Stampede For A Slice Of Exciting Australian Palladium Discovery

Apart from a handful of specialist exchange-traded funds, or by sending your money to Russia or South Africa, there are few ways to get exposure to the hottest of the precious metals, palladium — but that might be changing.

In Australia, a palladium “drought” looks like it might be breaking with early signs of a significant discovery of the metal which has traditionally played second fiddle to its big sister, platinum.

It’s early days for Chalice Gold, the small explorer which has made the discovery near the west coast city of Perth, but when it launched a fresh fund-raising exercise last week it was bowled over in the stampede.

Big-Name Investors Pounce On Chalice

The company was only seeking $19 million via an offer of 28.7 million shares but received applications for $48 million, with reports that some of the world’s canniest mining entrepreneurs participated in the rush including billionaire Robert Friedland.

What caught the eye of seasoned mining investors is a combination of demand for palladium, a metal used to clean the exhaust gases of gasoline-powered vehicles and the potential for Chalice’s discovery to become Australia’s first palladium mine.

For a country with a reputation as a source of most minerals the absence of commercially-viable deposits of palladium or platinum has puzzled geologists for decades.

The gap has left the metallic family known as platinum group metals (PGMs) largely to a duopoly of Russia, which its palladium rich orebodies, and South Africa with its platinum rich deposits.

Both platinum and palladium are used in jewelry but their major use is in cleaning the exhaust-gas emitted by gasoline and diesel engines.

Until recently, platinum was the star of the PGM industry but because it is preferred in diesel-powered vehicles it suffered a setback in the wake of the 2015 Volkswagen emissions rigging scandal.

Before VW cut the ground out from under platinum demand it sold for around 50% more than palladium, whereas today as gasoline engines have taken market share from diesel, it is on top with a price of $1840 an ounce more than double that of platinum which is selling for $768/oz, and slightly more than the precious metal leader, gold, which is at $1773/oz.

Chalice, which has seen its share price rise by 400% from 15 cents to 78 cents since the start of the year, has found itself in the right place at the right time with the palladium price tipped to rise strongly.

On The Road Back To $2500/Oz

Citi, an investment bank, forecast last week that palladium would return to $2500/oz over the next six-to-12 months, and could go as high as $2700/oz, as the global vehicle industry recovers from the coronavirus slump.

That price forecast, if correct, will ensure ongoing interest in what Chalice appears to have discovered at Julimar, just 45 miles north-east of Perth in a region largely overlooked by earlier explorers.

Early-stage exploration has yielded what looks to be a large and richly mineralized structure relatively close to the surface with a best intersection of 33 meters assaying 6.5 grams per ton of palladium, plus useful grades of platinum, nickel, copper and cobalt starting at a depth of 44 meters.

Much more work is required to know whether the Julimar discovery can be profitably mined but the rush by seasoned investors to buy a stake in Chalice is an encouraging sign that something significant could happen.