Erdene Resource Development (TSE:ERD) used its fourth-quarter and full-year 2025 results call to discuss the early operating performance of the Bayan Khundii Gold Mine in Mongolia, which delivered first gold in September 2025 and entered its initial ramp-up phase during the fourth quarter.
Bayan Khundii begins operations with higher-than-planned mining tonnage
President and CEO Peter Akerley described Bayan Khundii as an emerging “high-grade, low-cost” gold producer owned 50/50 with Mongolian Mining Corporation through the Erdene Mongol LLC joint venture. Erdene also holds a 5% net smelter royalty on production from the joint venture after the first 400,000 ounces of gold, which management expects to be reached within the first five years.
Management noted that dilution was elevated during the early ramp-up as the mine completed overburden stripping, established consistent working levels, and transitioned a workforce with bulk mining experience toward selective mining in a high-grade open pit setting.
Q4 processing results: 7,434 ounces of gold produced and sold
On the processing side, the company reported that 145,000 tonnes were fed into the plant in Q4 at a measured feed grade of 2.0 grams per tonne. That generated production of 7,434 ounces of gold, sold at an average price of CAD $4,187 per ounce, resulting in CAD $31 million in revenue. The quarter also produced 2,634 ounces of silver as a byproduct.
Akerley said the plant’s target is 1,950 tonnes per day (about 650,000 tonnes annually). In 2025, throughput averaged 77% of target but reached nameplate by year-end, and that performance “has continued into Q1.” He also said gold recovery has been consistently above expectations, running above 96%.
One operational issue discussed on the call was blast fragmentation. Management said roughly 15% of ore had been stockpiled because it was oversized for the crusher, and noted that the hardest ore hosts the highest grades. A mobile crushing unit introduced in late Q1 is intended to improve plant efficiency, while consultants have been advising on blasting improvements.
Focus on improving grade and dilution control during ramp-up
During Q&A, Akerley addressed questions about why processed grades are below the reserve grade outlined in the feasibility study. He said the company anticipated producing at roughly 50% of projected production during ramp-up while training crews and improving practices such as blasting and dig line control. He pointed to the difference between the average grade mined (2.4 g/t) and processed (2.0 g/t), describing that as reflecting approximately 20% dilution.
Management said lower-grade stockpiled material was blended through January and February, contributing to plant feed grades in the 1.5–2.0 g/t range. Akerley said grades began trending upward as the operation improved crushing capability, mining and blasting processes, and ROM pad blending. The company’s stated objective is to deliver feed at the Bayan Khundii reserve grade of approximately 3.8 g/t as established in the feasibility study.
Erdene said it will provide a Q1 production update for Bayan Khundii in late April and expects that, as ramp-up completes in Q2, it will have an improved understanding of production for the remainder of 2026.
Exploration and expansion: Dark Horse, Khundii West, Striker West, and Ulaan
Beyond ramp-up, management emphasized district-scale growth opportunities in the Khundii Minerals District. Akerley highlighted the Dark Horse satellite deposit, located 2.5 kilometers north of Bayan Khundii on the same license. Dark Horse is slated to begin production in late 2027 and currently has an established reserve of 48,000 ounces at 7 g/t, along with additional low-grade oxide resources.
Erdene reported Q4 drill results at Dark Horse that included intercepts of 9 g/t over 19 meters and 28 g/t over 3 meters. A resource update is planned for Q2 2026, with further drilling intended to define reserves and complete grade control ahead of mine planning in 2027.
At Dark Horse North, the company cited drilling that intersected shallow oxidized zones and extensions at depth, including 43 meters of 1.9 g/t gold. Management said oxides are being evaluated for heap leach processing as a potential complement to the Bayan Khundii carbon-in-pulp plant.
Elsewhere in the district, Akerley discussed the potential to expand production near the current open pit in the Striker West and Ulaan areas. He cited recent drilling at Striker West that included 42 meters at 7 g/t gold. At Ulaan, he noted broad lower-grade intervals (including 330 meters of over 1 g/t starting at 80 meters depth) and high-grade intersections of 20–40 meters exceeding 8 g/t.
Financial position, costs, and 2026 priorities
Chief Financial Officer Robert Jenkins said Erdene’s consolidated IFRS results reflect its joint venture interest and proportionate share of Erdene Mongol’s operating results, along with corporate activities. For 2025, the company recognized a CAD $1.3 million loss from its investment in Erdene Mongol, reflecting its share of pre-operating costs in the first nine months, partially offset by proceeds from gold sales after first pour.
As of December 31, 2025, Erdene’s investment in Erdene Mongol was valued at CAD $46.5 million on the balance sheet, representing 84% of total assets reported under IFRS. Jenkins added that Erdene Mongol ended 2025 with $13 million of cash and that “no further capital injections are expected” from Erdene because Bayan Khundii is now generating positive operating cash flow.
At the corporate level, Erdene ended 2025 with CAD $5 million of cash. Jenkins also noted the company had CAD $30 million in the treasury following a bought-deal private placement that closed in February 2026, which management said will support exploration and technical work at Zuun Mod and Tereg Uul.
On costs, Akerley said the company needs “a couple of commercial quarters” to establish all-in sustaining costs (AISC). He referenced the 2023 feasibility study estimate of $869 and said that applying inflation and higher royalties tied to the current gold price would put the figure “somewhere in that $1,250 range,” while emphasizing the company expects better clarity after commercial production history is established.
Management also discussed safety and community metrics, reporting 476 staff and contractors on site at the end of Q4 (about 40% local residents), 4.9 million person-hours logged since construction began, a total recordable injury frequency rate of 1.8 per million person-hours, and zero reportable environmental incidents in 2025.
About Erdene Resource Development (TSE:ERD)
Erdene Resource Development Corp is a Canadian-based resource exploration company. It is primarily engaged in the exploration and development of precious metals and mineral deposits in Mongolia. The company’s project consists of Bayan Khundii, Altan Nar, Zuun Mod, and Khuvyn Khar. The Bayan Khundii and Altan Nar project is located within the Tian-Shan copper-gold belt in southwest Mongolia from the Chinese border city of Ceke. The Zuun Mod project is located within 200 kilometres of China’s border in Mongolia’s Bayankhongor Province.
