Antimony Mine in Idaho Warrants U.S. Support, Says Analyst
Research Report

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Disclosures for Roth MKM, Perpetua Resources Corp., July 22, 2024

Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures: ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2024. Member: FINRA/SIPC.

Perpetua Resources Corp.'s (PPTA:TSX; PPTA:NASDAQ) Stibnite gold-antimony project in Idaho "merits immediate attention and endorsement" by the U.S. federal government, purported ROTH Capital Partners Managing Director Mike Niehuser in a July 22 research note. He bases his assertion on the importance of such a project to national defense, the current antimony price, and the Department of Defense's (DOD's) previous funding of Stibnite.

"We view that from the DOD's perspective, given antimony's inelastic demand and multiple risks of adequate supply, advancement of the Stibnite gold project may be paramount," Niehuser wrote.

Recommended Buy, 56% Return

ROTH's target price on Perpetua, US$10 per share, implies a 56% potential return for investors, given the U.S.-based company was trading at the time of the report at about US$6.41 per share.

U.S. Needs Domestic Supplier

The U.S. needs the Stibnite project to come online for the antimony, a byproduct of gold mining, noted Niehuser. Today, China, Russia and Tajikistan control 90% of the global supply of this element; none is being produced in the States.

"This places the U.S.' manufacturing base and national security at risk should relations between the U.S. and China deteriorate," Niehuser commented.

Because the metal is used in various military applications, including artillery, grenades, shoulder-launched munitions, mortars, and missiles, it is critical to warfighting, and the U.S.' support of Ukraine in its conflict with Russia has strained ammunition supplies.

Further, the DOD itself acknowledged the significance of Stibnite back in December 2022 when it wrote in a release, "Perpetua's Stibnite-Gold Project produced antimony trisulfide for the U.S. ammunition industrial base during World War II and the Korean War, and it is the sole domestic geologic reserve of antimony that can meet Department of Defense requirements."

Metals Prices, Today vs. 2020

The price of antimony trisulfide currently exceeds US$10 per pound (US$10/lb), which "demonstrates its price insensitivity and inelastic demand." On the day Niehuser wrote his research report, it was US$10.42/lb, materially higher than the US$3.50/lb price used in the base case outlined in the 2020 Stibnite feasibility study (FS).

The same is true for gold and silver. Today, gold is about US$2,400 per ounce (US$2,400/oz) versus US$1,600/oz in the FS. Silver is about US$29/oz versus US$20/oz in the FS.

"Current metal prices may suggest consideration of Case E, the most optimistic price scenario calculated in the 2020 feasibility study sensitivity analysis," added the analyst. "At current prices, this would suggest a net present value discounted at 5% of US$2.943 billion (US$2.943B) and an internal rate of return of 36.9%."

Additional Financing Potential

Niehuser noted that additional financing support may be available for Stibnite in the form of debt financing from the Export-Import Bank of the United States (EXIM) through its China and

Transformational Exports Program. EXIM indicated a potential to finance US$1.8B of debt, which compares to Stibnite's US$1.658B capex requirement indicated in the FS.

"This may significantly reduce financing risk for the Stibnite gold project," added the analyst.

He pointed out that the DOD has provided to date about US$75 million (US$75M) to Perpetua for Stibnite "for the purpose of determining acceptability of antimony trisulfide (Sb2S3, or stibnite)  concentrate and to support permitting activities."

This total includes US$34.6M (February 2024) and US$24.8M (December 2022) through the Defense Production Act Title III, US$15.5M (August 2023) from the DOD's Ordinance Testing Consortium and US$200,000 (September 2022) from its Defense Logistics Agency.

Permitting To Conclude This Year

Niehuser highlighted that permitting of Stibnite is "coming into the home stretch." Perpetua expects to receive a final environmental impact statement and draft record of decision from the U.S. Forest Service in Q3/24, followed by a record of decision by year-end.

Project Risks Receding

As for environmental protections, Niehuser wrote that Stibnite's development was done "at or above industry standards, providing a once in a generation opportunity to restore fish spawning areas."

Regarding commodity price and financing risks, they are abating, with current metals prices and the possibility of debt financing from EXIM.

Potential lawsuits after Stibnite receives permitting "remains the highest concern for delaying construction," Niehuser pointed out but added that even these are less likely given the U.S. Supreme Court decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council. An endorsement by the current U.S. Administration would further decrease litigation risk.

"We believe that there is the potential for unanimous agreement by all interested parties that construction of the Stibnite gold project will benefit fish, national security and investors," wrote Niehuser.