It was announced on June 24th that the Mongolian People’s Party would retain a strong parliament majority. The election result marks the first time a single party has retained an absolute majority in consecutive elections.
This is excellent news for Mongolian mining investors as the Mongolian Prime Minister Ukhnaa Khurelsukh pledged to put more considerable effort to promote national development and improve livelihoods for the citizens of Mongolia.
On Thursday the prime minister emphasized on four goals to be achieved in the coming four years with one notable goal which was to:
Increase and diversify its exports
“The way for the Mongolian economy to become debt-free, competitive, and an active participant in regional trade is to increase exports,” he said.
“To achieve the goal to become an exporter, Mongolia will provide policy support to domestic producers, develop mining, food and agriculture, organic food production, energy, tourism, creative industries, information technology, transportation and logistics as priority sectors, and strengthen the partnership between the public and private sectors,” the prime minister said. “In particular, we will work hard to support agriculture, meet domestic food demand, and become a food exporter.”
The landlocked East Asian country is largely dependent on export earnings from the mining sector, with official data showing the mining industry accounts for around 90 percent of Mongolia’s total exports.
It is also worth noting mining accounts for 23 percent of Mongolia’s overall GDP, so the mining sector in itself will be critical for the countries GDP growth in the future. Copper and coal are responsible for about 70 percent of Mongolia’s total export revenues; however, the country is beginning to diversify with the development of its gold mining sector.
In September 2016, the Mongolian government showed a strong commitment to developing its mining sector by signing the Foreign Investment Promotion and Protection Agreement (FIPA) with Canada.
“The FIPA provides Canadian investors operating in Mongolia with a legal framework that will help bring greater predictability and certainty to their investments,” according to the Government of Canada. Canada is now one of the top investors in Mongolia, and the FIPA helps to further create a positive investment climate in this emerging economy.
In 2018, Canadian direct investment in the country totaled approximately C$6.1 billion, with a vast majority of that going to the Mongolian mining sector.
This has presented the opportunity over these last few years for companies to create value in the country by exploring and developing resources.
Steppe Gold has emerged as one of the world’s newest gold producers and Mongolia’s premier precious metals operators. In June 2017, Steppe acquired an 80% interest in the “UK” project in Bayankhongor and three months later acquired the ATO project from Centerra Gold.
Currently, the company’s flagship asset is the Altan Tsagaan Ovoo “ATO” Gold Mine, which is set to produce 60,000 ounces of gold in 2020 with projected cash costs per ounce being US$550.
This represents quite a margin at present gold prices, as 2020 cash flow should generate $40m + of EBITDA for the company. The current market capitalization for Steppe is 96 million dollars. The ATO mine presently has NI 43-101 compliant 1.22 Moz Au Eq resource.
However, for the remainder of this year, the company is looking to aggressively expand its resources through exploration as new resource estimates are expected to be published on the ATO gold mine and the companies newly discovered Mungu deposit.
On May 11th, the company reported its first gold and silver sales, which generated cash flow before stream obligations of US$8.5 million. The company plans on using positive cash flows from the ATO mine to expand the open pit and processing facilities for the company to increase gold production to a targeted 150,000 ounces of gold per annum.
In addition to the on-going high margin production from the ATO mine in the coming months, the company plans on releasing drilling results for approximately 11,000 meters of diamond core drilling targeting extensions at depth on the ATO1, ATO4 and Mungu deposits which should be available in the coming weeks according to the May news release.
This represents quite a growth story for the remainder of the year as to summarize:
- Guidance of 60,000 ounces of gold produced in 2020
- Projected cash costs per ounce being ~US$500
- New resource upgrades are being estimated for the ATO deposits and the Mungu deposit
- Drilling results for 11,000 meters of diamond core drilling at ATO and Mungu expected to be released in coming weeks
- Commencing drilling on four new discoveries in 2020 at the companies UK property, which represents one of the largest exploration licenses in Bayankhongor gold belt.
- Commenced feasibility study to produce 150,000 ounces per annum.
Steppe Gold trades on the Toronto Stock Exchange under the symbol STGO.
To learn more about the company please visit:
Steppe’s website, here
Steppe’s corporate deck, here
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