Oxus Com

Main Menu

  • Home
  • Net present value
  • Trustee
  • International monetary system
  • Principal-Agent Theory
  • Banking

Oxus Com

Header Banner

Oxus Com

  • Home
  • Net present value
  • Trustee
  • International monetary system
  • Principal-Agent Theory
  • Banking
Net present value
Home›Net present value›Take advantage of the millennium offer

Take advantage of the millennium offer

By Terrie Graves
February 4, 2022
0
0
  • The price of lithium carbonate equivalent has jumped 350% since the acquisition of the lithium mining royalty
  • Project Thacker Pass’ after-tax net present value is worth 71% more than Trident’s market capitalization
  • Gold royalty portfolio acquired with 19% yield on purchase price

Commodity Royalty Group Trident Royalties (TRR:48p) closed the deal of the millennium last year. In March 2021, the group paid US$28m (£20.7m) for a 60% interest in an existing gross revenue royalty on the Thacker Pass Lithium surface mine project in Nevada, l one of the largest known lithium deposits in North America. Thacker Pass is operated by Lithium Americas Corp (NYSE: TSX: LAC), a well-funded mining group with a market capitalization of C$4 billion.

At the time, Thacker Pass contained Canadian Institute of Mining Metallurgy (CIM) compliant mineral reserves of 3.1 million tonnes of lithium carbonate equivalent (LCE), making it the largest reserve of lithium in the United States, and one with an estimated life of 46 years based on Proven and Probable LCE Reserves. However, the Mineral Resource Estimate (MRE) was close to 6 million tonnes LCE, providing additional resources to extend mine life or support production expansion.

Lithium Americas then released an updated MRE that more than doubled the size of Measured and Indicated Resources to 13.7 million LCE tonnes, of which 8.2 million tonnes are classified as Measured (from 3.8 million tonnes) and 5.5 million tonnes indicated (against from 2.2 million tonnes). In addition, the capacity of phase 1 of the project was increased from 30,000 to 40,000 tons of annual LCE production, with phase 2 (starting 3.5 years later) providing an additional 40,000 tons (instead of 30,000 tons). The licensing process is well underway and Lithium Americas is developing an integrated pilot plant which is expected to be operational in the first half of 2022.

With this in mind, Trident owns a 60% share of the 8% Gross Revenue Royalty (GRR) on all mining proceeds generated by Thacker Pass, reducing to 4% (so 2.4% share for Trident) after United States royalties. $22 million has been repaid. Lithium Americas has the right to reduce the GRR to 1.75% (1.05% attributable to Trident) by making a redemption payment of $22 million ($13.2 million to Trident) at any time. Obviously, Lithium Americas will do this before production begins, as the price of LCE has fallen from US$12,800 per ton at the time of acquisition in March 2021 to US$59,000 per ton, due to the insatiable global demand for battery metal.

The rise is supported by solid fundamentals. For example, S&P Global Market Intelligence estimates that annual demand for battery applications will grow from 341,439 tons of LCE in 2021 to 807,399 tons in 2025. By 2024, investment bank UBS estimates that the market will become loss-making and by 2030, annual demand will exceed supply by 2.1 million tonnes. This underscores not only the importance of new sources of LCE, but also the strategic value of Thacker Pass for the US electric car industry.

So not only is Trident on track to recoup 80% of its cash investment before production even begins, but the net present value (NPV) of the future revenue stream has skyrocketed. At an LCE spot price of $55,000 per ton, and after completion, royalty income attributable to Trident in Phase 1 of the Thacker Pass project will be $14.4 million per year, increasing to $28.9 million usd.

Analysts at in-house broker Tamesis have updated their models and calculated that at an LCE price of $50,000 per tonne (thus below the current spot price of $59,000), the post-tax net present value of the flow of Trident’s royalties are equivalent to US$295m (75.6p share), or 58% more than Trident’s own market capitalization of £125m (48p).

TRIDENT VAN PORTFOLIO ESTIMATES

In addition, the group holds 19 additional royalties and streams, nine of which are already generating cash flow. These include the acquisition of US$69.75 million in mid-December 2021 of drawdown covering seven producing gold mines operated by five counterparties in six countries, financed by a new credit facility of 40 million US dollars and a placement of 35 million US dollars.

The directors of Trident estimate that the acquired portfolio will generate $13.3 million in revenue in 2022, increasing to $14.3 million per year between 2023 and 2026. Indeed, Trident will recover all of its capital within five years. , and will benefit from a free port thereafter. It’s smart business. Following this transaction, Orion Mine Finance Fund, a fund managed by Orion Resource Partners, a global alternative investment management firm with $8.3 billion in assets under management, controls nearly 10% of Trident’s shares.

TRIDENT ROYALTIES

In addition, Trident has made a $2.5 million deposit as part of a $52 million transaction to acquire a 1.5% indirect royalty on gross proceeds from the Sonora Lithium Project, an ongoing asset. advanced stage development in Mexico jointly owned by Bacanora Lithium and Ganfeng Lithium. . Ganfeng is a global lithium producer with a market capitalization of US$28.5 billion, with world-class processing expertise and an aggressive production growth program. Bacanora provided guidance on commissioning the plant in Q4 2023, with Phase 1 targeting steady-state production of 17,500 LCE tonnes per year, increasing to 35,000 LCE tonnes per year when Phase 2 commences after five years.

This means that at LCE’s current spot prices, and assuming Trident acquires the Sonora Lithium Project royalty in early 2023, the group could generate aggregate revenue from its two lithium royalties of $37.5 million. per year under their respective Phase 1 production profiles, increasing to US$75.1 million per year under the respective Phase 2 production profiles.

Additionally, although Tamesis expects Trident’s net income to more than double from $4.9 million this year to $13.2 million by 2024, to push earnings up from share price (EPS) from 1.7c to 4.6c, these estimates exclude the Sonora Lithium project and are based on conservative LCE prices of USD 40,000 per tonne (2022 and 2023) and USD 30,000 per tonne (2024), well below the current spot price of USD 59,000 per tonne.

TRIDENT REVENUE FORECASTS

I first advised to buy the shares of Trident, at 37p (Alpha Report: An Inflation Hedge for Low-Rated Commodities and Green Energy,” November 1, 2021), and see significant benefits in light of the surge in the price of LCE and subsequent acquisitions. My initial target price of 60p and the risk-free NAV estimate of 85.9pa that I described in my report are very conservative. To buy.

Simon Thompson’s latest report for our Alpha service was released today – Take Advantage of Semiconductor Megatrends

Alpha is our digital subscription service designed to give you deeper insights, research reports and analysis.

If you are already a subscriber, you can upgrade to Alpha here: Investorschronicle.co.uk/alphaupgrade

If you’re new to Investors’ Chronicle, subscribe to Alpha here: https://www.investorschronicle.co.uk/alphasub

■ Simon Thompson’s latest book Successful Stock Picking Strategies and his previous book Selection of stocks for profit can be purchased online at www.ypdbooks.com, or by calling YPDBooks on 01904 431 213 to place an order. The books are not sold by any other source and are priced at £16.95 each plus £3.25 postage and packaging [UK].

Promotion: Subject to stock availability, books can be purchased at the promotional price of £10 each plus £3.25 postage and packing, or £20 for both books plus £3.95 postage and packaging.

They include case studies of companies in Simon Thompson’s low-cost equity portfolio, outlining the investment characteristics that made them successful investments. Simon also highlights many other investment approaches and stock screeners he uses to identify small cap companies with investment potential. Content details can be viewed at www.ypdbooks.com.

Related posts:

  1. Buddies of Maitai name for monetary readability and sustainable forest administration
  2. Photo voltaic panels and California canals may make a profitable pair
  3. McLanahan Direct Drive Crushing helps lithium restoration and recycling.
  4. Important has its finger on the heartbeat of uncommon earth safety of provide
Tagsnet presentpresent npvunited states

Categories

  • Banking
  • International monetary system
  • Net present value
  • Principal-Agent Theory
  • Trustee

Recent Posts

  • LEVY: Waterloo School Board muzzles lone black administrator
  • Prime Minister announces additional support for Ukraine and shared priorities at G7 summit in Germany
  • Mayor of Schaumburg recommends salary increases for village administrators and commission members
  • Chimpanzees master virtual reality to find hidden fruits
  • Patriarch Al-Rai, Lebanon’s top Christian cleric, urges politicians to form a government.

Archives

  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • March 2020
  • Terms And Conditions
  • Privacy Policy