Erdene Resource Development Corporation (“Erdene” or the “Company”) is pleased to announce the execution of Strategic Alliance and Investment Agreements with Mongolian Mining Corporation (“MMC”) for the development of its Bayan Khundii Gold Project. This Strategic Alliance brings together Mongolia’s pre-eminent precious metals explorer with an exceptional national miner in a partnership to unlock the riches of the Khundii Minerals District (“KMD”).
- MMC is Mongolia’s largest internationally traded mining company, listed on the main board of the Hong Kong Stock Exchange (HKEx: 975).
- Erdene holds three mining licenses and an exploration licence in the KMD in southwestern Mongolia that host high-grade, open pittable gold deposits, and silver, copper, lead, zinc and molybdenum resources.
- MMC to invest US$40 million in return for a 50% equity interest in Erdene’s Mongolian subsidiary, Erdene Mongol LLC (“EM”), holding the Khundii and Altan Nar mining licenses and the Ulaan exploration license through a three-stage transaction.
- Erdene will retain a 50% equity interest in EM and a 5.0% Net Smelter Return (“NSR”) royalty on all production from the Khundii, Altan Nar and Ulaan licenses, as well as any properties acquired within 5 kilometres of these licenses, beyond the first 400,000 ounces gold recovered.
- The first stage of the transaction, to be completed in January 2023, sees MMC invest US$5 million in EM to finance exploration, and an updated Feasibility Study (“FS”) and Life of Mine (“LOM”) Plan for the Bayan Khundii Gold Project.
- The second stage of the transaction will see MMC invest an additional US$5 million upon delivery of the updated FS to complete pre-development and exploration work in advance of a Bayan Khundii construction decision.
- The third stage of the transaction will see MMC invest a further US$30 million once EM has reached a construction decision, providing equity capital for the Bayan Khundii Gold Project, targeting close in Q3 2023.
- Erdene will appoint EM’s Chief Executive and Chief Exploration Officers and MMC will appoint EM’s Chief Operating and Chief Financial Officers.
- Erdene maintains a 100% interest in its large Zuun Mod Molybdenum-Copper deposit and Khuvyn Khar Copper project, located approximately 30 kilometres east of Bayan Khundii, and adjacent to a planned railway development.
Quote from the Company
“We are extremely pleased to announce our Strategic Alliance with MMC, Mongolia’s leading private-sector mining company,” said Mr. Peter Akerley, Erdene’s President and CEO. “The combination of our exploration expertise and their mining experience and execution capability will ensure the success of the Bayan Khundii Gold Project and the expansion of the Khundii Minerals District for the benefit of all stakeholders. This alliance transforms our Company, establishing a clear path to unlock the riches of the Khundii Minerals District.”
Quote from Mongolian Mining Corporation
“We are excited to partner with Erdene on exploration activities and to fund further development of their projects in Mongolia,” said Dr. Battsengel Gotov, Executive Director and CEO of MMC. “Our partnership will be important in unlocking new opportunities for the Mongolian minerals sector which will further increase the industry’s contribution to the economy.”
Summary of Strategic Alliance
Under the Strategic Alliance and Investment Agreements, MMC will invest US$40 million in Erdene’s wholly-owned subsidiary, EM, in a three-stage transaction to acquire a co-controlling equity interest in the company. Erdene will retain a 50% equity interest in EM, as well as a 5.0% NSR royalty over all licenses held by EM, and those acquired within 5 kilometres of the existing licenses, following 400,000 ounces of gold production. The key terms of the Strategic Alliance are as follows:
- Stage 1 – To Be Completed in January 2023 – MMC advances US$5 million to EM to finance an updated FS and LOM Plan for the Bayan Khundii Gold Project, and to conduct exploration on the Khundii, Altan Nar and Ulaan licenses.
- Stage 2 – Targeting Q2-2023 – MMC will advance a further US$5 million to EM upon delivery of the updated FS and LOM Plan to complete pre-construction works and follow-up exploration in the Khundii Minerals District.
- Stage 3 – Targeting Q3-2023 – MMC will advance a final US$30 million following a positive construction decision to fund the equity component of the Bayan Khundii Gold Project.
Funds invested by MMC in EM during Stages 1 and 2 will be in the form of convertible loan instruments. Upon completion of Stage 3, MMC’s investment in EM will be registered as a 50% equity interest in the company with the Mongolian State Registration Office.
Erdene will have the right to appoint EM’s Chief Executive Officer and Chief Exploration Officer and MMC will appoint EM’s Chief Operating Officer and Chief Financial Officer.
Until conclusion of Stage 3, EM will be governed by a Steering Committee of four members, two of which will be appointed by Erdene, and two of which will be appointed by MMC. Upon conclusion of Stage 3, EM will be governed by a Board of four directors, two of which will be appointed by Erdene and two of which will be appointed by MMC. Erdene will remain the operator of the Bayan Khundii Gold project until the completion of the third phase. After Stage 3, the board of EM will assume joint responsibility for EM’s operations, with MMC focusing on development and production and Erdene leading exploration.
Erdene maintains a 100% interest in its subsidiary Anian Resources LLC, the entity that holds the Zuun Mod Copper-Molybdenum mining license located approximately 30 kilometres east of the Bayan Khundii Gold Project.