This strategic placement has provided Challenger Gold with an immediate cash injection of $5.6m and the option exercise to potentially inject an additional $9.3m. Pic via Getty Images
Mining
Special Report: Argentina’s largest real-estate developer Eduardo Elsztain now holds a 5% stake in Challenger after spending $5.6m on shares at a premium to the market price.
Challenger Gold (ASX:CEL) wants to be one of Argentina’s next gold producers via the advanced Hualilan project in the country’s San Juan province.
With a significant resource of 2.8Moz, where 90% of the value of metal in the ground is gold, feasibility work to date has led to well understood metallurgy and cost estimates.
A scoping study released in November last year included forecast EBITDA of US$738 million ($1.1 billion) over the life of mine with a rapid payback of under 1.25 years based on the current production of 116,000ozpa gold, 444,000ozpa silver and 9,125tpa zinc.
The study suggests the mining of a high core at the 2.8Moz Hualilan will rake in more than $1 billion in earnings over seven years, where a hefty 81% of that resource is found in the higher confidence indicated category.
CEL has already identified several “material” opportunities to improve on the scoping study outcomes, including via the recently confirmed conversion of the gold-silver concentrate produced by the flotation circuit into dore on site, thus potentially reducing transport costs and treatment/refining charges, and increasing payability.
The $100.89m market cap explorer has added to its war chest following a private $5.6m placement to Argentinean businessman and entrepreneur Eduardo Elsztain via an affiliate of his assets group.
Elsztain – who now holds a 5% stake in CEL – has built a huge portfolio of real assets in the last three decades, spanning rental and mixed-use properties in Argentina and farmland in Latin America.
He also has extensive interests in mining both inside and outside Argentina.
The placement of 66,377,283 shares at a price of 8.5 cents per shares represented a 6% premium to the last trading price of 8c and a 9% premium to the 20-day VWAP of 7.8c.
It also included a one for one option exercisable at a price of 14 cents per share for a period of 12 months.
According to CEL, Elsztain signalled an intention to take a larger stake in the company subject to, among other issues, CEL’s funding requirements and a more detailed due diligence.
The company plans to use the funds to carry out various activities including pre-feasibility study tasks, metallurgical test work, expanded regional exploration as well as a geotechnical drill program.
“This investment is a testament to the hard work of our team and the robust potential of our exploration efforts,” CEL executive director Sonia Delgado says.
“We look forward to collaborating closely to unlock value for all stakeholders and contribute positively to the local community and economy.
“This marks a significant milestone in our journey, and we are excited about the opportunities this partnership will bring.”
Meanwhile, CEL has started a process aimed at procuring funding to complete the Hualilan bankable feasibility study by either a strategic investor, royalty or stream finance, or other forms of non-dilutive finance.
The process is progressing well with significant interest from strategic investors, royalty/streaming groups, and project financiers with several now progressing through due diligence.
CEL says the immediate cash injection of A$5.6 million from the strategic placement allows this process to continue and provides the company with the option to extend this process until after the completion of the Hualilan PFS should this be required.
This article was developed in collaboration with Challenger Gold, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
