Erdene's Q3: lower gold costs, richer ore, faster Dark Horse

By Amara Osei

CFO Robert Jenkins reported C$71 million in third-quarter revenue for Erdene Mongol, down 5% from the second quarter as softer metal prices offset a modest production increase, while both cash costs and all-in sustaining costs fell, and management expects sustaining costs to fall further.

What changed at Bayan Khundii?

Bayan Khundii, 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. Unless otherwise noted, operating and joint-venture figures from the call represent 100% of Erdene Mongol.

The mine processed 164,000 tons of ore, up 6% from the prior period. Gold recovery held at 96%, unchanged from the second quarter and above the mine’s 93% target, while ore sent to the plant averaged 2.3 grams of gold per ton.

President and CEO Peter Akerley said the mine is moving into “deeper, higher-grade areas.” He said high-grade mineralization is concentrated, requiring the team to distinguish it from lower-grade ore and waste. Specialists have joined efforts to improve resource modeling, grade control, blasting and other mining practices.

Akerley said dilution ran at about 15%, with ore losses assumed at approximately 2.5%; both sat well below levels earlier in the year. Reconciliation among the resource model, grade-control model and grades delivered to the mill improved, with variability of roughly 10% in either direction over the preceding month.

Grades remain the test.

Management wants an average head grade of about 3 grams per ton in Q4 as mining advances in the Striker and Midfield zones. Akerley said that figure could serve as a base for 2027, with potential improvement if higher-grade Dark Horse material entered mill feed. Management also said richer ore could make Q4 the mine’s strongest of 2026.

Takeaway: Richer ore and tighter control could lift output and reduce costs in the next two quarters.

What did revenue and costs show?

Sales of nearly 12,000 ounces of gold and more than 3,000 ounces of silver generated the C$71 million revenue. The 5% decline came as softer metal prices offset a modest production increase.

Costs moved lower.

Cash costs declined to $1,742 per ounce from $1,899, while all-in sustaining costs fell to $1,848 from $1,991. CFO Jenkins expects per-ounce sustaining costs “to continue falling as production increases.” Guidance will follow the joint venture’s budgeting process.

The joint venture repaid $30 million of debt during the quarter and ended September with a balance equivalent to C$132 million. 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.

Takeaway: Softer prices held revenue down even as unit costs fell and the venture repaid debt.

What can exploration add?

Erdene has begun a 16,500-meter drilling program across the Khundii Minerals District. A 9,000-meter program at Bayan Khundii West aims to expand the resource base and improve confidence in it, with results expected in Q1 2027. The company expects to finalize plans for feeding ore from that area into the plant in H1 2027.

At Dark Horse South, grade-control drilling supports bringing higher-grade material into mill feed in H2 2027, ahead of the original 2028 schedule, Akerley said.

Erdene is also assessing a heap leach operation for lower-grade material from Dark Horse and other sources. Its initial concept could produce roughly 15,000 to 25,000 ounces annually over more than five years. Akerley cautioned that detailed estimates were premature. An internal scoping study is planned for Q4, followed by potential definitive studies in 2027 if the project advances.

Takeaway: Exploration now has dated decision points at Bayan Khundii West, Dark Horse South and the proposed heap leach.

What does Zuun Mod show?

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 $33 per pound and $6.50 per pound, respectively, NPV rose to about $2 billion and the return to 28%.

Akerley said Erdene is discussing Zuun Mod with potential financing, operating and offtake partners but gave no timetable for an agreement. A 4,500-meter drilling program is underway, and technical and infrastructure studies are planned for 2027.

Zuun Mod remains preliminary.

Erdene is a Canada-based resource company producing high-grade, low-cost gold at Bayan Khundii, with precious- and base-metal interests around the Khundii district. It calls the area underexplored and highly prospective, with nearby projects forming an organic growth pipeline. It lists on the Toronto Stock Exchange as ERD, the Mongolian Stock Exchange as ERDN and OTCQX Market as ERDCF.

Takeaway: The project offers long-duration copper and molybdenum exposure but needs partners, studies and drilling before financing.