Cheap Chalice set for recovery on hybrid vehicle boom and development of WA palladium project, says MD

Chalice (CHN) boss Alex Dorsch gave the crowd a right old rev up on the company’s value proposition at a recent investor conference.

Speaking at the Brisbane leg of the Resources Rising Stars “Summer Series”, Dorsch said Chalice (trading at $1.88 for a $727m market cap) was as cheap as chips.

He know doubt felt the same back in April last year when Chalice sank to 83c on general market malaise and metal price weakness.

Times have changed on both fronts since, forcing the market to pivot back to the Chalice value story which is underpinned by its remarkable 2020 Gonneville discovery with its magic mix of palladium-platinum-gold (3E), nickel, copper and cobalt on Perth’s doorstep.

Canaccord is on board with the cheap as chips proposition. It has just initiated on the stock with a $3.70 price target.

Chalice is now marching Gonneville towards first production with a final investment decision planned for the first half of CY2028.

Before it gets there, it sits well and truly in the famed valuation trough of the famed Lassonde curve which impacts valuations of all pre-mining projects. As Dorsch said, the trough is the boring bit of the mining game as it is all about permitting, feasibility studies and funding.

“But that provides an opportunity as well because, as most people know, the other end of the Lassonde curve, when you get close to production, can be one of the biggest re-rates in the value chain for a mining asset,” Dorsch told the conference.

“If you can have a two or three year investment horizon, you could see this thing really accelerate in value as it gets closer to production.”

Having said that, Dorsch acknowledged that metal price movements alone can do the heavy lifting on the valuation no matter where a project is on the Lassonde curve. It helps to have a world-scale project under your belt, as is the case at Gonneville.

The key metal for the project is palladium. At Chalice’s base case price assumption in its December PFS of US$1,300/oz (currently US$1,720/oz), the metal will account for 51% of project revenue.

Again on the PFS base case assumptions, Gonneville will be the lowest-cost PGM producer outside of Russia with an estimated 3E AISC of US$370/oz on annual 3E production of 220,000oz.

So leverage to the upside from higher prices than assumed in the base case is extreme, just as it was to the downside when palladium sank to as low as US$900/oz in late 2024, taking Chalice’s market down with it at the time.

There were a couple of factors behind the price slump – dumping of the metal by major producer Russia to fund its war with Ukraine and a perception that the rise of electric vehicles would smash demand for the palladium, used in catalytic convertors in internal combustion engines.

On the first point, Dorsch said it was notable that despite the Russian dumping situation, palladium from Russia was never formally sanctioned because the West was too dependent on supply continuing.

He added that the recent rebound in prices was saying the market is short again, and that Western world consumers are crying out for opportunities to diversify their supply chains away from Russia, and the other big supplier, South Africa.

The second factor that has been holding back palladium prices – the rise of EV’s –  is not based on reasonable assumptions at all, according to Dorsch.

“What you are seeing in reality is people are quite interested in hybrid vehicles (which come with an ICE engine),” he said.

“So if you think hybrid vehicles are sensible and they’re a good transition technology, basically, the PGMS are the opportunity because the consensus is that the demand’s going to fall off a cliff.’’

The move by China to establish their own exchange for PGMS lends weight to Dorsch’s proposition that EV’s won’t be killing off palladium demand any time soon.

He said the exchange was a signal that the Chinese are very much buyers again. “They’re saying they can’t get real physical delivery, and they need to set up their own physical exchange,” Dorsch said.

“That sort of tells you that they are big buyers again. So even in China where everyone thinks that BYD is producing 100 per cent battery electric vehicles, something like two thirds of BYD’s sales are actually hybrids.”

Marmota:

It’s a rare thing to have a mining executive mobbed by investors after making a conference presentation.

But that was the situation Marmota (MEU) executive chairman (Dr) Colin Rose found himself in after exiting the stage at the Sydney leg of the “RRS Summer Series” conference last week.

It was an engaging presentation by the ever-urbane Rose all right as he talked to the company’s excitement over its fast-advancing Gawler gold project in South Australia.

Last mentioned here in October as a 7.2c stock with a $75m market cap, Marmota has since marched on to 13c for a market cap of $168m. So it is fair to say interest is up in the stock for sure.

But the executive chairman getting mobbed?

Maybe it was a show of appreciation by investors that Rose had put away a $15m placement before spruiking the company at the conference, not after, as is so often the case with junior exploration companies.

Or maybe it was Rose reminding investors that before it became a successful gold explorer Marmota was a successful uranium explorer in SA until, like the rest of the industry, it got Fukushima’d, as he put it.

Marmota still holds the ground which covers the same paleochannel that hosts Boss Energy’s Honeymoon uranium operation, which has some scale-of-resource issues to deal with. That’s kind of interesting from a Marmota perspective.

Others obviously think so as Rose disclosed that the company had been “approached by more than twenty companies in the last year or two years to try and get hold of that uranium ground or those uranium rights, maybe to IPO it”.

Rose said he wanted to get back in the uranium space. “But we’re having such success in the gold area, where gold prices are, our focus at the immediate time and for the next at least nine months is going to be almost entirely on gold,” he said.

So maybe it was what Rose said about the gold project that had investors running for a post-presentation briefing.

Last year Marmota notched up the high-grade Greenewood discovery near the existing high-grade Auroa Tank discovery, which is the subject of a scoping study into a possible low cap cost heap leach operation.

In his presentation, Rose said the latest drilling results from Greenewood would be available in about 10 days. So they can’t be far off now. He added that March would see the drilling of the Mainwood prospect in the arc of gold Marmota is putting together on its Gawler ground.