Challenger’s renewable energy deal could reduce Hualilan costs and emissions

Challenger is taking steps to secure its green credentials by signing a memorandum of understanding with YPF Luz for the supply of renewable power to its Hualilan gold project in Argentina.

Besides reinforcing the company’s commitment to develop the project into a gold mine with one of the lowest carbon intensities globally, the MoU also has the potential to substantially reduce the cost of power.

Notably, access to a sustainable and low-cost power source via a reliable grid connection will not only improve economics by removing the need for on-site power storage, it will also de-risk Hualilan.

This has such potential to improve the project that Challenger Exploration (ASX:CEL) could well execute a power purchase agreement with YPF Luz – a subsidiary of Argentina’s largest integrated energy company YPF S.A. – if the price per kilowatt hour is under US7c.

“This MOU is a key milestone in the development of our Hualilan Gold Project. It provides the project with much more than just a low cost and secure source of renewable source of power that will underpin project economics,” managing director Kris Knauer said.

“With other measures already in train, it has the potential to see Hualilan emerge as one of the lowest carbon intensity gold mines in the world.

“Additionally, it allows Challenger the flexibility to move any capital costs associated with the provision of power to the project off-balance sheet.”

Power alternative

Under the MoU, YPF will present the company with a high-level technical alternative for the supply of renewable electric energy to the Hualilan project.

To develop this alternative, the parties will negotiate a binding agreement that will include YPF LUZ´s’ obligation to develop the alternative, and the agreements that they may enter into – such as a PPA – if the development is satisfactory.

YPF will also have the right of first refusal for the energy supply to the Hualilan gold project in any future tenders for a term of five years providing it matches the best price.

Hualilan Gold Project

The Hualilan gold project in Argentina’s San Juan Province is a near term development opportunity with a JORC resource of 2.8Moz gold equivalent that is open in all directions.

This resource includes a high-grade core of 9.9Mt grading 5 grams per tonne (g/t) gold equivalent (AuEq), or 1.6Moz AuEq.

Drilling to date has intersected high-grade gold over 3.5 kilometres of strike and extended the known mineralisation along strike and at depth in multiple locations.

Recent work has also demonstrated that this high-grade skarn mineralisation is underlain by a significant intrusion-hosted gold system.Challenger’s current work program will include a Scoping Study followed by a Pre-Feasibility Study. Additionally, the company has started exploration along the 30 kilometres of unexplored trend with the same geology as Hualilan. First results have been exciting including samples grading up to 54 g/t gold 10 kilometres from Hualilan.

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.