Chalice’s time arrives with Government handouts and growing palladium demand

Being a former Adelaide boy, Chalice (CHN) boss Alex Dorsch, was nicely relaxed at the annual gathering of junior and mid-tier mining companies at the Resources Rising Stars Gather Round conference on Thursday.

It helped that Chalice has just brought in Mark Cutifani’s Odin Partnership as a strategic adviser across all aspects of getting Chalice’s world-scale Gonneville PGE-nickel-copper project into production by early 2030.

Dorsch said it was a no-brainer to bring Cutifani and his partners at Odin, Tony O’Neill and Omar Davis, on board as collectively they have the best Rolodex in the base and precious metals business.

That happens when, as in the case of Wollongong/Western Mining Corp boy Cutifani alone, you have been a CEO of Anglo American and AngloGold, and the executive chair of Vale Base Metals.

Odin’s arrival comes at a pivotal time as Gonneville is pretty much ready to go but for having the $820m development financing requirement for the first stage open-cut development in the bag.

Odin will be full of ideas on that front.

But the reality is that the task is not as onerous at it might seem thanks to Gonneville’s magic mix of strategic/critical metals qualifying it for the type of low-cost debt funding governments around the world are providing in truckloads to strengthen supply chain security.

“There is no shortage of appetite at the moment to finance large critical minerals projects in safe jurisdictions,’’ Dorsch said. He said the intention was to debt finance 60-70% of the required $820m.

Apart from the eagerness of governments to provide debt finance for critical metals projects, the deep pockets of the streaming/royalty companies could bridge a financing gap left after the debt is put to bed.

Dorsch said in the case of Gonneville, there was potential to consider a streaming deal on the project’s minor metals (by overall value) of gold and platinum.

Canadian streaming giant Wheaton recently paid BHP $US4.3 billion in a silver streaming deal covering BHP’s share of silver production from the Antamina copper mine in Peru. Antamina is obviously a producing mine.

But Wheaton took things a step further in a recent US$300 streaming deal with ASX-listed junior KGL Resources covering silver and gold by-product production at its Jervois copper project in the Northern Territory. KGL has yet to build the mine.

For the Gonneville project, it is the price of palladium that matters. At a base case assumed price of US$1,300/oz (the spot price is US$1,500/oz), palladium will account for 51% of revenue (197,000/oz annually).

Its precious metal cousin gold has left palladium behind in terms of price performance in recent years due to palladium dumping by Russia which accounts for about 40% of world supply, something the US is tackling through 133% tariffs.

While the gold price is what it is, it has started a trend of being substituted where it can be in industrial applications by lower cost alternatives. The electronics sector is a particular area of focus given it accounts for about 8Moz of annual gold consumption.

“Palladium is about a third of the price at the moment of gold, and it is effectively almost exactly the same characteristics in terms of conductivity as gold,” Dorsch said.

“So that is a big burgeoning area of palladium demand. And there is a lot of substitution already happening from gold to palladium.

“The Russians and South Africans are not going to grow supply, but you’ve got all these new applications coming in, and that we think is going to really outstrip supply very, very quickly,’’ Dorsch said.

Given the palladium market itself is only 9Moz annually, even small demand/supply changes can power up the price, as was the case earlier this year when the price topped US$2,000/oz.

Given the gold replacement thematic, and the demand push coming for more hybrid cars post the war in Iran, a return to that level or higher is something Dorsch will be cheering on.

In a US$1,300/oz base case environment, Gonneville’s NPV has been stated as $1.4 billion. Use US$2,000/oz, it takes off to $3.1bn. At Thursday’s closing price of $1.62, Chalice’s market cap was $630m.

Peninsula Energy:

Peninsula boss George Bauk is a Carlton tragic so it was kind of appropriate that he was the last speaker for the first session (first quarter) of the RRS Gather Round conference.

Had he been slotted to speak in the last session (fourth) quarter who knows, he could have gone missing like his beloved Bluebaggers.

The reality is though Bauk would have stood up at any timeslot.

It’s a good time to be in uranium, with the March average for the prices that matter – the long-term or contract prices – continuing to edge up US$91.50/lb.

More than that for Peninsula though was Bauk’s news that the company was producing yellowcake again at its Lance uranium project in Wyoming after resolving an issue with the agitators in the precipitation tanks at the ISR operation.

The project has been on and off like the Carlton FC for the last 10 years, with Bauk arriving last year with a reset plan to get it to steady state production, as well looking to leverage off its large- scale resource base.

Now the agitator hiccup has been fixed, Lance is on its way to achieving near-term guidance of 400,000-500,000/lbs in CY2026, rising to 500,000-600,000/lbs in CY2027.

Given the resource base at Lance is 58Mlbs, and the project is licensed to produce up to 3Mlbs a year, a bigger future for the project, and Peninsula’s status as one of only five producing mines in the US, is in the works.

That was reflected in Peninsula trading at more than $1 a share in late January before the agitator news hit the market. Add in the impact of the broad market sell-off caused by the war in Iran, Peninsula is now trading back at 52c for a $212m market cap.

As mentioned earlier, the lower level is despite the uranium price continuing to advance. Like the lithium/EV thematic that has powered up in light of the Strait of Hormuz oil blockade, so too has the uranium/nuclear power thematic.

The nuclear thematic has also been powered up by China and India contracting 70Mlbs of production in recent deals. Meanwhile, the commitment to grow nuclear power is as big as ever in the US.

But if the US wants a domestic supply base that meets both its currents needs and what’s to come, it had better getting cracking. Naturally enough, Peninsula sees itself as part of Team USA when it comes to meeting domestic uranium requirements.

“The US consumes about 50Mlbs of uranium per annum, and last year only produced 2Mlbs,” Bauk said in his quarter time rev-up to investors at the conference.

“So there is a significant shortfall in the US of uranium availability – and there is two applications: you’ve got civilian demand . . . and then you’ve got military applications, including SMRs and bases, and the like.

“There is a big need for the restocking of uranium in the US, and what’s critical is that the restocking has to come from uranium that is produced in the US.

“At the moment, that restocking can only be purchased from five companies, and we are one of those five companies.”