Erdene Files Khundii Gold Project Preliminary Economic Assessment Technical Report
Erdene Files Khundii Gold Project Preliminary Economic Assessment
Technical Report
Halifax, Nova Scotia – February 5, 2019 - Erdene Resource Development Corp. (TSX:ERD ;
MSE:ERDN) ("Erdene" or the "Company") is pleased to announce the filing on SEDAR of the
independent Preliminary Economic Assessment (“PEA”) Technical Report (the “Report”) for its
100%-owned Khundii Gold Project (the “Project”) in southwest Mongolia. The Report entitled “ NI
43-101 Technical Report for the Preliminary Economic Assessment of the Khundii Gold Project” ,
dated February 4, 2019, was prepared in accordance with National Instrument 43 -101 Standards of
Disclosure for Mineral Projects (“NI 43 -101”) by RPMGlobal Asia Limited (“RPM”). The Report is
available under the Company’s profile at www.sedar.com and will also be available on the
Company’s website at www.erdene.com.
“The PEA demonstrates the robust economics of the high-grade, low-capital Khundii Gold Project,”
said Peter Akerley, Erdene’s President and CEO . “The 56% Internal Rate of Return (“IRR”) at a
US$1,200/ounce (“oz”) gold price is amongst the highest in our peer group . Additionally, the
Project’s after-tax Net Present Value at a 5% discount rate (“NPV 5%”) of US$99 million increases to
$124 million at a US$1, 300/oz gold price, demonstrating the Project’s leverage to higher gold
prices.”
“We have accepted RPM’s recommendation to proceed to a NI 43 -101 Pre-Feasibility Study, and we
have received proposals from engineering firms to lead the work, which we plan to award this
quarter. Simultaneously, we are progressing as expected on securing mining licenses for the Project,
which provide long-term security of tenure , and are finalizing exploration plans for the 2019 field
season, as we seek to grow resources,” concluded Mr. Akerley.
PEA Highlights for Khundii Project Open Pit Gold Mine Development
The PEA envisions a high-grade, open-pit mine, producing an average of 51,200 oz per year at an
average grade of 3.42 g/t gold over eight years. Mining will begin at the Bayan Khundii Striker Zone,
expanding into adjacent zones within Bayan Khundii, prior to incorporating resources from the
neighbouring Altan Nar deposit in later years. The development incorporates a conventional gravity
separation circuit and a carbon -in-pulp plant with processing capacity of 1,800 tonnes per day. The
key Project metrics are highlighted below:
• After-tax NPV5% of US$99 million and IRR of 56% at a US$1,200/ oz gold price
• After-tax NPV5% of US$ 124 million and IRR of 68% at a US$1,300/oz gold price,
demonstrating significant leverage to gold prices
• Low initial capital expenditure of US$32 million, using a contract mining fleet
• All-in sustaining cash cost (“AISC”) of US$714/oz of recovered gold
• Payback of less than 2 years
Opportunities to Enhance Project Value
The Company sees the following opportunities to increase value at the Khundii Gold Project:
• Higher Grade Upside: The very high -grade nature of the deposit provides upside should
continuity of the ultra high-grade zones be established during mining. The highest gold values
in the block model supporting the PEA are 55 g/t, while mor e than 40 intersections ranging
from 50 g/t to 2200 g/t gold were encountered during drilling.
• Additional Resources at Bayan Khundii : Approximately 60,000 ounces of Indicated
Resources and 70,000 ounces of Inferred Resources grading more than 4 g/t gold are located
outside the designed mineable open pit for the PEA. The majority of these resources are
contained within the West Striker Area, approximately 100 metres from the ultimate pit wall,
situated at around 100 metres depth. Accessing these resources by underground methods will
be considered in future study.
• Additional Resources at Altan Nar: The majority of the resource contained a t the Altan Nar
Project remains undeveloped in the current PEA. Further drilling and metallurgical work is
required to incorporate this material into development scenarios.
• Exploration Potential: The Bayan Khundii and Altan Nar deposits are situated in a h ighly
prospective region that has received minimal historical exploration. The Company, through its
proprietary regional database and experience in the region, is well positioned to add resources
through exploration.
• Recovery Upside: The Bayan Khundii mine ralized material has an average recovery of 92%
in the PEA. However, master composite sample testing indicates that recoveries of up to 99%
are possible for high-grade material. For Altan Nar material, an average recovery of 62% has
been applied in the PEA due to arsenopyrite content of the ore. Master composite testing of
representative samples from the Discovery Zone pit has returned recoveries of up to 88%.
Further metallurgical testing could support higher recoveries.
• Mine Planning: The PEA represents the first step toward addressing the viability of a mining
operation at the Khundii Gold Project. Further work may identify cost saving opportunities
such as improved pit sequencing through pit phasing, waste haul optimization including in-pit
dumping, reduced dilution and loss through the application of more selective mining
techniques and interim pit design targeting improved early grades.
• Mine Equipment Selection: There is opportunity to consider Tier 2 suppliers for non -critical
equipment, reducing capital and operating costs.
• Land Acquisition: The Mongolian Ministry of Mining and Heavy Industry has recently
reopened the tender licensing system, and the Company expects prospective licenses to be
released in 2019. The Company has identified m ultiple prio rity targets within the
surrounding regional district and will be an active participant in the tender processes for these
properties.
Next Steps
The PEA indicates that the Khundii Gold Project is projected to be economically viable and RPM
recommends that Erdene proceed to a n independent NI 43 -101 Pre-Feasibility Study in order to
further assess the viability of the Project . The Company has created a Mining Studies Group to carry
out mining, geotechnical, metallur gy, waste management, environmental, social impact and
hydrogeology work to support the Pre-Feasibility Study in 2019.
Erdene initiated the mining license application process for Bayan Khundii in 2018 and e xperts have
been appointed by Mongolia’s Mineral Council to review and approve the application, and Erdene
has provided the necessary information in support. Experts have completed a site visit with a
Mineral Council meeting anticipated later in Q1-2019. The Altan Nar mining license filing will take
place in the first half of 2019. Mongolian mining licenses have a 30 -year term and are renewable for
up to two, further 20-year periods.
It is expected that the Project will advance t hrough the final permitting approvals, feasibility and
project finance by early 2020. Construction is anticipated to take one year and Erdene is targeting to
commence production in 2021.
Background on the Khundii Gold Project
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. Although epithermal gold and porphyry
copper-gold deposits are well documented across the border in China and alon g the Belt’s westward
trend, exploration in Mongolia was limited until the mid-1990s, when the country opened its doors to
foreign exploration . Exploration since that time in southeast Mongolia led to t he discovery of the
world-class Oyu Tolgoi gold -copper deposit. Erdene has been the leader in e xploration in southwest
Mongolia over the past decade and is responsible for the discovery of the Khundii Gold District. The
Khundii Gold District is comprised of multiple , high-grade gold and base metal prospects, two of
which are being considered for development: Bayan Khundii and Altan Nar . The Company has to
date invested US$1 7 million in exploration and resource development on the Bayan Khundii and
Altan Nar projects.
Qualified Person and Sample Protocol
The information in th is press release that relates to the Preliminary Economic Assessment of the
Khundii Gold Project, is based on information compiled and reviewed by Mr . Igor Bojanic, who is a
Fellow of the Australasian Institute of Mining and Metallurgy, and is an employee of RPM Advisory
Services Pty Limited . Mr . Igor Bojanic has sufficient experience, which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which, he has undertaken to
qualify as a Qualified Person, as that term is defined by National Instrument 43-101.
Mr. Igor Bojanic is not aware of any potential for a conflict of interest in relation to this work for the
Client.
Michael MacDonald, P.Geo. (Nova Scotia), Vice President Exploration for Erdene, is the Qualified
Person as that term is defined in National Instrument 43 -101 and has reviewed and approved the
approved the non -PEA and Mineral Resource estim ate technical information contained in this news
release on behalf of Erdene. 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, field and laboratory duplicates, and blanks.
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 four exploration licenses and a mining license
in southwest Mongolia, where exploration success has led to the discovery and definition of the
Khundii Gold District. Erdene 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.
Cautionary Notes
The 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
prefeasibility 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.
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, guida nce 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 cau tions 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 actual results to differ ma terially from those in
forward-looking statements include 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
Ken W. MacDonald, Vice President and CFO
Phone: (902) 423-6419
E-mail: [email protected]
Website: www.erdene.com
Twitter: https://twitter.com/ErdeneRes
Facebook: https://www.facebook.com/ErdeneResource
LinkedIn: https://www.linkedin.com/company/erdene-resource-development-corp-/
YouTube: https://www.youtube.com/channel/UCILs5s9j3SLmya9vo2-KXoA