Erdene’s Bayan Khundii Gold Project, BFS results03.Aug 2020.
Bayan Khundii Gold Project (BK) in southwest Mongolia is high-grade, opencast project 100% owned by Erdene Resource Development Corp. Erdene announced the results of an independent Bankable Feasibility Study (BFS).
The independent Bankable Feasibility Study was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) and has 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 technical report, prepared by the Roma Group Ltd, pursuant to NI 43-101 guidelines, will be filed on SEDAR within 45 days.
“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, opencast 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 2-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.”
“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,” continued Akerley. “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 3Q20.”
“We have recently engaged HCF International Advisers Ltd (HCF) to secure debt financing for the project,” concluded Akerley. “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.”
The BK BFS is based on an opencast mining operation targeting 600 000 tpy of feed material for the processing plant. The total mineable mineralised plant feed is 3.4 million t 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). Mineralisation starts at surface, with the majority of the deposit contained within the top 100 m. The deposit structure, grades and depth suggest selective open cut mining will be utilised. 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 mine, 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$/t material moved) basis. The contractor is proposing a total of 4 x excavators (2 x ore, 2 x waste), 10 x 55 t 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.
The ore-processing plant will be located adjacent to the Bayan Khundii opencast mine and throughput will target 600 000 tpy of ore, nominally 1800 tpd. Total mineralised material from BK, processed in the plant over the course of the mine life, is 3.4 million t at an average diluted head grade of 3.7 g/t gold. Using an estimated mill recovery of 93.1%, total recovered gold over the life of the Bayan Khundii deposit is 381 700 oz.
Operating costs are based on the mining and processing scenarios outlined above and assumes contract mining. Power for operations will be generated through a hybrid diesel and solar generation solution, provided under a power purchase agreement for the duration of the Project. All other activities are assumed to be owner-operated. The AISC for Bayan Khundii is estimated at US$733/oz.
Opportunities to enhance project value
The company sees the following opportunities to enhance value at the Khundii Gold Project:
-Additional resources at Bayan Khundii
-The Bayan Khundii Resource includes measured and indicated resources of 521 000 oz at an average grade of 3.16 g/t gold,and Inferred Resources of 103 000 oz of gold at a grade of 3.68 g/t gold which could potentially be added to opencast reserves through both additional drilling and rising gold prices
-Recent drilling at the Midfield SE and Striker SW zones of the project area intersected exceptionally high-grade gold, including 1 m of 582 g/t gold within an intersection of 5.5 m grading 126 g/t at Midfield SE, in areas of the resource currently classified as waste or sub-grade material. The areas are expected to provide additional high-grade feed in the early phases of development
-Additionally, very high gold grades observed in drilling in the Striker West portion of the deposit have the potential to provide additional high-grade resources should closer spaced drilling improve continuity
-The reported resource is pit constrained based on multiple parameters including a US$1350 gold price. Multiple high-grade intersections outside the mine provide expansion targets requiring additional drilling in a rising gold price environment
-Further drilling is planned for 3Q20 to confirm the existence of high-grade material within the Bayan Khundii project area
The Bayan Khundii deposit is situated in a highly prospective region that has received minimal historical exploration. On the Bayan Khundii property, multiple high-grade targets have been established through limited shallow drilling and surface sampling within 4 km of the deposit, including the Khar Mori (Dark Horse) prospect identified in late 2019.
Erdene recently trenched new gold zones at Dark Horse, with assays returning 6 m grading 8.8 g/t gold, including 1 m of 50.8 g/t gold, and 4 m of 14 g/t gold, including 1 m of 45.3 g/t gold. As a large untested prospect, Dark Horse provides significant discovery potential along strike with a well-defined and continuous gold-in-soil anomaly along a NE trending structure for 1.3 km. In addition, there are several isolated but intense gold-in-soil anomalies at or near NE-NW structural intersections. Drilling is planned for 3Q20.
Although a 93% gold recovery has been utilised for the BFS, testing of a recent master composite sample, representative of the BK ore, with a head grade of 3.6 g/t gold, returned recoveries averaging 95% indicating an opportunity for increased recoveries in the plant.
Higher grade upside
The very high-grade nature of the Bayan Khundii deposit provides upside should continuity of the ultra high-grade zones (greater than 20 g/t gold) be established during mining.
Khundii Gold District
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 a 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.
The Bayan Khundii Gold Resource includes 521 000 oz of 3.16 g/t gold Measured and Indicated (M&I) and 103 000 oz of Inferred resources at 3.68 g/t gold. Within the M&I resource, a proven and probable opencast reserve totals 409 000 oz at 3.7 g/t, providing possible significant growth of reserves with the potential development of the remaining M&I and Inferred resources.