Outperform Rated Co. Owns the Only Advanced-Stage Antimony Project in the US
Research Report

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Perpetua Resources Corp. (PPTA:TSX; PPTA:NASDAQ) caught the attention of RBC Capital Markets as it initiated coverage on the U.S.-based mining company with an Outperform rating and a US$23 per share price target, reported Analyst Michael Siperco in a July 18 research note.

"Stibnite is a high-quality gold project in Idaho with an antimony kicker that should boost returns and supports funding due to its strategic importance," Siperco wrote. "With key permits in hand, the way is paved for financing/construction either as a standalone project or potential mergers and acquisitions target with strong margins, front-loaded production and a reasonable payback despite the +US$2.2 billion (+US$2.2B) price tag."

45% Return Potential

Perpetua's share price was US$15.87 at the time of Siperco's report, noted the analyst. It was trading at about a 25% discount to peer consensus net asset value and at a 40% discount to shovel-ready developers.

From US$15.87 per share, the return to RBC's US$23 per share price target is 45%. The company could rerate toward RBC's target on execution toward construction in late 2025 and initial production in

H2/28, noted Siperco.

Perpetua has 109.6 million shares outstanding and a US$1.7B market cap.

Gold With Antimony Kicker

Mining at Stibnite began in the 1900s and peaked during World War II when it produced antimony and tungsten for the U.S. war effort. In 2009, Perpetua (then Midas Gold) consolidated the region and began defining the current resource. Prior operations caused extensive environmental damage, remediation and restoration efforts for which Perpetua includes in its Stibnite plan of operations. These will include removing legacy tailings, re-establishing fish migration pathways and improving water quality.

Stibnite is the only near-term source of U.S. domestic antimony production and could meet about 35% of the country's demand. It was among the first 10 projects selected by the National Energy Dominance Council for what equates to a streamlined permitting path. Also, Idaho recently passed the SPEED Act intended to improve coordination between state agencies and fast track permitting.

Construction at Stibnite could begin in H2/25 once finalization of the roughly US$150 million (US$150M) state/federal reclamation bond is approved. First gold could come in H2/28.

The Mining Plan

Production is to be front loaded, the plan calling for higher grades and more ore to be mined in years one through four, 500,000 ounces of gold equivalent (500 Koz of Au eq) annually at an all-in sustaining cost (AISC) of US$435 per ounce (US$435/oz). In subsequent years, 300 Koz will be produced at an AISC of US$756/oz, net of antimony byproduct credits. As for antimony, 20,000,000 pounds (20 Mlb) of it are to be produced annually. The life of mine is 15 years.

Three in situ deposits will be mined, starting with Yellow Pine, then Hangar Flats and ending with West End, progressing from higher-value to lower-value ore. During years one through four, along with mining Yellow Pine, historically tailings will be moved hydraulically to the processing plant and processed. The plant will use flotation, pressure oxidation and gold/silver doré recovery. Gold recoveries are estimated to be between 68% and 91%, averaging 89%.

The bulk of antimony mining, an estimated 111 Mlb in all, would happen in years one through six. Perpetua plans to produce an antimony concentrate. There is no antimony refining capability in the U.S. but Perpetua has agreements with two domestic refineries, U.S. Antimony and Sunshine Silver, that are investigating the possibility of refining antimony.

Several Financing Avenues

Siperco reported that financing of Stibnite is advancing. Perpetua is waiting to hear back on its application for project debt financing from the Export-Import Bank of the United States (EXIM). A preliminary response is expected in H2/25. RBC assumes EXIM will approve debt financing for Stibnite, at 7%. Also, Perpetua recently raised US$475M and plans to sell a royalty or stream for a 3–3.9% stake for an estimated US$200–250M. Were all three sources of funding to come to fruition, the total amount would more than cover Stibnite's US$2.1B capex. Perpetua may need additional capital to cover antimony refining, but this too could "see further government support," Siperco wrote.

Franco-Nevada has a 1% net smelter returns (NSR) royalty on all future payable silver doré Stibnite produces, for total consideration of US$8.5M. Franco-Nevada also has an option to acquire an NSR on all silver payable from antimony concentrate production at Stibnite. Silver royalty payments are to kick in in the seventh year after commercial production commences and remain in effect to year 15.

Robust Project Economics

Siperco highlighted that Stibnite has attractive economics with upside potential at the spot gold price and even lower, boosted by antimony byproduct credits. Even without the "strategic kicker" from antimony, the project still has strong margins. The analyst also pointed out Stibnite's leverage to gold and antimony prices, the latter having risen 400% to all-time highs.

Using a 2025 consensus case gold price of US$2,100/oz and an antimony price of US$10/lb, Stibnite would yield a US$1.4B net asset value discounted at 5% (NAV5%) and a 15% internal rate of return (IRR). This is according to the 2020 feasibility study (FS) and 2025 cost update.

Using RBC's price deck of US$2,600/oz gold and US$15/lb antimony plus a 10–15% higher capex and opex than in the FS, Stibnite would yield a US$1.6B NAV8% and a 24% IRR and have a four-year payback.

At spot prices of US$3,350/oz gold and US$28/lb antimony, RBC's valuation would be 70% higher.

Compelling Acquisition Target

Stibnite is an attractive takeout target, noted Siperco, especially for producers looking to diversify jurisdiction risk. Already the project is significantly derisked due to its strong upfront production potential and the likelihood of receiving EXIM financing. Also, Stibnite offers large scale and high margins and is in an advanced stage and mining friendly jurisdiction.

Further, Stibnite's 12,000-acre land package offers exploration upside, wrote the analyst. The district remains underexplored, and mineralization at the three deposits remains open at depth and along strike. The area outside the current reserve open pit at Yellow Pine, for instance, shows potential for high-grade antimony and gold. Perpetua's database indicates multiple, exploration areas and priority targets, such as Scout and Garnet, at the property.

"The geological setting is conducive to further discoveries, especially in areas where historical mining and exploration were limited or poorly documented," Siperco added. "We ascribe US$378M in value to unmodeled resources (about 2,700,000 ounces) at Stibnite at a valuation of US$100/oz Au eq."

Management is Good Fit

Perpetua is led by Chief Executive Officer (CEO) and Director Jon Cherry who has 31 years of experience in the mining industry. He spent 11 of them at PolyMet Mining Corp. (POM:TSX; PLM:NYSE.MKT) as CEO and 20 at Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTNTF:OTCMKTS) in various positions in environmental and governmental affairs. Perpetua's chief financial officer is Jessica Largent, its vice president of permitting is Alan Haslam, its vice president of projects is Michael Wright and its vice president of external affairs is Mckinsey Lyon.

The 10-member board, including Cherry and Largent, collectively have extensive experience in mining. Other areas of expertise among members include finance and capital markets, permitting, public policy, legislation and media.

"Management brings meaningful experience in advancing and constructing large-scale mining projects for large producers, with extensive experience among senior executives and the board with similar mines in the region and refractory deposits like Stibnite," Siperco wrote.

What to Watch For

The analyst noted the many near-term potential catalysts for Stibnite and Perpetua. This quarter, the company expects to receive the remaining state permits, secure the reclamation bond and U.S. Fish and Wildlife Service approval of the plan of operations.

A preliminary response from EXIM about debt financing (likely an approval) is anticipated in Q3/24 or Q4/24 with final approval due subsequently. Perpetua may start early construction work then make a construction decision in Q4/24. Next year should see completion of the EXIM financing package and Stibnite construction.

Further out, Perpetua could produce first gold in H2/28 and reach commercial production in H1/29 or H2/29.