Challenger Gold’s 2.8Moz Hualilan Resource Backed by Strong Economics and Early Cash Flow

A Significant Step Towards Production

Challenger Gold Limited (ASX, CEL) has provided a comprehensive update on its flagship Hualilan Gold Project in Argentina, signalling a major milestone with the commencement of toll milling operations expected in the fourth quarter of 2025. This development is supported by a substantial 2.8 million ounce gold equivalent (AuEq) resource, which remains open in multiple directions, offering significant upside potential.

The company’s strategy to initiate early production through a toll milling agreement with Austral Gold Limited allows Challenger to generate meaningful cash flow with relatively low upfront capital expenditure. This approach not only mitigates funding risks but also lays a solid foundation for the planned standalone development targeted for 2027.

Robust Economics Backing the Project

Challenger’s 2023 Scoping Study and the more recent 2025 Pre-Feasibility Study (PFS) highlight the economic viability of Hualilan. The studies demonstrate a low capital intensity project with an attractive internal rate of return (IRR) and strong net present value (NPV). For example, the 2023 Scoping Study showed a pre-tax NPV of A$629 million at a gold price of US$1,750 per ounce, with an IRR of 75% pre-tax, underscoring the project's potential to be a top 20 ASX gold producer.

The toll milling phase is expected to process approximately 450,000 tonnes over three years, recovering around 90,000 ounces of AuEq with an average grade of 6.2 g/t gold and 35 g/t silver. At spot prices near US$3,300 per ounce of gold, EBITDA could reach US$143.5 million, reflecting the project's strong margin profile despite a modest all-in sustaining cost (AISC) forecast of around US$1,455 per ounce AuEq.

Favourable Mining Jurisdiction and Experienced Leadership

Argentina’s mining landscape has transformed positively, with the Regime for Large Investments (RIGI) providing legal certainty, tax reductions, and improved currency controls. Hualilan’s location in the San Juan province benefits from established infrastructure and proximity to other major mining operations, enhancing logistical efficiencies.

Challenger’s board and management team bring a wealth of experience and hold a combined 24% shareholding, aligning their interests closely with shareholders. Notably, prominent Argentinian investor Eduardo Elsztain is the largest shareholder, reinforcing confidence in the project’s prospects.

Strategic Portfolio and Future Growth

Beyond Hualilan, Challenger holds the El Guayabo Gold-Copper Project in Ecuador, boasting a combined resource of 9.1 million ounces AuEq. While exploration is currently paused pending cash flow generation from toll milling, the company is actively evaluating options to maximise value from these assets, especially in light of recent regional transactions such as the Lumina Gold takeover by CMOC.

Looking ahead, Challenger plans to release a full-scale Pre-Feasibility Study for Hualilan in early 2026, aiming for a final investment decision by mid-2027. The company’s phased approach, starting with toll milling, positions it well to manage risk while unlocking the full potential of its district-scale gold resources.