Steppe Gold Expands Mongolian Gold Production with Boroo Acquisition and ATO Expansion

Steppe Gold Ltd. (TSX:STGO) has significantly expanded its gold production operations in Mongolia through the acquisition of Boroo Gold from Boroo Singapore, which closed on August 1, 2024. This strategic move has positioned Steppe Gold at the forefront of gold production in Mongolia, with the Boroo Mine now under its ownership producing approximately 65,000 to 70,000 ounces of gold annually. The acquisition is expected to boost Steppe Gold's combined production to 80,000 to 85,000 ounces in both 2024 and 2025, representing a substantial increase in the company's overall output capacity.

The Boroo Mine represents a valuable asset with significant financial potential. According to the most recent technical report, the mine boasts a Net Present Value of $260.1 million, calculated using a 7.5% discount rate and a gold price of $2,300 per ounce. This valuation suggests considerable upside potential given that the assumed gold price is notably higher than current spot prices. As of the third quarter of 2024, the Boroo mine had already produced approximately 57,244 ounces of gold, demonstrating its operational efficiency and production capabilities.

In a parallel transaction that also closed on August 1, 2024, Steppe Gold announced the sale of its Tres Cruces Project to Boroo Singapore for approximately CAD$12.0 million. This divestiture allows Steppe Gold to concentrate its resources and management attention on its Mongolian operations while providing additional liquidity through cash payments over an 18-month period from the closing date. The integration of Boroo's operations is expected to yield additional cost savings and operational synergies for Steppe Gold, with the company already witnessing strong revenue growth in the second half of 2024 as a result of this strategic acquisition.

Steppe Gold's flagship ATO Gold Mine continues to demonstrate strong performance, with the company mining 62,181 tonnes of ore in the third quarter of 2024 and stacking 125,898 tonnes at an average grade of 0.56g/t. The company is currently expanding this core asset, with Phase 2 production expected to commence in the first quarter of 2026. This expansion is supported by a fully funded $150 million finance package, with the first $50 million tranche already drawn to accelerate construction and development activities.

The technical report for the ATO expansion estimates an after-tax NPV5% of US$242 million and an Internal Rate of Return of 67%, based on conservative gold and silver prices. When adjusted for a more current gold price of $2,300 per ounce and using a 7.5% NPV rate, the ATO project's NPV increases to $422.6 million, highlighting its substantial value potential. Stonegate Capital Partners' valuation of Steppe Gold applies an EV/NAV range of 0.60x to 0.80x, resulting in a valuation range of $0.47 to $0.81 per share, with a midpoint of $0.64. Using an EV/Reserves valuation method with a multiple range of 120x to 140x yields a valuation range of $0.56 to $0.75 per share, with a midpoint of $0.66.

These strategic developments position Steppe Gold as a significant player in the Mongolian gold mining sector, with enhanced production capabilities and a strengthened financial outlook. The company's acquisitions and expansions are likely to attract increased investor attention as it continues to grow its operations and capitalize on the potential of its gold assets in Mongolia, establishing itself as a key contributor to the country's mining industry and economic development.