If you have a very high tolerance for risk, then it could be worth checking out the speculative ASX stock in this article.
That's because analysts at Bell Potter believe that it could more than quadruple in value from current levels.
Which speculative ASX stock?
The stock in question is Chalice Mining Ltd (ASX: CHN). It is a minerals exploration company and the owner of the Gonneville Project in Western Australia. This project hosts a rare mix of critical metals required for decarbonisation and urbanisation including palladium, platinum, nickel, copper and cobalt.
The company notes that Gonneville has a tier-1 scale mineral resource estimate containing approximately 17 million ounces of platinum group elements (PGEs). In addition, it has 960,000 tonnes of nickel, 540,000 tonnes of copper, and 96,000 tonnes of cobalt. This makes it one of the largest recent nickel sulphide discoveries worldwide, and the largest PGE discovery in Australian history.
Last week, in response to the current metals price environment, the ASX stock announced that it has reduced the size of its board and implemented additional targeted reductions in corporate overheads and project expenditures.
This will ensure that the company remains in a strong financial position to advance the Gonneville Project and undertake targeted, value-add exploration activities. The latter includes targeting new copper-gold targets as well as magmatic sulphide targets proximal to the project.
Big returns
In response to the update, Bell Potter has reaffirmed its speculative buy rating and lofty $5.15 price target on the ASX stock. Based on its current share price of $1.13, this implies potential upside of 355% for investors over the next 12 months.
To put that into context, a $1,000 investment would turn into approximately $4,500 if Bell Potter is on the money with its recommendation.
Bell Potter was pleased with the aforementioned announcement and believes it leaves Chalice Mining well-positioned for the future. It said:
Assuming a cash balance at end CY24 of ~$77m, the targeted expenditure rate could be sustained through the release of the PFS and to the end of 2028, while still leaving CHN with a cash buffer of ~$30m, plus investments. The bulk of CHN's expenditure goes to exploration and evaluation and under this scenario we anticipate CHN would be able to maintain a meaningful exploration program of $6-$8m per year. The cash buffer would provide the optionality for CHN to pursue any fresh exploration success.
It was also happy to see management looking for copper and gold at the project. It adds:
We note the inclusion of new copper-gold targets in the FY25 exploration budget. CHN has a strong track record of value identification and creation in this field. This includes the discovery and sale of the Zara Gold Project (for US$114m in 2012), the spin-out of Falcon Metals (FAL, not rated, mkt cap $49m) and an accretive equity investment in Spectrum Metals (SPX), acquired by Ramelius Resources (RMS, not rated) in February 2020. In our view, this opens up a fresh pathway of value creation for CHN.
Cyclical lows
Outside the above, the broker believes the ASX stock is well-funded and suspects that the PGE market is at a cyclical low. It feels this could make it a good time to snap up its shares. It concludes:
We do not see CHN needing to raise equity in the foreseeable future, thereby protecting shareholders from dilution while providing exposure to a PGE market which is, in our view, at cyclical lows and vulnerable to supply shocks. We retain our Speculative Buy recommendation and $5.15/sh valuation.
