Published: July 23, 2020 |

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Erdene Resource Development Corp. has released the results of an independent bankable feasibility study (BFS) for the 100 percent owned, high-grade, open-pit Bayan Khundii Gold Project (BK Project) in southwest Mongolia. The independent BFS incorporated detailed mine design and scheduling, front-end engineering design for the processing plant and site infrastructure, a hydrogeological assessment, mineral waste facility design, comprehensive capital and operating cost estimation, and an updated economic model. These studies have been completed by a consortium of International and Mongolian firms with significant experience operating in Mongolia and internationally.

“The Bayan Khundii BFS results confirm the high-return nature of this project in its base case, with significant potential upside due to ongoing district-wide exploration and exposure to rising gold prices. The shallow, high grade, open-pit Bayan Khundii deposit lends itself to conventional mining and processing techniques, reducing the execution risk in bringing the project into production in an accelerated timeframe,” said Peter Akerley, president and CEO.

“As a low-capex, low-opex project with a less than two-year payback and significant growth potential, Bayan Khundii offers investors and stakeholders exposure and leverage to gold as we move towards first production in early 2022,” added Akerley.

“Recent exploration results, including intersections of high-grade gold in the Midfield SE and Striker SW zones of the Bayan Khundii deposit, currently classified as sub-grade material, are expected to add to the project’s robust economics. The Bayan Khundii development is the foundation for growth in our underexplored Khundii Gold District and we see significant potential to expand resources, extending the mine life and creating value for all stakeholders.  We will follow up on recent exploration success with additional drilling in Q3 2020,” said Akerley.

“We have recently engaged HCF International Advisers Limited (HCF) to secure debt financing for the project. Their expertise, combined with the support of the European Bank for Reconstruction and Development (EBRD) position us well to secure the funding to commence construction later this year,” concluded Akerley.

MINING

The BK BFS is based on an open-pit mining operation targeting 600,000 tonnes per year of feed material for the processing plant. The total mineable mineralized plant feed is 3.4 million tonnes at an average diluted head grade of 3.7 g/t gold and average strip ratio of 9.1:1 (waste tonne: plant feed tonne). Mineralization starts at surface, with the majority of the deposit contained within the top 100 metres. The deposit structure, grades and depth suggest selective open cut mining will be utilized. Mining will use hydraulic excavators in backhoe configuration. Drilled and blasted material will be loaded into haul trucks, with waste rock deposited in an engineered Integrated Waste Facility (IWF) adjacent to the pit, and ore hauled to a crusher or run-of-mine (ROM) pad adjacent to the processing plant.

The BK BFS has assumed contract mining based on methodology and costing contained in proposals received from contractors with suitable experience in Mongolia in similar open-pit mining environments. In this scenario the contractor provides the full fleet and personnel to operate the project on a schedule of rates (US$/tonne material moved) basis. The contractor is proposing a total of 4 x excavators (2 x ore, 2 x waste), 10 x 55t payload trucks, 3 x blasthole drills and a fleet of ancillary and support equipment to deliver the required material movement. The contractor’s workforce peaks at approximately 190 personnel to deliver the required schedule of production.

PROCESSING

The BFS assumes processing of ROM material via a conventional crush and grind circuit and a carbon in pulp plant. Plant design by 360-Global has been based on testing at Blue Coast Research which has established optimal processing parameters, including; grind size of 80 percent passing 60 microns; design inputs for comminution circuit, low cyanide concentration in leach circuit (0.5 g/litre sodium cyanide); 36 hour retention time; carbon adsorption parameters and detoxification reagent dosages. The process circuit has been designed to maximize water recovery with the most efficient dewatering process (ceramic disc filters) to achieve targeted 15 percent moisture in tailings, minimize chemical and reagent usage and minimize environmental impact.

The ore-processing plant will be located adjacent to the Bayan Khundii open pit and throughput will target 600,000 ore-tonnes per year, nominally 1,800 tonnes per day. Total mineralized material from BK, processed in the plant over the course of the mine life, is 3.4 million tonnes at an average diluted head grade of 3.7 g/t gold. Using an estimated mill recovery of 93.1 percent, total recovered gold over the life of the Bayan Khundii deposit is 381,700 ounces.

ENVIRONMENTAL AND PERMITTING

In June 2020, Erdene completed an independent environmental and social impact assessment in accordance with the performance requirements of the European Bank for Reconstruction and Development (EBRD). The study was led by Sustainability East Asia in consortium with Eco Trade and Ramboll Australia. Concurrently, the Mongolian statutory detailed environmental impact assessment (DEIA) for the project has been prepared by Eco Trade in accordance with the applicable national standards. Local stakeholder consultations on the DEIA are planned for Q3 2020. Following the consultations, the company will submit its statutory DEIA to the Ministry of Environment and Tourism of Mongolia for approval.

Erdene has obtained many of the key permits required to construct the Bayan Khundii Gold Project over the past year. In August 2019, the company received the Bayan Khundii Mining License, securing the site for 30 years, with the option to extend for 70 years. Additionally, the company’s statutory technical and economic assessment (Mongolian Feasibility Study) was approved by the Mineral Resource and Petroleum Authority in early 2020. The Mongolian Ministry of Environment and Tourism approved a water reserve and flow rate to be utilized for the planned processing plant and infrastructure of the Khundii Gold Project. Additionally, the project’s land arrangement plan has been approved by the local community, granting access to the 100-hectare area required to construct the BK open-pit and associated surface infrastructure. permission to construct is expected to be received following approval of the Mongolian DEIA.

PROJECT FINANCE AND NEXT STEPS

The company has engaged HCF to act as project finance advisor, with primary responsibility for securing debt. HCF is a leading independent corporate finance advisory boutique based in London, focused on the global natural resources and infrastructure sectors. HCF provides strategic and financial advice to companies and financial institutions across the complete life cycle of a project, including structuring of debt finance. HCF possess significant Mongolian experience, having acted as an advisor on the financing of Oyu Tolgoi, Mongolia’s largest mining project, and has strong relationships with the EBRD, a strategic investor in Erdene and one of Mongolia’s largest foreign investors. HCF is working with Erdene to secure the full financing package by the end of 2020. It is anticipated that senior debt financing could comprise as much as 70 percent of the total financing package given the project’s strong cashflows.

In addition to project financing, over the coming months, project development work will be focused on:

• Securing approval of Erdene’s Board of Directors to begin construction
• Completing the DEIA and obtaining necessary permits to commence construction
• Drilling at Bayan Khundii to incorporate recent discoveries into an updated resource
• Optimization of the project execution schedule, including procurement and permitting
• Ongoing documentation to support the update and filing of existing permits and filing for additional permits that
  may be required
• Completion of detailed engineering and design
• Initiation of early works in support of full construction

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 the Mongolian stock exchanges.

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