Erdene Achieves Gold Production in Mongolia, Advances Multi-Mine District Strategy

• Erdene Resource Development achieved first gold production at Bayan Khundii in Q3 2025, completing the $115 million build in 22 months on time and on budget
• The company is transitioning from bulk mining to selective high-grade open pit operations, targeting commercial production by April 2026 at 3.8 g/t head grade
• Operating subsidiary carries $123 million debt being repaid while maintaining $10 million exploration budget for 2026 to advance multiple projects
• Dark Horse satellite deposit contains 48,000 ounces at 7 g/t with potential for heap leach expansion alongside CIP plant capacity increases
• Five-year development plan includes advancing Altan Nar gold-copper project, Zuun Mod molybdenum-copper system, and Tereg Uul near-Oyu Tolgoi grassroots targets

Erdene Resource Development Corporation achieved a significant milestone in September 2025 with first gold production at its Bayan Khundii mine in southwestern Mongolia. This transition from explorer to producer marks the beginning of what CEO Peter Akerley describes as a systematic strategy to build "a new minerals district in southwestern Mongolia that ultimately will be a multi-mine producer of multiple commodities."

The achievement positions Erdene among a select group of junior mining companies that successfully navigated the challenging period of high-cost capital and prolonged exploration to reach commercial production. With gold prices hovering near $4,600 per ounce and copper maintaining strength, the company now faces the challenge of converting initial production success into a sustainable multi-asset operation while maintaining the capital discipline that characterised its development phase.

Construction Execution in Evolving Infrastructure

The Bayan Khundii mine was constructed for $115 million over 22 months, meeting both budget and timeline targets in an environment often characterised as infrastructurally challenging. Akerley notes that perceptions of Mongolia's remote southwestern region evolved during the construction period itself: 

"We brought in power from the Chinese border. Roads are being built past our project now. So, much of what was considered a challenge was mitigated through the good contractors we had on site, but also that changing infrastructure."

The successful execution stemmed partly from Erdene's partnership with Mongolian Mining Corporation (MMC), which contributed both capital and operational expertise from developing a billion-dollar coal mine in Mongolia. This partnership brought complementary skill sets - Erdene's 25 years of Mongolian exploration experience combined with MMC's demonstrated ability to deliver large-scale mining projects on budget in challenging conditions.

The transition from explorer to producer fundamentally altered Erdene's market positioning. Trading volumes increased fourfold upon achieving production, supported by a share consolidation that improved liquidity. "There's a different audience out there that's paying attention," Akerley observes, noting that the company now attracts different investor types focused on production metrics rather than exploration potential alone.

Operational Ramp-Up Through Technical Optimisation

The Bayan Khundii plant has reached nameplate capacity of 1,950 tons per day, operating at approximately 90% utilisation. However, the transition from bulk mining startup to selective high-grade operations continues to present technical challenges that directly impact reconciliation between reserve models and actual production.

Initial operations deliberately fed sub-grade material through the plant during commissioning, producing 340 ounces in September. The company has gradually increased feed grade to approximately 2 g/t - matching the resource average with a target of reaching the 3.8 g/t reserve grade by April 2026 when commercial production is expected to be declared.

Several technical refinements are underway. Blasting patterns required adjustment to achieve proper fragmentation, initially resulting in 15% of material being diverted due to excessive coarseness. "The hardest material is the stuff that has the most juice in it because that's the siliceous ore that is around the quartz veins," Akerley explains, noting that this higher-grade material's exclusion complicated early reconciliation efforts. A mobile crusher has been deployed to process this coarse fraction while longer-term blast optimisation continues.

The ramp-up process involves systematic improvements across the mining value chain. Akerley describes the progression: 

"It's everything from updated resources to digging lines to blasting to the mining. Mining is a big part of this. You have operators that are new to this who if they are experienced have come out of coal mining, so it's getting it down to very fine-tuned mining and then it's the blending of those stockpiles into the plant."

Financial Structure Supporting Strategic Capital Allocation

The operating subsidiary carries $123 million in debt comprising a $50 million commercial loan, approximately $60 million in shareholder loans from MMC, plus accrued interest. The company has begun debt repayment with priority given to retiring the commercial facility before shareholder loans.

Despite debt service obligations, partners have approved continued exploration spending - several million dollars in late 2025 and $10 million budgeted for 2026. This decision reflects confidence that Bayan Khundii operations have achieved self-sustaining status without requiring additional capital injections. The exploration budget enables simultaneous advancement of multiple projects while debt reduction proceeds.

Capital allocation priorities balance three objectives: debt reduction, sustained exploration across the project portfolio, and evaluation of plant expansion opportunities. The partners maintain flexibility to redirect cash flows toward development projects or additional acquisitions should opportunities arise, though debt retirement and exploration remain the near-term focus.

Interview with Peter Akerley, President & CEO of Erdene Resource Development Corp.

Resource Expansion Beyond Original Reserve Base

Erdene's reserve base was defined at $1,860 gold, creating substantial upside potential at current prices above $4,600. The company has contracted SLR Consulting to update resources and reserves, with revised numbers expected in Q2 2026 alongside an updated mine plan and production schedule.

Expansion drilling focuses on extensions to the west of the current pit, where mineralisation continues into state-owned ground. Discussions are underway regarding joint development of this continuation, which would require expanded plant capacity to process additional tonnage. Akerley indicates these negotiations tie directly into plant expansion studies since "it doesn't make sense to have that unless you have more capacity."

Lower cutoff grades enabled by higher gold prices have expanded the economic envelope significantly. Cutoff grades have declined from 0.6-0.7 g/t to 0.3-0.4 g/t depending on ore type, introducing heap leach opportunities for oxide material that would not have been economic at $1,860 gold.

Dark Horse Satellite Development

The Dark Horse deposit, located 3 kilometers north of Bayan Khundii, contains 48,000 ounces at 7 g/t grade designated for year three production. Recent drilling of 5,000 meters along a 1.5-kilometer trend aims to expand this resource and evaluate heap leach potential for lower-grade oxide mineralization.

Dark Horse material is "very free milling" supergene ore similar to material mined from Bayan Khundii's Midfield area, with recoveries projected at 88-92% compared to 93-95% for Bayan Khundii. The deposit features lower strip ratios than the main pit and requires minimal infrastructure investment - primarily a 3-kilometer haul road and separate waste storage.

The potential to expand Dark Horse significantly beyond the currently defined 150-200 meter strike length of the resource creates optionality for plant feed blending. Higher-grade Dark Horse material could complement variable-grade Bayan Khundii ore, optimising plant utilisation and economics. Development timelines require mobilisation by late 2026 to enable material delivery in late 2027.

Processing Capacity Enhancement Initiatives

Two parallel initiatives are under evaluation to increase processing capacity and throughput flexibility. The first involves adding a gravity circuit on the front end of the existing CIP plant, allowing recovery of coarse gold before conventional processing. This modification would increase effective capacity by reducing residence time requirements for recovered gold particles.

The second initiative evaluates heap leach processing for oxide material from Dark Horse and potentially other deposits.

These expansion concepts will progress through feasibility-level design during 2026, with investment decisions tied to resource expansion results and mine planning optimisation. The heap leach option would complement rather than replace CIP processing, creating flexibility in ore blending and plant utilisation strategies.

Altan Nar Gold-Copper Development

The Altan Nar project, located 15 kilometers north of Bayan Khundii, represents the next major development target with a timeline extending approximately three years to feasibility and investment decision. The project contains both gold and copper mineralisation, raising processing alternatives that could influence district-wide infrastructure planning.

Development options under evaluation include a separate flotation circuit producing copper-gold concentrate for sale into China, or integration with Bayan Khundii processing facilities. The decision will consider both technical optimisation and commercial considerations around concentrate sales versus doré production.

Altan Nar falls within the joint venture with MMC, ensuring alignment on development timing and capital allocation. At current metal prices, Akerley states there is "no question there's an economic deposit there" but the focus remains on optimizing the development approach to maximize returns.

Zuun Mod Molybdenum-Copper System

The Zuun Mod project, located outside the MMC joint venture area, will deliver a preliminary economic assessment before mid-2026. This baseline study will inform partnership discussions and potential investment decisions to advance the project through feasibility stages.

Zuun Mod hosts a large copper porphyry system containing a molybdenum-rich zone that has been the primary exploration focus. However, Akerley notes that "elsewhere, there's been significant copper intersections and we'll follow up in this copper market with that as well." Copper prices above $6 per pound and molybdenum strength create favourable economics for porphyry development.

The scale of the system and favourable metallurgy position Zuun Mod as a potential cornerstone asset, though development timelines extend beyond the near-term Bayan Khundii optimisation and Dark Horse development priorities. Partnership structures and financing alternatives will be evaluated following the PEA completion.

District Consolidation Through Grassroots Exploration

The Tereg Uul project near Oyu Tolgoi represents early-stage grassroots exploration with drill target development expected during 2026 and maiden drilling planned for later in the year. This initiative demonstrates Erdene's continued commitment to exploration despite operational priorities at Bayan Khundii.

A comprehensive resource update in Q2 2026 will report updated figures across all projects including Bayan Khundii expansion, Dark Horse, Altan Nar, and other targets. This consolidated reporting will provide investors with a complete view of the resource inventory supporting the multi-mine district strategy.

District consolidation opportunities exist through discussions with government stakeholders regarding adjacent state-owned ground with mineralisation continuity from Bayan Khundii. Erdene's demonstrated execution capability has established credibility that Akerley believes facilitates these conversations: 

"They recognise our company and our group with MMC as people that can get things done and there are opportunities out there with the government to begin to build out other projects adjacent to us."

The Investment Thesis for Erdene Resource Development

• De-Risked Production Platform: Transitioned from explorer to producer with $115M mine built on time and budget; achieved nameplate capacity 1,950 tpd with strong plant performance and recovery rates of 93-95%
• Near-Term Margin Expansion: Systematic ramp from 2 g/t current feed grade to 3.8 g/t reserve grade by April 2026 commercial production; all-in sustaining costs to be reported Q2 2026 with improving unit economics
• Multiple Organic Growth Drivers: Dark Horse 48,000 oz at 7 g/t entering production 2027; Altan Nar gold-copper advancing to feasibility over three years; Zuun Mod molybdenum-copper PEA mid-2026; plant expansion and heap leach studies underway
• Self-Funded Exploration: $10M 2026 exploration budget funded from operations while servicing $123M debt; MMC partnership provides operational expertise and capital access without equity dilution
• Proven Management Execution: 25-year Mongolia track record; delivered construction on time/budget in challenging jurisdiction; partnership with MMC brings billion-dollar coal mine development experience
• Strategic Optionality: Multiple pathways to value creation including resource expansion, satellite developments, M&A opportunities on adjacent state ground, and potential second processing hub at Altan Nar
• Favorable Macro Environment: Gold above $4,600, copper above $6, molybdenum strength align with multi-commodity district strategy; Mongolia infrastructure improving with power from Chinese border and new road access

Macro Thematic Analysis

Mongolia's emergence as a credible mining jurisdiction combines with unprecedented precious and base metal prices to create a compelling backdrop for district-scale developers. Infrastructure constraints that historically challenged southwestern Mongolia are actively being resolved through Chinese border power connectivity and road construction, directly reducing operating costs and development risks. 

The convergence of $4,600+ gold, $6+ copper, and strong molybdenum prices transforms projects defined at $1,860 gold into high-margin operations with expanded resource bases. Companies demonstrating execution capability in this evolving landscape gain access to consolidation opportunities and government partnerships unavailable to explorers. Erdene's timing - achieving production as infrastructure improves and metal prices surge - positions it to capitalise on both operational leverage and strategic optionality in building Mongolia's next major mining district.

"At these commodity prices, there's no question there's an economic deposit there. But how do we develop that? Do we create a separate concentrate flotation circuit and sell that as a concentrate into China, or is there a way we can incorporate that into the Bayan Khundii complex?"

TL;DR

Erdene achieved first gold production at Bayan Khundii in Q3 2025, building a $115M mine on time and budget in southwestern Mongolia. The company is ramping operations toward 3.8 g/t commercial production by April 2026 while advancing multiple satellite deposits including 48,000 oz Dark Horse at 7 g/t and larger Altan Nar gold-copper and Zuun Mod molybdenum-copper projects. With reserves defined at $1,860 gold versus current $2,600+ prices, substantial margin expansion and resource growth potential exists across a portfolio that positions Erdene to build Mongolia's next multi-mine district while maintaining self-funded exploration and systematic debt reduction.

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