Erdene Resource Development Corp. (TSX:ERD; MSE:ERDN) ("Erdene" or
the "Company") announces operating and financial results for the
three months ended March 31, 2020, and provides an update on the
Company’s Bayan Khundii Gold Project, including impacts of the
novel coronavirus (COVID-19). This release should be read in
conjunction with the Company’s Q1-2020 Financial Statements,
MD&A and Annual Information Form, available on the Company’s
website or SEDAR.
Quotes from the Company:
“We continue to make significant progress on our
Bayan Khundii Gold Project Bankable Feasibility Study (“BFS”) and
Environmental and Social Impact Assessment (“ESIA”), with delivery
expected in mid-2020," said Peter Akerley, Erdene’s President and
CEO. “These studies build upon the recent Pre-Feasibility Study,
based on a reserve of over 400,000 ounces at an average head grade
of 3.7 g/t gold, which outlined a high-return, low-capital cost,
open-pit development.”“Our goal is to define a relatively simple,
low-capital cost operation producing on average 60,000 ounces per
year and be shovel ready by the end of 2020,” continued Mr.
Akerley. “Permitting and development readiness activities are
ongoing in advance of financing and construction decisions,
targeting first gold production as early as 2021.”
“The Bayan Khundii development is the platform
for growth from which we will seek to continue our exploration
success and gold resource growth in the very prospective Khundii
Gold district,” concluded Mr. Akerley. ”To that end, we recently
completed modelling and interpretation work for our newly
discovered Dark Horse gold prospect and our Altan Nar project,
identifying multiple high priority drill targets that have the
potential to add significant resources.”
Q1-2020 Highlights and Subsequent
Events:
Khundii Gold Project – 100% Erdene
- Progressed Bayan Khundii BFS and
Front-End Engineering and Design (“FEED”) studies towards
completion in mid-2020:• A 3D fly-through video of the site design
is available at the following link.• Geotechnical & Pit
Hydrology: Roma Group completed pit geotechnical and hydrology
modelling that has been incorporated into the mine
design.• Mineral Reserves, Mine Planning and Production
Schedule: O2 Mining and Auralia Mining Consultants determined
minable reserves and optimized the mine plan. The mine plan has
been incorporated into the request for proposal packages sent to
potential contract miners for BFS costing.• Hydrogeology: Roma
Group completed a review of the hydrogeological data for the
permitted bore-field proposed for the process plant water supply
and confirmed its suitability at the BFS stage.• Metallurgy
& Process Design: Blue Coast Research performed further test
work to optimize cyanidation parameters and comminution circuit
inputs, and carried out carbon adsorption, detoxification and
dewatering tests to provide data to optimize the processing plant
design.• Process Design: 360 Global is advancing the Process
Plant design to maximize gold recovery, enhance operability, and
increase water re-use.• Non-process infrastructure: O2 Mining
and Mongolian consultants have substantially completed design of
mine support buildings including mine-dry, office, maintenance
facilities and worker accommodations to a level suitable for the
BFS and Mongolian permitting.• Waste Management: ATC Williams
completed the BFS-level design of the mineral waste facility, using
an industry-leading approach to the co-disposal of waste rock and
filtered tailings that seeks to minimize any potential impacts of
mine waste and tailings on the environment and
society.• Procurement: Mongolian and international suppliers
and service providers have received requests for proposals and the
process of evaluating their submissions has been initiated for
detailed costing and economic modeling.
- Received the Altan Nar Mining
License on March 5, 2020:• Mining licenses are valid for an
initial term of 30 years and can be extended to 70 years, providing
long-term tenure over the land package underpinning the Khundii
Gold District.
- Substantially completed the ESIA
led by Sustainability East Asia, and the Mongolian statutory
Detailed Environmental Impact Assessment (“DEIA”), built upon the
ESIA, is largely complete in advance of public
consultation:• The studies assessed potential impacts on the
local eco-system, air quality, water resources, traffic, and the
economy in the context of nearby communities and on-site
personnel.• English and Mongolian language ESIA reports will
be disclosed in the first half of 2020, following Board and lender
reviews.
- Obtained several key permits and
regulatory approvals required for construction:• Mineral
Resource and Petroleum Authority approved the BK Statutory
Technical and Economic Assessment (“Mongolian Feasibility
Study”).• Land Arrangement Plan approved by the local
government granting access to the 100-hectare area required to
construct the BK open-pit and associated surface infrastructure.
The Company received land use certificates for all surface
infrastructure.
Exploration
- Announced results of the Q4 2019
Altan Nar exploration campaign in January 2020, which returned some
of the strongest results to date:• Altan Nar – Discovery Zone:
Expanded the high-grade portion of the Central Gap Zone with 45.7
g/t gold, 93.4 g/t silver, 1.54% lead and 3.40% zinc over 7 metres1
beginning at approximately 70 metres vertical depth, within 23
metres1 grading 17 g/t gold at TND-135.• Altan Nar – Discovery
Zone: Confirmed high-grade mineralization north of the Gap Zone
with 12.2 g/t gold over 10 metres1, including 2 metres1 of 52.9 g/t
gold at TND-134 and 10 metres1 of 4.68 g/t gold at
TND-138.• Incorporated results from Q4 2019 surface
exploration work and drilling, and independent geophysical analysis
into 3D modelling.
- Formulated exploration plans for
the newly discovered Khar Mori (“Dark Horse”) prospect in advance
of the 2020 field season.
_____________________________
1 Result intervals (metres) represent measured widths – please
refer to individual news releases for projected true widths.
Corporate
- Recorded a net loss of $1,041,990
for the three months ended March 31, 2020, compared to a net loss
of $516,687 for the three months ended March 31,
2019:• Exploration and Evaluation expenditures, including
capitalized costs, of $1,511,929 in Q1 2020 exceeded costs of
$941,083 for Q1 2019 as increased technical consultant costs
associated with the Bayan Khundii Feasibility Study more than
offset lower exploration activity.• Corporate and
administrative expenses, excluding non-cash, share-based
compensation and depreciation were $304,746 for the three months
ended March 31, 2020 versus $296,330 in the prior year quarter as
higher marketing expenditures and additional director expenses
associated with the Bankable Feasibility Study offset savings in
regulatory and administrative expenditures.
Potential Impacts of COVID-19 on the Khundii
Gold Project
In late January 2020, Erdene initiated measures,
including travel restrictions, remote work and supplemental health
care for its Ulaanbaatar based and international staff in response
to the spread of the COVID-19 virus. Since mid-January, the
Mongolian government has restricted the movement of people and
goods within the country, as well as internationally to protect its
residents from the virus.
Although the full impact of the COVID-19 virus
will not be known for some time, the Company remains largely on
track for the delivery of the Bayan Khundii BFS by mid-2020.
Permitting and exploration also continues, though travel and public
gathering restrictions have led to modest delays. Further details
on potential impacts the Company is monitoring are as follows:
- Bankable Feasibility Study: The BFS
is well progressed with the remaining work-streams largely desktop
focused, following the completion of field based and laboratory
studies in late 2019 and early 2020. Costing work is being carried
out remotely, and procurement is focused on Chinese and Mongolian
vendors, where restrictions related to COVID-19 have been recently
relaxed. Although minor delays are anticipated in finalizing the
BFS, Erdene is on track to announce results of the BFS in mid-2020,
and delivery of the full report within 45 days of the
announcement.
- Permitting: The Ulaanbaatar based
team continues to make significant progress on permitting, as
evidenced by the recent receipt of the Altan Nar mining license.
Restrictions around public gatherings are delaying a public
consultation required for the approval of the DEIA. Other
permitting activities are not materially impacted by the
restrictions associated with the prevention of the spread of
COVID-19.
- Exploration and Field Activities:
Following the successful exploration results announced in January
2020, Q1-2020 exploration activities has been
desktop-focused. Mapping, geochemical and geophysical work
has been completed at the recently discovered Khar Mori (Dark
Horse) prospect in advance of the 2020 exploration season.
- Liquidity and Financing: With the
receipt of the US$5 million EBRD convertible loan financing in
November 2019, Erdene is fully funded through the delivery of the
BFS. The Company intends to secure project finance in 2020 but
recognizes the implications of the current volatile market
condition. Erdene is implementing costs saving measures and
building contingencies to maintain momentum and protect its key
assets.
Background on the Khundii Gold Project Development
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. The Company has
been the leader in exploration in southwest Mongolia over the past
decade and is responsible for the discovery of the Khundii Gold
District comprised of multiple high-grade gold and gold/base metal
prospects, two of which are being considered for development: the
100%-owned Bayan Khundii and Altan Nar projects. Together, these
deposits comprise the Khundii Gold Project.
In October of 2019, Erdene announced the results
of an independent Technical Report for the Khundii Gold Project
(press release here), which included a Pre-feasibility Study
(“PFS”) for the Bayan Khundii deposit and an updated Preliminary
Economic Assessment (“PEA”) for the Altan Nar deposit. The PFS and
the updated PEA results include an after-tax Net Present Value at a
5% discount rate and a US$1,300/oz gold price of US$97 million and
US$24 million, Internal Rate of Return (“IRR”) of 42% and 90% for
Bayan Khundii and Altan Nar deposits, respectively. The PFS
envisions an open-pit mine at Bayan Khundii from Years 0-7,
producing an average of 61,000 oz gold per year at a head grade of
3.73 g/t gold, and an open-pit operation at Altan Nar during Years
7-10, for an average annual production of 48,000 oz gold at an
average head grade of 3.46 g/t gold, utilizing a conventional
Carbon In Pulp processing plant at the Bayan Khundii mine. Erdene
has secured a mining license for the Bayan Khundii deposit in
August of 2019 and is rapidly advancing to production.
The Altan Nar 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
pre-feasibility 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.
Qualified Person and Sample Protocol
Peter Dalton, P.Geo. (Nova Scotia), Senior
Geologist for Erdene, is the Qualified Person as that term is
defined in National Instrument 43-101 and has reviewed and approved
the technical information contained in this news release. 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 m intervals (depending on the
lithology and style of mineralization) over the entire length of
the drill hole, excluding minor post-mineral lithologies and
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 core 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 batches 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 of precious and base metals in
underexplored and highly prospective Mongolia. The Company has
interests in three mining licenses and three exploration licenses
in Southwest Mongolia, where exploration success has led to the
discovery and definition of the Khundii Gold District. Erdene
Resource Development Corp. 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.
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 several
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
potential impacts of COVID-19 on the Company’s operations, 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 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 Robert Jenkins, CFO
Phone: (902)
423-6419Twitter: https://twitter.com/ErdeneResFacebook:
https://www.facebook.com/ErdeneResourceLinkedIn: https://www.linkedin.com/company/erdene-resource-development-corp-/YouTube:
https://www.youtube.com/channel/UCILs5s9j3SLmya9vo2-KXoA
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