Following the completion of an independent Preliminary Economic Assessment (PEA) study for its 100%-owned Khundii Gold Project in southwest Mongolia, Erdene Resource Development Corp. (TSX:ERD; MSE:ERDN) has drawn particular attention to the following results of the PEA.
• After-tax Net Present Value at a 5% discount rate and a $1,200/oz gold price
of $99 million and an Internal Rate of Return of 56%
• Pre-tax NPV5% of $135 million and IRR of 70%
• Initial capital expenditure of $32 million, using a contract mining fleet
• All-in sustaining cash cost of $714/oz of gold recovered
• Life of mine head grade of 3.42 g/t gold
• Average annual gold production of 51,200 oz and total LOM production
of 412,000 oz
• Mine life of 8 years plus one-year pre-production and two-year mine closure
• A payback of 2 years.
Summing up the PEA study, Peter Akerley, Erdene’s President and CEO, said it confirms that Khundii is a high-return, low-capital and low-operating-cost project that will form the cornerstone development in the emerging Khundii gold district. He added, “The project has the potential to provide strong returns to investors, bring industry and employment to a remote area of Mongolia and add to national gold reserves. We have a long history of operating responsibly in the country and we look forward to creating value for all stakeholders.”
Next steps include a pre-feasibility study carried out in parallel with mining licence, construction and operating permit applications in early 2019. The company also plans to do exploration work in the highly prospective surrounding district and to “opportunistically acquire additional licences in the region as they become available”.
Any PEA is a preliminary study, based in part on Inferred Resources, that are too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves which is required for a prefeasibility or feasibility study. Mineral resources that are not mineral reserves do not have demonstrated economic viability and there is no certainty that the PEA will be realized.