CEL - Challenger Gold

[frugal.rock]

PLACEMENT

The Company is also pleased to announce that it has received firm commitments for a A$10 million
placement to sophisticated, professional and institutional investors ("Placement").
Under the Placement the Company will issue approximately 83.3 million new fully paid ordinary shares In the Company at an Issue price of $0.12 per share ("New Shares").
The Placement was strongly supported by domestic and international institutions, both new and existing.

 

[Sean K]

Initial Mineral Resource Estimate of 4.5 Moz gold-equivalent1 at
CEL's 100% owned El Guayabo Project, Ecuador and Completion
of $10 million Placement
Highlights

▪ Initial Inferred Mineral Resource Estimate (MRE) of 270 mt at 0.52 g/t AuEq1for 4.5 Moz AuEq1
at CEL's 100% owned El Guayabo Project in Ecuador (refer Table 1).

▪ The 4.5 Moz1 MRE contains a significant higher-grade core of mineralisation (refer Table 2):

▪ 1.45 Moz at 1.0 g/t AuEq1
(0.65 g/t AuEq cut-off) including;
▪ 1.01 Moz at 1.2 g/t AuEq1
(0.8 g/t AuEq cut-off) ) including;
▪ 0.63 Moz at 1.5 g/t AuEq1
(1.0 g/t AuEq cut-off).

▪ The MRE is predominantly based on drilling at the GY-A and GY-B anomalies and is constrained
by drilling with mineralisation remaining open in both directions along strike and at depth.

▪ MRE does not include drill holes GYDD-23-039 (805.3m at 0.6 g/t AuEq) or GYDD-23-040 to 043
(assays pending) and will be updated upon the receipt of assays for these final five holes.

▪ Discovery Cost of approximately US$1.202 per ounce.

▪ Transforms CEL into a two-project company with gold equivalent resources of 2.8 Moz4
in Hualilan and 4.5 Moz1
in Ecuador, both of which remain open.

▪ Firm commitments received to raise $10 million by way of an institutional placement, with
strong support received from domestic and offshore institutional investors

▪ Funds from the capital raising to be primarily applied to:
▪ Completion of a Pre-Feasibility Study (PFS) at CEL's Flagship Hualilan Gold Project;
▪ Regional exploration activities and drilling at Hualilan.

Commenting on the resource, CEL Managing Director, Mr Kris Knauer, said

“I would like to congratulate our Exploration team in Ecuador for this outstanding start. An initial
resource of 4.5 million ounces1
, particularly given its higher-grade core of 1.5 Moz at 1.0 g/t AuEq, is
a great start and has significant value in its own right.

It is, however, only our starting point. This resource is focused on 2 of the 7 targets at El Guayabo
that have produced mineralised intercepts greater than 500 metres. Mineralisation on these two
targets remains open in all directions along strike and at depth with the resource limited by a lack of drilling. Additionally, the final five holes in the program are yet to be included in the estimate which
will be updated when assays for these holes are received."

1 Reported as Gold Equivalent (AuEq) values – for requirements under the JORC Code see page 2
2 Discovery cost includes cost of drilling, assaying and all GA associated with the MRE

And the market sold on the news.

View attachment 158171

Fortunately, I was on a plane between Dubai and Bali when this came out so I didn't choke on my weeties. This is total crap for what the market (and me) expected, hence the sell off. I have no faith left in the management of this company.

I will pick through the announcement in the morning, but on the surface of it, KK is having a lend of us.

"the other half" needs some justification.

 

[The Triangle]

Fortunately, I was on a plane between Dubai and Bali when this came out so I didn't choke on my weeties. This is total crap for what the market (and me) expected, hence the sell off. I have no faith left in the management of this company.

I will pick through the announcement in the morning, but on the surface of it, KK is having a lend of us.

"the other half" needs some justification.


View attachment 158190

In 20 years Cel and hot chilli will still be raising capital to drill.

 

[Sean K]

In 20 years Cel and hot chilli will still be raising capital to drill.

At least. I don't think either has any intent to actually operate a mine though. Just drill it out until it's worth something. So, maybe in 20 years a return. I should be still alive to see the day.

 

[Sean K]

Had a chance to look through the Ecuador initial MRE now that I'm home, and it's not as bad as I thought considering it's an initial MRE and GY-A,B and C are open, so room to expand in that particular area.

They also still have all the other anomalies to drill out that had similar footprints and mineralisation, so it will expand.

Next thing to get done is an MRE on the Colorado V JV anomalies that already have huge hits and just need sufficient drilling to complete an inferred MRE. They're ramping an exporation target there of around 450Mt @ 0.5-1g/t. It looks like it will be 0.5g/t with the current assays, so that would come to about 7.2Moz AuEq.

That would give El Guayabo about 11.6Moz.

Maybe Lumina will be interested in buying that off them to turn their project into a whopper. Can only hope.

The only real significant surprise to the upside for these guys might be to discover something new in Argentina. There's plenty of historical mining been done along strike from Hualilan and they have some good indications that there's gold on the other side of the hill, so it's prospective for another find. Might take a bit of luck though.

Having said the above, it's hard to trust what the MD comes out with now due to his ramping.

Maybe another catalyst will be a general rally in POG through $2070 and ATHs. Then, most gold juniors and explorers should run with it once the general market takes notice and switches from their bitcoins to PMs.

 

[Sean K]

CEL is looking in trouble. Has enough money in the bank in the short term and MC still around $90m but it's fallen off a precipitous. Not sure how they dig themselves out of this hole other than a new discovery at Hualilan.

Delaying the SS for Hualilan smells very ordinary. KK has always said they were going to produce a concentrate and the met was amazing. Now, they're talking about producing a dore. That has changed due to the met testing during the SS. But, they've already done lots of met testing previously and we were told it was exceptional. Shifting goal posts mid SS means there's something wrong IMO.

Recent Ecuador rock saw channel sampling in areas they can't get rigs to indicate the high grade core may extend to surface which is good. Apparently these samples are suitable for adding to the JORC MRE at GY-A and B.

KK came out with a video to discuss the results and he's much more subdued than normal, although he could't help himself by putting in a tonnage to the extra results. I suppose he would be a bit more subdued because he's put a lot of his own coin in this and has watched it go from 38c to 7.5c. He's way out of pocket on paper.

Unless Lumina come sniffing for El Guayabo or they find another skarn at Hualilan, this might turn out to be a fire sale.

 

[frugal.rock]

precipitous

precipitous precipice

 

[Sean K]

precipitous precipice

I need to have a word to my ChatGTP post writing app.

 

[Sean K]

This is going to be interesting. The SS is just on the high grade skarn bits of the deposit, because they know the rest is crap. It should be a pretty low cost capex/opex but since they've changed the goal posts it could be anything. Price action says it's going to be crap.

 

[The Triangle]

This is going to be interesting. The SS is just on the high grade skarn bits of the deposit, because they know the rest is crap. It should be a pretty low cost capex/opex but since they've changed the goal posts it could be anything. Price action says it's going to be crap.


View attachment 165370

Everything this company has done has been poorly received by the market.

The time is taken to get this study out demonstrated to me that it'll be junk and won't be surprised to see this in the 4-5 cent range in several months where it'll be flogged off to a canadian jr for script.

 

[Sean K]

Everything this company has done has been poorly received by the market.

The time is taken to get this study out demonstrated to me that it'll be junk and won't be surprised to see this in the 4-5 cent range in several months where it'll be flogged off to a canadian jr for script.

Over promised and under delivered at just about every corner. The comms have been abysmal.

This SS is only going to be done on 1.6M oz @ 5g/t I think, so hopefully the general market is only expecting that.

 

[Sean K]

Couldn't help themselves with ramping this up - "delivers in spades" LOL

 

[The Triangle]

Over promised and under delivered at just about every corner. The comms have been abysmal.

This SS is only going to be done on 1.6M oz @ 5g/t I think, so hopefully the general market is only expecting that.

Put that in WA and it's a $500m market cap - where costs are 3x what they are in Argentina.

The deposits are ok, not great. But have to ask why the market hates CEL so much - and I can only think the market makers don't have very high regard to for the top brass.

Couldn't help themselves with ramping this up - "delivers in spades" LOL

View attachment 165408

Hmm, were the consultants charging by the word? 558 pages for a scoping study?

66% post tax IRR and reasonably conservative metal prices used. That's all I care about. Big margin for f-ups here. I was actually expecting them to have a junk study. It's not too bad.

 

[Sean K]

Put that in WA and it's a $500m market cap - where costs are 3x what they are in Argentina.

The deposits are ok, not great. But have to ask why the market hates CEL so much - and I can only think the market makers don't have very high regard to for the top brass.

Hmm, were the consultants charging by the word? 558 pages for a scoping study?

66% post tax IRR and reasonably conservative metal prices used. That's all I care about. Big margin for f-ups here. I was actually expecting them to have a junk study. It's not too bad.

View attachment 165409

I made it to page 22, the end of CEL's summary of the Mining Plus SS. I did have a quick scan of what MP produced and they included an archeological report and a report on paleaontology. No dinosaurs were discovered.

 

[Sean K]

@The Triangle, at least we've got some initial fundamentals on this now and compare it to any other junior gold miner.

Current MC is about $100m so would be worth trying to find some comparisons to see how it sits.

Need to add Capex of $150m to the equation. Not sure where they get if for such a small project. Maybe they get $100m for selling off Ecuador to Lumina and you and I can chip in for the rest.

Compelling financial metrics of the Scoping Study include:

▪ Pre-tax NPV5 US$409m (A$629m) at US$1,750/oz Au $20/oz silver (spot gold price US$1975);
▪ Pre-tax NPV5 increases to A$820m at current gold (US$1,975) and silver (US$23) prices;
▪ Project IRR (Pre-Tax Real) of 75% and a breakeven gold price of US$983/oz.

 

[Sean K]

Well, at least CEL have enough cash in the coffers to advertise of Stockheadjob, one of the most unreliable and BS pieces of analysis that's in the multiverses. The Oz should be ashamed to be allowing this propaganda. Arsehats.

Strong cashflows, potential lowest quartile costs and rapid payback are just some of the standout features that a high-grade starter mine at the Hualilan gold project could deliver to Challenger Gold.

Strong cashflows, potential lowest quartile costs and rapid payback are just some of the standout features that a high-grade starter mine at the Hualilan gold project could deliver to Challenger Gold.

A new scoping study suggests the mining of a high core at the 2.8Moz Hualilan will rake in more than $1 billion in earnings over seven years.

A hefty 81 per cent of that resource at the Argentine treasure trove is in the higher confidence indicated category, where drilling is close spaced enough to provide the certainty needed for mine planning.

This includes a high-grade core of 1.6Moz at 5g per tonne (g/t) gold equivalent (AuEq).

Challenger Gold (ASX:CEL) also has plenty of room to grow the resource, which remains open in most directions, as drilling outside the current resource estimate has yielded some very encouraging results.

Notable intersections outside the resource include:

• 13m at 15.5g/t AuEq ~600m south of the resource
• 4m at 5.8g/t AuEq 600m vertically below the resource
• 42m at 5.9g/t AuEq that is open beyond this intersection
• 32.5m at 3.5g/t AuEq that is open beyond this intersection.

Adding further interest, regional exploration has also indicated that there’s more gold to be found in the broader project land holding.

Rock chip sampling has returned (separate) high-grade assays of up to 26.9g/t gold and 1785g/t silver in a series of old workings 2km north of Hualilan while stream sediment sampling about 10km to the northwest returned a top result of 54.4g/t gold and 151g/t silver.

High-grade core pays off in spades​

The scoping study, which focuses exclusively on the high-grade core, has now delivered outstanding economics for a mine that will deliver annual production consisting of 116,000oz of gold, 440,000oz of silver and 9175t of zinc (141,000oz AuEq).

This is forecast to deliver EBITDA of $1.1 billion over the initial mine life of seven years while total pre-production capital is estimated at a relatively low $211.1 million with payback in just 1.25 years.

CEL notes that this represents a low start-up project that can be funded even in current challenging market conditions.

Hualilan is also likely to be among the lowest cash cost quartile gold producers with all-in sustaining costs of $US830/oz ($1291/oz).

Unsurprisingly, this delivers strong returns with pre-tax net present value (NPV) and internal rate of return (IRR) – both measures of profitability – estimated at $629 million and 75 per cent respectively.

Where it gets even more interesting is that the scoping study uses conservative price assumptions of $US1,750/oz gold and $US20/oz silver.

Should current spot prices be used instead, the NPV shoots up to $820 million, which is a huge positive to say the least.

Potential for more​

While attractive, the scoping study ignores the 1.7Moz AuEq remaining after the life of mine considered in its scope.

CEL says work is under way to evaluate heap leach processing and a larger open pit to capture this remaining resource.

Metallurgical testing is under way to evaluate options to recover this lower-grade mineralisation.

Other material opportunities to improve the scoping study findings include a low-grade zinc concentration pathway which could triple the recovered zinc and add up to an additional $US250 million net revenue.

Potential processing of the gold-silver concentrate on site to produce gold and silver dore is also being considered as this could deliver additional revenue of over $US165m before costs.

The test work will also help the company determine if both conventional flotation and carbon-in-leach (CIL) processing will be evaluated in the next stage of studies.

It noted that while flotation delivered superior economics, the CIL case had a capex that is $US20 million lower.

The company adds that while previous mine optimisation was done using $US1700/oz and unit costs 10-20 per cent higher than final costs, re-optimisation using a $US1750/oz gold price and final costs is likely to see materially more ounces in the mine.

 

[The Triangle]

These are very rough numbers. CHZ was a major disappointment. 2 years of holding for maybe 20% gain at best following a takeover. The scoping study numbers were almost identical to CEL. So - I can't exactly see CEL moving very far.

My thumb suck prediction based off nothing is a takeover for about 11 cents a share with the Ecuadorian assets spun off into another company. By that time CEL will have probably issued themselves 10,000 trillion performance options.

I don't believe for a moment these executives want to go into production probably just want to flip it and go on to the next thing.

	CHZ	CEL
Payback	1.25 years	1.25 years
Gold USD	1800	1800
Post Tax IRR	59%	80%
Post Tax NPV5	300 M	430 M
AISC USD/oz	$820	$830
Mining inventory koz	~750	~850
Takeover AUD	$90 m	???

 

[Sean K]

These are very rough numbers. CHZ was a major disappointment. 2 years of holding for maybe 20% gain at best following a takeover. The scoping study numbers were almost identical to CEL. So - I can't exactly see CEL moving very far.

My thumb suck prediction based off nothing is a takeover for about 11 cents a share with the Ecuadorian assets spun off into another company. By that time CEL will have probably issued themselves 10,000 trillion performance options.

I don't believe for a moment these executives want to go into production probably just want to flip it and go on to the next thing.

	CHZ	CEL
Payback	1.25 years	1.25 years
Gold USD	1800	1800
Post Tax IRR	59%	80%
Post Tax NPV5	300 M	430 M
AISC USD/oz	$820	$830
Mining inventory koz	~750	~850
Takeover AUD	$90 m	???

Watched the Webinar on Friday and there were a couple of gems. KK going off-piste as usual saying the SP should be triple and that they're going to sell Ecuador (as we have predicted) to a Canadian company, read Lumina. Can't imagine anyone else buying it. Maybe they get $10 an ounce for Ecuador = $45m. That's half their current MC, so seems wrong.

They have some strategic investors and mining companies in the data room to see if they're interested in investing or buying Hualilan. Maybe Ecuador goes some way in paying for some capex and makes a bank feel more comfortable with lending some cash.

On the surface of it, looks undervalued, even for such a small operation. NPV around $600-800m and increasing with POG breaking up. With an EV around $80m it should be a little higher if it's actually going into production.

Argentina's election result may be a kicker. If they ditch the peso and dollarise perhaps that puts the inflation genie back in the bottle. Not sure if the gauchos will be happy to lose their peso, but they need to do something significant or the country is toast.

Not sure how KK gets away with his off the cuff material announcements in these videos.

 

[Sean K]

Expecting some news next month on financing Hualilan and a JORC/Canadian standard MRE update on Ecuador. Must be close. A small catalyst could be selling Ecuador to Lumina. There were mining financiers in the data room as mentioned above in Nov/Dec so there's got to be news one way or the other. If they don't get the financing they'll probably try a royalty company and last/worse case have to go to the market to at least keep the lights on, which would be terribly dilutive if at all possible.

Look at that beautiful bottom!

Maybe I'm dreaming.

 

[Sean K]

I might be dreaming but I sense something fishy going on here. Happy to see some interest that is going to win me the monthly trophy.