Steppe Gold

Near Term Gold Producer in Mongolia

This profile is part of a paid investor education campaign.*

Overview

Steppe Gold (TSX:STGO)  is a precious metals development company and near term gold producer in Mongolia. The company owns the Altan Tsaagan Ovoo (ATO) and the Uudam Khundii (UK) gold projects in Mongolia.

At the flagship ATO project, Steppe Gold is in the final stages of developing an open pit heap leach operation. Gold production is expected to commence in the coming months as the Company completes construction and moves into commissioning. Economics are highlighted by an initial capital cost of approximately US$20 million with cash costs of less than $500/oz.

Following the commencement of commercial production, Steppe Gold will continue its feasibility study into the development of the much larger fresh rock resource underlying the current mining operation. The proposed development of a CIL operation processing fresh rock will have a life of mine of approximately 12-15 years. Existing defined fresh rock resources will be supplemented by the new discovery of high grade gold and silver mineralization on the Mungu Trend. Steppe Gold’s exploration is showing that the high grade Mungu Discovery is semi continuous to the structurally controlled mineralization drilled at the ATO 4 Deposit and that significant resource expansion is possible.

The UK project is the first of its kind joint venture (80/20) between Steppe Gold and the Bayankhongor Provincial Government. The company has completed a highly successful initial exploration program on this project, consisting of IP and magnetic surveys, as well as rock chip and soil geochemical programs. This exploration program resulted in four discoveries, which the company plans to further explore with an extensive program of trenching and drilling in the latter half of 2019. The Company is continuing to asses a number of additional opportunities for the acquisition of exploration licenses and mining projects across Mongolia.

Steppe Gold’s management team has a track record of success in Mongolia. Keeping projects on track and under budget is Steppe Gold’s General Manager of Processing, Grant Smith. Smith has experience in constructing and operating heap leach operations and most recently worked on the Tujuh Bukit gold heap leach project in East Java, Indonesia.

Company Highlights

  • Near term gold producer in Mongolia.
    • Initial capital cost of approximately US$20 million, average cash costs less than US$500/oz.
  • Mine construction at ATO is currently under budget.
  • US$23 million gold and silver streaming agreement with Triple Flag in place.
  • Updated resource estimate and feasibility study underway for the larger fresh rock project underlying the current mining project at open cuttable depths. This larger Phase 2 Project would involve the construction of a grinding and CIL circuit and would have an expected life of mine of 12-15 years and an annual production profile that could reach ~150,000 ounces on a gold equivalent basis.
  • Joint venture partnership in place for the UK project with the Mongolian government. Management has a proven track record of success in Mongolia.Initial capital cost of approximately US$20 million, average cash costs less than US$500/oz.

Mining in Mongolia

Mongolia is known as one of the last frontiers for large scale mining projects, offering investors and mining companies alike an interesting opportunity. With the success of Oyu Tolgoi, a tier one producer and one of the largest copper mines in the world, Mongolia has demonstrated the geologic potential for mineral wealth. Mongolia had a GDP of US$11.43 billion in 2017 and has an annual growth rate of approximately six percent. The growth of the economy is supported by commodity exports, such as copper and coal, improved business sentiment and the implementation of a government-led economic adjustment program.

The World Bank believes that Mongolia’s growth outlook is positive and is supported by the mining and manufacturing sectors. Gold exploration accounts for 45 percent of the mining sector and 2.6 percent of the country’s GDP, leading to the implementation of policies and programs to help promote gold mining.

In March 2017, the Mongolian government signed a Foreign Investment Promotion and Protection Agreement (FIPA) with Canada. The agreement provides Canadian investors operating in Mongolia with a legal framework that will help bring greater predictability and certainty to their investments. Canada is a significant investor in Mongolia and has invested approximately $6.4 billion into the country.

Mongolian Assets

ATO Gold-Silver Mine

The 5,493-hectare ATO gold-silver project is located in the Dornod province of eastern Mongolia. Steppe Gold’s mining license for the project is fully permitted for 30 years.

2017 technical report

A 2017 technical report outlined a project development plan for an open pit heap leach operation at ATO. The project could produce approximately 147,000 ounces of gold and 673,000 ounces of silver from oxide ores over its 4.5 year mine life. Economics are highlighted by an initial capital cost of approximately US$20 million and average cash costs less than US$500/oz.

2017 resource estimate

In 2017, Steppe Gold released a resource estimate for ATO. The report outlined a proven and probable mineral reserve of 5.23 million tonnes grading 1.25 g/t gold and 10 g/t silver. It also described a measured and indicated resource of 12.23 million tonnes grading 1.49 g/t gold, 9.99 g/t silver, 0.75 percent lead and 1.34 percent zinc, as well as  an inferred resource of 1.05 million tonnes grading 1.03 g/t gold, 25.18 g/t silver, 0.52 percent lead and 1.11 percent zinc.

Exploration

Centerra Gold (TSX:CG), the prior operator and owner of the ATO project, spent over US$25 million on exploration, including the completion of 67,000 meters of drilling and 28,421 meters of trenching. Since acquiring the property, Steppe Gold has completed an additional approximate 20,000 meters of drilling.

ATO4 & Mungu Discovery

The Mungu discovery is located northeast of the current resource from the ATO 4 Deposit. The discovery is located on a 20-kilometer long structurally controlled, north trending mid sulphidation epithermal gold silver system. Steppe Gold believes that the ATO 4 Deposit may be semi continuous to the mineralization at the Mungu Discovery. The ATO 4 Deposit currently remains open along strike to the north and at depth.

Mine construction and near term production

Construction for the mine is nearing completion and will enter a commissioning phase in the coming months. The operation will contain a ROM pad, crushing circuit, leach pads, leach ponds, ADR plant and gold room. A 200 person camp, ablutions and messing facilities have also been commissioned and are fully operational.

The company is currently crushing ore at a rate of approximately 3,000 tonnes per day with approximately 160,000 tonnes stacked on the leach pad as of mid-March 2019.

Steppe Gold is awaiting approval of its cyanide permit, which the company expects to receive in the near term. Once the company obtains the permit, it can commence gold production, with commercial production expected in early H2 2019.

Moving Forward

Following the completion of construction, Steppe Gold will commence gold production , then turn its focus on exploration efforts at the ATO deposits and Mungu Discovery. The company will also be working towards releasing an updated feasibility study for the fresh rock project that will include the Mungu Discovery.

  • Complete ADR plant construction and commissioning in the coming months.
  • Receive cyanide permit, begin leaching and pour first gold by early H2 2019.
  • Complete maiden mineral resource on Mungu deposit in H2 2019.
  • Restart exploration program at ATO and Mungu deposit in H2 2019.
  • Commence trenching and drilling program at UK project in H2 2019.
  • Continually assess additional exploration licenses and mining projects for acquisition.

The UK Gold Project

The 14,397-hectare Uudam Khundii property is comprised of one exploration license and is located 800 kilometers southwest of Ulaanbaatar, Mongolia. The property is an 80/20 joint venture with the Provincial  Government of Bayankhongor.

The property is located between Erdene Resource Development Corporation’s (TSX:ERD) Bayan Khundii gold discovery and Altan Nar epithermal gold deposits.

Steppe Gold has completed an initial exploration program on the property that included geological mapping, geochemical sampling and geophysical surveys. The company expects to commence its trenching and drill programs in the near term. Steppe Gold is also looking into expansion opportunities to further consolidate its footprint in the area.

To date the company has completed:

  • 1,940 line kilometer ground magnetic survey
  • 12 line kilometer IP survey
  • 346 rock chip samples
  • 8,427 soil geochemical samples

Management

Matthew Wood — Chairman, President and CEO

Matthew Wood is a mineral resource explorer and developer with over 25 years of global industry experience in mining and commodities investments. He has managed investment deals in diamonds, coal, energy, ferrous metals, base and precious metals, among other commodities. His unique skills in technical and economic evaluation of resource opportunities have resulted in a record of nurturing resource deals from early-stage, to market listings and exit strategies for his investors.

He was formerly the founder and Executive Chairman of the Mongolian coal company, Hunnu Coal Limited. Hunnu Coal was IPO of the year for all sectors on the ASX in 2010, and its sale for approximately A$500 million in 2011 to Banpu PCL was recognized as the Mines and Money 2012 Deal of the Year. Wood has founded and been involved in many other resource companies and investments over the years. He has extensive experience and many key relationships in Mongolia and was recently awarded the Order of the Polar Star, the highest state honor that can be awarded to a non-citizen of Mongolia. He has an Honours Degree in Geology from the University of New South Wales and a Graduate Certificate in Mineral Economics from the Western Australian School of Mines.

Bataa Tumur-Ochir — Director and VP Mongolia

Bataa Tumur-Ochir is responsible for new business acquisitions, development, government and community relations and the daily operations in Mongolia. He has strong relationships with all levels of government in Mongolia and was recently appointed independent advisor to the Ministry of Mining and Heavy Industry responsible for foreign investment and promotion.

He is currently a director at GCD Mongolia and CEO and executive director of ASX-listed Wolf Petroleum. Under his guidance, Wolf Petroleum was awarded the “Operator of the Year Award” from the Petroleum Authority of Mongolia, and today, Wolf Petroleum is recognized as the fastest growing petroleum exploration company with the largest petroleum exploration acreage in Mongolia. He holds a bachelor’s degree in business administration and graduate certificates in international business and marketing from Australia and Singapore.

Aneel Waraich — Director and Executive VP

Aneel Waraich is the founder of ATMA Capital Markets and ATMACORP LTD. He is a financial service professional with progressive experience in asset management and corporate finance businesses. Waraich focuses primarily on advising public and private companies in the natural resource sector.

In previous roles at Goodman and Company Investment Counsel and Dundee Capital Markets, he worked as an analyst valuing private companies. Most recently he worked as an investment banker focusing on deal origination, going-public transactions and financings for both public and private companies in the resource and technology sectors. He completed his MBA from the Goodman Institute of Investment Management at the John Molson School of Business.

Jeremy South — Senior VP and CFO

Jeremy South has been a director of Steppe Gold since March 2017. He has over 33 years of experience in M&A, capital markets and private equity in Europe, North America and Australia, including senior positions in investment banking at Deutsche Bank, NatWest Markets and Deloitte. For 10 years, he was a Global Leader and Mining M&A Advisor at Deloitte.

Based in Beijing for four years, he advised leading Asian trading houses and financial investors on mining M&A, financing and strategy, and he has worked with some of Asia’s largest companies. He acted as Chairman of Aldridge Minerals Inc. up until it’s recent sale to Trafigura Ventures. South is a Chartered Accountant and holds a Bachelor of Economics degree from Monash University (Australia). He holds the ICD.D designation as a graduate of the Institute of Corporate Directors.

Greg Wood — VP Operations

Gregory Wood is an Australian citizen and was appointed as Vice President Operations of Steppe Gold LLC in 2016. He is responsible for all mining-related operations in Mongolia. Prior to joining Steppe, he held positions as Director and Non-Executive Chairman of Carajas Copper Company, Operations Manager of Harvest Minerals and as CEO of Black Star Petroleum. He has extensive experience in the oil and gas industry through his past family oil business’s and has completed the Petroleum Engineering for non-engineers programmer in Houston, Texas.

Wood was a systems accountant with over 12 years extensive experience in financial reporting, financial analysis, developing key performance indicators and modeling of financial reports over a number of industries including transport, media and infrastructure. He held management positions at Asciano and Patrick Stevedores.

Enkhtuvshin Khishigsuren — VP Exploration

Enkhtuvshin Khishigsuren has over 30 years of Mongolian mineral exploration experience. He spent the first 10 to 12 years of his career at Central Geological Expedition doing regional geological mapping in various areas of Mongolia, followed by seven years as senior exploration manager on the exploration of precious metal in Mongolia for Harrods Minerals.

Since 2005, he has been running his own company, Erdenyn Erel, which provides exploration and consulting services to western exploration and mining companies. He is responsible for identifying targets and properties based on his knowledge and experience. His experience has resulted in the discovery of several prospective gold and copper deposits in Mongolia; such as the multimillion-ounce gold deposit Olon Ovoot, the Zuun mod molybdenum porphyry deposit and the Shand copper porphyry deposit. He holds a bachelor degree in geological exploration from Azerbaijan State University and a Master’s degree in geological science from Shimane University, Japan.

Grant Smith — General Manager Operations

Grant Smith has over 15 years of heap leach experience beginning with Which Creek Copper in the Pilbara region in Western Australia since 2003. Following that, Smith spent time in Laos, Egypt and Mauritania as well as held consultative roles in Mongolia, Kazakhstan and Armenia. More recently, his extensive experience led him to Indonesia where he was responsible for the construction and operation of the heap leach at Tujuh Bukit gold heap leach in East Java, Indonesia.

Patrick Michaels — Director

Patrick Michaels is the Chairman of Zuri-Invest AG and the Chairman of Asty Capital AG in Zurich, Switzerland. He has been involved in numerous financings of gold mines in North America, among others. He is a well-respected financial adviser and fund manager throughout Europe.

Michaels has extensive experience in the fields of mining finance, fund management and asset allocation. He has a background in law and economics and did his training in the areas of private banking and investment research at UBS in Zurich. Additionally, he attended post-graduate courses at the Colorado School of Mines in Golden, Colorado.

Dr. Zamba Batjargal — Director

Dr. Zamba Batjargal has over 35 years of experience working for the government in Mongolia, dealing with issues of environmental protection and climate change. He was the Minister of the Environment of Mongolia from 1990 to 1996 and Director General of the National Agency for Meteorology, Hydrology and Environmental Monitoring from 1996 to 2001. Dr. Batjargal has experience in working outside of Mongolia due to his engagement in international bi-and multilateral cooperation activities.

He was Ambassador of Mongolia to Japan from 2001 to 2005. Between 2005 and 2011, he worked in New York as a Representative of the World Meteorological Organization (WMO) to the UN. Since 2014, he has served as an independent consultant on climate change and the development of green policy for public institutions and non-profit organizations. He was also an advisor at the Office of the President of the United Nations Environmental Assembly (UNEA) in Ulaanbaatar (2014 to 2016). He received his Ph.D. in physics and mathematics in 1978 from the Hydrometeorological State University, St.Petersburg, Russia.

Lewis Marks — Director

Lewis Marks has lived and worked in Asia for 40 years with a residence and business operations in Mongolia for 18 years. He served as a Director of CWT Mongolia from 2010 to 2016, a shareholder of Bayandari LLC from 2009 until 2017 and is currently a Director of Tsast Impex LLC. He also serves on the Board of Directors for LIM Japan Fund and is a Managing Member of MIC Global Partners LLC.

Between 1980 and 1993, he was with Marc Rich & Co. AG (purchased by Glencore International AG in 1993) and remained with Glencore International AG until 2000, where his responsibilities included selling Mongolian copper to China, and the non-ferrous metals and concentrates business in China and Japan. Prior to that, he practiced NY law at Yanagida & Nomura in Tokyo, Japan. Marks earned his Bachelor of Science in Foreign Service at the School of Foreign Service, Georgetown University in 1973 and his Juris Doctor from the School of Law at the State University of New York in 1977. He was licensed to practice law in NY in 1979.

Sheldon Vanderkooy — Director

Sheldon Vanderkooy is General Counsel for Triple Flag Mining Finance Ltd., a company that targets streaming and royalty investments in the mining sector. The Triple Flag Group has investments in Canada, Australia, the US, Peru and Mongolia. Prior to joining Triple Flag, he was Assistant General Counsel at First Quantum Minerals Ltd. and Senior Director Legal Affairs at Inmet Mining Corporation.

Prior to joining Inmet, he was a corporate and securities partner at Blake, Cassels & Graydon LLP in Toronto, Canada and a Chartered Accountant at Ernst & Young LLP. He holds a law degree from the University of Western Ontario (gold medallist) and a Bachelor of Commerce (Honours) from Queen’s University.


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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 Steppe Gold and seek advice from a qualified investment advisor.