JV Article: Steppe Gold passes 100,000 oz mark, fully funded for Phase II

“From the start of production in April 2020, the oxide zone of the heap-leach mine has seen uninterrupted production, despite major disruptions to the supply of reagents coming from China during the Covid pandemic,” says Bataa Tumur-Ochir, Steppe Gold’s Chairman and CEO. “We’re pretty proud of that.” 

Built-in only two years, the ATO mine in Dornod, northeastern Mongolia, is now closing in on its goal of nearly tripling annual production from 30,000 gold-equivalent oz. per year in 2023 and 2024 to 100,000 oz. a year by the end of 2025.

The company de-risked the US$129 million Phase II expansion project in July when the country’s oldest and leading corporate bank, the Trade and Development Bank of Mongolia, and other financial institutions, agreed to provide US$150 million in finance. “It’s incredibly gratifying to get the support of Mongolia’s most important players in the financial industry,” Bataa says.

An initial drawdown of US$10 million in mid-October will be used to start sourcing long-lead items, Bataa says, all of which should be ordered by the end of November.

“That will take six to eight months,” he estimates, “and we are preparing to start construction next year in May.”

ATO’s Phase II expansion is “completely de-risked and the government is very supportive,” Bataa says, noting the company has generated a total of US$188 million in revenues, and 99% of its employees are Mongolian nationals, making it one of the largest employers in the region. The company has also provided financial scholarships to more than 1,600 local students over the last five years.

Bataa, a Mongolian entrepreneur, teamed up with director Matthew Wood, an Australian mineral exploration geologist with a specialization in mineral economics, more than 10 years ago to develop the country’s prospective mining sector. 

Wood has a 30-year track record in resource development, and Bataa, now 38, was at the age of 26 among the youngest CEOs of an ASX-listed company. 

Because Steppe Gold has been selling its gold and silver bars to the country’s central bank, the mine is an incredibly important asset for Mongolia. “The government is very supportive of gold companies—it’s one of the ways for them to bring in foreign currency. Gold plays a very big role in our economy.”

Bataa notes that during the height of the COVID-19 pandemic, the government waived its 5% royalty on gold miners to alleviate their burden.

The Phase II expansion is a turnkey EPC contract with local and international companies. The company will start exporting zinc and lead concentrate directly to China. Construction started earlier this year with the crushing circuit, and the company anticipates the fresh rock mine expansion life is 12 years, which will extend open pit mining and milling operations to December 2038 and generate life-of-mine revenues of US$2.2 billion. 

The open pit’s fresh rock phase will recover 1.24 million gold-equivalent oz. over the 12-year period at an average of 103,000 oz. gold-equivalent annually at estimated all-in sustaining costs of US$850 per gold-equivalent ounce. A tailings storage facility will be located within 2 km southeast of the plant. 

Steppe Gold doubled the resource estimate in February 2021 to 2.24 million gold-equivalent ounces. ATO has measured and indicated resources of 41.6 million tonnes grading 1.04 grams gold per tonne, 15.31 grams silver per tonne, 0.38% lead and 0.63% zinc (1.67 grams gold-equivalent). 

In addition, recent drilling at ATO has found multiple high-grade zinc sulphide intercepts beneath the existing ATO gold deposits, with highlights of 20.9 metres grading 10.56% zinc and 3.13% starting from 348 metres downhole in drill hole ATO-364; 15 metres of 8% zinc and 5.9% lead from 371 metres in hole ATO-379; and 55.4 metres of 4.23% zinc and 1.83% lead from 99 metres in hole ATO-391.

Apart from the ATO mine, Steppe owns the Mungu gold and silver discovery immediately to the northeast of the current resource at ATO, and 80% of the Uudam Khundii property, 800 km southwest of the capital, Ulaanbaatar. 

The Uudam Khundii project, which is 20% owned by the local government, is located between and adjoining the Bayan Khundii gold discovery and the Altan Nar epithermal gold deposits being explored by Erdene Resource Development (TSX: ERD; US-OTC: ERDCF).

Initial results from 18 trenches for 933 metres at the Milky Way prospect and the Altan Soum prospect outlined a mineralized system of at least 700 metres in length and up to 12 metres wide, with individual sample results of up to 1.49 grams gold, 450 grams silver, 2.98% copper, 3.98% lead and 0.31% zinc.

At Mungu, the company believes that the epithermal gold-silver system could be similar to the ATO Pipe #4 at the ATO gold mine and requires further exploration.

Although focused on Mongolia, the company has also ventured overseas with the acquisition in March of Anacortes Mining and its Tres Cruces oxide gold project in Peru. Tres Cruces is situated about 10 km from Boroo Ptd. Ltd.’s Lagunas Norte mine. The move turned Steppe Gold into a multi-jurisdiction gold company with production and development projects in two of the most untapped gold provinces in the world.

“Tres Cruces has many similarities to our ATO mine, with an oxide deposit at surface that can be quickly brought into production with significant upside in the underlying fresh rock,” Bataa says.

In August Steppe Gold updated a preliminary economic assessment for Tres Cruces outlining a seven-year mine life producing about 68,000 oz. gold a year at an all-in-sustaining cost of US$734 per ounce. 

Steppe Gold listed on the TSX in 2018 and its key shareholders include insiders and management (22%); Eric Sprott (10%); LIM Asia (6%) Fidelity (6%); and Triple Flag / Elliot Management (4%).

At press time in Toronto Steppe Gold’s shares were trading at 72¢ apiece, giving it a market capitalization of roughly $75 million. 

“Our market cap is not at the stage where we want it to be, but it’s a great opportunity for new investors to come in as our Phase 2 expansion is being completed,” Bataa says. “As a Mongolian company we have access to information and data and lots of local companies are coming to us with their projects. Just 1.2% of the land in our country is covered by mining licences, and just 10% of that is under operation. We have a great head-start as a major investment vehicle into precious metals in Mongolia.”