Steppe Gold Signs Binding Term Sheet for US$150 Million to Fully Fund the Phase 2 Expansion at the ATO Gold Mine
Steppe Gold Signs Binding Term Sheet for
US$150 Million to Fully Fund the Phase 2
Expansion at the ATO Gold Mine
Ulaanbaatar, Mongolia--(Newsfile Corp. - July 11, 2023) -
Steppe Gold Ltd. (TSX: STGO)
(OTCQX:
STPGF) (FSE: 2J9)
("
Steppe Gold
" or the "
Company
")
is very pleased to announce it has signed a
binding term sheet (the "
Term
Sheet
") to provide up to US$150 million in financing to fully fund the
construction and completion of the Phase 2 Expansion at the ATO Gold Mine (the "
Phase 2
Expansion
").
ATO Phase 2 Expansion Highlights:
US$150 million fully funded to finance the Phase 2 Expansion of the ATO Gold Mine.
Initial funding of US$50 million loan approved to order equipment and long lead items.
The financing payback period starts upon completion of Phase 2 Expansion.
First concentrate production and sales from Phase 2 is anticipated in 2025.
Construction has commenced with the crushing circuit at 90% completion.
The EPC selection process is well advanced, with final negotiations on timelines.
Fresh rock mine expansion life is 12 years, extending open pit mining and milling operations to
December 2036.
The open pit model demonstrates the fresh rock phase generating 1,237,000oz Au Eq recovered
over 12 years, at an average Au Eq oz of 103,000oz per annum.
Total gross revenue over the next 14 years is anticipated to be US$2.2 billion, including the current
oxide phase.
Approximately 300 new jobs will be created during the construction and operation phases.
Project is fully supported by local communities and all stakeholders.
The Government of Mongolia fully supports mining and industrial export revenues into the country.
This significant milestone is the culmination of two years of collaborative efforts with our key
stakeholders in Mongolia as we successfully move forward with the Phase 2 expansion. Since our listing
in 2018, the Company has been dedicated to establishing a strong social license for our sustainable
mining project, aiming to create lasting value for the people of Dornod and Mongolia. The secured
financing will spur employment and investment during the upcoming construction phase and sustain
these benefits until at least 2036.
Recognizing the untapped economic potential within the expansive +5,500-hectare license area, the
Company remains committed to an active exploration program to fully leverage its value.
The terms of the financing comprise three tranches of US$50 million each for a total of US$150 million,
to be funded in line with the planned construction phase of the Phase 2 Expansion.
Financing Details
1
.
US$50 million term loan from the Trade and Development Bank of Mongolia ("
TDB
"). The Bank
Loan will have a term of four years at an interest rate of 13.4% with flexible prepayment conditions.
2
.
Senior Secured Credit Facility for US$50 million comprised of a senior secured non-revolving
amortizing loan (the "
EPC Loan Facility
").
Term of 60 months
Repayments commencing 35 months from the Closing Date
Funded in tranches commencing in January 2024
Interest rate of 12% per annum
3
.
Senior Secured Gold Linked loan for US$50 million (the "
Gold Linked Loan
")
Subject to market conditions and equity markets, the Company has negotiated a Gold Linked
Loan with fixed repayment terms.
Repayments commencing from approximately January 1, 2026, which assumes first
concentrate production in mid-2025.
Gold-linked loan repayment over five years based on concentrate production with a final
payment of US$40 million.
Warrants with a $1.50 strike price to be issued on drawdown under the Gold Linked Credit
Agreement, subject to approval of the Toronto Stock Exchange (the "
TSX
").
Conditions and Next Steps
The parties will move to definitive loan documentation, with funding in tranches over the next 9 - 12
months.
The TDB Bank Loan will likely be funded starting in July.
The lenders' obligations to advance any loan proceeds shall be subject to the satisfaction of
customary advance and release conditions for a project financing of this nature.
Financial covenants will be customary for a financing of this nature.
Steppe Gold is in discussions with Triple Flag Mine Finance, and Triple Flag has expressed their
support in principle for the Phase 2 financing, and welcomes partnering with TDB on the Phase 2
Expansion.
Steppe Gold Chairman and CEO, Mr. Bataa Tumur-Ochir commented, "
This is a significant milestone
for Steppe Gold and secures the future of the ATO Gold mine for the next 14 years. It has been a
challenging yet rewarding 5 years since we listed on the TSX, and the Company has been working
towards unlocking the full potential of the ATO Gold Mine through the Phase 2 expansion. Most
importantly, it allows the Company to move forward with all our stakeholders in Mongolia with a long-
term and sustainable project in the region, with secure employment opportunities and positive
economic outcomes."
Steppe Gold Chairman and CEO, Mr. Bataa Tumur-Ochir expressed immense pride in this collaboration
with TDB, its long-time banking partner and extended his gratitude to the entire TDB Group for their
partnership and unwavering support in realizing their vision of developing Mongolia's mining industry and
boosting export revenues for the country.
The secured funding package will enable Steppe Gold to expedite the Phase 2 Expansion with
confidence, ensuring that their objective of initiating concentrate sales in 2025 is met. During the
construction phase of the expansion, the Company will maintain its production of gold and silver from the
current oxide phase for a period of three years.
Jeremy South, Steppe Gold Senior Vice President and Chief Financial Officer noted,
"We are very
pleased to have reached agreement on a competitive lending package in a very difficult market for
mine development financing.
It underscores the strong fundamentals of the ATO Gold Mine and it
represents a strong vote of confidence in Mongolia and in the Steppe Gold team.
Importantly, it builds
in flexibility in debt service and aligns the repayment schedule with the project cash flows, as well as
limiting dilution in tough equity markets."
Goh Way Chuan, Director of TDB Capital commented, "
We are delighted to announce the extension of
our long-standing partnership with Steppe Gold. The team at Steppe Gold has delivered on its
promises and we are excited to partner with them on the Phase 2 Expansion with a flexible capital
solution that matches risk and reward
."
Shaun Usmar, CEO of Triple Flag Mine Finance also commented, "
As a founder investor in Steppe
Gold and one of our initial stream partners, we congratulate Steppe Gold on this landmark financing
for the Phase 2 Expansion at the ATO Gold Mine. We are excited to partner with TDB and Steppe
Gold as they embark on this significant project."
About Trade and Development Bank of Mongolia:
Trade and Development Bank of Mongolia is Mongolia's oldest and leading corporate bank. The Bank
acts as a primary lender to most of the Mongolian leading corporations, foreign corporations, and
foreign representative offices across all major industrial and commercial sectors.
About TDB Capital
TDB Capital is an investment management company with well-diversified assets in various sectors and
roots in the financial industry.
Steppe Gold Ltd.
Steppe Gold is Mongolia's premier precious metals company.
For further information, please contact:
Bataa Tumur-Ochir, Chairman and CEO
Shangri-La office, Suite 1201, Olympic Street19A, Sukhbaatar District 1,Ulaanbaatar 14241,
Mongolia Tel: +976 7732 1914
Cautionary Note Regarding Forward-Looking Statements
This news release contains certain statements or disclosures relating to the Company that are based on
the expectations of its management as well as assumptions made by and information currently available
to the Company which may constitute forward-looking statements or information ("
forward-looking
statements")
under applicable securities laws. All such statements and disclosures, other than those of
historical fact, which address activities, events, outcomes, results or developments that the Company
anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-
looking statements. In some cases, forward-looking statements can be identified by the use of the words
"allow", "anticipated", "assumed", "believe", "continue", "estimates", "expected", "planned", "potential",
"target", "will" and similar expressions. In particular, but without limiting the foregoing, this news release
contains forward-looking statements pertaining to the following: terms of the debt financing, use of
proceeds of the debt financing, capital expenditures of the Company, the impact of production on
investment, job creation and value creation, the timing, goals, targets and revenue related to the Phase 2
Expansion and terms of the EPC Contract and future plans of the Company.
The forward-looking statements contained in this news release reflect several material factors and
expectations and assumptions of the Company including, without limitation: that the Company will
continue to conduct its operations in a manner consistent with past operations; the general continuance
of current or, where applicable, assumed industry conditions; obtaining applicable TSX approval; and
estimates related to the commencement and production of gold.
The Company believes the material factors, expectations and assumptions reflected in the forward-
looking statements are reasonable at this time but no assurance can be given that these factors,
expectations and assumptions will prove to be correct. The forward-looking statements included in this
news release are not guarantees of future performance and should not be unduly relied upon. Such
forward-looking statements involve known and unknown risks, uncertainties and other factors that may
cause actual results or events to differ materially from those anticipated in such forward-looking
statements including, without limitation: changes in business plans and strategies, market and capital
finance conditions, general economic, market and business conditions; reliance on industry partners;
and certain other risks detailed from time to time in the Company's public disclosure documents
including, without limitation, those risks identified in this news release, and in the Company's annual
information form for the year ended December 31, 2022, copies of which are available on the
Company's SEDAR profile at
www.sedar.com
. Readers are cautioned that the foregoing list of factors is
not exhaustive and are cautioned not to place undue reliance on these forward-looking statements.
The forward-looking statements contained in this news release are made as of the date hereof and the
Company undertakes no obligations to update publicly or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, unless so required by applicable
securities laws.
The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or
accuracy of the content of this news release.
To view the source version of this press release, please visit
https://www.newsfilecorp.com/release/173065