Trade tensions between China and the United States just keep ratcheting higher.
In the latest tit-for-tat move, China’s commerce ministry on Dec. 3 said it would not permit the export of dual-use - military and civilian - items related to gallium, germanium, antimony and super-hard materials to the U.S. It’s also implementing stricter controls for graphite-related items.
This move came after the U.S. government escalated technology curbs on China’s semiconductor sector - the third crackdown in three years. The latest restriction involved limits on the sale of high-bandwidth memory chips to China.
A commerce ministry directive on dual-use items cited Chinese national security concerns. The order takes effect immediately. These curbs strengthen enforcement of the existing limits on exports of the critical minerals that China began rolling out last year that apply only to the U.S. market.
The Effects of This Trade War Ramp Up
Wall Street has a tendency to often ignore news related to commodities, in this case believing there are lots of these minerals in inventory. However, inventories eventually dry up. So the longer-term effects of the Chinese ban on these minerals to the U.S. will be substantial.
Gallium and germanium are used in semiconductors, while germanium is also used in infrared technology, fiber optic cables, and solar cells. So far this year, China accounted for 59.2% of refined germanium output and 98.8% of refined gallium production, according to the critical minerals consultancy Project Blue.
In addition, China accounted last year for 48% of globally mined antimony, which is used in ammunition, infrared missiles, nuclear weapons and night-vision goggles, as well as in batteries and photovoltaic equipment.
An export ban on gallium and germanium would deliver a $3.4 billion hit to the U.S. economy, the U.S. Geological Survey (USGS) said in a report last month. China’s curbs on shipments of germanium and gallium have already led to an almost twofold increase in the minerals’ prices.
Let’s narrow our focus to just antimony. Prices of antimony trioxide in Rotterdam soared by 228% since the beginning of the year to $39,000 a metric ton on Nov. 28, according to data from information provider Argus.
Antimony History
Despite having significant reserves of stibnite (the major ore mineral for antimony), the U.S. depends on other countries, primarily China, for more than 80% of its supply of this critical mineral. Due to America’s heavy reliance on imports, coupled with antimony’s traditional and emerging applications, the USGS recently ranked stibnite as the No. 10 most critical mineral to the U.S. when it comes to supply risk.
Many of North America’s richest gold (GCG25) districts host healthy amounts of antimony, but the latter is often discarded in favor of the more valuable precious metal. This dynamic, however, reversed at gold mines in Idaho and Alaska when antimony’s strategic value increased during the World Wars.
During WWII, antimony was a true hero. It’s a critical element in the production not only of fire-retardant military uniforms and tents, but also in the mass production of many means of modern warfare, from bullets and artillery shells to night vision goggles, nuclear weapons, and anti-tank missiles.
During the Second World War, when the U.S. faced a crisis because it didn’t have sufficient antimony of its own, it launched the development of the Stibnite Mine in Idaho.
From 1941 to 1945, the Stibnite Mine produced more antimony and tungsten than any other mine in the U.S. – accounting for 90% of the antimony and 40% of the tungsten produced during this wartime effort.
This Idaho mine has been credited for saving millions of lives and helping to bring World War II to an end. “In the opinion of the munitions board, the discovery of that tungsten at stibnite, Idaho, in 1942 shortened World War II by at least 1 year and saved the lives of a million American soldiers,” according to the March 7, 1956 U.S. Senate Congressional Record.
A friend of mine in the military once told me that antimony is the metal that wins wars. The Chinese ban could throw sand into the gears of the U.S. military machine.
Buy Perpetua Resources Stock
Export bans on critical minerals from China have been in the queue for a while now and are intended as a warning. It’s a clear signal that China is preparing to strike back more forcefully against U.S. economic pressure than it has in the past few years.
Despite its wide number of uses, there are still no mines producing antimony in the U.S.
Soon, everyone will be digging in their backyard to find antimony. But there’s no need to - you can find it on the Nasdaq, trading via Perpetua Resources (PPTA).
Located within the abandoned Stibnite Mining District, Perpetua Resources' Stibnite Gold Project is one of the largest economic reserves of antimony not controlled by China. Here are some of the details on the project…
In April, the company received a letter of interest from the U.S. Export-Import Bank for a loan up to $1.8 billion. The monies will be used to develop its antimony and gold mine in Idaho.
In addition, antimony is so important to national defense that the U.S. Department of Defense committed nearly $60 million to fund the mine’s permitting process, which has lasted eight years already, to boost domestic production.
The company is totally rehabilitating the site, including environmentally, at a cost of a billion dollars. World War II activity there did a lot of environmental damage. The Stibnite Gold Project would be the fourth-largest U.S. gold operation by grade, and likely produce between 4 million and 5 million ounces of gold. As the only domestic source of mined antimony, the project is expected to produce about 115 million pounds, while the U.S. uses roughly 56.7 million pounds of antimony each year - much of which comes from China.
Perpetua had initially planned to begin production by 2028, should it obtain final permits. But China's moves means the company is studying ways to produce antimony faster.
I have recommended PPTA in the past at $6.83 and $8.64. I still recommend it at current prices, around $10.00.
