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Challenger Gold (ASX:CEL) has announced its goal of raising up to A$1 million through a Share Purchase Plan (SPP), providing eligible shareholders in Australia and New Zealand the chance to invest in the company. However, the company retains the right to accept applications either partially or in full, potentially raising more or less than the target amount. The SPP aims to offer shareholders the opportunity to acquire shares without incurring brokerage, commission, or transaction costs. This initiative is part of Challenger's broader strategy to secure funds for its Toll Milling project and general working capital needs.
The funds raised through the SPP will complement those from a previously announced strategic placement. This placement is expected to raise A$6.6 million and will be used to finance the commencement of Toll Milling operations for 450,000 tons of high-grade ore from the company's Hualilan project over the next three years. Toll Milling is an important aspect of Challenger's strategy to generate early cash flow and capitalize on the current strong gold prices, which have been trading above US$2,500 per ounce.
The SPP will open on October 4, 2024, at 9:00 AM AWST (Australian Western Standard Time) and will remain open until 5:00 PM AWST on October 18, 2024. Shareholders interested in participating in the SPP can apply for shares in increments ranging from A$2,500 to A$30,000. The purchase price for the shares under this plan is set at A$0.045 per share, the same price as the shares being offered in the strategic placement to the company’s strategic investor. This price represents a 17% discount to the last closing price and an 18% discount to the 5-day volume-weighted average price (VWAP) of shares traded on the Australian Securities Exchange (ASX) prior to the announcement.
All new shares issued under the SPP will rank equally with the existing shares of Challenger Gold. The funds raised through this initiative will be instrumental in supporting the development of the company's Toll Milling project at Hualilan, with additional funds allocated toward general working capital.
The Hualilan project is a significant milestone for Challenger Gold, with the Toll Milling agreement allowing the company to process high-grade ore containing 85,550 ounces of gold (Au) and 495,334 ounces of silver (Ag). The ore has an average grade of 5.8 grams per tonne (g/t) of gold and 32.2 g/t of silver. This represents only 3% of the Hualilan mineral resource, which stands at 2.8 million ounces of gold equivalent. The toll milling project will generate substantial near-term cash flow for the company, providing a clear pathway toward a larger stand-alone development of the Hualilan mine.
Toll Milling is expected to commence within the next nine months, as the Toll Mill is already fully permitted for immediate mining and processing. The agreement also includes provisions for funding the mining, transportation, and processing of the Hualilan ore until Challenger Gold receives its first revenue from gold sales.
