TIDMTRR
RNS Number : 5179H
Trident Resources Plc
25 March 2020
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
APPIX 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
Cliffs Asia
Pacific Iron
1. M77/1259 Ore Pty Ltd 100% Production 12 Oct 2032 798.4 Ha
----------------- --------- ------------ ------------ ---------
2. E77/1322 Marda Operations 100% Exploration 17 Jan 2021 25 BL
Pty Ltd
----------------- --------- ------------ ------------ ---------
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 Tonnes Fe (%) SiO2 (%) Al2O3 P (%) LOI (%)
(Fe %) (Mt) (%)
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 Tonnes Fe (%) SiO2 (%) Al2O3 P (%) LOI (%)
(Fe %) (Mt) (%)
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.
END
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