Erdene Resource Development Corp. (TSX:ERD; MSE:ERDN) ("Erdene" or
the "Company") announces operating and financial results for the
year ended December 31, 2019, and provides an update on its Khundii
Gold Project, including potential impacts of the novel coronavirus
(COVID-19). This release should be read in conjunction with the
Company’s 2019 Financial Statements and MD&A, available on the
Company’s website or SEDAR.
Quotes from the Company:
“Erdene’s exploration and pre-development
successes over the past year have positioned the Company to advance
rapidly through the initial stages of the Bankable Feasibility
Study (“BFS”) for the high-grade, near-surface, Khundii Gold
Project," said Peter Akerley, Erdene’s President and CEO. “During
the past year we delivered both the Preliminary Economic
Assessments (“PEA”) for two deposits and the Pre-Feasibility Study
(“PFS”) for Bayan Khundii, established an open-pit mineable reserve
of over 400,000 ounces grading 3.7 g/t gold, secured two mining
licenses, registered water resources, obtained land use permits and
added ounces through exploration.”
“With the financial support of the European Bank
for Reconstruction and Development (“EBRD”), we remain committed to
Mongolia's growth and development, the generation of strong return
for our investors, and shared benefits for all our stakeholders in
Mongolia and internationally,” continued Mr. Akerley. “We
remain on track for delivery of the BFS in mid-2020, with
permitting and development readiness activities ongoing in advance
of financing and construction decisions in 2020, targeting first
gold production as early as 2021.”
2019 Highlights and Subsequent
Events:
Potential Impacts of COVID-19 on the Khundii
Gold Project
In late January 2020, Erdene adopted protective
measures which included travel restrictions, instituted remote
working and extended health care support for our Mongolian and
international teams to minimize the impact of COVID-19 on staff,
stakeholders and our operations. Although we remain largely
on track for the delivery of the BFS, there is the potential for
delays, which we are closely monitoring. We will provide updates on
our actions and the implications to our Company of COVID-19 as
further information becomes available.
Khundii Gold Project – 100% Erdene
- Announced robust results within a NI 43-101 Technical Report
led by Tetra Tech, Inc, comprised of the Bayan Khundii (“BK”) PFS
and an updated Altan Nar (“AN”) PEA (results at US$1,300/oz gold
price, unless noted): -- Post-tax Net Present Value at a 5%
discount rate (“NPV5%”) of US$97 million and a 42% Internal Rate of
Return (“IRR”) for the BK PFS. -- Post-tax NPV5% of
US$144 million and 58% IRR at current (US$1,500/oz) gold prices for
the BK PFS. -- Incremental post-tax NPV5% and IRR of
US$24 million and 92%, respectively, for the updated AN PEA,
reflecting the second phase of the development utilizing BK
infrastructure. -- BK Life of Mine (“LOM”) Earnings
Before Interest, Taxes and Depreciation of US$211
million. -- LOM head grade of 3.73 g/t gold for the BK
PFS and 3.46 g/t gold for the updated AN PEA. -- BK
Measured and Indicated Resources of 520,700 ounces gold at an
average grade of 3.16 g/t gold, a 20% increase from the September
2018 resource estimate. -- BK Proven and Probable
Reserves of 422,000 ounces gold at an average grade of 3.7 g/t
gold. -- Project life of 11 years, comprising of a
one-year pre-production period, six-year operating life for BK,
three-year operating life for AN, and one-year mine
closure. -- Average annual gold production of
61,000 ounces in the BK PFS and 45,300 ounces of gold and 205,000
ounces of silver in the updated AN PEA.-- All-in sustaining
cost (“AISC”) of US$746/ounce of gold recovered for the BK PFS, and
for the updated AN PEA, US$931/ounce of gold equivalent (see press
release dated October 21, 2019 for “AuEq”
definition). -- BK PFS Initial Capital US$40 million and
US$2 million incremental capital at year-7 for AN PEA.
-- Payback period of less than two years for the BK
PFS. -- Significant benefits to Mongolia, including
royalties and taxes of US$82 million for LOM and 300 local
jobs.
- Launched the BFS and Front-End Engineering and Design (“FEED”)
in December 2019 required for permitting, project finance, and
board approval to commence construction of the Khundii Gold
Project: -- Studies will be delivered by a consortium of
international and Mongolian consultants and will incorporate an
updated mine design study, FEED for the processing plant and
associated infrastructure, a hydrogeological study, detailed waste
management plans, and an updated economic model. -- BFS
results scheduled to be announced in mid-2020.
- Received the Khundii Mining License on August 5, 2019, and the
Altan Nar Mining License on March 5, 2020: -- Mining licenses
are valid for an initial term of 30 years and can be extended to 70
years, providing long-term tenure over the land package
underpinning the Khundii Gold District.
- Completed hydrological drilling and established water resources
for the Khundii Gold Project: -- During 2019, five (5)
process-water production boreholes were established within 3.2
kilometres of the proposed location of the Bayan Khundii processing
facility. -- A water resource sufficient to meet the
anticipated process plant requirement for the life of the BK
facility has been registered and approved by the Ministry of
Environment and Tourism. -- Water well has been
established, registered and approved within 200 metres of the
proposed camp.
- Concluded the BFS geotechnical drill program in Q4 2019 for
Bayan Khundii: -- Six (6) geotechnical drill holes (745
metres) were bored in Q4 2019 to assess the strength and stability
of the various lithologies within the proposed Bayan Khundii
open-pit. -- Results will be incorporated into the BFS
and are expected to result in a safe steepening of pit walls, as
the PFS slopes were conservative in the absence of geotechnical
data.
- Conducted additional metallurgical testing on Bayan Khundii
ore: -- Blue Coast Research in British Columbia, Canada,
performed further testing to optimize the comminution (grinding)
circuit; to determine the ideal grind size for optimized gold
recovery; determine the most efficient dewatering procedures to
maximize water recovery; determine carbon adsorption
characteristics; optimize percent solids of the process plant
slurry, and; detoxification test work designed to minimize cyanide
in tailings. -- Test work to date confirmed the
high recovery rates of gold across the BK deposit and largely
corroborated key assumptions in the comminution and tailings
handling circuits of the proposed process plant.
- Initiated procurement work-stream for the BFS
costing: -- Request for Proposal packages for key plant
and equipment have been developed and are scheduled to be released
to pre-qualified suppliers and contractors within the next two
weeks. -- Responses are due to be received by mid
Q2.
- Advanced the Environmental and Social Impact Assessment
(“ESIA”), led by Sustainability East Asia LLC: -- The
study assessed potential impacts on local climate and air quality,
water resources, traffic, and the economy in the context of nearby
communities and on-site personnel, and is largely
complete. -- Given the Project's modest initial scale and
industry-leading avoidance and mitigation measures, benefits are
expected to outweigh the low and moderate residual anticipated
impacts from operations. -- The ESIA is expected to be
disclosed in the first half of 2020, following Board and lender
reviews. -- The Mongolian statutory Detailed
Environmental Impact Assessment (“DEIA) for BK, built upon the
ESIA, is mainly complete in advance of the public consultation,
which is scheduled to take place in H1 2020.
- Obtained several key permits and regulatory approvals required
for construction: -- Mineral Resource and Petroleum
Authority approved the BK Statutory Technical and Economic
Assessment (“Mongolian Feasibility Study”). -- Mongolian
Ministry of Environment and Tourism approved a water reserve and
flow rate to be utilized for the planned processing plant and
infrastructure of the Khundii Gold Project. -- Land
Arrangement Plan is approved by the local community granting access
to the 100-hectare area required to construct the BK open-pit and
associated surface infrastructure.
Exploration
- Completed the 2019 exploration campaign, drilling 22 holes
totaling 4,367 metres at Bayan Khundii and Altan Nar which returned
some of the highest grade intersections* to
date: -- Bayan Khundii – Midfield Zone: Confirmation
drilling for the PFS Resource intersected 112 metres of 5.9 g/t
gold, including 8 metres of 45 g/t gold and 1 metre intervals of
81, 95 and 129 g/t gold at BKD-261 -- Bayan Khundii –
Striker and Midfield Zones: Definition drilling intersected 32
metres of 2.4 g/t gold in BKD-269 and 37 metres of 1.7 g/t gold in
BKD-270 demonstrating continuity of mineralization within the BK
deposit. -- Bayan Khundii South Extension: Step-out
drilling, under cover, 350 metres south of the BK deposit. BKD-268
intersected anomalous gold mineralization up to 1 metre of 2.45 g/t
gold within the same altered volcanic unit which hosts the
high-grade BK gold deposit. -- Altan Nar – Discovery
Zone: Expanded the high-grade portion of the Central Gap Zone with
45.7 g/t gold, 93.4 g/t silver, 1.54% lead and 3.40% zinc over 7
metres beginning at approximately 70 metres vertical depth, within
23 metres grading 17 g/t gold at TND-135. -- Altan Nar –
Discovery Zone: Confirmed high-grade mineralization north of the
Gap Zone with 12.2 g/t gold over 10 metres, including 2 metres of
52.9 g/t gold at TND-134 and 10 metres of 4.68 g/t gold at
TND-138. -- Dark Horse (Khar Mori) – New, high-grade gold
discovery on the Khundii Mining license, 3.5 kilometres north of
the BK deposit, with high-grade surface rock samples grading up to
87.8 g/t gold.
** Result intervals (metres) represent measured
widths – please refer to individual news releases for projected
true widths.
Corporate
- Raised C$11.9 million in 2019 through a convertible loan and
equity financings to complete the Bayan Khundii Gold Project
Pre-Feasibility and Feasibility Studies, the repurchase of the
Sandstorm NSR royalty, exploration and general working
capital: -- Closed a US$5 million (C$6.6 million) convertible
loan financing with the European Bank for Reconstruction and
Development (“EBRD”) in November 2019. -- Raised $5.3
million in equity through a series of non-brokered
private-placement offerings. -- Current working capital
of $3.8 million will fund the Company through completion of the
Bankable Feasibility Study.
- Repurchased 50% of the Khundii NSR royalty from Sandstorm Gold
on April 12, 2019: -- The implied value of the NSR
royalty is well in excess of the C$1.2 million repurchase
price.
- Recorded a net loss of $2,683,292 for the year ended December
31, 2019, compared to a net loss of $3,656,990 for the year ended
December 31, 2018: -- Exploration and Evaluation
expenditures, including capitalized costs, of $6,694,914 in 2019
exceeded costs of $5,958,692 for the prior year as increased
technical consultant costs associated with the Khundii Gold Project
PEA, the Bayan Khundii PFS and the updated Altan Nar PEA more than
offset lower exploration activity. -- Corporate and
administrative expenses, excluding non-cash, share-based
compensation and depreciation were $1,142,956 in 2019 versus
$1,407,536 in 2018 primarily due to lower staffing costs as a
result of personnel changes and reduced marketing spend.
Potential Impacts of COVID-19 on the Khundii
Gold Project
In late January 2020, Erdene initiated measures,
including travel restrictions, remote work and supplemental health
care for our Ulaanbaatar based and international staff in response
to the reported spread of the COVID-19 virus. These measures have
been recently expanded to include our Canadian head office staff
following Canadian federal and provincial Government advice. Since
mid-January, the Mongolian government has restricted the movement
of people and goods within the country, as well as internationally
in an effort to protect its citizens from the virus.
Although the full impact of the COVID-19 virus
will not be known for some time, the Company remains largely on
track for the delivery of its BFS by mid-2020. Permitting and
exploration also continues, though travel and public gathering
restrictions have led to delays. Further details on potential
impacts the Company is monitoring are as follows:
- Bankable Feasibility Study: The BFS is well progressed with the
remaining work-streams largely desktop focused, following the
completion of field based and laboratory studies in late 2019 and
early 2020. Costing work can be completed remotely, and procurement
is focused on Chinese and Mongolian vendors, where restrictions
related to COVID-19 have been recently relaxed. Although minor
delays are anticipated in finalizing the BFS, Erdene continues on
track to announce results of the BFS in mid-2020, and delivery of
the full study within 45 days of the announcement.
- Permitting: The Ulaanbaatar based team continues to make
significant progress on permitting, as evidenced by the recent
receipt of the Altan Nar mining license. Restrictions around public
gatherings are delaying a public meeting required for the
development approval of the DEIA; however, Erdene has received the
preliminary sign-off from the Ministry. Assuming no further
restrictions are enacted, permitting is expected to remain on
track.
- Exploration and Field Activities: Following the successful
exploration results announced in January 2020, work over the past
few months has been desktop focused. Mapping, geochemical and
geophysical surveys are planned for Q2 at the Dark Horse project
assuming no travel restrictions. Surveying work is also expected to
commence this week in support of permitting.
- Liquidity and Financing: With the receipt of the proceeds
from the US$5 million EBRD convertible loan financing in November
2019, Erdene is fully funded through the delivery of the BFS. The
Company intends to secure project finance in 2020 but recognizes
the potential for delays given current market condition. Erdene is
implementing costs saving measures and developing contingencies to
maintain momentum and protect its key assets.
Background on the Khundii Gold Project
Development
Erdene’s deposits are located in the Edren
Terrane, within the Central Asian Orogenic Belt, host to some of
the world’s largest gold and copper-gold deposits. The Company has
been the leader in exploration in southwest Mongolia over the past
decade and is responsible for the discovery of the Khundii Gold
District comprised of multiple high-grade gold and gold/base metal
prospects, two of which are being considered for development: the
100%-owned Bayan Khundii and Altan Nar projects. Together, these
deposits comprise the Khundii Gold Project.
In October of 2019, Erdene announced the results
of an independent Technical Report for the Khundii Gold Project
(press release here), which included a Pre-feasibility Study
(“PFS”) for the Bayan Khundii deposit and an updated Preliminary
Economic Assessment (“PEA”) for the Altan Nar deposit. The PFS and
the updated PEA results include an after-tax Net Present Value at a
5% discount rate and a US$1,300/oz gold price of US$97 million and
US$24 million, Internal Rate of Return (“IRR”) of 42% and 90% for
Bayan Khundii and Altan Nar deposits, respectively. The PFS
envisions an open-pit mine at Bayan Khundii from Years 0-7,
producing an average of 61,000 oz gold per year at a head grade of
3.73 g/t gold, and an open-pit operation at Altan Nar during Years
7-10, for an average annual production of 48,000 oz gold at an
average head grade of 3.46 g/t gold, utilizing a conventional
Carbon In Pulp processing plant at the Bayan Khundii mine. Erdene
has secured a mining license for the Bayan Khundii deposit in
August of 2019 and plans to start producing gold in late
2021.
The Altan Nar PEA is by nature, a preliminary
economic study, based in part on Inferred Resources. Inferred
Resources are considered too speculative geologically to have the
economic considerations applied to them that would enable them to
be categorized as mineral reserves, which is required for a
pre-feasibility or feasibility study. Mineral resources that are
not mineral reserves do not have demonstrated economic viability
and there is no certainty that the PEA will be realized.
Qualified Person and Sample Protocol
Peter Dalton, P.Geo. (Nova Scotia), Senior
Geologist for Erdene, is the Qualified Person as that term is
defined in National Instrument 43-101 and has reviewed and approved
the technical information contained in this news release. All
samples have been assayed at SGS Laboratory in Ulaanbaatar,
Mongolia. In addition to internal checks by SGS Laboratory, the
Company incorporates a QA/QC sample protocol utilizing prepared
standards and blanks. All samples undergo standard fire assay
analysis for gold and ICP-OES (Inductively Coupled Plasma Optical
Emission Spectroscopy) analysis for 33 additional elements. For
samples that initially return a grade greater than 5 g/t gold,
additional screen-metallic gold analysis is carried out which
provides a weighted average gold grade from fire assay analysis of
the entire +75 micron fraction and three 30-gram samples of the -75
micron fraction from a 500 gram sample.
Erdene’s drill core sampling protocol consisted
of collection of samples over 1 or 2 m intervals (depending on the
lithology and style of mineralization) over the entire length of
the drill hole, excluding minor post-mineral lithologies and
un-mineralized granitoids. Sample intervals were based on meterage,
not geological controls or mineralization. All drill core was cut
in half with a diamond saw, with half of the core placed in sample
bags and the remaining half securely retained in core boxes at
Erdene’s Bayan Khundii exploration camp. All samples were organized
into batches of 30 including a commercially prepared standard,
blank and either a field duplicate, consisting of two quarter-core
intervals, or a laboratory duplicate. Sample batches were
periodically shipped directly to SGS in Ulaanbaatar via Erdene’s
logistical contractor, Monrud Co. Ltd.
About Erdene
Erdene Resource Development Corp. is a
Canada-based resource company focused on the acquisition,
exploration, and development of precious and base metals in
underexplored and highly prospective Mongolia. The Company has
interests in three mining licenses and three exploration licenses
in Southwest Mongolia, where exploration success has led to the
discovery and definition of the Khundii Gold District. Erdene
Resource Development Corp. is listed on the Toronto and Mongolia
stock exchanges. Further information is available at
www.erdene.com. Important information may be disseminated
exclusively via the website; investors should consult the site to
access this information.
Forward-Looking Statements
Certain information regarding Erdene contained
herein may constitute forward-looking statements within the meaning
of applicable securities laws. Forward-looking statements may
include estimates, plans, expectations, opinions, forecasts,
projections, guidance or other statements that are not statements
of fact. Although Erdene believes that the expectations reflected
in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct.
Erdene cautions that actual performance will be affected by several
factors, most of which are beyond its control, and that future
events and results may vary substantially from what Erdene
currently foresees. Factors that could cause actual results to
differ materially from those in forward-looking statements include
potential impacts of COVID-19 on the Company’s operations, ability
to obtain required third party approvals, market prices,
exploitation and exploration results, continued availability of
capital and financing and general economic, market or business
conditions. The forward-looking statements are expressly qualified
in their entirety by this cautionary statement. The information
contained herein is stated as of the current date and is subject to
change after that date. The Company does not assume the obligation
to revise or update these forward-looking statements, except as may
be required under applicable securities laws.
NO REGULATORY AUTHORITY HAS APPROVED OR
DISAPPROVED THE CONTENTS OF THIS RELEASE
Erdene Contact Information
Peter C. Akerley, President and CEO, or Robert Jenkins, CFO
Phone: (902)
423-6419Twitter: https://twitter.com/ErdeneResFacebook: https://www.facebook.com/ErdeneResourceLinkedIn:
https://www.linkedin.com/company/erdene-resource-development-corp-/YouTube:
https://www.youtube.com/channel/UCILs5s9j3SLmya9vo2-KXoA
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