The ASX 200 stocks attracting the biggest broker upgrades: Chalice and Champion Iron

Chalice Mining (ASX: CHN) shares experienced the largest week-on-week rise in consensus target prices among ASX 200 companies last week. The optimism has been fueled by a recent 11% bounce in palladium prices, which hit a 5-year low earlier this month.

Chalice says its Julimar Project's Gonneville Deposit is the country's largest PGE (platinum group elements) discovery in history. Its annual modelled metal production could enable the manufacturing of approximately 330,000 EVs per annum. But the economics have been less than stellar.

The stock is down around 70% since August 29 after its long-awaited scoping study for Gonneville assumed palladium prices of US$2,000 an ounce. For context, the project will produce several battery metals including nickel, copper and cobalt. However, palladium will make up approximately 55% of revenues.

On November 10, palladium spot prices hit a five-year low of US$951 an ounce.

Chalice Mining (blue) and Palladium prices (green) (Source: TradingView)

Macquarie and Bell Potter have maintained their Outperform and Buy ratings on Chalice, respectively, while most other brokers remain significantly less optimistic. Interestingly, Chalice raised $100 million in May 2022, with Macquarie and Bell Potter acting as joint lead managers for the placement.

The Biggest Broker Upgrades

'Target price' is an aggregate of Refinitiv broker target prices. % Dif compares target prices between 17 and 24 November 2023.

Shares in Champion Iron (ASX: CIA) have rallied around 25% since late October, in parallel with the ~20% rally in iron ore prices.

Champion Iron operates the Bloom Lake mine in Canada, which is one of the highest-grade iron ore deposits in the world. Its average iron ore content is around 66% whereas most iron ore majors like Fortescue and BHP average around 57-59%.

The company is progressing a Direct Reduction Pellet Feed study, which seeks to produce 7.5 million tonnes per annum of high quality iron ore products. The Direct Reduction is a more energy-efficient and environmentally friendly process than the traditional blast furnace process.

Champion Iron shares have surged to previous peaks in February 2023, April 2022 and August 2021. While the stock has rallied into overbought territory, analysts remain upbeat and continue to nudge their share price targets higher. At such inflection point, is the stock set for a multi-year breakout or will it remain rangebound?

Champion Iron five-year chart (Source: Market Index)