Erdene Resource Development TSE: ERD reported third-quarter net income of just under C$10 million as its Bayan Khundii gold mine increased production and reduced costs. Management said higher-grade ore could make the fourth quarter the mine’s strongest of 2026.
The mine in southwestern Mongolia produced 11,853 ounces of gold during the quarter, slightly more than in the second quarter. Erdene owns 50% of the operation through Erdene Mongol, a joint venture with Mongolian Mining Corporation. Operating and joint venture financial figures discussed on the call represent 100% of Erdene Mongol unless otherwise noted.
President and CEO Peter Akerley said the mine is moving into deeper, higher-grade areas after a period in which the team worked to improve selective mining and reduce the loss or dilution of valuable ore.
Higher grades targeted after operational improvements
Bayan Khundii processed 164,000 tons of ore in the quarter, a 6% increase from the prior period. Gold recovery was 96%, unchanged from the second quarter and above the mine’s 93% target. Ore sent to the plant averaged 2.3 grams of gold per ton.
Akerley said the deposit’s high-grade mineralization is concentrated, making it important to distinguish between high-grade ore, lower-grade ore and waste. The company has brought in specialists to improve resource modeling, grade control, blasting and other mining practices.
During the question-and-answer session, Akerley said dilution was running at about 15%, with ore losses assumed at approximately 2.5%. Both were well below levels earlier in the year, he said. He added that reconciliation among the resource model, grade-control model and grades delivered to the mill had improved, with variability of approximately 10% in either direction over the preceding month.
Management would like to see an average head grade of about 3 grams per ton in the fourth quarter as mining advances in the Striker and Midfield zones. Akerley said that figure could serve as a base for 2027, with the potential to improve depending on when higher-grade Dark Horse material enters the mill feed.
Joint venture revenue falls as costs improve
Erdene Mongol generated C$71 million in third-quarter revenue from sales of nearly 12,000 ounces of gold and more than 3,000 ounces of silver, CFO Robert Jenkins said. Revenue fell 5% from the second quarter as softer metal prices offset a modest production increase.
Cash costs declined to $1,742 per ounce from $1,899, while all-in sustaining costs fell to $1,848 per ounce from $1,991. Jenkins said he expects per-ounce sustaining costs to continue falling as production increases, but the company plans to provide guidance after the joint venture completes its budgeting process.
The joint venture repaid $30 million of debt during the quarter and ended September with a balance equivalent to C$132 million, Jenkins said. It held C$19 million in cash at quarter-end.
At the consolidated level, Erdene recorded C$10.6 million as its share of income from Erdene Mongol. Net income was just under C$10 million, or C$0.14 per share, and the company ended the quarter with more than C$25 million in cash.
Exploration and potential heap leach expansion
Erdene has begun a 16,500-meter drilling program across the Khundii Minerals District. A 9,000-meter program at Bayan Khundii West is intended to expand and improve confidence in resources, with results expected in the first quarter of 2027. The company expects to finalize plans for feeding ore from that area into the Bayan Khundii plant in the first half of 2027.
At Dark Horse South, grade-control drilling supports bringing higher-grade material into the mill feed in the second half of 2027, ahead of the original 2028 schedule, Akerley said.
The company is also assessing a potential heap leach operation for lower-grade material from Dark Horse and other sources. Akerley said the initial concept could produce roughly 15,000 to 25,000 ounces annually over more than five years, but emphasized that it was too early for detailed estimates. An internal scoping study is planned for the fourth quarter, followed by potential definitive studies in 2027 if the project advances.
Zuun Mod study outlines long-life project
Erdene’s preliminary economic assessment for its wholly owned Zuun Mod molybdenum-copper project outlined a 34-year mine processing approximately 25 million tons annually. The study estimated life-of-mine recovery of about 670 million pounds of molybdenum and almost 1 billion pounds of copper.
At assumed prices of $25 per pound for molybdenum and $5 per pound for copper, the assessment estimated an after-tax net present value of $745 million using an 8% discount rate, a 16% internal rate of return and approximately $687 million in capital expenditures. At higher assumed prices of $33 for molybdenum and $6.50 for copper, the estimated net present value rose to about $2 billion and the return to 28%.
Akerley said Erdene is discussing the project with potential financing, operating and offtake partners, but did not give a timetable for an agreement. A 4,500-meter drilling program is underway, and the company plans technical and infrastructure studies in 2027.
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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