Trident Royalties. - Portfolio Update: Thacker Pass Lithium Royalty

Trident Royalties

01/02/2023 07:00

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RNS Number : 4954O  Trident Royalties PLC.  01 February 2023

1 February 2023

 

Trident Royalties Plc

("Trident" or the "Company")

 

Portfolio Update: Thacker Pass Lithium Royalty

Trident Royalties Plc (AIM: TRR), the diversified mining royalty company, is
pleased to note recent updates on the Thacker Pass lithium project ("Thacker
Pass" or the "Project"), in Nevada, by the project operator, Lithium Americas
Corp. ("LAC")(1, 2). Trident holds a 60% interest in a gross revenue royalty
over the entirety of the Project.

 

HIGHLIGHTS

 

·      General Motors Co. (NYSE: GM) ("GM") and LAC have announced that
they will jointly invest to develop Thacker Pass, which is the largest known
source of lithium in the United States and the third largest in the world (the
"Agreement")(1).

 

·      Under the Agreement, GM will make a US$650 million equity
investment in LAC, which represents the largest-ever investment by an
automaker to produce battery raw materials.

 

·      GM has also entered into a 10-year offtake agreement, to purchase
the Phase 1 production from Thacker Pass. The price within the offtake
agreement will be based on an agreed upon price formula linked to prevailing
market prices.

 

·      LAC estimates the lithium extracted and processed from the
Project can support production of up to 1 million electric vehicles per year.

 

·      In connection with the Agreement, LAC has provided an update on
the construction plan for Thacker Pass including the release of an independent
National Instrument 43-101 ("NI 43-101") compliant feasibility study
("Feasibility Study")(2).

o  Thacker Pass construction plan targeting 80,000 tonnes per annum ("tpa")
of battery-quality lithium carbonate production capacity in two phases of
40,000 tpa, respectively ("Phase 1" and "Phase 2").

o  Phase 1 production expected to commence in the second half of 2026.

o  Project life of 40 years utilising less than 25% of the current Measured
and Indicated ("M&I") Mineral Resource estimate (3).

o  Proven and Probable Mineral Reserves of 3.7 million tonnes lithium
carbonate equivalent ("LCE") at an average grade of 3,160 parts per million
lithium ("ppm Li") (4).

o  M&I Mineral Resource estimate of 16.1 Mt LCE at an average grade of
2,070 ppm Li.

o  US$5.7 billion net present value ("NPV") at 8% discount and 21.4% internal
rate of return ("IRR"), after-tax when using a price assumption of US$24,000
per tonne of lithium carbonate.

o  LAC have awarded the Engineering, Procurement and Construction Management
("EPCM") contract for the construction of Thacker Pass to Bechtel Corporation.

 

·      Trident holds a 60% interest in a gross revenue royalty over the
entirety of the Project. Assuming LAC exercises the partial royalty buy-back
(US$13.2 million attributable to Trident), then Trident would retain the
equivalent of a (net) 1.05% gross revenue royalty.

o  At current lithium spot price of approximately US$66,000 per tonne LCE,
once at full production, the (post-buyback) royalty would generate over US$55
million per year to Trident.

 

Jonathan Evans, President and CEO of LAC, commented to LAC for the purposes of
their announcement(1):

 

"The agreement with GM is a major milestone in moving Thacker Pass toward
production, while setting a foundation for the separation of our U.S. and
Argentine businesses.  This relationship underscores our commitment to
develop a sustainable domestic lithium supply chain for electric vehicles. We
are pleased to have GM as our largest investor, and we look forward to working
together to accelerate the energy transition while spurring job creation and
economic growth in America."

 

Adam Davidson, Chief Executive Officer of Trident commented:

 

"Thacker Pass is an asset with significant strategic importance in the context
of the United States' transition to carbon net zero, and we are encouraged
that its status as such has been recognised by General Motors in the
largest-ever investment by an automaker securing battery raw metals.

 

"For Trident, Thacker Pass is expected to become an important component in our
expanding revenue-generative royalty portfolio as LAC advances towards Phase 1
production of 40,000tpa in H2 2026.   Until then, we continue to keenly
monitor its development including the result of the appeal process held in
early January, with a decision expected in the coming months."

 

Agreement with General Motors

 

GM has agreed to make an aggregate investment of US$650 million in two
tranches. In tranche 1, GM will acquire 15.0 million common shares of LAC
(each, a "LAC Share") at a price of US$21.34 per share (the "Tranche 1
Subscription Price"), for gross proceeds of US$320 million ("Tranche 1"). The
funds from Tranche 1 will be held in escrow until certain conditions are
met.  If those conditions are met, the funds will be released to LAC and GM
will own a 9.999% equity interest in LAC. LAC anticipates that the escrow
release will occur by mid-2023.

 

Following the satisfaction of certain conditions, GM has agreed to subscribe
for shares of LAC at the then market price on the date of subscription,
subject to a cap of 130% of the Tranche 1 Subscription Price in an amount
equal to US$330 million ("Tranche 2").

 

LAC has agreed to use the proceeds from the Agreement for the development of
Thacker Pass.

 

OFFTAKE & INVESTOR RIGHTS AGREEMENT

 

LAC has entered into an agreement to supply GM with lithium carbonate
production from Phase 1 of Thacker Pass (the "Offtake Agreement") in
connection with the escrow release of the Tranche 1 investment. The price
within the Offtake Agreement will be based on an agreed upon price formula
linked to prevailing market prices. The term of the Offtake Agreement will be
10 years from the commencement of Phase 1 production, with the option for GM
to extend by an additional five years. GM will also have a right of first
offer on the offtake of Thacker Pass' Phase 2 production.

 

LAC notes that GM has announced four U.S. cell plants with annual capacity of
160 gigawatt hours, including the Ultium Cells joint venture ("JV") plant with
LG Energy Solution in Warren, Ohio, which is in production, and additional JV
sites in Spring Hill, Tennessee and Lansing, Michigan that are scheduled to
open in 2023 and 2024, respectively. The first three Ultium Cells plants are
expected to create 6,000 jobs in construction and 5,000 in operations.(1)

 

GM is currently building electric vehicles in two Michigan plants, one
Tennessee plant and one Ontario plant, and its suppliers are investing to
create a robust North America-focused supply chain for electric vehicle raw
materials, processed material and components, with major projects under way in
California, Texas, Ohio and Quebec.

 

PROJECT UPDATE

 

LAC provided a project update in connection with the Agreement(2).  The
Thacker Pass Feasibility Study results reflect operational and process
improvements, including increased extraction rates from an optimised mine plan
through new ore control strategy, an increase in sulphuric acid utilisation by
targeting illite clay with greater potential for increasing lithium extraction
per tonne of sulphuric acid and increased crystallisation steps to further
remove magnesium impurities.

 

Other process and design improvements were made to further minimise the
project's environmental impact, including, increased capacity to 80,000 tpa
within approximately the same mining footprint as the permitted pit boundary
and without increasing the size of the sulphuric acid plant, additional
beneficiation and neutralisation circuits to increase the neutrality of filter
pressed tailings and implementing a tail gas scrubber utilising a
neutralisation solution in the sulphuric acid plant to minimise emissions and
reduce impacts to ambient air quality.

 

CONSTRUCTION TIMELINE UPDATE

 

Phase 1 will consist of a single sulphuric acid plant with a nominal
production rate of 3,000 tonnes per day sulphuric acid. Phase 2 construction
will begin upon completion of Phase 1, with the addition of a second sulphuric
acid plant with an additional nominal production rate of 3,000 tpd.

 

Total designed capacity of 80,000 tpa lithium carbonate production upon
completion of both Phase 1 and Phase 2. Actual production varies by year with
anticipated average production of approximately 70,000 tpa lithium carbonate
in the first 25 years and approximately 67,000 tpa over the life of mine,
including ramp up of Phase 1 and Phase 2.

 

LAC noted that it continues to prepare for construction while it awaits a
ruling for the appeal of the issuance of the United States Bureau of Land
Management ("BLM") Record of Decision ("ROD") following a hearing held by the
US District Court, District of Nevada ("Federal Court") on 5 January 2023.
During the hearing, plaintiffs and representatives from LAC addressed final
questions, the Federal Court reaffirmed no additional hearings or briefings
are required and they expect to issue a decision in the next couple of months.

 

References

1:             Source: Lithium Americas Corp. announcement dated
31 January 2023

                ( (http://www.ganfenglithium.com/ir_en.html)
https://www.lithiumamericas.com/news/gm-and-lithium-americas-to-develop-us-sourced-lithium-production-through-650-million-equity-investment-and-supply-agreement
(https://www.lithiumamericas.com/news/gm-and-lithium-americas-to-develop-us-sourced-lithium-production-through-650-million-equity-investment-and-supply-agreement)
(https://polaris.brighterir.com/public/trident/news/rns/story/xo1pnmr) )

 

2:             Source: Lithium Americas Corp announcement dated 31
January 2023

                (
https://www.lithiumamericas.com/news/lithium-americas-provides-general-motors-transaction-details-and-update-on-construction-plan-for-thacker-pass
(https://www.lithiumamericas.com/news/lithium-americas-provides-general-motors-transaction-details-and-update-on-construction-plan-for-thacker-pass)
)

 

3:             Thacker Pass Mineral Resource Estimate as of 2
November 2022. Source LAC (2)

 

 Category                        Tonnage  Average Li  Lithium Carbonate Equivalent (Mt)

(Mt)
(ppm)
 Measured                        534.7    2,450       7.0
 Indicated                       922.5    1,850       9.1
 Total Measured & Indicated      1,457.2  2,070       16.1
 Inferred                        297.2    1,870       3.0

Notes for the November 2, 2022 Mineral Resource:

1.     The Qualified Person who supervised the preparation of and approved
disclosure for the estimate is Benson Chow, P.G., SME-RM.

2.     Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability. Mineral Resources are inclusive of 217.3
million metric tonnes (Mt) of Mineral Reserves.

3.     Mineral Resources are reported using an economic break-even
formula: "Operating Cost per Resource Tonne"/"Price per Recovered Tonne
Lithium" * 10^6 = ppm Li Cut-off. "Operating Cost per Resource Tonne" =
US$88.50, "Price per Recovered Tonne Lithium" is estimated: ("Lithium
Carbonate Equivalent (LCE) Price" * 5.323 *(1 - "Royalties") * "Recovery".
Variables are "LCE Price" = US$22,000/tonne Li(2)CO(3), "Royalties" = 1.75%
and "Recovery" = 73.5%.

4.     Presented at a cut-off grade of 1,047 ppm Li.

5.     A resource constraining pit shell has been derived from performing
a pit optimization estimation using Vulcan software.

6.     The conversion factor for lithium to LCE is 5.323.

7.     Applied density for the mineralization is 1.79 t/m(3).

8.     Measured Mineral Resources are in blocks estimated using at least
six drill holes and eighteen samples within a 262 m search radius in the
horizontal plane and 5 m in the vertical direction; Indicated Mineral
Resources are in blocks estimated using at least two drill holes and six to
eighteen samples within a 483 m search radius in the horizontal plane and 5 m
in the vertical direction; and Inferred Mineral Resources are blocks estimated
with at least two drill holes and three to six samples within a search radius
of 722 m in the horizontal plane and 5 m in the vertical plane.

9.     Tonnages and grades have been rounded to accuracy levels deemed
appropriate by the QP. Summation errors due to rounding may exist.

 

 

4:             Thacker Pass Mineral Reserve Estimate as of 2
November 2022. Source LAC (2)

 

 Category                   Tonnage (Mt)  Average Li (ppm)  Lithium Carbonate Equivalent (Mt)
 Proven                     192.9         3,180             3.3
 Probable                   24.4          3,010             0.4
 Total Proven and Probable  217.3         3,160             3.7

Notes for the November 2, 2022 Mineral Reserve:

1.     The Qualified Person who supervised the preparation of and approved
disclosure for the estimate is Kevin Bahe, P.E., SME-RM.

2.     Mineral Reserves have been converted from measured and indicated
Mineral Resources within the feasibility study and have demonstrated economic
viability.

3.     Reserves presented at an 85% maximum ash content and 1.533 kilogram
of lithium recovered per run of mine feed cut-off grade. A sales price of
US$5,400/t of Li(2)CO(3) was utilised in the pit optimization resulting in the
generation of the reserve pit shell in 2019. Overall slope of 27 degrees was
applied. For bedrock material pit slope was set at 47 degrees.  Mining and
processing cost of US$57.80 per tonne of ROM feed, a processing recovery
factor of 84%, and royalty cost of 1.75% were additional inputs into the pit
optimisation.

4.     A LOM plan was developed based on equipment selection, equipment
rates, labour rates, and plant feed and reagent parameters. All Mineral
Reserves are within the LOM plan. The LOM plan is the basis for the economic
assessment within the NI 43-101 technical report titled "Feasibility Study,
National Instrument 43-101 Technical Report for the Thacker Pass Project
Humboldt County, Nevada, USA" with an effective date of November 2, 2022 (the
"Technical Report"), which is used to show economic viability of the Mineral
Reserves.

5.     Applied density for the ore is 1.79 t/m3.

6.     Lithium Carbonate Equivalent is based on in-situ LCE tonnes with
95% recovery factor.

7.     Tonnages and grades have been rounded to accuracy levels deemed
appropriate by the QP. Summation errors due to rounding may exist.

8.     The reference point at which the Mineral Reserves are defined is at
the point where the ore is delivered to the run-of-mine feeder.

 

Competent Person's Statement

 

The technical information contained in this disclosure has been read and
approved by Mr Nick O'Reilly (MSc, DIC, MAusIMM, MIMMM, FGS), who is a
qualified geologist and acts as the Competent Person under the AIM Rules -
Note for Mining and Oil & Gas Companies. Mr O'Reilly is a Principal
Consultant working for Mining Analyst Consulting Ltd which has been retained
by Trident to provide technical support.

 

** Ends **

 

Contact details:

 

 Trident Royalties Plc                                 www.tridentroyalties.com

 Adam Davidson / Richard Hughes                        +1 (757) 208-5171 / +44 7967 589997
 Grant Thornton (Nominated Adviser)                    www.grantthornton.co.uk

                                                     (file:///C%3A/Users/afdav/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/GCSQ6WT9/www.grantthornton.com)
 Colin Aaronson / Samantha Harrison / Samuel Littler

                                                       +44 020 7383 5100
 Stifel Nicolaus Europe Limited (Joint Broker)         www.stifelinstitutional.com (http://www.stifelinstitutional.com)

 Callum Stewart / Ashton Clanfield                     +44 20 7710 7600
 Liberum Capital Limited (Joint Broker)                www.liberum.com (http://www.liberum.com)

 Scott Mathieson / Cara Murphy                         +44 20 3100 2184
 Tamesis Partners LLP (Joint Broker)                   www.tamesispartners.com (http://www.tamesispartners.com)

 Richard Greenfield                                    +44 20 3882 2868
 St Brides Partners Ltd (Financial PR & IR)            www.stbridespartners.co.uk (http://www.stbridespartners.co.uk)

 Susie Geliher / Catherine Leftley                     +44 20 7236 1177

 

About Trident

 

Trident is a growth-focused diversified mining royalty and streaming company,
providing investors with exposure to a mix of base battery, precious, and bulk
metals.

 

Key highlights of Trident's strategy include:

 

 ·             Building upon a royalty and streaming portfolio which broadly mirrors the
               commodity exposure of the global mining sector (excluding fossil fuels) with a
               bias towards production or near-production assets, differentiating Trident
               from the majority of peers which are exclusively, or heavily weighted, to
               precious metals;

 ·             Acquiring royalties and streams in resource-friendly jurisdictions worldwide,
               while most competitors have portfolios focused on North and South America;

 ·             Targeting attractive small-to-mid size transactions which are often ignored in
               a sector dominated by large players;

 ·             Active deal-sourcing which, in addition to writing new royalties and streams,
               will focus on the acquisition of assets held by natural sellers such as:
               closed-end funds, prospect generators, junior and mid-tier miners holding
               royalties as non-core assets, and counterparties seeking to monetise packages
               of royalties and streams which are otherwise undervalued by the market;

 ·             Maintaining a low-overhead model which is capable of supporting a larger scale
               business without a commensurate increase in operating costs; and

 ·             Leveraging the experience of management, the board of directors, and Trident's
               adviser team, all of whom have deep industry connections and strong
               transactional experience across multiple commodities and jurisdictions.

 

The acquisition and aggregation of individual royalties and streams is
expected to deliver strong returns for shareholders as assets are acquired on
terms reflective of single asset risk compared with the lower risk profile of
a diversified, larger scale portfolio. Further value is expected to be
delivered by the introduction of conservative levels of leverage through debt.
Once scale has been achieved, strong cash generation is expected to support an
attractive dividend policy, providing investors with a desirable mix of
inflation protection, growth and income.

 

Forward-looking Statements

 

This news release contains forward‐looking information. The statements are
based on reasonable assumptions and expectations of management and Trident
provides no assurance that actual events will meet management's expectations.
In certain cases, forward‐looking information may be identified by such
terms as "anticipates", "believes", "could", "estimates", "expects", "may",
"shall", "will", or "would". Although Trident believes the expectations
expressed in such forward‐looking statements are based on reasonable
assumptions, such statements are not guarantees of future performance and
actual results or developments may differ materially from those projected.
Mining exploration and development is an inherently risky business. In
addition, factors that could cause actual events to differ materially from the
forward-looking information stated herein include any factors which affect
decisions to pursue mineral exploration on the relevant property and the
ultimate exercise of option rights, which may include changes in market
conditions, changes in metal prices, general economic and political
conditions, environmental risks, and community and non-governmental actions.
Such factors will also affect whether Trident will ultimately receive the
benefits anticipated pursuant to relevant agreements. This list is not
exhaustive of the factors that may affect any of the forward‐looking
statements. These and other factors should be considered carefully and readers
should not place undue reliance on forward-looking information.

 

Third Party Information

 

As a royalty and streaming company, Trident often has limited, if any, access
to non-public scientific and technical information in respect of the
properties underlying its portfolio of royalties and investments, or such
information is subject to confidentiality provisions. As such, in preparing
this announcement, the Company often largely relies upon information provided
by or the public disclosures of the owners and operators of the properties
underlying its portfolio of royalties, as available at the date of this
announcement.

 

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