Erdene Resources gets US$30M on revised deal for Mongolia gold project

Erdene Resource Development (TSX: ERD) has received a US$30 million ($41.1 million) investment earlier than originally planned after amending its strategic alliance deal with Mongolia’s largest independent miner for the development of the Bayan Khundii gold project.

The Canadian miner said the first two stages of the original agreement with the Mongolian Mining Corporation (MMC), announced in January, have already been executed. 

The third stage, which would have seen MMC investing a further US$30 million once Erdene had reached a construction decision, has been modified in the past three months, the company said.

Erdene and MMC agreed in August that the Mongolian miner would advance US$15 million of the US$30 million to continue project early works in the form of a convertible note.

Then on Oct. 12, the two companies amended the agreement and on Oct. 15, MMC advanced the final US$15 million of the US$30 million third-stage payment to progress Bayan Khundii and secure customary approvals.

The Halifax, N.S.-based company said international financial institutions are concurrently conducting due diligence on the project’s updated feasibility study and are expected to provide debt financing.

Erdene expects that senior debt financing could make up as much as 65% of the total financing package, with closing anticipated in late 2023.

According to Bayan Khundii’s latest feasibility study, production at the open-pit mine located in southwestern Mongolia would start in late 2025.

Output is expected to average 74,200 oz. of gold per year at an all-in sustaining cost of US$869 per ounce over its 6.5-year mine life.

While coal has been one of Mongolia’s main mining exports, the country is expanding its resource base and investing in sustainable development, including in green agriculture and renewable energy.

The country is also host to Rio Tinto’s (ASX: RIO; LSE: RIO) Oyu Tolgoi, which will become the world’s fourth-biggest source of copper at its peak production, in 2030.

Erdene shares were down 4.5% to 32¢ on Thursday morning in Toronto, valuing the company at $110.2 million. Its shares traded in a 52-week range of 25¢ and 45¢.