Erdene Resource Development Corp (TSX:ERD, OTC:ERDCF) made significant progress in the first quarter of 2024 with the development of its Bayan Khundii gold project in Mongolia in collaboration with the Mongolian Mining Corporation (MMC). Erdene CEO Peter Akerley announced that construction was 15% complete by the end of the quarter, proceeding on schedule and within budget. The project is expected to produce its first gold in the second quarter of 2025, positioning Bayan Khundii as one of the highest-grade open-pit gold mines globally. Akerley emphasized that this project would become Mongolia’s largest primary gold producer, boosting the mining sector’s contribution to the national economy and creating long-term value for Erdene shareholders. Additionally, Erdene launched its 2024 exploration program during the quarter to expand mineralization in the Khundii Minerals District, focusing on the Dark Horse, Ulaan, and Zuun Mod gold and copper targets.
Tag: Mongolia
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Mongolia’s Push for International Bonds Amid Mining Concerns
Mongolia is actively exploring avenues to raise international bonds in a bid to bolster its economic initiatives, yet investor apprehensions loom large owing to the country’s heavy reliance on mining. With the mining sector constituting a significant portion of Mongolia’s GDP and export earnings, the nation has been a magnet for substantial foreign investments, particularly in copper, coal, and various mineral deposits. However, this reliance on mining exposes Mongolia to inherent risks, exacerbated by frequent government policy shifts, which only serve to deepen uncertainties.
The recent amendment to Mongolia’s Minerals Law by the parliament has added another layer of concern for investors. The revised law places stringent restrictions on project owners, limiting their ownership to a maximum of 34%, while empowering the government to claim up to 50% of a project without cost. Furthermore, project owners are mandated to divest their remaining stakes to third parties within a year. Such drastic measures have the potential to deter prospective investors and tarnish Mongolia’s image as an attractive investment destination.
Compounding these worries is the uncertainty surrounding the government’s capacity to honor bond repayments, a recurring issue in the nation’s financial history. Previous commodity price downturns prompted the Ministry of Finance to undergo multiple rounds of bond restructuring, sparking apprehensions among investors about Mongolia’s fiscal sustainability.
To assuage investor concerns and successfully issue bonds on favorable terms, Mongolia must prioritize reinforcing its legal and economic foundations. While diversifying the economy remains a strategic imperative, sustainable diversification hinges on fostering responsible mining practices. Consequently, supporting the mining industry emerges as a critical necessity. By instituting transparent and predictable regulatory frameworks that instill confidence among investors, Mongolia can harness the full potential of its mining sector while fortifying long-term financial stability. Such measures will lay the groundwork for future development, facilitating diversified growth across diverse economic sectors.
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Rio Tinto Secures Power Supply Agreement for Oyu Tolgoi Mine
Rio Tinto Ltd announced on Monday its agreement with Mongolia to provide power to its Oyu Tolgoi copper-gold mine using a state-owned coal-fired power plant at Tavan Tolgoi. With the Mongolian government holding a 34% stake and Rio’s Turquoise Hill Resources with a 66% stake, the collaboration involves amending the current power supply agreement by March 2021, with construction of the coal-fired power plant slated to begin by July 2021. The plant, intended to support Oyu Tolgoi’s power needs, is anticipated to be operational within the next four years. Until then, power supply to the mine and underground project will continue as per the existing terms.
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France’s $1.6bn uranium deal with Mongolia faces delays
A $1.6-billion uranium mining deal between France and Mongolia, aimed at diversifying supplies for France’s nuclear reactors, faces political obstacles that may delay its finalization until after the upcoming elections in June, sources familiar with the matter revealed. The agreement, concerning the development and operation of the Zuuvch-Ovoo mine, was initially outlined during a visit to Paris by Mongolia’s President, Khurelsukh Ukhnaa, in October, with expectations for a final investment agreement by the end of last year and production commencement in 2028.
However, setbacks including the resignation of Mongolia’s chief negotiator and concerns over safeguarding strategic resources have led to delays and necessitated the redrafting of the deal. The potential postponement or cancellation of the project poses challenges for Orano, the French uranium producer, which views the plan as vital for expanding its supply sources amidst increasing global demand.
While Mongolian government representatives were unavailable for immediate comment on the contract delays, Orano affirmed ongoing negotiations and expressed optimism regarding finalizing the agreement promptly. The context of the deal underscores France’s efforts to bolster Mongolia’s strategic sovereignty amid its positioning between influential neighbors Russia and China, with the aim of reducing dependency on external energy sources.
However, geopolitical tensions and Russia’s assertive stance in the region, coupled with Mongolia’s energy vulnerabilities, have added complexities to the negotiation process. The situation underscores the broader geopolitical dynamics at play, including heightened competition for access to critical resources and influence in strategic regions.
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Erdene Secures $80M to Build Mongolia’s Largest Gold Mine
We are very pleased to close the financing for the Bayan Khundii Gold Project with our strategic partner MMC, Mongolia’s leading publicly traded mining company. With the first gold scheduled in 2025, Bayan Khundii will be one of the highest grade, open pit gold mines globally and Mongolia’s largest primary gold producer when it reaches full production.
Peter Akerley, President and CEO, Erdene Resource Development Corp.
Akerley continued, “The strengthening of our relationship with MMC through this financing supports our goal of creating a major new mining district in southwestern Mongolia. With MMC’s experience in large-scale mining, expertise in construction, power supply, transportation and logistics, and national and international relationships.”
The Bayan Khundii Gold Project will form a strong foundation for future growth in the Khundii Minerals District. Together we will grow the Mongolian mining sector, increase the industry’s contribution to the national economy, and create value for our shareholders.
Peter Akerley, President and CEO, Erdene Resource Development Corp.
Bayan Khundii Financing
Erdene and MMC signed a financial agreement to build the Bayan Khundii Gold Project. The funding is set up as a shareholder loan from MMC to Erdene Mongol LLC which is a joint venture between Erdene and MMC and has the mining licenses for Bayan Khundii, Altan Nar, and the extremely promising Ulaan exploration license.
The US$50 million shareholder loan will finance the building of the Bayan Khundii gold mine and processing complex. Up to five tranches totaling at least US$5 million may be drawn from the loan. The loan will mature five years after the initial draw date, and interest will be charged at a rate of 13.8 %, which will be paid in arrears every three months.
The first four interest payments are capitalizationable at EM’s discretion. When the loan matures, it will be fully repaid. Under the same conditions, MMC may choose to make available an additional US$30 million. Additionally, EM and commercial banks in Mongolia are negotiating a loan package for up to $30 million.
A 50 % guarantee from Erdene and Erdene’s interests in the Project, including its shares of EM and NSR interest and preferential rights over the Khundii, Altan Nar, and Ulaan licenses, will finance the shareholder financing. Under the terms of the companies’ Strategic Alliance agreement, MMC will have first dibs on Erdene’s Zuun Mod project and priority voting rights for as long as the loan is outstanding.
Erdene also has the option to become a lending shareholder on the same terms as MMC and buy 50 % of the loan.
This funding comes after MMC invested US$40 million as part of the Strategic Alliance Agreement to acquire a 50 % equity stake in EM. MMC will contribute a maximum of US$120 million toward the Bayan Khundii Gold Project’s development. The Strategic Alliance’s highlights are as follows:
- The main board of the Hong Kong Stock Exchange lists MMC, as the largest mining firm in Mongolia that is traded worldwide.
- MMC has made a $40 million investment in EM, Erdene’s Mongolian affiliate that had the Ulaan exploration license in addition to the Khundii and Altan Nar mining licenses.
- In addition to the first 400,000 ounces of gold recovered, Erdene is still the owner of a 50 % equity position in EM and a 5.0 % Net Smelter Return royalty on production from the Khundii, Altan Nar, and Ulaan licenses. Erdene also retains ownership of any properties purchased within a 700 km2 area of interest.
- The massive Zuun Mod Molybdenum-Copper deposit and Khuvyn Khar Copper project, which are around 30 km east of Bayan Khundii and next to a proposed railroad development, are both owned 100% by Erdene.
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Mongolia’s critical role in the global energy transition
Climate change is pushing the world to transition its energy systems at an unprecedented pace. This shift is contingent on a steady supply of minerals and metals critical for the production of low-carbon technologies. Mongolia’s rich endowment of copper, uranium, fluorspar, rare earth elements, and other critical minerals position it well in the global geopolitics of energy transition.
Minerals constitute more than 90% of Mongolia’s exports and contribute more than a quarter of government revenue. There is potential for Mongolia to shore up its long-term socio-economic development by harnessing its natural resources wealth. However, in the absence of due diligence and appropriate safeguards, this opportunity may turn into a risky undertaking for the country.
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Ivanhoe founder Robert Friedland awarded Mongolia’s Order of the Polar Star
Mining magnate Robert Friedland, the esteemed founder of Ivanhoe Mines (TSX: IVN) and Ivanhoe Electric (TSX: IE), has received official recognition from the government of Mongolia for his invaluable contributions to the nation’s mining industry.
On October 9, 2023, Mongolian President Ukhnaagiin Khürelsükh bestowed upon Friedland the prestigious Order of the Polar Star, the highest civilian honor awarded to a foreign national, in recognition of his leadership in the exploration and development of Oyu Tolgoi. This remarkable site is renowned as one of the largest copper and gold deposits ever discovered.
The Order of the Polar Star, established in 1936, has been previously bestowed upon illustrious figures such as former US President Barack Obama, former US Secretary of State Hillary Clinton, and former US Senator John McCain.
Expressing his gratitude, Friedland remarked in a press release on Monday, “We extend our heartfelt appreciation to the government and people of Mongolia for this exceptional accolade. Our experiences in the country, including the discovery and development of the extraordinary Oyu Tolgoi copper-gold deposit, will forever hold a special place in our hearts.”
Between 1996 and 2012, Friedland’s original Ivanhoe Mines group conducted mining operations across Mongolia, Australia, China, Myanmar, South Korea, and Fiji. Initially established in 1994 as Indochina Goldfields with a focus on mining endeavors in the Asia Pacific region, the company later adopted the more encompassing name Ivanhoe Mines in 1999.
Friedland served as the founding president and CEO of the original Ivanhoe Mines from June 1996 to May 2006 and again from October 2010 to April 2012. He also held the esteemed positions of executive chairman and chairman for a remarkable 17 years until May 2011.
In 2000, the original Ivanhoe Mines commenced exploration activities in Mongolia, leading to a decade of discoveries that unveiled a 12.4-kilometer-long chain of first-rate copper and gold deposits in the South Gobi region, now famously known as Oyu Tolgoi.
Open pit mining operations commenced in 2011, and the copper concentrator, the largest industrial complex ever constructed in Mongolia, began processing mined ore into copper concentrate in 2013.
During this period, the Australian mining giant Rio Tinto gained control of the original Ivanhoe Mines and, as per the agreement with Friedland, relinquished the Ivanhoe identity and rebranded the company as Turquoise Hill Resources, marking yet another chapter in the ongoing saga of Ivanhoe Mines.
In 2015, Oyu Tolgoi secured a noteworthy $4.4 billion finance facility from a syndicate of 20 international financial institutions, one of the largest project finance arrangements ever arranged in the global mining industry. The deal included agencies representing the governments of Canada, the US, and Australia, who collectively agreed to a total debt capacity of $6 billion.
Between 2014 and 2017, the Oyu Tolgoi mine produced an impressive reported output of 780,000 tonnes of copper, 1.8 million ounces of gold, and 4.5 million ounces of silver, generating $2.1 billion in operating cash flow (before interest and taxes).
However, the majority of Oyu Tolgoi’s vast mineral wealth lies beneath the surface, where copper grades are 360% higher compared to those found in the open pit. In January 2022, Oyu Tolgoi received approval to commence underground operations, with sustainable underground production anticipated in the first half of 2023.
According to Rio Tinto, Oyu Tolgoi is projected to produce an average of approximately 500,000 tonnes of copper per year from 2028 to 2036, from both open pit and underground sources. This substantial output is sufficient to support the production of around 6 million electric vehicles annually and an average of approximately 290,000 tonnes of copper over the mine’s estimated 30-year lifespan.
Friedland’s receipt of the award from Mongolia adds to his extensive list of accolades garnered over his illustrious career spanning nearly three decades in the mining industry.
In 1996, when Friedland served as co-chairman of Diamond Fields Resources, he was recognized as Developer of the Year by the Prospectors and Developers Association of Canada (PDAC) for his remarkable contributions to establishing and financing mineral exploration and development companies worldwide. This honor was, in part, a testament to his leadership role in the development of the Voisey’s Bay nickel mine in Labrador, Canada.
In August 2011, Friedland was bestowed with the Dealmaker of the Year Award for the original Ivanhoe Mines (later renamed Turquoise Hill Resources in 2012) by Australia’s Diggers and Dealers Mining Forum. This esteemed recognition acknowledged his exceptional aptitude in managing the intricate logistical aspects of asset development, which had captivated the industry for many years.
In March 2012,Mining billionaire Robert Friedland, the founder of Ivanhoe Mines (TSX: IVN) and Ivanhoe Electric (TSX: IE), has been officially honored by the Mongolian government for his significant contributions to the country’s mining industry. On October 9, 2023, President Ukhnaagiin Khürelsükh presented Friedland with the Order of the Polar Star, Mongolia’s highest civilian award for a foreign citizen, recognizing his leadership in the discovery and development of Oyu Tolgoi, one of the world’s largest copper and gold deposits.
The Order of the Polar Star was established in 1936 and has previously been awarded to esteemed individuals such as former US President Barack Obama, former US Secretary of State Hillary Clinton, and former US Senator John McCain.
Expressing his gratitude, Friedland stated in a press release on Monday, “We would like to sincerely thank the government and people of Mongolia for this very special award. Our experiences in the country, including the discovery and development of the exceptional Oyu Tolgoi copper-gold deposit, will forever have a special place in our hearts.”
Between 1996 and 2012, Friedland’s original Ivanhoe Mines group conducted mining operations across Mongolia, Australia, China, Myanmar, South Korea, and Fiji. Initially known as Indochina Goldfields when it was founded in 1994, the company later adopted the more universal name Ivanhoe Mines in 1999.
Friedland served as the founding president and CEO of the original Ivanhoe Mines from June 1996 to May 2006, and again from October 2010 to April 2012. He also held the positions of executive chairman and chairman for a total of 17 years, until May 2011.
In 2000, the original Ivanhoe Mines began exploration in Mongolia, leading to a decade of discoveries that revealed a 12.4-kilometer-long chain of high-quality copper and gold deposits in the South Gobi region, now known as Oyu Tolgoi.
Open pit mining commenced in 2011, and the copper concentrator, the largest industrial complex ever built in Mongolia, started processing mined ore into copper concentrate in 2013.
During this time, Australian mining giant Rio Tinto gained control of the original Ivanhoe Mines and, as per an agreement with Friedland, relinquished the Ivanhoe identity and renamed the company Turquoise Hill Resources, marking another chapter in the ongoing Ivanhoe Mines story.
In 2015, Oyu Tolgoi secured a $4.4 billion finance facility with a syndicate of 20 international financial institutions, making it one of the largest project finance facilities ever arranged in the global mining industry. The agreement included agencies representing the governments of Canada, the US, and Australia, which also agreed to a total debt capacity of $6 billion.
From 2014 to 2017, the Oyu Tolgoi mine produced approximately 780,000 tonnes of copper, 1.8 million ounces of gold, and 4.5 million ounces of silver, generating $2.1 billion of operating cash flow (before interest and tax).
However, the majority of Oyu Tolgoi’s vast mineral wealth lies deeper underground, where copper grades are 360% higher than those found in the open pit. In January 2022, Oyu Tolgoi received approval to begin underground operations, with sustainable underground production expected in the first half of 2023.
According to Rio Tinto, Oyu Tolgoi is now projected to produce an average of around 500,000 tonnes of copper per year from 2028 to 2036, from both open pit and underground sources. This output is enough to produce approximately 6 million electric vehicles annually and an average of around 290,000 tonnes over the estimated 30-year lifespan of the mine.
Friedland’s recognition in Mongolia adds to the numerous accolades he has received throughout his nearly three-decade-long career in the mining industry.
In 1996, when Friedland was co-chairman of Diamond Fields Resources, he was named Developer of the Year by the Prospectors and Developers Association of Canada (PDAC) for his role in establishing and financing mineral exploration and development companies worldwide. This recognition acknowledged his leadership in the development of the Voisey’s Bay nickel mine in Labrador, Canada.
In August 2011, Friedland received the Dealmaker of the Year Award from Australia’s Diggers and Dealers Mining Forum for his success in managing complex asset development logistics. This award recognized his exceptional accomplishments in the industry.
In March 2012, Friedland was honored as Mining Personality of the Year at the inaugural Asia Mining Awards for his role in Mongolia’s emergence as a major mining investment destination. Ivanhoe’s Oyu Tolgoi copper-gold mining complex was also voted Project Development of the Year.
In January 2016, Friedland was inducted into the Canadian Mining Hall of Fame, acknowledging his transformative contributions to the Canadian and international mining industries
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Getech : Supports Asian Battery Minerals in Nickel Exploration in Mongolia
Getech, the esteemed global leader in subsurface resource detection, has successfully concluded an exploration project for Asian Battery Minerals, a participant in the 2023 BHP Xplor accelerator program. The aim of the project was to identify potential nickel deposits in Mongolia.
Invited by BHP to participate in the accelerator program, Getech offered its exceptional geoscience exploration solutions to the program’s cohort. Asian Battery Minerals, with its focus on nickel exploration in Mongolia, chose to engage Getech’s services.
Leveraging its pioneering methodologies, including terrain and structural analysis, as well as gravity and magnetics data analysis, Getech provided invaluable assistance to Asian Battery Minerals. Their team produced an extensive report analyzing the structural and paleotectonic elements within the area of interest for exploration.
The project has been deemed a resounding success by Asian Battery Minerals, as the results have the potential to significantly enhance their exploration strategy in Mongolia.
Richard Bennett, the Executive Chairman of Getech, shared his thoughts on the accomplishment, stating, “While we are renowned for our extensive experience in mineral exploration for sedimentary basin ores, this project focused on ‘hard rock’ exploration. This challenge highlighted our capabilities in mineral systems analysis and data interpretation for deeper and older deposits, such as magmatic nickel. By harnessing our proprietary data collected over three decades and our expertise in geological exploration, complemented by AI-driven analytics, we can effectively identify potential new areas for a wide range of minerals.”
Gan-Ochir Zunduisuren, the Managing Director at Asian Battery Minerals, expressed his delight with the partnership, saying, “We are thrilled with the results of our collaboration with Getech. Their thorough analysis and innovative approaches have provided us with valuable insights for our nickel exploration endeavors in Mongolia.”
The collaboration with Asian Battery Minerals serves as a testament to the versatility and adaptability of Getech’s mineral exploration approach.
Background:
The BHP Xplor program is a global initiative that accelerates the progress of innovative early-stage mineral exploration companies in their search for critical resources vital to the energy transition. Over a span of six months, the program assists seven carefully selected companies in mitigating geological risks and preparing for investment opportunities.
Nickel, with its exceptional properties, plays a pivotal role in a wide range of clean energy technologies. It is indispensable not only in geothermal technologies but also in batteries for electric vehicles and energy storage systems. Moreover, nickel is crucial for hydrogen, hydro, wind, and concentrating solar power technologies. It serves as an essential component in nuclear energy technologies and carbon capture and storage systems. According to a report by McKinsey, the world may face a nickel shortage of 10-20% by the end of this decade. Consequently, nickel exploration has become a crucial aspect of the global energy transition. Getech, with its commitment to innovation and data-driven approaches, is actively addressing this pressing challenge.
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Erdene Provides Update on the Bayan Khundii Gold Project
Erdene Resource Development Corp. is pleased to provide an update on progress at its high-grade, open-pit Bayan Khundii Gold Project in southwestern Mongolia.
Quotes from the Company:
“Development activities at the Bayan Khundii Gold Project are underway with the early works phase of the Project nearing completion,” said Peter Akerley, President and CEO. “As a low-cost project utilizing conventional mining and processing techniques with significant growth potential, Bayan Khundii offers investors and stakeholders exposure and leverage to gold price.”
“With the finalization of the updated Bayan Khundii Project Feasibility Study, we are working to lock in the project financing in advance of a formal construction decision,” continued Mr. Akerley. “Through our Strategic Alliance with Mongolian Mining Corporation (“MMC”), Mongolia’s largest independent miner, we are targeting first gold and cash flow in 2025, while we continue to explore, discover and develop the other mineral deposits in our Khundii Minerals District.”
Early Works and Site Establishment
Erdene executed an early works contract with MCS Properties (“MCSP”), an affiliate of MMC near the end of Q2-2023. MCSP is one of Mongolia’s largest engineering and construction companies, with a staff of over 1,500, including 225 engineers. Established in 1999, MCSP is a major contractor to Mongolia’s mining industry, constructing critical infrastructure for the Oyu Tolgoi copper-gold mine as well as MMC’s Ukhaa Khudag (“UHG”) metallurgical coal operations.
The early works contract scope includes final design and engineering works, establishment of temporary construction facilities, including camp, fuel station, aggregate crushing and concrete batch plant, and bulk earthworks. Work is largely complete under this contract, with aggregate and concrete batch plants established, construction office and accommodations erected, bulk earthworks, including site levelling and process plant footing excavation well progressed, and off-site and on-site road improvements largely complete. In aggregate, the early works phase of the project represents approximately 5% of the total construction effort. Pictures of early works progress are attached to this release. Approximately 80,000 work hours have been recorded at the Bayan Khundii Project Site under the early works contract without lost time incidents or environmental infractions.
Building upon the success of the early works phase, Erdene is in negotiations with MCSP on an Engineering, Procurement and Construction contract for the balance of the build, targeting execution in Q4-2023. Additionally, Erdene is negotiating with a Mongolian power producer to secure the Project’s energy needs.
Bayan Khundii NI 43-101 Feasibility Study Update
On August 15, 2023, Erdene announced results of an updated Feasibility Study (“FS”) for Bayan Khundii. The FS was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and incorporates updated mineral resources and reserves, including maiden resources and reserves from the high-grade Dark Horse Mane deposit (“DH”), as well as current capital and operating cost estimates and metals prices.
Highlights of the FS are included below (US$1,800/oz Gold Price, unless otherwise noted), and further details are available in the Company’s August 15, 2023 press release. The Technical Report will be filed on SEDAR in late September 2023.
Base Case after-tax Net Present Value of US$170 million (NPV5%) and 35.3% Internal Rate of Return (IRR), increasing to US$196 million and 38.95% IRR, respectively, at current gold price of US$1,900/oz
Life of Mine Earnings Before Interest, Taxes and Depreciation of US$451 million, increasing to US$495 million at a US$1,900/oz gold price
Total recovered gold of 476,000 ounces, a 25% increase compared to the 2020 Feasibility Study from an average gold recovery rate of 93%
All-in sustaining cost (“AISC”) of US$869 per ounce and upfront capital costs of US$88 million, plus a 12% contingency, and $2 million of pre-production costs
Measured and Indicated Resources of 674,700 ounces gold at an average grade of 2.6 g/t gold, and 319,000 ounces silver at an average grade of 1.38 g/t silver
Proven and Probable Reserves of 513,700 ounces gold at an average grade 4.0 g/t gold, and 220,500 ounces silver at an average grade of 1.7 g/t silver
Average annual gold production of 86,900 ounces during years 2 through 5 – Life of Mine annual average production of 74,200 ounces gold
Eight-year project, comprising one-year pre-production, six and three quarter-year operating life and one-year mine closure period
Adjacent high-grade resources and recent discoveries provide high probability growth options
Significant benefits to Mongolia, including Life of Mine royalties and taxes of US$143 million and approximately 500 new jobs in Bayankhongor Province
Strategic Alliance with MMC and Project FinanceOn January 10, 2023, Erdene executed a Strategic Alliance Agreement (“SAA”) with MMC to develop the Bayan Khundii Gold Project (see press release here). Highlights of the SAA include:
MMC is Mongolia’s largest internationally traded mining company, listed on the main board of the Hong Kong Stock Exchange (HKEx: 975).
MMC to invest US$40 million for a 50% equity interest in Erdene’s Mongolian subsidiary, Erdene Mongol LLC (“EM”), holding the Khundii and Altan Nar mining licenses and the Ulaan exploration license through a three-stage transaction, based on achievement of milestones.
Erdene retains a 50% equity interest in EM and a 5.0% Net Smelter Return (“NSR”) royalty on all production from the Khundii, Altan Nar and Ulaan licenses, as well as any properties acquired within 5 kilometres of these licenses, beyond the first 400,000 ounces gold recovered.
The first two stages of the transaction were completed in January 2023 and May 2023, with MMC investing US$10 million to finance technical studies, including the FS, early construction works and exploration for the Bayan Khundii Gold Project.
The third stage of the transaction, expected to close once EM has reached a construction decision, will see MMC invest a further US$30 million, providing equity capital for the Bayan Khundii Gold Project.
Erdene will appoint EM’s Chief Executive and Chief Development Officers, and MMC will appoint EM’s Chief Operating and Chief Financial Officers.
Erdene maintains a 100% interest in its large Zuun Mod Molybdenum-Copper deposit and Khuvyn Khar Copper project, located approximately 30 kilometres east of Bayan Khundii, and adjacent to a planned railway development.
On August 30, 2023, Erdene and MMC amended the SSA to allow MMC to advance US$15M of the US$30M third stage to continue early works, while the parties work to secure the balance of capital prior to reaching a formal construction decision. The remaining US$15M will be advanced by MMC upon a construction decision, and all other major terms of the SSA remain unchanged.Two international financial institutions are conducting due diligence on the updated FS and are expected to provide the Project’s debt financing. These institutions are active in Mongolia, as major funders to the Oyu Tolgoi Copper-Gold project. It is anticipated that senior debt financing could comprise as much as 65% of the total financing package, with financial close anticipated in late 2023.
Next Steps
In addition to project financing, over the coming months, development work will be focused on:
Completing early works construction;
Executing the Engineering, Procurement and Construction contract for the Project;
Concluding the Project’s Power Purchase Agreement;
Optimizing the project execution schedule and completing value engineering;
Securing approval of Erdene and MMC’s Boards of Directors to begin construction; and
Exploring in the Khundii Minerals District to expand mineralization and convert resources to reserves.
Qualified Person and Sample ProtocolThe information in this press release that relates to the financial models for the Bayan Khundii Feasibility Study is based on information compiled and reviewed by Mark Reynolds, engaged through O2 Mining Limited. The information in this press release that relates to the capital and operating cost estimation for the Bayan Khundii Feasibility Study is based on information compiled and reviewed by Julien Lawrence, who is a FAusIMM and the Director of O2 Mining Ltd. The information in this press release that relates to the process design and recovery methods for the Bayan Khundii Feasibility Study is based on information compiled and reviewed by Jeffrey Jardine, who is a FAusIMM and is engaged through O2 Mining Ltd. The information in this press release that relates to the BK Resource Estimate is based on information compiled and reviewed by Paul Daigle, who is a P.Geo and is an employee of AGP Mining Consultants Inc. The information in this press release that relates to the Dark Horse Resource Estimate is based on information compiled and reviewed by Oyunbat Bat-Ochir who is a full-time employee of RPM Global and a Member of the Australian Institute of Geoscientists. The information in this press release that relates to the Bayan Khundii reserve estimate is based on information compiled and reviewed by Julien Lawrence. Each of Mr. Reynolds, Mr. Lawrence, Mr. Jardine, Mr. Daigle and Mr. Bat-Ochir has sufficient experience, which is relevant to the style of mineralization and type of deposit under consideration and to the activity which they have undertaken to qualify as a Qualified Person, as that term is defined by National Instrument 43-101. Each of Mr. Reynolds, Mr. Lawrence, Mr. Jardine, Mr. Daigle and Mr. Bat-Ochir is not aware of any potential for a conflict of interest in relation to this work with Erdene.
All samples have been assayed at SGS Laboratory in Ulaanbaatar, Mongolia. In addition to internal checks by SGS Laboratory, the Company incorporates a QA/QC sample protocol utilizing prepared standards and blanks. All samples undergo standard fire assay analysis for gold and ICP-OES (Inductively Coupled Plasma Optical Emission Spectroscopy) analysis for 33 additional elements. For samples that initially return a grade greater than 5 g/t gold, additional screen-metallic gold analysis is carried out which provides a weighted average gold grade from fire assay analysis of the entire +75 micron fraction and three 30-gram samples of the -75 micron fraction from a 500 gram sample.
Erdene’s drill core sampling protocol consisted of collection of samples over 1 or 2 metre intervals (depending on the lithology and style of mineralization) over the entire length of the drill hole, excluding minor post-mineral lithologies and un-mineralized granitoids. Sample intervals were based on meterage, not geological controls, or mineralization. All drill core was cut in half with a diamond saw, with half of the core placed in sample bags and the remaining half securely retained in core boxes at Erdene’s Bayan Khundii exploration camp. All samples were organized into batches of 30 including a commercially prepared standard, blank and either a field duplicate, consisting of two quarter-core intervals, or a laboratory duplicate. Sample batches were periodically shipped directly to SGS in Ulaanbaatar via Erdene’s logistical contractor, Monrud Co. Ltd.
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Talon Energy welcomes acceleration of coal seam gas exploration in Mongolia by partner TMK Energy
Australian-led Terra Energy, which owns and operates the Baruun Noyon Uul Coal Mine within the Gurvantes XXXV Project area, will cooperate with TMK on a drilling and seismic acquisition program, sharing costs and resources.
Accelerating exploration
The accelerated exploration program includes a minimum of four fully cored exploration wells to be drilled and tested for coal seam gas (CSG) in this already well-defined coal-bearing deposit.
This program has recently kicked off with the initial drilling being undertaken by Terra utilising contractors already engaged by Terra, with any subsequent testing activities to be managed by TMK.
About Gurvantes project
The Gurvantes XXXV Project, in which TMK Energy holds 67% and Talon Energy 33%, covers 8,400 square kilometres in what is considered one of the most prospective CSG basins globally.
It is less than 20 kilometres from the Chinese-Mongolian border and close to the extensive Northern China gas transmission and distribution network as well as being near several large-scale mining operations with high energy needs.
To cooperate
The agreement sets the terms under which the parties agree to cooperate on exploration activities within the overlapping licence areas which will drive significant cost savings for both parties.
As well as the drilling, the agreement with Terra includes ~40 kilometres of 2D seismic acquisition.
Additional costs associated with testing specifically associated with CSG exploration will be borne 100% by the Gurvantes Project partners, while any other testing work required for the coal mining operations will be borne 100% by Terra.
The term of the agreement is two years, however, this initial exploration program is only expected to take about two months. Further exploration may follow and if the activities are mutually beneficial, will be governed by the same agreement.
Overlap in data
The rights to explore for and develop coal resources and CSG resources are separate and unique, however, there is significant overlap in the geological data collected from drilling and exploration activities.
TMK Energy’s CEO Brendan Stats said: “With drilling and construction of our pilot well program now complete, we have taken advantage of what is a very timely opportunity to immediately commence what could be another high impact, low-cost exploration program over an area which already has an extensive data set and where we know that coal targets are present.
“We are pleased to have entered into this agreement with Terra Energy so quickly which will assist our efforts in accelerating an exploration program in this area.
“Similar values”
“Terra is an Australian-led mine operator, and we both share very similar values with respect to running a safe and efficient exploration program.
“With the drilling program already commenced, we hope to have the opportunity to further add to our already significant 2C contingent resources identified at Nariin Sukhait if further CSG resources are identified in this exciting new area,” Stats said.
“Strategic benefits”
“The potential discovery of commercial CSG methane deposits within our mining licences may offer strategic benefits to Mongolia and for Terra, the ability to expand our coal production and to lower our operating costs in the years ahead by replacing diesel consumption with locally sourced methane gas,” Terra Energy executive director Matthew Crawford said.