Challenger Exploration signs renewable energy deal to power Hualilan gold mine in Argentina

South America focused gold developer Challenger Exploration (ASX: CEL) has signed a renewable power supply deal that enhances both its green credentials and the economics of its proposed Hualilan Gold Mine in Argentina.

The memorandum of understanding (MOU) is with YPF Luz, one of the country’s largest energy companies with installed capacity of 3.2 gigawatts, including 468 megawatts of renewable capacity.

Under the non-binding MOU, YPF Luz will present Challenger with “high level technical alternatives” for renewable energy sources, with Challenger then deciding on whether the generator should proceed with any of the options.

If one of the alternatives is satisfactory, the parties will negotiate a binding agreement that could include a power purchase agreement or similar supply deal.

The MOU stipulates an energy supply price of below US7 cents (10 cents) per kilowatt hour. If YPF can match the best price, it has first right of refusal on any future supply tenders for a five-year period.

Greener, cheaper power

Challenger managing director Kris Knauer said that along with other measures the company already was undertaking, the MOU “has the potential to see Hualilan emerge as one of the lowest carbon intensity gold mines in the world.”

A supply deal would also enhance the project economics by enabling low-cost power from a reliable grid connection, rather than on-site battery storage.

The company is preparing an advanced scoping study for the project, in the San Juan province in the country’s west.

Hualilan has undergone extensive historical drilling, with more than 150 drill-holes dating back to the 1970s.

In March the company released an updated JORC-compliant interim mineral resource estimate of 2.8 million ounces of gold equivalent, including a high-grade core of 9.9 metres at 5 grams per tonne gold equivalent

San Juan is considered to be Argentina’s most mining-friendly jurisdictions, hosting world-class copper deposits such as Glencore’s as El Pachón, McEwen Mining’s Los Azules and Stillwater Mining’s El Altar.

Further afield

While Hualilan is Challenger’s near-term opportunity and flagship project, the company also owns the El Guayabo gold-copper prospect, covering 35 square kilometres in southern Ecuador.

This region is one of the most under-explored sections of the expansive Andean Copper Belt, which hosts some of the world’s largest porphyry copper and gold deposits including Lumina Gold’s 17-million-ounce Cangrejos Gold Project.