Proactive Investors - Trident Royalties PLC has agreed to sell gold royalties over several pre-production projects to Franco-Nevada Corporation (TSX:FNV) for up to US$15.8mln (£12.9mln) cash, and has separately renewed a debt facility on more favourable terms.
The company hailed the various benefits of the Franco-Nevada deal, which covers six gold mining projects that were acquired for roughly US$6.5mln: Lake Rebecca in Western Australia, Spring Hill in Australia’s Northern Territory, and a portfolio of four other Western Australia projects acquired from Talga Resources.
Firstly, the initial payment of US$14.55mln on completion and an extra US$1.25mln to be paid upon first production from the Rebecca project would see Trident realise a 143% return in around two years, as well as “rightsizing” the gold exposure in its portfolio.
Furthermore, the money provides further balance sheet strength for more acquisitions, which was further bolstered by Macquarie agreeing to reduce the rate and delay payments on Trident's existing US$40mln debt facility.
Trident chief executive Adam Davidson noted that the company’s cost of debt has nearly halved in less than a year.
He added: “Whilst Trident is actively seeking to accretively grow the portfolio, the (royalty) transaction highlights the company's differentiated approach to value generation by acquiring royalties at an attractive entry value and opportunistically monetizing following growth in the underlying assets.”
Assuming the leverage ratio is maintained, the restructured debt facility will include a 2% reduction in coupon that will reduce debt service costs by up to US$0.8mln per year. The loan term is also extended by one year to December 2025, and quarterly payments are deferred until June 2024.
In lieu of a cash fee, Macquarie has been given a 12-month extension to its warrants in the company.