Source: Streetwise Reports
August 29, 2023 (Investorideas.com Newswire) While Perpetua Resources Corp. is primarily known for gold exploration, a new grant from the Department of Defense has the company gaining U.S. strategic relevance with antimony trisulfide production.
Perpetua Resources Corp. (PPTA:TSX; PPTA:NASDAQ) is a development-stage mineral exploration company operating in the United States. It is primarily engaged in the rehabilitation of the Stibnite Gold Project in Idaho, which lies over 100 miles northeast of Boise and over 38 miles east of McCall. It's approximately ten miles east of Yellow Pine.
The Stibnite Gold Project contains gold, silver, and antimony mineral deposits, and the company is undertaking a permitting process for the redevelopment and restoration of the project. Its subsidiaries include Perpetua Resources Idaho, Inc. and Idaho Gold Resources Company, LLC.
The Catalyst: DoD Funding
On August 21, Perpetua Resources Corp. reported that its wholly owned subsidiary, Perpetua Resources Idaho Inc., had been awarded an ordnance technology initiative agreement (OTIA) of up to US$15.5 million under the prototype other transaction (OT) authority of the Department of Defense (DoD) through the DoD Ordnance Technology Consortium (DOTC).
The objective of the OTIA - which is managed by the U.S. Army Joint Center of Excellence for Guns and Ammunition at the Picatinny Arsenal in New Jersey - is to demonstrate a wholly domestic antimony trisulfide supply chain using ore from the Stibnite gold project site for use in munitions.
To meet this objective, the company plans to "obtain additional core samples from the project site, conduct a pilot plant study to produce mil-spec antimony trisulfide from the samples, design a full-scale process circuit, and deliver a modular pilot plant for the DoD to use in further investigations."
Under the OTIA, Perpetua will be reimbursed for these activities on a cost-plus fixed fee basis over the 24-month period of performance. The current estimated amount is US$15.5 million, which is subject to adjustment by the DOTC based on scope, costs, budget, or other factors as the program advances.
Perpetua will be entitled to reimbursement for all costs incurred under the agreement.
Why This Sector? New Product, Cost-Plus Contract
The United States has no domestically mined source of this critical mineral, so Perpetua Resources plans to re-establish a domestic supply as a byproduct of one of the highest-grade open-pit gold resources in the United States.
According to Benzinga.com, "Antimony Trisulfide, also known as Antimony sulfide (Sb2S3), is an important compound widely used in various industries. [It] finds extensive applications in industries such as fireworks, pigments, flame retardants, and electrical materials, to name a few."
"The Antimony Trisulfide market is expected to witness robust growth in the near future. Factors such as increasing demand for flame retardants in various end-use industries and the expanding electronics sector are the key drivers contributing to the growth of this market."
"Additionally, the compound's unique properties and eco-friendly nature have further bolstered its demand, ensuring positive growth prospects for Antimony Trisulfide in the foreseeable future. The Antimony Trisulfide market is expected to grow annually by 6.8% (CAGR 2023 - 2030)."
Another potential end use is antimony trioxide. A report from Future Market Insights explains that "The global antimony trioxide market is projected to attain a valuation of US$1.44 billion in 2023 and is estimated to reach US$2.44 billion by 2033 while exhibiting a CAGR of 5.4% during the forecast period. "
"The growing popularity of antimony trioxide as an ideal flame retardant additive is a key factor providing impetus to the growth of the antimony trioxide market."
"Antimony trioxide is also used as an opacifying agent for glass enamels and glasses. It also finds its application as a useful catalyst in the production of polyethylene terephthalate (PET plastic) and the vulcanization of rubber."
As you can see, for Perpetua Resources, which is traditionally known as just a gold miner, this expansion represents a hugely valuable secondary market - one that it can safely experiment with, thanks to the cost-plus nature of the DoD's commitment.
The contracting professionals at Oracle Netsuite explain the advantages thus: "A cost-plus contract has several advantages. Flexibility is one since work can begin before the project's full scope is determined. Another is that project expenses are reimbursed, which means contractors can choose the best materials rather than worrying about the cost of materials or the risk of cost overruns. And since profit is separated from costs, the contractor makes money regardless of unexpected expenses along the way."
In that sense, the DoD has essentially handed Perpetua Resources Corp. a golden ticket to prove a fully domestic antimony trisulfide supply chain starting with the Stibnite Gold Project.
Why This Company? Funded and Ready To Expand
With this latest funding injection, the firm is ready to begin a new growth phase. "We are excited to expand our partnership with the Department of Defense," says Perpetua Resources President and CEO Laurel Sayer, "and are proud to help demonstrate a fully domestic supply chain solution for the ammunition our troops need to keep our nation and our allies safe."
"Our vision remains unchanged," she continues, "which is to redevelop a world-class gold deposit, provide the country with the critical mineral antimony, and restore an abandoned brownfield site. Perpetua is ready to be part of the solution and support our country's defense supply chains from ground to round."
DOTC funding allows the company to demonstrate the suitability of the project's antimony trisulfide concentrate for use in munitions while the company continues through the permitting process led by the United States Forest Service (USFS).
This new agreement does not interrupt the continuing National Environmental Policy Act (NEPA) review process. The OTIA will build on research conducted under a previously announced Small Business Innovation Research grant.
The project will be powered by the lowest carbon emissions grid in the nation, and a portion of the antimony produced from the project will be supplied to Ambri, a U.S.-based company commercializing a low-cost liquid metal battery essential for the low-carbon energy transition.
In December 2022, Perpetua Resources was awarded a technology investment agreement of US$24.8 million in Defense Production Act Title III funding to advance construction readiness and permitting of the project. Antimony trisulfide from Stibnite is the only known domestic source of antimony that can meet U.S. defense needs for many small arms, munitions, and missile types. The objective of the funding, issued by the Air Force Research Laboratory, was to complete the environmental and engineering studies necessary to obtain the required permits for the production of antimony trisulfide.
Why Now? A Unique Miner at the Cusp of Something Big
As an August 21 company update from Cantor Fitzgerald explains, "Over the next two years, the grant of up to US$15.5 MM will be used to conduct a pilot plant study to produce military specification antimony trisulfide from the Stibnite project's drill core samples, design a full-scale processing circuit, and deliver a modular pilot plant for the DOD."
"PPTA is guiding to the Final Environmental Impact Statement (FEIS) and Draft Record of Decision (DROD) at Stibnite in December of this year and the Final Record of Decision (ROD) in March of next year. With US$14.1 MM in cash and additional grant income forthcoming from the DOD, we continue to believe PPTA is fully funded through Federal permitting."
"We are maintaining our Speculative Buy Rating and US$13.25/CA$16.50 price target. In terms of size, scale, grade, economics (payback period, IRR, capital intensity, etc.), and jurisdiction, Stibnite has all the hallmarks of a Tier 1 gold project. "Moreover, the project has the potential to be the largest (and only) domestic source of antimony, a mineral deemed 'critically' and 'strategically' important to the national interests of the United States, specifically, energy and defense. This by-product metal adds 'scarcity value' to the Stibnite project and makes Perpetua Resources highly unique among its development-stage mining peers."
Ownership and Share Structure
Perpetua Resources Corp. has a fully diluted base of 66.3 million shares, including 1.78 million options and 1.36 million warrants. As of June 30, its estimated cash balance was US$14 million.
Perpetua has a bulk of institutional investors.
According to Reuters, 72.31% of the company is with institutions. Paulson & Co. Inc. has 39.22%, with 24.77 million shares. Kopernik Global Investors LLC has 8.31%, with 5.25 million. Sun Valley Gold LLC has 7.86%, with 4.97 million. Krilogy Financial LLC has 2.57%, with 1.62 million, and BlackRock Institutional Trust Company NA has 2.29%, with 1.45 million.
0.31% is held by management and insiders.
CFO Jessica Largent has 0.08%, with around 50,000 shares. CEO and President Laurel Sayer has 0.07%, with around 50,000, and Director Chris Robinson has 0.06%, with 40,000.
The rest is with retail investors.
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