It’s only just over a year since Trident Royalties PLC (AIM:TRR) listed in London.
At the time it had a grand total of just one royalty in its portfolio, but leads on several more deals and big ambitions to boot.
The vision, said chief executive Adam Davidson, was to create a royalty company that was broadly reflective of the mining industry as a whole.
Fast forward to today, and that journey is well underway.
“We’ve gone from one royalty to thirteen in 15 months,” says Davidson, speaking shortly after the Thacker Pass lithium project, over which Trident holds a chunky royalty interest, received a significant boost to its resource base and planned production profile.
“We’ve kept up a pretty steady pace.”
There’s a way to go yet before that objective of mirroring the mining industry at large is achieved, but already Trident boasts a portfolio that includes iron ore, lithium, gold and copper. What’s more, two of these – royalties over the Koolyanobbing iron ore project in Australia and the Mimbula copper project in Zambia – are already in production and generating income for the company.
Two of the other projects represented in the royalty portfolio are already in construction, and Thacker Pass is likely to go into construction next year.
These income streams put Trident into a stronger position to do deals, and the increased credibility they bring allow debt finance to come onto the table as a real option, meaning that shareholders won’t be suffering significant dilution every time the company wants to do a major deal.
If that sounds like a virtuous circle, it is. Or pretty close, anyway.
And there’s something else that marks Trident out too – the commodities it’s focussed on.
Although there are only a couple of royalty companies listed in London, over in Canada they’re ten-a-penny. But as it stands almost all these royalty companies - with the notable exceptions of Anglo Pacific and Altius Minerals – are focussed on precious metals.
The benefits of doing that are to a degree obvious – project economics are well understood and pricing is transparent. What it also means, though, is that investors are inundated with precious metals royalty companies in the way they just aren’t by royalty companies like Trident, which are prepared to invest right across the board.
That openness to any commodity has meant that Trident has significantly outperformed almost all of its peers over the past few months, as precious metals have weakened significantly, but lithium and copper, to which it has significant exposure, has strengthened.
It won’t always be like that, of course, but then that’s the point of Trident’s focus on a diversity of commodities.
“The benefit of being diversified is that when one thing’s off, another thing’s on,” says Davidson.
“Iron ore’s softer, but still higher than where it was when we did our iron ore deal, and lithium’s on a tear. Overall, we have a smooth profile.
Which way Trident will jump next in terms of commodity is an open question.
But the wider strategy is clear enough.
“The priority is deals,” says Davidson
“The more cashflowing royalties you have, the more you re-rate upwards,” says Davidson.
“The pipeline is looking very good. With each deal we do we get more people reaching out to us, so the pipeline improves month over month.”
In addition to the debt facilities which are now becoming available to Trident, the company also has US$15mln in the bank, so there’s plenty of firepower available if the right deal does come across the table.
“I’d love to get some zinc, nickel or graphite in the portfolio,” says Davidson, but at this stage in the company’s development it’s not the commodity itself that will be the deciding factor.
“We still consider ourselves too young a company to be prioritising commodities. We will do what look to be the most accretive deals.”
And there’s no reason to suppose the pace of those deals will let up. Allowing that the average was just under one deal a month last year, that means that there could be nearly thirty royalties inside Trident’s portfolio this time next year.
“My expectation is that we’ll continue growing the company aggressively,” says Davidson.
“The revenue profile grows commensurately with the portfolio, and my job is to do that with the minimum of dilution. We listed at 20p, and the share price is now just a touch under 35p. So it’s working.”