Steppe Gold Ltd. (TSX:STGO) has made a significant leap in its gold production capacity with the acquisition of Boroo Gold from Boroo Singapore, a move that closed on August 1, 2024. This strategic acquisition brings the Boroo Mine under Steppe Gold's control, effectively establishing the company as the leading gold producer in Mongolia. The implications of this merger are substantial for both the company and the Mongolian mining industry.
The Boroo Mine, now a key asset in Steppe Gold's portfolio, currently produces between 65,000 and 70,000 ounces of gold annually, with a projected production of 430,000 ounces through 2031. This acquisition is expected to boost Steppe Gold's combined production to 80,000-85,000 ounces in both 2024 and 2025, marking a significant increase in the company's output. The mine's net present value (NPV) stands at $260.1 million, based on a 7.5% discount rate and a gold price of $2,300 per ounce, which is notably higher than current spot prices, suggesting potential upside.
The immediate impact of this acquisition is already evident, with Steppe Gold reporting strong revenue growth in the second half of 2024. The company anticipates further benefits through cost savings and operational synergies as it integrates Boroo's operations with its existing infrastructure. This consolidation is likely to enhance efficiency and profitability across Steppe Gold's Mongolian operations.
Concurrent with the Boroo acquisition, Steppe Gold has divested its Tres Cruces Project to Boroo Singapore for approximately CAD$12.0 million. This sale, which also closed on August 1, 2024, allows Steppe Gold to refocus its efforts on its Mongolian assets while providing additional liquidity. The transaction structure, involving cash payments over 18 months, ensures a steady influx of capital to support ongoing operations and expansion plans.
Steppe Gold's flagship ATO Gold Mine continues to be a cornerstone of the company's production. In the third quarter of 2024, the mine processed 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 expected to commence in the first quarter of 2026. The expansion is supported by a fully funded $150 million finance package, with the first $50 million tranche already drawn to accelerate construction and development.
The ATO expansion project's technical report estimates an after-tax NPV5% of US$242 million and an internal rate of return (IRR) of 67%, with a three-year payback period. These projections are based on conservative gold prices of $1,700 per ounce. When adjusted to a more current gold price of $2,300 per ounce and a 7.5% NPV rate, the project's value increases significantly to $422.6 million, highlighting the potential for substantial returns as the expansion progresses.
The strategic moves by Steppe Gold position the company as a major player in the global gold mining industry, particularly within Mongolia. The increased production capacity, coupled with the potential for operational synergies and cost savings, sets the stage for improved financial performance and increased shareholder value. Moreover, the company's focus on expanding its Mongolian operations could have broader economic implications for the country, potentially attracting further investment in the region's mining sector.
As the gold market continues to show strength, Steppe Gold's expanded production capabilities and strategic asset positioning could allow it to capitalize on favorable market conditions. The company's growth trajectory and increased scale may also enhance its appeal to institutional investors, potentially leading to improved liquidity and market valuation.
Investors and industry observers will be closely watching Steppe Gold's integration of the Boroo Mine and the progress of the ATO expansion in the coming months. The success of these initiatives could serve as a benchmark for future consolidation an
