Trident Acquires Cash Generative Gold Offtake
21 March 2022
Trident Royalties Plc
("Trident" or the "Company")
Trident Acquires Cash Generative Gold Offtake
Trident Royalties Plc (AIM:TRR), the diversified mining royalty and streaming company, is pleased to announce that it has entered into an agreement to acquire a gold offtake contract (the "Offtake") over the Sugar Zone Mine in Canada ("Sugar Zone"), owned and operated by Silver Lake Resources Limited (ASX:SLR) ("Silver Lake") from Orion Resource Partners ("Orion" or the "Seller") (the "Transaction"). With this, Trident now holds a total of 11 cash flowing assets, in addition to its attractive pipeline of advanced stage assets.
Sugar Zone is a producing underground gold mine located in Ontario, Canada. Trident is acquiring the Offtake for a total consideration of US$3.75 million, payable in new ordinary shares of 1p each in the Company ("Ordinary Shares") issued at 51.43p per share, being the 10-day volume weighted average price of Trident's shares to 18 March 2022, the last trading day prior to the date of the agreement. The Offtake covers 50% of all gold production at Sugar Zone up to 375,000 delivered ounces, with approximately 335,000 ounces remaining under the Offtake.
Adam Davidson, Chief Executive Officer and Executive Director of Trident commented:
"I am pleased to announce the acquisition of a gold offtake over the Sugar Zone mine located in Ontario, Canada. This is the fifth transaction that Trident has announced in the last 12 months, as we maintain our momentum in delivering high-value, accretive deals.
This Transaction arises as an addition to the portfolio acquired on 11 January 2022 and builds upon our successful relationship with Orion. Now underpinned by Silver Lake's considerable financial and operational acumen, we look forward to Sugar Zone developing into a premier Canadian gold mine. The Transaction provides Trident with accretive growth and immediate cashflow. In addition, the asset offers further geographical and operational diversity and increased exposure to the gold price and volatility, both of which remain heightened in the current geopolitical climate.
I am optimistic about the outlook. We have an excellent pipeline of potential transactions across a range of commodities, particularly towards further base and battery metal exposure, which will allow us to keep balance in our portfolio. This Transaction for shares adds an eleventh cash flowing asset to our portfolio while conserving cash reserves, ensuring we can continue to be nimble and dynamic with future transactions.
HIGHLIGHTS
· Sugar Zone produced 51,453 ounces of gold during calendar year 2021. The most recent resource estimates for Sugar Zone total 4.67 million tonnes (Mt) @ 10.9 g/t Au for 1.64 million troy ounces (Moz) gold 1, comprising: 2, 3
o Probable Reserves of 3.5 Mt @ 7.2 g/t Au containing 797,000 oz Au
o Indicated Resources of 2.8 Mt @ 11.9 g/t Au containing 1.1 Moz Au
o Inferred Resources of 1.9 Mt @ 9.5 g/t Au containing 567,000 oz Au
· The previous operator had completed a Feasibility Study 5 and commenced implementation of an expansion to increase the plant capacity to 1,200tpd from current installed capacity of 800tpd, which is expected to allow for gold production of circa 100,000 ounces per year prior to the acquisition by Silver Lake 4,5. Such an expansion would provide meaningful upside for Trident's offtake exposure.
· Silver Lake is a well-funded, ASX-listed mid-tier gold producer with a market capitalisation of approximately A$2.0 billion. As of 31 December 2021, Silver Lake held cash and bullion of A$277.9 million and had no debt.6
· Silver Lake announced the acquisition of Sugar Zone on 21 February 2022 following a Canadian CCAA process for a total consideration of US$102 million and has recently commenced a review of operations, "with the objective of delivering material operational improvements and a low capital growth strategy to leverage the installed infrastructure and current mineral resource".1
· The Transaction adds another immediately cash-flowing asset to Trident's growing portfolio, ultimately providing further diversification and lowering risk to investors, while highlighting Trident's nimble, opportunistic approach towards acquiring accretive precious metals assets.
The Sugar Zone Mine
The Sugar Zone Mine is a producing underground gold mine located in Northern Ontario, Canada. Sugar Zone is situated in close proximity to transport corridors, grid power, established mining services and suppliers. The Sugar Zone mine sits in the well-known gold-rich greenstone belt located just east of the world class Hemlo gold mines. Sugar Zone declared the start of commercial production on 1 January 2019, following pre-production mining during 2017 and 2018 4, and is one of Ontario's newest and highest-grade gold mines.
The most recent Mineral Reserve Estimate (dated 30 December 2020) is for 3.453 Mt @ 7.18 g/t Au for 797,000 ounces classified as Probable. The most recent Mineral Resource Estimate (dated 30 September 2020) contained 2.803Mt @ 11.87g/t Au for 1,070,000 oz Au (Indicated) and 1.866 Mt @ 9.45 g/t Au for 567,000 oz (Inferred). 3,4
Prior to the acquisition by Silver Lake, the previous operator set out significant resource upside potential for near mine strike resource extensions at Sugar Zone South and down dip at the Sugar Zone Deep and Middle Zone. Further along strike step-out potential is offered by the under explored Lynx, Wolf and Fox targets. 7
In calendar year 2021, Sugar Zone produced 257,281 tonnes at 6.5 g/t Au for 51,453 ounces gold.1 Sugar Zone is slated to produce 102,000 ounces of gold in 2023, with a sustainable yearly production of 98,700 ounces per year from that point onwards.9
Silver Lake has stated that it has commenced a review of operations at the Sugar Zone Mine with the objective of delivering material operational improvements and a low capital intensity growth strategy to leverage the installed infrastructure and current mineral resources. 1
Details of the Sugar Zone Offtake
An offtake contract is a contract pursuant to which the operator agrees to sell, and the purchaser agrees to buy, refined gold produced from the mine over which the offtake is granted. The key commercial terms include those relating to the amount of gold to be purchased, the delivery mechanics, and the payment terms.
Under the terms of the contract, the purchaser has the right to purchase gold from the underlying mine at any reference price from a list of specified reference prices in a defined period (the "Quotation Period"), which is 7 days. The purchaser then subsequently sells the gold, realizing a margin equal to the difference between the purchaser's sale price, and the reference price chosen by the purchaser during the Quotation Period.
The key terms of the Offtake are for delivery of 50% of all gold produced from the Sugar Zone Mine up to a total of 375,000 ounces, of which approximately 335,000 ounces remain.
TRANSACTION DETAILS
Acquisition Terms
Pursuant to a binding sale and purchase agreement (the "Sale and Purchase Agreement"), Trident, through its subsidiary Trident Offtakes LLC is acquiring 100% of the Offtake from the Seller in consideration for a payment of US$3.75 million to be satisfied by the issuance of new Ordinary Shares ("Consideration Shares") issued at 51.43p, being the 10-day volume weighted average price of Trident's shares to 18 March 2022, being the last trading day prior to the date of the agreement.
The Sale and Purchase Agreement also contains warranties, subject to customary limitations, and other standard terms for a transaction of this type. Completion of the Transaction is expected to occur upon issuance of the shares, which is conditional amongst other things on their admission to AIM.
Settlement and Dealings
Application has been made to the London Stock Exchange Plc for the admission to trading on AIM ("Admission") of the 5,542,752 Consideration Shares, which will rank pari passu with the Company's existing issued Ordinary Shares from their issue. Admission of the Consideration Shares to trading on AIM is expected to take place at 8:00am on 23 March 2022.
Total Voting Rights
For the purposes of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules ("DTRs"), following Admission, Trident will have 291,130,600 Ordinary Shares in issue with voting rights attached. Trident does not hold any shares in treasury. This figure of 291,130,600 may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company, under the DTRs.
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.
Notes & References
All of the technical information in this release has been extracted from the publicly available source documents identified below, the reader is advised that the appropriate CIM tables and Competent Persons Statements may be found in those documents.
1 Source: Silver Lake Resources announcement: 21 February 2022, Silver Lake Completes Acquisition of Harte Gold
( https://www.silverlakeresources.com.au/ )
2 Source: Harte Gold Corp. announcement: 20 January 2021, Harte Gold Announces Positive Feasibility Study Results for Expansion to 1,200 tpd.
3 Mineral Resource Estimate, as of 30 September 2020, at 3.0 g/t Au Cut-off Grade and 5.4 m*g/t Grade-Thickness Cut-off.
Mineral Reserves Estimate, as of 31 December 2020, using a gold price assumption of $1,450/oz. A mining cut-off grade of 5 g/t has been estimated based on operating cost projections, sustaining capital development cost, mining dilution and recovery, royalty payment requirements, and applicable metallurgical recovery.
Mineral Resources and Mineral Reserves comply with the requirements of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) and are classified in accordance with the CIM Definition Standards for Mineral Resources & Mineral Reserves (CIM Definition Standards). Totals may not add due to rounding.
4 Source: Harte Gold Corp. announcement: 1 November 2021 at 19:31:07 ET, Management Discussion and Analysis for the three and nine months ended September 30, 2021
( SEDAR, search 'Harte Gold' at https://www.sedar.com/search/search_form_pc_en.htm )
5 Source: Harte Gold Corp. NI 43-101 Technical Report: Feasibility Study for Expansion to 1,200 t/d for the Sugar Zone Mine, Sault Ste. Marie Mining Division, Ontario. Dated 5 March 2021, 18:12:25 ET.
( SEDAR, search 'Harte Gold' at https://www.sedar.com/search/search_form_pc_en.htm )
6 Source: Silver Lake Resources announcement: 21 February 2022, Half Year Financial Results Summary
( https://clients.weblink.com.au/news/pdf/02488733.pdf )
7 Source: Harte Gold Corp. Investor Presentation, Corporate Presentation April 2021.
( SEDAR, search 'Harte Gold' at https://www.sedar.com/search/search_form_pc_en.htm )
8 Source: Harte Gold Corp. announcement: 13 May 2021 at 19:08:24 ET, Harte Gold Reports First Quarter 2021 Results, Provides Updated Guidance for 2021 and Initiates Strategic Review.
( SEDAR, search 'Harte Gold' at https://www.sedar.com/search/search_form_pc_en.htm )
9 Source: The Northern Miner, January 21, 2022, Page 6
( https://www.northernminer.com/news/silver-lake-resources-grabs-troubled-harte-gold/1003838188/ )
** Ends **
Contact details:
|
Trident Royalties Plc Adam Davidson / Paul Smith |
www.tridentroyalties.com +1 (757) 208-5171 / +41 79 947 1348 |
|
Grant Thornton (Nominated Adviser) Colin Aaronson / Samantha Harrison / Samuel Littler |
+44 020 7383 5100 |
|
Stifel Nicolaus Europe Limited (Joint Broker) Callum Stewart / Ashton Clanfield |
+44 20 7710 7600 |
|
Tamesis Partners LLP (Joint Broker) Richard Greenfield |
+44 20 3882 2868 |
|
Hudson Sandler Investor Relations: John Smelt Public Relations: Charlie Jack / Harry Griffiths |
+44 207 796 4133 |
About Trident
Trident is a growth-focused diversified mining royalty and streaming company, providing investors with exposure to a mix of base battery, precious, and bulk metals.
Key highlights of Trident's strategy include:
· Building upon a royalty and streaming portfolio which broadly mirrors the commodity exposure of the global mining sector (excluding fossil fuels) 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 often largely relies 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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