TIDMTRR
RNS Number : 8248Z
Trident Royalties PLC.
27 January 2022
27 January 2022
Trident Royalties Plc
("Trident" or the "Company")
Trident Secures Right Over Sonora Lithium Royalty Interest
Trident Royalties Plc (AIM:TRR), the growth-focused mining
royalty and streaming company, is pleased to announce that it has
entered into an agreement to acquire, subject to certain conditions
and at its election, an indirect 1.5% Gross Royalty (the "Royalty",
and the acquisition thereof, the "Transaction") over the Sonora
Lithium Project in Mexico ("Sonora" or the "Project") from the
Estate of Colin Orr-Ewing (the "Estate" or "Seller").
The Sonora Lithium Project is an advanced, development stage
asset jointly owned by Bacanora Lithium Plc ("Bacanora") and
Ganfeng Lithium Co. Ltd. ("Ganfeng"), with Ganfeng acting as the
project operator. Bacanora has recently become a subsidiary of
Ganfeng as a result of an approx. GBP285 million cash offer for all
of Bacanora's ordinary shares. Sonoroy Holdings Limited (the
"Buyer"), a joint venture company in which Trident holds a 50%
interest, has the right to acquire the Royalty for a total
consideration of US$52 million in cash (US$26 million attributable
to Trident). A deposit of US$2.5 million (the "Deposit") is being
paid by the Buyer, with the balance to be paid upon completion of
the Transaction, expected to occur in early-2023 following a
favourable resolution of a dispute between the Seller and Bacanora
(the "Dispute"). If the Dispute is found against the Estate,
Trident's funding is fully repayable by the Buyer.
HIGHLIGHTS
-- The Royalty complements Trident's existing lithium royalty
over the Thacker Pass Lithium Project in the U.S., providing
exposure over what are expected to be North America's next Tier-1
lithium mines. Lithium has been categorised by the United States
Geological Survey as a critical mineral, with the International
Energy Agency estimating that the growth in demand for electric
vehicles could see lithium demand increase by over 40 times by
2030(1) .
-- At the current lithium carbonate equivalent ("LCE") spot
price of approx. US$55,000 per tonne, following completion, royalty
revenue attributable to Trident in the Project's Stage 1 would be
approximately US$14.4 million per annum, increasing to
approximately US$28.9 million per annum in Stage 2. Trident would
also benefit from potassium sulphate (potash) by-product revenues
at Sonora, providing a new commodity exposure to a high-value
fertiliser product.
-- At current spot prices, and assuming it acquires the Royalty,
Trident would generate aggregate revenue from its two lithium
royalties of approx. US$37.5 million per annum under respective
Stage 1 production profiles, and approx. US$75.1 million per annum
under respective Stage 2 production profiles(2) .
-- Sonora currently contains a CIM compliant open pit Mineral
Reserve of 4.5Mt LCE(3) . The Feasibility Study published by
Bacanora in 2018 contemplates an initial mine life of 19 years but
utilises only 770kt of the LCE reserve.
-- With Measured & Indicated Resources exceeding 5.0Mt LCE,
and an additional 3.8Mt LCE Inferred Resource, Sonora is considered
to have significant potential for future Reserve conversions to
extend the mine life and/or support a production expansion(4) .
-- Ganfeng (market cap of approx. US$30 billion) is a leading
global lithium producer with best-in-class lithium processing
expertise and an aggressive production growth agenda.
-- Sonora is at an advanced stage of development with permits
granted and site works for bulk earthworks, civil engineering, and
pouring foundations having commenced. Bacanora has provided
guidance of plant commissioning in Q4 2023, with Stage 1 targeting
steady state production of 17,500 LCE tonnes per annum and 35,000
LCE tonnes per annum at Stage 2. It is anticipated that Stage 2 is
expected to commence in year five of the mine plan.
-- Sonora has benefited from the operation of a pilot plant for
over five years. The pilot plant has significantly de-risked the
project, as Bacanora and Ganfeng have utilised it to inform the
final plant design, provide training to operators, and produce
product samples for end-users.
-- Once in production, Sonora is expected to operate in the
lowest operating cost quartile, with operating costs according to
the Feasibility Study published by Bacanora of US$4,000 per tonne
of LCE.
Adam Davidson, Chief Executive Officer and Executive Director of
Trident commented:
"Like Thacker Pass - over which Trident holds an existing Gross
Revenue Royalty - Sonora is a globally significant lithium asset
which is anticipated to be the next meaningful North American
lithium mine, with early construction works already underway and
first production anticipated for the second half of 2023. With the
potential to have both the Sonora and Thacker Pass royalties in the
Trident portfolio, shareholders in Trident would have exceptional
lithium exposure covering Tier 1 assets, both targeting very
near-term production, and therefore cash flows to Trident, in 2023
(assuming completion occurs) and 2024 respectively.
I want to highlight that this transaction showcases Trident's
creative energy and ability to work collaboratively with
counterparties. Working jointly with the Estate's advisors, Trident
has structured a transaction that secures the right to acquire a
Tier 1 royalty while avoiding exposure to any associated litigation
risk. By the time Trident's full acquisition consideration is paid,
construction at Sonora should be well advanced and cash flow
imminent, with revenue visibility long into the future."
The Sonora Lithium Project
The advanced, post feasibility study stage, Sonora Lithium
Project is focussed on the development of a shallow stratiform,
volcaniclastic sedimentary hosted, lithium bearing polylithionite
clay deposit, located in the State of Sonora in north-west Mexico.
Bacanora Lithium Plc published a Technical Report on the
Feasibility Study for the Sonora Lithium Project in January 2018
(the "Feasibility Study"). The La Ventana concession accounts for
88% of the mined ore feed in the Feasibility Study which covers the
19 years of the planned initial mine life(3) .
The updated December 2017 Sonora Mineral Resource Estimate(3)
comprises a Total Measured & Indicated Mineral Resource of
291Mt @ 3,250 ppm Li & 1.4% K, for 5,038kt LCE; and an Inferred
Resource of 268Mt @ 2,650 ppm Li & 1.2% K for 3,779kt LCE.
Total Mineral Reserves(3) (at 1,500 ppm Li cut-off) consist of
243,808kt @ 3,480 ppm Li & 1.45% K for 4,515kt LCE.
The Feasibility Study considers a planned 19 years of operation,
exploiting the clay deposits utilising loaders and haul trucks in
combination with surface miners, via a proposed open-pit mine and a
lithium carbonate processing facility. The study envisages a
yearly, minimum design output, commencing at 17,500 tonnes per year
("t/y") of battery-grade Li(2) CO(3) (Stage 1), for the first four
years of the Project, followed by a proposed expansion, by
duplicating the processing plant, to produce a target minimum
design output of 35,000 t/y (Stage 2). In addition, the Project
design allows for the production of up to 28,800 t/y of potassium
sulphate (K(2) SO(4) ), or 'potash', for sale to the fertiliser
industry. Per the Feasibility Study, Trident estimates that c. 96%
of production in the initial 19-year mine life is attributable to
the Royalty.
Whilst the Feasibility Study mine plan only covers the first 19
years of production, there are sufficient Mineral Resources to give
the potential to extend mining and processing significantly beyond
19 years. Considering the current life of mine schedule, a total
37.1Mt of ore at a diluted grade of 4,151 Li ppm and 1.76% K will
be mined, at this rate the Measured and Indicated Resources would
take 149 years to be exhausted(4) .
Details of the Sonora Gross Royalty
The key terms of the Royalty are as follows:
-- A gross royalty on all mineral products generated at the mine
of 3% (for an effective royalty of 1.5% attributable to Trident),
payable quarterly in arrears.
-- The Royalty applies in proportion to Bacanora Minerals
Limited (Canada) ownership of the concessions comprising the Sonora
project, including to La Ventana (Concession No. 235611),
Buenavista (Concession No. 235613), El Sauz (Concession No.
235614), and San Gabriel (Concession No. 235816), as well as a 5km
area of interest.
TRANSACTION DETAILS
Acquisition Terms
Pursuant to a legally binding sale and purchase agreement (the
"Sale and Purchase Agreement"), Sonoroy Holdings Limited, a 50/50
joint venture between Trident and Marmottes Capital Limited
("Marmottes"), which is owned by certain beneficiaries of the
Estate), is acquiring 100% of the Royalty from the Seller for a
total consideration of US$52 million in cash. An initial US$2.5
million deposit is being paid, and the balance is due upon
completion, which is subject to a Longstop Date of 31 January 2023
or such other date that is mutually agreed between the Buyer and
the Seller. Sonoroy intends to complete the Transaction within six
months of favourable resolution of the Dispute. The Transaction was
subject to a right of first refusal by Bacanora which expired on 16
December 2021 and was not exercised.
Trident is funding the initial US$2.5 million deposit by way of
an interest-free loan (the "Loan") to the Buyer. The Loan is
repayable to Trident on completion of the Transaction, or such time
as the Sale and Purchase Agreement or Joint Venture Agreement
otherwise terminates. The full amount of the loan is repayable
should the Transaction complete; however, the Buyer may retain
US$250,000 of the loan if the litigation is found in favour of the
Estate and Trident elects not to fund its pro-rata share of the
consideration. Until completion, the Loan is guaranteed by both
Marmottes and Tanamera Resources PTE Ltd, a connected party.
Following funding the US$2.5 million Deposit via the Loan, to
complete the Transaction of the effective 1.5% Royalty, Trident
would make a final net payment of US$23.5 million (being the $26
million pro rata consideration, less repayment of the Loan).
Joint Venture Agreement
The Joint Venture Agreement between Trident and Marmottes sets
out the terms on which the Joint Venture will be operated with the
right for each shareholder to appoint and remove a director, the
conduct of board meetings and certain reserved matters which
require the consent of both shareholders, as well as information
rights and deadlock provisions. The Joint Venture Agreement also
contains a right of first refusal to the other party on a sale of
their joint venture interest (other than intra-group
reorganisations).
In addition, the Joint Venture Agreement sets out the parties'
obligations to provide funding to Sonoroy in proportion to their
current holdings upon a favourable resolution of the current
litigation. Trident may withdraw from the Joint Venture at any time
prior to the completion of the funding and, in such event, it is
entitled to be repaid all of its loan (less US$250,000 where
Trident decides not to proceed, but a favourable conclusion to the
Dispute has been reached).Trident has negotiated certain
indemnities from connected parties, including in respect of the
cost of litigation that may be incurred by Trident prior to
completion of the funding and acquisition. The indemnities are
subject to customary limitations and exclusions.
Unless it has withdrawn from the Joint Venture, Trident intends
to utilise its cash resources or facilities at the time to provide
its share of the funding to the joint venture or, if these are
insufficient, to seek additional debt or equity funding.
Royalty Litigation
Bacanora is challenging the validity of the 3% Royalty over the
MSB concessions within the Sonora Lithium Project, payable to the
Orr-Ewing Estate, and is seeking to overturn a judgment of the
Court in Alberta which dismissed Bacanora's challenge in 2021 on
the basis that the action by Bacanora was time-barred. On 21
September 2021, Bacanora filed notice of appeal in respect of the
judgment, which Trident believes will be heard and determined in
2022.
Trident has structured its funding obligation to mitigate the
risks of the litigation through the Loan arrangements.
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 JORC tables and
Competent Persons Statements may be found in those documents.
1 Source: International Energy Agency
( www.iea.org )
2 Sonora Stage 1 at 17,500t/y LCE and Stage 2 at 35,000t/y LCE.
Thacker Pass Stage 1 at 40,000t/y and 80,000t/y LCE. LCE spot price
of approx. US$55,000.
3. Source: Technical Report on the Feasibility Study for the
Sonora Lithium Project, 25 January 2018
(Sonora Lithium Project (bacanoralithium.com)
Lithium carbonate equivalent or LCE is the industry standard
terminology for, and is equivalent to, Li(2) CO(3) . 1 ppm Li metal
is equivalent to 5.323 ppm LCE / Li(2) CO(3) . One unit of Lithium
Oxide Li(2) O is equivalent to 2.473 units of LCE. Use of LCE is to
provide data comparable with industry reports and assumes complete
conversion of lithium in clays with no recovery or process
losses.
4 Source: According to stated Bacanora estimates Sonora has the
resources to run for more than 200 years at the projected annual
production rate of 35,000 tonnes. This estimate would require the
utilisation of Measured, Indicated and Inferred Resources.
( https://www.bacanoralithium.com )
** Ends **
Contact details:
Trident Royalties Plc www.tridentroyalties.com
Adam Davidson / Paul Smith +1 (757) 208-5171 / +41 79
947 1348
Grant Thornton (Nominated Adviser) www.grantthornton.co.uk
Colin Aaronson / Samantha Harrison +44 020 7383 5100
/ Samuel Littler
----------------------------
Stifel Nicolaus Europe Limited (Joint www.stifelinstitutional.com
Broker) +44 20 7710 7600
Callum Stewart / Ashton Clanfield
----------------------------
Tamesis Partners LLP (Joint Broker) www.tamesispartners.com
Richard Greenfield +44 20 3882 2868
----------------------------
St Brides Partners Ltd (Financial www.stbridespartners.co.uk
PR & IR) +44 20 7236 1177
Susie Geliher / Catherine Leftley
----------------------------
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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