But then the bottom fell out of metals like nickel and cobalt – two components of its commodity mix – prices for its largest revenue generators palladium and platinum swung in quicktime from record highs to desperate lows and investor jitters over a scoping study on bulk, low-grade development sent the market darling back to the drawing board.
Now worth $420 million, Chalice boss Alex Dorsch is preparing for another run as a ‘counter-cyclical’ play, predicting bottom of the market signals may be in for platinum group metals.
Notably Sibanye-Stillwater boss Neal Froneman has said the South African giant could close its Stillwater-East Boulder mine in Montana in the USA, a 430,000ozpa producer which last year operated at all-in sustaining costs of US$1872/oz.
To put the jeopardy for those in the top half of the cost curve in perspective, palladium is currently trading at just US$950/oz, while platinum is sitting at US$988/oz.
It appears something has to give, with future demand also looking more promising, Dorsch told Stockhead on a trip to the proposed site of the Gonneville mine on the edge of the Julimar State Forest.
Used in catalytic converters that reduce emissions from internal combustion engines, he believes disillusionment with electric vehicle production costs is fuelling a revival in demand for PGE-rich hybrid cars, which in the current generation of technology use as much as 10% more PGEs than petrol cars.
“Hybrids are growing now at almost three times the rate of BEVs,” Dorsch said.
“Hybrids obviously require palladium, just like all petrol engines require palladium. So we think demand is going to rebound strongly.”
According to the International Energy Agency plug-in hybrid sales increased by around 75% in the March quarter in China, compared to a 15% growth rate for EVs, having also outstripped BEV growth rates in 2023, though they came off a lower base.
Dorsch continues to view current palladium and platinum pricing as unsustainable, pointing to the dramatic cost cutting going on from the world’s largest producer South Africa.
“South Africa is burning the furniture, I think is the term,” he said.
“They are basically cutting all their sustaining capex and trying to take cost out of their businesses wherever they can. And they’re also shutting down marginal shafts, which has a negative impact on supply but it’s clearly not enough.
“Clearly they’re going to continue to take cost out, Anglo is going to spin out the Anglo American Platinum business, and I think the focus on South Africa is going to be sacrifice future production for the sake of short-term cost reductions.
“That plays actually very nicely into our hands. We’re looking to be producing in the latter part of the decade.
“That’s actually a perfect sort of setup for us, because we want those more challenging operations in South Africa, those high-cost operations to shut down. So if anything, this is a great time for us not to be producing and sort of be on the road to become a producer.”
One operation, the Robert Friedland-backed Platreef deposit, recently began cold commissioning of what will initially be a 113,000ozpa PGE mine.
But existing operators are already down to bare bones. AmPlats recently cut 3700 jobs after trimming profits 18% to US$355.4m, while Impala Platinum cut its dividend this year.
Dorsch said a combination of Russian metal hitting western markets through back channels, legacy stockpiles and short bets was heaping downward pressure on prices.
“No one really knows what the thesis of those net short financial speculators are. But because we have such a large part of the PGE industry loss-making at current prices, you will eventually see supply contract, and we think that will return us to more sustainable price levels in the near term,” he said.
Chalice reached its zenith in late 2021 after drilling out what it called the first major PGE find in Australia and the largest nickel sulphide discovery everywhere in 20 years after a maiden resource announcement.
By March 2023, Julimar’s 1.9km long Gonneville had grown to 560Mt at 1.7g/t palladium equivalent, containing an estimated 16Moz of 3E PGEs (palladium, platinum and gold), 860,000t nickel, 520,000t copper and 83,000t of cobalt.
But a tepidly received scoping study, criticised for long-dated commodity price assumptions aligned with when the mine was expected to enter production in 2029, signalled the need for a rethink.
Chalice has since remodelled its resource. While its global resource has increased to 660Mt at 0.79g/t 3E, 0.15% Ni, 0.083% Cu and 0.015% Co, study work will focus on a higher grade sulphide component sitting beneath a 40m deep oxide layer to 1100m below surface of 59Mt at 2g/t 3E, 0.2% Ni, 0.21% Cu and 0.019% cobalt.
Key to delivering a more rigorous PFS will be metallurgical test work, for which diamond holes are currently being drilled.
That will support a shift to a selective mining model which will be less capital intensive.
Rather than starting out with a more novel hydrometallurgical flowsheet designed to appeal to lithium ion battery producers and OEMs, Chalice will focus on conventional processes to produce floated copper and nickel concentrates along with a dore made from leached palladium and gold tails.
The met testwork, expected to be finalised by October, will be a key here, given the variability in the grade, mineralogy and metal ratios between different domains of the deposit even with similar grades. This has delivered some early wins.
For instance, around 70% of nickel is now in recoverable sulphide form, compared to previous flotation recoveries in the range of 30-50%.
That’s significant, especially with the testwork and PFS study likely important to getting potential strategic partner, Japan’s Mitsubishi, to turn a recent non-binding MoU into a JV or equity investment.
“It really is the crux of the project, what those recoveries will be,” Dorsch said.
“It’s going to drive the economics, it’s going to drive the scale, it’s going to drive the level of metal production, of course.
“We’re doing … a very comprehensive test work program to reflect the polymetallic nature of the resource and the scale of it.”
Reducing the scale at Julimar has also seen Chalice elect not to propose mining any of the deposit which extends into the Julimar State Forest, a potential flashpoint for environmental complaints. Referrals for a public environmental review have already been submitted to state and federal authorities in March this year.
Dorsch says Chalice is confident assuming the PFS is positive, it can get Mitsubishi to the table on a joint venture offer.
It is currently non-exclusive, but Mitsubishi already owns a major platinum trading house, the largest in Asia, and has a deep understanding of the market. Other instos are still intrigued, with Gina Rinehart’s Hancock Prospecting still sitting on the Chalice register.
With the PFS its main focus and Chalice keen to stretch its current cash balance out to a decision to mine, exploration elsewhere at its West Yilgarn assets and along 26km-long Julimar Complex has taken a back seat.
It remains of interest, with 44 targets now generated over around 10,000km2 of turf stretching up and down the west coast.
But CHN has parted with some of its cash to take a strategic 6% stake in Encounter Resources (ASX:ENR), the next most advanced explorer behind ASX bolter WA1 Resources (ASX:WA1) in the emerging niobium, rare earths and IOCG hotspot of the remote West Arunta region on WA’s NT border.
Tipping $7.7mn into the gambit in April, Chalice’s stake was worth around $20m at the end of June.
“We’re looking at the West Arunta very favourably in terms of its real frontier exploration, one of the last areas of WA that hasn’t seen any material modern exploration,” Dorsch said.
“We were attracted to Encounter and attracted to that area in general.
“We don’t really prefer to hold listed equity investment, our preference is always to be in the project, but we do make exceptions for what we consider very high quality, high potential projects, which we think Encounter has got.”
Chalice shares closed 8.5% up yesterday at $1.14.
Ironically, the investor visit came the same day Liontown Resources (ASX:LTR), a $2.3bn lithium miner chaired by Chalice founder Tim Goyder and boasting Rinehart as its top investor, produced its first spodumene concentrate at the ~$1bn Kathleen Valley mine in the northern Goldfields, where construction was completed just about on schedule despite a poorly timed dive in lithium prices.
