Challenger swings into the big leagues with 4.5Moz El Guayabo resource

Challenger is officially a two-project play following the estimation of initial resources totalling 4.5Moz gold equivalent for its El Guayabo project in Ecuador, and a very positive response to a $10m placement.

The Inferred Resource of 270Mt at 0.52 grams per tonne (g/t) gold equivalent clearly confirms that a large-scale gold-copper-silver-molybdenum system is present at the project, which is adjacent to Lumina Gold’s giant 17Moz Cangrejos project.

While the definition of the resource is a big plus for Challenger Gold (ASX:CEL), which already has resources of 2.8Moz gold equivalent at its flagship Hualilan gold project in San Juan, Argentina, there are two significant points that highlight its attractiveness.

First up is the higher grade core of 1.45Moz at 1g/t gold equivalent, which managing director Kris Knauer says is a great start and possessing “significant value in its own right”.

The other is quite simply that there is plenty of potential for further resource growth as the resource covers just two of the seven targets at El Guayabo that have produced mineralised intercepts greater than 500m.

“Mineralisation on these two targets remains open in all directions along strike and at depth with the resource limited by a lack of drilling,” Knauer explained.

“Additionally, the final five holes in the program are yet to be included in the estimate which will be updated when assays for these holes are received.”

Mirroring a giant

This big initial resource is hardly surprising as El Guayabo is not just directly adjacent to Cangrejos, it is essentially the other half of the giant gold project.

Both projects share the same geology, surface footprint and mineralisation style, and are interpreted as being part of the same system.

With the Cangrejos Pre-Feasibility Study outlining production of 469,000oz gold equivalent per annum over its 26-year mine life at a capital cost of US$925m and operating cost of all-in-sustaining costs of US$671/oz, Challenger has a picture of just what might be possible at El Guayabo.

Placement to accelerate exploration and development

With all that in mind, it’s little wonder that Challenger has received firm commitments from sophisticated, professional and institutional investors for a $10m placement of about 83.3 million new shares priced at $0.12c each.

Given the very tight market for capital raising at present, the ability to raise that kind of money is testament to investors’ assessments of the quality of the assets Challenger is holding.

Those proceeds will be used to accelerate exploration and development activities with the bulk spent at Hualilan and $600,000 on exploration at El Guayabo.

This article was developed in collaboration with Challenger Exploration, 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.