Challenger Gold Secures Final Explosives Permit for Hualilan Toll Milling
Challenger Gold Limited (ASX:CEL) has reached a crucial milestone in its pathway to near-term gold production with the approval of the final permit required to commence drill and blast operations for its Hualilan Toll Milling strategy in Argentina.
Key Milestone Unlocks Path to Early Cash Flow
In a significant development for Challenger Gold, the company announced that its Argentinian subsidiary, Golden Mining S.A., has been awarded a permit for blasting operations at its Hualilan Project. The permit, Registration Number 98000817, was granted by the Ministry of National Security Argentina, marking the final regulatory approval needed before drill and blast operations can begin.
This achievement is particularly important as it directly supports Challenger's toll milling strategy, which aims to capitalize on the current high gold price environment (above US$3,300/oz) to generate early cash flow. This revenue will then be allocated toward the construction of the larger standalone Hualilan Gold project.
Outstanding Economics from Toll Milling Strategy
The toll milling strategy is built around a binding agreement with Casposo Argentina Mining Limited, securing processing of a minimum of 450,000 tonnes of near-surface Hualilan mineralized material over three years. The Casposo Plant, located 165km from Hualilan via established roads, has historically produced over 323,000 ounces of gold and 13.2 million ounces of silver.
The recently released Pre-Feasibility Study (PFS) for the toll milling operation demonstrated exceptionally robust economics:
| Economic Indicator | At Current Gold Price (~US$3,300/oz) | At Conservative Price (US$2,500/oz) |
|---|---|---|
| EBITDA | US$142.8 million | US$88.0 million |
| Post-tax NPV5 | US$82.2 million | US$50.5 million |
| Post-tax Free Cash Flow | US$91.8 million | US$56.7 million |
| All-In Sustaining Cost | ~US$1,454/oz AuEq | ~US$1,454/oz AuEq |
| Upfront Capital | US$8.9 million (A$13.8 million) | US$8.9 million (A$13.8 million) |
| Payback Period | 3 months from mining commencement | 3 months from mining commencement |
Notably, the recent A$37.5 million equity placement has effectively removed financing risk, funding development through to first cash flow and accelerating the development of the larger standalone Hualilan project.
Understanding Toll Milling: A Smart Route to Early Production
Toll milling refers to the process where a mining company pays a fee to use another company's processing facility rather than building its own. In Challenger's case, this approach offers several strategic advantages:
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Reduced Capital Requirements: By utilizing Casposo's existing plant, Challenger avoids the significant upfront investment of building its own processing facility.
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Accelerated Timeline to Production: Without needing to construct a processing plant, Challenger can begin generating revenue much sooner.
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Proven Processing Capability: The Casposo Plant has a demonstrated track record of processing similar ore, having achieved average annual production of 40,000 ounces of gold and 1.6 million ounces of silver at recoveries of 90% for gold and 79% for silver.
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Flexibility for Future Growth: The cash flow generated from toll milling can fund the larger standalone Hualilan development, creating a self-funding growth pathway.
What makes this approach particularly attractive in the current market is the substantial margin between the All-In Sustaining Cost of ~US$1,454/oz and the current gold price of ~US$3,300/oz, potentially delivering exceptional returns even in a more conservative price environment.
Hualilan Project: A Substantial Gold Resource
Challenger's flagship Hualilan Gold Project in San Juan, Argentina, features a JORC (2012) Compliant resource of 2.8 million ounces of gold equivalent (AuEq). This includes a high-grade core of 9.9 Mt at 5.0 g/t AuEq for 1.6 Moz AuEq within the larger resource of 60.6 Mt at 1.4 g/t AuEq.
Importantly, the toll milling strategy is based on extracting only 3% of the total 2.8 Moz Hualilan resource, focusing on the most accessible, high-grade material to generate early cash flow while preserving the bulk of the resource for the larger standalone development.
Strategic Portfolio Provides Optionality
Beyond Hualilan, Challenger also holds the El Guayabo Gold/Copper Project in southern Ecuador, which has reported a 9.1 Moz gold equivalent resource. This project provides additional optionality for the company, with Challenger currently exploring strategic alternatives to monetize or spin off these Ecuador assets.
Why Investors Should Track Challenger Gold
Challenger Gold presents a compelling investment case based on several key factors:
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Imminent Production: With the final explosives permit for Challenger Gold Ltd now secured, Challenger is positioned to begin generating cash flow within months, not years.
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Robust Economics: The toll milling strategy offers exceptional margins and rapid payback even at conservative gold prices, with significant upside at current spot prices.
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Funded for Success: The recent A$37.5 million equity placement ensures the company is fully funded through to production.
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Significant Resource Base: With 2.8 Moz AuEq at Hualilan and 9.1 Moz AuEq at El Guayabo, Challenger has substantial resources to support long-term growth.
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Strategic Approach: The toll milling strategy demonstrates management's focus on pragmatic, value-accretive development that minimizes dilution and maximizes shareholder returns.
For investors seeking exposure to near-term gold production with substantial upside potential, Challenger Gold represents an opportunity to participate in a company transitioning from explorer to producer at an ideal time in the gold price cycle.
"The approval of our explosives permit represents the final regulatory hurdle before we can commence drill and blast operations for our toll milling strategy. This is a significant milestone that unlocks our pathway to near-term gold production and early cash flow generation in a robust gold price environment." – Kris Knauer, Managing Director & CEO
Want to Capitalise on Challenger Gold's Path to Production?
Discover how Challenger Gold's toll milling strategy could deliver exceptional returns in today's high gold price environment. With all permits now secured and a fully-funded pathway to production, CEL is positioned to generate significant cash flow within months. To learn more about this compelling investment opportunity and the company's strategic approach to developing its substantial 2.8Moz gold resource at Hualilan, visit www.challengergold.com today.
