Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Trident Royalties (LON: TRR) has inked a deal to acquire an existing lithium royalty from Atherton Resources covering Anson Resources’ (ASX: ASN) flagship Paradox lithium project in the US state of Utah.
The UK-based miner and royalty company will pay $10 million in three tranches for the 2.5% net smelter return royalty, including $1.5 million in cash upon closing the deal.
Net smelter return is the net revenue the mine owner obtains from the sales, with transportation and refining costs deducted.
The royalty covers all projects owned by Anson within the Paradox Basin, which includes an advanced-stage lithium brine project, and it is tied to Anson’s ownership of the underlying projects.
Once Anson begins commercial product at the projects, Trident will pay up to $3.5 million as the first tranche payment. In addition, 50% of the payment can also be made via an issuance of its shares.
Trident will be entitled to 2% of net sales proceeds if Anson sells property within the Paradox Basin, and the royalty would no longer apply to the sold asset.
At spot prices of about $35,000 per tonne of lithium, Trident estimates the royalty would bring nearly $11 million a year for the first decade, the company said.
“The Paradox project reinforces our strong position in battery materials, and introduces exposure to direct lithium extraction, which could play a significant role in future lithium supply,” chief executive Adam Davidson said in the statement.
Based on the feasibility study, Paradox phase one is set to produce an initial 13,074 tonnes per annum for the first 10 years.
The project has an indicated resource estimate of 346,109 tonnes of lithium and an inferred resource of 691,800 tonnes. Phase two is expected to increase lithium production capacity substantially.
Trident shares hit a one-year low last week after Mexico cancelled Ganfeng’s Sonora lithium project concessions, on which Trident has an agreement to acquire a 1.5% royalty.
Mexico nationalized its lithium industry in April 2022 and, in February this year, it set up a dedicated mining zone, Li-MX-1, in Sonora. This region contains nearly all of Mexico’s lithium resources, valued at 12 trillion Mexican pesos, according to government estimates (about $696 billion at today’s exchange rates).
Ganfeng’s Sonora project hosts a total resource of 8.82 million tonnes of lithium carbonate equivalent – almost all of Mexico’s known lithium mineralization.
Shares in Trident are currently down almost 12% year to date, leaving the company with a market capitalization of £131.97 million ($166m).
