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I am hesitant to invest in penny stocks, especially in the mining space. Too many things can go wrong – with the geology, or the licensing, or the price of the commodity being produced. Many times, the company’s capital expenditures mount up due to unforeseen obstacles, and shareholders face being massively diluted.
However, Perpetua Resources (NASDAQ:PPTA) has such a compelling story that I couldn’t resist digging deeper.
Perpetua Resources is re-developing a mine that arguably helped defeat the Nazis. Stibnite Mining District, in central Idaho, produced 90% of the antimony that the Americans needed to create tungsten steel and harden lead bullets during WW2.
Before WW2, the US had depended on China for this critical metal, but Japan blocked that supply route. That sent the Americans scrambling for a domestic source.
Once WW2 ended, output from Stibnite mine dropped off. The mine shut down entirely in 1997. Today, the US is once again dependent for antimony on China, which produces 54% of global supply.
That spells bad news as tensions bubble up between China and the West. And it gets worse: the world’s second biggest supplier of antimony is Russia, with 18% of production.
Meanwhile, the uses for antimony have grown since the 1940s. The metal is nowadays needed to produce flame-retardant chemicals, automotive clutch and brake parts, and infrared sensors.
Antimony may even have a major role in green battery technology.
Bill Gates on board
Ambri, a tech start-up, has developed a ‘liquid metal battery’ it claims can outperform lithium-ion cells. The private company, which was funded in large part by Microsoft founder Bill Gates, uses a cathode comprised of solid particles of antimony in its patented technology.
Billionaire-backed Ambri signed a supply agreement with Perpetua Resources in August 2021. This year, six pilot projects using Ambri’s antimony-containing batteries are underway. If the technology lives up to the company’s claims, it could become a widely used solution for storing green energy in the grid. That would turbocharge demand for antimony, an already critical metal.
A golden opportunity?
Perpetua Resources expects to recover 115m pounds of antimony over the life of its project, with commercial production estimated to start in 2027. To put that into perspective, the company forecasts its mine will be able to meet 35% of US antimony demand during its life (up to 15 years).
In addition, the company expects to pull 4.24m ounces of gold out of the ground.
Mining analysts Hallgarten & Company estimate the net present value (NPV) of the project is $1.9bn. The company’s market capitalisation is currently $215m, meaning it is trading at a 90% discount to NPV.
Perpetua Resources still needs to achieve numerous permitting and financing milestones before it can start production. But if everything goes according to plan, it will be America’s only producer of a critical metal.
For now, I’m sitting on the side lines. But I’ll be watching closely for news on the Bill Gates-backed antimony battery cells. If that technology takes off in a big way, the antimony rush will really be on.
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