Erdene Provides Update ON the Bayan Khundii GOLD Project
TSX: ERD | MSE: ERDN
www.erdene.com [email protected]
ERDENE PROVIDES UPDATE
ON THE BAYAN KHUNDII GOLD PROJECT
Press Release
Halifax, Nova Scotia
2023.09.12
Erdene Resource Development Corp. (TSX:ERD; MSE:ERDN) ("Erdene" or the "Company")
is pleased to provide an update on progress at its high-grade, open-pit Bayan Khundii Gold Project
(“Bayan Khundii”, “BK” or "Project”) in southwestern Mongolia.
Quotes from the Company:
“Development activities at the Bayan Khundii Gold Project are underway with the early works
phase of the Project nearing completion,” 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 price.”
“With the finalization of the updated Bayan Khundii Project Feasibility Study, we are working to
lock in the project financing in advance of a formal construction decision”, continued Mr. Akerley.
“Through our Strategic Alliance with M ongolian Mining Corporation (“MMC”), Mongolia’s largest
independent miner, we are targeting first gold and cash flow in 2025, while we continue to explore,
discover and develop the other mineral deposits in our Khundii Minerals District.”
Early Works and Site Establishment
Erdene executed an early works contract with MCS Properties (“MCSP”), an affiliate of MMC near
the end of Q2-2023. MCSP is one of Mongolia’s largest engineering and construction companies,
with a staff of over 1,500, including 225 engineers. Established in 1999, MCSP is a major
contractor to Mongolia’s mining industry, constructing critical infrastructure for the Oyu Tolgoi
copper-gold mine as well as MMC’s Ukhaa Khudag (“UHG”) metallurgical coal operations.
The early works contract scope includes final design and engineering works, establishment of
temporary construction facilities, including camp, fuel station, aggregate crushing and concrete
batch plant, and bulk earthworks. Work is largely complete under this contract, with aggregate
and concrete batch plants established, construction office and accommodations erected, bulk
earthworks, including site levelling and process plant footing excavation well progressed, and off-
site and on-site road improvements largely complete. In aggregate, the early works phase of the
project represents approximately 5% of the total construction effort. Pictures of early works
progress are attached to this release. Approximately 80,000 work hours have been recorded at
the Bayan Khundii Project Site under the early works contract without lost time incidents or
environmental infractions.
Building upon the success of the early works phase, Erdene is in negotiation s with MCSP on an
Engineering, Procurement and Construction contract for the balance of the build , targeting
execution in Q4-2023. Additionally, Erdene is negotiating with a Mongolian power producer to
secure the Project’s energy needs.
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Bayan Khundii NI 43-101 Feasibility Study Update
On August 15, 2023, Erdene announced results of an updated Feasibility Study (“FS”) for Bayan
Khundii. The FS was prepared in accordance with National Instrument 43 -101 Standards of
Disclosure for Mineral P rojects (“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.
Highlights of the FS are included below (US$1,800/oz Gold Price, unless otherwise noted) , and
further details are available in the Company’s August 15, 2023 press release . The Technical
Report will be filed on SEDAR in late September 2023.
• 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 t axes of US$143 million
and approximately 500 new jobs in Bayankhongor Province
Strategic Alliance with MMC and Project Finance
On January 10, 2023, Erdene executed a Strategic Alliance Agreement (“SAA”) with MMC to
develop the Bayan Khundii Gold Project (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$40 million for a 50% equity interest in Erdene’s Mongolian subsidiary,
Erdene Mongol LLC (“EM”), holding the Khundii and Alta n Nar mining licenses and the
Ulaan exploration license through a three -stage transaction , based on achievement of
milestones.
• Erdene retains a 50% equity interest in EM and a 5.0% Net Smelter Return (“NSR”) royalty
on all production from the Khundii, Altan Nar and Ulaan licenses, as well as any properties
acquired wi thin 5 kilometres of these licenses, beyond the first 400,000 ounces gold
recovered.
• The first two stages of the transaction were completed in January 2023 and May 2023, with
MMC investing US$ 10 million to finance technical studies, including th e FS, ear ly
construction works and exploration for the Bayan Khundii Gold Project.
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• The third stage of the transaction, expected to close once EM has reached a construction
decision, will see MMC invest a further US$30 million , providing equity capital for the
Bayan Khundii Gold Project.
• Erdene will appoint EM’s Chief Executive and Chief Development 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.
On August 30, 2023, Erdene and MMC amended the SSA to allow MMC to advance US$15M of
the US$30M third stage to continue early works, while the parties work to secure the balance of
capital prior to reaching a formal construction decision. The remaining US$15M will be advanced
by MMC upon a construction decision, and all other major terms of the SSA remain unchanged.
Two international financial institutions are conducting due diligence on the updated FS and are
expected to provide the Project’s debt financing. 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, with financial close anticipated in
late 2023.
Next Steps
In addition to project financing, over the coming months, development work will be focused on:
• Completing early works construction;
• Executing the Engineering, Procurement and Construction contract for the Project;
• Concluding the Project’s Power Purchase Agreement;
• Optimizing the project execution schedule and completing value engineering;
• Securing approval of Erdene and MMC’s Boards of Directors to begin construction; and
• Exploring in the Khundii Minerals District to expand mineralization and convert resources to
reserves.
Qualified Person and Sample Protocol
The information in this press release that relates to the financial models for the Bayan Khundii
Feasibility Study is based on information compiled and reviewed by Mark Reynolds, engaged
through O2 Mining Limited . The information in this press release that relates to the capital and
operating cost estimation for the Bayan Khundii Feasibility Study is based on information compiled
and reviewed by Julien Lawrence, who is a FAusIMM and the Director of O2 Mining Ltd . The
information in this press release that relates to the process design and recovery methods for the
Bayan Khundii Feasibility Study is based on information compiled and reviewed by Jeffrey Jardine,
who is a FAusIMM and is engaged through O2 Mining Ltd. The information in this press release
that relates to the BK Resource Estimate is based on information compiled and reviewed by Paul
Daigle, who is a P.Geo, and is an employee of AGP Mining Consultants Inc. The information in
this press release that relates to the Dark Horse Resource Estimate is based on information
compiled and reviewed by Oyunbat Bat-Ochir who is a full-time employee of RPM Global and a
Member of the Australian Institute of Geoscientists . The information in this press release that
relates to the Bayan Khundii reserve estimate is based on information compiled and reviewed by
Julien Lawrence. Each of Mr. Reynolds, Mr. Lawrence, Mr. Jardine, Mr. Daigle and Mr. Bat-Ochir
has sufficient experience, which is relevant to the style of mineralization and type of deposit under
consideration and to the activity which they have undertaken to qualify as a Qualified Person, as
that term is defined by National Instrument 43 -101. Each of Mr. Reynolds, Mr. Lawrence, Mr.
Jardine, Mr. Daigle and Mr. Bat-Ochir is not aware of any potential for a conflict of interest in
relation to this work with Erdene.
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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 metre intervals
(depending on the lithology and style of mineralization) over the entire length of the drill hole,
excluding minor post -mineral lithologies an d 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 cor e 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 ba tches 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 o f 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 Khund ii 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.
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 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
materially from those in forward-looking statements include the 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 qua lified 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
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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-/
YouTube: https://www.youtube.com/channel/UCILs5s9j3SLmya9vo2-KXoA
BAYAN KHUNDII GOLD PROJECT – SITE PLAN
650,000 TPA CIP PLANT DESIGNED TO PRODUCE ~85,000oz Au ANNUALLY
93% Recoveries from Conventional Processing Methods and Free-Milling Ore
1,800 tpd CIP
Process Plant
Heavy Vehicle Workshop
Integrated Waste
Facility
Open-Pit
Fuel Station
Renewable &
Conventional Power Plant
Admin Facility
Central
Heating Plant
Concrete Batching Facility
Solar generation to provide ~20% of
project’s power requirements
Integrated waste facility to reduce
environmental footprint and improve
stability/ safety
Plant designed to recycle ~85% of water;
Restoration of remote rural water wells
Process Plant Footings Foundation Rebar Installation
Blinding Concrete Footing Compaction Crushing Plant
BAYAN KHUNDII GOLD PROJECT
Process Plant Early Works Construction
Pouring concrete