TNR Gold Corp. [TNR-TSXV] said Tuesday it has monetized its royalty holding on the Mariana lithium-potash brine project in Argentina via a partial sale to an Ontario limited partnership affiliated with Lithium Royalty Corp. (LRC).
TNR shares rallied on the news, rising 25% or $0.01 to $0.05 on volume of 737,390. The shares are currently trading in a 52-week range of $0.07 and $0.035.
LRC is a leading financier in the lithium industry, having completed 20 royalties since its inception in 2018.
Mariana is located in the renowned South American Lithium Belt. The 160 square kilometre Mariana project strategically encompasses an entire mineral-rich evaporate basin that ranks as one of the more prospective salars, or salt lakes, in the region.
There is no ready market for lithium. Lithium prices are determined by the purity and chemistry of the material as well as the length of the contract between buyer and seller.
Brines (in salt ponds) and spodumene (hard rock) represent the two main sources of commercial lithium production.
Under an agreement dated July 22, 2022, TNR said LRC pledged to buy a 0.5% NSR royalty for US$9.0 million, including an 0.05% NSR royalty sold by TNR on behalf of its shareholders. “This represents one quarter of the NSR royalty held by the company.’’
Back in October, 2021, TNR announced that International Lithium Corp. [ILC-TSXV] had completed the sale to Ganfeng Lithium Netherlands Co. B.V. of its remaining 8.58% stake in Litio Minera Argentina S.A., the owner of the Mariana Lithium project.
TNR said the deal included confirmation that Litio Minera Argentina would assume all rights or obligations that International Lithium had in relation to the Mariana property.
TNR Gold holds a 2.0% NSR royalty on the Mariana project. After the sale of a portion of the royalty to LRC, TNR will hold a 1.5% NSR royalty, including a 0.15% NSR held on behalf of shareholders.
Both TNR Gold and Litio Minera have acknowledged Litio Minera’s responsibility to pay the 2% royalty on commencement of production at the Mariana project. Litio Minera has assumed the right to the repurchase of 50% of the NSR royaly (that is 1.0%). It can purchase the asset for $1.0 million at any time within 240 days after the start of production.
The company would receive $900,000 and its shareholders would receive $100,000 upon completion of the repurchase by Litio Minera. In the event of such a purchase, TNR would then hold a 0.45% NSR and its shareholder would own a 0.05% NSR
“We are very pleased that after many months of deliberate negotiations, we have achieved this major milestone for our company and a further validation of TNR Gold’s business model,’’ said TNR CEO Kirill Klip.
“By monetizing part of our royalty holdings, we are providing a very important benchmark for valuation of assets in our royalty portfolio and generating very significant capital, while selling to LRC only a portion of our royalty on the Mariana Lithium Project,’’ Klip said.