Erdene Resource Development Corp. (ERD.CA) offers investors the best of both worlds: A near-term gold producer plus extraordinary exploration upside, explains Brien Lundin, executive editor of Gold Newsletter.
Over the past few years, Erdene has not only outlined the gold-rich BK deposit in Mongolia, but also multiple other gold and polymetallic discoveries and targets in the broader Khundii district that it controls in conjunction with 50% partner Mongolian Mining Co.
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. It 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).
That’s the remarkable exploration potential of Erdene’s assets. But first, there’s gold production on the table, with the first gold pour at BK slated for mid-2025. At that point, this high-grade, open-pittable deposit is projected to generate uncommon profits.
A recently updated feasibility study on BK demonstrates the strong economics of this deposit and what it will mean for Erdene’s market value.
With 513,700 ounces of reserves and an average head grade of over 3 g/t gold (about three times the global average for an open pit mine), BK has a projected after-tax net present value of $275 million and a rich after-tax internal rate of return of 49% at $2,200/oz. gold. All-in sustaining costs are projected to be just $869/oz., which implies truly extraordinary cash flows at today’s much higher gold prices.
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.
The key here is that Erdene has been conducting a large exploration drilling program on nearby and outlying targets on its property licenses, and the results have been consistently returning high-grade hits. We’ll continue to get drill results, and potentially market-moving ones, throughout the year as the mine rapidly progresses toward production.
So, again, we have the best of both worlds with Erdene — a severely undervalued development story with the kicker of exceptional exploration upside in the near- and medium-terms.
