Canada-based resource company Erdene Resource Development and Mongolian Mining Corporation (MMC) have signed strategic alliance and investment agreements to develop the Bayan Khundii Gold Project in southwestern Mongolia.

The agreements will see MMC investing $40m in Erdene’s wholly owned subsidiary, EM, in three stages.

In exchange, MMC will acquire a 50% stake in EM.

In addition to retaining a 50% stake in EM, Erdene will have a 5.0% NSR royalty over the Khundii, Altan Nar and Ulaan licences, including those owned by EM.

In the first stage, which is slated for completion in January 2023, MMC will spend $5m in EM to finance the project’s exploration, and an updated feasibility study (FS) and life of mine (LOM) plan.

MMC will spend a further $5m in the second stage of the transaction, upon delivery of the updated FS. This investment will fund the completion of pre-development and exploration work for the Bayan Khundii project.

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By GlobalData

Under the third stage, MMC will invest another $30m to provide equity capital for the Bayan Khundii Gold Project. This will be made once EM finalises the construction decision for the project.

Erdene president and CEO Peter Akerley said: “The combination of our exploration expertise and their mining experience and execution capability will ensure the success of the Bayan Khundii Gold Project and the expansion of the Khundii Minerals District for the benefit of all stakeholders.

“This alliance transforms our company, establishing a clear path to unlock the riches of the Khundii Minerals District.”

Erdene will serve as the gold project’s operator until the completion of the third phase, following which the EM board will assume joint responsibility for EM’s operations.

MMC executive director and CEO Dr Battsengel Gotov said: “Our partnership will be important in unlocking new opportunities for the Mongolian minerals sector, which will further increase the industry’s contribution to the economy.”