Q1 2021 Activities Update

RNS Number : 1474X

Trident Royalties PLC.

30 April 2021

 

30 April 2021

Trident Royalties Plc

("Trident" or the "Company")

Q1 2021 Activities Update

Transformational Lithium Royalty Acquisition & Fundraising, Continued Strength in Commodities

Trident Royalties Plc (AIM: TRR, FSX: 5KV), is pleased to provide an update on its activities undertaken during the first quarter ended 31 March 2021, including Q1 royalty receipts.

HIGHLIGHTS

Q1 saw a significant increase in battery metals exposure, in conjunction with an oversubscribed equity financing

· Trident completed its most significant transaction to-date with the acquisition of a 60% interest in a gross revenue royalty ("GRR") over the Thacker Pass Project ("Thacker Pass"), for a total consideration of US$28.0 million, comprising US$26.0 million in cash and US$2.0 million in new ordinary shares in Trident. Thacker Pass contains the largest defined lithium Mineral Reserve in the United States;

· A successful concurrent equity financing of approximately £20.7 million (approximately US$28.8 million) was conducted at no discount to the prevailing market price to execute the Thacker Pass lithium royalty transaction and strengthen the balance sheet;

· Trident completed the Talga gold royalties transaction and, shortly post quarter end, completed the previously announced Pukaqaqa copper royalties transaction, finalising the acquisition of these seven royalties; and

· With a portfolio inclusive of copper, iron ore, gold, and now lithium, Trident is increasingly reflective of the broader global mining sector, providing investors with an inflation hedge in the face of loose global monetary policy and direct exposure to a once-in-a-generation energy revolution.

Q1 royalty payments totalling approximately US$451,314 from royalties over producing assets, an increase of 55% over Q4 2020

Royalty / Stream	Q1 2021 Payment	Cumulative Payments since Acquisition
Koolyanobbing iron ore royalty ¹	A$100,479	A$2,740,884
Mimbula copper royalty	US$375,000	US$453,707

· Mimbula copper royalty payment of US$375,000 based on the Minimum Payment Schedule ("MPS") under the royalty agreement, representing a significant increase over Q4 2020. Q1 2021 production saw 671 tonnes of copper sold, an increase over Q4 2020 as the project continues to ramp up;

· The MPS on the Mimbula copper royalty continues in 2021 (US$375,000 per quarter in 2021, less any excess payments made above the MPS from previous quarters, increasing to US$500,000 per quarter in 2022 and US$750,000 for the first two quarters of 2023)²;

· Koolyanobbing iron ore royalty payment of A$100,479 (US$76,314³), a decrease over Q4 2020 on higher received price but lower volumes from the royalty area;

· Trident notes the average grade at Koolyanobbing has fallen from 59% to 57% Fe since 2H20. Recent unprecedented strength in the iron ore market, particularly for low-grade fines products, may incentivise operators to opportunistically favour production from lower grade areas in the short term.⁴ Trident's royalty covers a substantial portion of the Deception pit, the highest-grade deposit and a significant proportion of the total Koolyanobbing reserves. Trident anticipates deferred production of this higher quality ore will benefit the Company in the short-medium term;

· Trident also notes the recent strategy overview presentation by Mineral Resources Limited, the project operator, which highlighted the impending finalisation of a 10-year plan for the Yilgarn Hub, of which Koolyanobbing and its associated infrastructure is the central component. Additionally, Mineral Resources flagged the expansion of the Yilgarn Hub to 12Mtpa as a further growth opportunity; and

· Commodity prices underlying Trident's royalty portfolio remained strong throughout Q1 2021 with iron ore averaging US$131/tonne, copper averaging $8,503/tonne, lithium carbonate equivalent ("LCE") averaging US$9,083/tonne, and gold averaging US$1,793 /oz.⁵ Post quarter end, copper has continued to climb to near 10-year highs, while LCE prices have now doubled year-to-date to over US$13,500/tonne.

Q1 royalty portfolio growth, combined with positive asset-level progress by project operators

· Thacker Pass Lithium Project ⁶ : In January 2021, Lithium Americas Corp ("LAC"), the project operator, announced the receipt of the final key federal permit for the project, followed shortly thereafter by a US$400 million equity fundraise primarily to fund the commencement of construction. With the acquisition of 60% of the GRR, Trident now has exposure to a key global lithium asset with a clear pathway to production. Other highlights include:

§ Thacker Pass currently contains a CIM compliant Mineral Reserve of 3.1Mt LCE, the largest lithium reserve in the United States, with an anticipated mine life of 46 years based on reserves.

§ Thacker Pass is at an advanced stage of development with a highly attractive Pre-Feasibility Study ("PFS") announced on 21 June 2018 and a Definitive Feasibility Study due for completion in 2021.

§ LAC has announced that key permits are in place with commencement of construction targeted for late 2021 or early 2022 and Trident expects Phase 1 production to start ramping up in 2024.

§ The GRR is subject to a partial operator buy-back which Trident expects will be exercised by LAC for proceeds to Trident of US$13.2 million during the first year of operation (the "Buyback").

§ Based on the PFS parameters published by LAC (including an LCE price of $12,000/tonne), Phase 1 steady-state royalty revenue attributable to Trident is anticipated to be approximately US$3.8 million per annum, increasing to US$7.6 million per annum at Phase 2 steady-state (assuming the Buy-Back occurs before operations commence).

§ As anticipated, the third-party claimant has named Trident as a party to the existing litigation between Orion Resource Partners regarding the GRR. The seller of the royalty has provided Trident with an indemnity (subject to customary limitations and exclusions) in respect of such proceedings.

· Lake Rebecca Gold Project:   Apollo Consolidated Ltd ("Apollo"), the project operator, has committed a material budget increase to advance the Lake Rebecca Gold Project⁷ ("Lake Rebecca"), de-risking the route to a future development decision:

§ Apollo has entered into a binding sale and purchase agreement to sell its royalty interest over the Seguela Gold Project in Cote D'Ivoire for A$20M cash. It stated that the sale "will add to existing cash reserves" placing Apollo "in a very strong position to take Rebecca forward."

§ Apollo announced the strategic acquisition of additional land tenure around Lake Rebecca to allow for full operational and planning flexibility as the company moves towards commercial studies⁸.

§ Apollo recently issued a JORC (2012) compliant Mineral Resource Estimate ("MRE") update, providing a 50% increase in Indicated Mineral Resources to 815,000 ounces to a combined total indicated and inferred optimised pit-constrained 1.105M ounces gold Mineral Resource⁹.

§ The MRE update also noted the commencement of key technical studies to progress a potential +8 year mining and processing operation. With A$37.1M in cash and receivables on hand, Apollo remains well funded to aggressively advance Lake Rebecca⁹.

§ Additional geotechnical drilling on the eastern side of the Lake Rebecca deposit will assist in the outline of an optimised open pit shell for the proposed mine; drilling has intersected wide zones of high-grade gold mineralisation in two diamond drill holes located in the footwall of the Jennifer Structure¹⁰.

§ Apollo has stated the results from the two holes open potential for previously unknown structures to the east of the current resource, with intersections up to 16m @ 4.12g/t Au and 7.4m @ 4.70g/t Au respectively.

§ Geotechnical drilling elsewhere on the project also intersected significant gold mineralisation.

· Spring Hill Gold Project: Trident notes the receipt of environmental approval for the Spring Hill Gold Project ("Spring Hill") under the Environment Protection and Biodiversity Conservation Act (EPBC). The approval represents the achievement of a key milestone in the development of Spring Hill, clearing the way for next steps toward development.

· Pukaqaqa Copper Project: Nexa Resources SA, the project operator, noted in its 2020 annual filing that the first part of pre-feasibility metallurgical results for the Pukaqaqa Copper Project were concluded in December 2020, "demonstrating better results than previous campaigns, including improved recoveries and grades. During 2021, variability tests to confirm results will be held." The project budget has been increased by 60% from 2020, to US$2.4 million in 2021 to allow for further metallurgical testing and environmental closure works in the drilling area¹¹.

· Warrawoona Gold Project: Calidus Resources Ltd ("Calidus"), the project operator, is completing an integration study on its Blue Spec gold deposit to assess the economics of mining Blue Spec and trucking ore to the nearby Warrawoona plant, potentially increasing the robustness of Warrawoona by increasing operating margins¹². In addition, Caldius noted in its corporate presentation that Warrawoona will "commence main construction this quarter", as well as confirming that construction is fully funded and on schedule to pour first gold as planned in the first half of 2022.

· Mosquito Creek Gold Project: Calidus has entered into a Farm-In Agreement with Nimble Resources¹³, the project operator, which gives Calidus the right to earn up to 90% of the Mosquito Creek tenement E46/1035, located about 75km from its Warrawoona gold project and in the vicinity of the Blue Spec mining proposition.

§ E46/1035 is located along strike of two geochemical trends identified on tenements immediately to the west, Calidus states that 'many soil and rock-chip anomalies on the tenement have not been previously followed up with drilling' and 'fieldwork will start in earnest this calendar year'.

· Koolyanobbing Iron Ore Project: In its Q3 FY2021 quarterly results¹⁴, Mineral Resources Limited stated that 2.5 million tonnes of iron ore were shipped from the Yilgarn Hub for the quarter. Trident holds a 1.5% free-on-board royalty over the M77/1259 tenement which covers a substantial part of the Deception pit, which forms part of the broader Koolyanobbing iron ore operation in Western Australia.

· Mimbula Copper Project: Production continues to ramp up at the Mimbula Copper Project and, with the copper price recently touching near 10-year highs supported by solid fundamentals, the project is well positioned to capitalise on continued positive market sentiment.

Strong balance sheet to support future acquisitions

· Unaudited cash balance of US$7.4 million as of 31 March 2021 (not inclusive of Q1 royalty revenue, which was received post-quarter end);

· This substantial cash balance - coupled with ongoing projected revenues from two cash generative royalties and an ability to offer vendors publicly tradeable equity in Trident - supports capacity for future acquisitions;

· In addition, Trident entered into a term sheet with Tribeca Global Resources Credit Pty Ltd during Q1 in respect of a proposed debt facility up to an amount of US$10 million. The Facility is subject to the finalisation of definitive documents and satisfaction of customary conditions precedent;

· Indicative of the strength of the pipeline, Trident currently has 11 active NDAs under which it is reviewing a range of opportunities across commodities including mineral sands, lead, nickel, copper, gold, zinc, cobalt, potash, and iron ore; and

· Trident continues to prioritise production or near-production assets in order to materially build Trident's near-term revenue profile.

Adam Davidson, Chief Executive Officer of Trident commented:

"The first quarter of 2021 was perhaps the most significant for Trident since its admission to trading on AIM less than a year ago, with the $28 million acquisition of 60% of the Thacker Pass lithium royalty, coupled with a substantial equity raise.  The fundraising was conducted at no discount to the prevailing share price, was significantly oversubscribed and has resulted in a number of new institutional holders establishing a position in the Company.  In addition to funding our Thacker Pass transaction, we have a very healthy balance sheet to support the continued growth and diversification of our royalty portfolio - both through acquisition as well as positive asset-level progress.  This bodes exceptionally well for Trident, particularly against a global macro backdrop that is increasingly supportive of growing demand for critical commodities.

Within the last quarter we've seen material positive updates at Lake Rebecca, Spring Hill and the Western Australian Gold Royalty package tenements. Revenue continues to remain volatile across Trident's two paying royalties, a factor which underpins the opportunity available to Trident by which it can acquire single asset royalties at attractive valuations from natural sellers, to ultimately construct a diversified portfolio of royalties with a more predictable payment profile. Trident remains focused on executing value accretive transactions across the commodity and development space, with a particular focus on enhancing near term revenue."

References

¹   Inclusive of GST

² Source: Trident Royalties announcement dated 29 June 2020  https://polaris.brighterir.com/public/trident/news/rns/story/r73y4gx/export

³   AUD = 0.7595 USD (31 March 2021)

⁴ Source: Mineral Resources Limited Quarterly Activities Report - Q3 FY21

https://clients3.weblink.com.au/pdf/MIN/02364104.pdf

⁵ Source: Factset, 62% Fe (CFR), Copper (LME), Gold (LBMA). LCE CIF Asia (Benchmark Minerals)

⁶ Source: Trident Royalties announcement dated 19 March 2021

https://polaris.brighterir.com/public/trident/news/rns/story/xppvy9x

⁷ Source: Apollo Consolidated ASX announcement 18 March 2021

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02355042-6A1025215?access_token=83ff96335c2d45a094df02a206a39ff4

⁸ Source: Apollo Consolidated ASX announcement 2 February 2021

https://www.asx.com.au/asxpdf/20210202/pdf/44s8tvh55xk8dl.pdf

⁹ Source: Trident Royalties announcement dated 22 April 2021

https://polaris.brighterir.com/public/trident/news/rns/story/x5de8pw

¹⁰ Source: Apollo Consolidated ASX announcement 15 February 2021

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02340937-6A1020176?access_token=83ff96335c2d45a094df02a206a39ff4

¹¹ Source: Nexa Resources 2020 20-F Filing for Fiscal Year ended December 31, 2020  

https://ri.nexaresources.com/listgroup.aspx?idCanal=Ny3+tGR+zKsY3DSJghT06w==

¹² Source: Calidus Resources ASX announcement 23 March 2021

https://www.asx.com.au/asxpdf/20210323/pdf/44txnhs6lht9r1.pdf

¹³ Source: Calidus Resources ASX announcement 3 February 2021

https://www.asx.com.au/asxpdf/20210203/pdf/44s9lr42nqrvsh.pdf

¹⁴ Source: Mineral Resource Limited ASX Announcements

https://clients3.weblink.com.au/pdf/MIN/02364104.pdf

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	www.tridentroyalties.com [phone]
Grant Thornton (Nominated Adviser) Colin Aaronson / Samantha Harrison / Lukas Girzadas	www.grantthornton.co.uk [phone]
Tamesis Partners LLP (Joint Broker) Richard Greenfield	www.tamesispartners.com [phone]
Shard Capital Partners LLP (Joint Broker) Erik Woolgar / Isabella Pierre	www.shardcapital.com [phone]
St Brides Partners Ltd (Financial PR & IR) Susie Geliher / Catherine Leftley / Charlotte Hollinshead	www.stbridespartners.co.uk [phone]

About Trident

Trident is a growth-focused, diversified mining royalty and streaming company, providing investors with exposure to a mix of base and precious metals, bulk materials (excluding thermal coal) and battery metals.

Key highlights of Trident's strategy include:

· Building a royalty and streaming portfolio to broadly mirror the commodity exposure of the global mining sector (excluding thermal coal) 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;

· Acquiring royalties and streams in resource-friendly jurisdictions worldwide, while most competitors have portfolios focused on North and South America;

· Targeting attractive small-to-mid size transactions which are often ignored in a sector dominated by large players;

· 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;  

· Maintaining a low-overhead model which is capable of supporting a larger scale business without a commensurate increase in operating costs; and

· 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 has relied 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.

 

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