Q4 2020 Activities Update
1 February 2021
Trident Royalties Plc
("Trident" or the "Company")
Q4 2020 Activities Update
Strengthening Iron Ore & Copper Markets, Additional Base Metals Exposure
Trident Royalties Plc (AIM: TRR, FSX: 5KV), is pleased to provide an update on its activities undertaken during the fourth quarter ended 31 December 2020, including Q4 royalty receipts.
HIGHLIGHTS
Q4 caps off a transformative year for Trident
· A total of six transactions agreed over 11 royalties in 2020, including the acquisition of the Pukaqaqa copper royalties in Q4 from Orion Resource Partners ("Orion"), Trident's first all-equity deal;
· Strengthened the board and management team in 2020, most recently in Q4 with the addition of Martin Page as CFO and Julien Bosché as Vice President of Investments, completing the team by filling previously outsourced positions;
· With a portfolio inclusive of copper, iron ore, and gold, 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
· A number of pipeline transactions continuing to advance across multiple commodities.
Q4 royalty payments totalling approximately US$291,832 from royalties over producing assets
· Koolyanobbing iron ore Q4 royalty payment of A$305,770 (US$235,092¹), a decrease over Q3 on higher received price, but lower volumes from the royalty area as production from the broader Koolyanobbing Iron Ore Operation was more heavily weighted toward other pits;
· Koolyanobbing cumulative 2020 royalty payments of A$2,400,368 (approximately US$1.7 million at the historical FX rates for each payment), which equates to more than 35% of the A$6.65 million royalty purchase price recovered in the first full year alone, representing an exceptional return on invested capital;
· Mimbula copper royalty Q4 payment of US$56,740 on 633 tonnes of copper sold, an increase over Q3 of 158% on revenue and 146% on production as the project continues to ramp up;
· The Minimum Payment Schedule ("MPS") on the Mimbula copper royalty commences in Q1 2021 (US$375,000 per quarter in 2021, less any excess payments made above the MPS from previous quarters)2; and
· Commodity prices underlying Trident's royalties remained strong throughout Q4 with iron ore averaging $131/tonne, copper averaging $7,173/tonne, and gold averaging $1,876/oz.3 Current spot prices for iron ore and copper are well in excess of the Q4 average, presently at $157.4/tonne and $7,778/tonne respectively.3
Q4 royalty portfolio growth, coupled with positive asset-level progress by project operators
· On 18 December 2020, Trident announced that it entered into a conditional agreement to acquire three royalties over the Pukaqaqa Copper Project ("Pukaqaqa") from Orion in an all-equity transaction4. Highlights include:
§ Royalties over a large-scale copper project being actively advanced by an established South America-focused mid-tier base metals producer Nexa Resources (TSX: NEXA) ("Nexa");
§ Nexa has allocated a total of US$16 million towards advancing the project over the last three years, with the project status noted as "ongoing pre-feasibility study" with "a new phase of metallurgical tests" scheduled to be completed in 20205 & 6;
§ The 2017, CIM compliant7Mineral Resource Estimate includes a Measured and Indicated Resource of 309 million tonnes at 0.41% Cu (approximately 1.26 million tonnes of contained copper), with an additional Inferred Resource of 40.1 million tonnes at 0.34% Cu for 136,340 tonnes contained copper6;
§ The pending acquisition is Trident's first all-equity transaction, demonstrating an ability to continue to build the portfolio while preserving balance sheet cash and also seeing Orion, a leader in the royalty and streaming space, become a significant shareholder in Trident. Completion of the proposed acquisition remains conditional amongst other things upon the issue or deemed issue of a tax certificate by the Peruvian tax authorities in respect of the transaction.
· Trident has noted positive asset-level progress by project operators, including:
§ Lake Rebecca: As noted in the recent Royalty Portfolio Update announcement dated 14 January 20218, since completion of the Lake Rebecca gold royalty acquisition, operator Apollo Consolidated (ASX: AOP) has released technical and drilling updates which are considered very positive and see the potential for increased Resources (updated Mineral Resource Estimate expected in Q2 2021), as well as de-risking of future mining studies. Trident holds a 1.5% NSR royalty over the entirety of the current Lake Rebecca Resource.
§ Warrawoona: As noted in the Royalty Portfolio Update announcement dated 17 December 20209, in September, Calidus Resources Limited (ASX: CAI) ("Calidus") submitted an application to convert part of the royalty tenement to a Mining Lease. In addition, in Q4 Calidus announced that the Warrawoona Gold Project is now fully funded to production, with construction early works having already commenced.
§ Koolyanobbing: In its 2020 Annual General Meeting and third quarter update10, Mineral Resources Limited stated that 7.4 million tonnes of iron ore were shipped from Koolyanobbing, with FY21 guidance of 12-12.7 million tonnes and a year-end run rate target of 13 million tonnes. Trident holds a 1.5% FOB revenue 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: Production continues to ramp up at Mimbula and, with the copper price recently surging to nearly 8-year highs, is well positioned to capitalise on positive market sentiment;
§ Spring Hill: Permitting activities for the Spring Hill Gold Project continue to progress successfully with the final recommendation report completed by Australian permitting authorities on 23 December 2020.
Strong balance sheet to support future acquisitions
· Unaudited cash balance of US$6.9 million as of 31 December 2020 (not inclusive of Q4 royalty revenue);
· 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 continues to engage with debt providers in order to unlock additional funding capacity and provide shareholders with levered returns. Trident expects any debt facility would be agreed and drawn in conjunction with a future potential transaction;
· Indicative of the strength of the pipeline, Trident currently has 12 active NDAs under which it is reviewing a range of opportunities in nickel, copper, zinc, gold, silver, iron ore, mineral sands and lithium; and
· Trident continues to prioritise production or near-production assets, with an increased emphasis on larger, more substantive transactions to materially build Trident's revenue profile.
Adam Davidson, Chief Executive Officer of Trident commented:
"The significant progress Trident made during 2020 has meant that it has rapidly positioned itself as a go-to investment vehicle in which investors can gain exposure to an increasingly diversified portfolio of mining royalties. Our strategy of targeting attractive small to mid-size transactions, which are often ignored by larger players across assets in premier mining jurisdictions, has already proved successful in a short period of time. Having gained exposure to a portfolio which includes copper, iron ore and gold, all of which are forecast to continue their strong performance, we anticipate seeing increasing returns from our existing paying royalties.
"Looking forward to 2021, with our strengthened board and management team now fully integrated, we will continue to execute on the strategy and are currently evaluating and making positive progress on a number of potential transactions. We maintain a strong cash position which is continually added to with our two cash generative royalties, and along with the ability to fund future acquisitions using debt or equity, we have significant capacity to aggressively pursue future acquisitions. Our pipeline is strong and covers a broad range of commodities.
"We are very pleased with the opportunity set available to Trident and look forward with confidence to our progress during the year as we continue to build a diversified portfolio of mining royalties and streams."
References
1 AUD = 0.7688 USD (29 Jan 2021)
2 Source: Trident Royalties announcement dated 29 June 2020 https://polaris.brighterir.com/public/trident/news/rns/story/r73y4gx/export
3 Source: Factset, 62% Fe (CFR), Copper (LME), Gold (LBMA). Spot prices sourced dated 29 January 2021, sourced from LME for copper, and Financial Times for 62% Fe CFR China (TSI)
4 Source: Trident Royalties announcement dated 18 December 2020
https://polaris.brighterir.com/public/trident/news/rns/story/rmqp7vw/export
5 Source: Nexa Resources 2019 Annual Report
https://riperu.nexaresources.com/list.aspx?idCanal=tPFcom1XqQxIhf5L4ifI+A==
6 Source: "Technical Report on the Pukaqaqa Project, Huancavelica Region, Peru" (4 August 2017), available under Nexa's SEDAR profile at www.sedar.com
7 Source: Compliant with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves dated 10 May 2014.
8 Source: Trident Royalties announcement dated 14 January 2021
https://polaris.brighterir.com/public/trident/news/rns/story/rg4eg3r/export
9 Source: Trident Royalties announcement dated 17 December 2020
https://polaris.brighterir.com/public/trident/news/rns/story/w3mozjx/export
10 Source: Mineral Resource Limited ASX Announcements
https://www.mineralresources.com.au/investorresources/latest-asx-announcements/all/
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 |
+1 (757) 208-5171 |
|
Grant Thornton (Nominated Adviser) Colin Aaronson / Samantha Harrison / Seamus Fricker |
+44 020 7383 5100 |
|
Tamesis Partners LLP (Financial Adviser and Joint Broker) Richard Greenfield |
+44 203 882 2868 |
|
Shard Capital Partners LLP (Joint Broker) Erik Woolgar / Isabella Pierre |
+44 207 186 9927 |
|
St Brides Partners Ltd (Financial PR & IR) Susie Geliher / Catherine Leftley / Charlotte Hollinshead |
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 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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