Developing A New High-Grade Gold District in Underexplored Mongolia
This Erdene Resource Development profile is part of a paid investor education campaign.*
Over a decade ago, a team of Mongolian and international geologists working with Erdene Resource Development (TSX:ERD,OTC Pink:ERDCF) in unexplored areas of the Gobi Desert discovered very high grade, surface gold prospects. Through follow-up exploration, the area has evolved into a new gold district in Southwestern Mongolia with two surface deposits and multiple early stage prospects. The company is focused on rapidly advancing one of those deposits, the high-grade, open-pit Bayan Khundii gold project (“Bayan Khundii” or “BK”) to production. This initial development and the associated cashflow will form a foundation for growth as the exploration team continues expanding high-grade gold resources on adjacent prospects. The company has interests in three exploration licenses and three mining licenses covering 17,861 hectares (44,117 acres). Erdene is the longest standing foreign investor and most successful gold explorer in Mongolia, with an experienced management team and Board of Directors, a long-term focused, loyal shareholder base and strong social license.
Erdene’s deposits are located in the Edren Terrane within the Central Asian Orogenic Belt, which hosts some of the world’s largest gold and copper-gold deposits. Although epithermal gold and porphyry copper-gold deposits are well documented in China and along the Belt’s western trend, exploration in Mongolia was limited until the mid-1990s, when the country opened to foreign investment. Since that time, one of the worlds largest copper-gold deposits has been discovered and developed in Southeast Mongolia, Rio Tinto’s (NYSE:RIO) Oyu Tolgoi project, and Erdene has discovered the Khundii Gold District in the country’s southwest. Within the Khundii Gold District, the company has discovered multiple high-grade gold and base metal prospects, two of which are advancing to development: Bayan Khundii, followed by Altan Nar (“Altan Nar” or “AN”). In addition, the company holds a large molybdenum-copper resource at its 100 percent owned Zuun Mod project, 33 kilometres east of Bayan Khundii.
Bayan Khundii, Erdene’s flagship project, is a high-grade, near-surface gold deposit. Erdene’s geological team discovered the prospect in 2015 and progressed the discovery through the various studies. In July 2020, Erdene announced the results of an independent Feasibility Study for the Bayan Khundii gold project. The Feasibility Study results include an after-tax Net Present Value at a 5 percent discount rate and a US$1,400/oz gold price of US$100 million and Internal Rate of Return (IRR) of 42 percent. At a US$2,000/oz gold price, the project’s after-tax NPV 5 percent increases to US$297 million. The Feasibility Study envisions an open-pit mine at Bayan Khundii, producing an average of 63,500 oz gold per year, for six years, at a head grade of 3.71 g/t gold, utilizing a conventional carbon in pulp processing plant. Production is expected to commence in early 2022 based on the current project schedule.
Erdene continues to explore the potential for additional discoveries on its Khundii and Altan Nar licenses and is evaluating acquisition opportunities throughout the Khundii District. Over the past decade, Erdene has developed the largest proprietary geologic database of Southwest Mongolia’s mineralization that has led to the identification of more than 20 high-priority targets for acquisition.
Erdene Resource Development’s Company Highlights
- High-grade Bayan Khundii Project: Average head grade of 3.7 g/t gold is among the highest grade open-pit developments globally, with first production expected in 2022.
- Resource Expansion: The Bayan Khundii gold resource¹ includes 520,700 ounces of 3.16 g/t gold Measured and Indicated (M&I)² and 102,800 ounces of Inferred resources at 3.68 g/t gold. Within the M&I resource, a proven and probable open-pit reserve totals 409,000 ounces at 3.7 g/t, providing significant potential growth of reserves with the development of the remaining M&I and Inferred resources.
- Erdene’s Altan Nar gold resource includes 318,000 ounces of 2.0 g/t gold Indicated and 186,000 ounces of Inferred at 1.7 g/t gold in addition to significant silver and base metal content.
- Discovery Potential: Erdene’s properties are situated in an unexplored portion of the Central Asia Orogenic Belt, which hosts some of the world’s largest gold and copper deposits. Erdene’s technical team has established three greenfield gold and copper deposits — Zuun Mod in 2011, Altan Nar in 2015 and Bayan Khundii in 2018.
- Experienced Management Team and Board: The company’s management team has operated in Mongolia for over 20 years. Its Board includes members with significant expertise in exploration, development, construction, stakeholder relations and corporate finance.
- Strong Shareholder Base: Recent $15 Million strategic investment by Eric Sprott, significant investment by the European Bank for Reconstruction and Development and substantial ownership by insiders. Additionally, Mongolia’s largest foreign investor is financier for the project.
¹ For details of the Mineral Resources see Khundii Gold Project NI 43-101 Technical Report, Tetra Tech December 4, 2019 – SEDAR
² M&I: 171,000 ounces of 3.77 g/t gold Measured, and 349,700 ounces of 2.93 g/t gold Indicated
³ The Bayan Khundii Mineral Resource includes 521,000 ounces of 3.16 g/t gold Measured and Indicated (“M&I”) and 103,000 ounces of Inferred resources at 3.68 g/t gold. The Altan Nar Mineral Resource includes 453,000 ounces of 2.8 g/t gold equivalent Indicated and 277,000 ounces of Inferred resources at 2.5 g/t gold equivalent. Cut-off grades for Altan Nar are 0.7 g/t AuEq above a pit and 1.4 g/t AuEq below the same pit shell and for Bayan Khundii are gold only 0.6 g/t gold for 2018 and 0.55 for 2019. For details of the Mineral Resources see Khundii Gold Project NI 43-101 Technical Report, Tetra Tech December 4, 2019 – SEDAR
Erdene increased its resources in the Khundii Gold District, including both the Bayan Khundii and Altan Nar deposits significantly over the past five years (see table below for current NI 43-101). The deposits maintain the vast majority of the resources at a higher cut-off with 762,000 ounces of measured and indicated resources at an average grade of 3.7 g/t gold and a further 275,000 ounces of inferred resources at 2.4 g/t³ gold at a 1.0 g/t gold cut-off grade.
Bayan Khundii Gold Project
Bayan Khundii is the highest priority project for the corporation based on its grade, proximity to surface and favorable metallurgy. The Bayan Khundii deposit was discovered in Q2 2015 and step-out drilling in 2017 indicated very high gold grades, with up to one meter of 2,200 g/t gold within 14 metres of 158 g/t gold.
In February 2019, Erdene filed a positive Preliminary Economic Assessment (PEA) study for its Bayan Khundii and Altan Nar deposits in the Khundii Gold District. Prepared by RPM Global, this independent study confirmed the high-return, low-capital and low-operating cost potential of the project that will form the cornerstone development in the emerging District. The initial development envisioned in the PEA was to focus on a high grade, open-pit mine beginning at the Bayan Khundii Striker Zone and expanding into adjacent zones within Bayan Khundii prior to incorporating resources from the Altan Nar deposit.
Erdene proceeded immediately to an NI 43-101 Pre-Feasibility Study for BK and an updated PEA for AN, led by Tetra Tech, and announced results of these studies on October 21, 2019. Incorporating an updated Bayan Khundii resource, an initial Reserve Estimate for BK, and independent quotes for most major cost centers, Tetra Tech confirmed the high-return, low-capital and operating cost potential of the Bayan Khundii gold project.
In July 2020, Erdene released the Bankable Feasibility Study results for the Bayan Khundii Gold Project. Study highlights are presented below.
Erdene Resource Development President and CEO Peter Akerley describes the Bayan Khundii project as a “high-grade, low-capex, low-opex project with a less than two-year payback and significant growth potential.” The Bankable Feasibility Study for Bayan Khundii stated a base case after-tax Net Present Value of US$100 million and 42 percent Internal Rate of Return (IRR), increasing to US$274 million and 93 percent IRR at a gold price of US$2,000/oz.
The Bayan Khundii deposit has several characteristics that set it apart from other gold deposits, including the high-grade nature of the deposit (three times the global average of open-pit mines); simple mineralogy enabling good recoveries from conventional processing; shallow, open-pit resources; and the unexplored nature of the surrounding region. The Bankable Feasibility Study envisions a conventional crushing and grinding, leach and a carbon in pulp plant with processing capacity of 1,800 tonnes per day. Bayan Khundii’s initial pit-optimized reserve is estimated at Proven and Probable 409,000 ounces at a 3.7 g/t gold average grade.
The company sees the following opportunities to enhance value at the Khundii gold project:
Additional Resources at Bayan Khundii: The Bayan Khundii resource includes measured and indicated resources of 520,700 ounces at an average grade of 3.16 g/t gold and Inferred Resources of 102,800 ounces of gold at a grade of 3.68 g/t gold, which could potentially be added to open-pit reserves through both additional drilling and rising gold prices.
Recent drilling at the Midfield SE and Striker SW zones of Bayan Khundii intersected exceptionally high-grade gold, including one meter of 582 g/t gold within an intersection of 5.5 meters grading 126 g/t at Midfield SE, in areas of the resource currently classified as waste or sub-grade material. The areas are expected to provide additional high-grade feed in the early phases of development. Additionally, very high gold grades observed in drilling in the Striker West portion of the deposit have the potential to provide additional high-grade resources should more closely spaced drilling improve continuity.
Additional discoveries around Bayan Khundii: The Bayan Khundii deposit is situated in a highly prospective region that has received minimal historical exploration. On the Bayan Khundii property, multiple high-grade targets have been established through limited shallow drilling and surface sampling within 4 kilometres of the deposit, including the Khar Mori (Dark Horse) prospect identified in late 2019.
The Dark Horse prospect covers an area approximately 1.5 by 3 kilometers and is situated 3.5 kilometers north of the Bayan Khundii deposit. Previous exploration results at Dark Horse include a 32.9 g/t gold rock chip sample hosted by massive tourmaline cut by quartz stockwork veins. Follow up results included rock chip samples of 87.8 g/t gold, 18.2 g/t gold, 15.3 g/t gold and 12.1 g/t gold rock chip samples. Trenching results in Q2 2020 include 6 meters of 8.8 g/t gold, which contained 1 meter of 50.8 g/t gold on the main Dark Horse structure. Drilling is currently underway at Dark Horse with results expected in the coming weeks.
Only 16 kilometers north of the Bayan Khundii deposit, the company has a second high-grade gold and polymetallic project, Altan Nar (“Golden Sun”). The Altan Nar mineralized trend has been traced over 5.6 kilometers with 18 gold prospects identified. A preliminary resource (NI 43-101), including a small portion of the prospect area, includes an Indicated resource of 318,000 ounces at 2.0 g/t gold and an Inferred resource of 186,000 ounces at 1.7 g/t gold grade, as well as significant silver, lead and zinc resources. Altan Nar is viewed as the most advanced growth opportunity to follow the Bayan Khundii development, and a number of development options for Altan Nar are under consideration.
Erdene reported Q4 2019 drill results in February 2020; the results showed multiple shallow intersections in excess of 50 g/t gold. These results expand the high-grade core of the Discovery Zone deposit and open up new areas for future drilling that should positively impact Altan Nar resources.
Khundii Gold District
Erdene’s licenses are situated in an unexplored portion of one of the world’s great gold belts, the Central Asia Orogenic Belt. This belt hosts some of the world’s largest gold deposits, including the giant Oyu Tolgoi copper-gold deposit in Mongolia and the Kumtor gold deposit in Kyrgyzstan.
Along with its Bayan Khundii and Altan Nar deposits, Erdene has several other 100 percent-owned prospects and deposits in the Khundii Gold District that hold the potential to yield substantial additional resources:
- Dark Horse is a newly discovered prospect that provides significant discovery potential.
- Altan Arrow is an early-stage, high-grade gold-silver project located near Bayan Khundii.
- Ulaan is a recently optioned copper-gold porphyry prospect.
- Khuvyn Kar is an early-stage copper-silver porphyry project comprised of several drill targets and copper intersections.
- Nomin Tal is a narrow high-grade copper-gold discovery.
- Zuun Mod is a large molybdenum-copper porphyry deposit.
Erdene continues to evaluate opportunities throughout the Edren Terrane, within our licenses and elsewhere in the mineralized belt. This has led to the identification of prospects that are being explored through surface surveys on the company’s six licenses, drilling of selected targets and evaluation of acquisition targets on private and government held ground. Exploration within the licenses has identified significant gold mineralization. Approximately 70 percent of regional drill holes have intersected anomalous gold mineralization (defined as >0.1 g/t gold), with three holes intersecting greater than 20 g/t gold over 1 to 2 meter intervals. Regional drilling has been restricted to shallow targets with average drill depths of about 100 meters. Success has been driven by the abundance of untested, near surface geochemical and geophysical targets in a region that has had no previous modern exploration. Recent exploration successes testing shallow targets, and the definition of three deposits, exposed at surface, are testament to the discovery potential of this new district.
Over the past decade, Erdene has developed the largest proprietary geologic database of Southwest Mongolia’s mineralization that has led to the identification of more than 20 high-priority targets for acquisition.
Erdene Resource Development’s Management Team
Peter C. Akerley—CEO and Director
Mr. Akerley is one of the founding members and principals of Erdene Resource Development and has held the position of president and CEO of the company for over 17 years. With over 30 years of experience in mineral exploration, corporate financing, project development and management, Peter brings vast experience to his leadership role in the company. As a geologist, Mr. Akerley has worked extensively in jurisdictions around the world, mostly in North America, South America and Asia — predominantly in Mongolia.
Mr. Akerley also has extensive experience in corporate merger and acquisitions, joint venture arrangements and financings, having led Erdene through more than 20 business arrangements since taking the company public in 2004.
Robert Jenkins—Chief Financial Officer
Mr. Jenkins was appointed CFO on May 1, 2019, after joining the company as Vice President of Business Strategy in 2018. Between 2010 and 2017, Mr. Jenkins held a series of progressive finance and operational roles with Brookfield Asset Management in Toronto, Canada. He began his career in the assurance and consulting practices at Deloitte LLP. Mr. Jenkins graduated with a Bachelor of Commerce from St. Mary’s University and is a Canadian Chartered Professional Accountant.
Bilguun Ankhbayar—VP Business Development
Mr. Ankhbayar is a Mongolian mining finance professional, based in Ulaanbaatar, with 15 years experience in North American and Mongolian capital markets. Previously CEO of mining industry service provider Monrud LLC and Mongolian investment dealer MIBG, Mr. Ankhbayar brings tremendous experience in multiple areas to assist the company in reaching its business development goals. Mr. Ankhbayar holds a Bachelor of Commerce degree from St. Mary’s University and is a Chartered Financial Analyst.
Bayarmaa Bagabandi—Chief Administrative Officer
Ms. Bagabandi is a Mongolian executive with over 20 years experience in administration and operations. She manages administrative operations and is in charge of financial and management regulatory reporting for Erdene in Mongolia. Ms. Bagabandi holds a Bachelor’s Degree in Economics from Mongolian National University and an MSc in International Economics from Korea’s Sogang University.
Gendenjamtsyn Bat-Erdene—Senior Geologist
Mr. Gendenjamtsyn is a well respected geologist in Mongolia, with over 25 years experience in the country’s resource exploration industry carrying out extensive precious and base metal exploration for international companies such as Rio Tinto and Troy Resources. Mr. Gendenjamtsyn is also a leading member of the Mongolian Geological Society and has been accredited with several publications on Mongolian gold geology. Mr. Gendenjamtsyn obtained a BSc in Geology from Irkutsk State University in 1986 and an MSc in Geology from the Mongolian Technical University in 1999.
Julien Lawrence—Mining Engineer
Mr. Lawrence is a mining engineer and project manager with extensive experience developing projects in Asia, most notably in Mongolia, the Philippines, China and Kazakhstan. His work includes construction and commissioning of greenfield gold, coal, copper and nickel mining projects in these regions.
*Disclaimer: This profile is sponsored by Erdene Resource Development (TSX:ERD,OTC Pink: ERDCF). This profile provides information that was sourced by the Investing News Network (INN) and approved by Erdene Resource Development in order to help investors learn more about the company. Erdene Resource Development is a client of INN. The company’s campaign fees pay for INN to create and update this profile.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Erdene Resource Development and seek advice from a qualified investment advisor.