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Afternoon All, 


Chalice Gold's (CHN.ASX $CHN) Julimar high-grade PGE-Ni-CU-Co discovery has collectively created some A$1.4b of market cap. A healthy +2,437% share price gain from 12 months ago. We have been raising funds for Northem Resources, which plans to list early next year, and stands out amongst CHN's junior explorer neighbours as the largest tenement package with the lowest current MKT Cap/EV, which we hope to be a good combination for listing. 

In this desk note, some background on the Julimar discovery, the region and who is playing, and some comparison work on the regional explorers. 

Best,
Tom

 

Julimar Discovery  - Party Time!
 

Chalice Gold’s (CHN) Julimar discovery of high-grade PGE-Ni-CU-Co has kicked off a significant new province in the West Yilgarn (which runs from near Perth all the way west past Kalgoorlie). When you look at CHN and the listed plays immediately in proximity to Julimar (Devex Resources DEV.ASX, Mandrake Resources MAN.ASX, newly listed Caspin Resources CPN.ASX) there is ~A$1.4b of market capitalisation, which is largely attributable to the discovery in a period of just 8 months. And this is not including the $100m CHN are raising ($90m placement closed with $10m SPP). This makes Julimar one of the most significant resource discoveries in Australia of 2020, perhaps globally.

Chalice - Devex - Mandrake - Caspin  - Price Performance - 12m Chart (Click to enlarge)

A hat tip to the team at CHN, as many thought they were chasing a dream hunting in the area. I won’t pretend to have any great geological insight into the process of discovery, as described to me it is very challenging to look through the banded iron cover to see the remnants of the volcanic pods that hold the right ultramafic rock types.


There is genuine excitement from geo’s now about the West Yilgarn, proving these systems exist, and it is the addition of the Palladium (Pd) and Platinum (Pt) that are increasing the value of these deposits. Pd has risen from around US$500 per oz to US$2,300 per oz over the past 5 yrs. Platinum trades at US$970 per oz. the Pd, Pt and Nickel, Copper and Cobalt are all in-demand industrial metals and are all being supported at the margin by rising EV/renewable energy growth.
 

The Land Grab

Given CHN has quickly looked to peg an additional ~2,000km2 in the region, CHN must see the potential for similar discoveries in the area. It is an interesting exercise to break down the land holdings and market caps of the “nearology” plays in the area.

The following images are taken from the Northern Resources materials. The first map shows the listed players in the West Yilgarn, and puts them in perspective with reference to the Julimar discovery. Note the original Chalice tenement is approx 155km2

Map - Granted Tenements - Chalice - Devex - Caspin - Mandrake - Northam Resources (Click for Hi-Res image)

The next map has an overlay of CHN along with the other explorers and the ground being pegged by CHN in the area. In their capital raising presentation (HERE), they have new licence applications for >2,000km2 in the region, generally east of the discovery.


Map - Granted Tenements - Chalice - Devex - Caspin - Mandrake - Northam Resources - Plus Chalice Applications (Click for Hi-Res image)

A little more clearly from the CHN presentation, their granted and application tenements. CHN are pegging significant ground east of the Darling fault in the Yilgarn.


Map - CHN Granted and Pending Applications as of Dec 2020  (Source: CHN presentation 01/12/2020)

Battle of the Land Packages

 

On the basis of CHN completing their $100m capital raise (as announced today), the market cap will be $1,254m at the offer price of $3.75. Given this exploration success, it is no wonder the regional plays are enjoying the flow on effects of the Julimar success. It is a worthwhile exercise going through the regional explorers, and comparing them, given all of them are pre any real significant targeted modern PGE-Ni-CU-Co exploration.
 
The following regional peer summary shows the principal land assets in the Yilgarn and the approximate land holdings in km2. Note all the explorers have secondary assets in their portfolios. This comparison assumes the successful CHN raise of $100m. It is important to consider the "in the money" options as well (a lot of these were priced pre-Julimar no doubt!)

Regional Peer Summary - Click to enlarge
 

Notes:

1.Market capitalisation (excluding options) and enterprise value as at 30 November 2020. Source: S&P Global, Company announcements. On 1 December 2020 CHN in trading halt to raise $90.0 million at $3.75/share
2.Compared to other peers, Mandrake Resources has a significant percentage of its total capital structure (~33%) in options at $0.03 (closing trading price of $0.10 per share). Accordingly, the fully diluted market capitalisation and enterprise value have been included to reflect the exercise of these options and material impact on valuation
3.Devex Resources actual economic interest in the tenements will be less given one of the tenements is a joint venture to earn up to a 50% interest

Source Northam Resources

Northam Resources...Land and History



You can see the unlisted Northam Resources has by far the largest tenement holdings in the comparison to the other regional explorers, with the smallest market cap and EV. And CHN has applied for land all the way to Northam’s western boundary some ~30km adjacent to the Julimar discovery.
 

Northam Resources has also had some luck on their journey as well, as they originally acquired the land package to pursue the high-grade magnetite (Northam Iron) in the region, prior to the Julimar discovery. Whilst targeting the iron ore, they also accumulated the other mineral rights (including PGE-Ni-CU-Co) and have significant historical exploration and drilling data, cores and rock chips for sampling to assist in identifying drill targets.

Northam is already planning near term exploration activities having two previous RC holes that intersected >20 metres each of intrusive mafic and ultramafic rocks with both holes ended and still open within the ultramafic period structure which has been confirmed to contain nickel sulfides, chalcopyrite, pyrite and pyrrhotite. Further work is required given these drill programs were designed to target more shallow iron formations, however, the data from the two pre-existing RC holes (which are more than 500m) apart suggest it is a common and hence relatively large contiguous ultramafic structure. 

Northam will undertake more survey and testing of these samples prior to the intended IPO listing in Q1 2021 calendar year. This will place Northam in an enviable position as one of the many junior explorers in this area in so much as they will not only be drill-ready upon listing but already have known intersects of mineralised ultramafic structures at the time of listing.

Summary

Given the CHN success, +2437% in the last 12 months, it is clear why all ground in the area has been snapped up, and peers are trading a premium not usually enjoyed by junior explorers.

It is not likely that in the short term these sorts of discoveries can necessarily be repeated, just because of the location. However, history shows that provinces can emerge with geological breakthroughs and changes to the understanding of the geology and exploration techniques.

And whilst Northam Resources carries the risk of being unlisted, the intention is to IPO early in 2021. And on a comparison basis to the other regional plays, it stands out given its significant land package and discount to junior peers (DEV, MAN, CSP).  

Disclosure of interest - the author is participating in the current Northam Resources capital raise, and as such will own shares. Other Wentworth Directors and staff own shares in Northam Resouces. Wentworth Corporate Finance is the advisor to Northam Resources and has been paid fees. 
Best, 
Tom

Thomas Schoenmaker
Head of Wealth Management
Director

 

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