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. £285 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 20301.
• 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 profiles2.
• Sonora currently contains a CIM compliant open pit Mineral Reserve of 4.5Mt LCE3. 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 expansion4.
• 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.”

CEO Adam Davidson provides an overview of the business and its strategy below (Filmed May 2021)