Challenger Gold releases scoping study for low-cost Hualilan project
A scoping study on Challenger Gold’s (ASX: CEL) Hualilan project in Argentina suggests it could become one of the lowest-cost producers on the Australian Stock Exchange, with a rapid payback period of under 16 months and average annual production of around 116,000 ounces of gold.
The study presents an initial economic evaluation of the project focused on the high-grade core of the Hualilan resource estimate to deliver a low capital expenditure operation capable of being funded by the company in current tight market conditions.
It is estimated to have an earnings before interest, taxation, depreciation and amortisation (EBITDA) of $1.1 billion over an initial seven year life of mine and a pre-tax net present value (NPV) of $629 million at prices of $2,720 per ounce gold and $20/oz silver.
The pre-tax NPV increases to $820 million at current prices of $3,070/oz gold and $35/oz silver.
Challenger said the indicative NPV ignores the residual value of the 1.7 million ounce gold equivalent resource remaining after life of mine and is not considered to reflect the full value of the asset.
Initial column testing indicates it may be economically viable for the company to run a heap leach process option at Hualilan which would assist with recovering some of the mineralisation that has been excluded.
The scoping study is believed to have identified several clear — and potentially material -— opportunities for optimisation and improvement.
Low-cost producer
Hualilan is expected to be a low-cost mine when compared with current Australian producing gold mines.
The scoping study outlines a projected average all-in-sustaining-cost (ASIC) of $1,277/oz over the life of mine, placing Challenger in the lowest quartile of ASX-listed gold producers.
The average life of mine study production target would place the company within the current Top 20 ASX-listed gold producers.
Processing options
Challenger is seeking to fast-track production at Hualilan by expediting metallurgical testwork while evaluating options to recover and process lower-grade mineralisation using a larger open pit.
The scoping study presents two processing options, both using a 1 million tonnes per annum plant.
The first involves crushing, milling, gravity recovery of gold, conventional floatation, and flotation tailings leach (FTL), while the second evaluates gravity recovery, followed by conventional carbon-in-leach (CIL) techniques.
The floatation case is believed to provide a “superior” economic outcome, however the pre-tax NPV for both options is within a margin of 7%, while the CIL option has a $31 million lower capital cost estimate.
Following the receipt of further metallurgical results to supplement preliminary CIL recovery assumptions, Challenger will decide if FTL and CIL should be further evaluated in the next stage of studies.