As the world continues on its path of fighting the coronavirus, gold continues to showcase its strength in times of economic uncertainty. Gold is currently at seven-year highs in USD as unprecedented money printing programs by central banks continue, fiat currencies continue to devalue against gold globally.
Here are just a few currencies in the past month that has seen gold at all-time highs:
- The Canadian Dollar
- Indian Rupee
- Australian Dollar
- The Euro
- British Pound
- Japanese Yen
- South African Rand
- Brazilian Real
- Mexican Peso
- The Russian Ruble
But most notably,
- The Mongolian Tugrik
The world’s newest gold producer, Steppe Gold could not have timed it any better to enter the gold business. On March 25, Steppe announced the commencement of ore processing at its 100%-owned ATO gold mine in Mongolia. The company has set guidance to produce 60,000 ounces of gold in 2020 at cash costs of $500 per ounce (with AISC coming in at $650) from its heap leach operations, which should generate $40 million+ in EBITDA this year. Currently, the company has 45.6 million shares outstanding, and 45.7 million reserved for issuance as warrants, stock options, and convertible debentures. All options and warrants are priced at $2.00 or above (125%+ premium to current share price).
The companies current market cap is $41 million CAD.
The positive cash flows from the ATO Mine will go towards studies to expand the open pit and processing facilities to increase gold production to a targeted 150,000 ounces of gold per annum.
Its been fascinating to watch the rejuvenation of the mining sector in Mongolia over the past ten years, with Canada taking charge. Canada and Mongolia signed a Foreign Investment Promotion and Protection Agreement (FIPA) in 2016, which came into full effect in 2017. This agreement sets out a framework of legally binding rights and obligations that will protect Canadian investors in Mongolia.
It is worth noting Canada is one of the top investors in Mongolia, mainly in the mining sector. In 2015, Statistics Canada estimated Canadian investment in Mongolia at approximately $6.4 billion.
Steppe Gold has the infrastructure in place now to become the countries premier gold producer. The company completed a major milestone in January as it announced a landmark investment from the Mongolian National Investment Fund which is managed by DBM Asset Management Company, a wholly-owned subsidiary of the Government-owned Development Bank of Mongolia which clearly showcases the countries dedication and commitment to Steppe Gold and its pursuit of eventually becoming a 150,000-ounce gold producer.
The rest of the year is going to serve as a pivotal period for the company as it enters into a stage of exciting growth and expansion. The ATO Mine has a 43-01 compliant resource of 1.22 million ounces of gold equivalent (measured and indicated). Still, it has the potential to have an explosive growth year as the company will release new resource estimates for the ATO and Mungu deposits this year, which should increase its reserves.
We caught up with Aneel Waralch, Steppes Vice President and asked about the companies plan on operating during the Coronavirus pandemic and also on its exploration expectations in 2020:
Does the company expect the coronavirus to affect operations in the coming months?
“We can’t predict what will happen but given that Mongolia as a country was quite proactive early on closing their borders and restricting internal movements, social interactions etc we are in a better position than many others. Steppe Gold also reacted earlier on restricting travel for our team from January onwards so we don’t foresee any issues on operations. Currently, on site we are operating, mining, crushing and processing. All of our employees are tested 4 times a day for fevers and have personal protective gear including masks that have been provided from onsite medical staff. So we are being very careful on site as well and given the restricted travel there are no coming and goings with visitors or others on site. All employees stay on site on our camp.
The biggest issues that we could have expected to impact operations were to get all required chemicals in country and on site during these tough times and borders being closed with China. We managed to do that already so the hardest is behind us we think.
China is now getting back to business so we think the hardest part is behind us in terms of procurement of supplies for operations. Like I said the team has been great in isolating and all are safe on site as well so we don’t foresee any issues in continuing operations in Country.”
How many meters of drilling is estimated at Mungu and at the ATO deposits this year?
“We still have 11,000 meters of drilling results pending for ATO and Mungu. Once those come out we will incorporate into the resource and reserve update and then also study all results to come up with a new drilling program for ATO and Mungu. We should be able to start drilling again in summer/fall, but we don’t want to comment on the new program on ATO and Mungu until pending results are released and assessed.
While we work on the above we will start trenching and drilling on the exciting and yet to be drilled UK license down in the Bayankhongor gold belt where Erdene Resources has had exciting and strong results directly to the North and South of us.”
Be on the look out for Steppe in the coming months as it has many catalysts for the rest of 2020, including:
- Launch of Phase 1 gold production projected to produce 60,000 oz in 2020
- Expanding on the resources at the ATO Mine and including the new Mungu deposit
- Commencing drilling programs to follow-up on the 4 new discoveries made at the “UK” gold project
- Completion of an updated feasibility study for Phase 2 production increasing annual gold production to 150,000 ounces
The companies stock symbol:
STGO on the Toronto Stock Exchange
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