• I am perplexed to the timeline provided by the management team in the Project Scoping Study to when first production is, end of the decade,2029. In this current market I don't know who thought that was going to be a good idea, I believe it is a mistake that they would take back if they were to have the opportunity again.

Are you saying they should have withheld that forecast? The company is obliged to disclose all the results of the Scoping Study, and not just the nice bits.

A date of 2029 is realistic, but certainly towards the optimistic end. Note that the project is only at Scoping Study Stage, i.e., they don't have any Ore Reserves yet.

• However, in saying that the company has a really strong potential mine which I am willing to wait for and keep buying.

See above. They don't have a mine, they have Mineral Resources and there's a lot to do and money to spend to get to a mine from here.

• Is it a takeover target or does it partner up with a more experienced and cashed up resource company? Glencore, BHP or Rio Tinto?

My guess is that any larger company interested in getting involved (JV, takeover etc) would let Chalice derisk it further, as long as they're not creating more risks in the meantime, such as ESG related. I’m not sure if the scale fits in with the major players, but who knows?

The CHN presentation is big on upside and potential but less so on risks. They can get away with that under current ASX/JORC regulations, but the JORC update is very likely to compel companies to make the material risks as prominent as the upsides in their releases.

The Cost of Capital (6.5%) looks very low for this project. Whilst they show some stats on the sensitivity to CAPEX they don’t address this in enough detail.

Whilst I’m a humble geologist the processing flowsheet looks complex to me. If I get time I’ll look around to see if any other companies have operated a similar processing plant, especially at this scale. However, it’s better to ask a metallurgist/processing engineer’s opinion on this.

Related to these two issues is commissioning / ramp-up risk, especially if processing is trickier than expected. This typically results in experiencing the same, or even increased, costs but less revenue. Whilst this may be temporary it can often be very detrimental.

I think CHN has done a great job so far and the resources look robust, albeit based on a brief glance

Thanks for the feedback.

you’re correct , they don’t have a mine I said a potential mine. still a long way off.

the timeline could have been shortened.

if you do find something similar let me know.

@StuMas63

It is interesting that you mentioned there is no reserves statement for this scoping study. I haven't had time to go through the whole scoping study.

One thing that I noticed was Chalice taking the ground belonging to Northam Resources which I mentioned in the other straw.

That kind of gave me the impression that maybe things were not so rosy with Julimar and they needed additional options

At the time of the straw I didn't think much of that at the time. Only recently when the price was going nowhere I revisited that news in addition to hearing some majors taking a pass and made the decision to sell.

Seemed like a crazy move going against what all the instos and the management buying the capital raise at $7 was thinking at the time.

Might start a thread later to speculate who might be interested partners.

@edgescape

Ore Reserves will come out of a Pre Feasibility Study (PFS), which is the next step. A PFS is the minimum level of study required to declare Reserves.

A PFS requires more metallurgical test work, more progress on government permitting, social license, more precise and accurate estimates of inputs etc. It typically takes a year, but that depends somewhat on how much and how complex the test work is.

The primary purpose of the PFS is to determine to most feasible option to exploit the deposit (if there is one).

Yes, there are many companies taking up ground nearby (aka nearology), as it's a prospective area, but perhaps there's some potential rentseeking going on too.

PS I don't hold CHN shares or have any financial or fiduciary interest in such.

PPS I was on the JORC Committee for 8 years until last year, including 3 years on its Executive.

Thanks for that information.

why do you think potential first production is 2029?

time to get approvals , complexity or looking for more reserves ?

Chalice still needs to improve the recoveries in my opinion and get a reserves statement established.

The reserve statement means you can check what is economically feasible to extract from the resource.

You can look at Capricorn metals or Northern Star for examples of reserve statements. I think 29 Metals, Aurelia, Sandfire also have reserve statements for their base metals which might be a better comparison. On the PGE side maybe Zimplats although I havent' seen anything from their website.

The real dilemma with Poly-metallic systems is figuring out which metals is the most economical to extract.

Plus there is the issue of what metal demand looks like for the next decade given as we can see it is changing with technological developments.

31-August-2023: Money of Mine podcast: Why is the Chalice Share Price Down 30% in 2 Days?! | Daily Mining Show - YouTube

Show Notes: "Two big stories for us to pull apart today, Chalice and 29 Metals! We had Emanuel Datt of Datt Capital on for our Chalice segment, helping us get into the weeds on a range of aspects we found of interest. We also couldn’t help but discuss troubled copper miner 29 Metals, who have finally pulled the pin on a capital raise, 13 long days after denying the media speculation that a raise was imminent. "

CHAPTERS

0:00 Preview

0:58 Intro

3:37 Emmanual Datt & the Much-Anticipated Chalice Scoping Study

5:53 Breaking Down the Financial Assumptions

24:09 CHN being Western Aligned

27:43 What to look out for in Metal Equivalents

33:57 Top Tweets about Chalice

46:43 29M Raising $151m from Existing Holders

52:25 Analyst Questions from the 29M Investor Call

-------------------------------

DISCLAIMER

All Money of Mine episodes are for informational purposes only and may contain forward-looking statements that may not eventuate. The co-hosts are not financial advisers and any views expressed are their opinion only. Please do your own research before making any investment decision or alternatively seek advice from a registered financial professional.

-------------------------------

Source: https://www.youtube.com/@MoneyofMine

Disclosure: I do not hold CHN shares.

Further Reading:

Chalice Mining shares to move on PGE scoping study (afr.com) [Peter Ker, Resources Reporter, AFR, Aug 29, 2023 – 6.27pm]

CHN ASX: Tim Goyder says slump in Chalice Mining shares is an over reaction and the market needs to ‘get real’ (afr.com) [Peter Ker, AFR, Aug 30, 2023 – 12.58pm]

Tim Goyder, Chalice Mining’s largest shareholder, says a slump in the critical minerals explorer’s share price is an overreaction by a market that wants “a bed of roses” and needs to “get real” about long-term value.

Chalice shares fell more than 25 per cent to $3.77 on Wednesday – the price has more than halved in four months – after investors were disappointed at the results of a long-awaited scoping study into its Gonneville project.

Tim Goyder is a major Chalice Mining shareholder, and a large investor in lithium hopeful Liontown Resources. [Photo: Trevor Collens]

Gonneville has been touted as one of Australia’s best critical minerals discoveries for its platinum group elements, nickel and copper, but investors were underwhelmed by Chalice’s promise of a two-year payback on a mine costing between $1.6 billion and $2.3 billion.

Investor concerns were focused on the lower-than-expected rate of nickel recovery forecast by the study, capital spending that was higher than some estimates, and the fact Chalice has based its economic forecasts on commodity prices well above current levels.

But Mr Goyder, who is also chairman of lithium hopeful Liontown Resources, said he expected Chalice shares to recover within six months.

Chalice does not expect to be selling metals from Gonneville until 2029, and Mr Goyder said in that context, the company’s adoption of high commodity price assumptions was a case of “damned if you do, damned if you don’t”.

“If you believed consensus everywhere, you wouldn’t start anything. You wouldn’t even start exploration,” he said, adding that like Liontown, Chalice shares endured extreme volatility every time there was a market update.

Chalice has a market capitalisation of $1.5 billion; Liontown, where Mr Goyder is a 15 per cent shareholder, is valued at $6 billion.

“With a longer-term lens on, I believe the short-term aberrations of the market are really overdone,” he said.

“In the clear light of day any of these projects are so hard to find and the true value will come through. Everyone has gone very short term on their views on capex. They want a bed of roses with everything they touch, it is short-termism. The market has just got to get a bit real.”

Palladium is expected to provide about 55 per cent of revenue from the mine, and Chalice’s study assumed the metal would fetch $US2000 an ounce over the life of the mine. Palladium was fetching $US1218 an ounce on Wednesday; the price is down 30 per cent since January 1.

Chalice’s study assumed nickel – the metal that would provide 24 per cent of revenue from the mine – would fetch $US24,000 a tonne over the life of the mine; the current price is just below $US21,000 a tonne.

The study assumed copper would fetch $US11,000 a tonne during the mine’s life, rather than the $US8300 a tonne on offer this week.

Chalice’s forecast for platinum prices to average $US1000 an ounce were closer to Wednesday’s price of $US976 an ounce.

A 20-year operation

Chalice managing director Alex Dorsch was repeatedly asked about those commodity price assumptions on Wednesday, but told investors it was hard to know where they would be in 2029.

“There is about seven-plus years until we are actually producing any metal, so we are not talking about producing in the current commodity price environment, nor have we designed our operation in the current spot price, commodity price environment,” he said.

“We are designing a 20-year operation ... we are trying to understand those long-term dynamics as best as possible. We believe this project is robust under a number of scenarios.”

The critical minerals in the Gonneville deposit are increasingly sought by governments to ensure non-Chinese and non-Russian supply chains exist for the metals needed for decarbonisation.

Mr Dorsch said the decarbonisation megatrend and the geopolitical overlay were likely to “transform” demand for the metals discovered at Gonneville, and therefore future commodity prices were “very hard to predict”.

He said Chalice had relied on AME Group for the supply and demand models that underpinned the commodity price assumptions.

He added that prices for platinum and palladium were probably near a floor.

“We find it incredibly hard to believe a lower [platinum group element] price than what we are seeing today,” he said, adding that the study reflected only one portion of the geological opportunity in the Julimar province, which is 70 kilometres north-east of Perth.

The company continues to drill prospects close to Gonneville in the Julimar State Forest and those targets were not included in this week’s study.

--- end of excerpt ---

CHN ASX: Chalice questions critical minerals tie with Indonesia (afr.com) [Brad Thompson, reporter, AFR, Aug 7, 2023 – 6.22pm]

Chalice Mining's blowout: How a high-profile scoping study went so wrong (marketindex.com.au) [Kerry Sun, Aug 30, 2023 – 3:51pm]

This slide page maybe shows that Gonneville is low grade (0.5% nickel) overall at high tonnage 677mt.

Highest grade is at 1.2mt 1.7% nickel.

Hence also maybe why the chart is on the last page.

But if the bars to the right side of the graph can increase and the grey line shifts up then that would be an encouraging sign for the project overall.

Or another discovery via some of their new joint venture partners.

Anyways, it might be worth bookmarking or saving the chart to see if there is any improvement when the next update is presented.