Chalice Gold Mines

Cashed up and debt free with Canadian and Australian gold assets

 


 

Alex Dorsch of Chalice Gold Mines traces the company’s history back to 2006 when it listed on the Australian Stock Exchange, originally owning the historic Chalice gold mine in Western Australia. However, the CEO explains how it wasn’t until the 2009 venture into Eritrea in Northern Africa that the company was materialised, after its acquisition of the Zara Gold Project. Chalice advanced the project over the next three years, until a significant US$114 million bid, lobbed by a Chinese-Eritrean consortium convinced the company to sell. Using the funds from the Eritrea sale, Chalice spotted an opportunity in Canada and snapped up a gold project in 2012, before making a healthy profit again with a divestment in 2016.

 

By this point Chalice had developed a strong nous in reading the market and commodity price cycle, with an ability to smell the right time to invest in order to maximise investor returns.

 

The company changed tact slightly in 2017, when the board found there was a growing appetite for risk in the sector and decided to build a commanding exploration portfolio, targeting discovery in Canada and Australia.

 

“Here we are 18 months later and we’ve built a substantial portfolio of exploration assets in the world-class domains of Canada and Australia,” says Dorsch. The CEO believes that what sets Chalice apart from its exploration competitors is the company’s combination of financial capability and broad technical and commercial strengths.

 

Financial and technical proficiency

 

“It’s a unique business model where the company can apply its strong financial position as well as its deep technical and commercial ability to really interrogate projects quickly, pick opportune times to acquire and make material progress in developing each one.”

 

Returning to its transaction history, the sales in Eritrea and Canada put the company in a commanding financial position, in that it has been well cashed up and debt free ever since.

 

This is a rare position for a junior exploration company to find itself in; having a war chest of over AUS$40 million. Crucially, the healthy balance sheet has meant Chalice has not had to rely on capital markets and going back to shareholders every time it needs to raise funds to support development plans.

 

Dorsch also regards the board and 25-strong Chalice team as another key area of strength within the business. “We have a very experienced board led by well-known and highly regarded industry veteran Tim Goyder. He has a great track record of success and is an integral part of the business as executive chairman.”

 

“Beyond that, within the wider team there is a demonstrable depth and breadth of experience which I think is another key driver of the business.”

 

The decision to focus its exploration portfolio on Canada and Australia ended up being a no-brainer for the board for myriad reasons beyond the obvious low sovereign risk attached to operating in these secure, mining-friendly regions.

 

In fact, mining-friendly is a bit of an understatement, particularly in the case of Québec. The Canadian province rebates Chalice around 30% of its direct exploration expenditure and on top of that, there is not state royalty – making it a very attractive region for exploration.

 

“It’s the endowment of both regions and their geological potential,” says Dorsch. “We consider Canada and Australia as world class domains, with a lot more to give in terms of exploration potential.

 

“We like the geological selling point and investment certainty that comes with mining friendly jurisdictions, so from that perspective it’s a very attractive proposition to be operating in those countries.”

 

East Cadillac Gold Project

 

Chalice’s flagship asset is the East Cadillac Gold Project, located in the world-class Abitibi greenstone belt in Québec along the Cadillac break, which hosts over 100 million ounces (Moz) of gold discovered and a number of globally significant gold mines.

 

“We are in very good company and have a regionally significant ground position now covering over 27km of strike along that break. We are very encouraged by what we have seen from the work to date”

 

“We’ve only had the property for just over 18 months and have continued to expand the ground holding, while undertaking a back-to-basics, ground-up exploration programme to give it the best chance of success in making a substantial discovery.”

 

When Chalice first picked up the project, they noticed it had significant exploration gaps and was likened to a patchwork of random sampling and ineffective drilling. Seeing this, Chalice stepped back and began with regional sampling and all the modern geophysical tools it had at its disposal, including 3D Induced Polarisation, Aeromagnetic and LIDAR surveys.

 

“We used all of those tools successfully and started our first phase of drilling on the property in October last year and have only just completed that programme in early April,” reveals Dorsch.

 

From the initial phase of drilling Chalice has made two promising gold discoveries to date, with a large portion of results still pending and a number of additional targets waiting to be tested. The drilling was performed by two reliable international drilling contractors.

 

“We had great support from Foraco, G4, ALS, MRB & Associates, Abitibi Geophysics, amongst others in Val-d’Or; they have all done an excellent job. To drill the best part of 30,000 metres on time, under budget and without significant incident is very commendable, so we are really happy with that outcome.”

 

Australian assets

 

Turning to the Australian portfolio, Chalice has established two main projects Down Under: The Warrego North Project in the Northern Territory and the Pyramid Hill Gold Project in Victoria.

 

The former is located in the very well-endowed Tennant Creek area in close proximity to several historic mines dating back to the mid-20th century, including the 1.6Moz gold-producing Warrego Mine.

 

“We are immediately Northwest of the Warrego mine, a very high-grade historical gold-copper mine in the Tennant Creek IOCG domain. The area has many similar mines, all with a relatively small surficial footprint but very high-grade ore bodies extending at depth.”

 

“It is a difficult area to explore but we have the right EM and gravity signatures on our block that gives us a lot of excitement about exploration success,” says a hopeful Dorsch.

 

Chalice also recently picked up a district scale land position at Pyramid Hill, extending over 3,350km2 of ground North of Bendigo in Victoria. Initial findings indicate that there is a real lack of exploration under the Murray Basin cover in that area.

 

This notion has been strengthened by the Victorian government’s declaration that there is potentially over 32Moz of gold extending North of Bendigo, which has given Chalice extra motivation to begin work on the project very shortly.

 

Commodity markets

 

Chalice is looking to accelerate work across all of its projects over the next 12 months but will also uphold an aggressive acquisition strategy.

 

“We are looking at upwards of ten opportunities at any one time and enjoy the luxury of having a significant amount of capital to deploy –  but we always look at acquisitions with an owner’s mindset; we acquire projects that we genuinely want to run.

 

“Our strategy is very much based on making timely acquisitions of undervalued assets and at the moment our focus is on gold and nickel sulphide projects.”

Dorsch believes that macro conditions shaping the gold market have not had quite as profound an effect on prices as usual, citing ongoing political instability in North Korea and the Middle East.

 

However, Chalice continues to monitor these external forces and remains bullish on gold and other base metals, which are viewed as being at the beginning of an upturn in the cycle by the company. Hence, Chalice is keeping its ear to the ground with regards to opportunities in this space.

 

“Ours is a distinctive and unique value proposition,” concludes Dorsch. “Typically, junior explorers don’t have the ability to operate at our level, so I like to think we have a particularly strong value proposition given we are trading around our cash backing, with a proven model based on acquiring assets at opportune times, progressing them rapidly and delivering value to shareholders.

 

“Having that financial ability, commercial mindset as well as the technical ability really does differentiate us.”