CEL - Challenger Gold

[Sean K]

El Guayabo in Ecudador discovery now 1km in strike and 1km wide in the centre. That's one hell of an open pit. This is potentially a company maker in itself and it's their second banana project. This should attract some interest, even moreso than Hualilan I think. They could potentially sell off either deposit as seperate deals. Probably needs a high grade zone in there somewhere.

Initial MRE at Hualilan due shortly.

 

[Sean K]

KK out ramping his company straight away as usual. Don't know of many MDs who do this so promptly.

According to him the current drill results out above could have dimensions of 1000x1000x500 x sg of 2.5 = 1.25Bt. Surely not. He goes on to compare it to a deposit 5km up the road that has 20m ounces in it.

This is not the main target and they have identified 15 on the property. Maybe they need to send some of those rigs from Argentina up here.

 

[Sean K]

CEL has held up remarkably well the past few days considering the general market sentiment. Makes me think the bigger players are soaking up any weakness but the volume doesn't really represent that. Gives me a little more confidence that the Ecuador story has some legs and when combined with Argentina, they have two major projects.

I'm actually fascinated with where this goes because the company's stated goal is to drill these targets out until it's at a critical mass where they can sell it off. I'm not sure what price they have on themselves but KK said some time ago the idea was to double and double again, which was stated at about the 30c mark. I'll be satisfied at the 50c mark.

 

[Sean K]

Gold testing the crucial 1850 mark overnight. eeeek. I'm surprised the gold stocks have held up so well today, could have been much worse.

Not a great day to bring out good results. They're doing a lot of work to make this project look well advanced and a major to pick it up. Sounds like the skarn material has excellent recoveries while they expect the intrusion hosted material should be just as good.

 

[The Triangle]

As rivals turn screws on mining, Argentina puts out welcome mat

Government turns to capital-control loopholes and tax breaks, eyeing export boost as neighbours look to raise mine taxes.

www.batimes.com.ar

 

[Sean K]

TH for MRE.

This was supposed to come out last quarter but didn't so I picked it in May comp because it should have come out this month. Going to miss by a day or two. :-(

The MD is on record as saying the high grade skarn / mantos should triple in size, so about 1.5-1.8Moz at around 5g/t, then the low grade intrusives in the Verde Zone. The Verde Zone is supposed to be 1.5kmx200mx300m going at about 1g/t with lots of gaps/waste in it from what I can tell by their cartoons so it's very hard to guess the number.

It's only half way through the 200Km drill program, so it's just going to get bigger from what they come out with.

 

[Sean K]

I think the market is expecting much more than this and it will be smashed.

 

[Sean K]

I think the market is expecting much more than this and it will be smashed.

View attachment 142423

Although, maybe the upside is still attractive.

 

[Sean K]

Well, in a down day for gold and goldies, this has magically held up, so far, so maybe Mr Market didn't expect any more than 2Moz.

 

[The Triangle]

Surely this gets combined with a capital raising?

Grade probably better than expected but total Oz not enough to cause the SP to "double and then double again". I didn't see strip ratios with pit shells. Poor form by CEL. Presumably that will be in his little webinar. Not sure why the wasted my time with a $600 US pit shell as well.

Still a few more months of assays to trickle in and plenty of upside. Nearly held this for a year was looking to dump it next month. So we'll see.

 

[Sean K]

Surely this gets combined with a capital raising?

Grade probably better than expected but total Oz not enough to cause the SP to "double and then double again". I didn't see strip ratios with pit shells. Poor form by CEL. Presumably that will be in his little webinar. Not sure why the wasted my time with a $600 US pit shell as well.

Still a few more months of assays to trickle in and plenty of upside. Nearly held this for a year was looking to dump it next month. So we'll see.

There seems to be quite a bit outside the pit shell and overall dimensions of what's been drilled. There's a crap load of assays to be returned. They have actually completed about 180K m of the overall drilling with about 60K waiting in the shop.

Agree, CR probably on the cards, but I don't think they need it for the final 20K of drilling in Argentina. They might need it for PFS and Ecuador drilling though.

 

[Sean K]

I've worked out why I got the skarn/manto so wrong and it's because we may have been misled by the company. For the past year or so they've been telling us they had about 500-600K historical ounces (non-JORC) @ 10g/t Au in the deposit they inherited. It's been very clear from the announcements that the mantos had at least tripled in size, hence my call of about 2Moz in the mantos.

However, in the initial MRE announcement presentation they are now claiming the historical resource was just 250K @ 5g/t. The only out they have is that they're now calling it underground resource, as opposed to total resource, but still... It seems like they've been deceptive here, or just plain wrong.

I knew the Verde Zone had too many holes in it to even make a call and 1m ounces over 1.2km is pretty light on really.

I would be selling this on this MRE if it wasn't for Ecuador which could be better than this deposit.

 

[The Triangle]

So is it all the mom's and dad's expecting 3 million ounces who are dumping?

I watched the webinar - a few points I thought interesting but took with a big cup of salt...

• The argentine mining minster told them he was going to put pressure on CEL to start mining...
• Confirmed not looking for money in near future (how many times have I heard that before) 5-7 million quarterly cash burn (depends on rigs)
• "750,000 to 1,000,000 oz per year long-term target"
• $0.10kw-h power cost estimates...connected to the argentine power grid...giving them 3 years royalty free???
• $0.60l diesel costs estimates...
• $2/usd/tonne mining cost for ore and waste
• Talk about starting small scale - 100-150 million capex then scaling up out of cashflow (again, how many times have I heard that )
• Hopeful for upgrade to resource in mid October
• Seems like they'll go straight for a bankable feasibility and bypass scoping/pre-feas (which I am always in favour of)
• Rough estimate - 1 MTPA/120koz for 3 years at a cost below $600? at a 6:1ish strip. Then build up to the larger lower grade sections... Less than a 1 year payback - I more or less can get these numbers with my quick calculations as well.
• 10:1 strip ratio "Overall" - So that's pretty bad - so no wonder they left it out of the presentations. I don't know how he can look into a camera and call that a 'nice strip ratio'
• Water not considered a major issue.
• They are very much talking about getting into production quickly.
• They gave 2 groups access to their data room with a 12 month standstill agreement...

like most I was not very impressed by the resource, but it was still a very good presentation with a lot of details.

 

[Sean K]

So is it all the mom's and dad's expecting 3 million ounces who are dumping?

I watched the webinar - a few points I thought interesting but took with a big cup of salt...

• The argentine mining minster told them he was going to put pressure on CEL to start mining...
• Confirmed not looking for money in near future (how many times have I heard that before) 5-7 million quarterly cash burn (depends on rigs)
• "750,000 to 1,000,000 oz per year long-term target"
• $0.10kw-h power cost estimates...connected to the argentine power grid...giving them 3 years royalty free???
• $0.60l diesel costs estimates...
• $2/usd/tonne mining cost for ore and waste
• Talk about starting small scale - 100-150 million capex then scaling up out of cashflow (again, how many times have I heard that )
• Hopeful for upgrade to resource in mid October
• Seems like they'll go straight for a bankable feasibility and bypass scoping/pre-feas (which I am always in favour of)
• Rough estimate - 1 MTPA/120koz for 3 years at a cost below $600? at a 6:1ish strip. Then build up to the larger lower grade sections... Less than a 1 year payback - I more or less can get these numbers with my quick calculations as well.
• 10:1 strip ratio "Overall" - So that's pretty bad - so no wonder they left it out of the presentations. I don't know how he can look into a camera and call that a 'nice strip ratio'
• Water not considered a major issue.
• They are very much talking about getting into production quickly.
• They gave 2 groups access to their data room with a 12 month standstill agreement...

like most I was not very impressed by the resource, but it was still a very good presentation with a lot of details.

Good points Triangle. I think the 10:1 strip ratio is generous, when you look at the models of the Verde Zone, there's way more dirt in the shells than that by the naked eye.

While the next MRE will improve the numbers both in size and more Indicated, maybe some measured, I'm banking on Ecuador being the company maker now.

They obviously just want to make this look feasible with upside in order to sell it off.

 

[Sean K]

I watched the webinar - a few points I thought interesting but took with a big cup of salt...

Only just watched the webinar. He's very good at talking it up and gives a great spin on it. Some of the numbers he's thrown out in there are pretty wild, as you have indicated.

Sounds like just the high grade skarns could be selectively mined if they make it to 2Moz.

He also did briefly explain the difference in the original non-JORC compared to what they've produced but it's a bit flimsy.

Investor Centre – Challenger Exploration Limited

challengerex.com

 

[Sean K]

Those drill results mentioned above in Ecuador have come through and the holes were mineralised. Over 0.5g/t AuEq is good overall but they would have liked to see some high grade areas in there, preferably close to the surface. There's a couple of intersections 0.6 and 0.7, but over 1g/t would have been better of course. Still, if each of the exploration targets (CV A-H and GY A-E) in this area are similar, that's a huge bulk mining operation. It's going to have to be gigantic at those grades.

 

[Sean K]

In a price query tonight after jumping 30% for no reason. Answer: we know nothing. Going to be embarrassing if they bring out some good drill results in the next few days.

 

[Sean K]

Don't often raise money at a premium to the SP, but there you go. I don't quite understand this plan yet, but I assume the debentures can be converted in the future when the SP may be trading at a higher price.

 

[The Triangle]

Don't often raise money at a premium to the SP, but there you go. I don't quite understand this plan yet, but I assume the debentures can be converted in the future when the SP may be trading at a higher price.

View attachment 146579

Just looks like debt issued at a 9% interest rate + a massive 3% upfront? I would have lent them at 8.5% interest.

Upon closing, the Company will pay to QRC an establishment fee equal to 3% of the principal amount of the Debentures in cash or shares. QRC has notified the Company that is has elected for the establishment fee to be paid in Shares which will be issued at the same price of $0.19 as the At Market Placement

The Debentures are unsecured with a coupon (interest) rate of 9% (7% payable in cash and 2% payable in either cash or Shares, at QRC's election) payable quarterly in arrears. The Share price used to calculate the number of Shares to be issued for the interest component payable in Shares is the to 20 day VWAP ending three trading days prior to the interest being payable.

CEL were stuck in no mans land. Limited cash left, limited market interest, Ecuador looking glass have empty, falling gold prices, a dysfunctional Argentina, an MRE below expectations, etc. etc. Something is better than nothing, but this is certainly not as good as the headline suggests.

 

[The Triangle]

Since the comment about the SP going to "double and double again" by the MD the share price has actually halved and it's looking like it will halve again. However, in the past 12 months blackrock have doubled their holding in CEL to ~140,000,00 shares. Pretty much slicing their hands all the way down from the mid 30s to mid 20s to mid-teens catching the falling knife. Not sure if I should feel good about that or not...

All these junior goldies are getting hammered at the moment so it's looking like that debt/raising from several weeks ago may have been a good idea but my biggest worry now with CEL is that it turns into the new HCH. Forever drilling, forever diluting, never mining, and waiting around for the takeover that's never coming.