CHN chart, page-8546

Strategic MOU with Mitsubishi Corporation
CHN has entered into a non-binding Memorandum of Understanding (MOU) with
Mitsubishi Corporation to collaborate during the ongoing Gonneville Pre-Feasibility
Study (PFS) on CHN’s 100%-owned Gonneville PGE-Ni-Cu-Co Project in WA. The
intention is to form a potential strategic partnership to develop Gonneville Project. The
MOU covers technical, financing, marketing and offtake aspects of the Project during
the PFS. Upon completion of the PFS, targeted for mid-CY25, CHN and Mitsubishi will
aim to negotiate, within 90 days, a potential binding partnership contemplating a joint
arrangement and investment in the Gonneville Project. The MOU is non-exclusive and
does not restrict CHN from entering into any other transactions involving Gonneville.
Highly credible partner, deep skill-set
We view this as a strong endorsement of the Gonneville Project. Mitsubishi is one of
Japan’s largest industrial conglomerates and includes a Mineral Resources Group with
long-term interests in global Tier-1 mining projects across the commodity spectrum,
holding large exposures to coal, copper, lithium and nickel assets. It was a foundation
shareholder in the Escondida Copper Mine, discovered in the early 1990’s (remaining
a shareholder today) and its consistent participation in the Australian coal industry
dates from 1968. It also includes a Singapore-based trading arm, which is a key
participant in global metals and concentrate markets, including intermediate metal
products and PGEs. This has potential to be a material value-add to the development
of the process flow sheet and product mix from Gonneville. Mitsubishi has also worked
closely to facilitate low-cost funding for its joint venture projects.
Complementary value-add opportunities
The MOU is consistent with Gonneville being one of the largest undeveloped nickel
sulphide PGE Resources globally and its suite of metals all included on Japan’s
Critical Minerals list. We see opportunities for CHN to leverage Mitsubishi’s access to
markets in assessing the most capital efficient and highest returning product mix - a
key driver of project scale. Mitsubishi’s 12-month due diligence period has led to an
alignment on, and validation of, CHN’s staged development plan for a small-scale,
high grade starter project for Gonneville. We expect Mitsubishi’s access to capital,
including connections to the Japanese Government, and its historic involvement in the
development of large scale Resources projects to be advantageous to CHN.
Investment thesis – Speculative Buy, Valuation $5.15/sh
This update is consistent with CHN’s objective of securing a strategic partner by the
end-FY24 to assist in development of Gonneville. While no valuation-based
transaction or cash investment has been made, CHN held $107m cash at end March
and remains fully funded to complete the PFS by mid-2025 and lay out a clear case for
the project’s value ahead of any potential transaction. As a result of the endorsement
and potential project development support of Mitsubishi, we lower the risk-adjustment
discount we apply to our NPV-based Gonneville valuation. This lifts our valuation by
3%, to $5.15/sh and we retain our Speculative Buy recommendation.