Triple Flag to net Tres Quebradas lithium project royalty

Zijin Mining bought Neo Lithium and its Tres Quebradas project in Argentina for about $960 million in 2022.

Triple Flag Precious Metals (TSX: TFPM; NYSE: TFPM) will buy an existing 0.5% gross overriding revenue royalty on the construction-stage Tres Quebradas lithium project in northern Argentina from Lithium Royalty Corp. (TSX: LIRC) for US$28 million, it said Thursday.

The lithium brine project in Catamarca province, fully-owned by China’s Zijin Mining, is fully permitted and is expected to start production in the second half of 2025.

Triple Flag’s move into lithium follows Rio Tinto’s (ASX: RIO; NYSE: RIO; LSE: RIO) US$6.7-billion acquisition in October of Arcadium Lithium plc, which has brine operations in Argentina.

“While Triple Flag’s core focus remains on precious metals opportunities, the acquisition of the Tres Quebradas is a unique, counter-cyclical opportunity to deploy capital and gain exposure to a large, well-capitalized mining project with a long life and significant upside potential at attractive returns,” Triple Flag CEO Sheldon Vanderkooy said in a release.

Tres Quebradas has a nameplate capacity of 20,000 tonnes of battery grade lithium carbonate under its first stage. That could rise to a range of 40,000 to 60,000 tonnes of lithium carbonate if Zijin chooses to expand capacity under a second stage, Triple Flag said.

Tres Quebradas has indicated resources of about 5.4 million tonnes lithium carbonate equivalent (LCE) and inferred resources of almost 2.3 million tonnes LCE.

The transaction is expected to close in the first quarter of next year.

Zijin Mining acquired Tres Quebradas in early 2022 from Neo Lithium Corp. for US$770 million and has invested more than US$600 million in the project.

Miners venture into lithium

Triple Flag’s move into lithium comes at a time when the battery metal is oversupplied and prices have declined significantly. Nine lithium mines started production worldwide in 2023, according to S&P Global, and according to estimates in November from Macquarie, prices for lithium carbonate will likely average US$12,579 per tonne this year and dip to US$10,775 per tonne next year.

The timing of Rio Tinto’s decision to acquire Arcadium Lithium was aimed at capitalizing on lower prices.

“We believe in the demand for lithium,” CEO Jakob Stausholm told the Wall Street Journal in an interview in October. “Not long ago, we felt it was far too expensive. When the prices really started falling earlier this year, I put together a team, and they basically looked at every single project in the world.”