Risks Linger as Challenger Gold Advances Hualilan Toll Milling with Low CAPEX

Project Overview and Mining Strategy

Challenger Gold Limited has released a comprehensive Preliminary Feasibility Study (PFS) for its Hualilan Toll Milling Project in San Juan, Argentina. The study envisions a three-year toll milling operation, delivering 450,000 wet metric tonnes of gold-silver ore from three open pits, Sanchez, Norte, and Magnata, to Austral Gold’s Casposo process plant approximately 165 km away. Mining is scheduled to commence in September 2025, with ore haulage and processing following soon after.

The mining approach is designed for capital efficiency and operational flexibility, employing a rent-to-buy equipment model with Komatsu, complemented by contracted drill and blast services. This strategy minimizes upfront capital while maintaining control over operations. Waste rock from early pits will be used to construct access ramps, facilitating efficient progression into the larger Magnata pit.

Metallurgical Testing and Processing Compatibility

Extensive metallurgical testwork conducted at two independent laboratories confirms that Hualilan ore is well suited for processing at the Casposo plant. Gravity and leaching tests indicate gold recoveries averaging 84.4% and silver recoveries of 65.7%. The Casposo plant, currently commissioning after a period of care and maintenance, has sufficient capacity to process the ore in quarterly campaigns, with a conservative throughput target well below its nameplate capacity.

Opportunities to enhance recovery include finer grinding and optimized reagent use, while risks relate to potential variability in ore characteristics and plant performance. The toll milling agreement ensures that processing costs are payable only after initial cash flow is received, reducing upfront financial exposure.

Economic Highlights and Financial Metrics

The PFS projects an EBITDA of US$88 million at conservative metal prices (US$2,500/oz gold, US$27.50/oz silver), increasing to US$142.8 million at current spot prices. The pre-tax Net Present Value (NPV) at a 5% discount rate is US$73.8 million, with a swift payback period of just seven months from the start of site works. Post-tax NPV stands at US$50.5 million, also with a rapid payback.

Capital expenditure is notably low at US$4.2 million upfront, reflecting the toll milling model that avoids the need for on-site processing infrastructure. Operating costs include mining, haulage, toll processing fees, and general administration, with detailed cost breakdowns supporting the robust economic case.

Infrastructure, Environmental Approvals, and Social Commitments

The project benefits from existing infrastructure, including a modular camp and access roads, with minimal new construction required. Power will be supplied by diesel generators, and water sourced from a nearby creek with groundwater bores as backup. Ore haulage will follow a preferred route selected after community and government consultations.

Importantly, the Hualilan Project has secured Environmental Impact Assessment approval, the first gold project in San Juan Province to do so in 17 years, clearing a critical regulatory hurdle. Challenger has committed to local employment, community development, and supplier participation, underpinning its social license to operate.

Risks and Future Opportunities

Key risks include commodity price fluctuations, operational performance at the Casposo plant, geotechnical uncertainties, and potential variations in metallurgical recovery. The company is actively managing these through conservative planning, ongoing testwork, and contingency allowances.

Opportunities to improve project economics include optimizing mining dilution, enhancing recovery through finer grinding and reagent management, and leveraging the Casposo plant’s excess capacity to reduce costs. The PFS also lays groundwork for a potential future standalone processing facility at Hualilan, with infrastructure and stockpiles designed to support expansion.

Financing and Execution

Challenger has secured a US$20 million project finance facility, with an initial US$2 million tranche drawn to support early works and working capital. The company recently completed a AUD$28.4 million capital raise, significantly de-risking the project’s funding. Execution plans are well advanced, targeting mining commencement in October 2025 and toll milling start in November 2025, supported by a detailed schedule of contracts, permits, and mobilization activities.