Interim Results

RNS Number : 1852Z

Trident Royalties PLC.

13 September 2022

 

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

·	Completion of several acquisitions for a total consideration of US$76 .0 m, Trident's largest half yearly consideration paid to date.
·	Trident completed its largest transaction to date, acquiring a portfolio of gold offtake contracts for US$69.75 million.
·	Significant royalty and offtakes receipts of US$7.84 million generated from Trident's portfolio; inclusive of the gold offtakes assets, Mimbula copper royalty, and Koolyanobbing iron ore royalty.
·	Solid progress across the portfolio, with Koolyanobbing resuming iron ore sales, first gold poured at Ruby Hill and Santa Luz, and a significant resource update at the Rebecca gold project.
·	Thacker Pass continues to advance, with Lithium Americas confirming post-period end that it will commence early works production and release a defined feasibility study this year, pending a positive ruling in the Court of Appeals.

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:

Trident Royalties Plc Adam Davidson / Paul Smith	www.tridentroyalties.com [phone] / [phone]
Grant Thornton (Nominated Adviser) Colin Aaronson / Samantha Harrison / Samuel Littler	www.grantthornton.co.uk [phone]
Stifel Nicolaus Europe Limited (Joint Broker) Callum Stewart / Ashton Clanfield	www.stifelinstitutional.com [phone]
Tamesis Partners LLP (Joint Broker) Richard Greenfield	www.tamesispartners.com [phone]
Hudson Sandler Investor Relations: John Smelt Public Relations: Charlie Jack / Harry Griffiths	[phone] [e-mail] [e-mail]

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:

		Six months ended 30 June 2022	Six months ended 30 June 2021
		US$'000	US$'000
Loss after tax		(611)	(930)
Income tax		(189)	(131)
Amortisation		1,822	11
Finance costs net of finance income		2,240	31
EBITDA		3,262	(1,019)
Other adjustments:
Net foreign exchange losses		830	337
Income from financial instrument through profit and loss		1,000	753
Revaluation of royalty financial assets		(921)	(683)
Share-based payments charge and other non-cash items		430	167
Profit on disposal of intangible asset		(1,862)	-
Adjusted EBITDA		2,739	(445)

The following table shows total royalty receipts for the period for royalty intangible assets, net offtake interests, disposals and financial assets:

		Six months ended 30 June 2022	Six months ended 30 June 2021
		US$'000	US$'000
Royalty interests		561	77
Offtake interests (net proceeds)*		2,572	-
Proceeds from gold offtake amendment (gross)		3,706
Royalties due or received from royalty financial assets		1,000	753
		7,839	830

* 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

		Six months ended 30 June 2022 Unaudited	Six months ended 30 June 2021 Unaudited
Continuing operations		US$'000	US$'000
Revenue		3,133	77
Amortisation		(1,822)	(11)
Gross profit		1,311	66
Administrative expenses		(1,824)	(1,442)
Operating loss		(513)	(1,376)
Revaluation of royalty financial assets		921	683
Profit on disposal of intangible asset		1,862	-
Finance income		10	-
Finance costs		(2,250)	(31)
Net foreign exchange losses		(830)	(337)
Loss before taxation		(800)	(1,061)
Income tax		189	131
Loss attributable to owners of the parent		(611)	(930)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Deferred tax relating to items that have or may be reclassified		-	10
Exchange gains arising on translation of foreign operations		126	(10)
Other comprehensive income for the period, net of tax		126	-
Total comprehensive income attributable to the owners of the parent		(485)	(930)
Earnings per share:
Basic and diluted earnings per share (U.S. cents)		(0.21)	(0.64)

Condensed Consolidated Statement of Financial Position

As at 30 June 2022

		30 June 2022 Unaudited	31 December 2021 Audited
		US$'000	US$'000
Non-current assets
Intangible assets		114,863	44,900
Royalty financial assets at fair value through profit and loss		7,382	7,461
Deferred tax assets		1,174	1,043
Total non-current assets		123,419	53,404
Current assets
Trade and other receivables		3,849	1,212
Cash and cash equivalents		20,151	45,637
Current assets		24,000	46,849
Total assets		147,419	100,253
Current liabilities
Trade and other payables		207	1,039
Borrowings		2,500	10,536
Total current liabilities		2,707	11,575
Non-current liabilities
Borrowings (net of unamortised costs)		35,453	-
Contingent consideration		413	436
Derivative financial liability		1,154	172
Total non-current liabilities		37,020	608
Total liabilities		39,727	12,183
Net assets		107,692	88,070
Equity attributable to owners of the parent
Share Capital		3,835	3,307
Share Premium		106,387	87,046
Share-based payments reserve		641	403
Foreign exchange reserve		244	118
Retained Earnings		(3,415)	(2,804)
Total equity		107,692	88,070

Condensed Consolidated Statement of Changes in Equity

for the six-month period ended 30 June 2022

	Share capital	Share Premium	Share-based payments  reserve	Foreign exchange  reserve	Retained Earnings	Total
Unaudited	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
1 January 2021	1,335	23,288	63	89	734	25,509

Loss for the period	-	-	-	-	(930)	(930)
Other comprehensive income:
Deferred tax	-	-	-	-	10	10
Exchange losses on translation of foreign operations	-	-	-	(10)	-	(10)
Total comprehensive income for the period	-	-	-	(10)	(920)	(930)
Transactions with owners:
Issue of share capital	1,036	34,221	-	-	-	35,257
Share issue costs	-	(1,500)	-	-	-	(1,500)
Share-based payments charge	-	-	111	-	-	111
Total transactions with owners, recognised directly in equity	1,036	32,721	111	-	-	33,868
Balance at 30 June 2021	2,371	56,009	174	79	(186)	58,447
Unaudited
1 January 2022	3,307	87,046	403	118	(2,804)	88,070

Loss for the period
Other comprehensive income:	-	-	-	-	(611)	(611)
Exchange gains on translation of foreign operations	-	-	-	126	-	126
Total comprehensive income for the period	-	-	-	126	(611)	(485)
Transactions with owners:
Issue of share capital	528	19,613	-	-	-	20,141
Share issue costs	-	(272)	-	-	-	(272)
Share-based payments charge	-	-	238	-	-	238
Total transactions with owners, recognised directly in equity	528	19,341	238	-	-	20,107
Balance at 30 June 2022	3,835	106,387	641	244	(3,415)	107,692

Condensed Consolidated Statement of Cash Flows

for the six-month period ended 30 June 2022

		Six months to 30 June 2022 Unaudited	Six months to 30 June 2021 Unaudited
		US$'000	US$'000
Cash flows from operating activities
Loss before taxation		(800)	(1,061)
Revaluation of royalty financial instruments		(921)	(683)
Finance income		(10)	-
Finance costs		2,250	31
Profit on disposal of intangible asset		(1,862)	-
Net foreign exchange losses		830	337
Amortisation		1,822	11
Share-based payments charge and other non-cash items		430	167
Net cashflow before changes in working capital		1,739	(1,198)
(Decrease)/increase in payables		(832)	220
(Increase)/decrease in receivables		(145)	99
Income tax paid		-	(120)
Net cash from/(used) in operating activities		762	(999)
Cash flows from investing activities
Payments for acquisition of royalty intangible assets		(60,386)	(26,516)
Cash received from royalty financial asset		875	432
Payment for Sonora royalty investment		(2,500)	-
Net proceeds from disposal of intangible asset		3,528	-
Finance income		10	-
Net cash used in investing activities		(58,473)	(26,084)
Cash flows from financing activities
Issue of share capital		6,449	29,781
Share issue costs		(272)	(1,500)
Proceeds from borrowings		40,000	-
Repayment of borrowings		(10,000)	-
Finance costs		(3,850)	(46)
Net cash generated from financing activities		32,327	28,235
Net (decrease)/increase in cash and cash equivalents during the period		(25,384)	1,152
Cash at the beginning of period		45,637	6,971
Effect of foreign exchange rate		(102)	(16)
Cash and cash equivalents at the end of the period		20,151	8,107

 

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