Steppe Gold: An Action-Packed Expansion Story to Watch in 2022!

0:07 Hello, everyone, and welcome to Stepgold's live investment summit today, hosted by 6. Today I'm joined by Greg Wood, Stepgold's Chief Operating officer, as well as Anil Warich, the Stepgold's executive vice president. The team is going to walk us through a company presentation and after our presenters are going to be accepting questions. You can submit your questions using the Q&A panel found on the right hand side of your screen at any time today. And as always, this summit is being recorded and it's going to be available to watch afterwards on Six.com in the coming days. But without further ado, Anil, I'm going to kick things over to you to get us started. Thanks very much, Cam. And thank you, everyone, for joining today's kickoff summit for 2022. Especially I want to thank Greg, my partner who's in Australia right now with his family on vacation. So I appreciate you taking time and happy Australia Day to anyone else who's coming from that side of the world to join us. Thanks for taking the time to hear again the step story and what's in line for the next year.

1:06 For anyone who may be new to the story, obviously, if any of these participants today are supporters and we really thank you for your support from IPO or over the last year. Last year being a very difficult year for everyone, not just StepGold, not just Mongolia, but with COVID, global supply chain issues, certainly wasn't easy. But saying all that, we still were able to grow the company, create value for our shareholders and grow our asset base and what leads to be an exciting 2022 ahead of us. So just as a quick refresh for those who may be new to the story, We started this company at the end of 2016 as a private company with the aspirations of becoming Mongolia's premier precious metals company. So StepGold was formed at the end of 2016 with no assets and those aspirations. In 2017, privately, we acquired our first 2 assets, our cornerstone asset being the ATO project, which we purchased from Sentara Gold for US$20M.

2:10 We have previously spent about US$30M on this project. Our second asset we acquired was the highly prospective UK license in the southwest of the country, in the Bayan Hongor district, where another company and peer of ours, Erdene Resources, have had a lot of success around us. It's a very exciting exploration license that we hope to start drilling in the next quarter. In 2018, we listed our company. In fact, we were the only mining IPO on the TSX, on the main board in 2018. In a very tough market, we listed the company, raised $25M and built our first mine. So roll around to April 2020, mine was fully built, commissioned and ready to go. And of course, that was the beginning of what we know as COVID. So in a very tough environment, again, we were still able to bring production online for the first time ever and more importantly, with a 100% Mongolian team.

3:10 Not being able to travel and not relying on expats to run our business certainly didn't impact us. We brought production online for the first time ever, declared commercial production a few months later, very profitable out of the gate, start up, ramp up, all with a very skilled local Mongolian team. So we're very proud of that accomplishment in a very tough environment. In fact, many of you know that Mongolia had closed the borders back in early 2020 with Russia and China, you know, preemptively, proactively trying to mitigate the cases. And in fact, they had really good 2 years of no cases in country, very minimal cases in the country. And that allowed us to operate safely, our team safely. And we brought production online. Of course, the world continued to evolve and it's become very tough for a lot of people, obviously to get in the country, to procure key chemicals, reagents to produce.

4:06 And we've seen that with our deferral of production last summer. But while deferring production, we still built up a strong inventory to hit the ground running at the end of March, early April this year, when we restart production. While the production was deferred last year, we still managed to double our resource, increase our resource base that formed the backing of our Feasibility Study that we released in October of this year. That Feasibility Study added another 10.5-years of mine life. That's a permanent project, expansion project, and essentially doubles our production profile for an additional 10-years. A great accomplishment, a great expansion just around the corner.

4:52 2 weeks after that in November, 2021, we actually received half of the CapEx requirement for our phase 2. So our phase 2 was $130 million, roughly US of CapEx requirement. We received $65 million from a landmark investment debt provision from the Bank of Mongolia, sponsored by the Bank of Mongolia. So it was a very strong show of support locally, where within 2 weeks of releasing a feasibility study, we actually brought in that amount of capital to expand, to not slow us down. So we're actually underway on our phase 2 expansion, while restarting and bringing phase 1 back online and generating cash flow in short order. So, a few other accomplishments, I guess, over the last 12-18 months, we've managed to add additional institutional investors to our roster.

5:47 Obviously, Eric Sprott is an institution in itself. He came in in 2020, in the summer of 2020, and now owns 11% of our company. Fidelity International is now a 6% shareholder of our company. They've been buying on market over the last 12 months. So we have managed to bring in additional sophisticated investors to back our story. In addition, we've actually increased our bank coverage. Hannum and Partners launched coverage on STEP at the end of October, early November of last year. The current target price is $3.15. Stifle GMP launched a year before that. Their current target is $3.50 and Haywood has been covering us in its IPO. So we have 3 banks that cover us today and we expect to increase that bank coverage over the next few quarters as we get back into production and continue the expansion into phase 2.

6:38 As a reminder, we listed at $2 in 2018 when gold was just under $1,300. We hadn't built a mine. We had that financing CapEx build risk and yet we're trading today at levels below where we listed. And certainly some of our investors who are long-term investors have come in at levels higher than what we're trading today. And most importantly, I think you have a aligned board and management team. Today we own just under 20% of the company. Nobody sold a share. We continue to accumulate and we're in it to build a much bigger company. So here's just a highlight of kind of what we've built and where we're going. You'll get to see in the video shortly what it looks like with the phase 2 overlay on this phase 1 operation. Phase 1 currently has the ADR building to the left there. That's where we produce Gold and Silver Dory bars on site.

7:31 You have your leach pads on the top right there. We currently have unprocessed ore sitting on the pads ready to go. An inventory buildup over the last few quarters so that we can start leaching immediately once the winter thaws over. We've demonstrated from inception of production that we can produce, we can recover and it's highly profitable production. Obviously, with some delays in procurement, deferring it, not bringing it offline per se, but deferring it. We've now haven't lost it. We're just gonna build a catch up here in the coming quarter. You can see here in the middle is the crusher for phase 2. In fact, that crusher, which Greg might be able to confirm as well, will be operational early Q2. So it's being constructed as we speak, should be commissioned towards the end of this quarter early Q2, which will allow us to actually increase our crushing rate and hopefully processing rate for phase 1. So Over the next 2 years, while we're building phase 2 and we're adding the flotation plants, the crusher is already here now, upgrading the power, building a tailings facility, you'll have hopefully increased production from phase 1 with this additional phase 2 infrastructure already in place. We're really going to hit the ground running this year.

8:49 You can see everything is already there. Roads are there. This is a seamless expansion to phase 2 where we're going to be adding an additional plant by the ADR building there. It will be about 4 times the size of the ADR building and we'll start constructing that later this year. We are in a very good situation to double our production profile over the next 2 years and that will be for another 10 years.

9:18 The other project I mentioned earlier on is the UK project. This is the highly prospective exploration license that we've yet to drill. It's never been drilled. It's our acquisition from 2017. We've done the groundwork, the IP, the magnetics, the soil sampling, the trenching. We have 4 discoveries that are drill-ready and we've yet to be able to drill down here. We're really looking forward to drill down here for the first time ever. Hopefully by April or May this year, we can start an exploration program down here. The good thing is our neighbours, Urdine Resources, who are the white boxes to the north and south adjoining our license, have had some tremendous success in the last couple of years. They've had some new discoveries. They've grown their ounces and their resource base. They're now well over 1 million ounces. They have a Feasibility Study and a mining license on the license to the South of us to build a plant as well in the future. Certainly a project that's advancing and we're in the right jurisdiction.

10:13 We're very excited about this pipeline project when we have the time and resources to get to it in short order. The Phase 2, as I mentioned earlier, is the Feasibility Study that we put out in October of last year. The highlight numbers here are CapEx of US$130M, all in cost of US$850M, IRRs are well over 60%. NPV at about $1650 gold, $1625 gold is $232 million US.

10:42 Given where our market cap is today, that's a pretty significant boost. Quick payback and a lot of room for optimization. So what this feasibility study does include is upgrade to power to grid power. So currently it relies on diesel gensets, which we're using today in phase 1. That upgrade alone should be able to achieve about US$10M of savings a year on OPEX, which means the lower our all-in costs roughly we expect by US$100 an ounce. So there's room for optimization on all-in costs. Second, we believe there's a lot of optimization opportunities in terms of growing the resource base. This was based on ATO 1, 2 and 4 and very minimal amount of Munk, our new discovery. Now you can include Munk going forward.

11:28 We have completed some additional drilling on the ATO deposits. All that will be incorporated to extend either the life of mine or grow the production profile from circa 100,000oz a year to our target of 125,000oz to 150,000oz a year, or both, increased mine life and the production profile. It's very exciting to be able to optimise this baseline study in the coming quarter. That will be another update to the market while bringing production online, while breaking ground for phase 2. We think there's a lot of room for improvement and optimisation on this phase 2 operation.

12:01 Lastly, we've had a lot of success in, you know, the things that we do outside of operating, meaning that how we benefit the local communities through our ESG, our social responsibility, our meat and dairy co-op we've set up, sponsoring athletes to the scholarship programs, to the marmots, to the planting of the trees, and of course, the environmental management plan, where we achieved a high score of about 93% last year. So it's a very,

12:34 very strong accomplishment for our team. We don't let small, you know, one thing slow us down where we can't continue to grow. And I think it's very important. And lastly, we ended the year in Mongolia being recognized as the Mongolia's Development of the Year in 2021. And with that, we can actually hand over to Cam to show you a quick video before Greg gives an update on operations.

13:36 Thank you, Kem. Thank you, Cam. With that, I'm going to turn it over to Greg, our COO. Greg?

13:48 Thanks Anil. Good morning everyone. I'd just like to give you all a brief rundown on operations, looking at what we've achieved for 2021 and what we can expect from a very exciting and busy 2022. The highlights for 2021, as Neil just mentioned, included our environmental department achieving a score of 92.9% on their management plan, which is obviously a fantastic result, and also being recognised by Bloomberg as the development of the year also for 2021. In fact, I'd actually like to take this opportunity to highlight the outstanding job by all departments in 2021, which, as Neil mentioned, was a very difficult year for us in terms of COVID, maintaining strict COVID protocols, whilst at the same time, running the site to a very high level of dedication and professionalism. So it's something that we're very proud of. And we just think we've got a really fantastic team on the ground in Mongolia who work extremely hard.

14:53 The mining department produced 923,928 tons of ore and as at the 31st of December the ROMPAD had a balance of 552,594 tonnes at an average grade of 1.2g per tonne. In 2021, also saw the commencement of mining at the ATO4 and also included positive grade reconciliations across both ATO1 and ATO4. During 2021, we stacked 833,594 tonnes at an average grade of 1.9g per tonne.

15:41 As Anil mentioned before, currently the leach pad has approximately 1.6 million tonnes of ore across all 4 cells. What places Step Gold in a fantastic position for 2022 is the fact that approximately 550,000t of that 1.6Mt is totally unleached ore at an average grade of 1.9g per tonne. As Anil mentioned before,

16:09 once we get back into production in March, that ore is on the leach pad, prepared and ready to go. We'll see the mining and the stacking rates significantly increase for 2022 due to the inclusion of the new crusher, which will more than double our current rates. And we estimate the new crusher will be operational end of Q1 or the beginning of Q2.

16:39 Prior to the conclusion of 2021, we completed the construction of the boiler house. This has been an actually huge success and allowed us to continue running solution through the winter. This will no doubt be instrumental in Step achieving our production goals of 60,000 ounces for 2022, as we'll be able to run for the entire year. Finally, 2022 will also see the ongoing work of the Phase 2 expansion plan, which we just saw from that video, and that will commence construction across all major areas in 2022. I think overall, 2022 is shaping up as a very exciting year and I think we should see StepGold achieve higher results across the board.

17:27 Thank you. Thanks, Greg. Yes, so Just to reiterate, obviously, we've had a very tough 2021, as many have. Maybe more for us. I think logistical issues, procurement issues hit us before many other mining companies, given where we're located or even in our process. But certainly we've set ourselves up for a very active, we think,

17:58 more successful 2022. A lot of things have advanced significantly to set us up for hitting the ground and running. A lot of things going on between the restart of production, which means the restart of cash flow, which is cash flow that funds our exploration program on both properties as we restart exploration at ATO after the drilling program from last fall, which those results are still pending and should come out in the coming month or 2.

18:26 We'll have a new program design there. We'll have the maiden drilling at the UK project, which is a very exciting project and could be another production center for us in the future. Lots of opportunity down there as well. So having self-funded expiration from our own cashflow by taking on debt obviously as well to fund our phase 2 is a good position to be in. And certainly continue to advance phase 2 is a big deal because it's a two-year build, give or take. Obviously, we can't control some delays that may exist given the supply chain issues that still exist. COVID, of course, but 2 years, we think we're doubling our production and you're adding another 10 years from where we're at today, which is only about 2 years of oxide mine life ahead of us, which is still a significant amount of cash flow that's generated from phase 1. That oxide mine over the next 2 years, as we restart production, should generate a significant amount of free cash flow.

19:27 Ballpark, you're talking about somewhere between $40M to $60M of net cash over the next 2 years. That's a significant amount of cash flow for a company of our market cap today with another project that will come online soon after that will double that production profile and profitability. So quite exciting times for us. With that, this update was meant to obviously just get in front of new investors who maybe have us on the radar, supporting investors, obviously, and really get to the Q&A and answer any questions that people have today. Great. Well, thank you so much Neil and Greg for the great presentation. Great video as well. I'd like to remind everyone in the audience that you can of course ask any question you like using the Q&A tab found on the right-hand side of your screen. But with that, let's launch into the first couple that we've had. This one comes from Carl.

20:19 When are you looking to start the production again? Any comments? You predicted 60,000oz and then 50,000oz, now 120,000oz,

20:28 but that the production is much lower than that. I think you've addressed this head on to a degree.

20:37 I can expand on that. Sure. Absolutely. And thanks for that question, Carl. If you remember, we started production in April 2020. Our production profile was to be 50,000oz on a 12-month basis when we start production. So back in April 2020, we produced 15,000oz for that first quarter between April and June 30th. So a fantastic start, very profitable in the low $700 oil and cost.

21:02 The second quarter, we also produced 12,000oz to 13,000oz. Third quarter, it was closer to 10,000oz to 12,000oz, if I recall. So we produced over 35,000oz over 9-months, which gave us the ability to actually track closer to that 50,000oz target. Now, we took production offline in the winter because we started seeing

21:24 the procurement delays and we did not want to leach through our first winter, not having the next top-up of cyanide supply or reagent supply. We did that. We started production in April 2021. And then of course, in July, we announced that we have to defer and curtail production. And it's really just deferral. It's not like we've lost that production. We haven't lost those ounces. But what gives us comfort is that we've learned a lot in terms of how we can crush, stack,

21:55 how the processing, so we've never had any issues in processing. This ore leaches very well. It recovers very quickly. Our sales cycle is very quick. When we hit the ground running again, end of March, early April, as we've indicated in November last year, that's when we were restarting production. We're fairly comfortable over the 12-months post start of production that we can hit that 50,000oz to 60,000oz forecast.

22:21 That will be over the next 12 months. And the plus side here is this year, as we top up our reagents, we'll maybe do a second top up immediately so that we have some certainty on the next 12 months of production and processing, where there's no delays or taking off line because of procurement. But more importantly, we have this boiler house that we've installed. It's operational. Greg can confirm that's working and what that's doing. It will allow us to leach throughout the winter, this coming winter in 2022 and over 2023. So there will be no switching off of the leach pad or production this year. That's 1 good thing that's happened, a meaningful accomplishment and commissioning of a new boiler house that will allow us to run all year round. I guess that's a big difference as well to Carl's question.

23:18 Going to the next one about the increased production profile. Well, the increased production profile is based on building new plants. Obviously, it's a different processing. You're not relying just on leach pads and of course, less of weather seasonality you'll have when you're not just leaching anymore. When you have these plants, flotation plants, you're floating and you're producing concentrates. These will be shipped over to China. Those are the recovery numbers that we put on the feasibility studies. We're fairly comfortable with those 100,000oz

23:48 forecasts or even higher when we bring phase 2 online. Greg Morgan Okay, great. Thank you for that. Just next question— Councillor CUMMING Just to expand on that, Anil. Yes, just to expand, as Anil said, the boiler house has been running now. Nighttime temperatures on site are approximately sort of minus 25 at the moment. The solution temperature at the top of the leach pad with the addition of the boiler house now is sort of plus 9 degrees. So we're running solution through the winter. We're comfortable with that process now. So I'm looking at 2022, there should be no issues running solution for the whole year. Okay, great. Thank you. This next question comes from Jim. Could Greg or Anil briefly discuss the Aranjin convertible debenture deal and the potential value of the 1% smelting Royalty, as well as the potential value of the 50% interest in Gold held under Aranjin exploration licenses?

24:47 Sure. So Aranjin is a Copper company in Mongolia that has a few licenses that have obviously mainly Copper, but there have been precious metal showings on a few of those properties. Given the relationship between the companies in Mongolia, we saw it as an opportunity to expand Step Gold's package, land package for exploration, by having some exposure through another vehicle to any Gold that might be discovered, any precious metals that may be discovered on any of our Ranjin properties. So now in a way we've expanded our exploration portfolio by having exposure through our Ranjin. So it's really hard to put a value on an NSR. That's a very cheap deal.

25:35 I think it was a US$1.5M to fund a Ranjin exploration and some acquisition programs that gets us 50% of precious metals. Ranjin is a base metal Copper company. So that's not their focus. So it allows us to expand our precious metals footprint in-country, we think. And so the value of what the NSR could look like in the future, TBD, but it's certainly something that got us excited given the entry point. Great. OK, awesome. And there is a follow up question from Jim. But do you anticipate any more deals with other exploration companies around the U.K. Project? Listen, COVID has certainly slowed down transactions and so has our share price, to be honest.

26:22 When you don't have a currency that's fairly valued to do deals, that obviously puts a hold on things. And our cash today needs to be managed on current operations until the cash flow really kicks in and we build a solid balance sheet. We're not going to do deals for the sake of just getting bigger. That's not our MO. However, we are assessing, we've reviewed dozens of opportunities already in-country from the exploration, advanced exploration and even redevelopment. So we're constantly looking. UK, when people look at that map, certainly it looks like an opportunity where there could be consolidation. We have a very large package, 14,400 hectares, exploration license never been drilled. So we really would like to focus on what we have first. Let's see this drill and maybe that'll create some value. And even in share price, given, I think Urdine share price is probably $120M, $130M market cap gives them, and that's expiration with over 1 million ounces. We're not getting any value for that license today. So I think it's better to focus on de-risking our own license, getting some value for that, and then we can look at consolidation.

27:24 But certainly we're always open. We are a natural partner. And the first call, I would say, in Mongolia from private and public partners looking to advance because we have put, you know, Stepgold is allowed to put Mongolia on a map in terms of precious metals. We're not the size of Oitogai where there's finally good things happening there, but certainly we're doing things properly. We have the supporting country with the government, as we've shown. So we become the natural partner and platform. So, yes, we are looking at other opportunities. Awesome. Thank you for that. Andrew in the audience wants to know if you've finally received the reagents and how much have you procured? Yeah, So believe me, that's the biggest announcement that we're looking to put out to the market. And obviously, we will not announce procurement of cyanide reagents until it's in-country.

28:18 It's too premature to say it's on its way. I think we talked about it before, but over the last few months, since October, November, we've already opened up a few other channels for supply. So Our issues have been at the Chinese border and bringing supply up through China. That issue still exists today. Now that border is opening up slowly, but hazardous materials have not crossed through for anyone, not including us. We have been proactively, in the background, opening up new supply channels. There's new paperwork required from additional sources that are outside of Mongolia, outside of China. Those are the ones that we believe we will be able to announce in the coming weeks or well before the end of March when we need to restart production, when we said we restart production.

29:05 But certainly today we do not have it on site. Otherwise there would be a big announcement. That's a big announcement we think that would help de-risk the story further because people know we have those agents on site. It means you know that cash flow is coming back online. We had no issues in operating and processing and recovering Gold in those ounces. So the answer, long answer is no, not yet. But in the background, Greg and the team have been working with additional suppliers and those have been moving forward in the background. I think well before the end of March, we should have a positive announcement. The goal is once we get our first couple shipments, which should take us to about 6 months of supply. We're gonna restart that purchasing again, that procurement again, and soon after we'll have our next shipment. So our goal is while we bring production online in the coming months, we'll also be able to show the market that we've actually procured the next 6 to 12 months of supplies. So there's no break.

30:10 Absolutely, thank you for that, Anil. And that might actually also lead into this next question, but maybe if you elaborate, there are points that you can elaborate on that might be useful, but what was the cause of the procurement delays? Sure, sure. I mean, the cause is COVID, I'd say is the first, and second is it's a bureaucracy, which we can't control. It's a China border issue. So if you remember, in March 2020, we procured for the first time ever. We received our permit in December of 2019, being able to procure these reagents and to start production, which as we did then, we waited until April to start production. So we waited until after winter, but we procured and received our initial supplies in March of 2020, when the borders were closed and a very tough time. Roll around to 2021, you've seen those borders clamp up, a lot harder to get things through. The borders have been queued for months and 0.25 now with China and something that we can't control, certainly, and something we can't rely on. So that's something that could open up any day, but we've been saying that for months. So it's not something we're relying on. But again, that could change next week or the week after.

31:26 And 10 days later, we could have the China supply over the border very quickly. But that's been the cause, is not being able to get anything across the border in terms of these reagents from China. And it's not just us. It's a whole Mongolia issue. And In fact, we're finding that it seems to be a more global issue in terms of other countries that use that border, whether it's Korea, Japan, and others to bring product into Mongolia, they're also having the same issues. So that was the main issue that slowed us down. In the background, we've been looking at many supply opportunities to build new ones. And now I think we've learned from that to not rely on solely 1 country or 1 supplier for such a critical component of our business. And that's where we've already opened up 3 other channels, with 2 of them, we think, advancing very quickly with the paperwork. New permits are required, but all that's been done in the last couple of months and continues to advance.

32:26 Absolutely. And just staying on that topic, I think you've just answered it. Robert had asked about procuring reagents from other countries beyond Russia and China, but also plans to hold stockpile of reagents to avoid any supply chain issues for up to a year. But I think you've just answered that. If you'd like to elaborate, please go ahead, but otherwise we can move on to the next question. Yeah, exactly. Just in addition to that too, we've also expanded our storage facility on site, which will allow us to obviously stockpile larger quantities going forward. Great. Thank you for that, Greg. Yeah. And then on the issue of, it's not just 1 country risk either. We are procuring and have managed to speak to probably 4 other countries in the last 6 to 9 months.

33:15 And 2 of them that we're advancing on are not China. And we don't even see as much of a risk if there are some issues with what we're hearing in terms of potential wars or sanctions with our neighbor to the north being Russia. We still don't think that will impact our procurement that we're working on today. Great. Okay. Thank you. Richard's wondering, you know, he's talking about how he remembered that you had mentioned you were going to be building an all-year facility. Where's the development on that? Is it still being planned to be developed? Sure. So the Oyer facility means it's the add-on of the boiler house, which Greg and I have already spoken on, that allows us to run Oyer long. So Oyer long, you know, The ADR plant, you can see the yellow building there, that continues to produce Gold even as we speak, small quantities.

34:09 So we do run all year round even today in terms of mining, crushing, stacking, processing. But the boiler house, should we have all our reagents in place, which we didn't going into this winter, allows us to run all year round on the phase 1. On phase 2, phase 2, we'll be running all year round no matter what. These are flotation plants you're building. We've already upgraded the power. You already have the crusher there and you have a tailing facility and we're going to be producing concentrates that will be then exported. So there's a lot less seasonality in terms of weather for phase 2. So it will be in all your operation and actually more normalized and stable. Okay, great. And to that point, maybe Nigel is wondering, if the boiler house allows for consistent levels of production or reduced levels potentially.

34:59 If Greg can chime in, he can, but my understanding is that you still will have reduced levels of production, but higher than no boiler house. You still have some seasonality because it's still winter, but I can confirm. Yes, no Boiler house would effectively mean that production over those cooler months would effectively be 0, which we certainly saw last year before we had the boiler house. Now that we're running the boiler house and have done so for the last couple of months, as I alluded to before, night-time temperatures are sort of minus 25, minus 30 at the moment, down to sort of, up to sort of minus 10, minus 15 during the day. Boiler house is running well and the solution temperature at the back of the cell is sort of 8 to 9 degrees. So yes, during those colder months, production won't be as high as obviously the summer months, but it'll be significantly better than what we've seen in the past.

35:56 And even as Anil mentioned, even today, we're still producing small quantities of Gold. So If we weren't experiencing the issues we're experiencing with logistics and procurement, we'd be in full production as we speak. Great. Thank you for that. Chris, in the audience is wondering if you can trust the Mongolian government. And he's citing the experiences that we've seen with Rio and TRQ specifically. Sure, sure. Well, you know, as I've said in the past, you know, that's a too big to fill project, which we've just seen in the last week being solved, where Rio and the government have actually come to terms, and that's moving forward. And in fact, that project has moved forward every year in the last 10 years. So they've been heading, you know, this has been going on since, you know, for over a decade. But it's not a country-specific issue. It's actually an asset-specific issue. It was a poorly structured deal between Rio and the government right from the outset.

36:58 And that has caused all this noise for the last decade. But during that noise, they still built their mine, they brought it online. And now with the expansion, the major expansion, they've just nipped that in the butt and come to terms, thankfully. So now we can actually spend less time talking about that mess. But that is an asset specific issue where the government took and had the right to a 34% ownership at the asset level. But they didn't have the money to fund that development. So back then Rio gave them debt. And that debt means that as cash flow comes online from production, you're paying back the debt, which means the cash flow as an owner, you're not getting, right? Because you're paying back debt. So it's amortized and it looked like the cash flow wouldn't come in for another 30 years based on the current terms before they resolved it this week.

37:47 So that was the issue. So it was an issue that was very contentious that every new prime minister or president or election is part of the election cycle that they're bringing up and saying the people aren't benefiting. But that project employs the most Mongolians, obviously 15,000 to 16,000 Mongolians. I think it's the highest taxpayer in the country, biggest GDP driver, will be one of the top 4 mines in the world. And it's continued to advance the whole time. So clearly you can still do things. But saying all that, Stepgold was the first recipient of a US$3M investment from the Mongolian Sovereign Fund. Their first ever investment in a mining company was in Stepgold. Just 3-months ago, we announced the Bank of Mongolia sponsored a US$60M debt facility for Phase 2 expansion. So the government is actually giving us capital. They want to grow Gold production in-country, and we're doing the right thing. So I think we're showing a very supportive government, pro-mining, pro-foreign investment, and have been doing all the right things.

38:51 So, this government has been in power since July 2016. They've won 2 major majorities. In 2020, they won another major majority. And they've always confirmed, even when they come to PDAC and elsewhere publicly, that they've learned from some of the mistakes in the past. And they want to be our partners. They want foreign companies to go in there and help train and build minds. And that's what Stepgold is doing. So I think the government is very supportive. And we're kind of a poster child to show that, I guess. Great, thank you so much for that. John in the audience wants to know if you could dive into some more details on the phase 2 CIL or floatation plant development. Who's designing it, who's constructing it, And given COVID, what's the new schedule look like? Sure. So the Feasibility Study we put out in October, November of last year didn't include a CIL or CIP plant. So purely flotation plants producing concentrate as a starter, as our base. It doesn't mean that in 5-years or 6-years or 3-years we won't build a CIP or a CIL plant, but currently we can produce and profitably and have a very strong base of 10-plus-year mine life, sub $900 all in cost today without any optimization at 100,000oz run rate. A great base to grow our company. We're already in production and are growing into that.

40:12 We are building flotation plants to start. There's additional, and Greg can speak to that, but there's going to be additional, some engineering and refinement being completed over the coming months. As always, our goal is to have as much Mongolia content, as much local content as possible. That's from concrete, earthworks, steelworks, to construction, all that, but you still overlay where there's not the skill set, potentially. Nice Peacehold, I believe, did our tailings design and engineering work. Greg, if you want to jump in on anything else, I might have missed. Greg Mayes Yes, that's correct. Wherever possible, we use local construction companies wherever possible, and as Neil said, they are overlaid with potential expat design companies, for example, like Pesold, who did all of our leach pad and ponds work, and I'll also do the tailing stand facility as well.

41:10 Great, thank you. I don't know if there are any delays per se as yet because we were able to get that first tranche of half our CapEx requirement already. We don't need all our CapEx funding up front. It's over a two-year build, which is back in loaded. This year alone is probably closer to maybe at the high end, US$50M of CapEx, probably closer to US$25M-30M of CapEx. And so we already had the funding in place from the Bank of Mongolia funding. Groundworks or earthworks, I mean, In a way, phase 2 has already started, obviously, with the phase 2 crusher already being constructed and soon to be commissioned in the coming months. I think we've already started camp expansion.

41:58 Then the rest will start, I guess, sometime in Q2, I guess, right, Greg? Greg Morgan Well, I mean, some of that initial work has commenced already, so we have to go through translating design drawings and land permits and that kind of initial work, And that's already commenced as soon as the winter is kind of over. Great, okay, thank you for that. Last question we have so far right now from the audience. Feel free to ask more questions as you like. From Alan, are you using new technology to locate Gold? And what methods are you employing? Both Greg and I are not the geologists on the team, so we're not going to embarrass the team by answering that. I can certainly get back to you.

42:47 Our Executive Chairman is a very strong geologist who obviously has created a lot of value by buying this project when it was 1 million ounces. And look where we are today and still growing. It's more of a Matt Wood and Inkey, our VP of exploration question. But we can certainly ask them and get back to you, Alan. And if you if your contacts available, we'll get back to you in the next kind of next couple days on that. Great. Thank you for that. Another question, though. What do you see as the next evolution of Steps' environmental management plan?

43:37 Councillor CUMMING. Well, I guess that's a difficult one to answer. I guess we might have to get back to you with some more detail on that one, but the environmental management plan is obviously an ever-changing document, if you like, and the guys working on it monthly, quarterly, yearly. As Anil mentioned before, we've gone through several programs in terms of planting trees and the reintroduction of marmots to the local area, groundwater monitoring systems, that kind of stuff, but it's ever changing and ever evolving. If you needed more details, we can certainly provide that to you with any more specifics. Absolutely. Thank you for that, Greg. As you continue to grow and learn as a new producer, what does that mean for Steps 2022 investor relations strategies?

44:28 Well, Assuming we are in production, which obviously we know we will be, we've had to deal with this. I would say we were in the penalty box for the last 6-9 months given not having the agents to produce. But as we restart production, we've learned a lot in the last 2 years since we started production for the first time ever. So that's evolving, but this is only the phase 1 and the starter mine to actually grow the company. The real work will be certainly as we bring the second, much larger life of mine and plant online in the next 2 years. But certainly there's only a limited amount of producers that can produce at our profitability as quickly as we can. I can build a quality operation as we've done so and still manage to actually bring production online in one of the toughest times ever.

45:20 So we've learned a lot. And I guess going back to how local you should be, that's how you should run a business anywhere, not just in Mongolia, whether in West Africa or Canada. The more local you are, the less reliant you are on external forces that you can't control, and you can continue to operate and grow. So we've certainly learned that. And that was something we proactively set up anyways. That was from day 1, as how Step was to be set up as local as possible. And we continued on that. In terms of marketing and whatnot, you know, it's a lot easier to market when you have something to say. And now we have plenty to say. We've still had plenty to say last year, but unfortunately, when you're stuck in a corner without that production, when you were a producer and then in a way not, nobody pays attention to all the other good things that have happened. So we recognize that.

46:13 And I think the first box check again is that restart. And then it's really promoting the cash flow that underwrites the company and the expansion of the company, which not a lot of companies have. There's not a lot of companies that can use their own cash flow today to grow their own organic pipeline. And that's the exciting part where you have a producing asset that will fund a lot of the expansion to the much larger asset underneath for a much longer life of mine, higher production profile, yet still be able to fund what we hope is really sizzling expiration opportunities, both on this property and in our next one. So hopefully that answers the question. Great, thank you so much, Anil. Well, listen, gentlemen, I think that's all the questions and we're wrapping up on time anyways. So I'd like to of course thank you for coming on today, but I'd also like to thank everyone in the audience for joining us. If you didn't get a chance to get your question answered, or if you think of 1 after the fact, you can of course reach out to the Step Gold team directly and they'll follow up with you, but you can also find more information at stepgold.com.

47:18 With that, Anil, I'm going to hand things back to you for some closing remarks. Thanks Cam, and thank you everyone again for attending. Thank you for your support over the last couple of years. In a way, we're still getting started and we're very excited of what's to be built here in the very near future and beyond. As always, we are very accessible. If anyone wants to have any more questions, wants a direct call with anyone on the management team, we're always available. Please reach out to me directly. We can organize that. We look forward to updating you and we plan on doing these a lot more often, I guess, this year. So you'll see us and a lot more team members in the coming months. Thank you so much.