Steppe Gold announced the commencement of ore processing at the ATO gold mine on March 25th. What were the steps that led to production? In December 2019, Steppe Gold received its final permit; a cyanide usage, storage and transport license. In January, we received an investment from the Mongolian National Investment Fund, a landmark achievement as it is the first time they have invested in a mining company. This is significant because it shows the support we have at all levels in Mongolia, from the local level at the village, to provincial and federal. Although we received the final permit in December, we decided to wait until after the winter to commence production so as to hit the ground running. We have now started production when the gold price is more than US$500 higher from when we acquired and started building the mine two years ago. This has given us a great base to grow from. Despite its proximity to China and Russia, Mongolia has had remarkably low numbers of coronavirus cases. Has the pandemic impacted your operations? Fortunately, the COVID-19 outbreak has not impacted our operations at all. Steppe’s leadership in Mongolia, starting with president and CEO Bataa Tumur-Ochir, took measures in January to restrict travel, and the Mongolian government did an excellent job proactively clamping down on travel in and out of the country and closing down non-essential businesses and schools in early February. We have benefited from having less expats on our staff, with a skilled and experienced local operating team able to bring production online, leading to the May 11th announcement of the company’s first gold and silver sales.

We sold a total of 5,233 oz of gold and 1,372 oz of silver in two separate deliveries to the Central Bank of Mongolia, which generated cash flow before streaming obligations of US$8.5 million. For the next four to five years, all of Steppe’s production will be sold to the Central Bank. By selling in-country we pay a 5% flat government royalty, compared to the 10% royalty charged for exporting. Do you think the news that the Oyu Tolgoi expansion could cost between US$1.3 to US$$1.8 billion impacts investor confidence in Mongolian mining? Even though it is not related to Steppe Gold by any means, the noise created by such a giant project does create some impact to others operating in the country. OT has been successful, employs 15,000 Mongolians and is the largest GDP driver and tax payer in the country, but the government negotiations with Turquoise Hill and Rio Tinto from day one have caused delays. Occasionally, we have to educate people that are not as familiar with the jurisdiction and explain that the government is not an owner of Steppe’s assets, and from inception we have managed to advance our projects in harmony. I think Steppe Gold has de-risked the country somewhat, showing that as a new investor with global capital you can move into production without opposition or complications. Steppe’s share price almost doubled in late April. Has the market started to value the company as a gold producer? We listed the company on the TSX in May 2018 at C$2 and, despite the strong stock performance in April, we were still trading below the listing price at this point. Gold was US$500 less when we listed, and we still had capex and permitting risk ahead of us. Since then, we received all of the permits, constructed the mine and began production, so we are a lot more valuable today. These days, investors want to see sustained production with results from a couple of quarters and consistent cash flow, milestones Steppe will be achieving in the coming months. Can you outline the company’s plans to scale up the business in the next two years? Now that Steppe has shown it can produce gold, we will get back to the bigger strategy of growing our production profile to a mid-tier level. We have an organic pipeline to focus on, with 11,000 meters of pending exploration results to be updated in the next 60 days, which will tie into a resource and reserve update 60 days after that. This will give us a maiden resource update for the Mungu project, and an update for ATO deposits 1, 2 and 4. This data, alongside Steppe’s first earnings in call in August, will show the market we have upscale potential as well as downside protection as a producer.

Secondly, we will recommence feasibility work for phase two in the second half of 2020, to be able to outline to the market by Q1 2021 a definitive plan to expand from the heap leach to a CIL plant in short order. We already have the permits in place, and at that stage it will be a question of capital. The intention is to add another decade of mine life at a higher run rate.

Lastly, on the exploration side we will continue to explore the UK (Uudam Khundii) project in August, with an undrilled license in an exciting gold region where Erdene has already had success. This is only based on what we own today, and, as we grow our cash reserves and market cap, we can start to explore other growth opportunities that exist in Mongolia.