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Pre-feasibility study values Erdene's Bayan Khundii gold deposit at US$97M

Erdene Resource Development Corp. said Oct. 21 that it expects its Khundii gold project in Mongolia to generate strong returns following the results of two studies for the property's Bayan Khundii and Altan Nar deposits.

The company is targeting a development decision in 2020, with initial gold production anticipated in 2021.

A pre-feasibility study on the Bayan Khundii deposit outlined a net present value of US$97 million, after tax and discounted at 5%, with a 42% internal rate of return and a 1.8-year payback period.

An updated preliminary economic assessment on the Altan Nar deposit at Khundii defined a net present value of US$24 million, with a 92% IRR and a 1.1-year payback period.

Initial capital costs for the construction of a mine and processing plant at Bayan Khundii were estimated at US$39.9 million. In the sixth year of operations, construction of supporting infrastructure to incorporate the Altan Nar site is planned, with costs estimated at US$2.2 million.

The studies assumed gold and silver prices of US$1,300 per ounce and US$17.50/oz, respectively.

The operation is expected to have a mine life of 11 years, comprising a one-year preproduction period, six years of Bayan Khundii operations, three years of Altan Nar operations and a one-year closure period.

Bayan Khundii is expected to produce 61,000 ounces of gold per year, with Altan Nar expected to produce 45,300 ounces of gold and 205,000 ounces of silver annually.

The Bayan Khundii pre-feasibility study was based on an open pit mining operation targeting 600,000 tonnes per year of feed material for the processing plant, while the updated Altan Nar preliminary economic assessment was based on selective open pit mining, also targeting 600,000 t/y of mill feed.

The report included updated resources and a reserves estimate for Bayan Khundii, which hosts proven and probable reserves containing 422,000 ounces of gold. Measured and indicated resources increased 20% to 520,700 ounces of gold contained within 5.1 million tonnes grading 3.16 g/t of gold.

Earlier in October, Erdene Resource secured an C$8 million financing package led by the European Bank for Reconstruction and Development to fund a feasibility study for the Khundii project.