China's Antimony Export Curbs Spark Global Concerns, Boost Western Opportunities

Source: Streetwise Reports 08/22/2024

China’s recent announcement to limit antimony exports has sparked significant concerns across global markets, particularly in the U.S. and Europe. Read on to find out how Perpetua Resources Corp. (PPTA:TSX; PPTA:NASDAQ) could benefit from this news.

China’s recent announcement to limit antimony exports has sparked significant concerns across global markets, particularly in the U.S. and Europe. The export controls, set to take effect on September 15, are the latest in a series of restrictions imposed by Beijing on critical minerals, reflecting growing geopolitical tensions and the strategic importance of such resources. “The price of antimony doubled in July and hit a record US$22,750 per metric ton on August 6, driven by supply challenges and increasing applications in the energy transition,” according to Eri Silva of Commodity Insights on August 8.

Antimony, a metal with military and industrial applications, is primarily used in the production of lead-acid batteries, ammunition, infrared missiles, night vision goggles, and nuclear weapons, as well as in batteries and photovoltaic equipment. “Antimony has always been used in glass as a clarifying agent . . . it actually removes microbubbles, and that makes the glass more transparent. And in a solar application, the more transparent the glass, [the more] you can improve the efficiency,” noted Nils Backeberg, founder and director of Project Blue, as cited by Silva in Commodity Insights.

On August 22, 2024, H.C. Wainwright reiterated its “Buy” rating for Perpetua Resources with a price target of US$13.25.

According to US News on August 15, China’s dominance in the antimony market is substantial, accounting for 70% of the global mined output last year.

The country’s decision to restrict exports is officially framed as a move to safeguard national security and fulfill international non-proliferation obligations.

The impact of these restrictions is expected to be significant. Christopher Ecclestone, a principal and mining strategist at Hallgarten & Company in London, emphasized the critical role of antimony in military applications, stating in an August 15 U.S. News report that “the military uses of Sb (antimony) are now the tail that wags the dog. Everyone needs it for armaments, so it is better to hang onto it than sell it,” according to the same Reuters report.

The U.S. and other countries have been scrambling to reduce their reliance on China for key materials. As noted by SCMP, Beijing’s decision to tighten its grip on the global flow of critical materials, including antimony, comes amid rising tensions with Washington. The controls also cover smelting and separation technology and machinery related to super-hard materials like diamonds.

In response to these developments, companies like Perpetua Resources, which hosts the only domestic reserve of antimony, are exploring ways to accelerate their production of antimony in the U.S., supported by the Pentagon and the U.S. Export-Import Bank.

According to AP News on August 15, Perpetua’s CEO, Jon Cherry, indicated that the company is looking for ways to produce antimony faster to meet strategic needs in light of this development.

The ramifications of China’s latest move on the global supply chain and defense sectors will likely be profound, as antimony prices continue to rise amidst tightening supply and growing demand.

Western Antimony Companies Poised to Benefit Amid China’s Export Restrictions

The recent export restrictions imposed by China on antimony have opened the door for Western antimony companies to potentially benefit as global supply tightens. One such company is Perpetua Resources Corp. (PPTA:TSX; PPTA:NASDAQ), which is developing the Stibnite Gold Project in Idaho, a site that includes significant antimony reserves and the only such reserves in the U.S.

As noted by Reuters on August 16, Perpetua Resources continues to plan for full-scale production to begin in 2028 and is now studying ways to accelerate a portion of antimony this timeline in response to China’s curbs and to support U.S. demand. The Stibnite project, supported by the Pentagon, represents one of the largest antimony reserves outside of China, with 148 million pounds of antimony and 4.8 million ounces of gold.

China’s control over more than 70% of global antimony production has placed significant pressure on Western markets, particularly in the U.S., where domestic sources of antimony are virtually nonexistent.

According to Mining Weekly on August 15, Perpetua’s CEO Jon Cherry stated, “China is weaponizing the world’s access to critical minerals, and it’s never been more urgent to secure the United States’ critical mineral supply.” The company believes that the Stibnite project is positioned as a crucial component in re-establishing a U.S. source of antimony, which is essential for national defense and clean energy technologies.

While the project has faced opposition from environmental and community groups due to concerns about potential ecological impacts, Perpetua Resources remains committed to advancing the project. The company asserts that the Stibnite project will not only provide a critical supply of antimony but also contribute to the environmental restoration of the historically mined site. As China’s export restrictions take effect, companies like Perpetua Resources are poised to play a pivotal role in securing the supply of critical minerals for the U.S. and other Western nations.

The Catalysts For Perpetua Resources

Perpetua Resources is positioned for significant growth with several near-term catalysts that could substantially enhance its value. According to their August 2024 investor presentation, a critical upcoming event is the expected release of the Final Environmental Impact Statement (FEIS) and Draft Record of Decision in Q3 2024. This step is essential for securing the necessary environmental clearance, which is crucial for advancing the Stibnite Gold Project.

Cantor Fitzgerald also issued a research note, maintaining a “Speculative Buy” rating and setting a price target of US$13.75.

Following this, the Final Record of Decision is anticipated in Q4 2024. This decision will officially grant the major federal approval needed to begin construction, marking a significant milestone that could reduce the risk profile of the project.

Additionally, Perpetua Resources plans to pursue ancillary permits and finalize financing arrangements by early 2025, setting the stage for the commencement of construction and eventual commercial operations, which are targeted to begin in 2028.

These developments are expected to provide significant momentum for the company’s growth and its role as a key domestic supplier of antimony, a critical mineral for national defense and clean energy applications. However, it is important to remember that the revenues from antimony in proportion to gold are relatively small (~5% antimony and ~95% gold). Antimony, therefore, is the unique differentiator that should unlock the gold economics for investors.

Analyst Opinions

Perpetua Resources has garnered attention from several analysts due to the strategic importance of its Stibnite Gold Project, particularly in light of recent developments in the antimony market.

On August 22, 2024, H.C. Wainwright reiterated its “Buy” rating for Perpetua Resources with a price target of US$13.25. The report emphasized that China’s upcoming export restrictions on antimony, which will take effect on September 15, 2024, could tighten global supply, thereby enhancing the strategic value of Perpetua’s U.S.-based Stibnite Gold Project. The analysts highlighted the potential for the company to accelerate its production timeline due to increased interest from investors and other funding sources. They also noted that the U.S. Forest Service (USFS) is expected to release the Final Environmental Impact Statement (FEIS) and Draft Record of Decision (ROD) in Q3 2024, with the Final ROD anticipated in Q4 2024. H.C. Wainwright’s valuation of Perpetua is based on a discounted cash flow (DCF) analysis, reflecting significant upside potential amid rising antimony prices and tighter supply chains.

On the same day, Cantor Fitzgerald also issued a research note, maintaining a “Speculative Buy” rating and setting a price target of US$13.75 (CA$18.25). The report discussed how China’s announcement of export controls on antimony — a critical mineral used in various military applications—positively impacts Perpetua Resources. Cantor Fitzgerald highlighted that the Stibnite project, which houses the largest antimony reserve in the U.S., is strategically vital for national defense, particularly as the U.S. seeks to reduce reliance on foreign supply chains. The analysts also noted the progress in the permitting process, with the USFS expected to publish the FEIS and Draft ROD in Q3 2024, followed by the Final ROD in Q4 2024. [OWNERSHIP_CHART-10820]

Earlier, on July 30, Roth MKM’s Mike Niehuser had underscored the critical importance of Perpetua’s Stibnite project, particularly for U.S. national defense. Niehuser highlighted the project’s potential to address the inelastic demand for antimony, a mineral vital for military applications, and reduce U.S. reliance on China, Russia, and Tajikistan, which control 90% of the global supply. ROTH Capital set a price target of US$10 per share, indicating a 56% potential return at the time of the report with a Buy recomendation.

Ownership and Share Structure

According to Reuters, management and insiders own approximately 0.55% of Perpetua, and institutions own about 33.09%. Strategic investor Paulson & Co. Inc. owns around 40% of the company.

Reuters reports that there are 64.54 million shares outstanding and 64.19 million free-float traded shares. The company has a market cap of US$339.65 million and trades in a 52-week range between US$2.64 and US$7.13.

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Important Disclosures:

1. Perpetua Resources Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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( Companies Mentioned: PPTA:TSX; PPTA:NASDAQ, )

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