Challenger to start Argentine gold production in 2025

Challenger Gold to start Argentine gold production in Q2 2025 through toll treatment deal
High-grade starter pits at Hualilan to fund larger standalone development as gold prices hit record highs
Dolphin Real Assets Fund SPC Ltd. a part of Eduardo Elsztain’s Elzstain Group subscribes for $6.6m private placement ahead of mining

Special Report: Challenger Gold has set its sights on becoming a gold producer in the second quarter of 2025, with a significant investment from one of Argentina’s richest men helping unlock a path to production at a time of record gold prices.

With gold sitting above $3800/oz in Aussie dollar terms, Challenger Gold (ASX:CEL) has picked the perfect time to divulge its production plans, with a $6.6 million private placement to the family company of Argentine real estate tycoon Eduardo Elsztain to be used to develop an early entry toll milling operation for its Hualilan project in the South American minerals hotspot.

The cash flow is intended to be used to finance a larger standalone development of the broader Hualilan orebody, leveraging high grades and low strip ratios in shallow resources at the project.

478,000t of ore containing 85,500oz of gold and 495,334oz of silver has been identified as suitable for a toll milling operation, most of it in the indicated resource category, meaning there is a strong level of confidence that the mined ounces will correspond to the resource model.

Perhaps most importantly, the pits would contain super high grades of 5.8g/t gold and 32.2g/t silver from surface and at an average strip ratio of just 3.9:1. The average stripping ratio of gold in 2022 was 4.24:1, though open pit grades are typically far lower than those seen in the shallow resources at Hualilan and prices have exploded since.

The material for toll milling is also oxide, which typically comes with lower process costs compared to fresh rock and sulphide material.

It also represents just 3% of the 2.8Moz gold equivalent resource at the broader Hualilan project, leaving plenty of gold left to be mined in a larger, long-term standalone development.

An interim desktop study on the toll milling startup is due for release soon, which will later be incorporated into the larger life of mine plan contained in a pre-feasibility study on Hualilan.

Once out, Challenger will be able to share numbers with the market; however, a broker report this morning estimated that tolling will net Challenger $118 million in pre-tax cash flow.

New investment

Helping underpin the production plans is the upping of the Elsztain Group’s stake in Challenger via a $6.6m private placement from its subsidiary Dolphin Real Assets Fund SPC Ltd, which will be supported by a share purchase plan to help other shareholders top up their stakes, capped at $1m.

The placement price will be the lesser of 4.5c, the closing price before its announcement, or the volume waiting average price of Challenger’s shares over 30 days prior to its closing date

It’s a vote of support in the explorer-cum-miner’s strategy.

An EIA application for approval to mine has also been submitted, the final environmental approval needed to consider the Hualilan project fully permitted for both toll milling or standalone processing developments.

A separate EIA is being prepared to secure a haulage route via road between Hualilan and the toll treatment facility.

Ahead of the milling deal closing due diligence will be completed along with the execution of definitive agreements, with extensive due diligence completed to date included further metallurgical testing of Hualilan ore, a detailed economic analysis on the tolling agreement terms undertaken by a leading San Juan mining and processing consultancy and the design of toll milling pits.

Final met test work results are pending which mirror the toll treatment plant flowsheet, but cyanide leach tests undertaken to date on samples from the planned starter pits have averaged 84% and 81% for gold and 68% and 75% for silver.

CEL will have 450,000t of toll treatment capacity available to it over a three-year period, with the toll treatment agreement expected to be executed in 45 days.

TSX listing update

The completion of the placement and the toll milling strategy will be a catalyst to also progress Challenger’s planned TSX dual listing in Canada.

“The company has completed the required 43-101 reports for both Hualilan and El Guayabo and anticipates that these will be lodged with the TSX during the month,” Challenger said in a statement.

“The board has completed the relevant background checks required by the TSX.

“The company held the TSX listing back as it was advised that the strategy go to market following production via Toll Milling combined with a funding package would facilitate a stronger Initial response from North American Investors.

“The TSX listing will provide the catalyst for a process of board renewal with the Company to target 1- 2 Canadian based independent Directors that would likely replace existing CEL Directors.

“The board intends to appoint a CFO, who would be Involved In the Toll Milling, the regulatory matters associated with gold and silver export from Argentina and the TSX listing.”

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.