Materials

Chalice eyeballs well-funded, technically strong JV partner to help develop flagship asset, Julimar

By Market Index
Wed 19 Oct 22, 4:31pm (AEST)
Chalice
Source: Unsplash

Key Points

  • Chalice recently made an important breakthrough at the previously elusive northern extension
  • Chalice released a positive update on its Julimar Nickel-Copper-Platinum Group Element (PGE) Project
  • Discussions with potential partners are preliminary in nature

Having traded as high as $4.45 today (9% higher), Chalice Mining’s (ASX: CHN) share price was up around 5% heading into the close after the large-cap mineral exploration company released a positive update on its Julimar Nickel-Copper-Platinum Group Element (PGE) Project, located 70km north-east of Perth in WA.

Positive drilling results confirmed the interpreted northern extension of the Gonneville Intrusion deposit offset around 650m west-north-west by a fault, which management notes explained recent disappointing drilling results at its Hartog prospect.

Exploration activities are continuing across the 30km-plus long Julimar Complex, with four diamond drill rigs currently drilling across the 10km long Hartog-Baudin strike length.

Then there are two rigs continuing resource definition drilling at the Gonneville PGE-Ni-Cu-Co-Au Deposit.

Drilling further north

Chalice recently made an important breakthrough in exploration at the project, with the previously elusive northern extension of the Gonneville Intrusion interpreted at depth in an effective 2D seismic survey.

Drilling further north has now confirmed the Gonneville Resource, discovered in early 2020 on Chalice-owned farmland, is just a small part of the Julimar Complex.

“The complex is a very large mineralised system, which Chalice believes is capable of hosting multiple discrete Ni-Cu-PGE deposits, as evidenced by multiple sulphide drill intersections in wide-spaced drilling to date over 10km of strike length,” the company notes.

Possible JV partner

Given the considerable scale of the [Julimer] project, Chalice Mining also advised investors that it is considering selling a minority stake in Julimar to a partner with the technical expertise, market familiarity and financial strength.

Management also reminded the market that several large international trading houses, downstream battery and auto manufacturers have already registered significant interest in its flagship asset - Julimar’s large nickel sulphide endowment - following the passing of the Inflation Reduction Act (IRA) in the US.

While discussions with potential partners are preliminary in nature, it’s worth noting that the IRA offers incentives for US manufacturers to source materials specifically from trusted international partners with Free Trade Agreement status, like Australia.

What brokers think

Meantime, the company is focused on delivering the Scoping Study for a Gonneville mine development in late 2022.

While the last 12 months have not been kind to the Chalice share price, down -36%, the stock’s fortunes initially soared early 2020 after revealing a major polymetallic discovery at Julimar.

This discovery was followed by a maiden resource for the deposit late last year, which management regarded as the biggest nickel sulphide discovery in 20 years and the biggest platinum-group-elements find in Australian history.

Consensus on Chalice is Strong Buy.

Based on Morningstar’s fair value of $6.66 the stock appears to be undervalued.

Based on the two brokers that cover Chalice (as reported on by FN Arena) the stock is currently trading with 68.3% upside to the target price of $7.00.

After undertaking a mark-to-market review of September-quarter commodity prices, Ord Minnett lowers its target price on Chalice to $6.50 from $7.00 but retains a Buy rating. (04/10/22).

With a $129.6m cash position and free cash flow of $65.3m at FY22, Macquarie believes Chalice is well funded for exploration and pre-development activities and retains an Outperform rating and $7.50 price target. (30/09/22).

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Chalice Mining share price over one year.

 

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