CEL - Challenger Gold

[Sean K]

Sentazon is certainly firming up to be a high grade part of the project, relatively shallow, and growing.

Come on Newmont! Offer 50c and I'll be happy.

 

[Sean K]

Quarterly out. Good luck reading it all, coming in at only 184 pages weight.

I've really only dipped my toe into this puppy, waiting for confirmation of some continuity in the strike and thickness of the intersections. I think I understand the narrow high grade stuff in the faults and Sentazon, as the grades, widths and their little cartoons make it clear there's a lot of gold there, but a crap load of waste as well.

The Verde Zone is something I'm really trying to understand. There's been some huge low grade intersections along the entire strike, with some higher grades, it's just how continuous this is and what it adds up to. It's about 1.5kmx250mx300m. That's going to add up to some significant tonnage if it's all mineralised, or even partly thereof.

The go forward plan is to complete infill drilling over the entire 1.5 kilometre Verde/Gap Zone trend down to 300 metres vertically with at least three of the current drill rigs on site. Drilling is being conducted on fences of holes spaced 80 metres along strike with drilling on each fence of holes spaced at no more than 80 metres. This drilling has been designed to allow the calculation of an inferred resource in accordance with the JORC Code along the entire 1.5 kilometre long Verde Zone trend.

So, God knows what this initial inferred MRE will be, or when it's delivered. There's a zone of Verde yet to be drilled so perhaps after that with some additional infill where there's uncertainty. They might even put out separated JORCs on each zone.

 

[Sean K]

Sentazon certainly looking the goods. One part of this that's been relatively overlooked is the high zinc grades in the deposit, particularly the skarn. These would be good hits just for the zinc. Getting more confident that this overall deposit has some significant mineralisation. Discrete high grade areas not far from surface and a huge low grade intrusive halo over 1.5km, so far. Not really well loved though. Must be the ore type and potential capex which I'm yet to fully grasp. Their plan is to ship concentrate rather than produce dore in situ. But, even that is not really their plan, I think they're just shopping it around.

If you produced intersections like this in Australia, the stock would be many multiples of current MC.

 

[Sean K]

Interesting research piece from Canaccord which was done earlier in the year and does not include any of the significant step out drilling since and Sentazon, which is turning into the best high grade section along the project. Back then they were guestimating up to 1.5m in the high grade zones and potentially 4m in the intrusives. It's much larger now.

 

[Sean K]

This puppy just doesn't like 30c ish, but it is respecting 27.5ish, for now. Even with those previous results and the general gold sector running, just won't push through. Not sure what else they can do to prove they have a decent resource in the making - apart from actually putting out an MRE! Maybe they're waiting to close off some of these zones of mineralisation before putting something out, but an interim inferred one would be nice to juice things up a bit. Potential for overall 5m oz au and the MC around $282m with $35m in the bank...

 

[Sean K]

CEL finally looks like it might break up from this sideways ambling move between 27 and 32. Poked it's head through yesterday but slightly backtracked. With POG breaking out surely that will give this the push it needs. But, stranger things have happened...

A new presentation out today with a lot of updated slides. Preso on this afternoon in Noosa. Wish I could be there...

I think I might be the only holder here. Not sure why it's not loved and seemingly still undervalued to me. Maybe because it's Argentina. I'm having fun in the corner by myself anyway.

 

[galumay]

No, I still hold a parcel I bought many years ago! My only hole digger, bought for all the wrong reasons, hot tip from a mate that knew someone, some talk of Twiggy being involved I think. Still deeply underwater on it, but its a tiny position, not in my main portfolios and serves to remind me to never allocate capital to explorers ever again!

 

[galumay]

Does anyone know anymore about this stock? I have been given a 'tip' by a friend that works for the company and he is hopeful they are about to have a run up. He bought it at .20 a while ago - looks they fell after that to a low of round .08 and have been slowly rising again with a bit of a bump recently.

There seems to be some good news coming out of South Africa about their ground there and they have been 'pushed' by a guy called James Gerrish on the Finance News Network, looks like he is an senior advisor for Novus Capital. This is what he had to say/spruik about CEL,

Lelde Smits: "Finally gentlemen, if you were given $1 million for Christmas – what’s the first stock or sector you’d put it in to generate the greatest returns over 2013?"

James Gerrish: "I’ll put it on one stock and put it out on the line there, Challenger Energy Limited (ASX:CEL) is one I’ve been looking at for a long time- CEL- owner of the stock, I have a lot of clients in the stock, it’s a shale gas play, it’s just got some good news coming out of South Africa. If I had my choice I’d spread the $1 million around but if I had to put it on one name, it would be Challenger Energy, CEL."

Its not the sort of stock I would invest in, but I am considering a pure speculation/gamble play with some spare coin that I am prepared to lose!

There you go @Sean K - nearly 9 years ago! I had completely forgotten it was all about the shale in SA, that turned out to be a total dud in the end! (a good reminder to ignore anything analyst/advisors say!)

 

[Sean K]

No, I still hold a parcel I bought many years ago! My only hole digger, bought for all the wrong reasons, hot tip from a mate that knew someone, some talk of Twiggy being involved I think. Still deeply underwater on it, but its a tiny position, not in my main portfolios and serves to remind me to never allocate capital to explorers ever again!

LOL. Haven't heard the Twiggy one. The current management definitely expect someone to buy them out before they get to mine it. I reckon you'll make some money on this eventually, one day, maybe...

 

[Sean K]

Finally broke through that resistance zone. That should be support on the way back down now. If it goes back down. The way POG is going, there shouldn't be much holding it back now. While the gold majors will probably track gold - or lead it - comparatively, some juniors will overshoot on hype, and I hope this is one of them, but who knows. Might depend on how much it's ramped by twitter.

Fundamentally, this is bound to be a mining operation, pending any surprises from the Argentine government. There's no sacred sites nearby and the local population consists of llamas. Analysts reports have anything from 2-5m oz au already in the ground. 5m divided between 2m high grade and 3m intrusion hosted would be nice. Plus, the outlier to me is the additional minerals in their high grade areas. There's a lot of zinc in there that seems to go unnoticed.

If POG continues it's run then all time highs are on the horizon in the short term but I expect, and hope for, consolidation soon.

 

[Sean K]

Noosa Mining Conf Preso on their web site.

Gives a good summary of where they're heading with a concept of mining around the 9min mark.

 

[The Triangle]

Saying a preliminary resource estimate should be out by February definitely would have helped the SP. Yes, gold is up - but now the market has a date by which they can apply actual numbers and estimates to this deposit. One a resource is published it should link the SP to the gold price a bit more and establish a bottom price. I have been thinking it probably needs to be about 2.5 million ounces to justify this SP - the market knows it will grow from there. The trend at the moment seems to be get the highest possible tonnes or ounces of metal published and screw the grade. If 5-10 million ounces at a decent grade is the target then 60 cents to $1.20 wouldn't be impossible. KK obviously knows the metrics and knows exactly what to say in these presentations to get ppl like me working out what ifs.

I am hoping Ecuador turns in to solgold 2.0. They don't seem very interested in the deposit, it receives very little airtime in all these slides and presentations but 20,000 drill meters is a hell of a big cost to just test out a few targets - they must be confident.

 

[Sean K]

Saying a preliminary resource estimate should be out by February definitely would have helped the SP. Yes, gold is up - but now the market has a date by which they can apply actual numbers and estimates to this deposit. One a resource is published it should link the SP to the gold price a bit more and establish a bottom price. I have been thinking it probably needs to be about 2.5 million ounces to justify this SP - the market knows it will grow from there. The trend at the moment seems to be get the highest possible tonnes or ounces of metal published and screw the grade. If 5-10 million ounces at a decent grade is the target then 60 cents to $1.20 wouldn't be impossible. KK obviously knows the metrics and knows exactly what to say in these presentations to get ppl like me working out what ifs.

I am hoping Ecuador turns in to solgold 2.0. They don't seem very interested in the deposit, it receives very little airtime in all these slides and presentations but 20,000 drill meters is a hell of a big cost to just test out a few targets - they must be confident.

KK is very confident in this but, he comes across as a little too confident to me. Maybe his success at Citadel has influenced this. He sounds like he’s ramping it sometimes.

I’ve been completely skeptical in the deposit for months, as you may have read in my posts, but the consistency of high grade intersections in the skarn, plus discovering Sentozan along with the traditional Andean bulk tonnage, low grade intrusive/porphyr all adds up to me.

The historical non-JORC 600k @ 10g/t will at least double in size at a slightly lower grade. Then, it’s 1.2km strike of the intrusive with the dimensions that were mentioned in the preso. I think he said a likely total tonnage of 60-70Mt. The overall grade is a guess, and I guess it’s around 0.5g/t, so about 3.5m oz.

That may be an initial inferred MRE of 4.7m oz au (with Ag, Zn), divided between the three high grade skarns and the intrusive.

Yes, the MC is now getting away for an explorer in Argentina. The easy money may have already been made. I have been in for a while, yes, my average entry is in the mid 20s.

I’m still skeptical of the stock because, even though it’s got a high MC, as it should be much higher with that much gold sitting at surface. Unless those numbers are completely bogus, but no one has provided a counter point so far.

 

[Sean K]

This is turning into a buy the dips proposition for me with the extent of mineralisation being proven up and it's still relatively cheap, IMO, with 4-5Moz already defined and it's expanding.

If this was a just a Zn explorer you'd be happy with those grades and that's just going to be a by-product.

 

[Sean K]

Investor Webinar on tomorrow for those interested. I guess I'll see galumay, the triangle and me there.

Brief discussion of above results here:

 

[The Triangle]

Nothing intelligent to add here other than blatant pumping....

I was expecting results from Ecuador before Christmas and I suspect a few others were as well. Combined with the general poor last few weeks of trading for foreign gold juniors I think there were probably some shaky hands on those sell buttons. I may well be proven wrong, but very good opportunities to pick up shares near 6 month lows.

If you take the cherry picked old numbers of the CEL website for Ecuador they have 156m @ 2.6 g/t Au + 9.7 g/t Ag + 0.2% Cu & 112m @ 0.6 % Cu +0.7 g/t Au +14.7 g/t Ag. Average those out and I get a CuEq of 1.5%. If I made up a width and length of a deposit of 500m x 500m x 134m deep I get about 70 million tonnes. That's about $10 billion in the ground. Now I know I'm being somewhat fanciful, but I think this is an ex-newmont project from the late 90s - so not a bad starting point.

 

[Sean K]

Nothing intelligent to add here other than blatant pumping....

I was expecting results from Ecuador before Christmas and I suspect a few others were as well. Combined with the general poor last few weeks of trading for foreign gold juniors I think there were probably some shaky hands on those sell buttons. I may well be proven wrong, but very good opportunities to pick up shares near 6 month lows.

If you take the cherry picked old numbers of the CEL website for Ecuador they have 156m @ 2.6 g/t Au + 9.7 g/t Ag + 0.2% Cu & 112m @ 0.6 % Cu +0.7 g/t Au +14.7 g/t Ag. Average those out and I get a CuEq of 1.5%. If I made up a width and length of a deposit of 500m x 500m x 134m deep I get about 70 million tonnes. That's about $10 billion in the ground. Now I know I'm being somewhat fanciful, but I think this is an ex-newmont project from the late 90s - so not a bad starting point.

I think you can pump it a bit more than that Triangle. There is zero value assigned to Ecuador. And there's hardly any value assigned to Argentina....

KK has already told us what's in the Verde Zone. 50-60Mt @ about 1g/t ish - depending on which hits you choose. Say half that, so 0.5 g/t and you get 2.5-3Moz, then add in the high grade skarns and they are at least double the historical non-JORC resource, so somewhere between 1-2m oz. So, inferred MRE early next year should be between 3.5-4.5M oz au. This type of deposit should be worth at least $200 an ounce (KK says $250-300 at about the 5m mark below - but he's a better pumper than you or I) = $700-900M MC on current in-ground resources.

Investor Centre – Challenger Gold Limited

challengerex.com

 

[Sean K]

Drill results out this am which has given it a little spike, but these aren't anything to write home about really.

Doesn't change any of the above, as I'm not sure if these hits will materially change any mining scenario, especially the narrow and deep ones. Is it going to be worth digging UG to 530m for 45 g/m gold? Maybe a geo / mining engineer would know.

 

[Sean K]

The sooner these guys get an initial MRE out the better. There's quite a few high expectations of a number starting with 4, so hopefully they can deliver. Maybe I shouldn't be putting any numbers up so it's a complete surprise, but some analysts are also putting some big numbers on it unfortunately. Peloton are even calling it Hemi like potential, but I think they're getting that ramp from the MD. The general market seem to think they've got something decent, with a $330m MC, and no resource out yet. So, a lot is factored in already. A surprise to the upside will be the amount of Zn they have in this deposit. You could take out the Au and this could be a Zn mine.

 

[Sean K]

How Peloton value them according to MRE scenarios: