Perpetua Resources (PPTA) Reports
The broad market indices are up nicely today on news of significant de-escalation of U.S.-China trade tensions following weekend talks in Switzerland.
For the next 90 days, U.S. tariffs on Chinese goods will come down from 145% to 30% (this represents 10% reciprocal tariff and 20% related to fentanyl), while China’s tariffs on U.S. goods will come down from 125% to 10%. This tariff relief is much greater than was expected going into the talks.
While the news is good for stocks in general, in the short term it is sending the price of gold and gold stocks lower. While I’m not expecting this to be the end of the gold rally (the conditions that have supported gold’s rise still exist), it could stall things for a spell.
Specific to Perpetua Resources (PPTA), the company issued a Q1 update this morning that was a little underwhelming given that the company is still working through the process of getting final permits and funding to start construction on the Stibnite project. This is taking some time, despite the Stibnite Gold Project’s recent selection as a priority project by the White House.
As it stands right now, Perpetua is awaiting the section 404 permit from the Army Corps. This is the last remaining federal permit to be issued prior to a construction decision. Management says it expects it to be issued in Q2 (i.e., by the end of June).
The company is also working with various state and federal agencies, including the Idaho Department of Environmental Quality (IDEQ) and U.S. Forest Service (USFS), to address concerns and challenges to the project that have been raised by various interest groups.
Meanwhile, Perpetua is advancing construction readiness activities such as hiring a construction manager and general contractor (Ames Construction), plotting out work to the proposed Project site route (the Burntlog Route), doing basic engineering work (Ausenco Engineering) and planning out power upgrades (with Idaho Power Company). It has paid $18.8 million to Idaho Power Company for long-lead equipment needed to increase electrical capacity to the plant.
This is all a long-winded way of saying things are moving ahead, but slowly, as the final details and approvals are being worked out.
We are still awaiting a funding announcement, so the market is now starting to smell a secondary offering, which may be needed to get Perpetua to a stage where it has a stronger negotiating platform with prospective partners and/or a decision from the U.S. Import-Export Bank. RBC Capital Markets and Endeavour Financial are helping on this front.
The timing of this “meh” business update on a day when gold is down and there’s talk of China’s supply of rare earths to the U.S. continuing is responsible for PPTA trading down double digits.
Does it change the big picture? I don’t think so. I expect Perpetua will continue to move through the process and get to the construction phase of this project. And that should be very good for the stock. Keeping at buy half. BUY HALF
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