Royalty businesses typically focus on precious metals in the Americas Regions, which means they are heavily exposed to both commodity price risk and geopolitical risk. Trident has a different approach, it is looking to acquire royalties in precious metals, base metals, bulk metals and battery metals, and has a more open approach to jurisdictions. This will give Trident’s business a much lower risk profile than its royalty peer group, providing investors with an attractive lower-risk opportunity to invest in the mining sector.
Adam Davidson is the chief executive officer of Trident Resources. He has more than 10 years of experience in the natural resources sector, having held positions with Resource Capital Funds, BMO Capital Markets and Orica Mining Services. He previously served as a non-executive director of private gold producer RG Gold.
Trident is targeting small-to-mid-size royalties, as there is less competition for these deals from the larger more established royalty businesses. The company is seeking to acquire existing royalties, as well as writing new royalties and streams, with a focus on near-production or producing assets.
Trident Resources first acquisition is expected to be the Koolyanobbing Iron Ore Royalty. The company signed a definitive purchase agreement to acquire a 1.5% free-on-board revenue royalty over part of the Koolyanobbing Iron Ore Operation in Western Australia in March 2020. The Koolyanobbing Iron Ore Operation is operated by Mineral Resources Limited (ASX: MIN) and currently produces 11mln tonnes per annum (Mtpa), but production is expected to increase to 15Mtpa by the end of this year, with A$120mln being spent on the expansion of the Yilgarn Operation.
Trident is acquiring the royalty for a total cost of A$7.0mln, which will be paid in stages. Last quarter the royalty holder received a payment of around A$731,000; and with Mineral Resources planning to increase production levels before the end of the year, Trident could see an increased level of cash flow from this asset.
The Koolyanobbing acquisition is expected to close after the company’s shares begin trading on the AIM market and is likely to be the first in a pipeline of attractive follow-on transactions with Trident planning further acquisitions in the near-term.