Chalice back in the game as roaring palladium price hitches a hybrid vehicle ride

What a difference a month has made for Chalice Mining (ASX:CHN), owner of the 2020 world-scale Gonneville palladium-nickel-copper discovery on Perth’s doorstep.

It was a month ago when Chalice’s eternally youthful CEO Alex Dorsch made a company presentation to US investors at the Mining Forum Americas conference in Denver.

Chalice was still sporting the scars of a poorly-received August 2023 scoping study into Gonneville when Dorsch took to the stage, but the company’s market cap was showing signs of improvement at $665 million ($1.71 a share).

A month later and the market cap has taken off to $922m ($2.37 a share ), making for a $256m gain, or 38%.

The driving factor has been the rebound in palladium prices, with the metal expected to account for as much as 50% of Gonneville’s revenue when it gets into production, likely in 2029/2030.

It was an overly complex processing plan and a price deck that had palladium priced at $US2,000/oz in the 2023 scoping study that saw the market tear strips off Chalice’s market value at the time.

Complexity is never appreciated and the use of $US2,000/oz palladium in the project’s financial metrics was ridiculed given palladium prices at the time were $US1,200/oz and heading south fast on dumping by Russia, and a thematic that the rise of electric vehicles would destroy future demand.

The subsequent further fall in prices to less than $US900/oz – along with nickel’s dive - pretty much destroyed investor interest in Gonneville notwithstanding its Tier One credentials in the right sort of pricing environment, and with a reworked processing route.

Chalice has been beavering way since the scoping study on a preliminary feasibility that is due for release in November. A simpler project costing sub $1 billion and capable of becoming the lowest cost palladium producer in the world after nickel and copper credits is the expectation.

But more important to Chalice’s market cap recovery in the near-term – it was once a multi-billion dollar company – has been the big time comeback in the palladium price. This week it moved past $US1,600/oz.

That takes the metal’s gain since the start of the year to just under $US700/oz or 76%. So it has outperformed gold, which is saying something.

In his Denver address, Dorsch said it was only a matter of time before the palladium price recovered in a big way, noting the potential for a “fly-up” in prices – an expression that is a favourite of BHP’s when it is talking about the copper market and the need for incentive pricing (higher prices) to encourage new mine developments to meet future demand.

In the case of palladium, Dorsch said investors had also been a sold a pup on palladium demand. The idea that electric vehicles would kill demand for palladium’s use in petrol and hybrid vehicles was grossly exaggerated.

“What we’re seeing, particularly ex-China, is people have a strong preference for hybrid vehicles, and that’s going to support long-term palladium demand and other platinum group metals,” Dorsch said.

He also asked the question if the world really wants to continue to rely on Russia and South Africa which account for a scary 85% of supply.

All that feeds into expectations that when it comes to funding Gonneville’s development, government and credit agency support will be forthcoming, along with support from offtakers, with the first expected to be signed up early in 2016.

Genesis (ASX:GMD):

As impressive as Chalice’s market cap bounce back has been, it is left in the shade by what has been going on in the gold space.

Given gold now has a habit of posting record prices on a daily basis, the value creation in the gold producers has been phenomenal.

Raleigh Finalyson’s Genesis is an example. It was a $4.1 billion ($3.62 a share) company at Diggers & Dealers in early August. Yesterday it weighed in a $8.01 billion ($7.02 a share) for a 14-week gain of $3.91 billion or 95%.

It is a reminder of just what a special place the gold producers are in at the moment, and long may it last.

The gold price is one thing. For a gold stock to outperform all the others that also are being lifted by gold’s daily record it has to be making its own steam beyond what the gold price is delivering to capture an additional reward from the market.

Genesis again is the example. It outperformed the sector by scooting off 8% higher in Thursday’s market after releasing a September quarterly with a strong set of numbers pointing to the likelihood of it exceeding the upper band of its FY26 guidance for 260,000-290,000oz.

It was typical stuff from the company which likes to think of itself as the trusted one in the gold space. Over-delivery on promises is always warmly received.

Thursday’s share price out-performance also indicated that other factors in the market’s rating of the company were at play. And there was – the coming together of factors that suggests Genesis’ previous declared ambition to get 400,000ozpa by 2030 (“Aspire 400”) will be achieved well ahead of time.

The quarterly made a point of highlighting progress in securing the approvals and agreements needed for the Tower Hill project to produce its first ore in FY2028. It’s the one that has been known about for years under previous owners but has not got a move on until now because of the need to realign the rail line into Leonora.

Tower Hill comes with a shallow high-grade reserve of 15Mt at 2g/t gold in a single planned open pit within spitting distance of the Leonora mill. Talking about spitting, Tower Hill will spit out cash, even at much lower gold prices, making it a handy hedge to a major retreat in gold prices.

Finlayson noted that Tower Hill is all of 1km from the Leonora mill, which is the subject of an expansion study. Treating its ore there rather an earlier thought to haul it 100km over to the company’s Laverton mill could yield $225m in operating cost savings.

The Laverton mill is also being studied for mill expansion opportunities. It’s currently satisfied by feed from the adjacent Jupiter open-pit and third-party ore. But the $250m recent acquisition of Focus Minerals’ 4Moz Laverton project delivers more options close to the Genesis mill.

FireFly Metals (ASX: FFM):

FireFly boss Steve Parsons has long believed the best way to add value to a mining project is to get cracking with the drill bit.

The maxim is holding true in a big way at FireFly’s Green Bay copper-gold project in Newfoundland, acquired at the end of 2023 for what can now be seen as a knock down price of $65m.

Parsons has no less than eight rigs whirring away at the property and on Thursday reported that some exceptional drill results had extended the known mineralisation by more than 650m beyond the current resource.

The furthest drillhole recently completed from the northern end of the exploration drive intersected a stunning 49m grading 6.1% copper-equivalent, including a 14.3 massive sulphide zone grading 13.7% CuEq.

Firefly shares shot 22% higher to $1.69.

“These holes will form an important part of the updated (resource) estimate planned for later this quarter,” Parsons said.

“These results are truly world-class, with widths and grades which any copper miner would be delighted to have.”

The resource estimate currently stands at 24.4Mt grading 1.9% for 460,000 of copper equivalent measured and indicated, and a further 34.5Mt grading 2% for 690,000t CuEq of inferred resources.

FireFly was a $70m company when it picked up Green Bay, a former producer that came with some $250m in infrastructure assets. Its exploration success to date has carried it to a market cap of $1.15 billion.

The growing size of the resource and Green Bay’s tier 1 location means FireFly is a likely takeover candidate in a mining world short of quality copper assets that come with a gold element to boot.