SS1 announces high grades of critical military metal antimony at its US project- 10 hours later China bans antimony exports to the US

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 3,935,291 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.

Yesterday, Sun Silver (ASX:SS1) announced an exceptional drill result that contained a massive 1,249 g/t section of silver...

And 3.24m of 10,000 ppm of antimony.

(the assay lab test maxed out at antimony grades of 10,000ppm, so the sample is getting re-assayed to see how high the grade actually is)

SS1 is drilling to expand its giant 423M ozEq silver resource in the Nevada USA.

The silver resource is based on ~200 historical drill holes that have NEVER been assayed for antimony (only for gold and silver at the time).

Based on recent antimony grades in many of SS1’s new drill holes, SS1 is trying to figure out if its giant silver resource is also full of antimony too.

(and its based within US borders - in the mining friendly state of Nevada)

Antimony is a critical metal for military uses and the USA doesn’t have ANY local supply...

10 hours after SS1 announced this high grade antimony result...

China announced a full blown ban on antimony exports to the USA.

This was in retaliation for USA’s export bans to China on semiconductors and microchips for AI.

The US is trying to slow down China's artificial intelligence efforts...

... so China is now messing with US military supply chains by outright banning antimony exports.

A pretty good time for SS1 to prove up a giant antimony resource located within US borders...

(Source 1, Source 2, Source 3, Source 4)

Here is the high grade silver and antimony announcement from SS1 10 hours earlier:

(Source)

A few months back, on August 21st, China first started making noise about possible antimony “export controls” (less severe than a ban).

This was a few weeks after SS1 first announced on August 2nd that they suspected there could be antimony throughout its ~200 historical hole resource of 423M oz Eq silver.

SS1’s share price started running when China announced it was considering softer “export controls”.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Before that news in early August (BEFORE the China export controls news) no one had ever assayed the SS1 project for antimony mineralisation...

Over the next few months between August and today, SS1 started re-assaying the ~200 holes that make up its giant silver resource.

Since then SS1 has hit antimony in drillholes both inside and outside of its current resource:

Our working theory has been that there is a chance SS1’s deposit could host an antimony resource to go with its giant silver resource.

They just need to re-assay some (or all) of the ~200 historical drill cores for antimony, and keep hitting antimony grades in new drill holes.

SS1’s antimony potential caught the market’s attention in August when China first threatened export controls.

Was antimony going to be just a flash in the pan?

Well it just got pretty real last night when China outright banned antimony exports to the USA.

(Here are dozens of different news articles from the last 14 hours about it)

So far most of the drill result announcements from SS1 have always delivered silver AND had some sort of antimony mineralisation to report too.

So our theory could end up being correct and the next time SS1 update their resource estimate we could see antimony pop in as a credit to all of the silver.

(we are primarily in SS1 for the silver story, but the antimony is an exciting side story to follow too if SS1 deliver on it)

We think antimony could take SS1’s resource from a giant precious metals project to one that also has strategic military importance for the US...

Why an antimony resource could be a game changer for SS1

Because of China export ban news 10 hours ago, local antimony supply in the US has increased in strategic importance.

At the moment China, Russia and Tajikistan account for ~90% of the world’s antimony production.

Remember, inside the USA, there is currently zero local antimony supply.

The only company that has local antimony production planned is the $1BN capped Perpetua Resources.

Perpetua’s planned production would only meet ~35% of the USA’s local demand.

The U.S. Department of Defense (DOD) has set a specific goal to secure domestic antimony supply.

Antimony is highly 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.

It's rare to see the DOD get involved in supporting mining projects but with antimony it makes sense.

By banning exports, China isn't disrupting raw materials that go into an EV battery... it’s disrupting supply chains for raw materials that the military needs.

Which explains the US$1.8BN funding commitment from the U.S. Export-Import Bank (EXIM) to Perpetua Resources - which is really a local gold/silver project that could produce antimony as a by-product...

(which sounds a bit like what SS1 is developing... just saying)

(Source)

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

For those who have been following our SS1 coverage, we have written about Perpetua Resources before.

To date Perpetua Resources has received:

• US$24.8M in funding from the Department of Defence under the DPA Investment Program to support environmental and engineering studies in 2022.
• US$34.6M in 2024 under the Defense Production Act designed to support construction readiness and environmental activities on this mine.
• And a US$1.8BN letter of interest for a loan from the US Export-Import bank to construct the mine.

Usually, for precious metals development companies, raising big slugs of cash like this can be challenging.

It requires convincing financiers and investors to take a view on precious metals prices for the next decade or two.

Perpetua unlocked government funding support for its antimony - Washington is less concerned about fluctuations in gold/silver prices and more concerned about getting its hands on as much antimony as it can (regardless of price).

Side note - decades ago when the rare earths markets were much less developed, the Japanese government took a long term view on the security of supply and gave funding support to Australia’s biggest rare earths miner Lynas.

Perpetua Resources is a model for what we’d like to see SS1 achieve, now that there is clear evidence that antimony can attract US Government funding.

In a 2022 report, the U.S. House Armed Services Committee said it "is concerned about recent geopolitical dynamics with Russia and China and how that could accelerate supply chain disruptions, particularly with antimony."

In a previous announcement SS1 also mentioned that it is looking at “potential funding avenues with the Department of Defence in response to the urgent demand for antimony in the U.S”.

Hopefully that means SS1 is putting itself in front of the right people to try and get funding for its project, similar to the deals signed by Perpetua.

The main reason why we think the US may look to back more antimony projects in the US is because Perpetua’s mine (once in production) would only make up ~35% of US annual antimony demand AND the production would only last for 6 years.

If the Department Of Defence is serious about securing domestic antimony supply it will need to look at helping a few other projects off the ground.

Following this logic, we would expect the DoD to place a number of bets on US-based projects that make financial sense on their own BUT can also produce antimony.

DoD funding sparked Perpetuas’s share price rally?

Before the Department of Defence came knocking, Perpetua Resources was just another advanced gold/silver project in the US looking to lock in a big project financing package to get its project off the ground.

In August last year the company got its first tranche of cash from the DoD, then in February of this year another tranche and then finally in April this year, the US$1.8BN loan commitment.

Over that period we have seen Perpetua’s share price go from a low of ~US$2.50 per share to trade at close to ~US$8.50 per share...

This was the Perpetua chart when we wrote about it in late September.

Today it's trading higher at ~US$9 per share.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

IF SS1 can get its hands on some funding from the US government, we are hoping it can generate some additional momentum into SS1’s share price, like we saw with Perpetua.

Interestingly, SS1 recently managed to attract a new substantial shareholder to the register - Nokomis Capital.

We did a bit of digging and found that Nokomis Capital were also shareholders of Perpetua (Nokomis held ~1.9% stake in Perpetua Resources)...

This was from Perpetua’s January 2023 presentation:

(Source)

Hopefully, Nokomis coming onto the SS1 register is a good omen for what is to come...

Ultimately, we think that as SS1 clears the pathway to getting its project developed, its valuation should move higher - assuming silver prices are strong.

Any unexpected positive news regarding non-dilutive funding would just be an added bonus to our Investment Thesis.

SS1 progressing its project forms the basis for our SS1 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.

What is coming up next for SS1

(Source)

• 🔄 Assay results from 7,500m infill/extensional drilling - drilling is both infill (inside SS1’s current resource footprint) and extensional (looking to extend the deposit).
• 🔄 Antinomy potential - We want to see if antimony is widespread across SS1’s giant JORC resource.
• 🔄 Further update on US government funding - We want to see SS1 put out an update on the US$60M grant application the company is working on for its silver paste business.

Risks

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

SS1 is currently running an infill and extensional drill program.

There is no guarantee that the drilling will deliver extensions OR confirm 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.

Most of the antimony results SS1 has been putting out have been portable XRF readings.

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, we will need to see the final assay results to really see whether or not SS1 could have an antimony credit at its silver project.

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