With share freefall over, ‘project enhancements’ now core to Chalice claw-back

Plus, Coda finds enhancements of its own at SA copper project and Evion finds fans amid forecasts of graphite shortfall.

By Barry FitzGerald.


The freefall in the share price of Chalice (CHN) following last week’s release of a scoping study into the development of its Gonneville nickel-copper-PGE project on Perth’s doorstep has come to an end.

Since the report was released after trade on August 29, Chalice had given up 38% of its pre-release market cap. What was a $1.96 billion company is now a $1.2 billion company.

It is not the stuff that would normally be expected from a scoping study into a project with world class credentials. Come this Thursday though, there was a recognition that the sell-off had been overdone, with Chalice recovering by 8% to $3.13.

So the freefall is over. But it is also clear that it is now up to Chalice to deliver on the project enhancements – and its search for a strategic partner at the project – to recapture more of its lost ground.    

Chalice CEO Alex Dorsch said during the week that he was somewhat perplexed by the savage sell-off.

“We were not anticipating that sort of reaction to any degree. We obviously think that our study is fundamentally robust and of high quality. And we stand by the assumptions that we made,” Dorsch said.

He said the most common criticism of the study – the use of $US2,000/oz palladium prices without reference to much lower spot prices – was a bit surprising given Gonneville won’t come online until 2029 under current planning.

“So quite frankly, spot prices or near-term prices are largely irrelevant. We are talking about a mine that comes online in 2029 and continues for something like 20 years and probably goes well beyond that,” he said.

Perhaps his bigger point though was that the study was only a starting point.

“The study has done a good job of looking at some options for us but it is not a comprehensive suite by any means. So there is lots to do,” Dorsch said.

“The short-term-focussed market struggles to understand that maturing and being development ready on a project this size does take a lot of work and a lot of narrowing of estimate accuracy over time.’’

Project enhancements are the order of the day. On that score, watch out for work on bringing in higher grade underground ore into the mining plan to improve the overall economics and more work on the process flowsheet to improve nickel/cobalt recoveries.

The strategic partnering process, which only kicked off in April, could also change perceptions, particularly if one of the major mining groups steps up to become a partner in what remains a rare multi-decade opportunity across the full suite of metals critical for decarbonisation.

All that came through in Macquarie’s research note on the scoping study on Thursday, or a week after the study landed. It came with a $3.50 a share price target (down 65%) and was titled: “Scoping study just a snapshot in time”.

“We view the 42% fall in the share price as an overreaction. The study excluded upside from underground that we believe would have improved Gonneville’s economics through higher grades and higher recoveries,” Macquarie said.

Another big end of town broker, UBS, came out earlier on Wednesday with a $3 price target (down 50%) on the stock. It was titled: “As the scoping study disappoints, the PFS might look a little different”.

UBS reckons a smaller project starting out with a processing rate of 3.75mpta and increasing to 7.5mtpa (the study looked at 15mtpa and 30mtpa) might be the best way forward.

“It all leads to front ending more high margin production while retaining optionality for a larger operation later,” UBS said.

Again, the insights from the analysts are – and were – in the mix of the enhancement options Chalice is working through to make sure one of the best discoveries of recent times also becomes one of the best mine developments.


There is a recent example of how a scoping study should only be taken as the starting point for a future mine development, with enhancements to follow in the lead up to a financed final investment decision.

It came on Monday from the South Australian copper-cobalt developer Coda (COD), trading at 18c for a market cap of $26 million.

Back in March, Coda released a scoping study into the phased development of the sediment-hosted open-pit/underground copper resources at its Elizabeth Creek project, just across the gibber plains from BHP’s big Oak Dam IOCG discovery.

Coda too has an IOCG discovery on its hands - the deep Emmie project. But there is a lot more exploration to do there-before it becomes a development candidate.

Not to worry, the Zambian-style sediment project that was the focus of the scoping study more than covers the current market cap, and then some. The study arrived at a 14-year mine life producing 25,000t of copper and 1000t of cobalt annually.

The key study metrics were impressive enough, with pre-tax NPV estimated at $570m on what were very conservative metal price assumptions. First stage capex of $277m, followed by capex of $320m in a second stage development is nevertheless a big gulp for Coda with its $26m market cap.

But then again, copper is expected to take-off in the back third of the decade, according to BHP, in response to looming supply deficits, and there just isn’t enough copper projects on the drawing boards like Elizabeth Creek to help fill the gap.

The market looks to have overdone the financing challenge as despite copper holding up nice and strong, Coda shares have retreated from 27c since the release of the scoping study.

But back to the earlier point that scoping studies are just a hint of what a proposed development will eventually look like. Enhancements of all sorts in later and more detailed pre-feasibility and full-feasibility studies are pretty much guaranteed.

So there was no surprise then on Monday when Coda announced metallurgical testwork was pointing to an enhanced processing flowsheet (low-cost tails leaching) which could deliver a copper recovery boost of 40%.

The testwork was specific to the MG14 deposit but potentially at least, the results augur well for the other deposits that make up the project.

Coda CEO Chris Stevens said the scoping study was the starting point for further project enhancement, and that more enhancements were in the pipeline, the most advanced of which will be brought together in an updated scoping study before long.

Given Coda’s low market cap, the enhancements are likely to be closely watched by corporates looking for a way to become a copper producer – with IOCG exploration blue sky - in BHP’s backyard of big-time SA copper production.

Finally, Pitt Street Research has a 44c to 64c a share valuation range on Coda. It was paid research but well worth a read.


Plotting the share price of Syrah (SYR) is all that needs to be done to know how bad things are in the natural graphite space, notwithstanding accelerating EV sales with their lithium-ion batteries being chock-a-block with graphite over on the anode side.

It remains the case that the EV revolution, and natural graphite’s environmental advantages over the filthy synthetic graphite alternative, means there is a looming supply shortage for the material coming.

Benchmark Minerals Intelligence reckons around 2027 will be the pinch point. On its assessment, some 97 good sized graphite mines will be needed to meet its forecast demand growth from 1.11Mt in 2022 to 7.21Mt by in 2035.

It is not going to happen without a strong recovery in prices to encourage new sources of supply to come forward. Given it takes time and finance to build a mine, the required price incentivisation can’t be too far off now.

It is a medium-term story that doesn’t help Syrah much in the here and now. But for would-be developers, it is a timeline that could well give their projects fresh momentum in the next year or two.

It is against that backdrop that a little thing called Evion (EVG) – little in terms of its $11.4 million market at any rate – finds itself with an increasing fan base. It popped 10% higher in Thursday’s market to 3.3c a share in response to a speculative buy recommendation from Euroz Hartleys.

The broker has a 10c a share price target on the stock on the assumption that Evion issues an additional 1.5 billion shares to finance the development of its main event, the Maniry project in Madagascar, the world’s number two graphite producer.

Euroz Hartley’s undiluted valuation is more than 30c a share, with Evion’s emerging status as a producer of expandable graphite (not the battery market) from a project in India (not Madagascar) part of the reason for the lofty undiluted valuation.

The low-cost Indian expandable graphite project is a 50:50 joint venture with a local partner which has decades of experience in the business. First production is forecast for the coming December quarter and Euroz Hartleys reckons it could generate EBITDA of $A4m (100%) in FY2025.

 So it could be a nice little earner for Evion as it closes in on securing financing for the development-ready Maniry. A DFS late last year arrived at a post-tax NPV of $US205m and a 20 year-plus mine life, with a compliant “exploration” target suggesting multi decade production potential.

As highlighted by Euroz Hartleys, financing is the main hurdle, and there could be heavy dilution due to an equity raising to get Maniry up and away.

But such is the alarm in the major economies about securing non-China supplies (graphite is on nine non-China country critical minerals lists but only five of them have any production to speak of), the potential for funding other than equity has to be seen as a distinct possibility.

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