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| It’s just around the corner now.
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| The first gold from the world’s highest-grade open-pit gold deposit is officially on schedule for next year.
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| But those reading between the lines of Erdene Resource Development’s (ERD.TO; ERDCF.OTC) recent news release won’t be surprised if it comes sooner...and to the great surprise of the market.
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| You’ll see why in a moment. But first, consider why Erdene’s Bayan Khundii (“BK”) gold project in southwest Mongolia has far greater potential than most investors realize.
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| Already One Of The World’s Highest Grade,
Open-Pittable Deposits
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| Over the past few years, Erdene has not only outlined the gold-rich BK deposit, but also multiple other gold and polymetallic discoveries and targets in the broader Khundii district that it controls in conjunction with Mongolian Mining Company (“MMC”).
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| What really excites the company’s geological team is that exploration has revealed the potential to unlock a new, large-scale gold district within the Central Asian Orogenic Belt, which hosts giant gold and gold-copper deposits such as Kumtor (14 million ounces gold), Almalyk (25 million ounces gold), Muruntau (140 million ounces gold) and Oyu Tolgoi (62 million ounces gold).
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| Now, with the financing in place to complete construction at BK, all systems are a go for that deposit’s high-grade, open-pittable deposit to generate uncommon profits in the junior exploration sector.
A recently updated feasibility study on BK demonstrates the strong economics of this deposit...and what it will mean for Erdene’s current market value.
With 513,700 ounces of reserves and an average head grade at an eye-popping 4.0 g/t gold, the mine has an after-tax Net Present Value, discounted at 5%, of $170 million using $1,800/oz. gold. Its after-tax IRR is a robust 35.3%, and its initial capex is a modest $100 million.
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| Click image to enlarge.
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| At $1,800/oz. gold, BK would have all-in sustaining costs of just $869/oz, which implies almost $1,000 of cash flow per ounce of gold produced (and more like $1,200/oz. at current gold levels above $2,000/oz.).
As you could guess, the project is very sensitive to the gold prices, with the after-tax NPV jumping to $275 million and the after-tax IRR to 49% at $2,200/oz. gold.
The best part: These remarkable economics are why Erdene and its local partner are rapidly advancing BK toward construction and cash flow...but they have truly only scratched the surface of this remarkable new district’s potential.
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| A Sweetheart Deal With Mongolia’s
Biggest Mining Company
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| Construction at BK is moving ahead thanks to a just-announced $80 million debt financing by MMC, which initially took a 50% stake in the Khundii district back in January 2023.
MMC did so by agreeing to finance BK to a construction decision by investing $40 million. With that deal, Erdene retained a 5% NSR in the upside of the Khundii district, a 700-square kilometer area.
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| MMC may be the biggest mining company you’ve never heard of: It boasts a $1 billion market cap and is listed on the Hong Kong Stock Exchange. MCS Group, one of Mongolia’s largest conglomerates, owns 40% of MMC.
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| That connection with MCS is huge, as it gives the Erdene a well-heeled local ally to turn southwest Mongolia into the country’s next big mining destination.
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| Scratching The Surface Of
District-Scale Potential
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| That potential for Khundii to become Mongolia’s next big mining district is readily apparent.
As you can see from the map below, Erdene controls three mining licenses and an exploration license in the district.
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| Click image to enlarge.
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| In addition to BK, the Erdene-MMC partnership owns the Dark Horse discovery to the north (which is already contributing 40,000 ounces of 7 g/t open-pittable gold to BK’s resources).
Dark Horse has multiple underexplored targets, and it’s complemented by the blind-top high grade discovery Erdene made in 2021 on the Ulaan Southeast target to the west of BK.
Then there’s the longer-term potential of the polymetallic deposit outlined on Khundii’s Altan Nar project. Discovered in 2012, Altan Nar has a gold resource of more than 500,000 ounces at a rich 2 g/t gold.
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| A Moly-Copper Kicker
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| Note too that, 35 kilometers to the east of BK, Erdene controls 100% of the Zuun-Mod molybdenum-copper project.
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| Having a source of molybdenum (around 400 million pounds) that close to the border with China the world's largest molybdenum consumer, obviously puts Zuun-Mod in an enviable position.
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| With the Middle Kingdom hungry for base metals like molybdenum and copper, Zuun-Mod looks imminently developable. It’s also wide-open to expansion with the drill bit.
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| The Near-Term Re-Rating Factor:
Rapidly Advancing Toward Cash Flow
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| As noted above, the current market value of Erdene — only about US$78 million — is stunningly low in comparison with the company’s share of projected cash flow from BK alone.
Of course, the mining stock market is famously inefficient, especially these days, and incredible values can be found by sharp-eyed investors. In particular, undervalued companies going into production can be merely a waiting game for big rewards, as the market has to recognize rich cash flow.
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| But here’s why the situation with Erdene is even more special: Its cash flow is coming soon according to the schedule...and perhaps sooner than anyone believes.
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| Erdene’s recent update for the market on the BK project announced the “formal commencement of construction” and that the project was on schedule for the official first gold pour of Q2 2025.
But the news release also noted that the local contractor had already been working full-steam ahead, completing “temporary construction facilities, including aggregate crushing and concrete batch plants, fuel depot and construction camp, construction roads, and completed site leveling, detailed excavation, and all major reinforced concrete footings and columns installation for the Project’s process plant.”
You can see the extent of what’s already been done in this recent site photo:
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| Click image to enlarge.
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| Given the amount of work that has already been done — and the speed in which it has been accomplished — earlier gold production would surprise no one who has been watching closely.
And that could mean rich cash flow sooner.
Individual investors won’t be the only ones to spot this opportunity. There’s no disputing that, with these remarkable economics coming up like a speeding freight train, Erdene is a ripe target for major mining companies.
Thus there’s the potential for a highly rewarding take-out at any time.
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| Severely Undervalued
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| Bottom line: Erdene is a near-term gold producer with a near-unparalleled exploration upside.
This is one of the best high quality gold development opportunities available to play the Lassonde curve rerate while gaining exposure to an exceptional pipeline of development projects and exploration upside.
BK’s economics are already compelling, but with the exploration upside of an entire gold-rich district and with much higher gold prices seemingly ahead, the potential cash flow is truly stellar.
The best news?
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| The current market for gold has Erdene trading at a steep discount to its inherent value.
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| With the Fed set to pivot to a rate-cutting regime and the impact that will have on the gold price, this bargain may not last long.
Things are moving very quickly, and smart investors will look into Erdene Resource Development now.
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| CLICK HERE
To Learn More about Erdene Resource Development Corp.
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