A pre-feasibility study (PFS) for Chalice Mining’s (ASX: CHN) greenfield Gonneville project in Western Australia has confirmed a long-life, globally competitive critical minerals development set to generate $4.7 billion in free cash flow.
The study describes a two-stage open-pit mine and process plant development predicted to become a large-scale producer of 3E precious metals (palladium, platinum, and gold) averaging 220,000 ounces per annum, with valuable by-products of nickel (7,000 tonnes per annum), copper (8,000tpa) and cobalt (700tpa).
The pre-tax return is based on an initial 23-year open-pit mine life with a rapid Stage 1 payback of 2.7 years, increasing to $6.2b at spot prices and reducing the payback to 2.4 years.
The project is forecast to have a pre-tax net present value of $1.4b (increasing to $2b at spot) and a post-tax NPV of $1b (or $1.5b at spot) plus a 23% pre-tax internal rate of return (29% at spot).
Chalice expects Gonneville to create around 1,200 direct jobs during peak construction periods and around 500 jobs annually when the project reaches operational phase.
Palladium Leverage
A globally competitive second quartile cost profile will start with an all-in sustaining cost of US$50/oz 3E precious metals (net of by-product credits) in the first three years, trending to US$370/oz over the 1.2x strip ratio open pit phase.
The study highlighted significant leverage to the palladium price, with a $250 million increase in pre-tax NPV and a $640m increase in cumulative pre-tax free cashflow expected for every US$100/oz increase in the commodity’s long-term pricing.
The PFS does not include an assessment of future underground mining or extensions to mineralised zones beyond the resource that have been defined through step-out drilling.
Mining inventory and mine life has been limited by conservative design parameters (rather than drilling), and the modelled open pit exploits only 50% of the current resource.
High-grade mineralisation has been proven to extend approximately 900m beyond the limits of the resource, highlighting a robust life extension upside.
Maiden Ore Reserve
The PFS development plan is materially different to previous Gonneville studies, with a two-stage development, a ++simplified flowsheet++, and design optimisations based on a conservative bottom-of-the-cycle commodity price environment.
It outlines a maiden ore reserve for the project – limited to the open pit measured and indicated portion of the resource that has demonstrated economic viability – of 260Mt grading 0.86 grams per tonne 3E, 0.16% nickel, 0.098% copper, and 0.017% cobalt; containing 7.1Moz 3E, 400,000t nickel, 250,000t copper, and 430t cobalt, limited by infill drilling.
Chalice has significantly de-risked Gonneville with exploration investment to date of $240m including 1,200 resource definition drill holes, 33 dedicated metallurgical drill holes and over 1,400 metallurgical tests, 58 geotech-logged drill holes, extensive engineering trade-off studies, preliminary marketing discussions with smelters, active stakeholder engagement since the project’s discovery in 2020, and the progression of environmental approvals.
The company also spent $50m on the acquisition of a 26 square kilometre package of freehold land covering the proposed mine development area and further de-risking the project by providing certainty on tenure and a buffer to the limited neighbouring and biodiversity offset land properties.
Since 2023, Chalice has focused on simplifying Gonneville’s development plan, resulting in lower upfront costs and risks, enhanced margins and robust financial metrics.
Lowest-Cost PGM Mine
The pre-feasibility study positions Gonneville as the lowest-cost primary platinum group metal (PGM) mine in the Western world, and as Australia’s second largest nickel mine.
Critical minerals produced will be essential to the automotive industry (for electric, hybrid and internal combustion engine vehicles), the defence sector (high performance materials and electronics), data centres (semi-conductors and electrical components), and decarbonisation applications.
Chalice has aligned the project to Western government policy directives, helping address the critical minerals dominance of nations including China, Russia, South Africa, and Indonesia.
“This study demonstrates that Gonneville will generate solid returns, even at bottom-of-the-cycle prices, and will have an industry-leading cost competitiveness, while delivering substantial social and economic benefits for WA and Australia over a multi-decade life,” managing director Alex Dorsch said.
“The mine’s large and diverse production profile together with its scalability points to further upside particularly in volatile commodity price environments driven by the extreme scarcity of PGMs and the lack of large-scale base metal development projects worldwide.”
