Erdene Resource Development Q2 Earnings Call Highlights

Key Points

• Bayan Khundii production improved: Second-quarter gold output rose 37% quarter over quarter to 11,709 ounces, while throughput reached 94% of capacity and recoveries remained strong at 96%. Mining improvements lifted feed grades to 2.4 grams per tonne and reduced dilution to about 20% or less.
• Costs and finances strengthened: Cost of revenue fell about 20% to roughly C$2,000 per ounce as production increased, with further reductions expected if grades reach the 3.5-gram-per-tonne target. Erdene Mongol held US$40 million in cash, reduced debt with a subsequent US$10 million repayment and Erdene reported C$10 million in net income.
• Growth plans could extend mine life: Erdene approved 12,000 metres of second-half exploration, plans to introduce Dark Horse material into mill feed in 2027 and is evaluating a heap-leach facility. The company also expects a preliminary economic assessment for its Zuun Mod molybdenum-copper project in mid-to-late 2026 while maintaining its approximately 50,000-ounce 2026 gold-production target.

Erdene Resource Development TSE: ERD reported higher second-quarter gold production and lower unit costs as the Bayan Khundii Gold Mine in southwestern Mongolia continued its ramp-up toward steadier operations.

The Bayan Khundii mine, held through the 50/50 Erdene Mongol joint venture with Mongolian Mining Corporation, produced 11,709 ounces of gold during the second quarter, up 37% from the first quarter. Since first gold was poured in September 2025, the operation has produced nearly 28,000 ounces, President and Chief Executive Officer Peter Akerley said on the company’s second-quarter conference call.

Plant throughput totaled 153,000 tonnes of ore, or an average of 1,682 tonnes per day, representing 94% of capacity. Gold recoveries remained at 96%, exceeding the company’s 93% target. Silver production was slightly above 3,300 ounces.

Mining improvements support grade outlook

Ore feed grades averaged 2.4 grams per tonne in the second quarter, a 25% increase from the prior quarter. Erdene is targeting a processing grade of 3.5 grams per tonne by year-end, which Akerley said should lead to higher metal output and lower costs.

The company moved 3.8 million tonnes of material during the quarter, up 19% from the first quarter, and mined 247,000 tonnes of ore at an average grade of 1.4 grams per tonne. Ore volume rose 59% quarter over quarter.

Akerley attributed the improvement to greater experience with selective high-grade mining, more precise definition of high-grade zones, better blasting practices and high-precision GPS ore tracking. The front-end mobile crusher also began operating consistently, reducing stockpiling of oversized material that contained relatively higher-grade ore.

During the question-and-answer session, Akerley said the company had reduced mining dilution from an estimated 30% to 40% in the first several months of operations to about 20% or less, with a longer-term target closer to 10%. He said mine-delivered grades and mill-reported grades had recently begun to align more closely with grade-control models.

The processing plant was designed for a maximum capacity of roughly 1,950 tonnes per day, while the company has targeted throughput of about 92% of that level. Akerley said daily throughput has exceeded about 1,780 tonnes per day, though deeper mining could encounter harder rock and keep rates closer to planned levels.

Financial results and debt reduction

Erdene Mongol generated US$53 million in revenue during the quarter, or about C$75 million, on sales of nearly 12,000 ounces of gold and more than 3,300 ounces of silver. Average realized prices were US$4,493 per ounce of gold and US$72 per ounce of silver.

Total cost of revenue was US$24 million, or C$33 million, equating to approximately C$2,000 per ounce sold. Chief Financial Officer Bob Jenkins said costs per ounce were about 20% lower than in the first quarter due to increased production and improved mining efficiency.

Jenkins said the company expects costs to decline further in the second half if grades improve as planned. If Bayan Khundii reaches the 3.5-gram-per-tonne target, Erdene expects all-in sustaining costs to be about US$1,500 per ounce.

At June 30, Erdene Mongol held US$40 million in cash and had approximately US$120 million of project debt. Subsequent to the quarter-end, the joint venture repaid US$10 million on its fully drawn US$50 million working-capital facility. Jenkins said future capital allocation priorities include debt repayment and funding expansionary exploration.

At the corporate level, Erdene reported C$10 million in net income, or C$0.15 per share, compared with C$4.8 million, or C$0.07 per share, in the first quarter. The company ended the period with C$28 million in corporate cash. Erdene also launched a normal course issuer bid on June 30 and has since repurchased and canceled nearly 100,000 shares at an average price of C$5.20 per share.

Exploration targets mine-life extension

Erdene approved a 12,000-metre exploration program for the second half of 2026 focused on areas near Bayan Khundii. The program includes 9,000 metres at Khundii West and 3,000 metres at the Greater Dark Horse area.

At Khundii West, the company is evaluating potential westward pit expansion and discussing possible collaboration with Mongolian state-owned Erdenes Alt LLC, which holds a strip of land between the Khundii and Ulaan licenses. Akerley said discussions could mature in 2027 after regulatory work advances on the relevant exploration licenses.

Grade-control drilling is also underway at the Dark Horse South satellite deposit, which holds a 50,000-ounce high-grade gold deposit at surface. Erdene now plans to bring Dark Horse material into mill feed in the second half of 2027, ahead of the prior sequencing plan for 2028.

The company is additionally assessing a potential heap-leach operation using oxide mineralization at Dark Horse and other sources. Akerley said Erdene aims to establish about 100,000 ounces as a baseline resource to support a moderate-sized heap-leach facility after drilling and a resource update. Column-leach work remains underway at Blue Coast Research, with the company expecting Dark Horse recoveries to exceed 60% and potentially reach the low-70% range. If approved in 2027, a heap-leach facility could begin operating in 2028, according to Akerley.

Updated resources across the Bayan Khundii, Dark Horse, Ulaan and Altan Nar deposits include 835,000 ounces of measured and indicated gold resources grading 2.9 grams per tonne, plus 265,000 inferred ounces grading 1.5 grams per tonne. Akerley said the resource base supports the potential to extend production beyond 10 years.

Zuun Mod study expected in second half

Erdene said it remains on track to publish a preliminary economic assessment for its wholly owned Zuun Mod molybdenum-copper project within approximately 60 days, or in mid-second-half 2026. The project is located about 200 kilometres from China.

Jenkins said the gold joint venture’s extension and expansion projects are expected to be funded through operating cash flow or asset-level debt, meaning they would not necessarily compete with Zuun Mod for corporate capital. He added that Erdene has received preliminary offtake interest from potential counterparties in China, Korea and Japan, and has held early discussions with regional development banks.

Erdene maintained its 2026 production target of approximately 50,000 ounces of gold while pursuing higher grades, Dark Horse development, nearby resource growth and completion of the Zuun Mod economic study.

About Erdene Resource Development (TSE:ERD)

Erdene Resource Development Corp. is a Canada-based resource company producing gold at the high-grade, low-cost Bayan Khundii Gold Mine in underexplored and highly prospective Mongolia. The Company has interests in a portfolio of precious and base metal projects near the Bayan Khundii Gold Mine in the Khundii Minerals District, which provides a robust organic growth pipeline. Erdene Resource Development Corp. is listed on the Toronto ('ERD') and the Mongolian stock ('ERDN') exchanges and OTCQX Market ('ERDCF').

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