Trident Royalties PLC (AIM:TRR) has agreed to acquire an indirect 1.5% gross royalty over the Sonora Lithium Project in Mexico.
The Sonora Lithium Project is an advanced, development stage asset jointly owned by Bacanora Lithium PLC (AIM:BCN, OTC:BCLMF) and Ganfeng Lithium, with Ganfeng acting as the project operator.
Sonoroy Holdings Limited, a joint venture company in which Trident holds a 50% interest, has the right to acquire the royalty for a total consideration of US$52mln in cash, US$26mln of which is attributable to Trident.
Trident’s acquisition is subject to certain conditions, most notably the favourable resolution of a dispute between the seller, the estate of Colin Orr-Ewing and Bacanora.
If the dispute is found against the estate, Trident's funding will be fully repayable by Sonoroy.
READ Bacanora takes estate of Colin Orr-Ewing to court in royalty dispute
At current spot prices, and assuming it acquires the royalty, Trident would generate aggregate revenue from its two lithium royalties of about US$37.5mln a year under respective Stage 1 production profiles, and about US$75.1mln a year under respective Stage 2 production profiles.
"Like Thacker Pass – over which Trident holds an existing gross revenue royalty – Sonora is a globally significant lithium asset which is anticipated to be the next meaningful North American lithium mine, with early construction works already underway and first production anticipated for the second half of 2023. With the potential to have both the Sonora and Thacker Pass royalties in the Trident portfolio, shareholders in Trident would have exceptional lithium exposure covering Tier 1 assets, both targeting very near-term production, and therefore cash flows to Trident, in 2023 (assuming completion occurs) and 2024 respectively,” said Adam Davidson, the chief executive officer of the AIM-listed mining royalty and streaming company.
“I want to highlight that this transaction showcases Trident's creative energy and ability to work collaboratively with counterparties. Working jointly with the estate's advisors, Trident has structured a transaction that secures the right to acquire a Tier 1 royalty while avoiding exposure to any associated litigation risk. By the time Trident's full acquisition consideration is paid, construction at Sonora should be well advanced and cash flow imminent, with revenue visibility long into the future,” he added.