CHN - Chalice Mining

[Dona Ferentes]

CHN will be interesting again when it has a 4 in front of it..

Would you accept a 6?

YTD;

 

[Sean K]

Would you accept a 6?

YTD;

View attachment 160418

Long term 6 is probably OK. MC now around $2.3b. SS out next quarter will put a NPV on an open pit concept mine. Could be a pretty big number. It's going to be a frightening capex. Not sure if it's a multibagger from here. Maybe 2X if there's a bidding war.

 

[Sean K]

Watched the preso today at D&D, on line. It's a good story, but apparently the major majors aren't interested.

Alex speaks well.

His choice of boot colour and style is questionable.

I have a sneaking feeling that capex and payback under current conditions is turning heads, blair like.

Top Australian miners Rio Tinto and South32, along with Anglo American are understood to have moved on from Chalice Mining ahead of the deadline for first round bids in the coming weeks.

Indicative offers were initially due on August 21 but will now be received on September 11 in a sale process set to conclude around the end of the year at the earliest.

Sources say that the focus for the $2.2bn Australian listed Chalice will be gaining investment from a battery manufacturer or electric vehicle manufacture to offer tactical opportunities for the company downstream.

Operators could provide the expertise and capital, but would not be as strategic for Chalice.

One of the deterrents for operators to pay a knock out price, say market observers, is that Chalice has somewhat of a grab bag of assets and is yet to gain access to state land.

 

[Sean K]

That news on 9 Aug that some of the majors have had a look and said no thanks has not been good for CHN. I think some people might have been thinking this would end up in a bidding war as opposed to a walk off, including me.

What's wrong with it other than it's huge and complicated? WA heritage laws seemed to have been squashed. Maybe a Voice is whispering 'this is a bloody big risk'.

 

[Sean K]

Yikes!

I thought the capex would be around this but the NPV to be a bit bigger.

2 year payback.

 

[finicky]

My reaction to the delayed scoping study is one of heavy gloom.
The smaller 15mtpa option is given a $2.8 Billion npv when the company is already market capped at $2 Billion. Sure all sorts of enticements beyond the presently known Gonneville are stalely harped upon but how many will countenance hanging around for years to see if they eventuate? Just the wait for a plant build and commission and its many uncertainties are far beyond the patience of most. There's no frisson in the announcement, no positive surprise that will keep speculative investors attached - all just imo. I've relied too much on hope with this stock, nonetheless my remaining one is a financial white knight to ride in before too much damage is done. I reserve my option to sell.
Chartwise the break of the 5.50 support level is ominous I feel.

Held

 

[Dona Ferentes]

My reaction to the delayed scoping study is one of heavy gloom.
The smaller 15mtpa option is given a $2.8 Billion npv when the company is already market capped at $2 Billion. Sure all sorts of enticements beyond the presently known Gonneville are stalely harped upon but how many will countenance hanging around for years to see if they eventuate? Just the wait for a plant build and commission and its many uncertainties are far beyond the patience of most. There's no frisson in the announcement, no positive surprise that will keep speculative investors attached - all just imo. I've relied too much on hope with this stock, nonetheless my remaining one is a financial white knight to ride in before too much damage is done. I reserve my option to sell.
Chartwise the break of the 5.50 support level is ominous I feel.

Held

belted .. down 27 per cent today

Release of the study after the close of trading on Tuesday triggered a massive sell down of Chalice shares when trading commenced on Wednesday.

Investors looked past the promise of a two-year payback on a mine costing between $1.6 billion and $2.3 billion to instead focus on lower than expected production of nickel.

Some investors were also concerned that Chalice had based its economic forecasts on commodity prices well above current prices..

Palladium is expected to provide about 55 per cent of revenue from the mine, and Chalice’s study assumed the metal would fetch $US2000 an ounce over the life of the mine. Palladium was fetching $US1218 an ounce on Wednesday, with the price down 30 per cent since 01 January.

Chalice’s study assumed nickel - the metal that would provide 24 per cent of revenue from the mine - would fetch $US24,000 a tonne over the life of the mine; the current price is just below $US21,000 a tonne.

The study assumed copper would fetch $US11,000 a tonne during the mine’s life, rather than the $US8300 a tonne on offer this week.

 

[peter2]

Plus, CHN isn't going to make a final investment decision until 2026 (!) delaying any production to 2029 at the earliest.
Why would anyone still be holding?

 

[Miner]

Plus, CHN isn't going to make a final investment decision until 2026 (!) delaying any production to 2029 at the earliest.
Why would anyone still be holding?

I agree and so was market . CHN did lot of funfare creating expectations but could not (and would not IMO) deliver.
@Sean K - my perception few others eg CTM when they spell out the status of environmental approval and reality on DFS progress.

 

[Sean K]

Looking forward to seeing a capex. This flowsheet looks like $2b to me...

My fine tuned desktop capex estimation came out at 'humungous' - way out of CHN's league

Looks like you were closer @finicky

 

[Sean K]

I agree and so was market . CHN did lot of funfare creating expectations but could not (and would not IMO) deliver.
@Sean K - my perception few others eg CTM when they spell out the status of environmental approval and reality on DFS progress.

No wonder the big players who had a look in the data room and sneak peak of the DFS turned their noses up. Only BHP, RIO or Glencore could probably manage this.

Dona's post above noting the assumed metal prices in the financial model are ridiculous.

Fingers crossed CTM doesn't do a CHN. The capex from the SS was under $300m but it's a very different looking project now. Will double at least I reckon. They tell us ESG is 'all good', but who knows. Hard to trust anything these explorers/developers tell us.

 

[finicky]

Like nowhere else​

Despite the sell-off, PGE expert Keith Goode, a well known Australian resources expert and geologist who runs analysis firm Eagle Research Advisory, said Julimar still boasts palladium numbers in its deep drilling that “don’t exist anywhere else”.

He’s a strong advocate for the idea that Gonneville’s best development prospect is underground, where Chalice could selectively mine higher grade portions of its 1.9km long, 800m deep resource.

“They’ll definitely go underground,” he suggested.

“I’ve seen some of that drill core on the underground and you’ve got grades that are like 40g/t of palladium out there, those kind of numbers don’t exist anywhere outside of WA.

“I’ve never seen those kind of numbers ever, in any other PGE orebody in the world.”

He said the 23% sell-off yesterday was a “kneejerk reaction”, with the $1.6-2.3 billion capex bill hardly unusual for a project of its size and processing method in WA.

Goode said De Grey Mining’s (ASXEG) Hemi gold project could come back with similar capex numbers, given its scale and the fact it is looking also at using pressure oxidation autoclaves to process sulphide rich resources.

Liontown’s (ASX:LTR) Kathleen Valley lithium mine and Lynas’ (ASX:LYC) Kalgoorlie rare earths cracking and leaching plant are also creeping towards the $1b mark in terms of capex.

First stab​

In Goode’s opinion, Gonneville would be better developed conventionally like South African PGE projects, where higher grade sulphide ore is first sold to a third party smelter to generate income before constructing a smelter and eventually a refinery with the cash flows over time.

That would leverage what he says is a province scale opportunity at Julimar.

Currently Gonneville, which has high grade intercepts reported beneath the 800m base of its 560Mt resource, covers just 7% of the Julimar Complex, a 26km long structure which extends beneath the Julimar State Forest.

Beyond that is hundreds of kilometres of relatively unexplored territory on the western edge of the Yilgarn Craton, a geological structure thought to be barren relative to the historic gold, lithium and nickel rich Eastern Goldfields on the other side of the massive domain.

He described the study as a ‘first stab’, with the project’s scope likely to change especially after Chalice completes is strategic partnering process for Julimar.

“It’s just a scoping study, it’s not your final design route,” Goode said.

“So basically, you’ve got to do the PFS which really starts to hone down which way you’re going to go.

“Are you going to go the Hydromet route, or are you going to go conventional?”

 

[Sean K]

Like nowhere else​

Despite the sell-off, PGE expert Keith Goode, a well known Australian resources expert and geologist who runs analysis firm Eagle Research Advisory, said Julimar still boasts palladium numbers in its deep drilling that “don’t exist anywhere else”.

He’s a strong advocate for the idea that Gonneville’s best development prospect is underground, where Chalice could selectively mine higher grade portions of its 1.9km long, 800m deep resource.

“They’ll definitely go underground,” he suggested.

“I’ve seen some of that drill core on the underground and you’ve got grades that are like 40g/t of palladium out there, those kind of numbers don’t exist anywhere outside of WA.

“I’ve never seen those kind of numbers ever, in any other PGE orebody in the world.”

He said the 23% sell-off yesterday was a “kneejerk reaction”, with the $1.6-2.3 billion capex bill hardly unusual for a project of its size and processing method in WA.

Goode said De Grey Mining’s (ASXEG) Hemi gold project could come back with similar capex numbers, given its scale and the fact it is looking also at using pressure oxidation autoclaves to process sulphide rich resources.

Liontown’s (ASX:LTR) Kathleen Valley lithium mine and Lynas’ (ASX:LYC) Kalgoorlie rare earths cracking and leaching plant are also creeping towards the $1b mark in terms of capex.

First stab​

In Goode’s opinion, Gonneville would be better developed conventionally like South African PGE projects, where higher grade sulphide ore is first sold to a third party smelter to generate income before constructing a smelter and eventually a refinery with the cash flows over time.

That would leverage what he says is a province scale opportunity at Julimar.

Currently Gonneville, which has high grade intercepts reported beneath the 800m base of its 560Mt resource, covers just 7% of the Julimar Complex, a 26km long structure which extends beneath the Julimar State Forest.

Beyond that is hundreds of kilometres of relatively unexplored territory on the western edge of the Yilgarn Craton, a geological structure thought to be barren relative to the historic gold, lithium and nickel rich Eastern Goldfields on the other side of the massive domain.

He described the study as a ‘first stab’, with the project’s scope likely to change especially after Chalice completes is strategic partnering process for Julimar.

“It’s just a scoping study, it’s not your final design route,” Goode said.

“So basically, you’ve got to do the PFS which really starts to hone down which way you’re going to go.

“Are you going to go the Hydromet route, or are you going to go conventional?”

I thought there'd be a dead cat today but it's gone a bit lower. Could be a short term trading opportunity as it may be an overreaction. Not sure why people are so surprised with the capex, your desktop got it right.

I wonder why they didn't do more work on the underground phase of the mine. It's obviously going underground at some stage and they have quite a bit of it in indicated already don't they?

If they had have added a chunk of that in as UG phase it could have made the economics look decidedly better especially LOM. Maybe it'd be too much of a pluck to add it in with any fidelity and confidence at this stage.

I think we'll see the same reaction when DEG put their capex out.

 

[Sean K]

Geesh, the market is really saying something here. Maybe not oversold the past 2 days. Is this going to do an ASM?

 

[finicky]

I capitulated. Sold at market: 40,000 @ 3.13

Not Held

 

[Sean K]

I capitulated. Sold at market: 40,000 @ 3.13

Not Held

I've taken a short term gamble that your capitulation was a general market capitulation and those that wanted or needed to be out, are out. So, I've put a few coins on 13 black to see if there's a dead cat next week.

I thought you had taken just about all of your profits on this finicky. You must have had quite a holding.

 

[finicky]

Started off with 120,000 @ 0.142
Sold 20,000 @ 1.50 and 60,000 @ varying prices, leaving 40,000 that I hoped to hold to some sort of fruition.
Lost faith in the company and M.D after the admissions in the scoping study and I cracked psychologically in the third day of price descent. Could easily reflect capitulation point for other holders too.

 

[Sean K]

Started off with 120,000 @ 0.142
Sold 20,000 @ 1.50 and 60,000 @ varying prices, leaving 40,000 that I hoped to hold to some sort of fruition.
Lost faith in the company and M.D after the admissions in the scoping study and I cracked psychologically in the third day of price descent. Could easily reflect capitulation point for other holders too.

OK, so it's still your shout.

 

[finicky]

OK, so it's still your shout.

The beer would be flat to match my mood.

 

[Dona Ferentes]

bounce not bounce. kspkat.