Erdene Resource Development Corporation ($ERD)

Well, thank you, everyone, for joining this morning. I think we're just about ready to roll here. Everyone, good. Good morning, ladies and gentlemen. Welcome to the 2026 Annual and Special Meeting of the Shareholders of Erdene Resource Development Corporation. My name is Peter Akerley, and I'm the President and CEO of Erdene. Also attending today is Bob Jenkins, our CFO, here in front of me; and Layton Croft, the Chair of Erdene's Board of Directors. We also have Ken MacDonald, one of our directors and long-time members of the executive of the company. I'll come back to some of the other team members that are here as we get through the presentation. Pursuant to the bylaws of the corporation, I will act as Chair of the meeting. Julie Robinson of McInnes Cooper, Legal Counsel to and Corporate Secretary of the corporation, will act as Secretary of the meeting. With the consent of the meeting, the Chair appoints Computershare Investor Services as scrutineer. The notice calling this meeting was mailed by Computershare to all shareholders of record as of April 23, 2026. The Secretary will append Computershare's declaration of mailing as a schedule to the minutes of this meeting. The scrutineer has completed this preliminary tabulation of the shareholders present in person or represented by proxy. I ask Colleen Nielsen, representative of Computershare to read the preliminary report on attendance.

Mr. Chairman, I am scrutineer of Computershare Investor Services Inc. hereby report that there are at least 3 shareholders and/or proxy holders present at this meeting represent in person or by proxy 29,110,759 shares being 44.5% of the total outstanding shares of Erdene Resource Development Corporation.

Thanks, Colleen. Pursuant to the bylaws of the corporation, the Chair has satisfied a quorum of shareholders is present. Notice having been served in accordance with the corporation's bylaws and a quorum being present, I declare that the meeting is duly constituted for the transaction of business. However, I ask the scrutineer to submit its final report of attendance as soon as it is available. There are 6 formal items of business before the meeting today. First, to verify the minutes of the Annual and Special Meeting of Shareholders held on June 25, 2025; second, to receive the financial statements of the corporation for the year ended December 31, 2025, and the auditor's report on the statements; third, to elect directors for the forthcoming year; fourth, to appoint the corporation's auditor for the forthcoming year; fifth, to approve all unallocated rights issuable under the corporation's Omnibus Equity Incentive Plan; and finally, to transact such further and other business as may properly come before the meeting or any adjournment thereof. As we go through the formal items of business, I will read the resolutions and then call for a motion and a seconder before asking you to vote. Certain items of business require that I invite discussion before calling for the vote. Please note, only persons who are entitled to vote at this meeting are entitled to make or second a motion. The minutes of the meeting of shareholders held on June 25, 2025, are available to be read. Unless someone wishes them read, the Chair will entertain a motion to take the minutes as read and verified. Do I have such a motion?

I so move.

Do I have a second?

I second.

Is there any discussion on the motion? All in favor, please signify by raising your hand and saying aye. Any contrary, please signify by raising your hand and saying nay. Carried. The next item of business is to receive the financial statements of the corporation for the year ended December 31, 2025, as well as the auditor's report on the financial statements. Copies of the financial statements and the auditor's report were posted on SEDAR and were mailed to shareholders. The auditor's report by MNP LLP is unqualified. Are there any questions? As there are no questions, we will move on. The next item of business is the election of directors. The Board has determined that in the forthcoming year, the business of the corporation can be properly conducted by a Board consisting of 5 directors. The Board has fixed the size of the Board at 5. The 5 individuals nominated for election to the Board of Directors are Dr. Anna Biolik, Layton Croft, Ken MacDonald, Cameron McRae and myself, Peter Akerley. In accordance with the corporation's bylaws, no further nominations to the Board will be accepted at this meeting. We will now vote on the election of each of the nominees by a show of hands. For the election of Dr. Anna Biolik, all in favor, please signify by raising your hand. Any against? Carried. For the election of Layton Croft, all in favor, please signify by raising your hand. Any against? Carried. For the election of Ken MacDonald, all in favor, please signify by raising your hand. Any -- I have to pause there. I get a bunch of against. Any against? Carried. For the election of Cameron McRae, all in favor, please signify by raising your hand. Any against? Carried. For the election of Peter Akerley, all in favor, please signify by raising your hand. Any against? That's good. Carried. Thank you. I declare Dr. Anna Biolik, Layton Croft, Ken MacDonald, Cameron McRae and myself, Peter Akerley to be the directors of the corporation to hold office until their successors are duly elected or appointed. The next item of business is to appoint Erdene's auditor. The Chair will entertain a motion that MNP LLP be appointed auditor of the corporation to hold office until the next Annual Meeting of Shareholders or until its successor is duly appointed and that the directors be authorized to fix the auditor's remuneration. Do I have such a motion?

I so move.

Bob Jenkins, do I have a second?

I second.

Layton Croft. All in favor, please signify by raising your hand and saying aye. Any contrary, please signify by raising your hand and saying nay. Carried. I declare that MNP LLP is appointed auditor of the corporation to hold office until the next Annual Meeting of Shareholders or until its successor is duly appointed and that the directors be and are hereby authorized to fix the auditor's remuneration. The next item of business is to consider and if deemed advisable, pass a resolution approving unallocated rights under the corporation's Omnibus Equity Incentive Plan. The Omnibus Plan approved at the Annual and Special Meeting of Shareholders held on June 22, 2023, provides the corporation with a share-related mechanism to attract, retain and motivate qualified directors, employees and consultants. The Omnibus Plan is a rolling plan, which provides that the aggregate maximum number of common shares that may be issued under the Omnibus plan shall not exceed 10% of the issued and outstanding common shares of the corporation at any time. The rules of the Toronto Stock Exchange provide that all unallocated rights issuable under a rolling equity incentive plan must be approved by shareholders every 3 years after institution of the equity incentive plan. The corporation is seeking approval by the shareholders of all unallocated rights in accordance with the rules and policies of the TSX -- rights previously granted pursuant to the Omnibus Plan will continue unaffected by the result of the shareholders' vote in respect of unallocated rights. I will now entertain a motion to approve the resolution in the form set out on Page 14 of the management information circular in respect of the approval of the unallocated rights under the Omnibus Plan. Do I have such a motion?

I so move.

Bob Jenkins, do I have a second?

I second.

Layton Croft. Is there any discussion on this motion? We will take the vote by ballot. The scrutineer previously obtained ballots from all registered shareholders and proxy holders at this meeting. If a registered shareholder or proxy holder did not receive a ballot, please raise your hand and the scrutineer will pass one to you. She was ready to say no ballots. So now you've thrown her for a loop, I think. We're good. So I'm going to skip. The scrutineer has completed its report. I ask a representative of the scrutineer to read the report on the ballot vote.

Mr. Chairman, I as the scrutineer hereby report that the results of the vote by ballot with respect to the unallocated rights under the Omnibus Equity Plan is for the motion, [indiscernible] against the motion, 1,897,518 votes being 6.52% against.

Thank you. I declare that the resolution approving the unallocated rights under the Omnibus Plan in the form set out at Page 14 of the management information circular is approved. The items of business as set out in the notice of meeting have now been dealt with. Is there any other formal business? As there is no formal business -- further business, the Chair will entertain a motion to conclude the meeting. Do I have such a motion?

I so move.

Bob Jenkins, do I have a second?

I second.

Mr. Croft. All in favor, please signify by raising your hand and saying aye. Any contrary, please signify by raising your hand and saying nay. Carried. The formal portion of the meeting is now concluded. Thank you very much. So let me jump right into an overview of the company. And I'll take a little bit more time. And if you have questions along the way, please don't hesitate. Afterwards, we'll have a chance for questions as well. This is being webcast today. So we would ask afterwards that you ask your questions into the microphone, which we can find for you and make sure people online hear that as well. Yes. So let me jump into it. Our company has gone through a major milestone transition over the past year. To go from satellite imagery to a mine, which you see in front of you, doesn't happen very often in our business, and it's tremendously rewarding, exciting, and I thank our team for getting us here. But I've always looked at this since we made a decision to build it, it was all about let's get a foundation. Let's avoid the public market dilution that was a little bit better over the last year. But for much of our life, it's been highly dilutive. So to get to that point where we could get cash flow and dig into this amazing new minerals district was really that strategy that we've employed for the last several years. And now we're there. And you can start to see the fruits of that starting to pay dividends already as we look at the work we're doing at Dark Horse and Zuun Mod, and I'll talk about some of that today. But this is where we wanted to be. This is the table that we set to now explore this tremendous new district. And maybe people new to the company would look at it and say, great, you've got gold production. What's your return going to be on that 6-year mine life. For me, it's about a new district. It's so rare for that to happen in our business to go out there and find 3 deposits and really unlimited dollars and limited time. So what's to come is what excites me, and I'll try to focus on some of that today our standard forward-looking statements. And as I said, the top bullet on this highlights page is really about a new minerals district. This belt is phenomenal. I'll talk a bit about that. We've got that anchor of a high-grade open pit now, now positive cash flow after what are we 7 months into it. High potential to extend Bayan Khundii. I'll share that with you. We looked at a 6-year mine life and said, it's enough to get us started. It's high grade. It's at surface, let's get to cash flow, but there is a wealth of opportunities around that. Outside of Bayan Khundii, there's this tremendous area, including Altan Nar, Zuun Mod. And just keep in mind, as we go through this that we've really focused all of our dollars and efforts largely on the deposits we found. We just went out there and drilled them off and moved them into the queue. But that regional exploration, districts like this I think about some areas like Ecuador that are somewhat new to it, but maybe $1 billion in exploration has been spent. Never mind what they've spent on building mines, but we've spent $25 million on exploration, a lot more into building the mines, but a very small amount of money that's gone into exploration. So the exploration upside is tremendous. And we couldn't have asked for a better partner to help us do this. And I'll start off talking about that partner a little bit. We entered into this relationship with Mongolian Mining Corporation in 2023. In fact, I went over there just after COVID and we started negotiations. MMC is a 50-50 partner on the Bayan Khundii Gold project. And we knew we needed somebody like that to help us get this thing up and running. But we also recognized that we needed to make sure our shareholders had exposure to long-term upside. And so a key part of the negotiation was to keep back that 5% net smelter royalty that kicks in after 400,000 ounces. So when you kind of think about this development being multi-mine, you look out 4 or 5 years from now and you do the math on a 5% NSR, it could be $50 million, $60 million additional to our -- to our account, which shifts the economics more to a 60-40 than it does a 50-50. So that was a real key component. And the numbers I just quoted are if we have a couple of gold mines the size of Bayan Khundii what if we find that next big porphyry, what if Zuun Mod and the other projects keep moving along. And it's pretty exciting when you start to do the math on that upside, which is why I wanted to keep that added kicker of a 5% net smelter royalty. MMC contributed $40 million in equity and $65 million in debt. That was the deal effectively that got them the 50% interest. But it was also important to us that we kept the Zuun Mod molybdenum copper project out of that. And I'll speak to you about that project and why we think it has so much value for our shareholders. For those not familiar with Mongolian Mining Corp, they're listed on the Hong Kong Stock Exchange. But importantly, their parent company is one of, if not the largest business conglomerate in Mongolia. And the important aspect of that is that they bring all the elements that we need to build a new mining district. This isn't a one-off mine. They bring construction companies. They are one of the lead -- lead Mongolian mining construction company for Rio Tinto on the Oyu Tolgoi project. We were able to bring their A team over and build Bayan Khundii. But they have road construction. They have power transmission, power plant building, logistics, freight, everything you could possibly want to think about this as a multi-mine district they brought along with their sister companies. So a key element in our success in building Bayan Khundii, but as or more importantly, to build out this district moving forward. We'll talk a little bit about the power line we brought in from the border area, and that couldn't have happened without this partner. MMC has 3,300 employees. I think the numbers are somewhere, MCS has 14,000 employees. So they touch all elements of Mongolian society and business and a partner that I've known, the Chairman of MCS and the CEO of MMC, I've known them for over a decade. They are people that I felt I could trust and good partners all around. Not to spend too much time on this, but at the time we sought out a partner, we had 5 of the top 15 gold mining companies globally come to Mongolia, 2 of those repeatedly. And we selected MMC because -- those companies could bring expertise. They could bring money, but they couldn't bring the depth of local relationships that we found with MMC, and that's been demonstrated throughout our relationship with them. So we've laid out a clear 5-year plan to move this district forward and to generate additional value for our shareholders. Obviously, the focus remains heads down. Let's get Bayan Khundii to steady state. We hope to hit over 80,000 ounces as we get to that steady-state production. It averages about 75,000 over that first 6 years. But again, as I'll share with you, the potential for expansion around Bayan Khundii is significant. Our target would be to see that pushed out to as late as 2040. That would mean adding another 0.5 million to 1 million ounces of gold. I don't think that's arm waving. I think based on where we are in this district. And I think you'll see some of that that's a reasonable target for us. So we're very focused on that. We secondly will look at the Altan Nar project that sits 16 kilometers north and start to move that into the queue to bring that on later in this decade. The concept there is that between these 2 projects, we could see somewhere in that 150,000 to 200,000 ounce per year production profile. And that's pretty much in front of us today. Altan Nar already has over 0.5 million ounces of gold, and I'll speak more to that. One of the real hidden gems in our company, and many of you are familiar with it, is Zuun Mod. We really don't see much value in our current market capitalization to reflect what is one of the most exciting molybdenum copper projects that hasn't been developed in the Asia region. So this year, we'll deliver a PEA on that, and we're looking at something that could produce in the range of 20 million pounds per year. Again, I'll speak to that in more detail. But underlying all of this, I mean, these are the things that we already have. We have resources established on all of those projects and the growth potential in front of us. But coming back to what hasn't happened is there hasn't been any extensive regional exploration take place on these licenses, very little deep exploration. So I see high probability for future discoveries alongside some of the grassroots projects that we have like Khuvyn Khar and [indiscernible], which we're currently drilling on. Just a quick snapshot of our corporate structure. As most of you know, we did a consolidation in September of last year. That was a 6:1 consolidation that left us with 65 million shares outstanding. The objective here was to see that share price increase substantially, so that we could be considered for indices and for listings in the U.S. at some future point. In fact, just in the last few days, I've seen some correspondence from the U.S. exchange looking for interest in listing. I don't think it's imminent, but we wanted to prepare ourselves because we do feel that being listed in the U.S. will attract a lot more large institutions, large high net worth and increase our trading volume and liquidity. You'll see on this slide, our average trading volume is 150,000 shares per day. And that's probably a 3 to 4x increase dollar-wise compared to where we were pre-consolidation. So it has already attracted larger institutions. In fact, the financing we did in January, we had 20 institutions take part in that financing, which I don't think would have necessarily been attracted at that lower share price point. We're trading at a market cap of just over CAD 400 million. You can see our shareholder base on the right-hand side. I think most of you are familiar with the fact that Eric Sprott is our largest shareholder at approximately 23%. But we have seen a number of international institutions come in. We've seen a significant increase in U.S. institutional activity, most of it concentrated in New York. Proud to say we still have a very solid, large base of shareholders here in Eastern Canada, and thank you for your loyalty and support over the last 20 years. We are also dual listed on the Mongolian Stock Exchange. An important element of our story is back as far as 2017, we were talking to influential Mongolian politicians, business people. And the comment was foreign companies come into our country, and we don't have an opportunity to invest directly. And we took that to heart. We helped them rewrite the rules at the Federal Regulatory Agency and the Mongolian Stock Exchange. I'm proud to say today, we remain the only dual listed company on that exchange and the 7,000 shareholders have seen a very good return on their investment. So that's been a real success for us. On the cash side, Erdene is sitting with about $28 million in cash at the corporate level about equivalent of that in our subsidiary. So as I mentioned earlier, it's cash flow positive. There's close to $30 million in the bank at the sub level. Our focus is paying back the debt that you see just the second line under financial overview, $122 million in debt. So our strategic focus from that cash flow perspective is to get that debt paid off. And once that's paid off to shift into new developments, share funds coming back through dividends or share buyback to shareholders eventually. I think I've covered everything there. Just want to talk about the team for a minute. Most of us have been together for 20 years. As I mentioned earlier, I have Bob Jenkins with me, who's been a tremendous assistance to me and sort of right hand here in the Halifax office and overseeing much of the operations internationally. Bilguun Ankhbayar actually went to school here in Halifax at St. Mary's, went back and entered into a merchant bank position before he joined us and is now currently the CEO of Erdene Mongol, the gold production company. Just a bit of background there. We appoint 2 of the senior executives in the gold subsidiary and our partner, MMC appoints 2. So Bilguun is one of those 2 and Jon Lyons is the other, who's the Chief Operating -- sorry, Chief Development Officer. The difference between Chief Operating Officer and Chief Development is he's really the person that's guiding the next projects, alting our growth around the site, tremendous 2 individuals. And then Bayarmaa Bagabandi is our CAO. So if you think about Erdene's presence in Mongolia separate from the subsidiary, she's managing that. Michael Gillis, who is with us today alongside Mike McDonald and Peter Dalton. There's kind of the brain trust of the discoveries we've made. I don't want to exclude the Mongolian team as well because they've been critical to this and [indiscernible] on the page here, but a lot of young geos, probably as many as half a dozen core people on the ground with these 3 gentlemen who have been very successful. In fact, have had a technical paper printed in the Society of Economic Geologists about our district discovery. So thank you, and congratulations, gentlemen, on getting us to this point. And then just moving on to the Board. You've just heard all their names as I went through the formal script, but I don't think there could be a group of people put together with more experience across various disciplines in Mongolia. Dr. Anna Biolik was Canada's first ambassador to Mongolia, has maintained very strong relationships there. Prior to that, she was ambassador to the stance had worked out of St. Petersburg for a while. So very familiar with that part of the world. Layton Croft, an executive with over 30 years' experience, much of it in Mongolia, but with major mining companies, as you can see on the screen. And Ken MacDonald and I partner since this started back in -- I guess, we first started talking about it as early as 1999 as we worked on Clay in Georgia, I kept pushing people with the idea we should be going to Mongolia. So it eventually worked out. Cameron McRae, the first CEO in terms of start-up of Oyu Tolgoi, managed a $6 billion build, and myself. So some great experience on the Mongolia side. Now we've been in this district. The province is called Bayankhongor. We've been there since 2005. So we're going on just over 20 years. We know the communities very well. We have a tremendous respect for the people, but the local culture, the local history and make great efforts to try to protect that wherever we can. Our focus really is on health and education. We have a community about 100 kilometers north of us called Shinejinst, and I won't go through all the details here, but just focused on improving fresh water supplies and school infrastructure, bringing in medical professionals from the capital city to help with screenings, just things that can make a difference on the ground in education and health. I'd also point out that we have 476 staff and contractors on site. I think since this is written, there's probably another 100. But the point I wanted to make is 40% of those people are local residents, 14% of those working at the mine are female. But it's probably the first time there's been a major industrial development in this community. And so we want to be stewards and leaders in that, good corporate governance, really focusing on the environment and safety. But the changes that we've seen in that local community in terms of young people being able to bring home a significant paycheck is really starting to pay dividends for everybody. So let me get on to the rocks. And many of you have heard this story before, but this belt called the Central Asian Orogenic belt, you see in brown here is the second most prolific gold belt on the planet after South Africa. just giant deposits. On the far left, you've got Muruntau with over 100 million ounces of gold. It's the biggest producing gold mine in the world. And now on the far right, you've got Oyu Tolgoi, which is Rio Tinto's and the government of Mongolia's mine, but it's a giant. It's going to be the fourth largest copper producer on the planet by the end of this decade. And here, we arrived in the '90s in this area outlined in orange here, the Trans Altai and had never seen modern exploration. We're the first geologist to go out there. And we luckily had the economic means to do the exploration. And I guess it started in 2009, really, we hit it hard with regional exploration, but we started from satellite imagery. This is an area that had no sophisticated exploration. We identified clay anomalies from space. We went down with boot and hammer. We found Altan Nar. We radiated out and found Bayan Khundii. But just a tremendous testament to patience and good exploration as much as anything. People say, "Well, what was your secret sauce?" It's just -- I saw other big companies come to the country and leave after a year for whatever reason, but it was persistence and patience and a good exploration team that we're loyal and excited about this opportunity as well. So yes, tremendous belt. We were very lucky to have arrived there at a time when it was remote. We were driving for 2 or 3 days to go look at these anomalies we had identified by satellite because there were no roads, there were no hotels. There was nowhere to stay. We went out there and set it up. But the big change for our company and the opportunity in front of us is that the exploration was in an area that was remote then. It's no longer that. And we now have rails and black top highways. We just brought in power 240 kilometers from China. A road was just constructed within 25 kilometers of Zuun Mod to take coal to the border. These things change the game for us. It's great if you have a high-grade nugget like Bayan Khundii, you can take a bit of a risk to develop something in a remote location. But now all these other projects can come along with the benefit of that infrastructure. And I look at Zuun Mod in particular, that's the best example, but we now have that infrastructure at our doorstep to complement this great belt of rocks. So I won't spend a lot of time on the technical elements here, but we've discovered the 3 kind of -- the full spectrum of deposits you find in these trains, low sulfidation, intermediate, and porphyry at Zuun Mod. But what I want to point out is the scale of these systems. That blue outline, you can see the scale bar at the bottom of the page. These are all 10 kilometers in diameter. They are exceptionally large, and they're still underexplored. The majority of our work has been shallow. And I just -- I get excited every time I look at this slide because, yes, there's Bayan Khundii, yes, there's Zuun Mod, but there's a multitude of other prospects. I wouldn't be exaggerating to say there's 25 solid prospects on those 3 license areas that need to be further explored. So let me jump over to Bayan Khundii and spend a bit of time on the mine. As I mentioned, jointly owned by Erdene and Mongolian Mining Corporation. It has a 650,000 tonne per annum open-pit, CIP plant, 33 buildings, and it took us only 22 months to go from initial construction to production. This was delivered for $120 million. And to put that in perspective, I would estimate at least 2x, if not 3x that cost to build the same mine in Northern Canada. First gold was poured in September. We achieved commercial production just recently. Our target is annual production of 80,000 ounces per year beginning in year 2 with 93% recovery. We are projecting top-quartile all-in sustaining costs. And as you can imagine, we have very significant leverage to gold price. I just commented on the time it took for us to go from construction to production. And this is amongst the fastest globally. You can see the chart on the right-hand side with Mongolia sitting at the top. In Canada, for example, it takes on average 17 years to go from discovery to production. So you can look at risk profiles, but if it takes you that long to get your return on investment, that's a pretty high risk. So go to places where you can get these things done quickly, which Mongolia has now demonstrated and not only Bayan Khundii but Oyu Tolgoi as well. One of the largest copper porphyry deposits discovered and built on the planet over the last 20 years was built and brought to production very rapidly while others stalled. So in terms of the performance since we first poured gold, great photo on the left there. We were a happy bunch when we first held those gold bars, but processed 296,000 tonnes right of mine ore. So 2 grams per tonne. And just to explain that a little bit, you can pretty much go out and bulk mine this deposit and get 2 grams per tonne. 2 grams per tonne is at least twice as high as any other open-pit gold mine -- or average gold mine grade globally. So our job now is to get that up to the 3.8 gram average grade of the deposit, and I'll speak more to that. We sold about 16,000 ounces of gold, 5,700 ounces of silver, and we generated $73 million in gross project revenues by the end of Q1, which is about CAD 100 million. Our gold recoveries are well ahead of what we had forecast, averaging 96%. And immediately on hitting first gold, we began exploration at Dark Horse, and I'll come back to that exploration upside. we will be updating resources, reserves and mine plans in 2026. This is a shot of the site. You can see the CIP plant in front of you, Carbon in Pulp. We have the overhead transmission line I just mentioned. So 240-kilometer power line built by our partner, sister company, Mongolian MCSI. And they took on the cost of that. They invested it was over $26 million, and we have a power purchase agreement with them that we would pay off over, I think it's 7 years, Bob, and then the cost will drop by 30% to 50%. So we ended up with a much more stable long-term lower cost access to power, which otherwise would have been susceptible to the high diesel costs that we're seeing today. So quite happy with how that worked out. We're also the first dry stack tails facility in Mongolia. From an environmental and safety perspective, it makes a lot of sense. And so this is the first of in Mongolia. It allows us in this arid climate to retain about 80% of the water used, which is important in the Gobi. Just a few shots of the interior of the plant. I talked about the capacity and recoveries, but the plant is working exceptionally well. Very pleased with how things have gone on that front. So our ore is sourced from currently just the Bayan Khundii pit. You can see in the bottom of this page, about 460,000 ounces at 3.8 grams. Next year, and in fact, we're drilling as we speak, the next deposit at Dark Horse, we plan to start bringing that into production in September of next year. And you'll note the grade, 7 grams per tonne open-pit sitting at surface. So that will be a great complement and allow us to bring that grade up even further in a blend as we start to open that up next year. Our reserve life based on the feasibility was a 6-year reserve life, which you can see in this slide. For the first 6 months of operation, we had projected a 50% production as we go through ramp-up. And I'd say we're still in that ramp-up as we move through Q2, but targeting as we move into the middle part of this year, getting that grade up closer to 3.5 gram range. We are seeing that trajectory, and I'll comment on that further, I think, in the coming slides. Our targeted all-in sustaining cost is $1,250. That's related to grade. So if you think of 2 grams per tonne, it's almost double that. And as you move it to 4 grams per tonne, it shrinks to that $1,250, but we still feel that's a good target for us to be aiming for. Corporate income tax, 25% and royalty of 5%. What I wanted to focus on is the upside. So this is the reserve we had in 2019. We brought it to production. This is a very large system. You can see what I consider the heat engine in the middle of this, and that's a porphyry center. But all of these fluids migrate out from the center and typically 2 to 3 kilometers from that center, you'll see these distal gold deposits formed. And we're just now mining by in Bayan Khundii, but you can see Dark Horse South, Altan Arrow, some other discoveries here, Ulaan. So there's this ring of mineralization that needs further exploration. And with the exception of Ulaan, most of our drilling has been within 150 meters of surface. So plenty of upside there. Our focus is on 2 distinct areas, Dark Horse and Khundii West, and I'll share with you some images from that. Dark Horse is a 3-kilometer long trend, about 2.5 kilometers north of the deposit. And in March, we announced some drill results. So those text boxes at the top of your page are the drill results we announced in March. You can see the -- at the south end or the left-hand side of the screen at the bottom, that's our 48,000 ounces of 7 grams. So beginning in September next year, we'll open that up, but we went in there in late last year and announced recently some of these other results. And you can see 10 meters of 9 grams, 19 meters of 9 at surface in areas that previously were not mineralized or were barren. So plenty of room to expand there. But importantly, along that entire trend, we're getting mineralization of substance. And I won't spend a lot of time on this. But for those familiar with it, in the mining industry, gold mining industry, there's CIP plants like we have enclosed facilities and then there's heap leach facilities that are typically processing lower-grade material, but they're lower CapEx and lower OpEx. So we're now developing resources that we believe will be amenable to that lower cost facility, and we're looking at complementing our CIP with an additional production facility of maybe, let's say, 25,000 to 30,000 ounces a year. We're working through the studies on that. So an exciting opportunity there. Now the more substantial opportunity at Bayan Khundii is on your screen. You can see the pit. That pit is where the 460,000 ounces sit. That pit was designed at $1,850 gold. So you can imagine as gold goes to $5,000, that pit gets quite a bit larger, and it starts to envelop what you see on the left-hand side of your screen. Importantly, as you move further to the west, you come to our Ulaan deposit. And you can see some of the intersections we've had there, 77 meters of 3, 40 meters of 8, a very high-grade portion of the deposit. And in the middle, you'll see this blank spot. Some of you are familiar with this. That blank spot is controlled by a company named Erdenes Alt, and this is a license controlled by the Mongolian-owned gold company who've effectively said they're looking for investment on this. They would like to see it jointly developed. So now we're working with them to look at ways that we can bring this entire deposit together and effectively build a super pit that would extend all the way to the west. No guarantees that we get that solved, but I feel like we're a lot closer to it than we might have been a few years ago. And there's no question, the deposit is just one very large deposit and a portion of it is controlled by Erdenes Alt. They are in a situation where they need to get access to a deeper area, and they can't do that without crossing our boundaries. So excited about that potential. We have 6 years of reserves at Bayan Khundii in that pit and at Dark Horse. So this is a future opportunity for expansion or extension. But it does change the game a little bit in terms of the scale and life of this operation. And part of the reason why I say -- I see us having that opportunity to push this out another 10 years beyond where we are today and plenty of other exploration. So that's by in Bayan Khundii. Let me jump to the north to Altan Nar. So Altan Nar is 16 kilometers north. This is the first discovery we made in this area, and it's a big system. I talked earlier about the scale of these systems. This is 5.5 kilometers of mineralization within, which we've really just drilled off the 2 areas you can see outlined, we call Discovery Zone and Union North. And within that, in the top 150 meters, there's almost 0.5 million ounces of gold at a couple of grams per tonne. So again, high grade relative to the world average. The difference here is this is a gold-polymetallic deposit. So it's gold, but it's also silver, lead and zinc. So can we recover some value from the silver, lead and zinc? That's the work we're doing now. There'll be more drilling later this year and next. There is the option of taking the high-grade portion of this and shipping it to Bayan Khundii, but I feel like we'll lose too much of the value that will be left in the ground there. So we're working through some options, but I feel confident we have in front of us another economic deposit that you could go open up today. The question is how big could this be before we do that and which route do we want to take for processing. But great optionality and a great value add for the company as we move forward. So everything I just talked about is 50-50, MMC Erdene. Now I'm shifting into the 100% owned. And Zuun Mod's been with us for a long time, but really for the reasons of lack of infrastructure, it wasn't a project you could bring forward. But for the reasons I mentioned earlier, I feel like now is the time. This is one of the largest undeveloped moly projects in Asia. It has a similar concentration of copper, so a great byproduct opportunity. But moly prices have really taken off over the last really 5 years. It's been $20 plus in the last week or 2, it's reaching up as close as $40 a pound. And we have 600 and -- well over 700 million pounds of moly equivalent, 630 million pounds of molybdenum, most of it accessible by open-pit. So you can do your own math on that. It's a tremendously valuable resource asset for our company and one that we're increasingly getting more aggressive on. As I mentioned earlier, we will deliver a preliminary economic assessment. We've had people in China over the last month or so, verifying our view of the market, and that market looks very strong to bring on new development. We visited 6 moly producers and upstream users over the last couple of months and just came away from that thinking, the demand is very, very strong right now. I would have said probably 5, if not all, 6 of them said they would buy our concentrate at $30 a pound if we could deliver it today. So yes, right time, exciting opportunity. Just a little bit on the market. If you look at the slide on the top, the chart on the top, those bars on the far right are an indication of the deficit towards the end of the decade. That deficit of 15 million pounds, we're talking about 20 million pounds perhaps that we would produce in that range. So a great time to be bringing on a new start-up. And that's probably the timeline we're looking at 2029, 2030 built. Moly use is expanding greatly in renewables, specialty steels. Even though the steel consumption or the steel market is not growing gangbusters, the specialty steel side is, when you look at China, in particular, great demand for specialty steel and moly goes into as an alloy of the specialty steel market. You'll also note just one other thing on the bottom of the page. China is by far the dominant producer, but you can see those orange bar charts on the bottom are starting to shrink as they have mines that are getting old in life and low in grade. So yes, very excited about what we have there. And it's not just molybdenum. This is a copper porphyry system within, which we have some copper targets as well. So Zuun Mod, you can see in the bottom right, sits in that blue shaded area. But in January, I think it was, we announced our best copper intersections to date. And you can see here that we had 60 meters of 0.6 copper and within that, a 30-meter zone of over 1%. So very high grade. I've added to this chart the depth of the Oyu Tolgoi deposit. So you can see that blue line in the center where it plateaus there at about 700 meters is where this fourth largest copper mine in the world is now being developed. And we haven't done any exploration deep in the system. So what our technical team has been doing is engaging one of the top geophysical companies globally based in Canada to go over here in August, September, and do a very large deep geophysical programs, which will provide us with the ammunition to target drilling better. And so as we get towards the end of this year, not only will you see the PEA on Zuun Mod, you'll see some results of drilling these copper targets. Finally, on the exploration side, we announced in July of last year, the option to earn an 80% interest in a project we call Tereg Uul. What's unique about this is it's just 10 kilometers from that fourth largest copper gold mine I've been talking about. And an area that surprising to me, I walked out there, Peter was out there in August of last year, and I was very surprised at the limited exploration that's taken place here. And we did make a gold discovery at surface, which is being drilled as we speak today. We have a couple of geophysical targets that we'll test as well. And they're -- I don't want to call them shots in the dark, but they're geophysical targets, and we'll see what we end up with. But we're in -- we wouldn't go anywhere and drill geophysical targets, but when you're 10 kilometers south of Oyu Tolgoi, a long trend, it makes sense to get some of those targets tested. So watch for that over the next couple of months, we'll have some results out. So in wrapping things up, I just wanted to sort of give you a sense of what's happening over the next several months and really throughout the rest of the year. Our objective is to get Bayan Khundii to steady state. I said I'd talk a little bit about that, and maybe I'll just spend some time on that now. As we've gone through the initial 6 months, we've really been training up a workforce that is young, largely experienced in coal mining, so bulk mining. And we've been bringing in experts to train them on more selective mining. And that's probably the learning curve that we need to get through over the next few months. And we've seen that if you looked at the results towards the end of March, and we're seeing it in May. I think May will probably be our largest production month that we will have had. But we're getting there. And it's just a matter of getting through those initial start-up bumps, and we've seen days that are well over 4 grams per tonne going through that mill. So it will ebb and flow, but ideally along that trajectory of getting us to that 3.8 grams per tonne. So that remains the focus. Tereg Uul, I just talked about, you'll see drill results as we move into Q3. We're very focused on the expansions around the mine site. So the discussions I talked about with Erdenes Alt, to expand to the west. We have Dark Horse drilling planned for later this year. In fact, we're doing the infill drilling today. The Zuun Mod PEA, I would say that this PEA is more advanced than a lot of companies would do at this level. The studies are quite in depth. We've contracted with half a dozen world leaders in terms of engineering. So that will get delivered in September. We are also simultaneously talking to potential partners on the Zuun Mod project. I do feel we need an Asian partner to assist us with bringing that to market. Khuvyn Khar, I talked about as well. We'll have the geophysics and drilling later this year. Ulaan, we're moving into the mining license category. So everything we own is a mining license except for Ulaan, which is exploration. So there's a process there we have to go through before we get that up to the ability to mine. And then a bit of a sleeper as well is Altan Arrow. There's 0.5 million ounces of gold sitting at surface that's ready to start moving forward, and we plan to get more aggressive with that as we move to the latter part of this year and into 2027. So lots on our plate. Exciting times. As I said at the outset, we set this table. We planned this for 5 years, and now we're here, and we can start to deploy cash flow and the strong cash position to begin creating more value for our shareholders. Thank you very much. Happy to take any questions.

Peter, thank you. Can you speak to seasonality of the area? And is there any seasons that we can expect due to rains or whatever that, that would play a role as well, just cost controls and how you can put that into place and what role would $100 oil make a difference and so on? And you've got the power lines in. Is there -- and those costs will go down over the longer term. I'm just curious the controls around that.

Sure. Yes. So on the seasonality side, we're in a dry area climate with extreme temperature swings. So plus 40 would be the high in the summer and minus 40 in the winter. But this is a country and a workforce mining industry that's familiar with those conditions. So we don't see a whole lot of change seasonally from a production perspective. I would say during the start-up, a couple of things, training up our staff, particularly young geologists in the pit is pretty hard to do when it's minus 30. So when spring came around and getting our people out there and our experts, that's kind of a one-off, but that was one thing we noticed as we started up. We surprisingly had high spring runoff into the pit. You don't expect it in a narrowed terrain. But as the spring melt happened, we had more water in the pit than we would have liked. So that slowed us down a bit in April. But I'd say as a general rule, we don't see seasonality having that big an impact. In terms of cost controls, I might ask Bob to assist me with the numbers on this, but we have obviously been following diesel prices closely like everybody is, whether you're in the mining industry or not. And we luckily had made that decision to tap into this opportunity to bring in fuel or power from the China grid. That China grid, by the way, is about 60% renewable, 40%. And we feel pretty good about the stability of those prices. But Bob, I don't know if you have those numbers fresh in your head in terms of impact on our all-in sustaining costs based on current fuel increase.

Yes, the estimate from the team on the ground is 10% of the AISC is diesel related, either directly or indirectly. So seeing the fuel price at current levels is probably 15% more, so probably in the ballpark of $100 ounce AISC.

I can repeat that if you want. Yes. So that our exposure to diesel is about 10% of our all-in sustaining costs. So given where the price move has been 50% increase, maybe 5% increase in our all-in sustaining cost at current diesel prices. Yes I get that right. In terms of cost controls, I'm not sure, was there other specifics in there or...

Again, just trying to get an idea what kind of costs on the road are going to be. Obviously, the relationship you have with the Mongolian government and the success of your partner and alleviates some of those concerns.

Yes. Well, maybe just to dive into the all-in sustaining costs a little bit. About 30% of the costs are related to the mining costs, and we have probably the most efficient, largest scale earth mover in the country as our partner. So we feel pretty good about those controls and being able to stay at or below market in Mongolia. We rent our fleet, so there's not really much of a fluctuation on cost there. Another 30% round it would be processing. And in fact, on the processing side, the largest cost in terms of hard cost is the purchase of chemicals. And our use of cyanide has been about half of what we had projected. I can't quantify the dollars on that for you, but that's been a good positive factor. I don't know, Bob, you have an idea, but going in the right direction. And then the other probably 30% would be related to the electrical side, thereabouts, and because most of it is now coming from the grid.

Is there less cyanide used in the CPI process versus leaching?

Good question. I would say we would probably use more cyanide in the heap leach than we would in the CIP just because it's not as efficient.

Yes.

Okay. Please, once a year opportunity to...

I was just wondering about Zuun Mod. I mean, my assessment is the same, is that you're really not getting much value for it yet, and yet it's a tremendous asset, especially with all the infrastructure that you now have that can access it. I was just wondering if your intention on developing it is to do it with a partner or to try to finance it on your own.

Yes, to do it with a partner. I think we have a great partner in Mongolia in both MMC and MCS. And one way, shape or another, we would see MCS and MMC is assisting us with that, whether it's just in the infrastructure as a partnership, those are discussions we will have in the future. What we want to do strategically is get that PEA established so that we have a cornerstone value that we can talk to partners about because at this point, we have a resource, but we don't have that negotiating piece of the puzzle that I'd like to have in place. Part of the process of having our team in China over the last couple of months was to talk to prospective partners. So in addition to having someone in Mongolia helping us with the build and the internal side of things, having a company that can take that product and move it into the upstream uses in China would be ideal. So we're having all of those discussions, and those will become more advanced as we pass through the year and get closer to that PEA delivery.

Will 2030 still the date for operational mining?

That's kind of what we're using as a loose number. We'll spell that out more clearly as we get to the delivery of the PEA, we'll try to clarify that. It took us 22 months to build Bayan Khundii. So I think I'd be fool of myself if I said it was less than that for this build because it is significantly larger. Zuun Mod would be -- trying to think now, it would be 20x the size in terms of rock moving to what we have at Bayan Khundii. Please feel free -- okay. Thank you very much. I appreciate your support and appreciate you joining us today. Thank you.