Trident enters deal to buy portfolio of three royalties
Trident Royalties announced on Friday that its wholly-owned subsidiary TRR Services UK has entered into a binding, conditional agreement with Bellatrix - a wholly-owned subsidiary of Orion Resource Partners - to acquire a portfolio of three existing royalties over the Pukaqaqa Copper Project.
The AIM-traded firm said the deal involved the acquisition of two of the royalties, and the acquisition of Peruvian company Tiomin Peru, which owns the third.
It said Pukaqaqa is majority-owned and operated by NYSE- and TSX-listed Nexa Resources, with the royalties being acquired for $3m of new ordinary shares in Trident.
Trident described Pukaqaqa as a large-scale project advancing towards development, operated by an established South American mid-tier miner.
It said Nexa Resources is a South America-focused mid-tier producer with five operating base metals mines, and an additional mine currently under construction, as well as three operating smelters in Peru and Brazil.
Pukaqaqa was a “cornerstone project” within Nexa´s growth pipeline, and comprised 34 concessions covering 11,125.87 hectares in the Huancavelica region of Peru - an established mining district.
In its 2019 annual report, Nexa noted Pukaqaqa's project status as “ongoing pre-feasibility study”, with the first stage of the pre-feasibility study completed and “a new phase of metallurgical tests” to be completed in 2020.
Trident said Nexa had allocated a total of $16m towards advancing the project over the last three years, which it described as a “significant sum” relative to commensurate junior-led projects.
The 2017 CIM-compliant mineral resource estimate included a measured and indicated Resource of 309 million tonnes at 0.41% copper, with an additional inferred resource of 40.1 million tonnes at 0.34% copper.
It said the most recent technical report contemplated an open-pit mining operation to feed a 30,000 tonne-per-day processing plant, to produce copper and molybdenum concentrates over a 19-year mine life.
Pukaqaqa consisted of a large scale copper-gold skarn-type deposit, associated with an anticline hosted sub-volcanic intrusive.
Project construction capital expenditure of skarn-type deposits was “typically much lower” than commensurate scale porphyry deposits.
The morphology of the deposit, with a sub-horizontal, shallow dipping, blanket of near-surface mineralisation and higher grade breccia-hosted zones, offered the potential for large scale low-stripping ratio open-pit mining, Trident explained, with free-digging potential, subject to further technical studies.
Further, exploration upside was offered both in the wider licence holding and through possible mineralisation extensions along strike and down-dip of the current resource, it added.
The potential for underlying porphyry-style mineralisation below the project was also yet to be drill tested.
Trident said the first royalty, the ‘Vaaldiam Royalty’, was a sliding scale net smelter return royalty of 1% if the quarterly average reference copper price was $3.00 per pound or less, and 2% if it was greater than $3.00 per pound.
It said the Vaaldiam Royalty was over the entire mining property, as well as a 15 kilometre area of interest.
In addition, there were a total of $8m in milestone payments delivered early in the mine life, with $4m upon the start of commercial production and an additional $4m upon the second year of commercial production.
The second was the Pukaqaqa Norte royalty, which is a 1.00% net smelter return royalty covering concessions in which the bulk of the contemplated open pit would be located, with the third being the Pukaqaqa Sur Royalty, which is a 0.50% to 1.00% net smelter return royalty, depending on the specific concession, covering concessions with “promising” exploration potential in the south-eastern area of Pukaqaqa, which could be repurchased at any time for $0.35m.
“The royalties cover a large-scale asset which is being actively advanced by an established regional operator that, once in production, will generate a significant revenue stream for nearly two decades based on the most recent technical study,” said chief executive officer Adam Davidson.
“On the current resource, at a processing rate of 30,000 tonnes-per-day we believe Pukaqaqa has the potential to produce around 35,000 tonnes of copper per year, along with potential molybdenum, gold, and silver credits.
“Whilst not losing sight of our priority to acquire cash generative royalties, as we plan for Trident's long-term growth, acquiring attractive development stage royalties over significant assets such as this has the potential to catapult a royalty company from junior status to that of mid-tier [or] major.”
At 1148 GMT, shares in Trident Royalties were up 11.94% at 34.7p.