Ann: Gonneville Resource Increases By Approx. 50% to 3Mt NiEq, page-209

Bell Potter Latest

Analyst

David Coates 612 8224 2887

Authorisation

Regan Burrows 618 9326 7677

4 April 2023

Published before midday

Chalice Mining Ltd (CHN) Resource upgrade exceeds expectations

Major Resource upgrade at Gonneville

CHN has announced a major Resource upgrade for the Gonneville deposit, at its 100% owned Julimar Nickel-Copper-PGE (Platinum Group Elements) project, ~70km north of Perth in WA. The upgraded Resource is 560Mt at 0.88g/t 3E (Pt + Pd + Au), 0.16% Ni, 0.09% Cu, 0.015% Co, containing 16Moz 3E, 860kt Ni, 520kt Cu, 83kt Co (~3.0Mt NiEq or ~30Moz PdEq). The latest update has delivered an approximate 60% tonnage increase, and +50% increases in contained palladium and nickel metal, the main value drivers for the Gonneville deposit. The Resource is defined over a strike extent of ~1.9km, from surface to a depth of ~800m and remains open at depth. CHN continues to intersect magmatic sulphides over a strike length of >10km, highlighting the potential for additional discoveries along the >30km long Julimar Complex.

Positive update ahead of our expectations

This is a major positive development for CHN, in our view. It delivers a material increase in the size of the Resource and the Indicated and Measured category has increased by ~63Mt (~26%) over the previous Resource. Importantly, 95% of the Resource above a depth of 200m is now classified as Indicated, hence available for conversion to Reserves to underpin the Scoping Study. The Resource includes a high- grade sulphide component of 120Mt at 1.6g/t 3E, 0.20% Ni, 0.18% Cu, 0.017% Co, containing 5.8Moz 3E, 230kt Ni, 210kt Cu, 20kt Co (~1.0Mt NiEq or ~10Moz PdEq). This adds significant optionality to potential development scenarios for Gonneville, which we view as an advantage. We calculate a discovery cost of A$11.70/oz for the additional contained palladium alone, not only value accretive (CHN is currently valued at ~A$200/ Pd Resource oz) but also competitive with comparable gold sector metrics.

Strategic partnering process underway

This latest Resource update reinforces Gonneville’s status as a Tier-1, globally significant Ni-PGE deposit and should be a positive catalyst for the strategic partnering process that CHN has stated is underway. In the first instance, CHN has targeted a range of downstream, trading and end-user parties. We view this as a sound strategy, designed to add value to the project prior to seeking the involvement of a mining and operating partner. Companies we believe would be attracted to Gonneville include BHP Group (BHP, not rated), Anglo American (AAL:LN, not rated), Glencore (GLEN:LN, not rated) and Sibanye-Stillwater (SSW:SJ, not rated).

Investment thesis – Speculative Buy, Valuation $12.00/sh

CHN’s 100%-owned Julimar project is a globally significant PGE-Ni-Cu deposit. Located 70km north of Perth in WA, it represents a unique opportunity to establish a new, strategic, long-life, low-cost PGE and base metals supply in a top mining jurisdiction. This is reinforced by the inclusion of PGE’s nickel and cobalt on Australia’s and the USA’s critical minerals lists, due to their role in the lithium-ion battery and hydrogen fuel cell production value chain and Russia’s market dominance. The latest Resource update has exceeded our expectations and we lift our valuation by 8%, to $12.00/sh. We retain our Speculative Buy recommendation.