Perpetua Resources Announces Sale of Silver Royalty for $8.5 Million in Proceeds

Rhea-AI Summary

Perpetua Resources Corp. announced a Royalty Agreement with Franco-Nevada , receiving an $8.5 million upfront payment for a silver royalty on future production from the Stibnite Gold Project. The silver proceeds complement the Department of Defense funding for permitting and construction readiness activities. Silver represents less than 0.3% of projected revenue, enhancing liquidity and reducing equity dilution for Perpetua.

Positive

• Perpetua received an $8.5 million upfront cash payment from Franco-Nevada for a silver royalty on future production from the Stibnite Gold Project.
• The silver royalty proceeds complement the funding received from the Department of Defense for permitting and construction readiness activities.
• Silver represents less than 0.3% of projected revenue in the 2020 Feasibility Study, reducing equity dilution and enhancing liquidity for Perpetua.
• The transaction with Franco-Nevada provides over $80 million in non-dilutive capital when combined with the Department of Defense funding.
• Perpetua aims to use the proceeds for general corporate purposes and to advance the construction readiness of the Stibnite Gold Project.
• The Stibnite Gold Project is designed to re-establish a U.S. source of the critical mineral antimony, supporting national and economic security.

Negative

• None.

Financial Analyst

The agreement between Perpetua Resources and Franco-Nevada represents a strategic financial maneuver to bolster Perpetua's liquidity without resorting to equity financing, which could dilute existing shareholders' value. The $8.5 million upfront cash payment is a significant infusion of capital, particularly when considering that the silver by-product constitutes a mere fraction of the project's total projected revenue. This move is indicative of Perpetua's broader strategy to secure non-dilutive funding, a positive signal to investors who may be concerned about the preservation of shareholder equity.

Furthermore, the involvement of the Department of Defense in funding indicates governmental support for the project, which could be seen as an endorsement of its strategic importance. This factor, combined with the royalty agreement, suggests a strong confidence in the project's viability and potential profitability. Investors should note, however, that the success of such projects is not guaranteed and is subject to various risks, including environmental, regulatory and market-related uncertainties.

Market Research Analyst

From a market perspective, the transaction underscores the increasing importance of critical minerals like antimony in the context of national security and economic stability. The Stibnite Gold Project's ability to provide a domestic source for antimony may position Perpetua Resources favorably within the market, especially as geopolitical tensions heighten the need for secure supply chains. The long-term implications for Perpetua could include strengthened partnerships and potential for increased market share within the critical minerals sector.

It is also worth noting that the royalty sale to Franco-Nevada, a company with a robust portfolio of mining assets, reflects a vote of confidence in the Stibnite Gold Project's prospects. This could potentially attract additional investment and partnerships in the future, as the project progresses through the NEPA review process and closer to construction commencement.

Mining Industry Analyst

The decision to sell a royalty on a non-core asset, such as the silver by-product, is a common practice in the mining industry, allowing companies to unlock immediate value from assets that may otherwise contribute minimally to the overall project economics. In the case of Perpetua Resources, the revenue from silver was projected to be less than 0.3% of the life-of-mine revenue, which suggests that the impact on the company's revenue stream from this transaction will be negligible in comparison to the potential upside from the gold and antimony production.

Investors should be aware that the success of the Stibnite Gold Project hinges on the successful navigation through environmental permitting processes, which can be lengthy and unpredictable. The NEPA review process, in particular, is a critical step that will likely influence the project's timeline and, consequently, the timeline for realizing returns on investment.

Silver royalty proceeds complement the funding Perpetua has received through the Department of Defense to continue advancing permitting and construction readiness activities.

Silver represents less than 0.3% of projected life-of-mine revenue in the 2020 Feasibility Study

BOISE, Idaho, March 21, 2024 /PRNewswire/ - Perpetua Resources Corp. (Nasdaq: PPTA) (TSX: PPTA) ("Perpetua Resources" or "Perpetua" or the "Company") announced today that it entered into a Royalty Agreement (the "Agreement") with a wholly-owned subsidiary of Franco-Nevada Corporation ("Franco-Nevada") pursuant to which Perpetua, through its subsidiaries, sold Franco-Nevada a royalty ("royalty") on the future payable silver production from the Stibnite Gold Project in exchange for a cash payment of $8.5 million (the "upfront payment").

"This transaction allows Perpetua to monetize a non-strategic by-product from the Stibnite Gold Project and enhance our liquidity to cover a majority of our near-term priorities that are not covered by the funding we've received from the Department of Defense to advance permitting and construction readiness," said Jon Cherry, President and CEO of Perpetua Resources. "Establishing a domestic source of the critical mineral antimony is more important than ever, and we stand ready to responsibly produce critical resources here at home and help strengthen America's national and economic security."

Highlights of the transaction:

• $8.5 million upfront cash payment to Perpetua upon closing of the transaction
• Franco-Nevada will receive all of the payable silver by-product revenue over the life-of-mine, subject to the terms of the Agreement
• Silver represents less than 0.3% of projected life-of-mine revenue in the 2020 Feasibility Study
• The additional liquidity provided from the upfront payment complements the funding that the company has secured through the U.S. Department of Defense
• Perpetua intends to use the proceeds for general corporate purposes

"We appreciate Franco-Nevada's continued confidence and support of the Stibnite Gold Project," said Jessica Largent, CFO of Perpetua Resources. "We have been focused on minimizing equity dilution and this transaction combined with the full anticipated amount of Department of Defense funding represents over $80 million in non-dilutive capital.  Moving forward, we will continue to evaluate various financing options that unlock shareholder value as we receive permits for our world-class project and transition towards construction."

Perpetua's proposed Stibnite Gold Project (the "Project") is designed to re-establish a U.S. source of the critical mineral antimony as a by-product of one of the highest-grade open pit gold resources in the United States. The additional funding will allow the Company to continue advancing the construction readiness of the Stibnite Gold Project and support general corporate expenses related to the Project's progress through the National Environmental Policy Act ("NEPA") review process, led by the United States Forest Service ("USFS").

About Perpetua Resources and the Stibnite Gold Project

Perpetua Resources Corp., through its wholly owned subsidiaries, is focused on the exploration, site restoration and redevelopment of gold-antimony-silver deposits in the Stibnite-Yellow Pine district of central Idaho that are encompassed by the Stibnite Gold Project.  The Project is one of the highest-grade, open pit gold deposits in the United States and is designed to apply a modern, responsible mining approach to restore an abandoned mine site and produce both gold and the only mined source of antimony in the United States. Further advancing Perpetua Resources' ESG and sustainable mining goals, the Project will be powered by the lowest carbon emissions grid in the nation and a portion of the antimony produced from the Project will be supplied to Ambri, a U.S.-based company commercializing a low-cost liquid metal battery essential for the low-carbon energy transition. Perpetua Resources has been awarded a Technology Investment Agreement ("TIA") of up to $59.4 million in DPA Title III funding to advance construction readiness and permitting of the Project. Antimony trisulfide from Stibnite is the only known domestic source of antimony that can meet U.S. defense needs for many small arms, munitions, and missile types. In addition to the company's commitments to transparency, accountability, environmental stewardship, safety and community engagement, Perpetua Resources adopted formal ESG commitments which can be found here.

Forward-Looking Information and Cautionary Note

Investors should be aware that full funding under the modified DPA TIA is subject to negotiation of the additional in-scope work and final availability of funds. Until the agreement is amended, the additional $34.6 million in funding will be unavailable. While Perpetua expects to enter into the modification in the first quarter of 2024, there is no assurance that we will be able to finalize the amendment on the expected timeline or at all. Additionally, funding under the DPA TIA is available only for the specified costs related to permitting, environmental baseline data monitoring, environmental and technical studies, and advancing construction readiness and is not available to fund the Company's costs under its Administrative Settlement and Order on Consent obligations and certain corporate expenses. Statements contained in this news release that are not historical facts are "forward-looking information" or "forward-looking statements" (collectively, "Forward-Looking Information") within the meaning of applicable Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. Forward-Looking Information includes, but is not limited to, disclosure regarding possible events, next steps and courses of action including environmental clean up actions by us and our contractors; ongoing funding and anticipated liquidity; our ability to comply with and obtain permits related to the Stibnite Gold Project; actions to be taken by the Department of Defense, USFS, the State of Idaho and other government agencies and regulatory bodies; negotiation of the definitized agreement and anticipated approval of reimbursement requests; our ability to successfully implement and fund the Project and the occurrence of the expected benefits from the Project; our and Ambri Inc.'s ability to perform under the supply agreement, which agreement is subject to certain conditions, including identification of one or more refiners to transform our antimony concentrate into antimony metal, and mutual agreement on certain material terms, including volume and pricing. In certain cases, Forward-Looking Information can be identified by the use of words and phrases or variations of such words and phrases or statements such as "anticipate", "expect" "plan", "likely", "believe", "intend", "forecast", "project", "estimate", "potential", "could", "may", "will", "would" or "should". In preparing the Forward-Looking Information in this news release,  Perpetua Resources has applied several material assumptions, including, but not limited to, assumptions that we will successfully negotiate a definitized agreement and that the full amount of the DPA award will be funded on the expected timeline; that the current exploration, development, environmental and other objectives concerning the Stibnite Gold Project can be achieved and that its other corporate activities will proceed as expected; that general business and economic conditions will not change in a materially adverse manner and that permitting and operations costs will not materially increase; that the review process under the NEPA (including any joint review process involving the USFS,  the State of Idaho and other agencies and regulatory bodies) as well as the public review process and supplemental draft environmental impact statement will proceed in a timely manner and as expected; that we will be able to discharge our liabilities as they become due and continue as a going concern; that we will be able to obtain sufficient funding to finance permitting, pre-construction and construction of the Project and that all requisite information will be available in a timely manner. Forward-Looking Information are based on certain material assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Perpetua Resources to be materially different from any future results, performance or achievements expressed or implied by the Forward-Looking Information. Such risks and other factors include, among other things, changes in laws and regulations and changes in the application of standards pursuant to existing laws and regulations which may result in unforeseen results in the permitting process; uncertainty surrounding input to be received from regulators and community stakeholders; risks related to dependence on key personnel; risks related to unforeseen delays in the review process including availability of personnel from the USFS, State of Idaho and other state, federal and local agencies and regulatory bodies (including, but not limited to, potential future U.S. government shutdowns); risks related to opposition to the Project; risks related to increased or unexpected costs in operations or the permitting process; risks that necessary financing will be unavailable when needed on acceptable terms, or at all, and that we will be able to continue as a going concern; risks related to the outcome of litigation and potential for delay of the Project, as well as  those factors discussed in Perpetua Resources' public filings with the U.S. Securities and Exchange Commission (the "SEC") and its Canadian disclosure record. Although Perpetua Resources has attempted to identify important factors that could affect Perpetua Resources and may cause actual actions, events or results to differ materially from those described in Forward-Looking Information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that Forward-Looking Information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on Forward-Looking Information. For further information on these and other risks and uncertainties that may affect the Company's business and liquidity, see the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's filings with the SEC, including Perpetua's Annual Report on Form 10-K filed with the SEC on March 16, 2023 and subsequent Quarterly Reports on Form 10-Q filed with the SEC, which are available at www.sec.gov and with the Canadian securities regulators, which are available at www.sedar.com. Except as required by law, Perpetua Resources does not assume any obligation to release publicly any revisions to Forward-Looking Information contained in this news release to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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SOURCE Perpetua Resources Corp.

FAQ

What is the purpose of the Royalty Agreement announced by Perpetua Resources Corp. with Franco-Nevada ?

The purpose is to sell a silver royalty on future production from the Stibnite Gold Project in exchange for an $8.5 million upfront payment.

How much does silver represent in terms of projected revenue in the 2020 Feasibility Study for Perpetua?

Silver represents less than 0.3% of projected revenue, reducing equity dilution and enhancing liquidity.

What will Perpetua use the proceeds from the Royalty Agreement for?

Perpetua intends to use the proceeds for general corporate purposes and to advance the construction readiness of the Stibnite Gold Project.

What is the goal of the Stibnite Gold Project by Perpetua?

The goal is to re-establish a U.S. source of the critical mineral antimony as a by-product of one of the highest-grade open pit gold resources in the United States.