Perpetua Resources Corp. (PPTA:TSX; PPTA:NASDAQ) sold a royalty on all future silver production from its Stibnite gold-antimony-silver open-pit project in Idaho to Franco-Nevada, which paid Perpetua US$8.5 million (US$8.5M) up front, reported Cantor Fitzgerald analyst Mike Kozak in a March 22 research note.
This is "a much welcome cash injection as Perpetua nears the conclusion of the federal permitting process," Kozak wrote.
219% return possible
The analyst reiterated Cantor's CA$16.50 target price on Perpetua, currently priced at about CA$5.65 per share, noted Kozak. The difference between these prices implies a potential return for investors of 219%.
Valuation of the royalty
According to Kozak, the after-tax net present value, discounted at 5%, of the royalty is US$11.5M, using a long-term silver price of US$24 per ounce.
"Perpetua selling forward all future silver production from the mine is immaterial to the project economics as the metal represents less than 0.3% of Stibnite's total future revenues as per the 2020 feasibility study," the analyst explained.
All cashed up
Kozak pointed out that Perpetua has sufficient funds to get through federal permitting. In addition to the US$8.5M from Franco-Nevada and the US$7.1M that the company had at the end of Q3/23, it has further funding, up to US$34.6M from the U.S. Department of Defense.
What to watch for
Upcoming catalysts for Perpetua include completion of the Final Environmental Impact Statement and a Draft Record of Decision from the U.S. Forest Service, expected in Q2/24. After, that the Final Record of Decision will be issued, likely in Q4/24.
"When in production, Stibnite will be one of the Top 5 largest gold mines and the single largest antimony mine in the United States," Kozak wrote.
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