You're listening to The Whole Truth, a Resources Rising Stars podcast.
Welcome to the final episode of The Whole Truth podcast for 2025. We've ended the year on a very high note here talking to Alex Dorsch. She's the managing director of Chalice. Chalice owns the Gonneville project in Western Australia. It will produce a basket of metals, but most notably one of them is palladium. A lot of this discussion centers on platinum. The price has had a very strong run and it looks like it's set for further gains, basically because the world is coming to realize that EVs are not going to take over the world as nearly as rapidly as previously thought.
Platinum is a key ingredient in the hybrid engine model and petrol engines. So the platinum price took a bit of a knock when the world took a view that EVs were going to take over. There's been a big realization in the last six months, of course, that in fact petrol and hybrid cars have got a very strong future. That's seen the platinum price run, and it's taken Chalice with it. Chalice shares have doubled this year, and the company looks set for further gains on the back of this trend towards hybrid vehicles. Alex takes us through why hybrids are so good news for the platinum price and how leveraged Chalice and Gonneville is to further gains in the platinum price. The long and the short of this discussion is: if you think that the world is going to keep buying hybrids and petrol cars, then you're going to like Chalice.
Alex, to twist a great line from Charles Dickens, it was the worst of times. It's fast becoming the best of times at Chalice. Obviously, you know, still some more work to be done, but you've had a cracking year.
Yeah, thanks Paul. Good to be with you. Yeah, it has been a cracking year after two very, very difficult years. You know, we sort of went through a trough in the cycle for PGMs and nickel at the same time, 2023-24. And now, as you said, yeah, the trend is our friend again. PGMs have really started to lift off the lows. So yeah, it's been a fantastic year commodity price-wise. That looks like it's going to continue, and obviously we've done amazing work on our project as well.
So now let's look at the worst of times, as Dickens would say. I mean, we had you in this studio in August 2023. You just put out the scoping study on the Gonneville project, and you were getting castigated far and wide. One of the things that you were getting speared over was the assumed prices that you had put into that study. Not normally the palladium price. I think you had nominated a price of, what, $1,300 — no, it's $2,000 an ounce. And people said it's unrealistic. You'll never get $2,000 an ounce, and therefore the study doesn't really add up. But funnily enough, the platinum price today is, what, $1,750 going on to $1,800. You must sort of wonder whether you should have listened to them and just stayed the course.
Yeah, I think, I mean, the context there is, you know, when we found this deposit in 2020, the price was about $2,500. And then we spent sort of three years sort of fluctuating between $2,000 and $3,400. So it was pretty geopolitically charged, the metal. You know, palladium, it's a Russian metal. Russia produces 40% of the world's output. And it was volatile. So we unfortunately, I guess, went and designed the project at a heightened price environment. We also designed the project with a more downstream type, you know, flow sheet. And then sort of over the course of 2023, the prices really started to dive, all the way down from $3,400 to about $900 US an ounce. So we were sort of caught between not having quite the right flow sheet, not having the right metallurgy, but also on the wrong side of the trend.
So you put that scoping study out, you priced in US $2,000 an ounce. You got fairly monstered. As I say, people said that's not realistic. So you went back to the drawing board, and this is where the game really started to change for Chalice, wasn't it? You went back to the drawing board, but as I said, going from the worst of times to the best of times earlier this year, you announced a big metallurgical breakthrough that was a game changer for the project.
Yeah, that's right. I guess the benefit was all the metal was still in the ground. Even though we copped a bit of a whack on the trough of the cycle and the original scoping study, as you said, we went right back to square one. And we said for the first sort of two or three years we couldn't make the flow sheet generate saleable nickel concentrate. We could generate a saleable copper concentrate very, very easily. We were sort of not having much luck getting the nickel concentrate up to a saleable nickel content. Then late last year, early '25, we started to really understand what reagents and what grind size, what parameters in the float cell would generate that plus 8% nickel concentrate, which is sort of the saleable threshold is about 6%.
Now, the key implication of this is that it meant that you actually cut off a chunk of the processing route, didn't you? The last few stages, which means that you're just going to sell a concentrate rather than a more developed, more processed product. And by ending your processing route sooner, in simple terms, you therefore obviously save a whole lot of capex.
Yeah, that's right. We were effectively building two plants. In the scoping study, we were building a float plant, a leach plant, and this big hydromet facility to process the nickel concentrate. So we've dropped the hydromet facility. So in the pre-feasibility study that came out last week, about $300 million Australian is gone because we're not doing that hydrometallurgical process anymore. We've still got the float plant, the leach plant, but we just don't have that level of processing anymore on the nickel side.
So, it's a super shorter processing route.
Absolutely. Fundamentally simpler. It's like what everyone else does. If you've got a gold-copper operation like a Boddington or a Telfer or a Cadia, they float into a copper concentrate and then they leach the float tails and get whatever remaining gold comes out of that wasn't captured into the float.
So that metallurgical breakthrough means that you cut a whole lot of capex out of it. You reduced the cost of the project, made it simpler, but of course in the process or against the background of rising prices, particularly palladium.
So when you've put out the PFS, you now have priced in — what's your assumed price there?
So we've taken a more realistic view of the macro. I guess we did all our design optimizations really at the bottom of the cycle. So that was about $1,300 US an ounce palladium, about $16,000 nickel, and about $8,500 copper. So we've used those prices to sort of make sure the project...
So this is important because — so for our listeners, because they would say, right, the prices you're now assuming in the PFS that you've just put out are actually lower than spot.
Oh, much lower than spot now. So we did...
So you've turned the whole thing upside down. You had a price assumption in the scoping study that was higher than spot.
Hence you got monstered. You've now got to assume prices are much lower than spot. So you've been very conservative.
Yeah. I think we have had that feedback that certainly on the PGMs we've been much, much more conservative. But you know, we have just lived through two and a half years where the price trundled between sort of $900 and $1,100. So we wanted to make sure that the project was absolutely rock solid even at the trough of the cycle. We think prices are going much, much higher, mind you, than $1,300. So that's why we presented at spot, and we gave obviously a range of — we gave a table which shows you...
As we said, $1,750 today.
Exactly. So that's the benefit of our project now with this simple flow sheet, with those big capital bits of plant taken out. We can sit there and be profitable. We can get this project going at the bottom of the cycle, and it starts to look incredibly compelling towards the top of the cycle. And we don't think we're at the top of the cycle yet. You know, last time prices went $3,000 plus. They've just gone through $1,700 US an ounce. So yeah, we think given the inelasticity, there's no other projects that can come online to satisfy demand. So when the market is short, prices typically explode very, very rapidly higher. So that's what we're seeing at the moment.
So you've combined — you've now got a better price environment and you've got a much lower capex and a simpler project. Now you put all that into the PFS, and what does the PFS show Gonneville will look like now?
Yeah. So it looks like a 23-year open cut operation not far outside of Perth. And it's going to generate about $4.7 billion of cash flows over that 23 years, and we'll only have mined about half of the existing resource.
So what's the internal rate of return? That's, I suppose, the key figure here.
