Overview
Trident Royalties (AIM:TRR,OTC:TDTRF) is a mining royalty company which provides investors with exposure to lithium, gold, copper, silver, iron ore, and other commodities (excluding thermal coal). Its diversified commodity portfolio aims to bridge the gap in the royalty sector, which is currently dominated by precious metal royalty companies. Trident is establishing itself as a royalty company with the intent of building a portfolio which broadly reflects the diverse spectrum of the entire mining sector.
Mining royalties are contractual arrangements that provide a mining company with a lump-sum upfront payment in exchange for a share of its future revenues. Royalties offer several advantages over other investment structures, including no dilution risk from future financings (as royalties are typically structured as a fixed percentage of revenue), while retaining exposure to resource growth and project expansion upside. Royalty companies enjoy various benefits, including diversification, high profit margins, and reduced risk. By investing in multiple mines simultaneously, royalty companies can mitigate the impact of an underperforming mine, as they continue to generate revenue from others. Investing in royalty companies offers investors exposure to the price movements of the underlying commodity while eliminating exposure to the risks associated with the capital and operating costs of the mine.
For mining companies, royalty financing offers several benefits compared to traditional forms of funding. For example, in contrast to debt, royalty financing comes with extended terms, no fixed payments, and is generally simpler to implement, with limited covenants. While, in contrast to equity, royalties are non-dilutive to share capital.
Historically, the royalty model has mostly been confined to the precious metals sector and, as such, has been unavailable for many investors looking for exposure to other metal classes and broader mining industry, as a whole. Trident’s royalty model is unique as it aims to bring under its umbrella the entire gamut of the mining industry, providing exposure to commodities such as lithium, copper, iron ore and other metals. This should attract investors willing to participate in the growth of metals such as lithium and copper, without taking the risk associated with investing directly in the mining companies themselves.
Since listing in mid-2020, the company has acquired 21 assets (royalties and gold offtake agreements), of which 13 are currently cash-flowing. While the current revenue mix is weighted toward gold, asset-level developments across the portfolio, specifically at the Thacker Pass (lithium) and Mimbula (copper) projects, continue to indicate a higher mix of lithium and copper royalty revenue going forward. Thacker Pass is on track to be the largest lithium producer in North America within the next three years. The cash flow from this royalty, at current lithium prices and full production, should be roughly $21 million per annum (assuming partial operator buy-back occurs, LCE price of $25k/t, 80 k/t per year production rate).
Trident has developed a portfolio which not only provides material revenue today but includes a tangible growth profile to significantly grow revenue over the next few years. A significant portion of future revenue is underpinned by assets already in construction, including Thacker Pass, Mimbula (in production, ramping-up) and Greenstone (discussed in detail below). Longer-term revenue growth is supported by a mix of expansions and new project development.
In addition to the revenue shown below, Trident anticipates two material one-off payments of $8.75 million in 2025 from Avino Silver and $13.2 million in 2026 from Lithium Americas.
Company Highlights
Trident Royalties is a diversified mining royalty company which provides investors with exposure to the full breadth of mining commodities, including precious, base and battery metals, and bulk/industrial minerals (excluding thermal coal). The company is listed on the AIM market of the London Stock Exchange under the ticker ‘TRR’ and on the US OTCQB market under the ticker ‘TDTRF’.Since its listing on London’s AIM market in June 2020, the company has acquired 21 assets, of which 13 are currently cash-flowing.The company’s broad asset base, which includes exposure to lithium, gold, copper, silver, iron ore and other commodities, differentiates it from its peers, which are mainly limited to precious metals. Greater than 60 percent of its asset NAV (by Unrisked Asset NAV – Tamesis Partners, 8 November 2023) is located in resource-friendly countries such as Canada, Australia and the US, which reduces jurisdictional risk.Management’s track record for value creation is impressive, delivering shareholder returns of 80 percent since listing. Trident has an attractive pipeline of future cash-flowing opportunities in battery and base metals. In particular, the Thacker Pass Lithium Project in the U.S. and the Mimbula Copper Project in Zambia hold significant potential for increased revenue to Trident. Thacker Pass is projected to deliver ~US$15 million in annual royalty revenue within the next three years (Revenue estimates by Tamesis Partners (8 November 2023)
Key Assets
Thacker Pass Lithium Royalty
Trident holds a 60 percent stake in a 1.75 percent gross revenue royalty (1.05 percent, net to Trident) covering Lithium Americas’ Thacker Pass Lithium Project, which stands as one of the most substantial lithium resources in North America. It is Trident’s flagship royalty asset and is currently under construction with first production targeted for 2027.
Lithium Americas made significant asset-level progress towards the development of Thacker Pass with several recent milestones, including:
$650 million equity investment by General Motors into Lithium Americas.The commencement of Phase 1 construction following the receipt of notice to proceed from the Bureau of Land Management.
Thacker Pass holds considerable national significance for the US, which currently produces limited lithium domestically, as it endeavors to establish and enhance its independent critical minerals supply chain.
Gold Offtake Portfolio
Trident’s gold offtake portfolio comprises ten projects owned by different operators. Of these, nine projects are currently producing and have generated $6.8 million in revenue in FY 2023. The portfolio will further benefit from progress made across various assets including the advancement of Equinox Gold’s Greenstone project in Ontario, Canada. The Greenstone project is 96 percent complete as of November 2023, with pre-commissioning activities ongoing currently. Over 15 million tonnes of material have been moved thus far, and the buildup of the ore stockpile is progressing ahead of schedule, with the first gold pour expected in May 2024.
Trident holds a gold offtake agreement for the Greenstone project with an annual cap of 58,500 oz, and previously secured a guarantee from Premier Gold Mines Limited (a subsidiary of Equinox) that any shortfall in deliveries for 2024 and 2025 will be compensated at a rate of $23.50/oz. Gold offtakes are similar to a stream in that it entitles Trident the right to purchase the gold at a price below spot, allowing Trident to simultaneously sell the gold at spot and thus clipping a margin which has historically yielded an NSR equivalent of 1.33 percent.
Mimbula Copper Project
The Mimbula Copper project is owned by Moxico Resources. The project comprises a deposit abundant in copper oxides and sulfides, situated in the Zambian Copperbelt on the outskirts of Chingola. Trident owns a 0.3 percent gross revenue royalty (GRR) over all copper produced from the Mimbula Mine.
Phase 1 mining operations, which are expected to produce 10,000 tons of copper cathode per annum, commenced in early 2023. The Phase 2 expansion to 56,000 tons of annual copper production is underway, with Moxico Resources targeting Phase 2 production to commence in mid-2025.
Paradox Lithium Project
The Paradox Lithium project is owned by Anson Resources. It is an advanced lithium development project spanning 167 sq. km. in the Paradox Basin located in southern Utah, USA. Trident owns a 2.5 percent net smelter return (NSR) royalty, applicable to all projects owned by Anson Resources in the Paradox Basin.
In October 2023, Anson reported a 45 percent increase in the mineral resource to a total of 1.05 MT lithium carbonate equivalent, directly benefiting Trident’s royalty.
La Preciosa Silver Project
The La Preciosa Silver project is operated by Avino Silver and Gold Mines. The project is a development-stage property, hosting one of the most significant undeveloped silver resources in Mexico. Trident owns a 1.25 percent NSR royalty over La Preciosa. Moreover, Trident has the right to receive a milestone payment of US$8.75 million from Avino within 12 months of first silver production.
Antler Copper Royalty
The Antler copper project is located in Arizona, USA, and is operated by New World Resources. Trident owns a 0.90 percent NSR royalty on the project. The project is exceptionally high-grade and is located in an attractive mining jurisdiction with high-quality existing infrastructure. Pre-construction work on the project is expected to begin in Q1 2025.
The royalty comprises two buyback provisions, enabling the acceleration of cash flow while ensuring Trident maintains significant ongoing exposure to the project and potential exploration success. Additionally, Trident has a right of first refusal, granting the company the privilege to match any new royalty or streaming transaction until 12 months after the commencement of commercial production at Antler.
Management Team and Board of Directors
The management team has significant experience in private equity, banking, operational and commodity markets.
Adam Davidson – Chief Executive Officer
Adam Davidson has over a decade of experience in the natural resources sector. His most recent role was with Resource Capital Funds (RCF), a prominent mining-focused private equity firm. Before joining RCF, Davidson held positions in metals and mining equity research at BMO Capital Markets and in strategic planning at Orica Mining Services. His extensive background encompasses mining capital markets in various jurisdictions and commodities. He began his career at T. Rowe Price and has also served in the US Marine Corps.
Richard Hughes – Chief Financial Officer
Richard Hughes’ background encompasses diverse mining capital markets and advisory roles across various jurisdictions and commodities. He established an independent consultancy in 2019, offering corporate finance advisory services to mining and royalty finance companies. Before this venture, he served as a senior member of the metals and mining investment banking team at RBC Capital Markets in London from 2010 to 2018. Hughes commenced his career at CIBC, contributing as a member of the global mining group.
Albert Gourley – Non-executive Chairman
Albert Gourley is a managing partner of Faskens law firm and has held directorship positions in numerous mining and mineral exploration companies listed on the TSX, TSX-V and AIM. Notably, he was involved with a company acquired by Franco-Nevada for its gold royalty on the Newmont Ahafo Mine in Ghana. His mining industry experience includes working with the Noranda Group from 1992 to 1995, and he served as the CEO of an AIM-listed industrial mineral producer from 2011 to 2012.
Helen Pein – Non-executive Director
Helen Pein has over 30 years of experience as an economic geologist in the natural resource sector. She currently serves as a director of Pan Iberia (UK) and is a founding member of Panex Resources (Mauritius and SA), a private company dedicated to discovering and developing global mining projects. She was previously a director and shareholder at Pangea Exploration for two decades. As a member of the executive team, she played a pivotal role in the direct discovery and evaluation of several world-class gold and mineral sands deposits across Africa.
Peter Bacchus – Non-executive Director
Peter Bacchus boasts over 25 years of experience as a prominent global M&A adviser. He currently serves as the chairman and chief executive of Bacchus Capital, an independent investment banking boutique specializing in the natural resources sector. He has been involved in large M&A transactions, financed substantial deals, and advised on development projects worldwide. He served as the global head of mining and metals at Morgan Stanley and held senior-level positions at Jefferies and Citigroup. He also sits on the boards of Gold Fields Limited, Kenmare Resources, and Galaxy Resources.
David Reading – Non-executive Director
David Reading has over 40 years of experience in the mining industry, with expertise across all phases of mine development, encompassing exploration, feasibility, financing, construction and operations. He holds an MSc in economic geology and is recognized as a fellow of the Institute of Materials, Minerals, and Mining, as well as a fellow of the Society of Economic Geologists.
Leslie Stephenson – Non-executive Director
Leslie Stephenson has more than 30 years of experience in the financial services sector. She has worked for two major insurance companies in the US. Additionally, she has held positions in banking and undertaken senior roles at HSBC, particularly in the areas of strategic planning and risk management. She holds an MBA from the Richard Ivey School of Business and a BA from Western University.
This article was written in collaboration with Couloir Capital.