Trident Royalties 3Q20 update

Highlights

Royalty portfolio

• Three transactions announced over a total of six royalties in 3Q20, executing on Trident's strategy to rapidly build critical mass.
• The 3Q20 transactions add significant precious metals exposure to Trident's existing portfolio of base metals and bulk commodities, providing investors with a commodity allocation largely in-line with that of the global mining sector.
• Several pipeline transactions materially advanced over the course of 3Q20 to further build on the company’s momentum.

3Q20 royalty payments totalling approximately US$480 247

• Koolyanobbing iron ore royalty payment of AUS$652 073 (US$458 280) on lower production volume from the royalty area vs 2Q20 but higher received price, with cumulative payments of AUS$2 094 598 (US$1 487 165) received over the first three quarters of 2020.
• The total royalty revenue from Koolyanobbing over the first three quarters alone represents more than 30% of the royalty purchase price recovered, representing an exceptional return on invested capital.
• Mimbula copper royalty inaugural payment of US$21 967 in the early stages of the project's ramp up, albeit with 3Q20 production punctuated by outages at the Konkola Copper Mines (KCM) processing plant due to a pit slough at KCM's Nchanga mine.
• The 3Q20 Mimbula payment was on approximately 270 t of copper sold. As the project's ramp up accelerates, October copper sales alone have already significantly exceeded the entirety of 3Q20 sales.
• Commodity prices remained strong with iron ore averaging $117.30/t, copper averaging $6525.90/7, and gold averaging $1911.40/oz.

3Q20 royalty acquisitions add significant precious metals exposure

• On 24 September 2020, Trident announced that it entered into an agreement to acquire an existing 1.5% net smelter return (NSR) royalty over the development-stage Lake Rebecca project in Australia, a significant gold asset actively progressing towards production.
  • Lake Rebecca represents a key cornerstone asset for Trident and is anticipated to provide material cashflow once in operation.
  • Maiden Resource of +1 million oz announced in February 2020 with recent drilling returning multiple significant intercepts outside of the current resource.
  • Drilling remains ongoing at Lake Rebecca with a focus on extending gold mineralisation in and around the current pit-shells, increasing confidence levels at the existing resource, and to test further prospective locations at the project.
• On 28 August 2020, Trident announced that it entered into an agreement to acquire a total of four attractive exploration and development-stage gold royalties located in Western Australia from Talga Resources Ltd, including:
  • 1.5% NSR royalty over tenement E45/3381 (currently being converted to mining lease M45/1289) which forms part of the Warrawoona Project. The Warrawoona Project is owned and operated by Calidus Resources Ltd which recently released a feasibility study outlining an operation with average gold production of 90 000 oz/yr. Construction has commenced at Warrawoona, with orders placed for long lead items, including SAG mill, in preparation for the commencement of the main project construction in the March quarter of 2021. The royalty covers the eastern strike extension of the Klondyke Resource, including a proportion of the JORC (2012) compliant resources drilled in 2019.
  • 1.5% NSR royalty over tenement M45/618 which forms the entirety of the Talga Talga Project owned and operated by Novo Resources, which recently acquired Millennium Minerals' nearby gold mill and is pursuing fast-track planned Pilbara conglomerate gold production.
• On 14 July 2020, Trident announced that it entered into an agreement to acquire a variable price royalty over the Spring Hill gold project. Spring Hill is owned and operated by private group PC Gold Ltd, which is actively advancing the project.

Positive asset-level progress and performance by project operators

• Warrawoona: in September, Calidus applied to have part of the E45/3381 tenement converted into a mining lease. The lease forms part of the Warrawoona Gold Project, which has now commenced early-stage construction activities. Trident owns a 1.5% NSR over E45/3381.
• Koolyanobbing: in its 2020 Annual Report, Mineral Resources Ltd stated that "both the Deception and Jackson pits successfully transitioned to lower-strip ore delivery phases." Trident holds a 1.5% FOB revenue royalty over the M77/1259 tenement which covers a substantial part of the Deception pit and which is part of the Koolyanobbing iron ore operation in Western Australia.
• Mimbula: the Mimbula Copper Mine continues to ramp up production, with the in situ orebody now being actively mined in addition to the stockpiles.
• Spring Hill: the operator of the Spring Hill Gold Project continues to actively move the project towards development with key permitting processes advancing.

Balance sheet to support future acquisitions

• Trident agreed to the early payment of the second tranche of the purchase price for the Koolyanobbing royalty acquisition in exchange for a AuS$350 000 discount, resulting in an effective annualised 17.5% risk free return on capital whilst removing the future payment obligation.
• Cash balance of US$12.68 million as of 30 September 2020.
• Even when accounting for subsequent transactions, this substantial cash balance - coupled with projected revenues from two cash generative royalties and an ability to offer vendors publicly tradeable equity in Trident - supports significant capacity for future acquisitions.
• In addition, the company continues to advance debt discussions as a means 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 or transactions.
• Indicative of the strength of the pipeline, Trident currently has 6 active NDAs under which it is reviewing a range of opportunities in nickel, copper, zinc, gold and battery minerals.
• 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, CEO of Trident commented: "We are very pleased with Trident's progress over 3Q20. In a short period of time, we have added an additional six royalties to the portfolio - providing investors with precious metals exposure spread across a number of assets in one of the world's premier mining jurisdictions.

"Meanwhile, both copper and iron ore prices remain strong, providing a positive outlook for Trident's existing paying royalties. In addition, gold prices remain near all-time highs, supporting the continued advancement of Trident's precious metals exploration and development-stage royalties. The addition of Helen Pein, a highly experienced economic geologist, as a Non-Executive Director will further support Trident as we continue to execute on the strategy into the fourth quarter. I look forward to reporting on our progress as we continue to assemble a strong portfolio of mining royalties and streams."

Read the article online at: https://www.globalminingreview.com/finance-business/02112020/trident-royalties-3q20-update/