Trident’s royalty deal for a Zambian copper mine

AIM-listed diversified mining royalty and streaming company Trident Resources is acquiring a royalty from Moxico Resources over copper production from its operating Mimbula copper mine and associated stockpiles, located in Zambia’s prolific Copperbelt Province.

Trident Resources, soon to be renamed Trident Royalties, entered into a gross revenue royalty (GRR) with Moxico Resources in exchange for a cash consideration of US$5 million and Trident is entitled to royalty payments on production commencing from 1 July 2020 and extending in perpetuity.

Moxico will use the proceeds of the transaction to fund the continued ramp-up of the Mimbula mine, as well as for general working capital purposes. Royalty payments to Trident will be made on a quarterly basis.

Moxico has a highly experienced board and management team led by former Rio Tinto chief executive Alan Davies, who has assembled a strong team of proven mine operators with significant experience in the Zambian Copperbelt.

Mimbula has a significant JORC (2012) compliant measured and indicated resource of 69.8 Mt grading 0.96% total copper (TCu) for 668 000 t of contained copper and an inferred resources of 14.2 Mt grading 0.92% TCu as at August 2019. The asset is currently ramping-up production, having sold its first London Metal Exchange registered Grade A copper with a 99.99% purity in June 2020.

The GRR is applicable to production from the Mimbula mine, comprising of 100% of production from licences 21816-HQ-LML (Mimbula), 8440-HQ-SML (Zuka), and on 50% of the production from licence 8514-HQ-SML (OB18). The licences collectively cover 1 271 hectares.

Trident owns a 1.25% Gross Revenue Royalty (“GRR”) over all copper produced from the Mimbula Mine in Zambia, which is operated by Moxico Resources Plc. The GRR will decrease to 0.3% upon US$5.0 million being paid on the royalty, with a subsequent decrease to 0.2% once the royalty has been paid on 575,000 tonnes of copper. In addition, the GRR is subject to a Minimum Payment Schedule in which the higher of the minimum amount, or the Gross Revenue Royalty amount, are due; specifically:

• No required minimum payments on production in 2020 (GRR rate still applies);
• Minimum payments of US$375,000 per quarter in 2021;
• Minimum payments of US$500,000 per quarter in 2022; and
• Minimum payments of US$750,000 in each of the first two quarters of 2023.

If, in a given quarter during the minimum payment schedule period, Moxico makes GRR payments in excess of the quarterly minimum amount, it may carry over the excess amount to any subsequent quarter in which the GRR amount is less than the minimum payment schedule amount.

“We are delighted to announce the acquisition of a cash generative royalty over the Mimbula Mine, a long-life asset with favourable production and cost profiles,” says Trident CEO and executive director Adam Davidson.

“The royalty will provide our investors with exposure to an attractive commodity produced from an asset located in a prolific region in the Zambian Copperbelt, operated by an experienced management team.

“In addition, the royalty is structured attractively such that Trident will rapidly recover its invested capital, while retaining long-life exposure to the growth of the asset. We are very pleased to have concluded transactions on two cash generative royalties within a short time frame and I look forward to reporting further on our progress as we continue to build a diversified portfolio of mining royalties and streams,” Davidson concludes.

US$5 million acquisition of a copper royalty over a significant producing asset

Trident Resources Plc (soon to be renamed Trident Royalties Plc) (AIM: TRR), is pleased to announce that it has entered into an agreement with Moxico Resources plc (“Moxico”), to acquire a staged Gross Revenue Royalty (“GRR”) overproduction from the operating Mimbula copper mine and associated stockpiles (the “Mimbula Mine”) located in Zambia’s prolific Copperbelt Province. The GRR is being acquired in exchange for a cash consideration of US$5.0 million (the “Transaction”). Trident is entitled to royalty payments on production commencing from 1 July 2020 and extending in perpetuity.

HIGHLIGHTS

An attractive transaction structure, enhancing Trident’s portfolio

·     A highly accretive transaction on an immediately cash-generative royalty over a long-life, low-cost producing asset which is currently ramping-up production;

·     Structured as a GRR of 1.25%, decreasing to 0.3% upon aggregate royalty payments of US$5.0 million being paid to Trident, with a subsequent decrease to 0.2% once the royalty has been paid on 575,000 tonnes of copper cathode or other finished copper product sold; and

·    The GRR is subject to a Minimum Payment Schedule (as defined below), which ensures that Trident will at minimum be repaid US$5 million within three years.

·    At current copper prices, Moxico’s long-term production profile is expected to exceed that required for the Minimum Payment Schedule

A significant asset operated by an experienced counterparty

·     The asset is currently ramping-up production, having sold its first London Metal Exchange registered Grade A copper with a 99.99% purity in June 2020;

·    The Mimbula Mine has a large, well-defined JORC (2012) compliant total Mineral Resource of 84 million tonnes of ore grading 0.95% copper for a total of 798,000 tonnes of contained copper at a 0.3% cut-off;

·    The GRR covers a large land package of 1,271 hectares, with attractive exploration and growth potential; and

·    Moxico has a high-quality management team led by Alan Davies (former Chief Executive of Rio Tinto’s Minerals and Energy division) with additional collective prior experience at Anglo American, Anglo Gold Ashanti, and First Quantum.

A desirable commodity with sound growth fundamentals

·      Enhances Trident’s royalty portfolio diversification by adding exposure to a highly favourable commodity;

·      Copper is currently in a deficit position which is forecast to widen in the near future; and

·     Zambia is a favourable mining jurisdiction as the 2^nd largest copper producer in Africa and 7^th largest globally.

The Central African copperbelt is the world’s largest and highest-grade sediment-hosted copper district, with world class mining operators in the region such as First Quantum, Glencore, Rio Tinto, Barrick, Ivanhoe and China Non-Ferrous Metals. The Mimbula Mine is an open pit operation located adjacent to the Konkola Copper Mine complex. As an established mining district, Zambia boasts excellent infrastructure, a skilled workforce, and suitable legal framework for mining royalties.

Mimbula has JORC (2012) Measured and Indicated Resources of 69.8Mt grading 0.96% total copper (“TCu”) for approximately 668,000 tonnes of contained copper and an Inferred Resources of 14.2 Mt grading 0.92% TCu for approximately 130,000 as at August 2019. In addition, the Company has a non-compliant Resource on the Zuka licence of 7.3Mt grading 1.1% TCu for 80,400 tonnes of contained copper. The Company has a strategic, life-of-mine tolling agreement with Konkola Copper Mines (“KCM”) in which the oxide ores are currently being processed through the Nchanga Tailings Leach Plant (“TLP”), producing LME Grade A copper cathode.

Adam Davidson, Chief Executive Officer and Executive Director of Trident commented:

“We are delighted to announce the acquisition of a cash generative royalty over the Mimbula Mine, a long-life asset with favourable production and cost profiles. The royalty will provide our investors with exposure to an attractive commodity produced from an asset located in a prolific region in the Zambian Copperbelt, operated by an experienced management team.

“In addition, the royalty is structured attractively such that Trident will rapidly recover its invested capital, while retaining long-life exposure to the growth of the asset. We are very pleased to have concluded transactions on two cash generative royalties within a short time frame and I look forward to reporting further on our progress as we continue to build a diversified portfolio of mining royalties and streams.”

The Transaction

The Gross Revenue Royalty is being acquired for a cash consideration of US$5.0 million, payable immediately by Trident. Moxico will utilise the proceeds of the Transaction to fund the continued ramp-up of the Mimbula Mine, as well as for general working capital purposes. Royalty payments to Trident will be made on a quarterly basis.

The GRR rate will be 1.25%, decreasing to 0.3% upon US$5.0 million being paid on the royalty, with a subsequent decrease to 0.2% once the royalty has been paid on 575,000 tonnes of copper. In addition, the GRR is subject to a Minimum Payment Schedule in which the higher of the minimum amount, or the Gross Revenue Royalty amount, are due; specifically:

·      No required minimum payments on production in 2020 (GRR rate still applies);

·      Minimum payments of US$375,000 per quarter in 2021;

·      Minimum payments of US$500,000 per quarter in 2022; and

·      Minimum payments of US$750,000 in each of the first two quarters of 2023.

If, in a given quarter during the Minimum Payment Schedule period, Moxico makes GRR payments in excess of the quarterly minimum amount, it may carry over the excess amount to any subsequent quarter in which the GRR amount is less than the Minimum Payment Schedule amount.

Mimbula Mine

The GRR is applicable to production from the Mimbula Mine, comprising of 100% of production from licences 21816-HQ-LML (Mimbula), 8440-HQ-SML (Zuka), and on 50% of the production from licence 8514-HQ-SML (OB18). The licences collectively cover 1,271 ha.

Mimbula has a significant JORC (2012) Compliant Measured and Indicated Resource of 69.8Mt grading 0.96% total copper (“TCu”) for 668,000 tonnes of contained copper and an Inferred Resources of 14.2 Mt grading 0.92% TCu as at August 2019. In addition, the Zuka licence has a non-compliant resource of 9.7Mt grading 1.14% TCu for 111,000 tonnes of contained copper. As the acquisition of 50% of the OB18 stockpile was completed post- publication of the JORC Resource, the below does not include OB18.

The Mimbula Mineral Resource Estimate as set out in the Mimbula Project Phase 1 Feasibility Study Report (dated 31/01/2019) was prepared by David H. Stock, Consulting Resource Geologist, in line with the 2012 edition of The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC (2012)”). Mr Stock is the Qualified Person responsible for the Mineral Resource Estimate in compliance with the Canadian National Instrument 43-101 (NI43-101) Standards of Disclosure for Mineral Projects for a Definitive Feasibility Study.

Mimbula Resource Statement as of August 2019

Note: Cut-off at 0.3% Cu. Mimbula Resource is JORC (2012) compliant, while Zuka Resource is non-compliant.

Mimbula Reserve Statement as of August 2019

Note: Cut-off at 0.35% Cu.

The Resource is open on strike, indicating strong exploration potential. In addition, <5% of the current Resource is attributable to sulphide ore, indicating potential for extension at depth. The Company has a strategic tolling agreement with KCM for the life-of-mine in which oxides ores and stockpiles are being processed through the TLP producing LME Grade A copper cathode.

Moxico has a highly experienced Board and management team led by Alan Davies, who has assembled a strong team of proven mine operators with significant experience in the Zambian Copperbelt.