Shareholders in Chalice Mining (ASX: CHN) meet next Friday, December 3 to approve the spinoff of the company’s gold mining assets and a $15 million or more fund raising to launch the new company on an independent path while the parent will be left to plot how to exploit one of the world’s most important mineral finds for decades.
It’s a divorce that will see winners, not losers.
The demerger will see Chalice and Falcon Metals go their separate ways, freeing up managerial time and focus for Chalice to concentrate on its world class Julimar – Gonneville nickel, copper, PGE, cobalt discovery and start work on four other prospective areas along the 26-kilometre line of strike northwest of Perth.
The spinoff will see Chalice shareholders getting one Falcon share for every three held.
Falcon is seeking to raise a minimum of $15 million and up to $30 million via a stockmarket listing. Chalice shareholders will have the opportunity to lift their holdings in falcon in the issue.
Falcon’s assets are gold mining prospects in Victoria and WA – the Pyramid Hill, Viking and Mt Jackson gold prospects.
The Pyramid Hill project is a 5,000-square-kilometre-plus area in Central Victoria’s Bendigo Zone that Kirkland Lake Gold’s rich Fosterville mine has boosted to one of the most prospective gold areas in the country.
The Viking and Mount Jackson projects are in WA.
The spinoff is also good news for Falcon and its trio of projects that would have been submerged in all the enthusiasm for the massive Gonneville find in WA.
It should in fact be seen as a significant event for Chalice because it separates the interesting gold assets from the fabulous Gonneville find, while at the same time opening Chalice up to possible corporate activity in 2022 and beyond.
Chalice’s AGM heard this week from company management and chair Tim Goyder (who stepped down at the end of the meeting) and boy, were they ebullient:
“The Company’s incredible growth and success has been driven primarily by the spectacular and rapidly evolving PGE-nickel-copper-cobalt-gold discovery at our Julimar Project, located just ~70km north-east of Perth and surrounded by world-class infrastructure,” Mr Goyder told the meeting.
“The recent announcement of our Maiden Resource Estimate for the Gonneville deposit has attracted headlines around the world – and justifiably so. It confirms that Gonneville is the largest nickel sulphide discovery worldwide in over 20 years, and the largest PGE discovery in Australian history – but exploration of the district has only just begun.
“The Resource been a game-changer not only for Chalice, but also across the broader mining and exploration industry globally. It is hard to recall a recent discovery which has had such profound implications for Western Australia.
“One of the strongest themes emerging in the mining industry is the need for ‘green metals’ and their critical role in decarbonising the global economy. Our tier-1 scale discovery at Julimar is uniquely positioned to satisfy the immense future demand for these metals and we are justifiably proud of this,” Mr Goyder said.
The company has six other targets – four along the 26-kilometre Julimar line of strike one further north (called Barrbarra) in the company’s more than 8,000 kilometres of exploration ground along the western edge of the Yilgarn Craton (which is home to the WA gold and nickel fields). The sixth is called Southwest, in the southern part of the exploration area.
Chalice said in its AGM presentation that a “Large-scale Ni-Cu-PGE soil anomaly already identified at Barrabarra 300 kilometres north of Julimar where AC drilling is now underway.”
MLEM (moving loop electromagnetic) work will recommence at South West in in the current 4th quarter and initial airborne EM (electromagnetic) surveys over remaining Julimar and new Barrabarra areas are also scheduled for the current quarter.
The Gonneville discovery and its 330 million tonnes (initial estimate) of nickel, copper, PGE minerals and cobalt covers only 7% of the Julimar strike zone’s 26 klicks. Seven rigs- three reverse circulation (RC) and four diamond – are continuing a 160,000-metre step-out and resource definition drill program at Gonneville, testing its width and depth (its open at 630 metres or around 2,000 feet!).
The company plans testing drilling for metallurgical work and more resource delineation while the scoping study for the initial development will continue till the end of the June quarter. The company plans to make its mining licence application in the first quarter of 2022.
Testing along the remaining 24 kilometres of the strike zone – containing at least four major areas of interest – is starting using some of the $86 million in cash on hand to finance the work.
The four areas of interest along the strike are known as Hartog, Baudin, Janz and Torries which is furthest north from Gonneville.
Reconnaissance drilling at the Hartog-Baudin Targets within the Julimar State Forest will see initial low-impact drilling utilising small track-mounted diamond rigs is planned to commence immediately once access and permitting approvals have been secured for the state forest areas in which the strike zone is located. The approvals are expected in the coming weeks and the work will extend into 2022 to around the end of the June quarter
A total of around 70 drill sites are planned with the ability to drill multiple angled holes at each site. No mechanised vegetation clearance is required to complete this first pass of drilling (to satisfy the state government).
Reconnaissance drilling at the Jansz-Torress Targets at the northern end of the Julimar Complex – AC drilling is planned on private farmland in the current December quarter and continue until the end of the June quarter.
At this week’s AGM Chalice said “the compelling Hartog Target is the highest priority – access approval expected shortly.” It said Hartog was a 6.5-kilometre-long magnetic anomaly.
So far “30 ground EM conductors and multi- kilometre scale Ni-Cu soil anomalies suggests Hartog is “comparable to Gonneville pre-discovery” Chalice said in an AGM presentation.
The big question for 2022 is how long can Chalice remain independent?
The global mining industry now knows it has made the major global metals discovery so far this century.
Non-Australian giants like Barrick, Newmont, Polymetal, Freeport and Anglo American would all be interested but would also recognise that they would be blocked from acquiring the company because they are foreign companies.
Similarly Chinese companies need not apply.
The Julimar complex of prospects is a major future national asset for Australia (and WA)
For an idea of the possible high level of interest, look at the way BHP and Andrew Forrest’s Wyloo Metals are fighting over Canada’s Noront Resources and its Eagles Nest and other finds in remote northern Ontario.
When will one or both companies look south to Australia and start eyeing off Chalice? Chalice clearly doesn’t have the financial resources or size to develop Gonneville into a major mine.
It is ‘only’ worth $3.4 billion at the moment and developing Gonneville as well as working on the other areas will require a multi-billion dollar spend over the next five to 10 years.
BHP and Newcrest are shareholders in Solgold and its massive copper gold discovery in Ecudaor called Cascabel where one of the early exploration holes encountered 1,500 metres of continuous mineralisation.
Rio Tinto has the large Winu low grade copper and gold (and some silver) fund in the Eastern Pilbara, near the slowly emerging gold and copper province to the north and northwest of Telfer, owned by Newcrest.
Rio Tinto, BHP and Fortescue Metals face the problem of how to refocus themselves with Chinese iron ore imports looking to fall in coming years. The three companies can use the still large cashflows from their huge iron ore businesses to finance new businesses.
Fortescue is doing that with hydrogen, Rio with lithium in Serbia and a dabble in batteries and BHP is pushing deeper into nickel in WA as well as looking for other exploration involvement in Canada and Australia.
BHP has singled out potash as a non-iron ore involvement for the future. It’s quit oil and is on the way out of thermal coal, so it needs a suite of new, top tier businesses.
Gonneville is by far the best Top Tier mining prospect globally.
BHP is already occupied with its nickel mines and processing in WA, plus copper, gold, uranium and silver at Olympic Dam and at nearby Oak Dam which at the moment looks a smaller version of Olympic Dam.
BHP already controls two of the world’s top four copper deposits – Escondida in Chile and Olympic Dam.
If it was to link with Chalice (it would be more expensive that buying Noront) BHP would be a major global player in copper, nickel, gold and the PGE metals.
And finally, what about the big talking super funds, especially those industry funds through the likes of IFM (owned by 15 industry funds) that keep talking about financing infrastructure here and offshore.
On what we already know, Gonneville-Julimar will be a major Australian infrastructure asset for decades to come – an ideal investment for organisations now used to looking at long investment and payback times, such as a globally important mine/mines.