Are there unforeseen problems at Chalice Mining’s huge nickel, copper, gold, platinum, palladium and cobalt find northeast of Perth that have forced the company to postpone its long-awaited scoping study on mining and processing millions of tonnes a year from the world class strike?
Judging by a surprise update on Tuesday announcing a delay to the study and the market’s sell-off in Chalice shares, the answer would have to be ‘yes’.
While ‘problems’ might be going too far, the explanations given by Chalice in the statement to the ASX show more work is needed on the exploration and processing sides of the mining equation.
if anything, the ‘problems’ could be more a case of knowledge gaps in the makeup of the deposit, its mineralisation and the best way to process the ore and get maximum extraction and the most suitable products for end users such as the renewables industry, especially batteries.
It was only a week ago that the company was highlighting new areas of interest at Dooley’s which suggested a separate area of mineralisation well to the north of Gonneville.
That work is continuing
News of the delay came as a shock to the market on Tuesday – investors had been expecting a study and more detail on the size and quality of the resource at Gonneville and its 350 million tonnes of ore containing copper, nickel, cobalt and PGE3 (palladium, platinum and gold), the first major discovery.
Tuesday’s news ended a long run up of 50% or more in the company’s share price in recent months and saw the shares ended down 9% at $5.93 but they had been as low as $5.47
That’s still well above the 2022 low of $3.37 in June and it was evident there was a slow rebound underway late in the session.
From details in the statement, trial processing of the core for the study and other work seems to have found recovery yield problems and questions about the best way to crack the technicals around the mineralogy of the ore at Julimar and Gonneville in particular.
As well, more detailed drilling of some of the higher-grade areas of the Gonneville deposit is needed and will be done in coming months. That will enable Chalice to have a better understanding of its distribution and whether it justifies mining the higher-grade areas as the company has been suggesting now for months.
Chalice made it clear that a revised study completion timeline will be determined once the mineral resource is updated in late the March quarter next year.
Chalice said in Tuesday’s statement that its understanding of the Julimar project “continues to evolve rapidly with recent technical studies and scoping assessments highlighting which development options are favoured from a value, optionality and risk perspective. “
“However, the studies have demonstrated that the scale of the Resource and uniqueness of the mineralogy at Julimar has resulted in a longer study duration than originally anticipated to determine the preferred development pathway.
“The Company continues to take a measured and systematic approach in the current Scoping Study phase, which includes more comprehensive analysis in certain areas (in particular in mineralogy and metallurgy) than would typically be undertaken at the Scoping Study level.
“Flowsheet development work has continued and has converged recently on options that would further enhance metal recovery beyond a typical base metal sulphide processing flowsheet. Importantly, recent metallurgical testwork has demonstrated the potential to improve recoveries of palladium, platinum and gold through leaching of the flotation tails and/or finer grinding.
“Given the unique mineralogy of the Gonneville Resource, experimentation in this phase of testwork was expected to, and has delivered, opportunities as the study work progresses.
“Initial mining optimisation studies have indicated that conceptual pit stages are constrained by the limit of drill data, especially at the northern end of the Gonneville Resource where recent drilling assay results were reported (refer to ASX Announcement on 23 November 2022).
“These studies have also highlighted that selective mining approaches (targeting higher grade zones) require further modelling of the recently completed localised 10m spaced infill drilling, in order to accurately evaluate these options. In light of this, a further Resource update is now planned for late Q1 2023.
“The planned metallurgical testwork and Resource update have the potential to materially impact the economics of the Project and, as such, the Company has determined that the Scoping Study originally scheduled for release in late 2022 should be extended to allow the results from this work to be incorporated. The value opportunities identified are considered sufficiently material to warrant this additional work.
“Independent external reviews of metallurgical testwork to date and flowsheet design by internationally recognised consultants have also identified further opportunities for improvement, which will be evaluated in the next phase of studies. An independent review of the key study areas completed to date has provided a strong endorsement of the quality and scope of the work.
Chalice Managing Director and CEO, Alex Dorsch, said: “The recent metallurgical testwork results have highlighted a material opportunity to deliver significant improvement to metallurgical recoveries through leaching of the flotation tails and/or finer grinding.
“The new results point to a significant step forward in metallurgical understanding of the unique PGE-rich nature of the deposit.
“This, combined with the recent wide, PGE-rich step-out drilling results to be incorporated in the Resource update in Q1 next year, have given us compelling reasons to extend the Scoping Study in order to fully evaluate and understand the additional value potential.
“With a unique polymetallic deposit of this scale and potential, our Scoping Study represents a critical iterative process that should explore all credible development options.
“We will complete our technical studies to the highest possible standard and explore all avenues to unlock the full value of the Resource for our shareholder, Mr Dorsch said.”
