Triple Flag Precious Metals (TSX: TFPM; NYSE: TFPM) has added two Peruvian assets to its portfolio with the acquisition of silver and gold streams on the Arcata and Azuca mines operated by Sierra Sun, a private mining group headquartered in Lima.
The streaming deal will cover 5% of payable metal from the two mines during their operating life, which is expected to be 10-plus years, with no step-down in stream rates. As consideration, Triple Flag will pay $35 million (C$50 million) cash upfront, and then make ongoing payments of 10% of the spot silver or gold price for each ounce delivered.
“Collectively, Arcata and Azuca are expected to have at least a 10-year mine life, with Sierra Sun targeting production to restart at Arcata in the near term,” said Sheldon Vanderkooy, Triple Flag’s CEO.
He added that gold-equivalent ounces pursuant to the streams are expected to ramp up to approximately 5,000-6,000 oz. per year by 2028.
Shares of Triple Flag Precious Metals gained 4.1% in New York to close on Wednesday at $17.70, for a market capitalization of $3.6 billion.
Nearing production
Of the two assets, Arcata represents the core value driver as the underground mine is fully permitted and funded for restart, with first production expected in the second half of 2025.
The Arcata mine was previously developed by Hochschild Mining (LSE: HOC), which first produced its silver concentrate in 1964. In 2019, the British miner placed it on temporary care and maintenance due to low silver prices. Sierra Sun subsequently acquired the asset with a view to restart production.
Current infrastructure at Arcata includes a 2,500-tonne-per-day concentrate processing plant, a 12 megavolt-amperes power line, backup generators, camps and road access.
Azuca, also part of the Hochschild transaction, represents a satellite underground deposit located 116 km north of Arcata. The mine is scheduled to begin production by the end of 2029.
As of the end of 2023, Arcata’s measured and indicated resources totalled 2.14 million tonnes at a silver-equivalent grade of 523 grams per tonne, containing 35.9 million oz. silver-equivalent, while Azuca’s totalled 7.05 million tonnes grading 246 grams silver-equivalent for 55.7 million oz.
The two deposits also had over 10 million tonnes of inferred resources containing over 105 million oz. silver-equivalent.
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