Challenger Exploration (ASX:CEL) South American gold copper projects


by Jessica Amir

Challenger Exploration Limited (ASX:CEL) Managing Director & CEO, Kris Knauer talks about the company's focus on two new gold copper projects in Argentina and Ecuador, its new issue to recapitalise, and exploration plans.

Katrina Bullock: Hi I’m Katrina Bullock for the Finance News Network and joining me in the studio today, all the way from Challenger Exploration Limited (ASX:CEL) is Managing Director and CEO, Kris Knauer. Kris, welcome back.

Kris Knauer: Thank you for having me.

Katrina Bullock: Could we start with an introduction to the company?

Kris Knauer: Challenger Energy is a single asset company, has a world-class shale gas exploration play in South Africa. For the last six years, the company’s been waiting for the South African Government to award the tenure. And basically, they ran out of time and money waiting, so they approached me. I’m a big Challenger shareholder already and I’ve got a high-grade gold deposit in Argentina and also a world-class exploration play in Ecuador. So we’re putting those two projects into Challenger, keeping the South African shale gas play; we’re capitalising it. We’ll raise $5 million and also putting a new Board on with South American experience, as well.

Katrina Bullock: So copper gold assets in South America have been getting a lot of attention, thanks to the success of SolGold (LON:SOLG)?

Kris Knauer: Yes SolGold has got a lot of attention. It’s not just SolGold though in Ecuador, I mean the biggest concession holder in Ecuador is Fortescue Mining (ASX:FMG). Gina Rinehart has just reportedly bid $200 million exploration expenditure for a block. BHP Group (LON:BHP) announced an $80 million farm in the other day in Ecuador. It’s effectively been locked up, up until six years ago. It’s the middle of the South American copper belt and you’ve got all the majors scrambling for ground, over there.

Katrina Bullock: So you’re seeing a lot of potential in the region?

Kris Knauer: A lot of potential. I mean we sit eight kilometres from a 10 million ounce ore body.

Katrina Bullock: Now turning to some of your projects. Could you tell us a little bit more, starting with Argentina?

Kris Knauer: So Argentina, effectively it’s in San Juan Province in Argentina. The location’s a bit like sitting between Kalgoorlie and Boulder over in WA. We’ve got a high-grade gold deposit, it’s 644,000 ounces, about 12 grams a tonne gold, plus silver, plus zinc, non-JORC. Having said that, when it’s non-JORC, there’s 150 drill holes into the project, so we know that deposit quite well. Really it’s a case of the next six months is all about JORC resource and also scoping it out.

The deposits open in all directions, it’s been locked up in a legal dispute with no work done for almost 20 years. So the next six months are twofold, JORC resource and then, is it much bigger than the current 600,000 ounces? And if it is basically that’s okay, nice project to put into production and generate a cash flow.

Katrina Bullock: How about your projects in Ecuador?

Kris Knauer: Ecuador is the classic big company drill project play. Newmont Goldcorp (NYSE:NEM) did some scout drilling about 15-20 years ago, got some fantastic results, world-class, 150 metres at 2.5 grams gold, a couple of hundred metres at 0.5 per cent copper, 0.5 gram gold. These were in vertical breccia pipes that were a couple of hundred metres in diameter. Newmont were chasing open cut high-grade gold and it was never going to be that.

Having said that, the Newmont personnel never went to site, the core was logged by Ecuadorian junior GOs, who’d never seen a porphyry system. Basically, they didn’t recognise that it was the top of a porphyry system. So really, we’ve got a world-class porphyry target there as well.

Katrina Bullock: How about Karoo Basin?

Kris Knauer: Karoo was and remains a world-class asset. I know Challenger had a $50 million farm in deal lined up six years ago, when it looked like that tenement was being awarded. Unfortunately, it’s politically unpopular in South Africa, the shale gas. At some point in time that will be awarded and it’s a nice problem to have. Then we work out what we do with an asset that’s probably worth $50 million.

So again, that is a third world-class project. I mean that project, the US geological survey calculated recoverable reserves there on that concession, of about seven TCF of gas, which is half of the Gorgon project, to put it into perspective. And that’s from the bottom 200 metres of two-kilometre shale pile. The well drilled in I think it was 1968, that blew out, flowed at 800 million cubic feet a day out of the shales, wasn’t fracked. So it’s ranked as in the top 10 shale gas basins in the world.

Katrina Bullock: Turning to the capital raising. How much are you looking to raise?

Kris Knauer: We’re looking to raise $5 million and of course, where we are is we’ve got Peloton Capital and Baillieu’s as our co-lead brokers. So the five is pretty much locked away. The reason I’m chatting to you guys is we’re making sure we’ve got spread all locked away. So any of your clients who want a small allocation, the spread is always helpful. That’s generally the biggest problem in something like this, making sure you’ve got those names. So we should be live hopefully today on the prospectus.

Katrina Bullock: How many cents per share are you looking at?

Kris Knauer: Three cents per share. So we’ll come on with a market cap of about $14 million, $5 million we’ve raised, so you’re talking an EV of $8 million. You look at our gold resources in Argentina, admittedly non-JORC; they’re trading at $20 an ounce. Most other companies are trading at, with high-grade resources like that, are trading at $40 to $60 dollars an ounce. Then you throw in Ecuador for nothing and you throw in South Africa for nothing. So it should go well.

Katrina Bullock: Where can investors go to find out more?

Kris Knauer: So our website is probably the easiest way, which is They can approach their broker; I think most brokers should know where to get a copy of a prospectus as well. But it is on our website and feel free to download it there.

Katrina Bullock: Lastly before we let you go, any final words for investors?

Kris Knauer: We priced it very well; it’s a high quality project. We’ve spent $3 million in the ground over the last 12 months, so we’ve got a backlog of things, we’ve just put in for assay now. Unfortunately you don’t want results before prospectus. And so there will be a lot of significant news flow, within the first couple of months of listing as well. And then we’ll start drilling literally within two months in Argentina, probably sooner.

Katrina Bullock: Kris Knauer, thank you so much for the update and good luck with the raising.

Kris Knauer: Thank you very much.