Sprott invests $15m in Erdene

The funds from the financing will be used to initiate early construction works at the Bayan Khundii gold project, in Mongolia, and to continue exploration to expand the resource.

The private placement consists of the sale of about 33-million subscription receipts at a price of $0.45 apiece, to an entity controlled by Sprott and the concurrent sale of up to 11-million units of the company at a price of $0.45 apiece.

Each subscription share is convertible to units and each unit consists of one common share and one warrant, with each warrant exercisable into one common share of the company within two years of the closing date, at a price of $0.60 apiece.

Erdene this week also announced the results of an independent bankable feasibility study (BFS) conducted by a consortium of international and Mongolian firms to confirm the high-return nature of the openpit Bayan Kundii project.

The BFS included detailed mine design and scheduling, front-end engineering design for a processing plant and site infrastructure, a hydrogeological assessment, a mineral waste facility design, capital and operating cost estimates and an updated economic model.

“The Bayan Khundii BFS results confirm the high-return nature of this project in its base case, with significant potential upside due to ongoing district-wide exploration and exposure to rising gold prices.

“The shallow, high-grade, openpit Bayan Khundii deposit lends itself to conventional mining and processing techniques, reducing the execution risk in bringing the project into production in an accelerated timeframe,” says Erdene CEO Peter Akerley.

He adds that as a low capital and operating expenditure project, with a less than two-year payback and significant growth potential, Bayan Khundii offers investors and stakeholders exposure and leverage to gold as the project moves towards first production in early 2022.

Recent exploration results, including intersections of high-grade gold in the Midfield Southeast and Striker Southwest zones of the Bayan Khundii deposit, currently classified as sub-grade material, are expected to further add to the project’s robust economics

The project marks the foundation for growth in the Khundii gold district for Erdene.

The company plans to undertake additional drilling in the third quarter.

Bayan Khundii has an after-tax net present value of $100-million at a 5% discount rate, and an after-tax internal rate of return of 42%, with a payback period of 1.9 years.

The project is estimated to require $59-million of capital expenditure pre-production and $5-million as the remaining capital cost for the life-of-mine.

Bayan Khundii has a measured and indicated resource of 1.9-million tonnes, grading 7.10 g/t gold, for 441 000 oz, at a 1.4 g/t cut-off grade.

The BFS is based on an openpit mining operation targeting 600 000 t/y of feed material for the processing plant. The total mineable mineralised plant feed is 3.4-million tonnes at an average diluted head grade of 3.7 g/t.

The study has assumed contract mining based on methodology and costing contained in proposals received from contractors with suitable experience in Mongolia in similar openpit mining environments.