Erdene Resource Development (ERD.TO; ERDCF.OTC) has a high-grade, open-pittable gold resource in Mongolia on track for production and a district’s worth of potential to grow that resource.

The problem: How to unlock the potential of a multi-mine district without diluting the value of a junior resource company.

The good news: Erdene just found the key to unlock all that potential and more…just as gold has begun a new run toward record highs.

Dear Fellow Investor,

It is the perfect deal at the perfect time.

You see, Erdene Resource Development (ERD.TO; ERDCF.OTC) was looking for a partner to help advance its Khundii Minerals District in Mongolia into production.

Why did they need a partner? Consider this:

• Their project, which began as one of the world’s richest open-pit mining projects, rapidly expanded into an entire district replete with high-grade discoveries.

• Drilling in this new district in southwest Mongolia initially uncovered the rich Altan Nar deposit, offering not only gold and silver, but also lead and zinc, for an additional big resource of over 450,000 gold-equivalent measured and indicated ounces — plus another 277,000 ounces of inferred gold-equivalent.

• The keystone project, Bayan Khundii, discovered in 2016 boasts over a half million open-pittable ounces in measured and indicated resources at over 3 grams per tonne gold, with incredibly rich economics thanks to that grade. But it was just the beginning…

• Then drilling began to expand the Dark Horse discovery, two kilometers north of Bayan Khundii, with amazing near surface drill hits like 15 meters at 42.8 g/t gold and 12 meters at 20.2 g/t gold.

• The drills then turned up the Ulaan discovery, which looked like a continuation of Bayan Khundii, with eye-popping results like 41 meters at 8.1 g/t gold and 216 meters at 1.1 g/t gold.

Adding to the excitement was the potential to connect Bayan Khundii, Ulaan and Dark Horse, and perhaps more discoveries, as the drills were enjoying tremendous hit rates.

Add it all up, and what began as a rich open-pit that Erdene could handle on its own was quickly evolving into one of the world’s great new gold districts, with the potential for multiple high-grade mines.

That’s why Erdene began searching for help…and discovered that the perfect partner was one already in their neighborhood.

A Mining Giant To Unlock The Potential

As it turns out, Mongolian Mining Corporation (“MMC”) — Mongolia’s largest publicly traded mining company — had everything Erdene was looking for to move the district forward.

Erdene and MMC announced their partnership last month on the Khundii Minerals District, a landholding comprised of three mining licenses and an exploration license in southwest Mongolia.

The goals of the alliance are to move Bayan Khundii to a construction decision and advance the promising gold discoveries on the Dark Horse and Ulaan properties. Longer term, it also wants to assess the viability of the resource on its Altan Nar project.

As you’re about to see, the deal gives Erdene the money to advance Bayan Khundii and to continue testing key mineralized zones at Dark Horse and Ulaan with the drill bit, without further dilution to the company’s share structure.

In short, it promises to help Erdene unlock the cash-flow-generating potential of Bayan Khundii while proving up the multi-mine potential of the broader Khundii Minerals District.

Bayan Khundii:
A Rare, High-Grade Open Pittable Gold Deposit

Bayan Khundii is a rarity in gold exploration — an oxide gold deposit that is both near surface and high-grade.

According to the most recent reserve estimate on the deposit, Bayan Khundii contains 409,000 ounces of proven and probable ore in an economic pit with an average grade of 3.7 g/t gold within a larger resource totaling 537,000 ounces of measured and indicated resources, averaging 3.13 g/t, at a 0.6 g/t cut-off, with an additional 32,600 ounces averaging 3.25 g/t.

To give you a sense of how rich the deposit is, consider that the gold mining industry is content to mine open-pit resources that grade 1 g/t or less.

The power of that grade plays out in the economics for Bayan Khundii. Using a 5% discount rate and just a $1,400/oz gold-price base case, the project has an after-tax NPV of $100 million and a very rich after-tax internal rate of return of 42%.

Now, MMC has agreed to invest $40 million to push the project toward production, getting a 50% equity interest in return in the Mongolian subsidiary that holds the Khundii Minerals District licenses.

MMC will invest $5 million this month to generate an updated feasibility study for Bayan Khundii, $5 million to fund pre-construction work and $30 million in Q3 2023 to fund the equity component of the construction financing for the project.

The funding promises to unlock the cash-flowing potential of Bayan Khundii by late 2024, so the future looks bright and imminent.

But that’s only where the potential begins…

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The Potential For Not One, But Multiple Mines

The deal comes with an additional benefit for Erdene on the Khundii District as a whole.

Erdene retains a very significant 5% Net Smelter Return on all production from the district over 400,000 ounces.

That’s key, because both the Dark Horse and Ulaan targets have shown potential to host much more near-surface, high-grade gold. And yet Erdene has still only scratched the surface of the potential for its massive property position.

Consider that Erdene’s projects are located in the eastern portion of the Central Asian Orogenic belt, which hosts giant gold and gold-copper deposits, including Kumtor (14 million ounces gold), Almalyk (25 million ounces gold), Muruntau (140 million ounces gold) and Oyu Tolgoi (62 million ounces gold).

Erdene’s exploration on its ground has consistently turned up new high-grade gold discoveries, so more discoveries of these deposits would surprise no one.

With a processing complex at Bayan Khundii to feed with ore from the existing deposits and any new discoveries, Erdene’s 5% NSR could prove highly lucrative on top of the production from BK itself.

Add in the established resources on the Altan Nar project (453,000 indicated gold equivalent ounces and 277,100 inferred gold equivalent ounces), and the company’s NSR would be roughly economically equivalent to an additional 10%-20% interest in the district.

In short, Erdene gets a clear path toward production and more exploration, minimizes dilution and retains an effective majority interest.

A Connected, Local Partner

MMC makes a great partner, not only because of its contacts within the Mongolian government, but because it has the wherewithal to move Bayan Khundii into production.

The Hong-Kong-listed company has a market cap of around US$300 million and its parent company is one of Mongolia’s largest taxpayers.

MMC’s parent company has more than 10,000 employes and operations in engineering, energy, communications, property, mining, consumer goods, health and hospitality.

Obviously, this backing should come in handy as the partner looks not just to build Bayan Khundii but to build out the infrastructure for the whole district.

Pairing MMC with Erdene has the potential to unlock the latent economic power within the Khundii Minerals District.

Huge Value Being Unleashed

With the first investment from the alliance on the way, a new feasibility study on Bayan Khundii should be in hand soon and the partners should be on their way to putting the mine into production.

The advancement of Bayan Khundii, the continued exploration of the Khundii Minerals District and the 100% interest Erdene maintains in the Zuun Mod copper-moly project puts Erdene on a significant re-rating path as the gold bull market continues.

If you want to maximize the leverage of upcoming production with exploration potential on world-class targets…just as gold is taking off…you need to look closely at Erdene now.

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To Learn More about Erdene Resource Development Corp.