Resource World Magazine

16 www.resourceworld.com A P R I L / M A Y 2 0 2 0 Broker's Picks by Stew Vorberg and Doug Wood I n June 2019, we introduced you to Steppe Gold Ltd. [STGO-TSX; 2J9-FWB]. Back then, we were attracted to the company because its wholly-owned Altan Tsaagan Ovoo gold project in Mongolia (ATO Mine) was on track towards producing low-cost oxide gold. The company recently announced it has commenced ore processing and states it is on track to produce 60,000 ounces of gold this year at an estimated cash cost of about US $500 per ounce. Due to the recent market turmoil, the company's market capi - talization has returned to the levels it was at when we first brought it to your attention. Steppe Gold has now mined, crushed and stacked approximately 533,000 tonnes of oxide gold ore at a grade of 2.0 g/t gold on its Cell1 leach pad. At an expected gold recovery rate of 70%, Steppe already has 24,000 ounces of leachable gold on Cell1. This equates to approximately US $38 mil - lion of recoverable gold at a gold price of US $1,600 per ounce. Positive cash flows from the ATO Mine will go towards completing resource upgrades and a feasibility study that aim to expand the open pit and processing facilities to a targeted 150,000 ounces of gold equivalent per year. The current mining plan, which is based on an Oct 2017 Technical Report, outlines an initial open pit heap leach operation which is estimated to produce 146,669 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 a 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 US $333 per ounce gold produced (based on a LOM average gold price of US $1,307/oz). Current Proven and Probable Reserves stand at 5.23 million tonnes averaging 1.25 g/t gold and 10.00 g/t silver. That trans - lates to 210,000 ounces of contained gold and 1.68 million ounces of contained sil- ver. Geologically speaking, these resources ar e hosted in in three carrot-shaped, verti- cally downward-plunging, Jurassic-aged breccia pipes. With commercial gold production underway, Steppe Gold intends to focus more of its attention on exploring and further delineating the nearby Mungu discovery and ATO deposits. New resource upgrades are being calculated for ATO 1, 2 and 4 deposits as well as an initial resource for the Mungu deposit. The company esti - mates that it should be able to release a revised resource and reserve statement by the third quarter of 2020. In January of his year, Steppe Gold was the first company to receive funding from the Mongolian National Investment fund PIF SPF (US $3 million in a 12% two-year secured debenture). This fund is a wholly-owned subsidiary of the Government-owned Development Bank of Mongolia. Its mandate is to finance high return projects that increase economic growth and provide a positive contribution to the social and economic development of the country. If you are still looking for more upside, Steppe Gold holds one of the largest exploration licenses in the Mongolia's Bayankhongor province and has already identified four new discoveries on its 144 km 2 Uudan Khundii (UK) Project. This project is an 80/20 Joint Venture with the provincial government of Bayankhongor and the four new discoveries will be drill tested this year. Steppe gold has a tight share structure with just 45 million shares outstanding and a strong management team led by Bataa Tumur-Ochir, President and CEO. Tumur- Ochir is a Mongolian Citizen who has strong relationships at all levels of government in Mongolia and was recently appointed inde - pendent advisor to the Ministry of Mining and Heavy Industry responsible for foreign investment and promotion. Steppe Gold has a market capitalization of about $35 million and is now in produc- tion. When you include the exploration and resource expansion potential, we are of the view that Steppe Gold is underval- ued at current prices. 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 pro- jections herein are those of the authors and may not reflect that of MRCC. The informa- tion and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or war - ranty, expressed or implied, is made as to their accuracy or completeness. The issuer(s) men- tioned in this article may not be suitable for all investors. Please consult an investment pro- fessional for advice regarding your particular circumstance. Neither the author nor MRCC accepts liability whatsoever for any loss aris - ing from any use of this article or its contents. Information may be available to MRCC which is not reflected herein. This article is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. The informa- tion contained in this article is not intended to constitute a research report. Stew Vorberg and Doug Wood are not beneficial owners of the company highlighted in this article. Steppe Gold commences gold production in Mongolia,

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