Steppe Gold Ltd. (TSX:STGO) has substantially expanded its gold production operations in Mongolia through strategic acquisitions and project developments. The company's acquisition of Boroo Gold from Boroo Singapore, finalized on August 1, 2024, has elevated Steppe Gold to a leading position in Mongolian gold production. The Boroo Mine, now under Steppe Gold's ownership, currently produces between 65,000 and 70,000 ounces of gold annually, with projected production of 430,000 ounces through 2031.
This acquisition is expected to boost Steppe Gold's combined production to 80,000 to 85,000 ounces in both 2024 and 2025, representing a significant increase in the company's overall output. According to the most recent technical report, the Boroo Mine demonstrates a Net Present Value of $260.1 million when calculated using a 7.5% discount rate and a gold price of $2,300 per ounce. By the third quarter of 2024, the Boroo mine had already produced approximately 57,244 ounces of gold, indicating strong operational performance.
The integration of Boroo's operations is anticipated to generate additional cost savings and operational synergies for Steppe Gold. The company has reported strong revenue growth in the second half of 2024 as a direct result of this strategic acquisition. In a complementary transaction, Steppe Gold announced the sale of its Tres Cruces Project to Boroo Singapore for approximately CAD$12.0 million, which also closed on August 1, 2024. This divestiture enables 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.
Steppe Gold's flagship ATO Gold Mine continues to demonstrate strong operational performance. During the third quarter of 2024, the company mined 62,181 tonnes of ore, with 125,898 tonnes stacked 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. The ATO project expansion is supported by a fully funded $150 million finance package, with the initial $50 million tranche already utilized 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 Net Present Value increases to $422.6 million, underscoring its substantial potential value. 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 establish Steppe Gold as a significant participant in Mongolia's gold mining industry, with enhanced production capabilities and a strengthened financial outlook. The company's acquisitions and expansion initiatives are positioned to attract increased investor interest as it continues to develop its operations and leverage the potential of its gold assets in Mongolia.
