Benzinga - by The Critical Metals Report, Benzinga Contributor.
Source: Streetwise Reports 04/10/2024
Perpetua Resources Corp.'s Stibnite project in Idaho has a mineral you may not have heard of: Antimony. But it's an important material needed for national defense, and right now most of it comes from China, Russia, and Tajikistan.
As the West continues to try and break free of resource dependence on China in the new green economy, developer Perpetua Resources Corp. (NASDAQ: PPTA) announced it has received a Letter of Interest (LI) from the Export-Import Bank (EXIM) of the United States for up to US$1.8 billion financing for its Stibnite gold and antimony project in Idaho.
Antimony is important to national defense as a key material used in munitions, but no domestic supply is currently mined and China, Russia, and Tajikistan control 90% of the supply chain, the company said.
The loan would be offered through EXIM's "Make More in America" and "China and Transformational Exports Program" initiatives, noted analyst Mike Kozak of Cantor Fitzgerald in a Monday research note.
"According to PPTA, the LI indicated that the potential US$1.8 (billion) in supportive debt financing may also be eligible for special consideration under Section 402 of EXIM's reauthorization that directs it to take steps to mitigate the competitive impact of export support provided by the People's Republic of China" wrote Kozak, who rated the stock a Speculative Buy with a CA$16.50 target price.
Kozak continued, "The potential US$1.8 (billion) of EXIM project financing support directly relates to the antimony by-product (critical for munitions) that will be produced at PPTA's Stibnite open-pit gold project (Idaho)."
Perpetua's stock rose 44% following the news to CA$9.34 by Tuesday morning.
The company said it expects to submit a formal application to the bank this year, upon which EXIM will conduct due diligence to determine if a final commitment can be issued.
"Note that initial CAPEX was estimated at US$1.3 (billion) in the 2020 Feasibility Study (FS) (and) will need to be updated to reflect industry cost inflation" Kozak wrote.
Analysts Lucas N. Pipes and Nick Giles of B. Riley Securities wrote in an update note on April 8 that "the potential financing would carry a repayment tenor of 15 years."
"We believe the cost of capital could be in the mid-single digits" the analysts wrote.
The Catalyst: Domestic Antimony Production Needed Now
"From EXIM's potential financing of up to (US)$1.8 billion to the multiple Department of Defense's multi-million-dollar awards to Perpetua, there is a profound recognition that we need domestic antimony production now" Cherry said. "The EXIM debt funding could fund a substantial portion of the estimated costs to build the Stibnite Gold Project."
Analyst Mike Niehuser of Roth Capital Partners increased his target price to US$10.00 per share and maintained his Buy rating on the stock in a more recent note.
Additionally, the company expects to receive ancillary permits and project financing in early 2025 and reach a construction decision later in 2025. Perpetua intends to achieve commercial operations in 2028 based on the current timeline.
The company says Stibnite is one of the highest-grade, open-pit gold deposits in the U.S. It is working to restore the abandoned mine site and produce gold, which is the only antimony in the U.S. The strategic critical mineral is used in many military applications, including armor-piercing bullets, night vision goggles, and laser sighting, Forbes reported.
"It is the key element in the creation of tungsten steel and the hardening of lead bullets, two of its most crucial applications during WWII" David Blackmon wrote for the publication.
The historic Stibnite mine "was able to step up production of the antimony that is an element in the mine's ore and helped fill the void."
"The Stibnite mine ended up producing fully 90% of America's demand for antimony for the duration of the War and was key to producing 40% of the tungsten steel needed for the military effort" Blackmon wrote. "Following the War, output from the Stibnite mine gradually declined, and its operations were shut down entirely in 1997."
Fresh Leadership
Analyst Mike Niehuser of Roth Capital Partners noted in a March 14 research note that Cherry's more than 33 years of industry experience "may provide PPTA with the necessary leadership to advance the project to operation and meet unexpected challenges."
Niehuser increased his target price to US$10.00 per share and maintained his Buy rating on the stock in a more recent note.
PolyMet's NorthMet project received the highest rating the Environmental Protection Agency (EPA) has ever given to a mining project, Perpetua said.
Cherry also "played a leading role in negotiating a joint venture with Teck Resources Ltd. (TECK:TSX; TECK:NYSE) before PolyMet's sale to Glencore International Plc (GLNCY:OTCMKTS)."
Ownership and Share Structure
Refinitiv reports that management and insiders own approximately 0.38% of the company.
According to Refinitiv, Director Christopher James Robinson owns 0.09% of the company, while CFO Jessica Marie Largent owns 0.13%, former President and CEO Laurel Sayer owns 0.14%, Vice President of Permitting Alan Douglas Haslam owns 0.09%, David L. Deisley owns 0.02%, General Counsel L. Michael Bogert owns 0.05%, Vice President of External Affairs Mckinsey Margaret Lyon owns 0.05%, Director Robert Alan Dean owns 0.01%, and Human Resources Manager Tanya Dawn Nelson owns 0.01%.
A strategic investor, Paulson & Co. Inc., owns 38.63% of the company. According to Refinitiv, institutions own approximately 26.66% of the company, as Kopernik Global Investors, L.L.C. owns 8.19%, Sun Valley Gold, L.L.C. owns 7.28%, Krilogy Financial L.L.C. owns 2.6%, BlackRock Institutional Trust Company, N.A., owns 2.77%, B. Riley Financial Inc. owns 2.32%, Eidelman Virant Capital owns 1.49%,, Franklin Advisors Inc. owns 0.85%, Earth Resource Investment Group owns 0.73%, and State Street Global Advisors (U.S.) owns 0.7%.
Refinitiv reports that there are 64.12 million shares outstanding and 63.75 million free float traded shares. The company has a market cap of CA$561.72 million and trades in a 52-week range between CA$3.56 and CA$8.80.
Important Disclosures: