Monsters of Rock: And now for the strategic partner you've all been waiting for ...

Chalice Mining announces non-binding MoU with Mitsubishi to collaborate on its Julimar nickel-copper-PGE project
Market hits one-time critical minerals darling for near 20% in response to partner selection news
Once worth billions, Chalice lost steam after a negative reaction to a scoping study last year

Chalice Mining (ASX:CHN) has spent the best part of two years progressing a ‘strategic partnering process’ for its Julimar nickel-copper-PGE deposit.

Discovered in farmland near Perth where no one had previously thought to look shortly before the Pandemic, it turned Tim Goyder-backed prospect generator Chalice into a rare beast, an early stage explorer with a market cap big enough to raise $100 million in single runs and crack the ASX 200.

Since the release of a scoping study that underwhelmed the market last year, however, the steam has well and truly come out of the engine.

Chalice is down ~25% YTD and ~18% today, in a hint the strategic partnering non-binding MoU it announced with Japanese mega-conglomerate Mitsubishi was not quite what the doctor ordered.

OR IT COULD BE A CONSPIRACY!

#ShitHotcopperSays $CHN Manipulated. Fake orders. Bots@ASX when will you do something?! pic.twitter.com/WRVTVd3D40

— Demoniaco (@DemoniacoASX) July 3, 2024

OK, probably not, but what’s the long and short of it?

CHN says the addition of Mitsubishi to its project team is considered the attraction of a Tier-1 strategic partner. But there are no hard and fast commitments, with Mitsubishi having 90 days post the completion of a PFS due in 2025 to discuss a ‘potential binding partnership, such as a joint arrangement and investment’.

That means there’s no equity investment yet to progress a project which, though it will no doubt be significantly altered in a PFS likely to focus on a more selective higher grade project, came in with a capex in last year’s scoping study of between $1.6-2.3bn.

Mitsubishi’s entry is the second play Japanese carmakers have made in the ailing WA nickel space in recent months.

While low prices and oversupply from Indonesia have seen a number of local nickel players pull up stumps – and the future of the big one BHP (ASX:BHP) Nickel West still up in the air – Japanese interest in local resources have given hope all is not lost as they try to source critical minerals outside of Chinese influence.

Sumitomo and Mitsubishi agreed to fund a $98.5m definitive feasibility study on the Ardea Resources (ASX:ARL) owned Kalgoorlie Nickel Project, while Korea’s largest electronics company Samsung signed a non-binding term sheet on supply from the Alliance Nickel (ASX:AXN) proposed NiWest project.

Unique orebody

Few can doubt the unique nature of the Julimar discovery.

The nickel, copper and PGE Gonneville deposit is the largest of its kind found in Australia, but comes with potentially complex processing routes and a tough choice between bulk and selective mining methods.

Those products are all of value to carmakers – nickel and copper in EVs and palladium and platinum in internal combustion engine vehicles and hybrids, where they’re used in catalytic converters to reduce petrol emissions.

The vast bulk of PGE production is undertaken in South Africa and Russia, with only a handful of discoveries made in Australia to date and no output yet to speak of.

Gonneville’s location is also a flashpoint. Being less than 80km from Perth, it seems ideally placed to be serviced from a major capital city.

While the deposit sits on farmland purchased by Chalice, its exploration ground to the north sits beneath the Julimar State Forest. Chalice has so far been able to conduct low impact exploration on targets beneath the State Forest and has committed to “responsible environmental management and open stakeholder engagement”. But environmental approvals will be closely scrutinised.

The company expects they will take around three years to complete.

But with the currently disclosed capex investors were likely looking for a major miner or downstream partner to commit to a stake to share the funding load and lend the market the confidence lost amid falling nickel, palladium and platinum prices in the past couple years.

Chalice MD Alex Dorsch was positive on the MoU, which he said came after ‘extensive due diligence and discussions over the past ~12 months and highlights the longer-term strategic nature and value of the Project as a potential large-scale, long-life and low-carbon source of critical minerals for Western markets.

“We have built a collaborative relationship through the process over the last 12 months, and we have strong strategic, cultural and operational alignment with Mitsubishi. We are excited to work together over the next phase of Project studies towards delivery of the PFS in mid-2025 and targeted Final Investment Decision in late 2026,” Dorsch added.

“We are pleased to sign this MOU with Chalice in relation to the highly strategic Gonneville PGE-NiCu-Co Project. The Project has the potential to become a large-scale, globally significant critical minerals asset, and its US IRA-qualifying suite of metals could have a strategic importance for Japan in the future,” Mitsubishi’s general manager of the battery minerals office Kota Ikenishi said.

“We are excited to work together with Chalice and leverage our complementary skillsets to advance the project as we explore the possibility of formalising a potential long-term partnership.”

Materials moves

The reaction to Chalice’s news was a rare black spot on the market today, with the materials sector up 1.11% and energy 0.56% higher.

Coal stocks continued to run amid concerns Anglo may be forced to permanently close its Grosvenor mine after a fire, with uranium miners also strong performers along with the big iron ore producers lifting in response to stronger property sales data and policy support in China.

READ: Bulk Buys: Anglo walking on hot coals as fire hits sale process

Ramelius Resources (ASX:RMS) dropped 0.53% after announcing a $175m debt facility a day after emerging as a near 18% holder of Spartan Resources (ASX:SPR), but Spartan was up 1.09%.