2020 was a breakthrough year for ASX mining shares, with commodities including gold, iron and copper running to multi-year highs.
Higher commodity prices brings to life many more prospective exploration projects, with a number of ASX mining shares delivering 1,000% returns last year .
Chalice Mining Ltd (ASX: CHN) was one of the best performing ASX mining shares, running from 20 cents to close at almost $4.00 in 2020.
On 5 January 2021, Bell Potter upgraded the Chalice Mining share price target from $5.35 to $5.60. Here's why the broker sees significant upside in the exploration company.
The Chalice growth story so far
Chalice is a Perth-based exploration company, focused on base and precious metals. It has an experienced management and geological technical team whose members are recognised for their exploration success.
The company's strategy is to target tier-1 scale (net present value greater than US$1 billion) mineral projects. This by actively managing its exploration portfolio and undertaking high impact activity on its projects.
Chalice advanced two gold projects to the point where they were sold for $107 million – far more than the cost of exploration – to larger companies for subsequent development. Chalice returned $25 million to its shareholders and retained significant funds for further exploration.
Today, the company's assets comprise 2 new and significant discoveries, the Julimar project in Western Australia and the Pyramid Hill gold project in Central Victoria. Chalice also owns a number of minor exploration projects and royalty interests for a range of metals including gold, nickel, copper and vanadium.
Chalice share price upgraded with buy rating
The Chalice share price was upgraded from $5.35 to $5.60, or a 25% upside to its current share price. Bell Potter believes the company is well-funded to continue its major exploration program at Julimar, plus drilling programs at Pyramid Hill gold project and limited exploration on its other projects with cash currently estimated at ~$120 million.
This funding will support even higher levels of drilling activity and associated economic studies at Julimar. The broker continues to regard the Julimar proejct as a world ranking one with potential to become a major new Tier-1 source of platinum-group elements.
Foolish takeaway
ASX mining shares across the board, from giants such as BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) to microcaps, have all benefited from higher commodity prices.
Chalice's recent capital raising was well-received by the market, and places the company in a position to deliver further drillings activity and economic studies for its two core projects in 2021.
At the time of writing, the Chalice share price is trading up 3.57% at $4.64.
