Stonegate Capital Partners Updates Coverage on Steppe Gold Ltd. (TSX:STGO) 2022 Q3

DALLAS, TX -- February 1st, 2023 -- Steppe Gold Ltd. (TSX:STGO): The full report can be accessed by clicking on the following link: https://stonegateinc.com/reports/STGO_22Q3.pdf

Company Updates

• Flagship projects strarts commercial production:  Steppe Gold’s flagship project Altan Tsaagan Ovoo (ATO) is fully constructed and began producing gold and silver in the Spring of 2020. For F22, the Company has updated that they produced 7,150 ounces of gold in 4Q22 to bring total gold production to 33,500 ounces in 2022. This was driven by 958,288 tons mined and 922,051 tons crushed and stacked. Additionally, management has indicated that they have a total recoverable gold inventory from oxide ores at approximately 80,000 ounces.
• ATO property projected to generate positive cash flow: The ATO property is projected to produce strong annual cash flows with annualized production expected to produce ~50,000 oz of gold per annum from the heap leach operation with cash cost per ounce of ~US$550 over the life of the mine. The Company believes this should equate to $40M+ of EBITDA.
• ATO expansion project moving forward: Steppe has three diamond core exploration drilling rigs focusing on resource extensions at AT01 and AT04 as well as Mungu, a high grade, near surface gold and silver potential site located northeast of the current resources at the ATO project. Importantly, the Company published a bankable feasibility study in November 2021 for the expansion of the ATO Gold mine. Highlights include increased production to 100,000 oz of gold annually, an estimated mine life of 12.5 years, and an after-tax NPV 5% of $232M with an IRR of 67%, and a payback in 3 years. Production on phase 2 is expected to start in Q2 2024. Steppe has just recently announced they have approval to connect to the state grid for power in phase 2 as well which will equate to >$100/oz in savings a significant milestone and achievement. Financing for this expansion is done through a $65M 3-year term loan at 9% interest raised in November 2021. Approximately $59.7M was funded through the Gold-2 National Program, facilitated by the Central Bank of Mongolia.
• Additional exploration assets: Steppe’s Uudam Khundii (UK) property currently encompasses 14,397 hectares located 800km south-west of Ulaanbaatar and holds one exploration license. Steppe Gold has commenced initial exploration activities on the property. Steppe has now commenced a ~3,000m drill program with maiden results expected in 1H23.
• Operations update for 2022: Included in the year end update was a large supply of reagents thanks to a strong supply route leading to uninterrupted operations since the resumption of irrigation in the spring. Without the presence of technical or operational issues, this correction in supply chain management leads us to believe that operations should continue uninterrupted for the foreseeable future. Management has also announced the completion of a new crushing unit that is ready to take on the substantial mined ore inventory.
• Valuation: We use a DCF analysis off our mine models for phase I and phase II at the ATO mine. Combining the separate valuations for phase I and phase II, we arrive at a range of C$3.13 to C$3.49 with a mid-point of C$3.31. See page 10 for further details.