Putin’s posturing powers palladium price

The resources game can be a tough one. Just ask Alex Dorsch, the seemingly eternally youthful MD of Chalice (ASX:CHN).

Chalice made one of the best metals discoveries globally at its Gonneville project on Perth’s doorstep in March 2020.

The wonderful mix of palladium-nickel-copper-cobalt proved to be Tier 1 in scale – 17Moz of palladium-platinum-gold, 960,000t of nickel, 540,000t of copper and 96,000t of cobalt.

The resource was big enough to carry Chalice’s market cap from $40m before the discovery hole to as much as $4 billion.

But then the two key metals at Gonneville – palladium (50% of revenue) and nickel (25%) fell away to six year lows. Chalice’s market cap was taken down in the process to less than $400M.

The rise of electric vehicles meant palladium’s key market was shrinking, and the flood of Chinese-backed laterite nickel from Indonesia had torched nickel prices which were meant to be on the up and up thanks, funnily enough, to the rise of EVs.

But then along came President Vladimir Putin this week to pose the question of whether Russia should consider retaliating against the wall of sanctions imposed by the West since his 2022 invasion of Ukraine by imposing export limits on commodities like nickel, titanium, and maybe others.

Russia and its satellites are big producers/exporters of the mentioned metals and those that weren’t specifically mentioned, including palladium.

Whether or not it was a hollow threat from Putin – there is a war to fund after all – didn’t matter in commodity markets. Nickel bounced from its recent lows and palladium raced up from $US898/oz to $US1,022/oz.

Chalice shares in the meantime have climbed from 94c last Friday to $1.16 in Thursday’s market for an all up gain of 23%. It is welcome stuff and has lifted Chalice’s market cap back to $430m.

Dorsch didn’t know Putin was about to stir up commodity markets when he spoke at the Resource Rising Stars Gold Coast conference last week where he noted the stock “really was at rock bottom valuation at the moment”.

But he did highlight the stresses building in the palladium market and that something had to give. He noted that producers in the other big producer nation, South Africa (36%), were bleeding at the six-year low in prices, and that the big producer in North America (13%) needed prices to be more like $US1,800/oz to survive.

Gonneville on the other hand could sit comfortably in the second quartile, meaning it could make money even at the six-year low in prices.

He also highlighted that the death of palladium because of the rise of EVs had been exaggerated because of the greater use of the metal in catalytic convertors in hybrids, a sector winning back consumers tired of finding a charging station, or anxious about making a long trip.

Having said all that, the reality of lower prices for the time being has meant that Chalice has had to do a big rethink into Gonneville’s development. A starter project targeting the 10% of the orebody where the grade is 2.5 times the average grade is the focus of the preliminary feasibility expected in mid-2025.

As metal prices inevitably improve in response to sanctions/closures impacting current producers (palladium), and sheer demand growth (nickel), Gonneville will be cranked up to a level that better matches its Tier 1 resource size.

Japan’s Mitsubishi Corp is focussed on that sort of medium to longer term scenario. It signed a non-binding strategic MOU with Chalice in July. While non-binding, the intent is to formalise a potential partnership post the release of the PFS.

GOLDEN CHALICE:

Chalice’s cash position of $111m means that it is more than covered for the now mainly office-based planning work for a Gonneville development.

It is why Dorsch has decided to add a gold-copper exploration leg to the company’s story.

Gonneville was a breakthrough discovery on the western side of the Yilgarn Craton. Now Chalice is having a shot achieving the same at Barrabarra project up north and some 80km east of Geraldton.

It is virgin country from an exploration perspective but two years’ worth of systematic exploration by Chalice has mapped untouched stretches of greenstone belt geology.

“The target style is orogenic gold, or classic goldfields, but also intrusion hosted systems like Boddington (Newmont’s 40M oz gold deposit in the Darling Ranges down south),” Dorsch told the RRS Gold Coast conference.

“You can imagine one hint of gold mineralisation in this area would totally rewrite or totally revolutionise the geological understanding of the West Yilgarn. And that's exactly what we did when we drilled the first hole in Gonneville.”

Drilling of the first of the targets is planned for the December quarter.

Nimy:

Promising greenfields exploration results will always be well received by the market regardless of what the broader mining/commodities markets are doing.

Nimy (ASX:NIM) proved the point this week when it reported that all four holes in a drilling program at is Masson nickel-copper prospect had returned massive, disseminated and vein-style sulphide mineralisation on visual inspection.

One of the holes returned sulphide mineralisation across a 60.3m interval from 267.7m including visible pyrite and chalcopyrite (copper sulphide).

Nimy said a sulphide-rich zone at Masson now extends along a strike length of 220m and to a depth of 254m and is open in all directions.

So there’s a lot of smoke building up over the prospect.

Assays are expected in 4-5 weeks, but it can be said that the overall prospectivity of Masson has been upgraded thanks to the visually interesting intersections being within and adjacent to the targeted electromagnetic targets.

There is a suite of other EM targets 3km to the north and 3km to the south of Masson which are now a priority for follow up drilling.

Masson is part of Nimy’s district-scale Mons project area about 140km north-northwest of Southern Cross on the northern end of the Forrestania nickel-copper belt.

Nimy shares improved 3.5% to 9c on the exploration news, valuing the company at $16 million.