Outstanding Results from Metallurgical Testing Significantly Upgrade CEL's Hualilan Gold Project

Challenger Exploration (ASX: CEL) (“CEL” the “Company”) is pleased to report the results from its balance of its Stage 1 metallurgical testing at the Company's flagship Hualilan Gold Project, in San Juan Argentina. This program involved significantly more detailed flotation, gravity recoverable gold (GRG) tests and leach testing of the various flotation tails components. It has been designed to lock in the flow sheet to support a Scoping Study. Additional Stage 2 work involving comminution and variability testing, blended test work, and pilot plant testing is ongoing.

• Average gold recovery increased to 95% across all ore types at the Hualilan Gold project
• Clear route to recover zinc and lead credits via standard sequential flotation with recoveries of:
  • 89% for zinc (Zn): (high-grade skarn mineralisation); and
  • 77% for lead (Pb): (high-grade skarn mineralisation)
• The confirmation of both of Pb and Zn as payable metals will significantly boost project economics with zinc comprising 11% of the historical foreign resource estimate by value1
• Production of attractive lead (>65% Pb) and zinc (>50% Zn) concentrates and discussions with off-takers confirming excellent payabilities for both concentrates.
• Sequential Flotation has the added advantage of generating extremely high-grade Au-Ag concentrates (120 g/t Au, 300 g/t Ag) which will significantly reduce transport costs
• Au-Ag concentrates have no deleterious elements and are exceptionally low in arsenic which, coupled with their high-grade nature, will result in outstanding payability
• Direct rail option to Rosario Port for concentrate export confirmed with indicative pricing indicating a 50% cost saving on earlier transport options further enhancing project economics

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

“Our early metallurgical testing was initially completed to provide comfort prior to committing to 200,000 metres of drilling at Hualilan. While it had pointed to good recoveries and attractive concentrates these recent results are far beyond our expectations and provide the project with a major boost.

The ability to recover zinc will materially improve economics as will the significant lift in concentrate grades which cuts concentrate transport costs in half on a per ounce basis. Additionally, the direct rail option will cut anticipated concentrate transport costs in half again.

The best way to sum up the metallurgy is a recent comment by our lead metallurgical consultant from SGS Lakefield to us which was - "You have been blessed with the metallurgy at this project. To concentrate up 50 times with such little loss in recovery across all metals does not happen often at all, and, I am astounded that we can produce a 65% lead concentrate from a starting grade of 0.5%."

The metallurgical testwork program has been conducted using SGS Lakefield. Testwork completed to date involved a sequence of 28 flotation tests (including gravity), gravity recoverable gold tests (GRG), and leach testing of the various flotation tail components. This testing was conducted on composites representative of the higher-grade skarn material, the intrusion-hosted mineralisation, and sedimenthosted mineralisation.

This testing has demonstrated:

• excellent recoveries of gold, silver, zinc, and lead into various high payability concentrate products for the high-grade skarn material.
• excellent recoveries of gold and silver into high-payability concentrate for the intrusion-hosted material
• the outstanding high-grade nature of the concentrates produced with the average gold and silver grades in the Company’s concentrates more than double than indicated by earlier testing
• the exceptionally clean nature of the gold-silver concentrates which are low in all deleterious elements and have a an extremely low arsenic content making them highly attractive
• recoveries of 70-80% of any residual gold and silver not recovered into the concentrate via a simple cyanide leach of the floatation tails increasing total recoveries to 95% (Au) and 91% (Ag)
• excellent gravity recoveries across the various ore types with third party Gravity recoverable Gold (GRG) testing confirming high recoveries via gravity at coarse grind with recovery of
  • 70% Au from the intrusion hosted mineralisation via gravity at a final grind of P80=83µm
  • 44% Au from the high-grade skarn material at a final grind of P80=87µm.
• good recoveries of gold and silver into an Au-Ag concentrate from the low grade (0.7 g/t Au, 7.6 g/t Ag) sediment-hosted material confirming excellent recoveries for all three components of the Hualilan mineralisation.

Ongoing discussions with potential off-takers as the Stage 1 testing has progressed, refining the grades and compositions of the concentrates likely to be produced, has indicated that payabilities for all metals will be excellent. Expected payability for gold in the Au-Ag concentrates is >95%, with payability for Au-Ag in the Pb concentrate also expected to be >95% with lead payability >90%. Zinc payability is also expected to be at the upper range of what was expected with payability expected to be in the mid to high 80 percent range.

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