SS1 announced antimony potential… weeks before antimony became “cool”.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 3,810,000 SS1 shares at the time of publishing this article. The Company has been engaged by SS1 to share our commentary on the progress of our Investment in SS1 over time.

Until this week we didn’t really care about a metal called antimony.

Turns out antimony has many critical uses in military and defence.

But the US has no domestic supply.

...and a few days ago China announced “export controls” on antimony - it has just become one of the most in demand critical minerals...

Which got us thinking about an announcement that our 2024 Pick Of The Year Sun Silver (ASX:SS1) put out a few weeks ago.

SS1 is currently running a 7,500m drill program to grow the size and upgrade the classification of its 292,000,000 ounce silver equivalent JORC resource in Nevada, USA.

Three weeks ago SS1 announced onsite XRF drill results with silver grades of up to 296 g/t silver.

...and a 1,466 ppm (0.146%) sniff of antimony.

(Source)

The antimony didn’t catch our attention at the time.

BUT...

That sort of antimony grade (IF confirmed in final assay results) would be almost 2.5x higher than the grades from a project that received a US$1.8BN funding commitment in the US...

(Source)

AND

Just a few days ago China announced export restrictions on antimony.

Which is huge news from both:

A) A security of supply perspective - About 85% of supply comes from China, Russia and Tajikistan. China is the biggest supplier at ~55%.

AND

B) Because of Antimony’s use in the Defence industry...

Antimony has become increasingly strategic because of its use in military equipment.

It’s used in stuff like infrared missiles, nuclear weapons and night vision goggles, and mostly as a hardening agent for bullets and tanks.

Applying geopolitical pressure by restricting battery metals or energy supply is one thing, but messing with military supply chains is next level.

Due to its strategic use in the military, antimony is high on the US critical metals list.

For some context - during World War 2 the Japanese cut off antimony supply from China to the US which sent the US scrambling to find and fund domestic antimony supply to support the war effort.

Right now several decades later, the US does not currently have any domestic supply of antimony.

Which explains the US$1.8BN funding commitment to a gold/silver project that could produce antimony as a by-product...

We think it won't be the last time a project like that gets government support in the US...

Especially after the Chinese export bans and the recent price runs for the commodity...

The antimony price has already doubled in the last 6 months, and the export restrictions come into effect next month (Sept 15th), so prices could keep running...

(Source)

There are not many ASX listed antimony stocks out there, one of them is up 100% in the last 2 days since the export ban was announced.

So what does a Chinese antimony export restriction and a rocketing antimony price have to do with SS1’s silver project in the USA?

The first batch of assay results could show SS1’s huge silver/gold resource also has antimony potential...

IF the 0.146% antimony grades from on site XRF readings are confirmed in final assay results.

We are Invested in SS1 as our Small Cap Pick of the Year because they acquired a huge silver project in the USA while the silver price was low - and then silver price then hit decade highs.

SS1’s silver project has ~200 historical drill holes and a 292Moz silver equivalent JORC resource.

According to SS1’s May 30th announcement - its ~200 historical drillholes were only tested for silver or gold... and nothing else...

So, many of them could potentially also contain antimony, we just don’t know at this stage.

(Source)

IF SS1’s first new drillhole throws up a decent antimony grade along with the silver grade, it might mean there is more antimony across the entire resource, only the antimony was not previously tested for or reported on.

(antimony is usually found together with silver or gold deposits)

We have been patiently waiting for the silver assay results on SS1’s first hole, but given the sudden interest in antimony it’s worth noting this as a potential addition to the silver story.

Especially given SS1 had announced the antimony potential weeks before the Chinese export restrictions and before antimony started getting investor attention.

If antimony performs like rare earths did after the Chinese rare earths export controls from back in 2010, expect a lot of new antimony projects popping up on the ASX...

As they always do, the capital markets will “do its thing” to fill the drop in supply and rising price.

We think adding antimony to SS1’s already giant silver resource would be a great addition to the SS1 value proposition, especially if domestic antimony supply becomes a US defence priority, given that SS1’s project is located in the USA.

So IF (and it’s a big “if” at this stage) the first hole that SS1 drilled returns high antimony grades, there could be a chance that the 200 historical holes may also contain antimony?

Again, a few weeks ago we didn’t really care about the antimony sniffs in the first drill hole, but given the surge in sentiment toward antimony and looking into it a bit more, we think it’s now worth keeping an eye on.

On the silver side - the silver price has been running again in the last 3 weeks and looks like it might test decade highs again soon.

So SS1’s first batch of assay results could come at a time where the silver price is running again.

Now, with the interest in antimony stocks and the silver price creeping higher we think SS1’s assay results could be well received by the market.

Ultimately the drill results to increase the JORC resource size and its classification are a key milestone for SS1 achieving our Big Bet which is as follows:

Our SS1 Big Bet

“SS1 re-rates to a +$300M market cap by expanding its large US silver resource and moving into development studies and/or attracting a takeover bid at multiples of our Initial Entry Price”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our SS1 Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

Reminder: SS1’s drill program.

SS1 is at the early stages of a 7,500m drilling program for its silver project in Nevada:

Last month SS1 updated the market with some xPRF results from the first “step-out” hole of the program.

This was the hole where the antimony was identified, along with high grade silver XRF reading for a grade of up to 296 g/t.

It’s important to note that whilst the news is positive, the grades SS1 announced were based on XRF readings, not lab assays.

The samples were sent to the lab about 3 weeks ago so assay results for the first hole are expected any week now.

You can read our full note here: SS1 finds silver in step out hole - bring on the assays...

Over the next few months we expect more drilling results to be announced from this program.

There are two main goals with the upcoming drill program:

1. Upgrade the size of its JORC resource (through exploration drilling)
2. Upgrade its resource classification (through definition or infill drilling)

As investors in early stage resource companies we are most excited by the exploration drilling.

Any high-grade assay results from holes outside of SS1’s existing resource are “blue sky” upside for the company, and potentially a catalyst by themselves (particularly if there are any big, BIG hits).

Once the drilling program is complete, SS1 will review all of the drilling and publish an upgraded JORC resource.

The bigger the size, the better the result for SS1.

In addition to growing the size of the resource, SS1 will be able to improve the classification of its resource (reducing the development risk for larger funds, banks and major miners in the area).

At the moment, SS1’s resource is 100% in the inferred category - which is the lowest confidence interval and where there is still some level of uncertainty around a resource estimate.

SS1 moving that resource into higher confidence categories and potentially increasing the size could start to bring more institutional/corporate interest into the company.

Update on the silver paste program

Earlier this month SS1 commenced a technical assessment on its silver paste program.

Silver paste is used in producing solar panels, improving solar panel efficiency.

SS1 is looking to build a silver paste production facility as a downstream “value add” to sell into the domestic market in the US.

China currently supplies 90% of the world’s solar panels.

The USA has set a target for solar to reach 30% of U.S. electricity generation by 2030.

In order for the US to meet its sustainability goals under the net zero plans it will need A LOT more solar panels.

One of the key components of that supply chain is “silver paste”.

Which SS1 is looking to develop.

This technical assessment will evaluate specifications and production processes in relation to engineering aspects of the program.

Things like process flow sheets, feed material, cost estimates, equipment suppliers, etc...

This is a critical step of the project before external stakeholders can come in and support with funding.

SS1 has already appointed a US group Holland & Knight to seek out grant funding from various US government departments to support the silver paste program.

SS1 has already applied for a US$60M tax credit for expenditure on the project.

The application was made in June this year and we think the technical assessment will be a critical milestone before the grant is provided.

What is coming up next for SS1

🔄 First assay results for the 7,500m drilling

SS1 is currently drilling out its project, assay results are expected any day now.

This is the area where SS1 is currently drilling and where the first pXRF results came from:

What could go wrong?

In the short term the risk we see for SS1 are “exploration risk”.

SS1 is currently running an infill and extensional drill program.

There is no guarantee that the drilling delivers extensions OR confirmation of the existing mineralisation.

Exploration risk

There is no guarantee that SS1’s upcoming drill programs in Nevada are successful and SS1 may fail to find economic silver-gold deposits.

Source: “What could go wrong?” - SS1 Investment Memo 18 May 2024

Another risk that sits outside of our SS1 Investment Memo is related to the antimony potential of SS1’s project.

Up until now, the only indication we have that there may be antimony prospectivity is from portable XRF results which SS1 only announced a few weeks ago.

XRF readings are usually not 100% accurate and so there could be variances in the final grades once the final assay results are announced.

There is also a risk that the antimony grades were only across tiny intervals which might mean there is no broad based mineralisation across SS1’s project.

Ultimately the final assay results COULD reveal lower than expected antimony grades and/or a tiny amount of mineralisation.

IF SS1’s share price starts to react to positive expectations from the antimony side of the story and SS1 fails to deliver, its share price could be impacted negatively.

Also, it is worth noting that Chinese export restrictions have not always translated to sustained underlying commodity price rises.

Rare earths export restrictions in 2010 helped Lynas get off the ground, but since then there have been few successful new entrants to the market.

Graphite export restrictions in 2023 did not see a sustained price rise for graphite, and many graphite projects remain stranded.

With a dominant market share, China can also flood the market to hurt the viability of projects that have antimony by-products, along with a range of other critical minerals.

As a result, commodity price risk is a factor that we’re conscious of with SS1:

Commodity price risk

The performance of commodity stocks are often closely linked to the value of the underlying commodities they are seeking to extract. Should silver and gold prices fall, this could hurt the SS1 share price.

Source: “What could go wrong?” - SS1 Investment Memo 18 May 2024

To see other risks to our Investment Thesis check out our SS1 Investment Memo here.

Our SS1 Investment Memo

For a full rundown of our investment thesis, read our SS1 Investment Memo, where we share:

• What SS1 does
• The macro theme for SS1
• Our SS1 Big Bet
• What we want to see SS1 achieve
• Why we are Invested in SS1
• The key risks to our Investment Thesis
• Our Investment Plan