Erdene Resource Development has initiated full construction at the Bayan Khundii Gold Project, a high-grade, open-pit gold mine in south-western Mongolia.

This follows a strategic alliance agreement (SAA) with MMC to develop the Khundii Minerals District, signed on 10 January 2023.

The SAA was formalised later that month, granting MMC a 50% equity stake in Erdene’s subsidiary, Erdene Mongol (EM), which holds the mining licences for the project.

MMC invested $40m in EM, which holds the licences for the Khundii, Altan Nar and Ulaan sites.

Erdene retains a 50% equity interest in EM and a 5% net smelter return royalty on production from these licences after the first 400,000oz of gold are recovered.

Erdene’s interests in the Zuun Mod Molybdenum-Copper deposit and Khuvyn Khar Copper project remain wholly owned by the company.

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By GlobalData

These projects are located near a planned railway development and are not part of the SAA with MMC.

Construction at Bayan Khundii was agreed upon on 15 January 2024, following the completion of early works in the latter half of 2023.

The project has 513,000oz of gold reserves with an average grade of 4.0 grams per tonne and is expected to produce 87,000oz annually in its peak years.

MCS Property, affiliated with MMC, has obtained the engineering, procurement and construction services contract for the project, valued at $54m.

The process plant’s construction is a critical activity, with major components already on-site and completion expected by the end of the year.

Additionally, EM secured a power purchase agreement with MCS International for a hybrid power station to support the project. The station will include diesel generators, a solar farm, battery storage and necessary infrastructure.

So far, the Bayan Khundii Gold Project has attracted around $80m in investment, including Erdene’s previous expenditures and MMC’s $40m funding. Further funding details to complete construction are expected to be announced in the first quarter (Q1) of 2024.

The project is on schedule and budget to achieve operations commissioning and first gold in Q2 2025.

Erdene president and CEO Peter Akerley said: “We are extremely pleased to announce the formal commencement of construction at the Bayan Khundii gold project and the close of our strategic alliance with MMC, Mongolia’s leading publicly traded mining company.

“The Bayan Khundii gold mine is one of the highest-grade, open-pit gold mines under development globally and will be Mongolia’s largest gold primary producer when it reaches full production.”