From Resource Rising Stars (Barry Fitzgerald)Chalice:It could be...

From Resource Rising Stars (Barry Fitzgerald)

Chalice:

It could be thought that an 18% increase in the global resource at Chalice’s Gonneville deposit to 660Mt containing 17 million ounces of 3E metals (palladium, platinum and gold), 960,000t of nickel, 540,000t of copper, and 96,000t of cobalt would be a cause for celebration.

Not for Chalice. Its shares took a 10% hit in Wednesday’s market, falling 13c to $1.15.

The market has soured on Gonneville ever since it became clear its development as a large-scale, bulk tonnage operation would require currently heroic palladium price assumptions to be met.

Those assumptions might well be met in time given the queries over long-term supplies from the world’s biggest suppliers, Russia and South Africa.

But it was best for Chalice to go off and rework development plans, most notably start planning a selective open pit/underground mining operation based on higher grade portions of the orebody.

The smaller starter operation could, given the right commodity prices, be followed by a future bulk mining opportunity. So there is a sensible progression strategy now being pursued, with Wednesday’s update also including a revised higher grade resource of 59Mt containing 3.8M oz of 3E metals, 120,000t of nickel,120,000t of copper and 11,000t of cobalt.

Even in that reduced but higher grade form, Gonneville still represents one of the biggest undeveloped metals projects in Australia, or any other top notch mining destination for that matter.

Maybe that should have been a cause for celebration in Chalice’s update.

Argonaut’s head of research Hayden Bairstow seems to think that should have been the case. He has got a $2.40 price target on the stock.

“Our price target is derived from a 50/50 blend of NPV using Argonaut’s commodity price outlook and at current spot prices. Progressing the scoping study on the smaller scale project presents a key near-term catalyst for Chalice,” Bairstow said.

“The pre-feasibility study on the larger scale project is also progressing. The regional exploration potential within the Julimar State Forest remains strong and ongoing drilling could present positive catalysts through discovery.”