ASX-listed Challenger Gold expects to generate first revenue this month soon after toll mining and processing started on ore from the Hualilán gold project, in Argentina, on May 1.

The company is processing ore through Austral Gold’s Casposo mill, marking Challenger’s transition from developer to gold producer.

A full-scale prefeasibility study (PFS) on the Hualilán project, in Argentina, will be released imminently.

Challenger initiated a toll-mining strategy for the project starting with ore transport and processing at the third-party Casposo mill to provide cash flow for future standalone operations.

Despite having faced minor ore hauling delays earlier in the quarter, Challenger is currently moving 1 000 t/d of ore, including through night shift operations from the second week of May.

The company has a three-year high-grade toll milling plan in place at the Casposo mill.

The tolling phase acts as a bridge to a planned, larger and permanent operation at Hualilán, which will double the company’s production to more than 150 000 oz/y.

Meanwhile, the company says infill drilling at the Magnata pit at the Hualilán project is delivering results above expectations, with the average grade from completed holes having been 7 g/t – compared with 6.2 g/t modelled in the PFS for the toll milling part of operations.

Some standout intercepts include eight metres grading 17.1 g/t gold equivalent, seven metres grading 12.5 g/t gold equivalent and four metres grading 15.7 g/t gold equivalent.

Challenger says it has also discovered new high-grade zones within the pit, which points to potential resource upside.

The Magnata access ramp is on track for completion by mid-May, at which point the company intends to accelerate mining.

Challenger has A$20.6-million of cash on hand following peak mining activity expenditure of A$15.8-million in the first quarter. Mining rates have since been reduced to conserve cash ahead of first revenue.

The company advises that toll milling capital spend is more than 95% complete.