April 8 (Reuters) – Perpetua Resources (PPTA.O) has received a letter of interest from the U.S. Export-Import Bank (EXIM) for a loan worth up to $1.8 billion to develop an antimony and gold mine in northern Idaho, part of Washington’s evolving strategy to offset China’s critical minerals sector dominance.

The loan, if approved, would be one of Washington’s largest investments ever in a mine and reflect the Biden administration’s growing comfort using the federal government’s balance sheet to fund extractive projects at terms more favorable than those available with private lenders, a practice that Beijing has deployed for years.

Perpetua said EXIM, which acts as the U.S. government’s export credit agency, has told the company that it qualifies for two loan programs designed to support those that compete with China.

The loan would have a 15-year repayment term, far longer than likely with private financing. The interest rate would be set at closing, although EXIM has told Perpetua it qualifies for “flexibility” on the rate given the mine’s Chinese competitors.

Perpetua would have to arrange a separate equity funding component, likely either through issuing stock or a royalty.

The letter of interest indicates that Perpetua – which counts hedge fund manager John Paulson as its largest shareholder – has cleared the initial loan requirements to start the formal application process, which is expected to take 12 months. The letter also allows Perpetua to start negotiations with equipment suppliers.

The Pentagon has already committed nearly $60 million to fund permitting for the mine, known as Stibnite, which would entail cleaning and expanding a site that was polluted by World War Two-era mining.

“This loan is a big piece of our financing puzzle,” said Jon Cherry, who became Perpetua’s CEO last month. “It provides a lot of certainty to move this project forward.”

In response to a request for comment from Reuters, EXIM said: “Letters of interest are nonbinding statements that indicate that EXIM is open for business in the market identified and is willing to consider financing for a given export transaction should an application be submitted.”

COMPETING WITH CHINA

Located 150 miles (241 km) north of the state capital of Boise, Stibnite contains roughly 189 million pounds of antimony, a metal used as a hardening agent for bullets and tanks, as well as in flame retardants and alloys for electric vehicle batteries. China is the world’s largest antimony producer, with nearly 50% market share. Stibnite would be the only American source of the key metal.

The deposit also contains an estimated 6 million ounces of gold, most of which would be exported to international refineries and thus meeting a key requirement for EXIM financing. While gold is not a critical mineral, its production is seen as helping to financially buttress the mine’s antimony production and ensure a domestic supply of the metal for the Pentagon.

Concerns have grown that China could try to harm the Perpetua mine’s prospects by ramping up its own production of antimony in a bid to gain global market share, something Chinese-linked producers of nickel, cobalt and other critical minerals have systematically done in recent years.

The $1.8 billion loan figure is based on an EXIM formula tied to the number of construction, operation and reclamation jobs at the mine. The project was forecast in 2020 to cost $1.3 billion, a number expected to rise due to post-pandemic inflation.

The backing for Perpetua comes just weeks after the U.S. Department of Energy (DOE) said it would lend Lithium Americas (LAC.TO) up to $2.26 billion to build Nevada’s Thacker Pass lithium project, which will supply General Motors (GM.N).

DOE rules require the use of union labor and do not allow the funds to be used to dig a mine itself, although processing facilities do qualify. The EXIM financing rules do not have the same restrictions on labor and will allow Perpetua to dig a mine pit.

The Stibnite project has not yet won the support of Idaho’s Nez Perce tribe, which is concerned the mine could affect the state’s salmon population. The company and the tribe, however, have started discussing water restoration projects.

In addition to the potential loan for Perpetua, EXIM has announced letters of interest with Australian Strategic Materials (ASM.AX) for a rare earths project, as well as to niobium miner NioCorp (NB.O) and titanium recycler IperionX (IPX.AX).