For companies globally, COVID has and continues to test management teams in ways that most have never experienced throughout their careers. Health pandemics impact everything from supply chains, optimization, traditional mining processes by implementing strict safety protocols.
In saying all of that, Steppe Gold has achieved plenty of corporate success this year and looks to build on it in a big way in 2021.
The company officially reported the achievement of commercial gold production in July at its 100% owned ATO mine in Mongolia, and since then, many corporate milestones have been accomplished:
- $15 million strategic investment from the legendary mining investor, Eric Sprott in early July. (click here)
- Commenced drilling and trenching programs at the ATO Gold Mine and Uudam Khundii (“UK”) Gold Project in July. (click here)
- A Bankable Feasibility Study was announced in late July, andcurrently underway for the expansion of the ATO Gold Mine into fresh rock ore with a planned production profile of approximately 150,000oz gold equivalent per year and an estimated ten-year mine life should be completed in the first half of 2021. (click here)
- The company announced some exploration results at its ATO4 deposit alongside its Mungu Discovery: (click here)
The company recently announced its third-quarter earnings, which showcased its operations’ high-margin component as cash costs remained at market low levels of $572 per ounce, with all-in-sustaining costs coming in at $794 per ounce sold.
The ATO mine generated the company $12.7 million in operating cash-flow in the third quarter. In total, the company generated $24.2 million in operating cash-flow in the first six months of production and has a current cash position of over $37 million.
Even though Steppe is a much smaller operation than all of these companies in the chart below, it serves as an excellent illustration of the industry’s norms for all-in-sustaining costs amongst operators.
In addition to the on-going operations at ATO, the company’s next big catalyst is resource expansion. The company plans to publish new resource updates on the existing ATO deposits and also deliver a maiden resource estimate on the Mungu discovery.
I recently caught up with Steppe’s executive vice president and director, Aneel Waraich, for a general update on the company:
Alexander Deluce:
Thank you, Aneel, for joining us for another Q&A, and congratulations to you and the management team for reporting a solid Q3, which really showcased the high-margin side of the asset with cash costs coming in at $572 per ounce and all-in-sustaining costs coming in at $794 which helped generate nearly $13 million in cash flow for the quarter.
How are things going operationally with Steppe as the company continues to optimize and scale operations?
Aneel Waraich:
Thank you so much, Alex, for your kind words. And for spending time with me, so that your readers can benefit from a Steppe Gold update. Operationally, we are still in ramp-up mode as expected for our first year of production, but it is nice to have strong cash flow out of the gate and to keep growing the balance sheet while we optimize our production. Our team expects to be in stable production with a cost profile of less than $700 AISC USD Life of Mine, by Q2 next year.
Like every producer experiences during the start-up and ramp-up of production, we predict and plan for some of the challenges that we’ll encounter along the way, but there are always some unknown factors that arise, too.
Given COVID, our Steppe team is without doubt doing a great job. We have had the distinct advantage in 2020, of not being slowed by the pandemic, our 100% Mongolian, highly-skilled team has been running the operations and ensured that production continued.
Alexander Deluce:
With the addition of the on-going production side of the business, the company looks to expand its resource profile in 2020.
Is the company still on track to publish new resource estimates by the end of the year?
Aneel Waraich:
We have been drilling since the summer, focusing on the infill and extensional drilling on ATO 1, 2 and 4, and now have enough drilling completed on Mungu to put a maiden resource on it. We are very eager to provide the market with a resource update on all of Steppe’s projects, very shortly.
We are really close to delivering this update by the end of year, but have guided the market to expect it by early Q1 of 2021 latest. The reality is, the one area that COVID does slow us down, is in getting lab results on the drilling.
Alexander Deluce:
With the addition of 24/7 drilling to establish the new resource upgrades, should investors expect extensive drill programs in 2021 at ATO and Mungu?
Aneel Waraich:
Yes, the Steppe Gold team plans to continue with extensive drilling programs in 2021. The recent ‘24/7’ drilling efforts enabled us to get as much done before winter started. We have now completed drilling for 2020, and once our resource update is complete we will also review the new targets for 2021 program. We anticipate having an extensive drill program on ATO and Mungu, and on the licence which we can commence by mid-March/early April 2021, after assessing the latest results and establishing new targets.
Alexander Deluce:
It was very interesting to see some of the trenching results at the exciting UK prospect which included 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.
Does the company still plan to drill the four discovery zones at the UK asset this year, and can you touch on where the property is located in relation to Erdene’s deposits?
Aneel Waraich:
Thanks for sharing my excitement on the UK project, Alex! Our early-stage initial results were very encouraging, given that it is located in a highly- prospective gold belt and district, and Erdene has already been experiencing considerable success in close proximity to our UK site.
As mentioned earlier, Steppe has now stopped all drilling and winter has set in. We have the trenching and geophysics completed for the UK project, so we are ready to go and expect to start drilling immediately in late Q1/early Q2 of 2021. We are very excited at the prospect of showing the market the results of our first ever drilling on this particular licence.
Alexander Deluce:
It was also recently announced that Steppe secured an initial tranche of project financing from the Mongolian central bank for the company’s expansion to eventually produce 150,000 ounces equivalent annually.
Can you touch on the support Steppe has received in the country from local government, in addition to working closely with the Central Bank of Mongolia when it comes to gold sales?
Aneel Waraich:
Yes, it was great to show the market that Steppe Gold received a strong in-country endorsement, through the initial tranche of project debt sponsored by the Mongolian Central Bank. This significant support was part of the Mongolian government’s Gold 2 Programme, setup to partner with gold producers and expand in-country production efforts.
Steppe’s successes, every step of the way, can be attributed to the support we receive from all levels of government, and earlier this year we also received the $3M USD investment from the Mongolian National Fund, a newly-established sovereign fund in Mongolia.
This clearly reinforces the level of in-country support for Steppe Gold, and the capital available to us from various Mongolian government-sponsored sources as well as our domestic banks. The Steppe team looks forward to continuing to increase our Mongolian shareholder base, with a listing on the Mongolian stock exchange in early 2021. 2021 is going to be an even more exciting year for Steppe Gold, and I look forward to sitting down with you again, Alex, to talk about STGO’s growth.
Steppe Gold currently has a market cap of $131 million dollars and trades on the Toronto Stock Exchange under the symbol STGO.
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