Resource World Magazine

30 www.resourceworld.com J U N E / J U L Y 2 0 1 9 I n our experience, the market will always be drawn to projects that make financial sense. Low capital costs and low cash costs often translate into robust returns on investment. These factors caught our attention when we looked at Steppe Gold Ltd. [STGO-TSX; 2J9-FWB]. The company's wholly-owned Altan Tsaagan Ovoo gold project (ATO) is an advanced-stage oxide heap-leach gold operation being developed in eastern Mongolia. It is currently on track to pour its first gold bar in the second half of 2019. Geologically speaking, the currently delineated precious and base metal min - eralization at the ATO Project is hosted in three carrot-shaped vertically downward plunging, Jurassic-aged breccia pipes. As an upside, there are additional potential resources being drilled off at the Mungu gold and silver discovery located northeast of the current oxide resource. Drilling at Mungu has intersected impressive grades including 46 metres averaging 14.98 g/t gold and 82.02 g/t silver. Steppe Gold has completed a 20,000-metre drill program at ATO-Mungu. The mining plan, based on an October 2017 Technical Report, envisions an approximate 40,000 oz/year open pit operation. The ATO Project is estimated to produce 146,699 ounces of gold and 672,518 ounces silver over a five-year mine life with a total capital cost of US $19.6 million and total operating cost of US $48.8 million. The project's NPV (based on a 10% discount rate) was estimated at US $67 million with life-of-mine (LOM) average cash costs of sub US $400/oz gold produced (based on a LOM average gold price of US $1,307/oz). Following the commencement of com - mercial production, Steppe Gold will continue its feasibility study into the development of the much larger fresh rock resource underlying the current mining operation. The proposed future develop - ment of a carbon-in-leach (CIL) operation processing fresh rock will have a life-of- mine of approximately 12-15 years with annual production of 150,000 oz/year. The ATO resource was purchased from Centerra Gold for US $20 million which Steppe Gold raised in a CDN $25 million IPO, the only mainboard listing of the year, in May 2018. Centerra had spent US $25 million on exploration, including 67,000 metres of drilling and technical stud - ies. Steppe Gold subsequently raised US $23 million in a gold and silver streaming agreement with Triple Flag Mining Finance to develop the project. At last report, Steppe Gold reported that development of the heap leach operation at ATO was on track and under budget. The company has been mining since November 2018 and to date has mined over 230,000 tonnes grading 2.3 g/t gold. This works out to about 17,000 ounces of contained gold that has been piled on the leach pad. The company is modeling a leach recov - ery of 70% for gold which translates to about 12,000 ounces of recoverable gold currently on the pad. Current proven and probable reserves stand at 5.23 million tonnes averaging 1.25 g/t gold and 10.00 g/t silver or 210,000 ounces of contained gold and 1.68 million oz of contained silver. Steppe Gold is the first company to imple - ment the Mongolian government's "Gold-2" program. This initiative is a new government plan to support gold exploration and min- ing companies. The plan provides favourable royalty and tax structures and promises accelerated permitting procedures and sim- plified provincial regulations. Steppe gold has a tight share structure with just 41.5 million shares outstand- ing and a strong management team led by Matthew Wood, Chairman, President and CEO. Wood has extensive experience and many key relationships in Mongolia. Steppe Gold is fully financed for construc - tion and has about US $2.7 million in its till. It is now raising an additional US $5 million in a private placement of unsecured convertible debentures to fund a summer exploration program along the ATO-4- Mungu trend. In addition, a shareholder rights plan was recently adopted to ensure adequate time to evaluate unsolicited take- over bids for the company. Currently, no such bids have been made. Steppe Gold has a market capitalization of about $30 million and initial production is expected later this year. When you include exploration and resource expansion poten - tial, we feel Steppe Gold is one to watch. n Stew Vorberg and Doug Wood are Investment Advisors with Mackie Research Capital Corporation (MRCC). This article was pre- pared, in part, under contract by Thomas Schuster. The opinions, estimates and projec- tions herein are those of the authors and may not reflect that of MRCC. The information and opinions contained herein have been com- piled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accu- racy or completeness. The issuer(s) mentioned in this article may not be suitable for all inves- tors. Please consult an investment professional for advice regarding your particular Broker's Picks by Stew Vorberg and Doug Wood Steppe Gold advancing towards production

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