Gold has continued on its upward path the past month as record fiscal and monetary policy continues to take place globally, which has resulted in gold trading at all-time highs in most fiat currencies. Last week, gold smashed through its 8 year high in USD terms as the American economy continues to face unprecedented economic uncertainty.
As the chart below showcases, the aftermath of the last two recessions has been bullish for gold due to extraordinary monetary policy to combat downturns.
This has set up a favorable environment for one of the world’s newest high margin gold producers, Steppe Gold, who is solidifying itself as Mongolia’s premier gold producer. On July 6th, the company declared commercial production at its 100% owned ATO mine and announced it had sold over 15,000 ounces of gold in its first three months of production.
This is a significant milestone as the company now has reoccurring cash flow from its mining efforts. To date, the company has generated net cash flow, after royalty payments, of US$25.3 million. It is worth noting; the company has set guidance for producing 60,000 ounces in its first year of production at cash costs of circa $500 per ounce from the ATO Mine.
This represents at present gold prices, extremely high margin gold production.
After the company declared commercial production, on July 9th, Steppe announced a strategic $15 million dollar investment by Eric Sprott to help accelerate growth for the remainder of 2020.
Billionaire Eric Sprott is a true titan in the mining industry. With this strategic investment, this only strengthens the company and serves as a significant endorsement to the companies exciting gold assets. Mr. Sprott joins a strong shareholder base, which includes strong support from Mongolian nationals, family office investors, Triple Flag Mining Finance, and Elliot Management. Insiders and management also have substantial equity ownership to align themselves with shareholders:
The Companies Growth Prospects for 2020:
With Mr. Sprotts $15-million-dollar investment, Steppe is poised to have a very active remainder of 2020. As reported in May, the company is currently evaluating 11,000 meters of diamond core drilling targeting extensions at depth on the ATO1, ATO4, and Mungu deposits, which should be released in the coming weeks.
We recently caught up with Aneel Waraich, Executive Vice President and Director of Steppe Gold, and asked about the aggressive exploration plans for the remainder of the year:
With Steppe Gold declaring commercial production and having 3 drilling rigs on ATO1, ATO4, and the Mungu discovery, will exploration drilling begin in the coming weeks?
Mr. Waraich:
“Yes, the market should expect exploration results from the previous drilling program, which was mainly infill drilling on Mungu and ATO deposits in the coming weeks. We have now mobilized three drill rigs for ATO and Mungu and will start exploration programs there immediately so the market can expect a lot of news flow from drilling on ATO and Mungu in the coming weeks and months – very exciting to be able to get back to aggressive drilling which we have not been able to do to over the last 18 months while bringing production online.”
Is the company still on track to release resource upgrades on the ATO deposits and the initial resource estimate on the Mungu Discovery in the coming months?
Mr. Waraich:
“We are anticipating the maiden resource estimate on Mungu and upgrades on ATO deposits to be completed and released towards the end of September or early October latest.”
With the $15 million strategic investment from mining legend, Eric Sprott, will the company be more aggressive with exploration then it initially expected for the remainder of 2020?
Mr. Waraich:
“Yes, we now have 3 drill rigs mobilized for additional exploration at the ATO Mine and Mungu deposit versus 2 and we have also mobilized a 4th drill rig to start drilling down at our undrilled UK license once the trenching is completed over the coming weeks.”
With Steppe commencing night shift mining this month at ATO what type of increase does the company anticipate with regards to its mining rate?
Mr. Waraich:
“We anticipate a 50% increase in the mining and processing rate with the addition of the night shift this month. Our current mine plan was based on 3,500 tonnes per day, and we think the mining rate will be closer to 5,000+ tonnes per day going forward. This will lead to an operation that will grow from the initial 1.2M tonnes per annum plan to 1.5M-1.8M tonnes per annum. We will continue to update the market as we hit our new baseline mining rate.”
Does the company still plan to publish a feasibility study showcasing the potential to produce 150,000 ounces per annum in the years to come by the end of 2020?
Mr. Waraich:
“We have been working on the feasibility study with DRA Global to be completed by year-end or Q1’2021 latest.”
This showcases the growth potential for the remainder of 2020 for Steppe Gold. It is clearly a very exciting time for followers of the story.
The company currently has a market capitalization of $134 million and trades under the symbol STGO on the Toronto Stock Exchange.
We encourage readers to visit the companies website, here: https://steppegold.com/
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