Mongolia: Well-Positioned for Elevated Gold Prices

Mongolia is well known for being resource-rich- some of the world’s best mineral deposits have been discovered in the nation. In fact, the IMF identified Mongolia as one of the 29-resource-rich developing countries.

By being so rich in resources, the country is heavily dependent on mining to drive its economic growth. The mining industry in Mongolia never really blossomed until the 1990s, which was pivotal for the country. It transitioned to a free-market democracy that opened up the mining industry to foreign investment.

The country’s mineral riches are valued at between US$1 trillion and US$3 trillion across coal, copper, and gold.

One of the most famous deposits that developed into a mine in the country is the Oyu Tolgoi mine discovered by Canadian-based Ivanhoe Mines in 2001. The deposit resides in the Gobi Desert, and Turquoise Hill Resources is now the operator of the asset.

The copper production from this mine has been projected to produce 450,000 tonnes of copper for the next 50 years; the mining reserves are reported to extend up to 20 miles beneath the Gobi Desert and is also estimated to yield 330,000 ounces of gold annually.

 

Now with all this economic uncertainty globally due to COVID-19, central banks around the world have had to print endlessly to support their economies alongside major fiscal support coming from local governments.

 

In fact, interest rates are currently below 1% in 60% of the global economy and 97% in advanced economies. For many years plenty of market participants tried to refute gold due to its zero yield quality. 

 

However, many countries are currently running negative real interest, which means savings naturally become eroded on an annual basis as it does not keep up with the cost of living. Precious metals, specifically gold, have been a reliable store of value, which is why it has been entrusted as a wealth preservation tool for thousands of years globally. 

With negative real rates expected to persist globally for the foreseeable future to help pay-back all this unprecedented debt, it serves as a very favorable tailwind in the months and years to come for precious metals. 

 

This is very exciting for Mongolia as more capital is returning to the mining industry, which will only strengthen the country’s economy long-term as more mines are discovered, developed, and built. Two exciting Mongolian base gold companies are Erdene Resource Development Corp and Steppe Gold.  

 

Erdene Resource Development Corp:                    (TSX: ERD)

Erdene is currently developing a new high-grade gold district. The Khundii gold district resides in the central Asia Orogenic belt, which hosts some of the world’s largest gold and copper deposits.

The company currently owns three deposits:

  1. Altan Nar Deposit
  2. Bayan Khundii Deposit
  3. Zuun Mod Deposit

When the deposit is eventually in production, it is estimated to have a head grade of 3.7 g/t with a project mine life of 8 years, with annual production being 63,700 ounces.

The company is focused on expansion as the company is drilling and has identified eighteen targets over a 5.6km trend.

The company is targeting a 2-million-ounce resource. The company has commenced an 18,000-meter drill program, which will be completed in two phases. Phase I is already completed with assays pending, which will be followed by phase II, which is designed around the results of phase I.

Phase I consisted of 49 holes (8500 meters), which encountered numerous visible gold indications. 

The company has recently identified new high-grade surface mineralization at the deposits, consisting of 15m of 29 g/t gold, 5.5m of 125.9 g/t gold, and 15.1m of 25.59 g/t gold.

Be on the lookout for more assays to be published by the company shortly.

The system here seems like an exceptionally high-grade, open-pit gold deposit with construction planned in 2021.

Erdene Resource Development Corp trades under the ticker ERD on the Toronto stock exchange.

The company currently has a market capitalization of $107 million. The share structure summary:

  • Retail: 39%
  • Institutional & Family Offices: 30%
  • Eric Sprott: 14%
  • Company Management & Directors: 8%
  • Mongolian Shareholders: 5%
  • Teck Resources limited: 4%

 

Steppe Gold:       (TSX: STGO)

 

As many of my readers know, Steppe Gold is one of the world’s newest gold producers as it declared commercial production in July 2020.

Steppe owns the Altan Tsagaan Ovoo gold and silver project in the territory of Tsagaan Ovoo soum, Dornod province of Eastern Mongolia.

The ATO Project is comprised of one mining licence over 5,492.63 hectares.

The company is projected to produce approximately 60,000 ounces a year of gold from its phase I heap leach operation at the ATO mine. 

 

The company is completing a feasibility study which will serve the phase II expansion of the ATO Gold Mine to produce approximately 150,000 ounces of gold equivalent ounces per annum from the development of underlying fresh rock ores. 

 

The bankable feasibility study is expected to be complete in March/April 2021. The study is built on the previously completed Centerra Gold (previous owners of ATO) 2012 internal feasibility study and on further internal studies undertaken by Steppe Gold from 2017 to the present.

 

The company reported an impressive second quarter with 15,389 gold ounces and 4,978 silver ounces produced. Cash costs were $595, with all-in sustaining costs coming in at $739 per ounce sold. This is a very high-margin gold operation at current gold prices as the company begins to expand rapidly. 

 

In addition to on-going production, the company has considerable expansion plans. The company is expected to publish numerous resource updates before the end of the year, including an initial resource estimate at the Mungu deposit. 

 

Currently, the company has a NI 43-101 compliant 1.22 Moz Au equivalent resource: 

 

The company currently has three diamond core drill rigs operating at the ATO gold project on a 24hr basis. 

 

To date, in 2020, Steppe Gold has drilled 23 diamond drill holes for a total of over 9,482 meters. The company has now received results for infill drilling completed in 2019 and 9 holes from the 2020 drilling program.

 

Highlighted results for the 2019 drilling program include:

 

Results from the 2020 drilling program received to date at the Mungu Discovery include:

As showcased in drilling, this is clearly a very high-grade system. Mungu specifically has showcased bonanza results to date.

Visit the company’s Mungu page here, to review historical drilling to date on the asset. 

Steppe also owns the Uudam Khundii “UK” Project which is comprised of one exploration license covering 14,397 hectares. 

The project area is located 800 km south-west of Ulaanbaatar. 

The property is located between and adjoining the Bayan Khundii gold discovery and Altan Nar epithermal gold deposits explored and owned by Erdene Resource Development Corporation.

The company has commenced an exploration program at the project, which is focused on the company’s four discoveries. 

 

To date, Steppe Gold has completed 18 trenches for 933 meters in 2020 at the Milky Way Prospect and the Altan Sum Prospect. This work is ongoing, with more trenching planned across all four prospects discovered.

 

At the Milky Way Prospect, initial trenching results have highlighted a mineralized system of at least 700 meters in length and up to 12 meters wide with individual meter sampling results up to 1.49g/t gold, 450g/t silver, 2.98% copper, 3.98% lead and 0.31% Zinc. 

 

These are exciting early results, and the company is expanding its exploration efforts with a geophysical crew and drill rig planned to be mobilized to the site in the coming month.

Steppe Gold trades under the ticker STGO on the Toronto Stock Exchange.

The company currently has a market capitalization of $144 million. The share structure summary:

Retail: 37%

Mongolian Nationals: 16%

Insiders and Management: 13%

Family Office Investors (US & Europe): 11%

Eric Sprott: 11%

Triple Flag Mining Finance: 5%

Elliot Management: 4%

 


 

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