Chalice Gold Mines Shares Retreat as Progress Continues at Julimar

Chalice Gold Mines Shares Retreat as Progress Continues at Julimar

At time of writing the Chalice Gold Mines Ltd [ASX:CHN] share price has declined 10 cents or 6.29% to $1.49 per share.

The downwards movement comes despite a bump in the gold price.

The CHN share price retreat comes as the company announced preliminary metallurgical results at its Julimar Project.

Positive results, negative reaction

CHN released preliminary results of metallurgical test work done on mineral samples from its Julimar project today.

The limited study was conducted to assess the amenability of conventional flotation as a method of extracting the minerals from the mined ore.

While the company said the results are positive, the market appeared to disagree.

Sending the share price backwards.

Today’s reaction is rather interesting.

REVEALED: What’s Next for Aussie Gold Stock Prices? Learn more.

There are two points from the announcement to consider.

The first is that the conventional floatation method appears to be appropriate for treatment.

Meaning less conventional (i.e. more expensive) methods will not be needed.

The second point is that ~79% of the copper and nickel minerals were recoverable using their current method.

Now, if you’re a regular reader at The Daily Reckoning Australia then you may recall that Julimar hosts a high-grade platinum-group elements (PGEs)-nickel-copper-cobalt resource.

It also contains some gold.

CHN said recovery of the PGEs and gold was achieved but did not give a percentage figure.

By my estimates, the copper and nickel recovery and the absence of a recovery rate of the PGEs and gold could be behind the drop in share price.

Generally, a recovery rate of 90% is possible for copper when present as a sulphide.

Which is that case at Julimar.

Meaning CHN are about 11% off the mark currently.

How does this affect the economics of Julimar?

Mineral extraction is not a simple feat and depends on many different factors, including the type of rock the mineralisation is situated in.

Think of it like using an espresso machine.

Every time you purchase new beans you need to set the grind of the coffee beans so that the grind size is optimal.

Too fine and the flow of your pour will leave you with a nearly empty cup.

Too coarse and you won’t have extracted enough of the oil from the coffee grindings, leaving you with a flavourless cup of dark water.

So, it seems CHN has a bit of experimenting to do.

The company said that grind size and differential flotation variables are to be investigated in future test work to achieve separation of metals.

It is also worth noting that the limited samples used in the test work were from only one area at Julimar.

Meaning the tests are not a completely accurate representation of the recovery rates that might be expected at the project.

As the gold price continues to heat up CHN could be a stock to watch, particularly as it develops its other gold project. Our resident gold expert Shae Russell reckons other Aussie gold stocks could be set to spike as Australia becomes the next ‘gold epicentre’. If you want to learn more, download your free report here.

Regards,

Lachlann Tierney,

For The Daily Reckoning Australia