Royalty Acquisition & Proposed Move to AIM Market
Trident Resources Plc
Acquisition of Cash Generative Royalty
Creation of a New Growth-Focused Diversified Royalty and Streaming Company
Proposed move from LSE Main Market to trading on AIM
Trident Resources (LSE: TRR) ("Trident" or the "Company") is pleased to announce that it has entered into a definitive purchase agreement to acquire a significant, cash generative mining royalty (the "Acquisition"). The Acquisition will initiate the establishment of Trident as a new, growth-focused diversified mining royalty and streaming company.
As the Acquisition will constitute a change in strategic mandate and there is insufficient publicly available information about the proposed transaction, Trident's shares will be suspended both from trading on the Main Market of the London Stock Exchange (the "LSE") and from listing on the Official List (Standard Segment) of the FCA with immediate effect. On completion, Trident intends to seek the cancellation of the admission of its Ordinary Shares from the Official List of the FCA (Standard Segment) and their trading on the LSE's main market, and seek admission to trading on the AIM Market of the LSE ("AIM"), which the Directors consider to be a more suitable market and regulatory environment for a growth-focused royalty and streaming company. Concurrent with the proposed admission to AIM, Trident intends to conduct a financing and change its corporate name to Trident Royalties Plc.
HIGHLIGHTS
- Creation of new, growth-focused diversified mining royalty and streaming company aiming to provide investors with exposure to a mix of base and precious metals, bulk materials (excluding thermal coal) and battery metals;
- Agreement to acquire a significant, cash generative royalty:
o A 1.5% free on board ("FOB") revenue royalty over part of the Koolyanobbing Iron Ore Operation in Western Australia for a staged cash consideration totalling A$7.0 million;
o The royalty is over an asset located in the mining-friendly jurisdiction of Australia, with an established production track record and operated by a proven counterparty;
o Last quarterly payment of approximately A$731,000; and
o The asset operator recently announced its intention to increase production from the whole Koolyanobbing operation, which is anticipated to deliver stronger cashflow to the royalty;
- Trident has a pipeline of attractive follow-on transactions with further acquisitions expected to be announced in the near-term;
- Trident's board of directors considers mining royalty and streaming assets to represent an attractive opportunity for shareholders and new investors, providing exposure to commodity prices with a lower risk profile than mining equities, participating in growth from development and exploration expenditure without cost or dilution to the holder;
- Strategy to participate in a strong growth market for alternative finance in the mining sector by writing new royalties, as well as continued consolidation of existing royalties and streams available on attractive terms, taking advantage of gaps in the market under-exploited by peers; and
- Strong leadership and adviser team with a supportive shareholder base, well positioned to execute on strategy.
Adam Davidson, Chief Executive Officer of Trident commented:
"We are delighted to announce our first transaction which represents the initial step in our strategy to build a diversified portfolio of mining royalties and streams. With a large secondary market of existing assets ripe for consolidation as well as strong growth in alternative financing in the mining sector, we believe this represents an excellent opportunity for Trident's shareholders and incoming investors."
"Trident will be well positioned to execute on its strategy with an initial cash generative asset secured, a strong leadership team and supportive shareholder base. The Acquisition fit squarely with our initial priority of acquiring existing royalties, which are often available on attractive terms, and represents an ideal platform asset as we seek to execute on our extensive pipeline of opportunities and our longer-term growth strategy."
James Kelly, Non-Executive Chairman commented:
"Today's announcement is the culmination of extensive work on the Acquisition as well as developing the strategy of creating a new, nimble and growth-focused diversified mining royalty and streaming company. With most major players in the royalty and streaming space focused on larger transactions in precious metals and heavily weighted to the Americas, we believe that there is a clear opportunity for a London-listed diversified royalty and streaming company with a global mandate to execute on smaller and mid-sized transactions."
ESTABLISHING A GLOBAL, GROWTH-FOCUSED DIVERSIFIED MINING ROYALTY COMPANY
Trident plans to rapidly establish itself as a 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:
· Constructing 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 resources-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.
Trident plans to utilise its proposed admission to trading on AIM in London, flexible approach and global reach to become the "go to" name for diversified royalty and streaming exposure to mining commodities. To this end, Trident has assembled a strong pipeline of opportunities, including a number of attractive opportunities under exclusivity arrangements to facilitate their review. Trident intends to announce further royalty transactions in the coming weeks.
MINING ROYALTIES AND STREAMS REPRESENT A HIGHLY ATTRACTIVE ASSET CLASS
Trident believes that royalty and streaming assets represent a highly attractive investment opportunity. Royalties and streams typically earn a percentage of turnover from the production of commodities, providing direct exposure to commodity prices without direct exposure to operating and other expenses, and therefore have a lower risk profile than mining equities.
Capital and exploration expenditure by operators often benefit a royalty or stream holder by extending mine lives, increasing production rates and progressing development assets towards production without cost or dilution to the royalty holder.
Producing royalties and streams tend to deliver strong cash returns which can be leveraged through relatively lower cost debt and can underpin dividend returns to shareholder.
LEADERSHIP TEAM AND ADVISOR GROUP WELL POSITIONED TO EXECUTE ON STRATEGY
Trident has assembled a strong team with the requisite experience and technical and financial acumen to successfully execute on the proposed strategy.
In October 2019 Adam Davidson joined Trident as a Director and Chief Executive Officer. Adam has over 10 years' experience in the natural resources sector, most recently with Resource Capital Funds ("RCF"), a leading mining-focused private equity firm. Prior to RCF, Adam held positions with BMO Capital Markets and Orica Mining Services.
Tyron Rees joined Trident in October 2019 as Vice President of Corporate Development. Tyron has over 10 years' experience in the natural resources sector, most recently with RCF; prior to which, he held senior technical roles with Sandfire Resources and Newmont Goldcorp.
Non-Executive Chairman James Kelly has extensive experience in investment, strategy and management in the mining sector having held senior roles at a variety of companies from global diversified mining companies to private equity funds. Prior to founding Trident, James has held positions at Xstrata plc, Greenstone Resources LP, Cradle Resources Ltd, Vedanta Resources plc and JPMorgan.
Non-Executive Director Mark Potter has strong experience in the mining royalty sector, having previously held the position of Chief Investment Officer of Anglo Pacific Group Plc, where he successfully led a turnaround of the business through the acquisition of new royalties, disposal of non-core assets, and successful equity and debt fundraisings.
Trident is supported in the execution of its strategy by its adviser team including Tamesis Partners LLP ("Tamesis"), Azure Capital Pty Ltd ("Azure") and Ashanti Capital Pty Ltd ("Ashanti"). Together with the Company's board and management team, Trident's advisers bring a wide spread of global industry relationships from which to solicit proprietary transactions.
THE ACQUISITION AND PIPELINE
Koolyanobbing Iron Ore Royalty Acquisition
Trident has entered into a binding sale and purchase agreement with Fe Limited (ASX:FEL) to acquire a 1.5% FOB revenue royalty covering part of the producing Koolyanobbing Iron Ore Operation in Western Australia (the "Koolyanobbing Operation") for a staged cash consideration of A$7.0 million (the "Koolyanobbing Royalty Acquisition"). The royalty over ML77/1259 covers part of the Deception Pit at Koolyanobbing, which contains a JORC compliant Reserve of 9.3Mt @ 59.9% Fe and Resource (inclusive of Reserves) of 19.5Mt @ 59.9% Fe.
Koolyanobbing is owned and operated by Mineral Resources Limited ("Mineral Resources") (ASX: MIN), which acquired the asset from Cliffs Asia Pacific Iron Ore Pty Ltd in 2018. Since its acquisition, Mineral Resources has ramped-up production from the broader Koolyanobbing Operation from 6Mtpa in 2018 to an annualised rate of 11Mtpa as of February 2020. Mineral Resources has announced its intention to further increase production to 15Mtpa by end CY2020 underpinned by A$120 million growth capital dedicated to expansion of its Yilgarn Operations. Mineral Resources has previously outlined its intention to build a long-life iron ore export business in the Yilgarn region, utilising its innovative approach to mine development.
The Koolyanobbing Royalty Acquisition contemplates a headline consideration of A$7.0 million payable in two tranches:
· Tranche 1 - A$4.0 million payable on transaction completion; and
· Tranche 2 - A$3.0 million payable on the twelve-month anniversary plus one day from the Tranche 1 completion date. The Tranche 2 payment will be secured against the royalty.
The Koolyanobbing Royalty Acquisition will provide Trident with attractive exposure to a significant and growing iron ore asset, operated by an innovative and renowned operator with a strong balance sheet in an attractive jurisdiction. The acquisition will provide immediate access to material cashflow and assist in bringing scale and diversification to Trident's growing royalty portfolio. Since the first payment on the royalty (attributable to production from third quarter 2018), a total of approximately A$1,921,636 has been paid on shipments made to year-end 2019; with the most recent quarterly payment being A$731,733. As the broader Koolyanobbing operation continues to increase its annual production, royalty revenues are also anticipated to increase.
The Koolyanobbing Royalty Acquisition remains conditional on Australian foreign investment approval, Fe Limited obtaining any required shareholder approvals and, unless such condition is waived by Trident, admission to AIM or readmission to the Main Market, but is not conditional upon the proposed fundraising or shareholder approval. Under the terms of the agreement, cashflow attributable to the royalty from 1 January 2020 will be for the benefit of Trident. Further details of the Koolyanobbing Royalty Acquisition are set out in Appendix A to this announcement.
Broader portfolio under negotiation as part of an attractive pipeline
Trident is currently progressing discussions with multiple parties with regards to the potential acquisition of additional royalties to further underpin Trident's new strategy. However, there can be no assurance that any of these royalties will be acquired or the terms on which they may be acquired.
Several discussions are relatively advanced and are expected to move towards binding agreements in the coming weeks. Trident will continue to review a broad pool of attractive royalty and streaming opportunities to further underpin the strategy.
NEXT STEPS
As the Acquisition constitutes a change in strategic mandate and there is insufficient publicly available information about the proposed transaction, Trident's shares will be suspended both from trading on the Main Market of the LSE and from listing on the Official List (Standard Segment) of the FCA with immediate effect.
Trident intends to seek the cancellation of the admission of its Ordinary Shares from the Official List of the FCA (Standard Segment) and their trading on the LSE's main market and seek admission to trading on AIM ("Admission"), which the Directors consider a more suitable market and regulatory environment for a growth-focused royalty and streaming company.
Concurrent with Admission, Trident intends to conduct an equity financing and change its name to Trident Royalties Plc. The equity financing is intended to satisfy the consideration for any further royalty acquisitions agreed prior to Admission, in addition to providing capital to execute on pipeline transactions and for general working capital purposes.
The Company has retained advisers in relation to Admission including Grant Thornton UK LLP as its Nominated Adviser and Bryan Cave Leighton Paisner LLP as UK legal counsel. Tamesis, Ashanti and Azure will act as Lead Bookrunners for the fundraising to be undertaken on Admission.
Trident shareholder approval will be required to facilitate the planned equity financing and to approve a proposed change of the Company's name to Trident Royalties Plc. It is planned that a notice of meeting to convene a general meeting of shareholders will be sent to shareholders in due course with Admission expected to complete prior to 30 June 2020.
The Company looks forward to updating shareholders further with a detailed timetable in due course.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation EU No. 596/2015. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
ENQUIRIES
|
Trident Resources Adam Davidson (CEO)
|
+1 757-208-5171 |
|
Tamesis Partners LLP Richard Greenfield
|
+44 (0)20 3882 2868 |
|
Ashanti Capital Robbie Hamilton
|
+61 8 6169 2668 |
|
Azure Capital Partners John Toll
|
+61 8 6263 0847 |
|
Yellow Jersey PR Charles Goodwin / Joseph Burgess
|
+44 (0)20 3004 9512 |
APPENDIX A: FURTHER DETAILS OF THE KOOLYANOBBING ROYALTY ACQUISITION
The detailed summary below provides further information on the Koolyanobbing Royalty Acquisition, as well as the underlying mining operation. Additional information on Koolyanobbing can be found on Mineral Resources' website: https://www.mineralresources.com.au/
Asset Description & Key Metrics
The Koolyanobbing Operation is located 50km north of Southern Cross, Western Australia and is the collective term for multiple iron ore deposits and associated infrastructure within an approximate 100km radius.
Mineral Resources Limited acquired the Koolyanobbing Operation from Cliffs Asia Pacific Iron Ore Pty Ltd in 2018. Following the acquisition, Mineral Resources has ramped-up production to 11Mtpa as at February 2020, from the 6Mtpa run rate at the time of the acquisition. Recently, Mineral Resources announced its intention to further increase production from the whole Koolyanobbing operation to 15Mtpa by the end of calendar year 2020, with planning and approval processes already started. In an ASX announcement dated 25 February 2020, Mineral Resources stated its intention of developing a 10-year strategy for its broader Yilgarn operation, including Koolyanobbing.
The royalty being acquired under the Koolyanobbing Royalty Acquisition is payable on production from the M77/1259 tenement which constitutes part of the Deception Pit, one of the operating segments in the broader Koolyanobbing Operation. The Deception Pit is connected to Mineral Resources' Windarling operation by a 20km haul road, which is then connected to Koolyanobbing. Material from Koolyanobbing is transported by rail south to Esperance Port where it is loaded for export.
The Deception pit has a JORC 2012 Reserve of 9.3Mt (at 59.9% Fe) and a total Resource of 19.5Mt (at 59.9% Fe). Trident estimates up to 75% of the Deception Pit may contain mineralisation over which payments would be made under the Koolyanobbing Royalty Acquisition. There is no certainty regarding this estimate and the amount of production ultimately falling under the royalty may be higher or lower.
Since the first payment on the royalty (attributable to production from third quarter 2018), a total of approximately A$1,921,636 has been paid on shipments made to year-end 2019; with the most recent quarterly payment being A$731,733 which covered approximately 540kt of production from the Deception pit. The payments due under the royalty are based on the average iron ore price achieved by the broader Koolyanobbing Mining Operations. Details of the historic prices achieved by the Koolyanobbing Mining Operations can be found in Mineral Resources Ltd's H1 2020 financial results presentation dated 12 February 2020.
The royalty also covers the E77/1322 tenement which is located immediately east of M77/1259 but does not form part of the Koolyanobbing Operation.
Summary Table of Assets
The following table sets out the two tenements attributable to the Koolyanobbing Royalty Acquisition.
|
Asset |
Holder |
Interest |
Status |
Expiry Date |
Area |
|
1. M77/1259 |
Cliffs Asia Pacific Iron Ore Pty Ltd |
100% |
Production |
12 Oct 2032 |
798.4 Ha |
|
2. E77/1322 |
Marda Operations Pty Ltd |
100% |
Exploration |
17 Jan 2021 |
25 BL |
Summary of JORC Code 2012 Edition Compliant Reserves and Resources
The following table set out the Mineral Reserves attributable to the entire Deception Pit per Mineral Resources ASX announcement dated 20 November 2019. The royalty is only payable on production from the M77/1259 tenement which constitutes part of the Deception Pit, one of the operating segments in the broader Koolyanobbing Operation owned by Mineral Resources.
|
Category |
Cut-off (Fe %) |
Tonnes (Mt) |
Fe (%) |
SiO2 (%) |
Al2O3 (%) |
P (%) |
LOI (%) |
|
Proved |
- |
- |
- |
- |
- |
- |
- |
|
Probable |
54 |
9.3 |
59.9 |
4.84 |
1.96 |
0.118 |
6.13 |
|
Total |
54 |
9.3 |
59.9 |
4.84 |
1.96 |
0.118 |
6.13 |
Source: For source and competent person credential, please review the ASX announcement dated 20 November 2019: https://www.asx.com.au/asxpdf/20191120/pdf/44brg5h9jyn2hy.pdf
The following table sets out the Mineral Resources (inclusive of Reserves) attributable to the entire Deception Pit / Altair per Mineral Resources ASX announcement dated 20 November 2019. The royalty is only payable on production from the M77/1259 tenement which constitutes part of the Deception Pit, one of the operating segments in the broader Koolyanobbing Operation owned by Mineral Resources
|
Category |
Cut-off (Fe %) |
Tonnes (Mt) |
Fe (%) |
SiO2 (%) |
Al2O3 (%) |
P (%) |
LOI (%) |
|
Measured |
- |
- |
- |
- |
- |
- |
- |
|
Indicated |
50 |
15.6 |
60.1 |
4.6 |
1.8 |
0.12 |
6.2 |
|
Inferred |
50 |
3.9 |
59.3 |
5.7 |
2.1 |
0.11 |
6.2 |
|
Total |
50 |
19.5 |
59.9 |
4.8 |
1.9 |
0.1 |
6.2 |
Source: For source and competent person credential, please review the ASX announcement dated 20 November 2019: https://www.asx.com.au/asxpdf/20191120/pdf/44brg3kydbzhkj.pdf
The Reserves and Resources information in this Appendix A is extracted from ASX announcements made by Mineral Resources Ltd. Trident is not aware of any new information or data that materially affects the information included in the original ASX announcements.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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