Trident Royalties offloads gold assets, restructures debt
By Josh White
Date: Friday 09 Dec 2022
(Sharecast News) - Trident Royalties has entered into an agreement with Franco-Nevada Corporation, it announced on Friday, for the sale of several pre-production gold royalties for cash proceeds of up to $15.8m.
The AIM-traded firm said the sale would allow it to realise a "significant return" on its initial investment, while rightsizing the gold exposure within its portfolio and further strengthen its balance sheet for subsequent acquisitions.
At the same time, Trident said it had restructured its existing debt facility with Macquarie Bank on more favourable terms, reducing the coupon by up to 2%, deferring principal repayments, and extending the term by one year.
Trident said it had agreed to sell its pre-production gold royalties over Rebecca, Spring Hill, and four other projects acquired as a portfolio from Talga Resources to Franco-Nevada, in exchange for cash of up to $15.8m.
The royalties were acquired by Trident for $6.5m, representing a return on invested capital of 143% in around two years.
It said $14.55m of the consideration would be payable immediately on completion, and $1.25m would be paid on first production from the Rebecca gold project.
The transaction would result in Trident holding estimated pro forma cash of around $35m, placing the company in a "strong position" to pursue new opportunities and capitalise on current weakness in traditional debt and equity markets, particularly in non-precious metals commodities.
While the company said it remained focussed on accretively growing the business, the transaction highlighted its willingness to exit assets where substantial gains could be realised, enabling cash to be redeployed for stronger future returns.
The transaction also brought Trident's portfolio allocation for gold into line with longer-term expectations following the acquisition of the gold offtake portfolio in January.
It said the debt restructuring, meanwhile, illustrated the longer-term downward direction of its cost of capital, with the cost of debt nearly halving from one year ago.
The board said both the transaction and debt restructuring would provide the firm with access to capital from non-equity sources as it continued to guard against unnecessary dilution ahead of expected valuation catalysts, particularly de-risking events on its lithium portfolio, and ongoing growth from its gold offtake portfolio.
"We are delighted to have created this opportunity to realise significant value for our shareholders," said chief executive officer Adam Davidson.
"Whilst Trident is actively seeking to accretively grow the portfolio, the transaction highlights the company's differentiated approach to value generation by acquiring royalties at an attractive entry value and opportunistically monetizing following growth in the underlying assets.
"This transaction has enabled us to deliver a return of 143% in approximately two years since acquiring the royalties, allowing Trident to recycle capital for further investments and reducing reliance on capital markets."
Davidson said the company was also "pleased" to have the support of Macquarie Bank which, against the backdrop of rising global interest rates, reduced Trident's cost of capital and provided further flexibility to support future acquisitions.
"Trident remains committed to driving down our cost of capital as we mature and see the restructure of our debt facility as another step in this process, with Trident's cost of debt nearly halving in less than one year.
"The combination of this transaction and the debt restructuring creates an even stronger platform to support Trident's future growth."
At 1343 GMT, shares in Trident Royalties were up 9.32% at 51.38p.
Reporting by Josh White for Sharecast.com.
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