Steppe Gold - Positive Cash Flow and Exploration Update

0:05 Hi everyone, thank you for joining us. We're going to begin today with a short corporate video. Thank you for watching this video. My name is Batatomuricir.

0:52 I am the CEO and President of Stepgold. On behalf of Stepgold, I would like to update you on the half-year company results and share our plans for the next 6 months. Despite COVID-19 travel restrictions and border closing, Stepgold is continuing its operations without any material changes affecting the company. In the first half of the year, the company has achieved several significant milestones and advanced further towards achieving our goal of becoming the largest and premier gold producer in Mongolia.

1:29 Step Gold is the first and only mining company to attract investment from the Mongolian National Investment Fund and significant investment from local Mongolian financial institutions. 4 months ago, the company commenced gold production and closed its 1st gold sale with the Central Bank of Mongolia. Gold production plays a vital role in the Mongolian economy and the company receives an excellent support from the Mongolian government bodies at all levels. Step Gold has produced more than 15,000 ounces of gold and now we're happy to announce the commencement of commercial gold production. As of today the company has over 700,000 tons of ore on the leach pad and further 180 tons of ore on their own pad.

2:16 For the next 6 months we will continue our exploration drilling programs to increase and update our current resources on the ATO gold mine and also we will announce initial resource estimates on Munk Discovery. Starting this month, we are commencing a night shift mining to increase our mining rate by 50% from 100,000 to 150,000 tons per month. Step Gold is on track to produce 60,000 ounces this year and increase annual production to 150,000 ounces in the coming years with the completion of the stage 2 fresh rock mine. This is going to be a very busy year and an exciting time for step gold shareholders. Thank you very much to our partners, stakeholders and shareholders for your continued support and trust in the company.

3:19 Hi, my name is Bianca Bishola. I'm the CEO of 6 and welcome to the Step Gold Live Investor Summit. I'd like to start today by introducing our presenters, Anil Varach, Executive Vice President and Director, and Jeremy So, Senior Vice President and Chief Financial Officer. To kick things off, Anil and Jeremy will be telling the company's story, and then we'll be accepting questions. You can submit your questions in the Q&A panel on the right-hand side of your screen. Without further ado, take it away, Anil. Great. Thanks, Bianca, And thanks, everyone, for taking the time to hear the STEP story or to get updated since you've last heard from us. So STEP Gold, for those new to the story, is a main board listing on the Toronto Stock Exchange. We listed on May 22nd, 2018, and we were the only IPO on the main board for a mining company in 2018.

4:11 During that time, over the last 2 plus years, we've actually built our first mine, and we're happy to announce that we're actually in production today. We announced commercial production at the beginning of July and we're obviously very happy to be able to bring production online in a high Gold price environment. So the Heat Beach mine that we built is really our stage 1, our step 1 in building our company out. And we're currently focusing on our feasibility study to grow our production from 60,000 ounces to 150,000 ounces. And I'll get into that a bit more later. Just highlighting our share structure here today. And for those who have followed us, you'll see our capital structure has changed most recently with Eric Sprott investing 15 million Canadian just closed a couple weeks ago. And we think it was a very strong endorsement to bring Eric in after we've already built our mine, when we're already generating cash flow, and to be one of his 1st mining investments in Mongolia. So I think it was a great endorsement for the country, our team, and the assets. And we're very happy to have his endorsement.

5:19 But we have some really good shareholders including Mongolian Nationals, the Mongolian Sovereign Fund, Newly Established Sovereign Fund. We were their first ever investment they made earlier this year and we have a lot of support from family offices around the world, as well as Elliott Management out of New York and Triple Flag Mining Finance. So we have a very strong backing and we're looking to build a big company here today. Just going to highlight our board of management for those who are new to the story. Matthew Wood, who's our executive chairman, and Bhattacharya Tumurashar, who's our president and CEO now, have worked together for over a decade. Matt is a gold geologist by trade, went to Mongolia in 2009 looking for precious metals and actually coal was hot and he was able to list a company called Hunu Coal, $20 million IPO, aggressively acquire assets and put it into early stage production and sold that company for 500 million in 2011.

6:19 And Bato was part of that company back then as well. What's most important from that experience and that success that Matt had early on was that he had 300 employees in that company upon sale and only 3 were expats, including himself. And so when we set up StepGold in 2016, that's what we were replicating from that success is to be a Mongolian company listed on the TSX, which we listed in 2018.

6:44 And today, half our board are Mongolian, all of our employees in country are Mongolian except for 2. And during this time of a global pandemic, we actually brought production online without any expats in the country. So that just goes to show how important it is in any jurisdiction to have a local workforce.

7:05 Skilled labor force does exist in Mongolia and we've clearly taken advantage of that and been able to operate where the country has actually been closed. So as I mentioned before, this is very important that, you know, step people, all of our employees in country are Mongolian, including our contractors, Mongolian contractors, and we've really employed a lot of people from within the province. So it's been a big win, as you saw in the capital structure earlier on. We have a buy-in now from I guess all levels in Mongolia, including the locals,

7:38 provincial and federal government. We're now a taxpayer and a royalty payer. And of course, with the Sovereign Fund endorsement, I think that shows you all the support we have in country. So we're very proud of how we run our business today. This is just highlighting some of the social responsibility initiatives we've taken. Right from day 1 we've set up scholarship programs for the locals, We sponsor athletes, we set up a meat and dairy co-op. So we're very happy in terms of how we've grown our involvement in the local community,

8:12 including converting unskilled labor force to skilled labor force where there wasn't that skill set, who are now working for us full time. So, we're very happy with that accomplishment. This is really highlighting our milestones from where we started at the end of 2016 to where we are today, summer of 2020. End of 2016 is when we set up our company. 2017, we acquired both of our assets with our cornerstone flagship asset being the ATO project, which we purchased from Sentara Gold for $20 million. 2018, we listed $25 million IPO And we commenced that development immediately on this first stage 1 starter mine, which is the Heatbleach project that's in production. 2019, we received our final permit after we completed the mine. And today we're in commercial production, generating cash flow in a $2,000 gold price environment.

9:04 What's important here is that we listed in 2018 when gold was $700 less. We had modeled and we're very happy with the margin we had back then when we were building our mine for the first time. And obviously we didn't have to pay for any of this upside given the current gold price environment. So we listed at $2 just over 2 years ago and we're trading 40-50% above that listing price so there's a lot of room to grow here still. Why Mongolia? I think for those who aren't familiar with Mongolia, it's obviously a very resource-rich country. They've had already a tier 1 discovery and mine through Oyatogoy that's run by Rio Tinto.

9:50 That's a copper asset that when the expansion is complete will be, I believe, the number 3 or 4 copper mine in the world. So there are world class discoveries and it's relatively underexplored and it has a large footprint with what we expect is world-class precious metals assets to follow. And that's where StepGold is going to focus on precious metals assets we own today and hopefully discovering in the future. Again just talking about step where we are today we have cash flow which which is great for downside protection today our balance sheet is over 23 million US on the balance sheet in cash we're continuing generating cash flow and working aggressively on our development and expansion project, which is a phase 2 CIL plant expansion. And we believe we could be breaking ground on that expansion second half of next year.

10:44 And of course, We still have all the exploration upside and sizzle that many Explorer co-hosts offer where we're actually funded on that exploration. So we have 3 drill rigs today on ATO and Moongoo currently drilling new holes at depth at ATO 1 in Moongoo, which I'll get to later. And if we do make new discoveries or have good results on our exploration, we don't have to go back to the market to raise any money. So we have fully funded exploration programs on both of our projects, which I'll get to shortly. This is highlighting where we are in the country. So in the easternmost province of Mongolia is Donau province. This province is directly south of Russia. So you have Russia to the north and you have China to the east here. So This is a project we bought from Sentara Gold for US$20M.

11:35 We had previously spent just under US$30M on the project, drilled 6,000 to 7,000m, 20,000m of trenching. Most importantly, we got it fully licensed and permitted for the heap leach that we just built, our phase 1 project, but also our phase 2, which is the CIL plant in flotation circuit. So we bought a build ready project, but took a phased approach where we built the heap leach first for lower CapEx, established ourselves as a producer, a taxpayer, a multi-payer, an employer in-country, and most importantly generate a lot of cash flow that now funds the expansion of our company and our assets. So we have the ability to fund what we think is our equity component of this phase 2 expansion from our own cash flow.

12:23 And that's a very unique situation to be in today, which also funds all our exploration and the feasibility study that's ongoing today. Our second project, actually, I just want to highlight that where we're located south of Russia, this epithermal gold deposit, we're on a trend that goes into Russia where there's large 5, 10 million plus ounce deposits, very similar to ours, many in production. So we believe we're on the right trend here. We're really going to spend

12:52 a lot more money and time exploring our asset where we haven't had time or money to focus on given we're building our first mine. Our second project is the Udham Hundi project in the southwest of the country in a very exciting new gold belt in district. The UK project is a 14,400 hectare exploration license we acquired in 2017 jointly with the provincial government. So it's the first of this kind, 80-20 joint venture, 80-step gold and 20 provincial government that we established.

13:23 It's a very exciting project that has yet to be drilled but has, I'll get to it in another slide, has been drilled all around and finally we get to spend some time and money down here this summer and all throughout the rest of the year. So this is our project. This is obviously in the winter where it's dry and not green. But what it shows you is how easy it is to build and mine and operate. We're not disturbing anything. And so this is the AT01 deposit here. We've literally chopped off the top of the center cap. And I believe we're probably about a 10 meter shallow open pit today. And this will go down to about 40m. So it's a shallow open pit before you transition to the sulphides. So this is where we started our production.

14:11 We've ended up mining, blasting and crushing almost 1 million tons today. And we've had some positive grade reconciliation so far, where our model grade on the mine is 1.25 grams. We've come in at close to 2 grams so far. So we've had a win on both the commodity pricing as well as the grade so far. And those are 2 things you don't have to pay for. That's actually what helped attract Eric, both on our cashflow and this upside that we didn't have to pay for. We just released our first quarter ever as a producer, our quarterly results and earnings earlier this week. And I'll have Jeremy just highlight a few of those highlights there in terms of the revenue and cost and whatnot.

14:58 Jeremy. Thanks, Neil. And welcome everybody. Just to reflect on our Q2 just released, we produced, we sold 12 and 500 ounces in 0.25 2. We had quite a bit of silver, but obviously the silver is relatively insignificant, generated about $19.5 million in cash and revenue and around $12 million in operating income

15:30 from mine operations before non-cash charges. So, you know, very, very profitable, you know, first quarter, good start. And we're very pleased with, you know, just to have that first quarter of commercial production, Q2 in the books.

15:52 We are looking to produce something similar in the following quarter, and I think a very good start. Back to you, Anil. Yes, Thanks, Jeremy. I just want to highlight that when you look at the numbers here, you see over 15,000 ounces produced of gold, but that was produced in that quarter. But the last gold pour, the last gold sale actually happened in Q3 in early July. And so that's why

16:23 the numbers are net. Yeah. 12 and 500 ounces in sales and 15 and 500 in production. Yeah. Is that, thank you. So this is highlighting our current.

16:37 Go ahead, Jeremy. Yeah, I was just going to say, sorry, I didn't touch on cash costs, but the other key metric coming out of Q2, We've been guiding towards life of mine, cash costs of $550 an ounce. Q2 came in under $600. So we're trending the right way and all in sustaining costs of around $730 an ounce. So, both those metrics very much, I'd say bottom quartile and certainly probably bottom decile in terms of global peers. Operating in Mongolia, you do have the benefit of a relatively low cost environment in terms of both labor, but also ability to acquire consumables and reagents.

17:30 And we talked a bit about CapEx. CapEx for this project was under 25 million and that was really benefiting from being adjacent to China. So yeah, some strong financial benefits there. Absolutely. And of course, most people know, but as a new, when you bring production online, usually your first few 0.25 or 1st year, your costs are always going to be higher as expected. Many people don't make money in their first few quarters. We're forecasting our life of mine, cash costs and all in costs. But the goal is obviously to trend lower as we continue to optimize each quarter going forward. Just to be clear, so that we have forecasts of what the life of mine costs will be, but everyone, most people know that the costs will be somewhat higher at the beginning.

18:18 And obviously we're tracking quite well to our forecasted life and mine costs.

18:25 This is highlighting our technical report. This is I think where it gets exciting. This is only based on Sentara's drilling of 67,000 meters. We've obviously have started mining already on the reserves here up top, which is the oxides. And you can see the grade here 1.25 and we're seeing higher today. So We do expect you'll see a material update when we update all 3 deposits, ATO1, 2 and 4, both for the oxides and the sulfides, but also now adding 0.25 deposit and discovery to this table later this year. So we're currently drilling.

19:02 I think we'll be drilling, we'll have probably close to 40,000 meters of drilling, if not more, by the time we get to this resource and reserve update later this year. We are drilling now and we'll look to incorporate all that with our past drilling programs into our maiden resource and reserve update, which includes a new deposit. So this is, I guess, more of a stale table, but it tells you where we started, how we listed a couple of years ago, and you'll see, I think, a material improvement and a lot more ounces on the balance sheet later this year. Just going to flip through these slides to show you what we've built. This is obviously our infrastructure today. This is what our site looks like with the ADR building on the left and leached pads to the right. Now you can see the leach pad on the right here is full on cell number 1 and we're currently loading up cell number 2 as we speak.

19:54 This is the ROM pad, the compressor circuit here with the ADR building here to the top left. This is the camp 200 person camp, hotel, restaurant, cafeteria. We have a mini sports complex here that will continue to build out as we grow.

20:13 And this was designed to grow as we move from phase 1 to phase 2. This is the CIL plant in operation where we will expect more personnel on site. This is the inside of the ADR building. You can see it's a high quality little operation here. So most people are more than pleasantly surprised when they come to site and see our operation, how clean and well built it is. And we do take pride in this. Most people don't expect to see this when they go.

20:43 Okay, so this is highlighting a bit more on where we're at today in terms of cash flow and how we're going to leverage our cash flow from the starter mine in this first couple of years to actually push forward on our expansion project, which is the Phase 2 expansion. So we're looking to complete a feasibility study on this phase 2 expansion by Q1 next year. All the work is already started.

21:08 We're doing additional network, obviously design engineering work, which incorporates tailings, as well as obviously adding a CIL plan and flotation circuit. And we believe we'll have a final number by Q1, which will probably come in at about 100 million US or better, and hopefully a lot better. But assuming 100 million capex for the expansion, clearly you can see from our cash flow and our cash balance today that we can fund a lot of that just from our own equity. So we believe between debt and equity, we will be able to fund this without any external equity funding at this point. So we're in a really good position to be able to self-fund our contribution. But we will take advantage of debt to expand this given it will be on more favorable terms. If you're already in operations and you're already a producer and getting cash flow, you can get more favorable debt terms both locally, hopefully from student development banks and tier 1 banks. We've already started that process

22:07 on funding this phase 2. So we will move quite aggressively come Q1 when we get our final numbers into our expansion into phase 2, which most probably will start second half of next year in terms of construction. And the second half, later in the second half of 2022 or maybe early 2023 is when that production comes online. Which means that you actually don't need to run the heat bleach any longer. All of the other material will go through the CIL plants where our target is to get to 150,000 ounces a year with an initial mine life of 10 years.

22:40 That's coming from a baseline feasibility study from Sentara completed in 2012 with our additional work that's been completed in the last couple of years. And now we're bringing it home with DRA Global completing the last part of this BFS.

22:57 Okay, so this is really a good highlight of where we started and where we're going and where we're focusing on our exploration efforts on ATO and Mungu today. The current mine, the phase 1 mine, the heap leaches is the top 25 to 40 metres of these 3 deposits, ATO 1, 2 and 4. So really you can put a finger in there and that's it. After that, it transitioned to the Sulphides and that's all phase 2 material.

23:23 When we took over the project, we actually took a phased approach. So what we did, instead of building the heap, bleach, CIL and flotation circuit as per the original feasibility study, building it all at once and processing all 3 deposits, ATO deposits at once.

23:41 We took the phased approach on this build. It's lower risk and gives us a better chance to understand the geology underneath and get a better handle on the phase 2, which we think we have. So this box to the right highlights kind of our interpretation of the data set we started with. Sentara did a good job of acquiring data, but we think maybe the interpretation was poor on this deposit. And so really quickly us and SRK was on

24:08 site, found that ATO4 Moongoo looked to be on this 20-kilometer trend. And in fact, just north of Moongoo is another discovery called Byingul, about a kilometer and a half north of Mungu. We've actually put a few holes into Bayangul as well, test holes, and we have encountered minimization. So it's very encouraging. There's a lot of upside, a lot to be done on this property where we haven't had the time or money. We have drilled 30,000 metres to date, and we have had success. And where we've had success is drilling out AT04

24:42 towards Mungu first. So when you go up here from the 0, all this drilling here into the right towards the middle of the Luzardo. So we've now extended ATO4, where originally the model said it was a constrained pressure pipe, and now we've extended that mineralization. So it's additional ounces that are obviously going to phase 2, probably additional oxides that we've hit going into the sulfides that didn't exist when we bought this project. So clearly we've been right here and this is very exciting to show ATL4 which is probably double the size than it was in the model I showed you previously. But of course what's very exciting is a Mung discovery. So Mung means silver Mongolian, and that's the Sentara discovery. They discovered probably with the silver at surface, they had stepped back about 30 meters and went into Mung. And you know, they had success, But they never put a resource, a classified resource on Blue. And we drilled Mungu, when we took over the project, our first drill hole was 46m at 50g Gold and 82g Silver. So it's a higher grade fresh rock deposit. There are a little bit of oxides up about 8m from the surface, but it's

25:47 not material and they seem to be a bit lower grade than ATO. So there's no meaningful, we think, oxide extension here, but certainly on phase 2, this adds a new deposit and a lot more ounces at a higher grade. And what's important here is that Moong is actually open at depth. It's only been drilled to about a vertical 300m so far. It's open to the North here on the right and it's open in this gap with ATO4. So we're going to continue drilling this out and then come up with our maiden resource on Moong later this year. So there'll be a positive and material update to all 4 projects when we update later this year, and that'll clearly show the path to Phase 2, and where you see these additional outages that now add to phase 2. So the way we see phase 2 panning out now is an open pit to about a depth of 300 meters, starting with ATO2 on the far left, and now you're incorporating ATO1, 4, and now Moongoo.

26:46 So that's probably your first decade of production to a depth of about 300 meters open pit and then you're going to decline underground into the high-grade chutes. So very exciting where we've had some success. We think there's a lot more opportunity on this footprint. Like I mentioned in Russia where there's larger deposits, we really want to chase this and see what scale exists here. I mean, it's possible for extensions, as I mentioned, at depth, but also to the east and west and north. And there's an opportunity here maybe to find other parallel structures that come off of this trend, just like ATO1 and 2 come off of ATO4. Maybe there's others. And so we're very excited to finally get back to exploration. So I mentioned 3 drill rigs on site today. The focus on those 3 drill rigs are at depth drilling, ATO1.

27:36 So we have 1 rig that's ATO1 drilling at depth, deeper hole here. So hopefully we'll encounter some maybe new discovery deposit extensions. But we now have the time and money with Eric Sprott's recent investment has given us a much stronger balance sheet to be more aggressive on exploration. It's a fantastic position to be in. The other drill rigs are focusing on Mungu and we're looking at Mungu at depth here. Like I said, it's still fairly shallow, so we're now looking at these deeper extensions of Mungu at depth. Very exciting with the expectation that the new slow from this drilling program currently should start trickling in in September. We've drilled a few holes already and they're actually at the lab and they'll start coming in, we think in the coming weeks. So very exciting to be able to release our drilling results in September, hopefully time frame or within a few weeks. So that's all new drilling and I think it'll be very exciting to the market.

28:41 Many have not paid attention to our previous successes. In our last couple of programs, we've had quite significant successes in drilling and I think we should highlight that again in the future and then show us some of the upside as we proceed. So that's the ATO in Mungu. Where we are today with the phase 1, how we're moving very quickly to phase 2 in short order. Given the economics on a CIL plant, you're going to have higher recoveries on gold and silver. We have a low CapEx. You have no barriers to actually expand. So we'll be, you know, all the heavy lifting to expand is done so it makes a lot of sense to bring that online as soon as possible. At a 150,000 ounces gold equivalent run rate with an estimated margin of $800 to $1,000, can't say for certain, you can see how quickly that cash flow and even the numbers could pile in on phase 2 and why we're aggressive to move that forward. So that's the ETO Mungu project and the highlights there. I don't know if I missed anything, Jeremy. If not, I'll move to UK.

29:48 You're muted, Jeremy. Sorry. You're muted, Jeremy. Sorry. So, one of the things, just to reflect on, you know, the profitability of the project, you know, I think it's noted in the release, we've mined over 1 million ounces. And when you look at even at the cash costs of under 600 and all in sustaining of 730, the point to note and why there's a very rapid accumulation of cash is that We've bought and we've essentially paid for that million ounces already. It's already in. It's already sort of come out of the bank. So the cash flow, the cash dropping to the bottom line is actually quite a lot more significant than is reflected in the cash cost numbers. Cash cost numbers really reflect an allocation, based on recoveries in grade, allocating costs of the leach pad that's already been built.

30:44 So that's why you're gonna see the cash build up rapid here. We were guiding the market to over $30M in cash at the end of this year. And that's incorporating a pretty aggressive exploration drill program, particularly at ATO. So just to add to that. Yeah. Thanks, Jeremy. Yeah, that's very important that we're targeting 30 million US at the end of the year on our balance sheet. That's net of expiration on both of our properties, sustaining CapEx on the Heat Bleach project, as well as the spend on the feasibility that's underway now. So we're not... And taxes. And taxes. So it's a very good position to be in where now we can just focus not on the us on execution and growing our company and hitting some of these new targets.

31:36 So with that, I'm just going to highlight the UK project, the Udham Hundi project I mentioned earlier on the map. This is in southwest of the country, very exciting project for us. It's 14,400 hectares, never been drilled by anyone. So not us, not previously, but has had drilling all around. So these 2 licenses to the north and south and the white, Altonar and Bayan Hundi, which I believe is now called the Hundi Gold Project. That's Erdene Resources, ERD, and they've done a fantastic job in the last couple of years exploring this region and having some really good discoveries, really high-grade hits on both projects. And now I think they're sitting at about 1 million ounces between their 2 deposits with a BFS on their product to the south. These are licenses that are joining to our property. So as you can imagine, our property is probably highly prospective.

32:30 We're very excited. We've done all the groundwork, IP, magnetic soil sampling. We have our 4 targets here in Discoveries, Milky Way, Alton Sum, Golden Step and Blue Hill. And finally, this summer, we've actually commenced a trenching program that's ongoing today at Milky Way. And then we'll move to Alton Sum and Golden Step and Blue Hill in the coming weeks and I guess months. And then we're going to mobilize a drill rig down here. And for the first time ever, we're going to drill this license. So this is something obviously has 0 value in our stock price today, which has all the upside of an Explore Co. In a large package where you have obviously the neighbours who've had success. So it's a very exciting project for us that we finally get to spend some real time and money on. And we really look forward to updating the market on that. I think trenching results as well will trickle in September along with some of the ATO Mungu drilling results. And then once we start drilling, again, too early to say, maybe October timeframe onwards, we'll get some drilling down here for the first time. And I think that could be very exciting drilling.

33:34 When you look at some of our Explorer coals elsewhere on the TSX Venture and TSX and with some of the hits they get, I mean, we're getting 0 value here. Very excited to see what we have down here. And We believe this could be another production center for the company. You can call this phase 3 if you like, but it's not the same property. There are no synergies, but it could be another production center where we could build a third mine. So we have a good pipeline of organically growing through phase 1, phase 2 in the UK. Not relying on any M&A to get to the size and scale that becomes relevant. However, we will focus our time and efforts on semi-native country given our success in terms of showing execution, our support in country, and I would say limited competition while the country remains restricted. We want to be a little aggressive on tying up other assets that we would like in country sooner than later with our goal of building a mid-tier precious metals company focused solely on Mongolia.

34:35 With that, I think we can turn over to questions. Bianca. Hello, can you hear me? Yeah. Great. Let's jump right into it. We have a bunch of questions. First question from Carl, has Step seen any triplet results so far? What's a triplet? I don't know. That's a good question. I have no idea. Carol, if you want to elaborate in the comments, please do so. But in the meantime, let's jump to the next one. The 550 USD, is that all in sustaining costs? No, No, that's a cash cost. So that's essentially a mining cost.

35:25 So all in sustaining includes sustaining CapEx and corporate G&A. So all in sustaining is about 730 in the first quarter. We think that will come down over time. As Anil mentioned, we've got some significant costs in the first quarter of production, but we will see. I think we'll see probably see all in sustaining in the 650 range life of mine as we move forward. Warner asks, are you milling yourself and what are the energy costs? Sorry, we're not really milling. It's a simple mine, crush and stack operation.

36:12 And then the material goes through a heap leach circuit. We use sprinklers and dripper tubes. We have pregnant pond, barren pond and it runs through an ADR plant and comes out as a Gold Dore bar. The energy costs, we use diesel generators at the moment. And those costs are actually, at the moment. And, you know, those costs are, you know, actually, you know, as you would expect, you know, we do spend quite a bit of money on fuel. But, you know, there's certainly in line with similar operations, we get our diesel from Russia. Similar question here regarding energy costs. With the recent decline in oil and gas prices, how will that improve the oil and sustaining costs?

37:01 Well, oil and gas prices have jumped around a little bit. I think we haven't seen a – we obviously benefited from lower prices earlier this year. I'm not anticipating that that's going to make a material difference to our all in sustaining costs. And if you're using $650 as a guide, $650 to $700 as a guide price, I don't expect it will benefit hugely. I mean, again, on the Oxide project, most of the money has been spent. So really all we're doing is we're allocating the cost of the million tonnes that we've mined over the last 20-months and additional mining costs as we move forward. We do benefit from our mining costs are not extremely low, but they're modest on a global scale.

38:02 And I think one of the things we really benefit from being in Mongolia is accessibility. We don't talk about that enough, but you know, this project is a 7 hour drive from Ulaanbaatar, the capital, 6 hours on paved Road. We're very close to the Chinese border, as Anil mentioned, and we're able to get reagents and parts and consumables into the country at very good prices and very high quality equipment as well. And that's what really enables us to do this. Well the other the other key thing you know there are a number of comparable projects in Canada that operate in almost the Arctic. There's a fly in fly out projects with costs in the $1,200 $1,300 range And they're very difficult projects to mine.

38:53 As you can see from the video and the comments in Ilme, we're mining essentially gravel. We're taking ore out of a pit or off the top of a hill, putting it through 2 crushers and then flushing the reagents through. So it's – and the topography of the area is the perfect – is perfect for heap leach, slightly sloping. And that enables us to come out with this extremely competitive cost structure. Next question says, with the 40 million USD EBITDA, with what goal price was that calculated?

39:40 That was using a $1600 goal price. You know, I think you're going to have swings and roundabouts. It's going to be some things that will end up costing less. And first year of production, there will always be some twists and turns on production. So we're sort of staying with that guidance on EBITDA. Clearly, gold price is higher than that right now. But we're keeping that guidance just so we've got a little bit of cushion if we have some drops in production along the way or other factors. So guiding again, $30 million of cash in the bank at the end of the year with a very busy gold, a very busy exploration cycle ahead of us.

40:31 And so we're gonna keep with those 2 numbers, 40 million EBITDA and $30 million in cash flow, cash on the bank. Paul Renkin asks, will you leach through the winter? Yep. Yeah, Janil, I've probably talked enough. Do you want to take that? Oh, no. Yeah. To run all year round. The other heap, which is in country and even in cold weather, similar to us, can run all year round. You just have to expect that there is seasonality to the recoveries you'll get in the winter months. We have modeled that, so you will see less ounces produced during those few months over the winter, but we will continue to stack and leach in the winter.

41:19 There are a few ways to treat it through heating solutions and tenting and all that stuff. The technical team, our operation team works on it and has experience on it. We have a team that's worked on operations like this in country all year round. So our plan is to run all year round on leaching, mining and crushing and stacking. Mongolia is, that part of Mongolia is desert like. It's incredibly dry. One of the biggest problems with heap leach projects is rain. If you're working on a heap leach project in Indonesia, you can get 350 days of rain. And that's a whole different other problem. Because it just messes with your solution and dilutes and dilutes your Gold solution. So we don't have that problem. We do have a problem with cold. It gets cold.

42:14 It gets cold early in Mongolia and it gets warm early. So very similar sort of summer winter split to just sort of north northern China if you know that area. So we can you know March can be 25 degrees. So you know they come out of winter very quickly. And again, because it's dry, we're able to use the tinting and heating, you know, without having to worry about precipitation. Very little snow in that region. Another question here. Did you inherit any existing permits at the time of acquisition from Sentara? Yes. Yes, we did. As Anil mentioned, this project is fully permitted for phase 1 and phase 2.

43:06 So, you know, there are, obviously we needed to get the reagent permits, but we're essentially permitted for this phase 2, fresh rock project. So we're going to be able to move reasonably quickly into that second phase. That's a big advantage not to have a permitting overhang or barrier. I mean, most people, you move to this stage too, and it could take years to get all the permitting complete. We've done all the heavy liftings and Tara did it. We obviously bought the project with all the permits and the only one you couldn't get before you built the mine was that cyanide transport usage and storage permit which we got in December of last year, which also carries on with phase 2. So we're in a very good position here to just keep moving forward. Thomas Szymanski asks, do you plan to hedge the gold price for the future production sales next 1.25 or so in order to secure margin for future expansion and financial needs?

44:03 We're not we're not looking at at hedging the gold price at this time. Yeah, I think most of the shareholders that we've spoken to are looking for exposure to higher gold prices. So we're not planning on that. It's actually not that easy to hitch the gold price, certainly in Mongolia. But we are looking at a number of options in our treasury unit to ensure that we maximize interest. Interest rates in Mongolia are relatively high, so we are able to benefit from some cash management options, but no plan at this time to hedge precious metal prices. Are you planning to join forces with the Airdene resources on development of UK project region in the future? No plans I don't think. Right Anil?

45:03 No plans. I think we haven't, We actually haven't drilled our own property. Like I mentioned earlier, there's a chance for a mine or 2 on our own property. I think we need to see what we have first before we look at any consolidation or joint venture or any of that stuff. But as of now, our team is looking to build and operate their own mines as we did with phase 1 and as we'll do with phase 2. And I think we'll see what lies ahead. I think our focus for now is let's get drilling on our property. Let's see what we have and then we'll take us, we'll see what the next steps are. Yeah I think Odeen is about 2 or 3 years away from production So I think it's early days yet and early days for them as well.

45:52 Similar thing here. What geophysics structures are STEP targeting at the UK project? I think we're early in that. I think obviously we've seen the BFS from Moudin. There's an expectation that geology is going to be relatively similar, but I don't think we're in a position to really speak to that. We've just started trenching and drill rig on site in the next couple of weeks. Yeah, obviously we have the data from surrounding areas and we've done our own geophysics studies to come up with these 4 discoveries, but they're quite big. Often, some of this thing is 3km by half a kilometre. That's where this trenching is going to come into play to give us some more data so that we can start drilling and hopefully de-risk that drilling.

46:43 I think it's still early days to comment on anything. But again, looking at your neighbors, you can see that you're probably a good chance of having similar geology to the north and the south, given where and how they're drilled. Raziel Zisman asks, are there any alternatives to diesel? Is there potential to use renewable energy in the future? Yeah, absolutely. That's a focus of ours. On phase 2, you're not going to be relying on diesel. It will be too costly and obviously not environmentally friendly, we would say. So we are looking at all the alternatives for powering up phase 2, which would include connecting to the grid and hopefully a toggle between renewable energy sources.

47:33 So sun, I'm not sure about the solar opportunity, but I know wind, we are on the Mongolian steppe, you can see there's nothing hindering the wind. So it gets very windy on site and we wanna take advantage of that. So we're certainly looking at wind power. We've talked to a few parties already who actually want to fund it and develop it themselves. And we certainly want to look at that. There's already a 50 megawatt wind power farm in the south of the country. We would like to do anything we can to help the country grow renewable energy sources. Yeah, we're looking at wind and solar. And yeah, we're actually in the middle of a study right now to assess that we are gonna need, yeah, we are gonna need to have something, yeah, significant power, significant additional power to start the CIL operation.

48:29 Speaking of, We have a question here from Michael Coogan, who asks what will the CIL bank cost? Yeah, like I mentioned- I think we're- Go ahead. Go. Yeah, I mean, I think- Go ahead. Go ahead. Sorry, you go. So 100 million, I think is the number we've used. It's actually lower than that in the current study. The current study comes in a little bit lower than that, but we're using 100 million as a guide. We did, as Anil mentioned, we did a full update of our feasibility study last year, about an eight-month process using external consultants in Mongolia to support our permitting process for the reagents. And we are having DRA update that, and we're doing a full run-through of new equipment sourcing procurement.

49:23 We do benefit again from being next to China. There's significant world class equipment providers just across the border in CIL. Another question about CIL. Will the CIL plant be housed in the ADR facility to help reduce CIL plant capex? I don't know the answer to that. I don't think so. I don't think that's the plan at the moment. But if it made sense and it fits, maybe. I actually don't know the answer to that, though. Yeah, I don't think so. I think you've got to build an additional facility for that. The ADR plant is reasonably full.

50:12 We have built this plant and all our operations on a modular basis, as you will have seen from the video and the photos, this is—we don't have any—we're not restrained by topography in terms of our ability to bolt on additional facilities, and we have structured the project with the phase 2 in mind. So, allowing additional space, both for leaching and for construction. We do run this company like a small company. We're all owners. So we're always looking at the most cost efficient, but not giving up on quality, but cost efficient ways to grow and build this expansion for sure.

51:01 I have 2 pretty similar questions, but they both boil down to what are the potential risks or challenges that could prevent Steph from meeting the 60,000 ounces by year-end guidance? Sure. Well, I mean, that's an aggressive guidance. You know, it's very comfortable to say 60,000 ounces over a 12-month period, as should be, given we started production only in April this year, production for the first time. But to hit the targets, we have to move aggressively for the rest of the year. But you can't give up on safety. So there's obviously risks of not hitting that target by the end of the year. But we have the luxury of a higher gold price, our cash flow and EBITDA most probably won't even be affected.

51:52 But if we don't hit it, then we're comfortable hitting it over a 12-month period, I think, Jeremy. Getting to it is still our intention and we're going for it. But you have to remember, we brought this production online with 100% Mongolian workforce, who are obviously skilled and had done an amazing job. But the guy who has built and operated the heap leach in many countries and including ours, who actually knows how to optimize and really get to as much as gold as possible is not even in the country yet. And so we have to, you know, that's the risk of not having him in, I think, the property area is probably, you probably pushing back on that target.

52:38 Yes. I mean, I think simple math. We did 15,000 ounces in Q2. We're hoping to do something similar in our third quarter. And having said that, in this type of operation, you are able to catch up. So there are some—it's not necessarily a straight line, particularly given the fact that we've already mined over 1 million tonnes. There are options. And so, I think we're just trying to run as hard as we can and produce as much Gold as we can in this environment. And bottom line is, with what we have today, what we're doing today, both on generating cash flow and all this exploration and expansion potential, We're not even valued at a 30,000oz producer, let alone a 60.

53:37 So while we're doing everything we can, there are levers to pull to actually increase production as we have so far. I think the focus is really on cash flow generation in this phase, making sure that we operate safely and that we maximise the cash flow over the next 18, 24 months and leading into that phase too. And that was always the plan. I mean, I think there have been some people look at our company and look at a small, a short mine life. I mean, the oxide was always meant to be short and it'll probably be shorter than the 4 and A05 years we can actually run. ATO4, we're very optimistic about the oxides of ATO4.

54:27 Now about to start mining that. So, I think we're confident that we're over the next 18, 24 months, we'll be able to maximise ounces and cash flow. And the most important thing for us is to operate safely, but control our costs. And I think The key thing coming out of our Q2 results is we've really underscored the cash flow generating potential of this project. We're being pretty conservative on our cost allocations and we won't know the life of mine until the mine is through. But we're very comfortable that we're operating in a, you know, to maximize cash flow. Yeah. And that kind of goes to one of the other questions I saw there anyways, in terms of funding, you know, we don't, There is no equity raise required at this point to actually bring Phase 2 online. We have our own cash flow generation that will actually fund that component in adding debt in. So If all goes well, there is no dilution required to actually bring that expansion on. We have our self-funding ability here with already having US$30M at the end of the year and adding to that the next couple of quarters next year before we even start. So I think we're very confident in being able to fund that. But that's not to say that we wouldn't raise equity at higher levels. If our stock does get re-rated, as it should, in the coming quarter and we trade more like our peers,

55:58 which should be multiples today, then you could raise strategic equity to expedite a build or buy other assets. The best thing is we don't need to raise any money, so we're not going to raise any money at these levels. Great. We still have a few questions, but we're coming to the end of time, and I want to make sure that we have time for a final word from you both. So what I'd encourage everyone to do is if you have a question that you weren't able to get answered or if you just thought of a question and it just came to you and you'd like the Step Gold team to answer them, I'm sure they'd be more than happy to answer any and all questions that you send directly to them. But Anil, Jeremy, thank you so much for walking us through this update. I'd like to pass it back to you both for the final word.

56:46 Thanks, Bianca. And yes, please, everyone, reach out directly. We're always open. We talk to any and every investor we can and love to clarify and talk about what's coming. So please do reach out directly and we'll be happy to answer any of the questions we can that weren't answered today. So I think just highlighting where we came from in the last few months and where we're going. We're in commercial production and we announced commercial production early July. We brought in with additional capital that has strengthened our balance sheet and put a lot more eyes on the story. And we think it's a great endorsement. And he's the equivalent to a blue chip institutional investor. And that's where our focus will be to bring others on our roster in the coming quarter. We've now commenced expiration on both properties. So that's a lot of news flow on that expiration backed by the resource reserve update at the end of the year and the final piece will be the feasibility study in Q1. So lots of good news and thank you for supporting your time.

57:49 Okay, and Just a bunch of questions on the phase 2 project, including use of renewable. There's been a few follow-up questions on that, So happy to take those questions. We are not providing too much information on that project, but happy to take any questions offline on sort of number of megawatts and sort of rough outlines. That information is not public, so it's not price sensitive, but I can give people some sort of idea of the types of power requirements we'll need. And there's also some questions on Mongolia and taxes and total group exposure and I'm happy to happy to take those at Jeremy at step valve calm excellent thank you guys great thank you