Steppe Gold Expands Mongolian Gold Production with Strategic Boroo Acquisition

Steppe Gold Ltd. (TSX:STGO) has significantly expanded its gold production operations in Mongolia through the strategic acquisition of Boroo Gold from Boroo Singapore, completed on August 1, 2024. This transaction has elevated Steppe Gold to a prominent position in Mongolia's gold mining sector, with the Boroo Mine now contributing approximately 65,000 to 70,000 ounces of annual gold production. The acquisition is expected to increase Steppe Gold's combined production to 80,000 to 85,000 ounces in both 2024 and 2025, representing substantial growth in the company's operational output.

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 using a 7.5% discount rate and a gold price of $2,300 per ounce. This valuation indicates considerable upside potential given current market conditions. By the third quarter of 2024, the Boroo mine had already produced approximately 57,244 ounces of gold, demonstrating its operational efficiency and production capacity. The integration of Boroo's operations is generating additional cost savings and synergies for Steppe Gold, with strong revenue growth already evident in the second half of 2024.

In a complementary strategic move, Steppe Gold sold its Tres Cruces Project to Boroo Singapore for approximately CAD$12.0 million, with this transaction also closing on August 1, 2024. This divestiture allows Steppe Gold to concentrate resources on its Mongolian operations while securing additional liquidity through cash payments distributed over an 18-month period from the closing date. This strategic repositioning strengthens the company's focus on its core Mongolian assets.

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 scheduled 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 price assumptions. 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, underscoring the project's 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 Mongolia's gold mining industry, with enhanced production capabilities and a strengthened financial outlook. The company's acquisitions and expansion initiatives are likely to attract increased investor interest as it continues to develop its gold assets and capitalize on Mongolia's mining potential.