Royalty over Development-Stage Copper Project
18 December 2020
Trident Royalties Plc
Royalty Portfolio Acquisition over Development-Stage Copper Project
Trident Royalties Plc ("Trident" or the "Company") (AIM: TRR, FSX: 5KV) is pleased to announce that its wholly-owned subsidiary TRR Services UK Ltd has entered into a binding, conditional agreement with Bellatrix Ltd, a wholly-owned subsidiary of Orion Resource Partners ("Orion" or the "Seller") to acquire a portfolio of three existing royalties (the "Royalties") over the Pukaqaqa Copper Project ("Pukaqaqa") through the acquisition of two of the Royalties and the acquisition of Tiomin Peru S.A.C, a Peruvian company which owns the third ("Tiomin"). Pukaqaqa is majority-owned and operated by NYSE- and TSX-listed Nexa Resources ("Nexa"). The Royalties and Tiomin are being acquired for a total consideration of approximately US$3,000,000 of new ordinary shares in Trident (the "Transaction").
HIGHLIGHTS
A large-scale project advancing towards development and operated by an established South American mid-tier miner
· Nexa Resources (C$1.35 billion market cap) is a South America-focused mid-tier producer with five operating base metals mines (plus an additional mine currently under construction) and three operating smelters in Peru and Brazil;
· Pukaqaqa is a cornerstone project within Nexa´s growth pipeline and comprises 34 concessions covering 11,125.87 ha located in the Huancavelica region of Peru, an established mining district;
· In its 2019 Annual Report, Nexa noted Pukaqaqa's project status as "ongoing pre-feasibility study" with the first stage of the pre-feasibility study completed and "a new phase of metallurgical tests" to be completed in 2020 1 & 2;
· Nexa has allocated a total of US$16 million towards advancing the project over the last three years, a significant sum relative to commensurate junior-led projects 1 & 2;
· The 2017, CIM compliant 3, Mineral 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 copper 2;
· The most recent technical report contemplates an open-pit mining operation to feed a 30,000 tonne-per-day processing plant to produce copper and molybdenum concentrates over a 19-year mine life 2;
· Pukaqaqa consists of a large scale Cu-Au skarn-type deposit, associated with an anticline hosted sub-volcanic intrusive. Project construction capex of skarn-type deposits is typically much lower than commensurate scale porphyry deposits;
· The morphology of the deposit with a sub-horizontal, shallow dipping, blanket of near-surface mineralisation and higher grade breccia-hosted zones, offers the potential for large scale low-stripping ratio open-pit mining, with free-digging potential, subject to further technical studies; and
· Further, exploration upside is offered both in the wider licence holding and through possible mineralisation extensions along strike and down-dip of the current Resource. The potential for underlying, porphyry style mineralisation below the project has also yet to be drill tested.
All-equity transaction adds a significant asset to the portfolio while preserving cash and establishes a shareholding in Trident by an industry-leader in mining royalties & streams
· The Transaction includes the acquisition of three royalties covering the entirety of Pukaqaqa, with significant additional milestone payments of US$8 million payable to Trident to be made in the first two years of commercial production;
· Relative to recent royalty precedent transactions over similar size and stage assets, Trident is achieving a very attractive entry valuation which would see an excess of the Transaction consideration recovered from the first milestone payment alone (US$4 million payable upon commencement of commercial production), to be followed by an additional US$4 million milestone payment in the second year of commercial production, plus uncapped life-of-mine royalty payments;
· The proposed acquisition is Trident's first all-equity transaction, demonstrating an ability to continue to build the portfolio while preserving balance sheet cash;
· Orion, a global alternative investment management firm with approximately US$6.2 billion under management (as of 31 March 2020), is a leader in the royalty and streaming space. Notable transactions in 2020 include the cornerstone asset vend-in to support the launch of Nomad Royalty Company (TSX-listed, C$593 million market cap) and the US$1.3 billion transaction with Occidental Petroleum Corporation to establish Sweetwater Royalties; and
· Upon completion of the transaction, Orion will become a 6.1% shareholder in Trident.
THE ROYALTIES
The three royalties that are to be acquired over Pukaqaqa in connection with the Transaction include the Vaaldiam Royalty (which is held and owned by Tiomin), the Pukaqaqa Norte Royalty, and the Pukaqaqa Sur Royalty:
1. Vaaldiam Royalty: A sliding scale NSR royalty of 1.00% (if the quarterly average reference copper price is US$3.00/lb or less), and 2.00% (if the quarterly average reference copper price is greater than US$3.00/lb). The Vaaldiam Royalty is over the entire mining property, plus a 15km area of interest. In addition, there are a total of US$8 million in milestone payments delivered early in the mine life, with US$4 million upon commencement of commercial production and an additional US$4 million upon the second year of commercial production;
2. Pukaqaqa Norte Royalty: A 1.00% NSR royalty covering concessions in which the bulk of the contemplated open pit will be located; and
3. Pukaqaqa Sur Royalty: A 0.50%-1.00% NSR royalty (depending on the specific concession) covering concessions with promising exploration potential in the south-eastern area of Pukaqaqa, which can be repurchased at any time for US$350,000.
Adam Davidson, Chief Executive Officer of Trident commented:
"We are very pleased to announce this all-share transaction with Orion. The royalties cover a large-scale asset which is being actively advanced by an established regional operator that, once in production, will generate a significant revenue stream for nearly two decades based on the most recent technical study. On the current resource, at a processing rate of 30,000 tonnes-per-day we believe Pukaqaqa has the potential to produce around 35,000 tonnes of copper per year, along with potential molybdenum, gold, and silver credits.
"Whilst not losing sight of our priority to acquire cash generative royalties, as we plan for Trident's long-term growth, acquiring attractive development stage royalties over significant assets such as this has the potential to catapult a royalty company from junior status to that of mid-tier / major. I would also add that it was a pleasure transacting with Orion, and we look forward to further engagement in the future. It is worth noting that Trident's transaction pace since our June 2020 listing continues to exceed my expectations and demonstrates the robustness of our pipeline. I look forward to reporting further on our progress."
COMPLETION OF THE TRANSACTION AND CONSIDERATION
The Royalties and Tiomin are being acquired for a total consideration of approximately US$3,000,000 to be satisfied by the issuance of 6,878,027 new Trident ordinary shares (the "Consideration Shares") on completion of the Transaction. The Consideration Shares will be issued at a price of 32.0314p, being the volume weighted average price of Trident's shares over the ten trading days prior to date of signing the sale agreement. The Consideration Shares will be subject to a six-month lock-in from their date of issue, subject to customary exclusions and to satisfy any tax liability of Bellatrix on the sale and any warranty claims.
Completion of the Transaction is conditional amongst other things upon the issue or deemed issue of a tax certificate by the Peruvian tax authorities in respect of the sale and will then occur on the admission of the Consideration Shares to trading on AIM ("Admission"). If completion of the transaction has not occurred within 6 months the agreement will terminate unless extended by the parties.
THE ROYALTIES & PUKAQAQA PROJECT
The following table outlines the application of each Royalty to the Pukaqaqa concessions:
|
Concession |
Applicable Royalty |
|||
|
Vaaldiam Royalty |
Pukaqaqa Norte Royalty |
Pukaqaqa Sur Royalty |
||
|
1% or 2% NSR, depending on reference Cu price |
1% NSR Royalty |
0.5% Effective NSR Royalty |
1.0% Effective NSR Royalty |
|
|
Conayca 33 |
ü |
ü |
|
|
|
Conayca 34 |
ü |
ü |
|
|
|
Conayca 35 |
ü |
ü |
|
|
|
Conayca 36 |
ü |
ü |
|
|
|
Conayca 36A |
ü |
ü |
|
|
|
Conayca 37 |
ü |
ü |
|
|
|
Conayca 39 |
ü |
ü |
|
|
|
Conayca 39-B |
ü |
ü |
|
|
|
Conayca 40 |
ü |
ü |
|
|
|
Acero Ccocha 2 |
ü |
|
ü |
|
|
Armida Tercera |
ü |
|
|
|
|
Armida Tercera-A |
ü |
|
|
|
|
Armida Tercera-B |
ü |
|
|
|
|
Barita Dos |
ü |
|
|
|
|
Bella Sol 2 |
ü |
|
ü |
|
|
Bella Sol 4 |
ü |
|
|
ü |
|
Bella Sol 5 |
ü |
|
|
ü |
|
Carlotita Primera |
ü |
|
|
ü |
|
Jupiter-I-1981 |
ü |
|
|
|
|
Leonor 31-M |
ü |
|
|
|
|
Manta 700 2010 M |
ü |
|
|
|
|
Manta Siete 2010 M |
ü |
|
|
|
|
Pukaqaqa 1M |
ü |
|
|
|
|
Rescatada 2012 M |
ü |
|
|
|
|
Rifle 1 |
ü |
|
|
|
|
Rifle 1-99 |
ü |
|
|
|
|
Rifle 3 |
ü |
|
|
|
|
Rifle 4 |
ü |
|
|
|
|
Rifle 5 |
ü |
|
|
|
|
Rifle 6 |
ü |
|
|
|
|
Rifle 6 AM |
ü |
|
|
|
|
Santa Felicia |
ü |
|
|
|
|
Rumimaqui |
ü |
|
|
|
|
Julio 79 |
ü |
|
ü |
|
The Pukaqaqa project contemplates the development of a copper, molybdenum, and gold deposit in Peru utilising open-pit mining to produce both a copper concentrate and a molybdenum concentrate via a 30,000 tonne-per-day onsite processing facility over a 19-year mine life. A NI43-101 Technical Report dated August 4, 2017 was filed on SEDAR by Nexa. The project map for Pukaqaqa is included in this announcement through the following link https://tridentroyalties.com/images/2020/Pukaqaqa_Location_.jpg
The skarn-type deposit is a result of metasomatic alteration and interaction between an intrusive pluton and carbonate host rocks. Mineralisation consists of massive, matrix bound sulphides in a hydrothermal breccia system at or outside the intrusive contact (exoskarn), as well as disseminated sulphides within the intrusive body (endoskarn).
The most recent CIM (2014) compliant Mineral Resource Estimate ("MRE") published by Nexa2 is included in the table below.
|
Mineral Resource Estimate as of July 31, 2017 |
|||
|
Category |
Tonnes |
Copper Grade |
Contained Copper |
|
(Mt) |
(%) |
(kt) |
|
|
Measured |
107.3 |
0.43 |
459 |
|
Indicated |
201.7 |
0.39 |
796 |
|
Measured and Indicated |
309.0 |
0.41 |
1,256 |
|
Inferred |
40.1 |
0.34 |
137 |
Notes:
· CIM definitions were followed for Mineral Resources.
· Mineral Resources were reported inside a preliminary Whittle pit using a 0.20% Cu block cut-off grade.
· Mineral Resources are estimated using a copper price of US$2.59/lb and an exchange rate of US$0.80 to C$1.00.
· Numbers may not add due to rounding.
Trident believes there exists significant potential to build on the existing MRE tonnages and categorisation through drilling along strike and down-dip, as well as with additional infill drilling. Additionally, there are up to seven named exploration targets situated within a 6km radius from the existing deposit, adding potential mine life to the operation. There is also potential for the skarn deposit to overlay large scale copper porphyry mineralisation.
Nexa continues to actively advance the Pukaqaqa project. In 2018, Nexa spent US$6.5 million, primarily on drilling and engineering work for the pre-feasibility study. In 2019, Nexa spent an additional US$6.0 million, primarily on metallurgical tests and engineering development. Trident´s current expectations are that Pukaqaqa would be built following the ramp-up of Nexa´s Magistral Copper Project, which is currently at the Feasibility Study stage.
References:
1 Nexa Resources 2019 Annual Report https://riperu.nexaresources.com/list.aspx?idCanal=tPFcom1XqQxIhf5L4ifI+A==
2 "Technical Report on the Pukaqaqa Project, Huancavelica Region, Peru" (4 August 2017), available under Nexa's SEDAR profile at www.sedar.com
3 Compliant with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves dated 10 May 2014.
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.
** 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 |
|
Yellow Jersey (Public Relations) Charles Goodwin |
+44 203 004 9512 |
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
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.
Company website
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