Chalice Mining (ASX: CHN) is set for good things at Julimar, but still has these 3 things to do

Chalice Mining (ASX: CHN) has been the exploration story of the decade. All of the hundreds of explorers on the ASX dream of stumbling across a monster deposit that can become a major mine. That’s just what has happened to Chalice Mining. Since March 2020 it has re-rated from 20 cents to over $9, its all-time-high, as it came across Julimar.  

From its all-time high, the stock has more than halved, but got a boost last week when it increased an Updated Mineral Resource Estimate. But where to next for the company and its share price? 

 

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Who is Chalice Mining?  

Chalice Mining is an ASX-listed resources company that listed in 2006 and was named after the gold project it held at the time. Before it discovered Julimar, Chalice Mining was a project incubator – it would discover and develop projects with the aim of selling them to a buyer, rather than developing the deposit into a major mine.  

Until late March 2020, Julimar was just one of Chalice Mining’s deposits and a relative afterthought in its portfolio. But everything has changed for the company since its discovery. Most particularly its share price, but also its objectives. It has spun off its other assets and focused single-handedly on Julimar.  

The first drill holes stunned the market, being in an area that had never been prospected for palladium metals or nickel before and being located barely an hour’s drive from Perth. But since then, it has discovered more and more at Julimar, and even now has just scratched the surface. 

 

And what is Julimar?  

Julimar is the first platinum group metals discovery in Australia’s history, promising to supply metals for the clean energy transition and lying less than an hour’s drive from Perth. Chalice Mining’s success has come from a ~2km section of the project, called Gonneville, where it has derived virtually all of its success from to date.  

 

Only 2% of the entire project drilled so far! 

Remember, Julimar is >30km and the company has identified at least five other targets beyond Gonneville. It has identified anomalies, but has only commenced drilling at two such targets. Chalice Mining directors told shareholders at last week’s investor webinar it has drilled just 2% of the entire project! 

 

Gonneville more than good enough for Chalice Mining 

The most recent Indicated and Inferred JORC resource for Gonneville is 350Mt @ 0.96g/t 3E (palladium, platinum and gold), 0.16% nickel, 0.10% copper, 0.015% cobalt.  

The grades may not seem high at first glance, but the deposit contains 11 million ounces of 3E, 560kt of nickel, 360kt of copper and 54kt of cobalt. As of early July 2022, ~90% of the resource above a depth of 250m is now classified as indicated.  

Even if this resource was all Julimar had, it would support a standalone mine. But Chalice Mining doesn’t know the full extent yet, even at Gonneville, with exploration continuing. And of course, there’s still more work to do beyond exploration.  

 

What’s on Chalice Mining’s to do list? 

Putting exploration activity to one side, there are three things Chalice Mining is looking at. First, how it will process the ultimate materials, whether through flotation or enrichment.  

Second, to complete a current scoping study and advance towards a pre-feasibility study. Chalice Mining hopes to complete this step by the end of 2022 and it will give the company a clear idea of the economic potential and the costs of funding it. Chalice Mining completed a $100m capital raising in May and told shareholders at last week’s investor webinar that it would be enough for 18 months, but it will have to seek more funding when this project enters production.   

Third, to commence major regulatory approvals processes, putting a formal mine proposal to regulators. This has been a major headache for the company and arguably part of the reason for its decline in recent months.  

You see, Julimar lies in a State Forest and local residents have tried to block approvals for drilling. While they have been unsuccessful for now, one can imagine it’ll be more difficult when it submits proposals for an operational mine. 

 

Will Chalice go at it alone? 

At this stage, it appears Chalice Mining is intent on seeing this project through to its final development. But, considering the project’s potential and likely importance considering the need for EVs and for the West to diversify its palladium supply chains from Russia, we would not be surprised to see a major miner make a bid for it.  

Still, we wouldn’t see Chalice Mining develop it alone or form a joint venture partnership, but a lot will be told once we see its Pre-Feasibility Study.  

 

Is Chalice Mining a buy right now? 

We think investors who haven’t bought into Chalice Mining already should wait until its Scoping and Pre-Feasibility Studies, which are due by this year’s end – in Q3 and Q4 respectively. This will give us a firmer idea of Gonneville’s economic potential and the costs to bring it to production.  

There might be some share price upside from further drilling results across the broader Julimar complex – there are currently 90 holes with assays pending. But investors shouldn’t get carried away and lose sight of Gonneville, which, no matter what else it finds at Julimar, will be this company’s maker.  

 

 

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Chalice Mining Frequently Asked Questions

• Is Chalice Mining an Australian company?

  Yes, it is Australian owned and its flagship Julimar project is in Australia. 

• Is Chalice Mining ethical?

  This question is up to individual investors, but ESG investors would be unlikely to favour Chalice just because it is a resources company. But there could be arguments made in its favour; most particularly that the minerals at Julimar will help in the process of decarbonisation. 

• Is Chalice Mining a good investment?

  For shareholders willing to sit back and wait until Julimar reaches full production, we think it is.  

• Does Chalice Mining pay dividends?

  No, and we think it is unlikely to until Julimar reaches production.