The ASX 200 stocks hit with the biggest broker downgrades last week: Chalice Mining, Alumina

Chalice Mining (ASX: CHN) shares heavily track the performance of palladium as its Gonneville Project anticipates approximately 55% of revenues to come from palladium production.

So what happens when palladium prices dip to five year lows of US$927 an ounce?

The Biggest Broker Downgrades

'Target price' is an aggregate of Refinitiv broker target prices. % Dif compares target prices between 1 and 8 December 2023

Palladium prices have been in a downward spiral since March 2022, down 47% year-to-date and down 50% in the past twelve months.

Palladium price chart (Source: TradingView)

What's interesting is that Chalice's Gonneville scoping study assumed palladium prices of US$2,000 an ounce to derive at a post-tax net present value between $2.8 billion and $4.2 billion. The current spot price environment would assume a substantial discount to those study assumptions.

Chalice Managing Director Alex Dorsch said in August: "There is about seven plus years until we are actually producing any metal, so we are not talking about producing in the current commodity price environment, nor have we designed our operation in the current spot price, commodity price environment," the Australian Financial Review reported. But this also assumes that palladium can recover from the downward spiral and double from current levels.