Q4 2020 Activities Update

Strengthening Iron Ore & Copper Markets, Additional Base Metals Exposure

Trident Royalties Plc (AIM: TRR, FSX: 5KV), is pleased to provide an update on its activities undertaken during the fourth quarter ended 31 December 2020, including Q4 royalty receipts.

 HIGHLIGHTS

Q4 caps off a transformative year for Trident

• A total of six transactions agreed over 11 royalties in 2020, including the acquisition of the Pukaqaqa copper royalties in Q4 from Orion Resource Partners (“Orion”), Trident’s first all-equity deal;
• Strengthened the board and management team in 2020, most recently in Q4 with the addition of Martin Page as CFO and Julien Bosché as Vice President of Investments, completing the team by filling previously outsourced positions;
• With a portfolio inclusive of copper, iron ore, and gold, Trident is increasingly reflective of the broader global mining sector, providing investors with an inflation hedge in the face of loose global monetary policy; and
• A number of pipeline transactions continuing to advance across multiple commodities.

Q4 royalty payments totalling approximately US$291,832 from royalties over producing assets

• Koolyanobbing iron ore Q4 royalty payment of A$305,770 (US$235,092¹), a decrease over Q3 on higher received price, but lower volumes from the royalty area as production from the broader Koolyanobbing Iron Ore Operation was more heavily weighted toward other pits;
• Koolyanobbing cumulative 2020 royalty payments of A$2,400,368 (approximately US$1.7 million at the historical FX rates for each payment), which equates to more than 35% of the A$6.65 million royalty purchase price recovered in the first full year alone, representing an exceptional return on invested capital;
• Mimbula copper royalty Q4 payment of US$56,740 on 633 tonnes of copper sold, an increase over Q3 of 158% on revenue and 146% on production as the project continues to ramp up;
• The Minimum Payment Schedule (“MPS”) on the Mimbula copper royalty commences in Q1 2021 (US$375,000 per quarter in 2021, less any excess payments made above the MPS from previous quarters)²; and
• Commodity prices underlying Trident’s royalties remained strong throughout Q4 with iron ore averaging $131/tonne, copper averaging $7,173/tonne, and gold averaging $1,876/oz.³ Current spot prices for iron ore and copper are well in excess of the Q4 average, presently at $157.4/tonne and $7,778/tonne respectively.³

Q4 royalty portfolio growth, coupled with positive asset-level progress by project operators

• On 18 December 2020, Trident announced that it entered into a conditional agreement to acquire three royalties over the Pukaqaqa Copper Project (“Pukaqaqa”) from Orion in an all-equity transaction⁴. Highlights include:
  • Royalties over a large-scale copper project being actively advanced by an established South America-focused mid-tier base metals producer Nexa Resources (TSX: NEXA) (“Nexa”);
  • Nexa has allocated a total of US$16 million towards advancing the project over the last three years, with the project status noted as “ongoing pre-feasibility study” with “a new phase of metallurgical tests” scheduled to be completed in 2020^{5 & 6};
  • The 2017, CIM compliant⁷ 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 copper⁶;
  • The pending acquisition is Trident’s first all-equity transaction, demonstrating an ability to continue to build the portfolio while preserving balance sheet cash and also seeing Orion, a leader in the royalty and streaming space, become a significant shareholder in Trident. Completion of the proposed acquisition remains conditional amongst other things upon the issue or deemed issue of a tax certificate by the Peruvian tax authorities in respect of the transaction.
• Trident has noted positive asset-level progress by project operators, including:
  • Lake Rebecca:  As noted in the recent Royalty Portfolio Update announcement dated 14 January 2021⁸, since completion of the Lake Rebecca gold royalty acquisition, operator Apollo Consolidated (ASX: AOP) has released technical and drilling updates which are considered very positive and see the potential for increased Resources (updated Mineral Resource Estimate expected in Q2 2021), as well as de-risking of future mining studies. Trident holds a 1.5% NSR royalty over the entirety of the current Lake Rebecca Resource.
  • Warrawoona: As noted in the Royalty Portfolio Update announcement dated 17 December 2020⁹, in September, Calidus Resources Limited (ASX: CAI) (“Calidus”) submitted an application to convert part of the royalty tenement to a Mining Lease. In addition, in Q4 Calidus announced that the Warrawoona Gold Project is now fully funded to production, with construction early works having already commenced.
  • Koolyanobbing: In its 2020 Annual General Meeting and third quarter update¹⁰, Mineral Resources Limited stated that 7.4 million tonnes of iron ore were shipped from Koolyanobbing, with FY21 guidance of 12-12.7 million tonnes and a year-end run rate target of 13 million tonnes. Trident holds a 1.5% FOB revenue royalty over the M77/1259 tenement which covers a substantial part of the Deception pit, which forms part of the broader Koolyanobbing iron ore operation in Western Australia.
  • Mimbula: Production continues to ramp up at Mimbula and, with the copper price recently surging to nearly 8-year highs, is well positioned to capitalise on positive market sentiment;
  • Spring Hill: Permitting activities for the Spring Hill Gold Project continue to progress successfully with the final recommendation report completed by Australian permitting authorities on 23 December 2020.

Strong balance sheet to support future acquisitions

• Unaudited cash balance of US$6.9 million as of 31 December 2020 (not inclusive of Q4 royalty revenue);
• This substantial cash balance – coupled with ongoing projected revenues from two cash generative royalties and an ability to offer vendors publicly tradeable equity in Trident – supports capacity for future acquisitions;
• In addition, Trident continues to engage with debt providers in order to unlock additional funding capacity and provide shareholders with levered returns. Trident expects any debt facility would be agreed and drawn in conjunction with a future potential transaction;
• Indicative of the strength of the pipeline, Trident currently has 12 active NDAs under which it is reviewing a range of opportunities in nickel, copper, zinc, gold, silver, iron ore, mineral sands and lithium; and
• Trident continues to prioritise production or near-production assets, with an increased emphasis on larger, more substantive transactions to materially build Trident’s revenue profile.

Adam Davidson, Chief Executive Officer of Trident commented:

 “The significant progress Trident made during 2020 has meant that it has rapidly positioned itself as a go-to investment vehicle in which investors can gain exposure to an increasingly diversified portfolio of mining royalties.  Our strategy of targeting attractive small to mid-size transactions, which are often ignored by larger players across assets in premier mining jurisdictions, has already proved successful in a short period of time. Having gained exposure to a portfolio which includes copper, iron ore and gold, all of which are forecast to continue their strong performance, we anticipate seeing increasing returns from our existing paying royalties.

“Looking forward to 2021, with our strengthened board and management team now fully integrated, we will continue to execute on the strategy and are currently evaluating and making positive progress on a number of potential transactions. We maintain a strong cash position which is continually added to with our two cash generative royalties, and along with the ability to fund future acquisitions using debt or equity, we have significant capacity to aggressively pursue future acquisitions. Our pipeline is strong and covers a broad range of commodities.

 “We are very pleased with the opportunity set available to Trident and look forward with confidence to our progress during the year as we continue to build a diversified portfolio of mining royalties and streams.”

  

References

¹ AUD = 0.7688 USD (29 Jan 2021)

² Source: Trident Royalties announcement dated 29 June 2020  https://polaris.brighterir.com/public/trident/news/rns/story/r73y4gx/export

³ Source: Factset, 62% Fe (CFR), Copper (LME), Gold (LBMA). Spot prices sourced dated 29 January 2021, sourced from LME for copper, and Financial Times for 62% Fe CFR China (TSI)

⁴ Source: Trident Royalties announcement dated 18 December 2020

https://polaris.brighterir.com/public/trident/news/rns/story/rmqp7vw/export

⁵ Source: Nexa Resources 2019 Annual Report 

https://riperu.nexaresources.com/list.aspx?idCanal=tPFcom1XqQxIhf5L4ifI+A==

⁶ Source: “Technical Report on the Pukaqaqa Project, Huancavelica Region, Peru” (4 August 2017), available under Nexa’s SEDAR profile at www.sedar.com 

⁷ Source: Compliant with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves dated 10 May 2014.

⁸ Source: Trident Royalties announcement dated 14 January 2021

https://polaris.brighterir.com/public/trident/news/rns/story/rg4eg3r/export

⁹ Source: Trident Royalties announcement dated 17 December 2020

https://polaris.brighterir.com/public/trident/news/rns/story/w3mozjx/export

¹⁰ Source: Mineral Resource Limited ASX Announcements

https://www.mineralresources.com.au/investorresources/latest-asx-announcements/all/