ERDENE ANNOUNCES STRATEGIC ALLIANCE WITH MONGOLIAN MINING CORPORATION “Combining Mongolia’s pre-eminent precious metals explorer with an exceptional national mining partner to unlock the riches of the Khundii Minerals District.”
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ERDENE ANNOUNCES STRATEGIC ALLIANCE WITH
MONGOLIAN MINING CORPORATION
“Combining Mongolia’s pre-eminent precious metals explorer with an
exceptional national mining partner to unlock the riches of the Khundii Minerals District.”
Press Release
Halifax, Nova Scotia
2023.01.10
Erdene Resource Development Corporation (TSX: ERD | MSE: ERDN) (“Erdene” or the
“Company”) is pleased to announce the execution of Strategic Alliance and Investment
Agreements with Mongolian Mining Corporation (“MMC”) for the development of its Bayan
Khundii Gold Project. This Strategic Alliance brings together Mongolia’s pre-eminent
precious metals explorer with an exceptional national miner in a partnership to unlock the
riches of the Khundii Minerals District (“KMD”).
Highlights
• MMC is Mongolia’s largest internationally traded mining company, listed on the
main board of the Hong Kong Stock Exchange (HKEx: 975).
• Erdene holds three mining licenses and an exploration licence in the KMD in
southwestern Mongolia that host high-grade, open pittable gold deposits, and
silver, copper, lead, zinc and molybdenum resources.
• MMC to invest US$40 million in return 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.
• Erdene will retain a 50% equity interest in EM and a 5.0% Net Smelter Return
(“NSR”) royalty on all production from the Khundii, Altan Nar and Ulaan licenses,
as well as any properties acquired within 5 kilometres of these licenses, beyond
the first 400,000 ounces gold recovered.
• The first stage of the transaction, to be completed in January 2023, sees MMC
invest US$5 million in EM to finance exploration, and an updated Feasibility Study
(“FS”) and Life of Mine (“LOM”) Plan for the Bayan Khundii Gold Project.
• The second stage of the transaction will see MMC invest an additional US$5 million
upon delivery of the updated FS to complete pre-development and exploration
work in advance of a Bayan Khundii construction decision.
• The third stage of the transaction will see MMC invest a further US$30 million once
EM has reached a construction decision, providing equity capital for the Bayan
Khundii Gold Project, targeting close in Q3 2023.
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• Erdene will appoint EM’s Chief Executive and Chief Exploration Officers and MMC
will appoint EM’s Chief Operating and Chief Financial Officers.
• Erdene maintains a 100% interest in its large Zuun Mod Molybdenum-Copper
deposit and Khuvyn Khar Copper project, located approximately 30 kilometres east
of Bayan Khundii, and adjacent to a planned railway development.
Quote from the Company
“We are extremely pleased to announce our Strategic Alliance with MMC, Mongolia’s
leading private-sector mining company,” said Mr. Peter Akerley, Erdene’s President and
CEO. “The combination of our exploration expertise and their mining experience and
execution capability will ensure the success of the Bayan Khundii Gold Project and the
expansion of the Khundii Minerals District for the benefit of all stakeholders. This alliance
transforms our Company, establishing a clear path to unlock the riches of the Khundii
Minerals District.”
Quote from Mongolian Mining Corporation
“We are excited to partner with Erdene on exploration activities and to fund further
development of their projects in Mongolia,” said Dr. Battsengel Gotov, Executive Director
and CEO of MMC. “Our partnership will be important in unlocking new opportunities for
the Mongolian minerals sector which will further increase the industry’s contribution to the
economy.”
Summary of Strategic Alliance
Under the Strategic Alliance and Investment Agreements, MMC will invest US$40 million
in Erdene’s wholly-owned subsidiary, EM, in a three-stage transaction to acquire a co-
controlling equity interest in the company. Erdene will retain a 50% equity interest in EM,
as well as a 5.0% NSR royalty over all licenses held by EM, and those acquired within 5
kilometres of the existing licenses, following 400,000 ounces of gold production. The key
terms of the Strategic Alliance are as follows:
• Stage 1 – To Be Completed in January 2023 – MMC advances US$5 million to EM
to finance an updated FS and LOM Plan for the Bayan Khundii Gold Project, and
to conduct exploration on the Khundii, Altan Nar and Ulaan licenses.
• Stage 2 – Targeting Q2-2023 – MMC will advance a further US$5 million to EM
upon delivery of the updated FS and LOM Plan to complete pre-construction works
and follow-up exploration in the Khundii Minerals District.
• Stage 3 – Targeting Q3-2023 – MMC will advance a final US$30 million following
a positive construction decision to fund the equity component of the Bayan Khundii
Gold Project.
Funds invested by MMC in EM during Stages 1 and 2 will be in the form of convertible
loan instruments. Upon completion of Stage 3, MMC’s investment in EM will be registered
as a 50% equity interest in the company with the Mongolian State Registration Office.
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Erdene will have the right to appoint EM’s Chief Executive Officer and Chief Exploration
Officer and MMC will appoint EM’s Chief Operating Officer and Chief Financial Officer.
Until conclusion of Stage 3, EM will be governed by a Steering Committee of four
members, two of which will be appointed by Erdene, and two of which will be appointed
by MMC. Upon conclusion of Stage 3, EM will be governed by a Board of four directors,
two of which will be appointed by Erdene and two of which will be appointed by MMC.
Erdene will remain the operator of the Bayan Khundii Gold project until the completion of
the third phase. After Stage 3, the board of EM will assume joint responsibility for EM’s
operations, with MMC focusing on development and production and Erdene leading
exploration.
Erdene maintains a 100% interest in its subsidiary Anian Resources LLC, the entity that
holds the Zuun Mod Copper-Molybdenum mining license located approximately 30
kilometres east of the Bayan Khundii Gold Project.
About Mongolian Mining Corporation
Mongolian Mining Corporation (“MMC”) is the largest, private producer and exporter of
high-quality washed hard coking coal (“HCC”) in Mongolia. MMC owns and operates the
Ukhaa Khudag (“UHG”) and the Baruun Naran (“BN”) open-pit coking coal mines, both
located in Umnugovi Aimag (South Gobi Province), Mongolia. The shares of MMC are
listed on the main board on the Hong Kong Stock Exchange (HKEx: 975), and the
company has a current market capitalization of approximately US$300 million.
MMC’s largest beneficial shareholder is MCS Group, one of Mongolia’s leading
conglomerates. MCS has operated in Mongolia for 30 years, and currently has operations
in engineering, energy, communications, property, mining, consumer goods, health, and
hospitality. MCS employs approximately 10,000 staff in Mongolia and is one of the
Country’s largest private taxpayers. MCS is committed to further developing and enriching
the Mongolian economy through its pursuit of responsible corporate excellence and
progressive technology.
Khundii Minerals District
The discovery of the Khundii (“Valley”) Minerals District is the result of more than 17 years
of exploration work by Erdene in a previously underexplored region of southwestern
Mongolia. During this time, Erdene has defined the Altan Nar and Bayan Khundii
epithermal gold deposits, the Ulaan and Dark Horse gold prospects, the Zuun Mod Mo-
Cu porphyry deposit, as well as several prospects and advanced exploration projects.
Collectively, these discoveries form the core of the KMD, covering an area approximately
50 by 100 kilometres, elongated northwest.
The KMD is located within the Trans Altai Terrane of the Central Asian Orogenic Belt
(CAOB). The CAOB extends 2,500 kilometres from the Ural Mountains to eastern China
and hosts numerous world-class porphyry and porphyry related copper and gold deposits.
These deposits include one of the world’s largest gold deposits, Muruntau, in Uzbekistan
and Rio Tinto’s well-known Oyu Tolgoi copper-gold deposit located approximately 650
kilometres east of the KMD, in southeast Mongolia.
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The area covered by the Strategic Alliance area includes the Bayan Khundii, Altan Nar
Ulaan and Dark Horse gold deposits and prospects, located within the Nomin Tal (Altan
Nar), Khundii (Bayan Khundii and Dark Horse) and Ulaan licences. Collectively, these
deposits include Measured and Indicated resources of 903K ounces of gold, 2.3M ounces
of silver, 64M pounds of lead and 70M pounds of zinc, together with Inferred resources
of 221K ounces of gold, 866K ounces of silver, 49M pounds of lead and 52M pounds of
zinc, as reported in NI 43-101 technical reports. Further technical studies are underway
and the Company is targeting reporting gold equivalent resources of two millions ounces
from these licenses.
The initial development is focused on the Bayan Khundii deposit which hosts 585,100
ounces of 2.19 g/t gold Measured and Indicated (“M&I”)2 and 35,900 ounces of Inferred
resources at 2.18 g/t gold. Within the M&I resource, a Proven and Probable open -pit
reserve totals 409,000 ounces at 3.7 g/t gold3 (press release here), providing significant
potential for reserves growth with the development of the remaining M&I and Inferred
resources1.
In July 2020, Erdene announced the results of an independent FS for the Bayan Khundii
Gold Project (press release here). The FS results include an after-tax Net Present Value,
at a 5% discount rate and a US$1,400/oz gold price, of US$100 million, and an Internal
Rate of Return (“IRR”) of 42%. The FS envisions an open pit mine at Bayan Khundii,
producing an average of 63,500 oz gold per year, for seven years, at a head grade of
3.71 g/t gold, utilizing a conventional carbon in pulp processing plant. Erdene will
undertake an updated Feasibility Study for Bayan Khundii in early 2023. Production from
Bayan Khundii is expected to commence in late 2024.
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 an exploration license in Southwest Mongolia, where exploration
success has led to the discovery and definition of the Khundii Minerals District. Erdene
Resource Development Corp. is listed on the Toronto and the Mongolian 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.
1 For details of the Mineral Resources see Erdene’s Q2/2021 results press release, dated August 16, 2021, and the
Company’s Q2 2021 MD&A, available on the Company’s website or SEDAR.
2 M&I: 232,700 ounces of 2.39 g/t gold Measured and 352,400 ounces of 2.08 g/t gold Indicated
3 P&P: 165,000 ounces of 4.4 g/t gold Proven and 256,000 ounces of 3.4 g/t gold Probable; For details of the Mineral
Reserves see Khundii Gold Project NI 43-101 Technical Report, Tetra Tech December 4, 2019 available on the
Company’s website or SEDAR
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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, including statements regarding the timing
and completion of the three stages of the Strategic Alliance and the future plans and
objectives for EM and the KMD under the Strategic Alliance. 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. Forward-
looking statements are based on a number of factors and assumptions which have been
used to develop such information but which may prove to be incorrect.
Erdene cautions that actual performance will be affected by a number of 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 actua l results to differ
materially from those in forward-looking statements include the ability to satisfy the
conditions to the completion of the Strategic Alliance, the ability to obtain required third
party approvals, market prices, exploitation, and exploration results, 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 HA S APPROVED OR DISAPPROVED THE
CONTENTS OF THIS RELEASE
Erdene Contact Information
Peter C. Akerley, President and CEO, or
Robert Jenkins, CFO
Phone: (902) 423-6419
Email: [email protected]
Twitter: https://twitter.com/ErdeneRes
Facebook: https://www.facebook.com/ErdeneResource
LinkedIn: https://www.linkedin.com/company/erdene-resource-development-corp-/