Trident Roylties: Lithium Royalty Acquisition & Fundraising of £20m

20th March 2021 | Trident Royalties plc

Transformational Lithium Royalty Acquisition & Fundraising of Approximately £20.2 million (approximately US$28.1 million)

Trident Royalties Plc (AIM:TRR, FSX:5KV), the growth-focused mining royalty and streaming company, is pleased to announce the proposed acquisition of a 60% interest in an existing gross revenue royalty over the Thacker Pass Lithium Project (“Thacker Pass” or the “Project”) operated by Lithium Americas Corp (NYSE: TSX: LAC) (“LAC”) from an Orion Mine Finance Fund (“Orion”) for a total consideration of US$28 million (the “Acquisition”). The consideration for the Acquisition is US$26.0 million in cash and 4,213,720 new ordinary shares of 1p each in the capital of Trident (“Ordinary Shares”) to be issued to Orion, being in aggregate US$2.0 million at the Placing Price (as defined below) (“Consideration Shares”).

In order to finance the cash component of the consideration for the Acquisition, Trident is also pleased to announce that it has conditionally raised approximately £20.2 million (approximately US$28.1 million), before expenses, by way of a conditional placing of new Ordinary Shares (the “Placing”) and subscriptions with the Company (the “Subscriptions”) at a price of £0.34 per share (the “Placing Price”).

The Placing was conducted by Tamesis Partners LLP (“Tamesis”), Shard Capital Partners LLP (“Shard”) and Ashanti Capital Pty Ltd (“Ashanti”, together with Tamesis and Shard, the “Joint Bookrunners”).

In addition to the Placing and Subscriptions, an offer will be made by the Company on the PrimaryBid.com platform of up to 1,500,000 new Ordinary Shares at the Placing Price to raise up to approximately an additional £0.5 million (approximately US$0.7 million) (the “Retail Offer”), and any proceeds of the Retail Offer will be applied for general corporate purposes. A separate announcement will be made shortly regarding the Retail Offer and its terms.

HIGHLIGHTS

Acquisition of a royalty over the largest lithium reserve in the United States, being taken into production by an experienced lithium project developer

  • Acquisition of a 60% undivided interest in a gross revenue royalty (“GRR”) over Thacker Pass from Alnitak Holdings LLC (the “Seller”), an entity wholly owned by Orion for a total consideration of US$28.0 million, comprising US$26.0 million in cash and US$2.0 million in new Ordinary Shares in Trident issued to the Seller at the Placing Price.
  • The GRR is subject to a partial operator buy-back which Trident expects will be exercised by the operator, LAC, for proceeds to Trident of US$13.2 million during the first year of operation (the “Buy-Back”).
  • The Acquisition is Trident’s second transaction with Orion following the pending acquisition of a portfolio of royalties over the Pukaqaqa Copper Project announced in December 2020.
  • Thacker Pass currently contains CIM compliant1 mineral reserves of 3.1Mt Lithium Carbonate Equivalent (“LCE”), the largest lithium reserve in the United States, with an anticipated mine life of 46 years based on reserves (Table 1).
  • With the Total Resources amounting to circa 8.3Mt LCE (Table 2) plus further as yet undrilled exploration targets, there is significant additional resource upside to potentially provide further reserve conversion to extend the mine life or support a production expansion.
  • LAC (market cap approx. US$2.0 billion) is an experienced lithium project developer that is well-funded with over US$500 million of cash-on-hand following a successful US$400 million equity raising in January 2021, the proceeds of which are stated by LAC to be primarily used for the development of Thacker Pass.
  • Thacker Pass is at an advanced stage of development with a highly attractive Pre-Feasibility Study (“PFS”) 2 announced on 21 June 2018 and a Definitive Feasibility Study due for completion in 2021.
  • LAC has announced that key permits are in place with construction targeted for late 2021 or early 2022 and Trident expects Phase 1 production to start ramping up in 2024.
  • Based on the PFS parameters published by LAC, Phase 1 steady-state royalty revenue attributable to Trident is anticipated to be approximately US$3.8 million per annum, increasing to US$7.6 million per annum at Phase 2 steady-state (assuming the Buy-Back occurs before operations commence).3

A transformational acquisition in line with Trident’s strategy to build a global diversified mining royalty & streaming company

  • The Thacker Pass GRR will be a cornerstone asset for Trident, complementing the Company’s existing portfolio of copper, iron ore and gold royalties.
  • The Acquisition adds a significant battery metals asset to Trident’s portfolio, which provides investors with exposure to large-scale projects in commodities well-positioned to benefit from global macro drivers and protect against inflation.
  • A highly accretive transaction which adds another near-term producing asset with long-term sustainable cash flows.
  • The Acquisition is Trident’s 7th announced transaction and would mark its 12th royalty since admission to trading on AIM in June 2020.
  • Represents Trident’s 2nd transaction with Orion, a fund managed by Orion Resource Partners, a global alternative investment management firm with approximately US$6.3 billion under management (as of 30 Sep 2020) and a leader in the mining royalty and streaming space.
  • Upon completion of this transaction and the Pukaqaqa acquisition, Orion will become a 6.3% shareholder in Trident.
  • The Acquisition represents a major step forward on the path to achieving critical mass, more than doubling the Company’s deployed capital.
  • The royalty company model delivers returns to scale as risk is diversified and access to capital is enhanced. Trident operates a low-overhead model, capable of supporting a larger scale business with minimal additional fixed costs.

Equity financing maintains strong balance sheet for future deals

  • The Company has conditionally placed and received Subscriptions for an aggregate of 59.3 million shares at a price of 34.0 pence per Ordinary Share to raise approximately £20.2 million (approximately US$28.1 million), before expenses.
  • A Retail Offer via the PrimaryBid.com platform will be launched for up to an additional US$0.7 million before expenses.
  • Net proceeds used to fund the Acquisition consideration, future royalty acquisitions and for general corporate purposes.
  • Trident remains debt free with pro forma cash of approximately US$7.4 post completion of the Acquisition (excluding any proceeds from the Retail Offer), available for future transactions.4
  • Increased equity and asset base expected to enhance debt capacity, together with the ability to offer listed equity to transaction counterparties to share in future value creation.

Adam Davidson, Chief Executive Officer and Executive Director of Trident commented:

“The Thacker Pass lithium royalty will be the twelfth, and by far the largest, royalty acquisition announced in Trident’s first ten months since being admitted to trading on AIM. I am delighted to have been able to secure a royalty over such as significant asset with a clear pathway to development. Thacker Pass, which will become a cornerstone asset for Trident, will bring the addition of lithium, a key battery metal, to our portfolio alongside existing exposure to iron ore, copper and gold. This will provide an important new dimension to Trident as we continue to build a portfolio of royalties to broadly mirror the commodity exposure of the global mining sector, with battery metals representing an increasingly significant component of the industry.

Thacker Pass is a globally significant lithium asset and one of the largest known lithium deposits in North America. Its location in Nevada is of strategic importance, being close to both key mining infrastructure as well as potential customers. Its mine life of some 46 years and mineral reserves of 3.1Mt LCE makes it one of the largest lithium projects located in a tier 1 mining jurisdiction. Funded to commence construction from existing cash and debt facilities, Thacker Pass has key permits in place to facilitate the commencement of construction anticipated for late 2021 / early 2022 and is being taken into production by an experienced project developer. On completion of the Transaction, the royalty will be highly accretive for Trident, adding another quality asset with line-of-sight to long-term sustainable cash flows.

I’m delighted by the strong support for our equity fundraising, with both new institutions and private investors joining our register, in addition to the welcome participation of many of our long-term supporters. The offering was oversubscribed and completed without a discount to our prevailing share price, underlining the strength of Trident’s investment case”

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