Challenger Gold Unveils Robust Toll Milling Plan with $221M EBITDA Potential at Hualilan
Challenger Gold (ASX: CEL) has delivered a compelling Pre-Feasibility Study (PFS) for toll milling at its Hualilan Gold Project in Argentina, outlining impressive economics that could generate $221 million in EBITDA over three years at current metal prices.
Toll Milling Strategy Unlocks Rapid Value from High-Grade Ore
The PFS confirms a toll milling strategy that leverages high-grade material from Hualilan while requiring minimal upfront capital. The approach capitalises on a partnership with Austral Gold to process ore at their Casposo plant, located 165km away on a sealed highway.
Key financial metrics from the PFS include:
- US$142.8M (A$221.4M) EBITDA at current spot prices (US$3,300/oz Au, US$33/oz Ag)
- US$88.0M (A$136.4M) EBITDA using conservative pricing (US$2,500/oz Au, US$27.50/oz Ag)
- Low US$8.9M (A$13.8M) upfront spend (US$4.2M capex and US$4.7M working capital)
- Quick payback period of just 3 months from mining commencement
- Competitive AISC of US$1,454/oz gold equivalent
The PFS establishes the economic viability of processing just 3% of Hualilan's substantial 2.8Moz gold equivalent resource, focusing on three shallow open pits with exceptional grades.
"This toll milling approach allows us to generate significant cash flow with minimal upfront investment while we continue developing the larger stand-alone Hualilan project," said Kris Knauer, Managing Director and CEO.
Mining Plan Targets High-Grade, Shallow Material
The mine plan focuses exclusively on high-grade, shallow material from three pits:
| Area | Material | Gold Grade | Silver Grade | Strip Ratio |
|---|---|---|---|---|
| Total | 465,000 tonnes | 6.16 g/t | 35.33 g/t | 6:1 |
The operation will produce 76,789 ounces of recoverable gold and 339,530 ounces of recoverable silver over a 30-month processing campaign at the Casposo plant.
Understanding Toll Processing
Toll processing is a business arrangement where a mining company pays a fee to have its ore processed at another company's facility. This approach has several benefits for junior mining companies:
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Reduced Capital Expenditure: By avoiding the need to build a processing plant, companies can significantly reduce upfront capital requirements.
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Faster Path to Production: Without the time needed to design, permit, and construct a processing facility, companies can begin generating revenue much sooner.
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Lower Operational Risk: The technical challenges of commissioning and operating a processing plant are transferred to an experienced operator.
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Focus on Core Competencies: The mining company can focus on its mining operations while the processing partner handles the metallurgical aspects.
In Challenger's case, the toll processing arrangement with Austral Gold provides access to an existing, permitted facility with proven capabilities to process the type of mineralisation found at Hualilan.
Toll Processing Economics and Logistics
The PFS details a straightforward toll milling arrangement with Austral Gold's Casposo plant:
- Ore will be hauled 165km on sealed highway to the fully-permitted Casposo plant
- Expected recoveries of 84.4% for gold and 65.7% for silver
- Processing in three-month batches (three months on, three months off)
- Processing rate of ~25,000 tonnes per month during campaigns
- All-in processing, haulage and access charges of approximately US$133/t processed
The schedule will see mining commence in September 2025, with first ore delivery to Casposo in October 2025 and initial processing beginning in November 2025.
Significant Upside Potential Beyond Current Plan
While the Challenger Gold toll milling plan represents an exceptional near-term opportunity, investors should note it extracts only 3% of Hualilan's 2.8Moz resource. The company is fully funded to execute this plan following its recent A$33.9M capital raise, which removes financing risk.
The current plan establishes a production pathway while the company continues developing a larger stand-alone operation that could potentially unlock significantly more value from the remaining 97% of the resource.
Mineral Resource and Reserve
The Hualilan project hosts a substantial mineral resource of 2.8 million ounces of gold equivalent (AuEq), with the toll milling operation targeting a small but high-grade portion of this resource.
The PFS has established a maiden Ore Reserve of 427,500 tonnes at 7.0 g/t AuEq (6.6 g/t Au and 37.6 g/t Ag), containing 96,200 ounces of gold equivalent. This reserve forms the basis of the toll milling operation and has been classified as Probable under the JORC Code (2012).
Metallurgical Performance
Extensive metallurgical testing has been conducted to confirm the recovery rates for the toll milling operation:
- Gold recovery of 84.4% through conventional gravity and cyanide leaching
- Silver recovery of 65.7%
- Favourable reagent consumption with cyanide usage of 4.1 kg/t and lime consumption of 6.3 kg/t
The metallurgical test work specifically represents the material from the three planned pits (Sanchez, Norte, and Magnata) and confirms compatibility with the Casposo processing flowsheet.
Environmental and Permitting Status
Challenger Gold has received approval of its Environmental Impact Assessment (EIA) in October 2024. An EIA Addendum will be required to authorise the mine plan presented in the PFS, but no significant challenges are anticipated in securing this approval.
As the operation will utilise toll processing, no on-site tailings storage facility is required, further simplifying the environmental footprint and permitting requirements.
Why Investors Should Follow Challenger Gold
Challenger Gold presents a compelling investment case with its dual-track approach at Hualilan:
- Near-term production and cash flow via the toll milling operation
- Significant long-term upside from the larger stand-alone Hualilan development
- Fully funded position following recent capital raising
- Strong leverage to gold price with substantial margins at current prices
- Low-risk implementation with conventional mining methods and proven processing
With mining scheduled to commence in September 2025 and first processing in November 2025, Challenger is positioned to quickly transition from explorer to producer while maintaining exposure to the full potential of its substantial gold resource.
The company's ability to generate significant cash flow from just a small portion of its resource while advancing its larger development plans positions it uniquely among junior gold developers.
Want to Discover This Compelling Gold Investment Opportunity?
For investors seeking exposure to a gold developer with near-term production potential and significant upside, Challenger Gold represents a unique opportunity. To learn more about their robust toll milling strategy with $221M EBITDA potential and their longer-term plans for the 2.8Moz Hualilan Gold Project, visit www.challengergold.com today and position yourself ahead of their production commencement in 2025.
