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Chalice Mining (ASX:CHN) has seen its price dip nearly -10% on Monday as the market clearly didn’t quite respond too graciously to a PFS for Gonneville, comprising palladium, nickel and copper in its current conceptualisation.
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Perhaps the fact Chalice expects to earn A$4.7 billion over 23 years is the kicker – that’s around $204 million a year on a back-of-the-envelope basis.
Not even reports Gonneville could be the “lowest cost PGM mine in the western world” was enough to keep investors excited; some HotCopper users pondered whether we’re just seeing investors sell the news.
There’s also the fact that Chalice said on Monday that 50% of its mineral resource remains unmined, suggesting further growth – at least one user pondered whether or not the company should be doing a PFS this early, then, seeing as it’s likely subject to change in that case. But risk-on sentiment crowded out that contribution, alas, looking back on morning trades, they might’ve had a point.
According to Chalice, Gonneville in its current iteration will see Stage 1 of works pay back in only 2.4 years (assuming spot prices stay high), earnings margins increase to 49% (assuming spot prices stay high), pre-tax valuation increases to $2B (assuming spot prices stay high)…and therein could lie the problem.
It appears Chalice’s entire PFS is based on the ever-fluctuating world of spot prices, which, in essence, offers reduced certainty for the company.
And to be fair, every mine in the world is at the behest of the commodity prices underpinning its target resource, but Chalice’s reliance on spot prices to improve the economics of Gonneville in its PFS is pronounced.
CHN last traded at $1.59/sh.
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