The Supply Crisis Threatening to Cripple the U.S. Military

 FN Media Group Presents Oilprice.com Market Commentary

LONDON, Dec. 2, 2024 /PRNewswire/ -- The Pentagon just got a painful wake-up call. Its stockpiles of crucial armaments are depleting at a record pace as the war in Ukraine drags on, and its poorly armed allies are even worse off.  Intelligence officers in Germany said that the country has only two days' worth of ammunition in case of a military threat.  Companies mentioned in this release include:  SQM (NYSE: SQM), Centrus Energy Corp. (NYSE:LEU), Barrick Gold Corporation (NYSE:GOLD), Newmont Corporation (NYSE:NEM), Arch Resources, Inc. (NYSE:ARCH).

In March 2024, the European Union allocated 500,000,000 Euros under the Act in Support of Ammunition Production (ASAP) to boost output capacity to 2 million shells annually by the end of 2025. But the Western militaries have a major problem.

This push for new military hardware requires a crucial critical metal called Antimony of which the U.S. produces exactly nothing. And it gets worse… This summer, China curbed exports of Antimony, sending prices soaring by 200% in the course of a few months. But even in this precarious situation, there are a handful of companies from Australia and Canada that are racing to bring online a new stream of antimony supply.

One of them, a Canadian exploration company called Military Metals (MILI.CN; MILIF.QB), spotted this disturbing trend early and started scooping up antimony assets in North America and Europe, eyeing a quickly emerging opportunity to provide the Western world with the ability to defend itself against its enemies without Chinese metals. 

New Sources of Antimony, from Slovakia to Nova Scotia

Critical minerals won the war for the Allies in WWII, precisely because the Allied powers controlled most of the world's minerals at that point in history, according to the Carnegie Endowment for International Peace.

Today, the tables have turned and China controls the lion's share of the world's most critical minerals, including antimony–a key component of national defense.

But Military Metals is fighting back, changing the trend with its newly acquired Antimony assets in Nevada and Nova Scotia, one of the few known sources of antimony in North America.

The company also recently announced that it has purchased one of Europe's largest antimony deposits in Slovakia with a historical resource. In the heart of Central Europe, it's a promising Soviet-era resource with an initial discovery from the 1950s and prior development in the '80s and '90s. It's already seen two phases of exploration, including drilling and adit excavation.

The Slovakian Trojarova asset is one of the European Union's largest Antimony deposits and with a historical resource of over 60,998 tons of Antimony has a in-situ value of $2 billion at today's spot prices and could give Slovakia a chance to become a critical metals hub for Western defense industries.

Compared to its closet peer, Military Metals (MILI.CN; MILIF.QB) appears to be significantly undervalued. Fellow antimony miner Perpetua Resources has only a slightly larger antimony resource of 90,000 tons but has seen its value soar to around $700 million. Perpetua saw a huge rise from $3 a share to $14 a share in the last 6 months.

Meanwhile, Military Metals is valued at only $25 million right now; yet its historical resource of 60,998 tons has an in-situ value of over $2 billion of antimony in the ground.

Across the Atlantic, in Canada, Military Metals is sitting on a recently acquired historical antimony/gold play that ended up being a major boom to the Allies in WWI, and reigns supreme as one of Canada's biggest past producing Antimony mine in the early 1900's. And on October 24^th, 2024, the company pounced on another opportunity to further consolidate this territory by signing an LOI to acquire more claims flanking West Gore.

It's an impressive historical resource, with historical drilling results demonstrating over 7 meters of 10.6 gpt gold and 3.4% antimony.

The move to consolidate territory surrounding West Gore—one of the biggest heroes of WWI—is a strategic move that could tie the junior miner directly to North American defense at a time when prices are skyrocketing.

Everyone's on War Footing, and Antimony is the Driver

When China started tightening the noose first on critical battery metal graphite, then on rare earth elements Germanium and Gallium, and finally on Antimony, Military Metals Corp. banded together to make the metals that China refuses to sell their primary business. This smart, fast-moving investment strategy could, according to Forbes, be the "latest to generate short-term profits of more than 100% on money invested".

Military Metals (MILI.CN; MILIF.QB) CEO Scott Eldridge sees a major antimony supply crunch coming. And antimony prices this year, along with new Chinese restrictions add extra support to that prediction with prices doubling since earlier this year from $12,000 per ton to $38,000.  That's why it's been acquiring past-producing antimony mines on two continents at breakneck speed.

They're eyeing a confluence of events, one of which is a major U.S. and European Army push to boost production of ammunition that relies on antimony.

Artillery shells are the kings of battle, and the king of kings is the 155-millimeter artillery shell. Now, the U.S. Army has set in motion a major push to ramp up production, gearing up for the opening of a new manufacturing facility in Mesquite, Texas. A second facility in Canada has been contracted to produce shells for the U.S. Overall, the U.S. Army is hoping to ramp up production from the current ~40,000 artillery shells per month, to 100,000 by the New Year.

That means they will need to secure a lot more antimony supply, at the same time that China is putting the squeeze on the critical mineral.

Other miners to watch in December are:

SQM (NYSE: SQM) is a Chilean chemical company and a leading global producer of lithium, a critical component in batteries used in a wide range of applications, including electric vehicles, consumer electronics, and increasingly, military technology. Lithium-ion batteries are essential for modern military operations, powering everything from advanced communication systems to unmanned vehicles and drones. SQM's production capacity and access to vast lithium reserves in the Atacama Desert make it a strategically important player in the global lithium supply chain.

A reliable and stable supply of lithium is crucial for nations like the United States, which rely heavily on advanced technology for their defense capabilities. Sourcing lithium from SQM allows countries to reduce their dependence on potentially unstable or adversarial nations for this critical material.

Centrus Energy Corp. (NYSE:LEU)

Centrus Energy Corp. is a key player in the nuclear fuel cycle, specializing in the production of low-enriched uranium (LEU). While LEU is primarily used to fuel nuclear power plants, it also has vital defense applications. Uranium is the essential fuel for the nuclear reactors that power US Navy aircraft carriers and submarines, which are critical for projecting US military power globally and providing a significant strategic advantage. Nuclear propulsion allows for extended operational ranges and reduces logistical challenges associated with refueling, making these vessels ideal for long-duration deployments.

Centrus plays a vital role in ensuring a secure and reliable supply of LEU for both defense and civilian nuclear applications in the Western world. By providing a domestic source of enriched uranium, Centrus reduces reliance on foreign suppliers, which can be subject to geopolitical instability or potential export restrictions.

Barrick Gold Corporation (NYSE:GOLD)

Barrick Gold Corporation is well-known for its dominance in gold production, but it is also a significant player in the copper mining industry. This is a crucial aspect of their operations, as copper is essential for a wide range of defense applications. It is used extensively in electrical wiring for military vehicles and equipment, in the manufacturing of ammunition, and in the production of advanced electronics for communication, guidance, and sensor systems. Copper's high conductivity and durability make it indispensable for these purposes.

Barrick's copper mining operations contribute to a diversified and reliable supply of this critical metal, which is essential for maintaining the technological edge of the US military. As a Western-based company, Barrick's operations are subject to stricter environmental and labor regulations than those in many other copper-producing regions.

Newmont Corporation (NYSE:NEM)

Newmont Corporation is a leading global gold producer with a significant and strategically important presence in the copper mining sector. Copper is essential for a wide range of defense applications, from the wiring in military vehicles and aircraft to the advanced electronics used in communication and weapons guidance systems. Its high conductivity and resistance to corrosion make copper indispensable in these critical applications.

Newmont's copper production contributes to a stable and reliable supply of this critical metal for the US defense industry. Sourcing copper domestically from Newmont reduces reliance on potentially unstable or adversarial nations, ensuring a more secure and ethical supply chain. Newmont adheres to high environmental and social responsibility standards, minimizing environmental impact and respecting the rights of workers and communities.

Arch Resources, Inc. (NYSE:ARCH)

Arch Resources is a major producer of metallurgical coal, a crucial component in the steelmaking process. While the world transitions towards cleaner energy sources, metallurgical coal remains essential for producing high-quality steel used in various defense applications. This includes everything from armored vehicles and naval vessels to critical infrastructure and the machinery used to manufacture weapons systems.

Arch Resources plays a crucial role in ensuring a stable supply of metallurgical coal for the US steel industry, which in turn supports the production of critical defense equipment. The company operates mines in regions with access to abundant coal reserves, ensuring a reliable supply of this essential raw material.

By. Michael Scott

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This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. The forward-looking statements in this publication are based on current expectations and assumptions about future events, geopolitical developments, trade policies, market conditions, the company's strategic initiatives to address the critical shortage of antimony, and current expectations, estimates, and projections about the industry and markets in which the company operates.  Factors that could change or prevent these statements from coming to fruition include, but are not limited to, the potential impact of the upcoming U.S. elections on various industries and specific companies, changes in government policies, market conditions, regulatory developments, geopolitical events and the company's ability to successfully acquire and develop new antimony resources and fluctuations in antimony prices. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.

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