Erdene Resource Development (TSX:ERD) - High-Grade Gold Producing in 2025

Aug 22, 2024

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Interview with Peter Akerley, President & CEO of Erdene Resource Development Corp.
Our previous interview: https://www.cruxinvestor.com/posts/rio2-tsxvrio-and-erdene-resource-development-tsxerd-nearing-gold-production-milestone-5653

Recording date: 19th August 2024

Erdene Resource Development (TSX:ERD, MSE:ERDN) is on the cusp of transforming from an explorer to a gold producer, offering investors exposure to a high-grade, near-term production opportunity in Mongolia's emerging Khundii Gold District. The company's flagship Bayan Khundii Gold Project is advancing rapidly, with construction approximately 40% complete and on track for first gold production in Q2 2025.

Key investment highlights include:

High-Grade, Low-Cost Operation: Bayan Khundii boasts an average head grade of 4 g/t gold, positioning it as one of the highest-grade open-pit gold mines globally. With projected all-in sustaining costs of $870 per ounce, the project offers strong margin potential in the current gold price environment.

Near-Term Production: Initial production is estimated at 85,000 ounces of gold per year for the first six years, with a seven-year mine life based on current reserves. However, significant exploration potential exists to extend the mine life and potentially increase production.

Strategic Partnership: Erdene has partnered with MMC, Mongolia's largest private mining company, which has contributed $120 million in funding and brings valuable in-country expertise. This partnership de-risks the project development and provides a platform for future growth.

Exploration Upside: The company has identified nearly 2 million ounces of gold equivalent resources across multiple deposits in its 700 square kilometer land package. Recent drilling has intersected high-grade zones near the current pit, suggesting potential for resource expansion and grade improvement.

Growth Strategy: Erdene aims to double production to around 150,000 ounces per year within the first few years of operations by optimizing Bayan Khundii, developing satellite deposits, and potentially building a second standalone operation.

Strong Financial Position: With MMC funding the majority of development costs, Erdene is well-positioned financially. The company expects to generate significant cash flow once in production, providing flexibility for future exploration and potential shareholder returns.

Favorable Macro Environment: The project benefits from the current strong gold price environment and increasing interest in frontier mining jurisdictions as traditional areas become mature.

Investors should be aware of potential risks, including country risk associated with operating in Mongolia, single asset risk during initial production, and general mining sector risks such as potential delays or cost overruns. However, the maturing of Mongolia's mining sector and Erdene's partnership with a major local player help mitigate some of these concerns.

As Erdene approaches key milestones such as construction completion and first gold pour, the company may see a re-rating in the market. The significant exploration potential in the Khundii Gold District also provides longer-term upside for investors.

CEO Peter Akerley summarizes the opportunity: "I've been at this for 35 years, and I haven't seen the prospectivity we have in this part of the globe. For us to have discovered four deposits in a short period of time, three of those sitting at surface, never having really spent the time or had the resources to do deeper exploration, I'm tremendously excited about what else is going to happen here."

For investors seeking exposure to a near-term gold production story with significant exploration upside, Erdene Resource Development presents a compelling opportunity to participate in the development of a new gold district in an emerging mining jurisdiction.

View Erdene Resource Development's company profile: https://www.cruxinvestor.com/companies/erdene-resource-development