- Working in rapidly growing Mongolia
- On track to generate 60,000 ounces of gold this year
- Eyeing expansion
What Steppe Gold does:
Mining is nothing new in Mongolia but it wasn't until the 1990s, and the transition of the country to a free-market democracy, that the industry was opened up to foreign investment.
The famous Oyu Tolgoi property in the country, operated by London-listed major Rio Tinto (LON:RIO), is one of the largest copper and gold mines in the world, and spans five deposits. The Mongolian government also owns a 34% stake in the property.
The Mongolian economy is growing rapidly and the government knows that mining is a key to sustaining growth. The country's mineral riches are valued at between US$1 trillion and US$3 trillion across coal, copper and gold.
Against this backdrop, one junior firm which is looking towards the country's next major gold project is Steppe Gold (TSE:STGO).
Steppe describes itself as Mongolia’s premier precious metals company and it is on track to produce 60,000 ounces of gold from its Altan Tsaagan Ovoo (ATO) gold mine in the East Asian country this year.
The company is also completing a feasibility study into expanding the mine to generate over double that, at around 150,000 ounces of gold per year.
In Mongolia, Steppe also has the Uudam Khundii (UK) gold project, which is an 80:20 joint venture between Steppe and the Bayankhongor provincial government.
How is it doing:
A few years ago, the Mongolia government launched the Gold-2 programme - which Steppe is part of - which is aimed at doubling the country's annual gold production by 2020, and which sees such perks for mining firms in terms of royalties and taxes and an accelerated mine permitting process.
Steppe's flagship project and the current focus is the ATO mine in Dornod province, which is officially expected to begin leaching in the first quarter of 2020, with production beginning shortly thereafter, a significant milestone for any resource project.
The company has announced that, as at January 29 this year, it had mined, crushed and stacked 400,000 tonnes of ore at a grade of 1.96 grammes per tonne (g/t) of gold on the leach pad.
"By the end of February, we expect to have 500,000 tonnes of stacked ore on the pad and ready to be leached. As the winter turns to warmer weather, again expected towards the end of February, early March, we'll start leaching that material and gold production will come very soon after. It's actually a 21-day leach cycle," the firm said at the end of January.
On January 22, the firm announced a landmark US$3 million debenture financing with the Mongolian National Investment Fund, which subscribed for a 12% two-year secured convertible debenture of the company.
"As we build the premier precious metals company in Mongolia, we are especially pleased to see the continued strong support from local institutions, who share our passion for developing the substantial mineral wealth of the country. In our recent capital raising activity, over 70% has come from Mongolian institutions," said Matthew Wood, Steppe's chairman, at the time.
Last year, the firm was also chosen as “The company of the year” by the Ministry of Mining and Heavy Industries in Mongolia and “The investment of the year” by the Mineral and Petroleum Authority of the country.
Inflection points:
- Start of production
- Gold price moves
What the boss says:
Speaking to Proactive in late January this year after closing a US$3M convertible debenture financing with the Mongolian National Strategic Investment Fund, Steppe Gold's co-founder and executive vice-president Aneel Waraich said the funds would be used as a working capital cushion as the firm goes into production.
"There's always knowns and unknowns in the startup of a mine so it's good to have additional capital," he said, though he made the point that he didn’t see any particular potential 'storms' ahead.
"We are comfortable to start the processing when the weather permits, that will get us into gold production, gold sales, and cash flow so, yes, we are in a very good situation," he said.
Waraich also noted that the firm was happy about the current rising gold price and that it would make US$800 an ounce, based on current pricing.