Chalice Gold Mines Limited (ASX:CHN)

April 23, 2014 | Price: $0.155

Emerging Companies

Overview: Chalice Gold Mines Limited (“Chalice” or the “Company”) is an Australian minerals company with gold and base metal interests in Canada, Australia, and Eritrea. Its most advanced asset is the Cameron Gold Project, Ontario, Canada, (“Cameron”) which hosts Measured and Indicated Resources (M&I) of 567,100 oz of gold at 2.45 g/t and Inferred Resources of 830,100 oz of gold at 2.11 g/t (excl. Dogpaw and Dubensk). A Preliminary Economic Assessment (PEA) into a 10-year mining operation was completed in Feb 2013. Cameron was acquired following the takeover of Coventry Resources Inc in Feb 2014 for ~46m shares.

Catalysts: Chalice aims to reoptimise Cameron by increasing open pit resources and delaying underground development. Two phases of drilling planned for 2014 may validate the strategy and drive interest in its shares which are presently trading below cash reserves. The Company has initiated an on-market buyback for up to 21m shares.

Hurdles: Cameron’s Preliminary Economic Assessment (PEA), conducted in Feb 2013, was based on the expected gold price of US$1,472/oz which implies ~22% premium to the lowest price level of $1,145 touched in 2013 (current spot price: US$1,369/oz). Whilst the Company has a strong cash balance of $55m, it remains reliant on external financing given the Project’s initial capex requirements of US$110m.

Investment View: Chalice offers speculative exposure to gold price trends and potential for enhanced economics at Cameron under new management. We are attracted to the Company’s project development record, funding position, and valuation. Proceeds from exploration, development, and subsequent sale of the Zara Gold Project, Eritrea, underpin its current cash reserves of $55m. With its shares ascribing little value to Cameron, and now supported by a share buyback, we commence coverage with a ‘speculative buy’

April 23, 2014

Spec Buy

$0.155

CORPORATE SUMMARY

Ticker CHN.ASX
Industry Mining
Price $0.155
Shares 297.5m
Other Securities Rights/Options on Issue 7.9m
Market Cap $46.1m
Net Debt -$55.1m
EV -$9.0m
Issued Capital $39.3m

ASSET OVERVIEW

Name Cameron Gold (100%)
Location Ontario, Canada
Status Resource
Ore Resource 20MT
Inventory 1.39Moz Au (2.11g/t +)
*excl. Dogpaw and Dubensk

MANAGEMENT

Executive Chairman Tim Goyder
Managing Director Bill Bent
Track Record
Value Creation Strong
Operations Fair
Capital Markets Strong

SHAREHOLDERS

National Nominees Limited 15%
Timothy R B Goyder 14%

Disclaimer

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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