Erdene Resource Development Corp. intends to move toward a pre-feasibility study at its Khundii gold project in southwestern Mongolia in 2019 after an independent preliminary economic assessment deemed the project economically viable.
The preliminary economic assessment for Khundii estimated a posttax net present value, discounted at 5%, of US$99 million, a 56% internal rate of return and a two-year payback period, according to a Dec. 18 release.
The study assumes a gold price of US$1,200/oz and an open pit mining operation targeting 600,000 tonnes per year of feed material for the process plant.
The project will produce an average of 51,200 ounces of gold per year for a total of 412,000 ounces. Khundii will have an eight-year mine life plus one year of preproduction and two years of mine closure.
Initial capital expenditures are estimated at US$32 million using a contract mining fleet, while life-of-mine sustaining costs are expected to total US$8 million.
All-in sustaining costs are estimated at US$714/oz for a life-of-mine total of US$295 million.
The Khundii project, comprising the Bayan Khundii and Altan Nar deposits, hosts a National Instrument 43-101-compliant measured and indicated mineral resource of 751,000 ounces of gold at 2.3 g/t gold and an inferred resource of 291,000 ounces of gold at 1.8 g/t gold.
At a higher cutoff grade of 1.4 g/t gold, the project contains 642,000 ounces of gold at 3.7 g/t gold in the measured and indicated category and 250,000 ounces at 2.3 g/t gold in the inferred category. These estimates incorporate resources reported in May and September.
Erdene expects the project to advance through the final permitting approvals, feasibility and project finance by early 2020 and start production within a year after that.