ERDENE ANNOUNCES POSITIVE UPDATED FEASIBILITY STUDY FOR THE BAYAN KHUNDII GOLD PROJECT Expanded reserves from Bayan Khundii and Maiden Dark Horse Resource result in 25% increase in production and strong NPV and IRR NI 43-101 Technical Report Highlights (US$1,800/oz Gold Price)
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ERDENE ANNOUNCES POSITIVE UPDATED FEASIBILITY STUDY
FOR THE BAYAN KHUNDII GOLD PROJECT
Expanded reserves from Bayan Khundii and Maiden Dark Horse Resource result
in 25% increase in production and strong NPV and IRR
NI 43-101 Technical Report Highlights (US$1,800/oz Gold Price)
• Base Case after-tax Net Present Value of US$170 million (NPV5%) and 35.3% Internal Rate of
Return (IRR), increasing to US$196 million and 38.95% IRR, respectively, at current gold price
of US$1,900/oz
• Life of Mine Earnings Before Interest, Taxes and Depreciation of US$451 million, increasing
to US$495 million at a US$1,900/oz gold price
• Total recovered gold of 476,000 ounces, a 25% increase compared to the 2020 Feasibility
Study from an average gold recovery rate of 93%
• All-in sustaining cost (“AISC”) of US$869 per ounce and upfront capital costs of US$88 million,
plus a 12% contingency, and $2 million of pre-production costs
• Measured and Indicated Resources of 674,700 ounces gold at an average grade of 2.6 g/t
gold, and 319,000 ounces silver at an average grade of 1.38 g/t silver
• Proven and Probable Reserves of 513,700 ounces gold at an average grade 4.0 g/t gold, and
220,500 ounces silver at an average grade of 1.7 g/t silver
• Average annual gold production of 86,900 ounces during years 2 through 5 – Life of Mine
annual average production of 74,200 ounces gold
• Eight-year project, comprising one-year pre-production, six and three quarter-year operating
life and one-year mine closure period
• Adjacent high-grade resources and recent discoveries provide high probability growth options
• Significant benefits to Mongolia, including Life of Mine royalties and taxes of US$143 million
and approximately 500 new jobs in Bayankhongor Province
• Equity capital for the Bayan Khundii Gold Project to be provided by Mongolian Mining
Corporation (“MMC”) under the terms of the previously announced Strategic Alliance
Press Release
Halifax, Nova Scotia
2023.08.15
Erdene Resource Development Corp. (TSX:ERD; MSE:ERDN) ("Erdene" or the "Company")
is pleased to announce results of an updated independent Feasibility Study (“FS”) for the high-
grade, open-pit Bayan Khundii Gold Project (“BK” or "Project”) in southwest Mongolia. The FS
was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral
Projects (“NI 43-101”) and incorporates updated mineral resources and reserves, including
maiden resources and reserves from the high-grade Dark Horse Mane deposit (“DH”), as well as
current capital and operating cost estimates and metals prices. The updated FS has been
prepared by a consortium of International and Mongolian firms with significant experience
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operating in Mongolia and internationally. The Technical Report, prepared by O2 Mining Limited,
pursuant to NI 43-101 guidelines, will be filed on SEDAR within 45 days.
Quotes from the Company:
“The Bayan Khundii Gold Project will be one of the highest grade open-pit gold mines in the world,
and Mongolia’s largest primary gold producer, when it comes on stream in 2025. This updated
Feasibility Study confirms the Project’s strong economics, supported by a 25% increase in
recovered gold due to the incorporation of additional resources from Bayan Khundii and the Dark
Horse Mane deposit,” said Peter Akerley, President and CEO. “As a low cost project utilizing
conventional mining and processing techniques with significant growth potential, Bayan Khundii
offers investors and stakeholders exposure and leverage to gold.”
“Bayan Khundii is the first development in what we expect to be a large-scale mining complex in
Southwestern Mongolia. We have a multitude of expansion opportunities in our pipeline as we
continue to add precious and base metal resources through exploration,” continued Mr. Akerley.
“Through our Strategic Alliance with MMC, Mongolia’s largest independent miner, we are moving
rapidly towards production. Early construction works are underway and we look forward to
achieving first gold and cash flow in 2025, while we continue to explore, discover and develop the
other mineral deposits in our Khundii Minerals District.”
“With MMC’s investment under the Strategic Alliance agreement, we have secured the equity
component of Project Finance. We are also well progressed on debt funding for the Project,”
concluded Mr. Akerley. “Leading international financial institutions have completed the bulk of the
technical, environmental and social due diligence on the project over the past couple of years.
With the delivery of the updated feasibility study, we expect to receive firm commitments in the
coming months.”
NI 43-101 Technical Report Overview
The Technical Report incorporates an updated reserve estimate for the BK Gold Deposit as well
as the maiden mineral reserve estimate from the very high-grade Dark Horse Mane Gold Deposit.
The FS includes 3.8 million mineable tonnes from the Bayan Khundii resource at an average
diluted head grade of 3.8 g/t gold and 1.7 g/t silver, and 0.2 million mineable tonnes from the Dark
Horse resource at an average diluted head grade of 7.0 g/t gold, all of which are Proven and
Probable Reserves.
The Technical Report envisions a high-grade, open-pit mine, beginning at surface in the southern
portion of the BK Gold Deposit (Striker and Gold Hill), and expanding northward into adjacent
zones at Midfield and Midfield NE. Dark Horse open pit will commence in Year 3 and will be
processed concurrently with BK Gold Deposit ore. The development incorporates conventional
crushing and grinding, leach and a Carbon in Pulp (“CIP”) plant with processing capacity of 1,935
tonnes per day.
The base case assumes a gold price of US$1,800/oz. All references to dollars within this release
are US Dollars (US$), unless stated otherwise. The Technical Report, pursuant to NI 43-101
guidelines for the Bayan Khundii FS will be filed on SEDAR within 45 days. Key metrics from the
Technical Report are presented in Table 1 below.
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Table 1. Bayan Khundii Gold Project Key Metrics
BK FS
Gold Price US$/oz 1,800
Production Profile
Average Head Grade Over Life of Mine1 g/t gold 4.0
Project Life2 years 8
Operating Life years 6.75
Target Plant Feed Rate Per Day3 tpd 1,935
Average Annual Saleable Gold oz 74,200
Peak Annual Saleable Gold oz 88,100
Average Gold Recovery Rate Over Life of Mine % 93%
Strip Ratio t:t 10.9
Operating Costs
Life of Mine (“LOM”) Average Cash Cost4 US$/oz 851
LOM Cash Cost plus Sustaining Cost (AISC)4 US$/oz 869
Pre-Tax Net Present Value
5% discount rate US$M 245
7.5% discount rate US$M 207
10% discount rate US$M 175
Pre-Tax Internal Rate of Return % 44%
After-Tax Net Present Value
5% discount rate US$M 170
7.5% discount rate US$M 141
10% discount rate US$M 117
After-Tax Internal Rate of Return % 35%
Payback Period (After tax) years 2.4
Capital Requirements
Pre-production Capital Cost, including contingency US$M 100
Life of mine (“LOM”) Remaining Capital Cost US$M 9
Notes:
1. Average diluted head grade of mineralized rock fed to process plant.
2. Project life comprising one-year pre-production period, approximately six and three quarter-year operating life and
one-year mine closure period.
3. Assumes process plant operates for 8,000 hours per annum to achieve the target production rate of 650 ktpa.
4. Operating costs reported in terms of saleable gold ounces for Bayan Khundii; costs include Royalty and Charges
of US$108/oz.
Technical Report Sensitivities
The following table shows changes in the after-tax NPV and IRR over a range of gold prices and
discount rates, demonstrating the impact of higher gold prices and the Project’s resiliency to lower
prices.
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Table 2. Technical Report Sensitivities – After-Tax Gold Price Sensitivity Analysis
Gold Price Sensitivity
Analysis Units US$1,400 US$1,600 US$1,800 US$2,000 US$2,200
NPV (5% discount rate) US$M 65 118 170 223 275
NPV (7.5% discount rate) US$M 48 95 141 188 234
NPV (10% discount rate) US$M 34 76 117 158 200
IRR % 18% 27% 35% 42% 49%
Bayan Khundii Mineral Resource and Reserve Estimate
BK Gold Deposit Mineral Resource Estimate
The BK Gold Deposit Mineral Resource Estimate (“ BK Mineral Resource”) was prepared in
accordance with NI 43-101 and CIM standards by AGP Mining Consultants Inc. (“AGP”) with an
effective date of April 20, 2023. The BK Mineral Resource was prepared by Paul Daigle, P.Geo.,
who is a qualified person (“QP”) as defined by NI 43-101.
The Mineral Resource has been constrained to a conceptual pit shell and is reported at a cut-off
grade of 0.40 g/t gold. The assumptions and parameters utilized to establish the cut-off grade and
pit shell are reported below in notes to Table 3. AGP recommends reporting the Bayan Khundii
Mineral Resource at a 0.40 g/t gold cut-off.
Table 3. BK Gold Deposit – Mineral Resource Estimate Summary, April 2023
Resource
Classification
Quantity
(Mt)
Gold Grade
(Au g/t)
Ounces Gold
(Koz)
Silver Grade
(Ag g/t)
Ounces Silver
(Koz)
Measured 4.0 3.03 394 1.44 187
Indicated 3.3 2.04 219 1.22 131
M&I 7.4 2.58 613 1.34 319
Inferred 0.2 1.08 6 1.32 8
Notes:
1. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
2. Summation errors may occur due to rounding.
3. The effective date of the Mineral Resources is April 20, 2023.
4. Open pit mineral resources are reported within an optimized constraining shell.
5. Open pit cut-off grade is 0.3 g/t Au based on the following parameters:
• Gold Price of US$2,000/oz Au
• Gold recovery of 95%
• Mining Costs of US$3.00/t
• Milling Costs and G&A of $22.00/t
• Capping of gold grades was 200 g/t Au and 50 g/t Ag on 1m composite values.
• The density varies between 2.58 g/cm3 and 2.66 g/cm3 depending on lithology.
Dark Horse Mane Mineral Resource Estimate
The Company is pleased to provide a summary of the maiden mineral resource estimate for the
Dark Horse Mane Gold Deposit (“Dark Horse Mineral Resource”) discovered in 2021 and located
just two kilometres north of the BK Gold Deposit. The Dark Horse Mineral Resource was prepared
in accordance with NI 43-101 and CIM standards by RPM Global (“RPM”) with an effective date
of November 1, 2022. The Dark Horse Mineral Resource was prepared by Mr. Oyunbat Bat-Ochir
who is a full -time employee of RPM and a Member of the Australian Institute of Geoscientists ,
and a QP as defined by NI 43-101.
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The Dark Horse Mineral Resource is reported above a gold cut-off grade of 0.35 g/t gold for oxide
and transition mineralization and 1.02 g/t gold for fresh mineralization. The Mineral Resource has
been constrained to a conceptual pit shell. The assumptions and parameters utilized to establish
the cut-off grade and pit shell are reported below in notes to Table 4.
Table 4. Dark Horse Gold Deposit – Mineral Resource Estimate Summary, November 2022
Type
Indicated Mineral Resource Inferred Mineral Resource
Tonnes Gold
Grade
Ounces
Gold Tonnes Gold
Grade
Ounces
Gold
(Kt) g/t Au (K oz) (Kt) g/t Au (K oz)
Oxide 578 3.0 56.2 75 1.1 2.7
Transitional 99 1.5 4.8 109 1.2 4.1
Fresh 5 4.9 0.7 - - -
Total 682 2.8 61.7 184 1.2 6.8
Notes:
1. The Statement of Estimates of Mineral Resources has been compiled under the supervision of Mr. Oyunbat Bat-
Ochir who is a full-time employee of RPM and a Member of the Australian Institute of Geoscientists. Mr. Bat-Ochir
has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and
to the activity that he has undertaken to qualify as a Qualified Person as defined in the CIM Standards of Disclosure.
2. All Mineral Resources figures reported in the table above represent estimates at November 1, 2022. Mineral
Resource estimates are not precise calculations, being dependent on the interpretation of limited information on
the location, shape and continuity of the occurrence and on the available sampling results. The totals contained
in the above table have been rounded to reflect the relative uncertainty of the estimate. Rounding may cause
some computational discrepancies.
3. Mineral Resources are reported on a dry in-situ basis.
4. The Mineral Resource is reported using a 0.35 g/t Au cut-off grade in oxide and transition mineralisation and 1.02
g/t Au cut-off in fresh mineralisation and is constrained above conceptual optimised pit shell. Cut-off parameters
were selected based on an RPM internal cut-off calculator, assuming an open cut mining method with 5% ore loss
and 10% dilution, a gold price of US$1,723 per ounce, a mining cost of US$3 per tonne and a processing cost of
US$16 per tonne milled and processing recovery of 90% for oxide, 87% for transitional and 30% for fresh Au
mineralisation. The conceptual optimised pit shell was constructed using a gold price of US$2,000 per ounce,
which is 1.4 times the long-term consensus forecast price.
5. Mineral Resources referred to above, have not been subject to detailed economic analysis and therefore, have
not been demonstrated to have actual economic viability.
BK and DH Reserve Estimate
The Bayan Khundii and Dark Horse FS Mineral Reserves have been estimated by QP, Mr. Julien
Lawrence, Director, O2 Mining Limited, using the 2014 CIM Definition Standards for Mineral
Resources and Mineral Reserves to conform to the Canadian National Instrument 43 -101
Standards of Disclosure for Mineral Projects. The total Mineral Reserve for the Bayan Khundii
deposit is shown in Table 5 and the total Mineral Reserve for the Dark Horse Mane deposit is
shown in Table 6. Mineral Reserves are based on the BK Mineral Resource and Dark Horse
Mineral Resource, reported herein. Mineral Reserves estimated for the BK and DH deposits are
based on Measured and Indicated Resources and have an effective date of August 1, 2023.
Reserves were calculated by O2 Mining using FS level engineering designs for the pit and
associated process plant operating parameters.
The cut-off grade for mineral reserve calculations is 0.63 g/t gold for the BK Gold Deposit and
0.68 g/t gold for Dark Horse Gold Deposit, based on a gold price of $1,816/oz. The reserves, as
defined by the regularized block model, contain modelled mineral losses of 2.5% and average
internal dilution of 10%, within the ultimate pit.
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A summary of the Mineral Reserves estimated for the BK and Dark Horse deposit with an effective
date of August 1, 2023 can be found in Tables 5 and 6.
Table 5. BK Gold Deposit – Mineral Reserve Estimate Summary, August 1, 2023
Classification Tonnage
(Mt)
Grade
(g/t Au)
Contained
Gold (Koz)
Grade
(g/t Ag)
Contained
Silver (Koz)
Proven 2.7 4.1 360.2 1.7 159.4
Probable 1.1 3.0 104.7 1.7 61.1
Total 3.8 3.8 464.9 1.7 220.5
Table 6. Dark Horse Gold Deposit – Mineral Reserve Estimate Summary, August 1, 2023
Classification Tonnage
(Mt)
Grade
(g/t Au)
Contained
Gold (Koz)
Proven - - -
Probable 0.2 7.0 48.8
Total 0.2 7.0 48.8
Notes:
1. The effective date of the Mineral Reserve estimate is August 1, 2023. The QP for the estimate is Mr. Julien
Lawrence of O2 Mining Limited;
2. The Mineral Reserve estimates were prepared with reference to the 2014 Canadian Institute of Mining, Metallurgy
and Petroleum (“CIM”) Definition Standards (2014 CIM Definition Standards) and the 2003 CIM Best Practice
Guidelines;
3. Reserves estimated assuming open-pit mining method;
4. Waste to ore cut-offs were determined using a NSR for each block in the model. NSR is calculated using prices
and process recoveries for each metal accounting for all off-site losses, transportation, smelting and refining
charges;
5. Reserves are based on a gold price of $1,816/oz; and
6. Mineral Reserves were calculated from a diluted “mining” block model which included average dilution of 10% and
losses of 2.5%.
Mining
The BK FS is based on an open-pit mining operation targeting 650,000 tonnes per year of feed
material for the processing plant. The total mineable mineralized plant feed is 4.0 million tonnes
at an average diluted head grade of 4.0 g/t gold and average strip ratio of 10.9:1 (waste tonne:
plant feed tonne). Mineralization starts at surface, with the majority of the deposit contained within
the top 100 metres. The deposit structure, grades and depth suggest selective open cut mining
will be utilized. Mining will use hydraulic excavators in backhoe configuration. Drilled and blasted
material will be loaded into haul trucks, with waste rock deposited in an engineered Integrated
Waste Facility (“IWF”) adjacent to the pit, and ore hauled to a crusher or run-of-mine (“ROM”) pad
adjacent to the processing plant.
The BK FS has assumed owner mining based on methodology and costing prepared from first
principles using vendor quotations for major cost elements and O2 Mining experience in Mongolia
in similar open-pit mining environments. In this scenario, the owner leases the major fleet and
provides for all minor fleet and personnel to operate the project. The mine plan proposes a total
of 4 x excavators (2 x ore, 2 x waste), 20 x 55t payload trucks, 3 x blasthole drills and a fleet of
ancillary and support equipment to deliver the required material movement. The mining workforce
peaks at approximately 260 personnel (employees and contractor personnel) to deliver the
required schedule of production.
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Processing
The FS assumes processing of ROM material via a conventional crush and grind circuit and a
carbon in pulp plant. Plant design by 360-Global has been based on testing at Blue Coast
Research which has established optimal processing parameters, including; grind size of 80%
passing 60 microns; design inputs for comminution circuit, optimal cyanide concentration in leach
circuit; 36 hour retention time; carbon adsorption parameters and detoxification reagent dosages.
The process circuit has been designed to maximize water recovery with the most efficient
dewatering process (pressure filters) to achieve targeted 15% moisture in tailings , minimize
chemical and reagent usage and reduce environmental impact.
The ore-processing plant will be located adjacent to the Bayan Khundii open pit and throughput
will target 650,000 ore-tonnes per year, nominally 1,935 tonnes per day. Total mineralized
material from BK, processed in the plant over the course of the mine life, is 4.0 million tonnes at
an average diluted head grade of 4.0 g/t gold. Using an estimated mill recovery of 92.6%, total
recovered gold over the life of the Bayan Khundii Project is 476,000 ounces.
Operating Costs
Operating costs are based on the mining and processing scenarios outlined above and assume
owner mining. Power for operations will be generated through an on-site hybrid diesel and solar
generation solution, provided under a power purchase agreement for the duration of the Project.
All other activities are assumed to be owner-operated. The AISC for Bayan Khundii is estimated
at $869/oz.
Table 7. Operating Costs
LOM ($ millions) US$/oz US$/tonne
Mine Operating Cost 165 347 41
Processing Cost 166 349 41
G&A 20 43 5
Total Site Operating Costs 352 739 88
Royalty and Charges 51 108 13
Sustaining Capital & Closure Costs 10 22 3
All-In Sustaining Cost 414 869 103
Note: Rounding may cause computational discrepancies
Capital Costs
Construction costs, primarily comprising the process plant and supporting infrastructure,
accommodation village, and associated engineering and indirect costs are estimated at US$88
million. Pre-production costs, including first fills and mobile site equipment total $2 million.
Additionally, a 12% contingency, or US$10 million, has been provided in arriving at the total
estimated capital cost. Sustaining capital of US$4 million has been included in the mine plan and
net mine closure costs are estimated at US$7 million, accounting for salvage values. Total life of
mine capital expenditures for the Bayan Khundii Gold Project are estimated at US$109 million.
Approximately $5 million of costs have been incurred to date, representing deposits on long-lead
mechanical equipment, temporary construction facilities and civil works.
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Table 8. Capital Costs
Item $ millions
Process Plant 47
Non-Process Infrastructure 14
Construction Indirects 27
Construction Costs 88
Pre-Production Costs 2
Contingency 10
Subtotal Plant and Infrastructure 100
Sustaining Capital 4
Reclamation and Mine Closure 7
Salvage (2)
Total 109
Note: Rounding may cause computational discrepancies
Environmental and Permitting
Erdene completed an independent Environmental and Social Impact Assessment (“ESIA”) for the
Project in accordance with the Performance Requirements of the European Bank for
Reconstruction and Development (“EBRD”) in 2020. Subsequently, the Mongolian statutory
Detailed Environmental Impact Assessment (“DEIA”) for the Project was approved by the
Mongolian Government in 2021. Additional studies were carried out in 2021 and 2022 as part of
the expected Project Lender’s due diligence.
Erdene has obtained approvals for the 12 project facilities that the company will own and operate.
Construction permits have been issued for nine of these facilities, including the CIP Process Plant,
and earthworks for several facilities is currently underway.
Project Finance and Next Steps
The Company engaged HCF to act as Project Finance advisor, with primary responsibility for
securing debt in 2020. HCF is a leading independent corporate finance advisory boutique based
in London, focused on the global natural resources and infrastructure sectors. HCF possess
significant Mongolian experience, having acted as an advisor on the financing of Oyu Tolgoi,
Mongolia’s largest mining project, and has strong relationships with the EBRD, a strategic investor
in Erdene and one of Mongolia’s largest foreign investors.
Two international financial institutions have conducted due diligence on BK and are expected to
provide debt financing for the project. These institutions are active in Mongolia, as major funders
to the Oyu Tolgoi Copper-Gold project. It is anticipated that senior debt financing could comprise
as much as 65% of the total financing package.
The equity capital for the project has been secured from the Mongolian Mining Corporation
through the Strategic Alliance Agreement announced January 10, 2023 (see press release here).
Highlights of the SAA include:
• MMC is Mongolia’s largest internationally traded mining company, listed on the main board
of the Hong Kong Stock Exchange (HKEx: 975).
• MMC to invest US$40 million for a 50% equity interest in Erdene’s Mongolian subsidiary,
Erdene Mongol LLC (“EM”), holding the Khundii and Altan Nar mining licenses and the
Ulaan exploration license through a three-stage transaction, based on achievement of
milestones.