Mongolia|opinion & analysis|May 18, 2016 / 02:19 PM
Erdene rises on Bayan Khundii gold discovery in Mongolia

AKIPRESS.COM - Erdene-mErdene Resource Development’s interest in Mongolia dates back to the late 1990s, and so it has experienced the good and bad times in the oft-volatile country. The company’s dedication may be about to pay off, however, due to its wholly-owned Bayan Khundii gold discovery and a clearer socio-political landscape courtesy of Rio Tinto’s resolution of investment negotiations at the world-class Oyu Tolgoi copper-gold mine, according to The Northern Miner.

Bayan Khundii is an emerging story that flew from greenfield prospect to Erdene’s flagship asset in roughly eight months. The company has held a variety of mineral interests in Mongolia, but the past year has been tilted toward gold. As such, Erdene had been advancing its Altan Nar project before regional prospecting changed the story.

“When we stepped out a little ways and mobilized to do our mapping, I think it was last May, our team ran a rock sampling survey over an area 20-km southeast of Altan Nar,” explains manager corporate development Dawson Brisco, who managed exploration programs in Mongolia for Erdene between 2005 and 2010.

“The gold values were significant and pervasive. Since there’s no glaciation in Mongolia, generally the grab samples are really close to source. It lit up like a light bulb, and we were seeing visible gold all over the place. It really wasn’t that long ago; Bayan Khundii has essentially become our priority and flagship over night,” he added.

Erdene mobilized in late 2015 to follow-up on the geochemical results, and managed a 695-metre program over 15 holes, which was focused on a core 500-meter by 400-meter target area that includes the Striker and Gold Hill prospects. Results from the maiden campaign in December identified five zones of gold mineralization and visible gold in “multiple intervals.”

Assay highlights from the program include: 26.4 meters grading 5.9 grams gold per ton from 33 meters depth in hole 9; 35 meters of 5.7 grams gold from surface in hole 10; and 7 meters grading 27.5 grams gold from 14 metres depth in hole 1.

Bayan Khundii is a low-sulfidation epithermal gold system wherein mineralization is associated with quartz veins and breccias within hematite-specularite veins and fractures, and disseminated within the altered host rocks.

“The host rock is predominantly volcanics and it’s heavily mineralized in lower-grade gold. So you have these high-grade veins running through a slightly lower-grade host rock, and that means there could be two pulses of mineralization here. That’s what we’re trying to figure out right now,” Brisco elaborated.

In early April, Erdene announced a 3,500-meter drill program to follow-up on initial results and test additional prospect areas over a 1.7-km trend. The exploration campaign is essentially split into two phases: an 1,800-meter foray at the core Striker and Golden Hill area, and a subsequent, 1,700-meter initiative to test regional targets.

Erdene released assays on the initial seven holes of the program on May 9. Hole 17 cut 63 meters of 5.3 grams gold from 50 meters down hole at Striker, while around 40 meters due southeast, hole 22 intersected 27 meters of 1.9 grams gold from 54 meters depth.

The results attracted interest from Sandstorm Gold, which invested $2.5 million in Erdene in February. The financing includes: a $1-million private placement composed of 5 million Erdene shares at 20¢ per share; plus $1.5 million in Sandstorm shares in exchange for 2% net smelter returns (NSR) royalties on Bayan Khundii and Altan Nar.

“Mongolia took a knock on the chin in relation to the Oyu Tolgoi negotiations, but now that’s resolved. I think the government has realized the value of the mining industry and that’s been reflected in many of the regulatory changes that have come around over the past two years,” Brisco said.

“Over this recession period there just weren’t a lot of companies doing boots on the ground exploration and making discoveries, but that’s the Bayan Khundii story. It started from the desk and satellite imagery work, to soil samples, and ultimately to the drill bit. It’s definitely increased our ability to finance because there aren’t many companies out there talking about the country. And I think there’s a growing level of excitement. People are looking for gold exploration stories to get behind,” he continued.

The other promising element of the Bayan Khundii story is the metallurgy. According to a test results in mid-February, gold at the project is “free milling and amenable to conventional processing techniques.” Erdene reported 99% gold recoveries from the higher-grade material using gravity and cyanide leach, while the lower-grade composite indicated 92% recoveries.

The company had just mobilized for the second, regional phase of drilling at the time of writing. Erdene expects results from the regional program to begin rolling in this summer.

“We haven’t even tested the targets undercover and the high-resistivity goes with the alteration package,” Brisco added. “Stepping out around one-km northeast of the Striker area we have a window of the same volcanic lithologies as we see in the main zone poking up through that younger cover. It’s the same alteration signature and they’re all hot with gold at surface. If you look at depth through geophysics they have that same signature and style we see in the main zone.”

Erdene has traded within a 52-week window of 11¢ and 55¢, and jumped 191%, or 32¢, to start the year en route to a 49¢ per share close at press time. The company maintains 115 million shares outstanding for a $61.3 million market capitalization, and reported working capital of around $2.5 million at the time of writing.

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