‘Ottawa’ Erdene Resource Development Corp, the Eternal Optimist, Does its Biggest Equity Financing

Hopes and dreams — backed by some encouraging signs from its exploration activities in Mongolia — are alive and well at Halifax-based Erdene Resource Development Corp.

This week Erdene moved to centre stage with a bought deal financing – its first.

Originally it announced a $10 million financing but demand was so strong that the underwriters — Paradigm Capital and Canaccord Genuity — upped it by 20 per cent. The underwriters have a 15 per cent over-allotment option.

Who would have thunk it given that a few months back, the company that, according to Bloomberg is followed by one analyst, Don Maclean of Paradigm, received $1.08 million from the exercise of warrants.

Once that cash was received Erdene – which, as Erdene Gold went public in the spring of 2014 at $0.85 a share – had $2.1 million in cash. In that IPO, Erdene raised $10.625 million with the proceeds being use to “fund further exploration in Mongolia.”

In its 12 plus years as a public company, Erdene has had some challenges: the shares have had two major ups (in 2007 and in 2011) and lots of lows with the stock trading below $0.50 for much of the past five years. Since going public the average stock price is $0.5517.

“From 2011 (when we discovered the first gold project in Mongolia) to 2015 it was a battle, a lot of hard work,” said Peter Akerley, Erdene’s chief executive. “We spoke to many investors, many of them in Asia during that period to keep moving things along,” added Akerley noting that it sought capital from far and wide. “You can’t be in the junior mining business and lose the faith. You have to be the eternal optimist.”

For instance, it arranged financings with Teck Resources (that raised a total of $2 million); with Sandstorm Gold (the $2.5 million raised funded its 2016 exploration projects); with a group of Mongolian investors (that raised $1 million) plus a series of private placements. “You survive in this business through different means but you can get there if you have the objective of you,” noted Akerley. “It’s a testament to patience.”

Now thanks to some recent good news — in late November when reporting on the fourth batch of its drill results it said they “further support our belief that Bayan Khundii represents one of the most prospective new high-grade, near-surface gold discoveries in the industry today” — Erdene is seemingly in a different situation.

“All the hard work is paying off,” added Akerley, when noting the commodity and financing cycle changed, at least for the major companies, about 18 months back. “Then it filters down,” he added.

Indeed the latest results support Erdene’s decision to persist with its exploration activities in Mongolia, a decision it recommitted to in mid-2012 when it spun off its North American-focused entity.

The reason: Mongolia was felt to be more attractive and offering better opportunities because of the underlying geology. “As a group we looked at a new belt of rocks that is probably the second most prospective of gold deposits in the world with the portion running through Mongolia virtually untouched,” said Akerley, who first visited the country 20 years back. “Where else would you hang your hat if you wanted to really to find what’s fun and exciting in this business, which is a big and near surface discovery.”

So what’s the game plan? Akerley said Erdene will continue to “go down a path, do good technical work to move towards development. If the project is good enough you’re certain to have M&A activity.”

Financial Post

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