gold-focused royalty and streaming company with the largest and most diversified portfolio of cash-flow producing assets. Its business model provides investors with gold price and exploration optionality while limiting exposure to cost inflation. Franco-Nevada is debt-free and uses its free cash flow to expand its portfolio and pay dividends. It trades under the symbol FNV on both the Toronto and New York stock exchanges.
About Trident Royalties
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.