Challenger confirms low-cost startup to Hualilan gold project

ASX-listed Challenger Gold has announced Peter Marrone as its chairperson-elect pending shareholder approval in June, the appointment of Yohann Bouchard as COO, an A$85-million private placement and a positive prefeasibility study (PFS) on the Hualilan gold project, in Argentina.
Marrone is currently chairperson and CEO of Allied Gold Corporation, before which he worked as chairperson of Yamana Gold – which he founded in 2003.
In turn, Bouchard brings to the position more than 25 years of progressive technical and operational experience in the mining industry, having worked as president of Andean Precious Metals and COO of New Gold and Yamana, respectively.
Bouchard and Marrone are in active discussions with respect to additional executive appointments.
The current nonexecutive chairperson, Eduardo Elsztain, will transition to the role of nonexecutive director following receipt of shareholder approval for Marrone.
Meanwhile, Challenger confirmed that Marrone and other lead investors will contribute A$10-million toward the total A$85-million placement the company intends to undertake.
The company has received binding commitments for about 708-million new fully paid ordinary shares at an issue price of A$0.12 apiece.
The proceeds of the placement will be used for resource growth drilling – particularly testing the broader Hualilan tenement package – and completion of a definitive feasibility study on Hualilan.
STUDY RESULTS
The PFS confirms Hualilan as a low-cost and low-risk development opportunity able to produce 1.8-million ounces over a 14-year mine life.
Using a $3 500/oz gold price assumption, the PFS finds Hualilan has an after-tax net present value (NPV) of $1.1-billion, with a payback period of 2.25 years and pre-tax internal rate of return (IRR) of 45%. At current gold prices of about $4 600/oz, however, the project’s after-tax NPV rises to $1.9-billion, its payback period reduces to 1.25 years and its pre-tax IRR grows to 83%.
The project will require $232-million in startup capital for production of 105 000 oz in year one and year two, followed by 12 years of production averaging 135 000 oz/y.
Notably, the PFS envisions a conventional 1.5-million-tonne-a-year flotation plant for Hualilan, as well as an eight-million-tonne-a-year heap leach circuit fed from a single openpit. This reduces operational risk and increases operational flexibility, compared with what was previously envisioned in the company’s 2023 scoping study.
Challenger expects Hualilan to have positive social impacts including 900 new jobs, at least $287-million of provincial royalties and $542-million of Argentinian corporate taxes and export duties.
