If it looks like a bull market (technical breakout in gold), smells like a bull market (significant negative yielding debt) and feels like a bull market (funds flowing into gold), it must be a bull market. Our analysis shows that equities in smaller sized companies outperform during a bull market. However, not all junior miners are created equal, and we believe there are three keys to picking them.
Chalice Gold Mines Ltd.
Chalice Gold is a unique well-funded explorer with district-scale exploration projects in high-grade gold provinces within tier-1 jurisdictions. Chalice’s key projects are the 100%-owned Pyramid Hill Gold Project located in the high-grade Bendigo gold district of Victoria, as well as the East Cadillac Gold Project in the significant Val-d’Or gold district of Quebec. The company is targeting 5Moz+ high-grade gold discoveries in greenfield but near-mine locations.
Chalice Gold (~C$30M in working capital), is actively exploring on trend with one of the world’s highest-grade gold mines in Australia (Fosterville). Additionally, the company recently ramped up exploration at its Mount Leopold project where it is preparing to drill in September. Trading near cash value, our thesis remains that Chalice is poised to rerate on the first hint of drilling success during its Phase 2 reconnaissance drill program.
Impact: Mildly Positive
Chalice has announced EM results from its recently expanded 1,800km2 property nickel property in Western Australia. Equipped with a technical team experienced in nickel sulphide discoveries, we expect the company is well positioned to make a discovery at its King Leopold project. With renewed focus in its Australian assets, we believe Chalice is poised to re-rate on the first hint of drilling success.
Chalice has announced Phase 1 results from its reconnaissance drill program at Pyramid Hill. Consequently, they have identified three high priority targets that requires follow-up drilling. With renewed focus on Pyramid Hill, Chalice is exploring under cover for the next Fosterville and we expect that the company could re-rate on a significant discovery.
Chalice announced the sale of its Quebec assets to O3 Mining, a new Osisko Mining (TSX:OSK) led venture, which should add C$12M in marketable securities to its balance sheet and allows Chalice to focus on Pyramid Hill. Chalice’s discounted EV doesn’t reflect that it is a cashed-up junior poised to re-rate on the first hint of drilling success in Australia.
Impact: Mildly Positive
Chalice announced the acquisition of the Ruins Project which expands its King Leopold Nickel Project holdings in Western Australia’s Kimberley region to ~1,800km2. As recently noted in our exploration update we view this acquisition as an inexpensive option on making a major discovery and additive to Chalice’s Pyramid Hill gold project, also in Australia. The news reinforces our thesis that Chalice is poised to rerate on the first hint of drilling success at either of its projects.
Introducing our inaugural Exploration Preview, which focuses on names within our coverage universe with drill bit torque. We review the exploration potential and try and quantify the potential impact on the share price should the company be successful in delivering results. We believe that exceptional drill results can create value regardless of where we are in the commodity cycle. Our top ideas are highlighted in Figure 1 below and will be presented in a similar alphabetical order within this document, bifurcated for precious and base metals focus.
Cashed-up junior on the hunt for major discoveries in two world class gold camps. With C$20M in cash, Chalice is actively exploring on trend with one of the world’s highest-grade gold mines in Australia (Fosterville). In addition, Chalice is also looking for the next Abitibi gold giant, on its recently consolidated East Cadillac project in Quebec. Trading near cash value, our thesis is that Chalice is poised to rerate on the first hint of drilling success at either of its two highly prospective projects.
Impact: Mildly Positive
Chalice has released encouraging results from its Pyramid Hill project where it just completed a 19,500m air-core and reverse-circulation (AC/RC) reconnaissance drill program. Chalice is on the hunt for quality deposits at Pyramid Hill in the prolific Victorian Goldfields of Australia while also advancing East Cadillac, within the Abitibi of Quebec, where exploration work is ticking the boxes for another Canadian Malartic. Chalice’s discounted EV doesn’t reflect that this is a cashed-up junior on the hunt in two major gold camps.