Gold has traded in a relatively tight range over the past month, even though numerous significant developments have crossed the wire revolving around the precious metal. On Tuesday, it was announced that the Moscow Exchange was planning to further boost gold trading after creating closer ties to the key London market.
The exchange in September started a link so users can trade spot gold at London prices using its own clearing system and with international banks, including JPMorgan Chase & Co. and Credit Suisse Group AG, providing liquidity. The exchange is also working with Shanghai to create a similar link that could dramatically increase gold trading as there have been rumblings that Russia may cancel its value-added tax on retail gold.
As many of my readers know, Russia has been stockpiling gold for a while now as it has been cutting its exposure to the U.S dollar. In fact, the country added another 3.1 tons of gold to its vaults in September. The share of monetary gold in Russia’s foreign exchange reserves accounted for 20.95% as of last month.
Steppe Gold:
As many of my readers know, Steppe Gold is Mongolia’s premier precious metals company and is projected to produce 60,000 ounces of gold annually from its ATO Gold Mine.
The company is days away from releasing their headline numbers from a feasibility study that leads into the phase II expansion of their ATO gold mine. ATO will produce ~150,000 gold equivalent ounces per annum from the development of underlying fresh rock ores once Phase II is complete.
The company is backed by a very strong group of shareholders, including the legendary Eric Sprott, numerous family offices, Fidelity International, and Elliot Management/Triple Flag as it strides into its phase II expansion plans.
After the feasibility study is published, I will be doing an editorial on Steppe Gold as the years ahead will be very exciting for this company and its shareholders, due to increased production capacity and exploration upside at its UK prospect.
Today I am pleased to be joined by Steppe’s Executive Vice President, Aneel Waraich, once again to provide Gold Telegraph readers with another update on the company:
Alexander Deluce:
Thanks, Aneel, for providing Gold Telegraph readers with another update on Steppe Gold. I noticed 2021 has been a very active year for the company regarding stacking, which provides a strong inventory once the headwinds from COVID are worked out.
Does the company still believe it can achieve 50,000 ounces of gold production over the next year?
Aneel Waraich:
Thanks for acknowledging the headwinds from COVID, Alex. That is exactly what our team is eagerly awaiting; borders to open up, so that we can fully achieve our commitment to shareholders around production of ~50K AU oz annually in this phase I.
The Steppe team has been transparent and regularly communicating to our shareholders that like many other mining operations around the world, we haven’t been immune to the pandemic impacts and need the Chinese/Mongolian borders to open up so that we can access our reagent supply for production.
That being said, we just released our Q3 update and have highlighted that our operations team has remained focused and motivated. We’re not resting on our laurels and haven’t experienced any issues on the leaching front; mining and stacking has continued and Steppe has well over 1 million tonnes of ore in inventory. We are extremely pleased with our strong gold and silver inventory build-up through the year, as it positions us well for when production is back online.
And what do those 1 million tonnes of inventory mean? We view that as ~$30M USD net coming onto our balance sheets in short order, which is essential for a producer with a market cap of our size.
We see this current unavoidable delay as purely a deferral. Our team does believe that once our reagent supply is replenished, and we’re in production that we’ll be back on track to produce 50-60K Au oz over the course of 12 months.
Alexander Deluce:
I noticed the company has been busy acquiring additions to ATO as construction and installation of a new fixed crushing unit in addition to a boiler house for winter leaching. Can you speak on how these upgrades will help the company in the months and years ahead?
Aneel Waraich:
Though we’ve had the same COVID impacts as our mining peers, this has still been such an exciting 18 months for us. We were able to start production in Spring of 2020, in the midst of all of this. And like any new and driven operations that is committed to continuous improvement, you don’t really know how things are going to play out until you are live and operational. So our team has been learning, adapting and optimizing!
We are now crushing more than a year ago; our bottlenecks have improved. Solid progress has been made on construction and installation of the new fixed crushing unit and we expect this to be operational before the end of the year. This new crusher will have a crushing capacity of 1,000t/hr, more than three times the current crusher capacity, allowing us to drive higher crushing rates in the remaining oxide phase with ample excess capacity in the plant.
The boiler house for winter leaching and production is in and currently being tested. We’ll be able to produce all winter. This is an extremely exciting update for us, knowing what extreme Mongolian winter temperatures we’ve had to contend with. And all of this continues to put us firmly on the path of a more steady 2022 and to meet those production commitments that I just mentioned.
Alexander Deluce:
How are things going with the definitive feasibility study? Is the company still expecting to publish this report in the coming weeks?
Aneel Waraich:
Yes, absolutely. In our recent Q3 Shareholder Update, we indicated that the DFS is now complete and we anticipate sharing headline results on October 26th. Paired with the further drilling down to 400m that has ben taking place at our ATO gold mine, these results will reinforce the strong long-term production profile of our assets, which is part of our shareholder value proposition.
Alexander Deluce:
For new readers, can you touch on the phase 2 expansion plans?
Aneel Waraich:
At the end of this month, on the heels of releasing Steppe’s DFS headline numbers we will also share details on what our Phase 2 expansion plans will look like.
As part of our Phase 2 planning, we have already appointed new professional teams in our auditors and counsel. Both Fasken have strong presences in Asia, with long histories of conducting strategic transactions from Asian corporates who have been buying gold globally. And on the operational front we continue to engage with global experts to ensure that we are prepared to optimize the operationalization of our Phase 2 expansions.
All of this strengthens our position to work with an international syndicate for debt financing. We’re already getting a lot of interest from potential partners. And this will allow us to be fully-funded for the phase 2 expansion, which is another positive step towards a steady and stable ‘next 12 months’ for Steppe Gold.
The best part is as we have touched on above, the expansion has already started with the fixed crusher being installed now. We will start to order long-lead items and will have cash flow and debt to finance the construction of phase 2. If all goes as planned we should be generating strong cashflow for the next two years from the oxide mine while building the phase 2 expansion and in two years or so we should be able to double or more our current production . I guess we are different than many other companies that on the back of releasing DFS we will start the construction/expansion immediately and not wait for a couple years to line up all the capital required. It will be a more seamless expansion where we will be producing from surface while bringing more production onlone.
We also plan to continue to add to this mine plan for phase as we include more ounces/drilling to keep extending the mine life and/or growing the production profile. So it will be a nice base to keep building on.
Alexander Deluce:
Finally, can you provide readers with Steppe’s 2021 exploration plans? How many metres of drilling is planned, and is there a specific zone the company is targeting for this drill program?
Aneel Waraich:
Yes, exploration is something we have also been working on during the last few months and hopefully can get a bit more drilling in between now and end of November. We have manage to drill about 3800 meters at ATO, stepping out from the core deposits for the first time…finally. We should have results coming in in the next 4-6 weeks and hopefully we have had some success stepping out in addition to the immediate opportunities to continue to grow ATO deposits at depth, Mungu deposit also at depth and also on the mineralize strike that continues north from ATO4 and Mungu.
On the UK project, this is still an un-drilled license with lots of exciting exploration and success around it. We still hope to try and get a few drill holes down at UK but if not, will start in early Q2 next year.
Steppe has an exciting 12 months ahead of us with production, expansion and exploration on both our projects.
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