Chalice Mining's metallurgical breakthrough signals lower operating costs at its Gonneville deposit in Western Australia and reduced complexity, but it may not satisfy investors, suggests Barrenjoey. Chalice says it's now able to produce copper and nickel concentrates from low-grade composites, removing the need for a high-cost hydrometallurgical process. Analyst Richard Knights says Gonneville could now generate a 19% internal rate of return. "However, our project net present value is still comfortably less than Chalice's market cap (A$565 million), even after modelling a debt funded doubling of capacity after four years of operation." Chalice needs a step-change in palladium prices or an ability to feed higher grade material to the plant for longer to excite investors, Barrenjoey adds. It retains an underweight call on the stock. ([email protected]; @dwinningWSJ)
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