After foolishly declaring PJX Resources Inc is unlikely to trade below $0.30 after its drill permit was finally granted on July 8 I have been scratching my head why the stock is now below $0.20. It is too early for the street to smell a drilling bust but these days the market frets that something will block a drill program such as a stakeholder protest or fire. I managed to get hold of CEO John Keating and he says drilling is underway, and there is no fire threat nor is there any issue with stakeholder. On July 30 I had assembled a graphic showing the wildfire situation in southeast BC which showed there was an out of control fire 20 km to the east of the Dewdney Trail drilling site but the two locations were separated by several north-south valleys. On August 16 I assembled a second graphic showing what the fire situation is today. That fire 20 km to the east is still "out of control", but in 2 weeks it has only grown from 11,382 ha to 11,903 ha. Most importantly, a very large area has gone from very high to low fire risk. So for now fire is not a problem, and drilling is underway, though the drillers are not happy that it is pissing rain so hard they have to keep drilling because the helicopter cannot bring replacement crew.

However, PJX has a new problem which will keep the stock under selling pressure for the next 6 weeks. In late November 2023 when PJX was raising money on the basis of the Sullivan style boulders it found in the talus the base of a mountain slope at Dewdney Trail it had a hard time raising money and was approached by somebody who specializes in arranging flow-through financings. The TSXV bulletin shows that 13,816,422 units were flow-through sold at $0.105. The TSXV used to disclose the identities of placees but more than a decade ago stopped naming even insiders and brokers due to privacy concerns. Keating won't tell me who took down the flow-through paper, but apparently 60% was taken by flow-through funds as opposed to high net worth individuals. Some of these funds began selling in late March as soon as the stock was free trading, but the recent price slump is due to stepped up selling. What puzzles ordinary investors is why start selling now when drilling of a potential world class Sullivan 2 target is finally underway?

I suspect what is happening is the same thing that torpedoed James Bay juniors like Dios Exploration Inc last year which had a Toronto fund called Marquest as an FT shareholder. This selling ramped up even as the James Bay juniors were finally getting boots on the ground after losing most of the summer prospecting season due to fire closures, a problem that does not exist this year in Quebec. It turns out that this type of flow-through fund has a distribution deadline which I think is October 31. There is an earlier deadline whereby the fund unit holders must elect to take stock or cash or perhaps a combination. It is even possible unit holders can make the election when they invest and would probably elect 100% cash because they don't know what the fund is buying and are only there for the tax benefits. Once the private placement is free trading the fund manager faces the tricky challenge of maximizing the amount of cash returned to fund investors so that they are inclined to invest in the next flow-through fund. That is why some selling starts four months after the financing closed.

Last year the problem was that the majority of fund holders elected to take cash because the market had turned so bad in H2 of 2023. So Marquest and all the other funds with a similar distribution structure were pounding out stock to raise cash. I think the way it works is that if as a fund investor I hold 1% of the fund when it closes, and I elect for 100% shares, I will receive 1% of each the fund's original position in each stock. So if a fund owned 1 million units of PJX, I would receive 10,000 PJX shares. I do not know how the warrants, which are supposed to be non-transferable, are handled. If I elected 100% cash I would get 1% of the cash generated at the time of distribution. If 60% of the PJX FT financing went to this type of fund, and everybody opted for 100% cash, there would be about 8 million PJX shares that need to be sold by the distribution date.

PJX has been a cult stock for a long time with high net worth individuals buying and never selling based on their enthusiasm for Keating's exploration strategy in southeastern British Columbia which includes not just the Hunt for Sullivan 2 but also a big picture theory that this reason is host to younger copper and/or gold mineralized intrusions. Keating has generally avoided doing flow-through with FT funds because they are just grinding out their commissions and could not care less about the fundamental outcome which they assume will be negative. But times were desperate and Keating did not know that the story would end up on the radar of Crescat and Quinton Hennigh. So PJX capitulated and now has the added complication that it granted a full $0.20 warrant to the flow-thru share. That means the fund manager has to convert any warrants in the money into cash by selling and exercising the warrant for the benefit of those fund holders who elected a cash distribution. This means that until the distribution date, which should be public knowledge, there will be a lid as high as 8 million shares hanging above $0.20 linked to those warrants. Keating says there have been no warrants exercised, probably because the first challenge is to liquidate the long position which process is now accelerating as the deadline later this year approaches.

The Crescat financing is now free trading but all that paper is betting on the fundamental outcome, and Quinton Hennigh will not have much to say on behalf of Crescat until there is news confirming a discovery. Such news is unlikely until late September. So what we are facing is an air pocket where there are "distressed" sellers (the FT funds) during a window when the market remains extremely bearish for resource juniors, and anybody who liked the story is already long. Potential new money will wait on the sidelines until there is a discovery game on signal.

Since the purchase price for the FT stock was $0.105 it is reasonable to assume that the funds will sell stock at least that low. So I will not be surprised if the stock sinks into the $0.10-$0.15 range where people like myself have a chance to average down until news emerges that the Sullivan 2 hypothesis is correct. Because these flow-through funds are not really supporting resource juniors, just engineering a tax dodge whose execution is indifferent to the needs of the juniors, the regulators should require such investments to be disclosed. But the regulators only work for the financial establishment, so any disclosures that help retail investors understand structural market risks unrelated to exploration fundamentals will never happen. Company principals like Keating are bound by confidentiality so they cannot help us, just quietly fume.

This situation would not have evolved if it were not for Canada's UNDRIP linked permitting system. The drill permits should have been in place by May, but because of the consultation merry-go-round they were not granted until July 8, and then came with a last minute requirement to do an extra check for "endangered species" within the vicinity of the drill sites which added another couple weeks of delay. As bad luck would have it, this meant the drill pad building crew lined up to start in early July took on another job and the start of the program was delayed another couple weeks so that drilling could not start until the second week of August. Had the permits been on time drilling would have started in mid June and we might know by now that we have a Sullivan 2 discovery on our hands. This would bring in new buying from investors who understand the upside, and the FT funds would have been selling into the buying rather than crushing the bid side of the order book. Now the funds are stuck selling into a no bid market because fundamental news will not come until close to their distribution deadlines.

There is a certain historical irony to this. When PJX appointed Chuck Fipke to its advisory board I asked Keating why and all he would say is that Chuck likes the story a lot. But I found out from another source that when Chuck saw that news release last year in late October, he knew immediately knew what it meant and bought a bunch of stock, including through the private placement.

This is interesting because his company Dia Met Minerals during the late 1980s had become a cult stock, especially among people in Kelowna where Fipke's lab was based. Diamonds were an alien concept so you had to be a true believer to buy and hold Dia Met. But Dia Met also raised flow-thru money from Ned Goodman's CMP funds. In November 1991 Dia Met and its farm-in partner BHP announced they had discovered a kimberlite pipe in the Northwest Territories that was diamondiferous. The disclosure was in the form of micro and macro counts, but the distinction at the time between micro and macro was based on a measurement in the longest dimension, which was effectively meaningless though it took a decade for a meaningful reporting standard for micro-diamond data to emerge. However, there was enough information about the harzburgitic chemistry (G10 garnets) that Dia Met attracted international buying from people who understood the diamond game and realized that there was something different and special about the Ekati discovery. And of course when the existing cult shareholders started to see their stock go up after years of flat-lining and sensed the excitement they didn't sell, but rather bought more of what was technically an illiquid stock.

But thanks to CMP there was plenty of liquidity as its fund managers unloaded the flow-through paper as the stock ascended from $0.60 into the $5-$10 range during H1 of 1992, and then, when results of a mini-bulk sample were released, confirming that true macro gem diamonds were present, the stock took off in H2 of 1992, surpassing $60 in mid 1993 when additional and better pipes were revealed. I have created a chart of Dia Met which includes the pre-split price calculated from the post split stock price to show how Dia Met fared until its buyout in 2001 by BHP at an implied project value of $2 billion.

So this situation of flow-through funds forced to sell by the end of October will keep the stock from going to the moon until they are done because the information flow by then will not definitively confirm a world class discovery, but reveal enough to signal to knowledgeable investors that it is game on. This forced selling will create welcome liquidity for newcomers willing to extrapolate the tea leaves PJX reveals between now and then, just as happened in H1 of 1992 with Dia Met. The high net worth PJX cult shareholders will probably not sell. Since this will be a multi-year exploration cycle if a discovery with implied scale is delivered, it will be good to see new money discover the story at a reasonable price and perhaps rekindle the belief that Canadian resource juniors can still ignite Canadian animal spirits. So maybe Chuck Fipke's arrival is a positive omen.

Fortunately fires so far are no a problem for Endurance Gold Corp which started drilling on July 8 at Reliance and on August 13 published an update that it has drilled 5 holes representing 1,854 m into the Imperial Zone and is drilling a sixth hole before moving upslope to test the 400 m gap between the Imperial and Eagle zone within the Royal-Treasure Shear corridor. Since 2020 Endurance has drilled 84 shallow RC holes and 82 core holes to test the Imperial and Eagle zones. Both zones have intersected high grade gold mineralization within the 1,500 km corridor of intense iron carbonate alteration. The setting is described as an "epizonal orogenic" system similar to the nearby high grade 5 million ounce Bralorne vein system, except that the presence of antimony means the mineralization is much higher than at Bralorne. An analogy has been made to the Fosterville system in Australia.

There are two reasons the market disrespects the Reliance project to such an extent that Richard Gilliam simply said "screw the stupid market" and wrote a $4 million check in May at $0.20, a premium to market, with a half warrant exercisable at $0.32. One is that while high grade has been intersected, the grade is not eye-popping multi-ounce gold as at Fosterville, which keeps big investors like Eric Sprott from getting interested. The other is that the mineralization seems to resemble the bars of scaffolding workers erect next to building. Such an apparent geometry makes it difficult for investors to conduct back of the envelope resource estimates so one cannot see the ounce tally growing with each new drill hole. For that to happen Endurance needs to drill many closely spaced holes, but the low market value makes financing such a strategy unappetizing. So investors have been waiting for the company to drill deeper to see if vein like structures emerge at depth as they do at Bralorne and which is predicted by the model.

Last year was supposed to be the turning point but plans were disrupted by fires in the Bralorne area that cost the company two drilling months. The initial focus was on extending the strike of the Eagle Zone and then the company moved downslope to test the shorter strike Imperial Zone down plunge while road building was done at Eagle to allow drilling from the post-mineral hanging wall side of the corridor. The plan was to return to Eagle later in the season and drill deeper holes but that never happened thanks to the fire evacuations.

The market was left with the impression nothing much was accomplished in 2023, though internally Robert Boyd's team was developing a better understanding of the geometry and the plunge of the system. This seems to have paid off with the Imperial drilling this year. All holes are reported to have intersected mineralization though the company has not reported intervals, preferring to wait for assays that probably will not arrive until the second half of September. But when I talked to CEO Robert Boyd this week he was clearly pleased with what has been encountered and now believes all of the Royal-Treasure Shear corridor is one big mineralizing system. The Imperial Zone represents a strike of only 200 metres, so the assays are unlikely to move the needle for the market, but if the next stage of drilling delivers mineralization it might attract market attention.

There is a 400 m gap between the Imperial and Eagle zones which is untested because at surface there is not much to get excited about, though this does not mean there is nothing at depth. The process of building roads to access the Imperial and Eagle zones by drilling northeast through the post-mineral hanging wall now makes it easy for Endurance to drill holes into the gap. During the second half of August Endurance will drill the gap. If no mineralization is encountered it will be a head-scratcher and Endurance will move the rig up the hill to test the Eagle Zone at depth. But even if it proves the presence of mineralization in the gap it will move the rig upslope in September to test the Eagle zone whose elevation creates a shorter drill season.

The longitudinal section shows that when Endurance chased the Eagle zone down plunge upslope there was not a lot of joy at depth, but the longitudinal in the August corporate presentation indicates that they think the rake of the plunge is in an area tested only to a 100-150 m depth. One of the things I like about Endurance Gold is that management is very good at creating graphics that help investors understand what the company already knows and what it is chasing. I have assembled two side by side graphics of drill plans and long sections to help investors the game plan this year. The first shows what it looked like at the start of the 2024 drill season and the second shows what has been done so far and what is planned. The stock has inched higher since the update was published on Tuesday, though it is hard to tell if that is due to investors realizing that the rest of the 10,000 m program could be game changing for Reliance or finally starting to respond to gold's refusal to develop a downtrend that crashes it back below $2,000. This year the Bralorne region is so far not threatened by fires, and Endurance Gold has the option to add a second rig, especially if the gap yields a pleasant surprise.

Perpetua Gold Corp has been rising this year because it looks like the perpetual permitting cycle will finally be done at the end of 2024 and the rising gold price is reducing anxiety that cost inflation will render the Stibnite Mine not worth developing when a mining permit is finally issued. To understand this problem I have created a DCF model based on the feasibility study's cost assumptions and created a graphic showing how the NPV and IRR of the project varies at prices ranging from $1,200 to $4,000. In late 2020 when the FS was published it used $1,600 gold as a base case price where the NPV ranged from $914 million at 10% discount rate to #1.2 billion at 5%. But with a CapEx of $1.3 billion the NPV even at 5% did not clear the development hurdle of matching or exceeding CapEx. However, gold at the time was above $1,600 where the NPV would clear the hurdle. At the current price of #2,485 the NPV ranges from $2.4 billion to $3.4 billion and the project is clearly worth developing. At $4,000 gold the NPV range soars to $5.0-$6.8 billion.

Unfortunately, since 2020 there has been considerable inflation and the big question on the minds of investors would be what is the CapEx and operating cost of Stibnite today? Earlier this year the Export-Import Bank gave Perpetua a letter of intent to provide up to $1.8 billion in loans to develop Stibnite if the Final Record of Decision is positive. That figure is 40% higher than the 2020 CapEx so I have escalated the CapEx and operating costs in my DCF model by 40% to see what happens. At the $1,600 base case price the project is, not surprisingly, dead in the water. However, at the current $2,485 gold price the IRR is 34%, well above the 15% hurdle, and the NPV ranges $1.6-$2.4 billion compared to $1.8 billion CapEx which clears the minimum NPV development hurdle. Based on a 100% net interest and 67.9 million fully diluted that translates into a CAD $32-$48 NPV per share price range, well above Friday's close of CAD $11.41. At $4,000 gold the range jumps into the $84-$117 range. Clearly the market is still worried a mining permit will be denied.

So where are we in the perpetual permitting cycle? On January 1, 2024 the United States Forest Service released an updated schedule for the Stibnite project that the USFS expected to publish a FEIS and a Draft Record of Decision in the second quarter of 2024 and a Final Record of Decision in the fourth quarter of 2024. The USFS has recently confirmed that the review of the FEIS is complete and both documents are now being reviewed in Washington DC, but the publication of a FEIS and Draft Record of Decision is now expected in Q3 of 2024 though they still expect a Final Record of Decision in Q4 of 2024. Given how slowly Washington moves, the final ROD will likely arrive at the end of the year. The USFS is under the jurisdiction of the US Department of Agriculture, which is separate from the US Department of Interior whose jurisdictions include the BLM and the US Fish & Wildlife Service. The latter means Secretary of Interior, Deb Haaland, will have a say in approving the Stibnite Mine. The decision to ban a private road to Trilogy's Ambler copper project in Alaska says a lot about what Haaland thinks about mining in America.

The recent Perpetua stock spike is not due to the rising gold price, but rather to a decision by China to add antimony to the graphite, germanium and gallium export bans it introduced last year. Antimony because of its use as a flame retardant and as part of an alloy for bullet casings is also known as a war metal. According to the USGS the United States in 2023 consumed 22,000 tonnes of antimony out of 83,000 tonnes produced globally. That is 27% of global supply of which Global West nations supply 4%. Current US consumption does not include a potential new usage for antimony in the form of innovative energy storage systems. Perpetua's Stibnite project became a pollution disaster during World War II because it was America's primary source of antimony. I always liked the Stitbnite story because not only would its redevelopment as a modern gold mine clean up the legacy mess, but it would provide secure domestic supply of antimony, on average about 35% of current US consumption as a by-product from gold mining at Stibnite. That is not enough to solve America's antimony Global East import vulnerability, but when I visited the project in 2018 when Stephen Quin was still in charge the team talked about a high grade antimony zone outside the pit shell to which in an "emergency" an adit could be driven to underground mine it.

The United States has been aware of its "critical mineral" import vulnerability for some time and through bureaus such as the USGS has been sounding the alarm. It is very obvious in my graphic which shows the percentage of supply for each of about 50 raw materials that need to be extracted which the United States supplies compared to the combined percentage supply by China and Russia. But America has an insane NIMBY mentality and a bizarre myopia about its metal supply import dependency. The thing I object to most about the Biden administration is making Deb Haaland Secretary of the Interior. She is the one behind the message from Washington to its bureaus to slow-peddle all permitting related to mineral extraction. Oddly, Gillian Tett in a recent Financial Times article notes that the United States handed out 758 oil drilling licenses in 2023, double the rate during the Trump administration. The United States is the world's biggest oil producer but seriously lags in the supply of most metals. The Stibnite Mine should have been approved two years ago but has been trapped in a perpetual permitting cycle thanks to American myopia.

I have digitized all the annual supply data for key metals published by the USGS since 1930 which is the basis for my antimony supply evolution chart whose country listing order represents cumulative supply. Until 1985 antimony supply was well diversified but then China came along and ultimately ended up with 85% of global supply thanks to a region where some good deposits were developed. But around 2013 Chinese supply began to decline so that last year it was only 48% of supply. The problem is depletion and China is worried about its own security of supply, and cannot be blamed for creating an export ban, especially given its ambition of displacing the United States from its role of top super-power. Since the start of 2024 the price of antimony has risen to an all-time record just above $9/lb. And guess which nation is in second place with 25% of global supply? Tajikistan, member of the Global East which when the Global West and East conflict turns hot is unlikely to supply the Global West. Russia is currently only 5% of global supply but its share was higher until 2022 when a gold mine with an antimony by-product, similar to the Stibnite situation, prioritized its mining schedule for gold recovery.

Perpetua's 2020 FS is now very stale given cost escalations from adapting to ever more stringent permitting requirements and inflation, but, assuming the ore schedule has not changed, escalating costs 40% still allows the project to clear development hurdles at $2,400 plus gold. The stock is up this past week because the Chinese decision to ban antimony exports should light a fire in Washington DC. The decision by the Export-Import Bank to offer to fund as much as $1.8 billion is all about the antimony by-product, so we know Washington is aware of the antimony supply problem. America's myopic NIMBYism could still lead to a thumbs down decision for Stibnite, but I think that will not be allowed to happen, especially since it will take two years to build the Stibnite Mine while stockpiles are run down. China's antimony export ban has turned Perpetual Permitting Corp and its Stibnite Mine into a poster child for American Myopia.