TNR Gold Corp (TSX-V:TNR, OTC:TRRXF) announced an extension to a royalty purchase agreement involving the Mariana Lithium project in Argentina, monetizing part of its royalty holdings and providing an important benchmark for valuations of assets in its royalty portfolio.
The agreement, originally reached in July, was made with an Ontario limited partnership affiliated with Lithium Royalty Corp for the sale of a portion of its net smelter returns (NSR) royalty involving the Mariana Lithium Project.
LRC has purchased a 0.5% NSR royalty from TNR for US$9 million, including 0.05% NSR royalty sold by TNR on behalf of its shareholder, the company said. This represents one-quarter of the NSR royalty held by TNR.
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TNR sold the portion of the NSR royalty, which is not subject to any buy-back rights of LMA. After the closing of the transaction with LRC, TNR will hold a 1.5% NSR royalty, including a 0.15% NSR royalty held on behalf of a shareholder (which represents a 1.35% NSR held by TNR and a 0.15% NSR in favour of the shareholder). The closing of the sale with LRC is subject to the parties' filing of certain notices in the Salta Mining Court in Argentina, TNR noted.
LRC continues to pursue the Salta Registrations, and while LRC and TNR both expect that the Salta Registrations are near completion, the Salta Registration are not yet complete. LRC has requested that TNR agree to extend the closing date to February 1, 2023, TNR added.
Kirill Klip, TNR's CEO commented, "We are very pleased that after many months of negotiations, we have achieved this major milestone for our company and a further validation of TNR Gold's business model. By monetizing part of our royalty holdings, we are providing an important benchmark for valuations of assets in our royalty portfolio and generating very significant capital, while selling to LRC only a portion of our royalty holding on the Mariana Lithium Project. This strategic transaction with LRC allows us to significantly improve our working capital position and strengthen our balance sheet."
The company has received a second non-refundable advance of US$350,000 from LRC under the terms of the royalty purchase extension agreement, Klip noted.
Representatives of Ganfeng Lithium confirmed to the Governor of Salta Gustavo Sáenz that the Mariana Project, that began construction last June, will start producing in 2024 an estimated 20 thousand tons per year of lithium chloride.
"We believe that our royalty holdings are undervalued, and their appropriate values are not reflected in the company's share price. This transaction clearly demonstrates it," Klip added.
By selling only a portion of its royalty holding on the Mariana Lithium project, the transaction with LRC allowed TNR to improve its working capital position and strengthen the balance sheet, according to the CEO>
"We have generated a total amount of cash for TNR Gold that is well above the company's recent market capitalization. We have received significant industry interest in our assets and the company is working on potential new strategic partnerships to provide further benchmarks for the market valuations of our royalty holdings."
Vancouver-based TNR Gold’s business model provides a unique entry point in the creation of supply chains for critical materials like energy metals that are powering the energy revolution, and the gold industry that is providing a hedge for this stage of the economic cycle.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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