Erdene Resource Development Corporation (ERD) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to the Erdene Resource Development's Zuun Mod Molybdenum-Copper Project BA results. [Operator Instructions]. Now let me hand the call over to John Vincic.

Thank you, operator, and hello, everyone, and thank you for joining today's call. Some housekeeping items to note. Following the release yesterday of the Zuun Mod Molybdenum-Copper Project's preliminary economic assessment results Management will provide highlights of the study in the path forward. The release and accompanying presentation for today's call can be downloaded from the company's website at www.erdene.com. I'll point out that the results of the PEA are preliminary in nature. The PEA is based on a mineral resource estimate that has not been upgraded to a mineral reserve and the economic analysis does not have as high a level of certainty as a prefeasibility study or feasibility study. The PEA includes inferred mineral resources that are not considered that are considered, pardon me, too speculative geologically to have economic considerations applied to them that would enable them to be classified as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is no certainty that the PEA will be realized. Actual capital costs, operating costs, production rates metallurgical recoveries and project economics may differ materially from those set out in the PEA. And the PEA is subject to various risks and uncertainties, including those related to commodity prices, exchange rates capital and operating costs, permitting time lines and the availability of financing. I'll also remind listeners that this conference call contains forward-looking information that is based on the company's current expectations, estimates and beliefs and may also use terms that are non-IFRS performance measures. Please review Erdene's latest disclosure materials, including yesterday's press release and the company's most recent annual information form for the risks associated with this forward-looking information and the use of non-IFRS performance measures. And please note that all dollar amounts mentioned today on the call are in U.S. dollars unless otherwise noted. Today's speakers from Erdene are Peter Akerley, President and Chief Executive Officer; John Lyons, Chief Development Officer; and Robert Jenkins, Chief Financial Officer. Peter, please go ahead.

Thank you, John. Good morning, and thank you, everyone, for joining us today. I would like to acknowledge that in addition to the team that John just mentioned, we do have our Board of Directors with us today as well, including our Chair, [ Laton Kraft ] and the Chair of the Technical Committee, Cameron McCraig. So starting on Slide 4. This is a particularly important day for me and for our team. I was introduced to the geology of Southwestern Mongolia. Over 20 years ago with a strong belief that this largely unexplored part of the Central Asian Orogenic belt held world-class mineral potential. Zuun Mod is one of the describers that is now proving that belief right. From early on, we recognized that Zuun Mod was a very large [indiscernible] copper deposit, but one set in a remote location with no roads, no power and no operating mines nearby. So we made a deliberate choice rather than continue the time and dollar intensive exercise of moving the project through studies and permitting to a large-scale development. We elected to be patient on Zuun Mod and instead focused on advancing our portfolio of gold projects built by [ Hyundai ] a smaller high-grade operation to establish our infrastructure, our access, our permitting track record, our operating team in the district and secured cash flow. This strategy has delivered. [indiscernible] has now been producing gold for just over a year through [indiscernible], our joint venture with Mongolia Mining Corporation. In building it, we delivered a 240-kilometer power transmission line in just over a year, along with the roads, camp and nonprocess infrastructure that will support our next phase of growth. Just as importantly, we have learned firsthand what it takes to build a mine in Southwestern Mongolia the regulatory processes, the logistics, the local workforce and the relationships with communities and government. That experience transfers directly to Zuun Mod. At the same time, the region around us has been transformed. We always believe that infrastructure would follow to a district sitting on the doorstep of the world's largest consumer of minerals, and that is exactly what has happened. Roads, power and border infrastructure have been built across Southwestern Mongolia and Northern China and new mines are now operating in the region. What was once Zuun Mod's greatest challenge, its location is fast becoming one of its strengths. The market has moved in our favor as well. Over this period, we have watched molybdenum demand grow steadily as it finds new applications in renewable energy, defense and electronics on top of its traditional role as an alloying agent for steel products. with global demand forecast to grow by at least 2% to 3% annually for the next decade and China demand growing at an even higher rate, we expect continued pressure on suppliers thereby adding to the current deficit in Asian markets and supporting today's prices in the $33 per pound range. Put these all together, a world-class ore body, roads and power arriving in our district, a strong and well supported lithium market, particularly in the China, Korea and Japan markets and a team that has already built and operated a mine in this region. We believe we are advancing Zoom mod and entering the [indiscernible] market exactly the right place at the right time. We are very pleased to have delivered this preliminary economic assessment for our wholly owned Zuun Mod Molybdenum-Copper project and I look forward to sharing the details with you today. As summarized on Slide 5, the PEA demonstrates strong economics, an after-tax NPV at an 8% discount rate of almost $0.75 billion and an internal rate of return of 16%. This is a conservative base case prices of $25 per pound molybdenum and $5 per pound copper well below today's levels. The project is even more attractive at current prices, which I'll come to in a moment. The study outlines more than 30 years of operation, averaging 25 million tons per year of mill feed through conventional processing. Over its life, the project is expected to produce nearly 700 million pounds of molybdenum and almost 1 million pounds of copper. The scale and longevity is what we mean by a world-class ore body, and I believe it is still only part of the story. As I'll discuss later, the Zuun Mod [indiscernible] complex offers exceptional exploration upside. And drilling on several of these targets will begin in the coming weeks. Moving to Slide 6. While the project has attractive economics at base case prices, applying current prices per pound molybdenum and $6.50 per pound copper, Zuun Mod shows its significant leverage to metal prices. At today's prices, NPV increases nearly threefold to approximately $2 billion and the IRR rises to 28%. And undiscounted free cash flow nearly doubles to $9.5 billion over the life of the project. Turning to Slide 7. Zuun Mod is located in the Bayan Khundii Minerals District in Southwestern Mongolia. In the Southeast report person of our more than 6,000 Hectar Hubenhar mining license, a license with more than 50 years remaining on the term and just 35 kilometers east of our operating by a Bayan Khundii gold mine. We've been focused on this part of the country for more than 20 years, defining 4 deposits and multiple prospects and a part of the Central Asian orogenic belt that had seen almost no modern operation before our discoveries. Having our operating Bayan Khundii gold mine, our people and our infrastructure just down the road from Zuun Mod a genuine advantage that few development stage projects can offer. As shown on Slide 8, the past decade has brought significant investments in roads, power transmission and border infrastructure across Southwestern Mongolia and Northern China. And with that several other new mines now operate in the region. Zuun Mod is approximately 200 kilometers from the Chinese border. Within the past year [indiscernible] road has been built just 35 kilometers from the project, improving connectivity with Mongolia's Southern Neighbor. The 240-kilometer power line we built for Bayan Khundii is within 30 kilometers of Zoom. With China's demand for minerals continuing to grow, we expect governments on both sides of the border to keep prioritizing infrastructure and resource development in Southwestern Mongolia. Zuun Mod is one of several projects advancing in the strategically important and growing region. I'll offer further commentary later in the call, but I'd like to hand over the call to John Lyons, Erdene's Chief Development Officer, for an overview of the key technical elements of the study. John has worked with her dean in Mongolia for nearly two decades and was a key member of the team that delivered the studies and manage construction of the Bayan Khundii gold mine. The same experience he and the team are now bringing to Zuun Mod. John?

Thank you, Peter. I'd like to start by reinforcing our excitement today in presenting the results of this PEA for Zuun Mod. The PEA was informed by, as you mentioned, learnings from our recent build, the Bayan Khundii gold mine and prepared by a consortium of consultants, all of whom brought operating experience, open Mongolia and in the disciplines they were selected to contribute towards PEA was led by O2 mining with key inputs from SLR advisory, Asia, Tetra Tech coffee in Australia, glucose research and MCS International. The study, in essence, outlines our preliminary development plans for one of Asia's largest undeveloped molybdenum copper projects. Turning to Slide 9. The PEA is based on a very large mineral resource prepared by SLR earlier this year. At the selected 250 parts per million cutoff grade, the Zuun Mod resource is estimated to contain 427 million pounds of molybdenum and 553 million pounds of copper classified at the measured and indicated categories. Inferred resources at an additional 783 million pounds on a contained molybdenum equivalent basis. These figures demonstrate Zuun Mod as one of the largest undeveloped primary within deposits in Asia. On Slide 10, you can see the 4 conceptual pit development stages at covering a footprint of approximately 3.5 square kilometers. Mineralization at Zuun Mod starts near surface and the deposits geometry, grade distribution and depth all support the use of conventional bulk mining methods. With low technical complexity. As shown here on Slide 11, the Zuun Mod projects demonstrates the potential for a large-scale operation with an expected mine life of over 3 decades. The average life of mine strip ratio is very low and about 1.3:1, with preferential targeting of higher-grade material earlier in the development. Process plant feed in the PEA totals over 830 million tons at a nominal throughput rate of 20% per annum. Our recent flotation test work here in Canada confirm the relative metallurgical simplicity of Zuun Mod material. As shown in the table, recoveries at 88% for molybdenum and nearly 90% for copper or have the potential to produce high-quality concentrates, both in terms of metal grades in concentrate as well as low levels of penalty elements below the trigger thresholds. Over the total proposed mine life, Zuun Mod expects to produce 672 million pounds of molybdenum and 947 million pounds of copper. That equates to around 20 million pounds of moly about 28 million pounds of copper and concentrates on average every year. The preliminary site layout is displayed here on Slide 12. At center, you'll see the open pit where mining we use hydraulic excavators in conventional shovel configuration drilled and blasted material be loaded into haul trucks with waste rock deposited either to the north in the mineral waste facility or used progressively to build the embanking of the tailings storage facility located to the West. By contrast, plant feed will be hauled to the crusher or the run of mine pad adjacent to the process plant. PEA assumes that open pit mining will be carried out by a contractor. Who will finance, own, maintain and operate the mining fleet. Drilling and blasting are similarly proposed to be contracted, that is common in Mongolia. The conceptual fleet takes at 63 units in year 7 to 13 and including 33 ultra-class haul trucks, 3 large face shovels to rehandle loaders, drills and other supporting equipment. Mining employment is estimated to peak at around 530 people around that same year's 7 through '13 and includes both the contractors and our owners' personnel. The process plant itself is a conventional molybdenum copper concentrator which you can see here in the reference map northeast of the pit. The flow sheet comprises primary crushing, poor ore stockpile and semi-hitogenous ball mill grinding to 200 microns, which then reports to bulk flotation. The bulk con is planned to be reground to 35 microns, cleaned and separated through moly flotation to produce separate copper and molybdenum concentrates. As highlighted earlier, our recent metallurgical test work has indicated that Zuun Mod can produce high-grade molybdenum and copper concentrates with low levels of deleterious cell. And at the target grades. Our Zuun Mod concentrates are expected to be well suited to the downstream roasters and converters in the region with whom we've spoken and who are understood to have the available capacity, tailings from the concentrator are planned to undergo thickening to around 55% solids or more and pumped to a dedicated storage facility west of the plant. Concentrate thickener overflow will be recycled to the milling and flotation circuits along with decant water recovered from the tail storage. Pressure filters are included as the last step for dewatering of concentrate products to typical moisture content levels ahead of packaging and shipment. Overall, our proposed development at Zuun Mod is relatively simple, combining well-established mining methods and mineral processing technologies that scale very well. value enhancement at the mine is outlined here in Slide 13. As the PEA is the first phase technical study for Zuun Mod, we see several opportunities to optimize the project through value engineering. Firstly, the mine plan has been developed only to a conceptual level and further study will examine haulage and load factors to increase productivity. As part of this work, the team will also evaluate electrification in the fleet could drive additional savings given the long life of mine proposed. Secondly, power and reagents consumption account for a significant portion of processing costs such that further evaluation is the potential to reduce use of these inputs and secure the most cost-efficient source of electricity. Thirdly, we aim to process Unman material with the lowest feasible water usage. To this end, dynamic thickening test work will examine to what extent the tails density and water recovery may be improved. In turn, these test results will help inform the project's water balance and its tailings behavior with potential to reduce water band, shrink the facility footprint and lower both our capital and operating costs. Finally, as with any significant project, detailed engineering and design work will allow us to flesh out the project scope. In turn allows us to secure higher confidence, more competitive bids for our major works and potentially improving on the estimates used here in the PEA. With that, I would like to turn the presentation over to our CFO, Bob Jenkins, to provide the PEA's financial highlights. Bob?

Thank you, John. Slide 14 summarizes the PEA financial highlights at both base case prices of $25 per pound of molybdenum and $5 per pound of copper as well as current prices of $33 per pound of moly and $6.50 per pound of copper. At the base case, the project is forecast to deliver an after-tax net present value at an 8% discount rate of $745 million and an internal rate of return of 16%. At current prices, the after-tax NPV at an 8% discount rate is almost $2 billion, and the internal rate of return is 28%. The life-of-mine revenues are forecast at $21 billion under the base case and at more than $28 billion at spot prices. Free cash flow is forecasted just under $5 billion under the base case and approximately $9.5 billion at spot. The project is forecast to break even at $18.50 a pound molybdenum, well below the base case price and 44% below today's price. Based on projected life of mine, 78% of revenues will come from moly and 22% from copper. As detailed on Slide 15, initial capital costs are estimated at $687 million providing an NPV to CapEx ratio of 1.1x under the base case and approximately 3x at spot. The plant makes up the largest component of capital at over 50% with related infrastructure at 16%, the tailings at 4% and contingencies at a weighted average rate of 35% represents just over 1/4 of the estimated total. As a reminder, we have assumed that the CapEx related to fleet is covered by the contract miner in forms part of the operating costs. Sustaining capital over the life of mines estimated at $463 million and consists primarily of tailings and mineral waste management facility construction and ongoing process and nonprocess infrastructure capital. C1 operating costs are $10.25 per pound of moly produced includes a copper credit of $7.05 per pound. When adding government royalties of $2.95 per pound, and sustained CapEx of $0.69 per pound, the PEA estimates an all-in sustaining cost of $13.89 per pound of moly produced. In aggregate, the PK estimate total taxes and royalties paid to the government of Mongolia of $3.7 billion during the fair distribution of the project benefits to the people of Mongolia in addition, the indirect benefits from employment and development that the project would deliver. Taken together, as shown on Slide 16, a Zuun Mod is forecast to generate approximately $170 million per year of free cash flow under the base case pricing assumptions and an average of $278 million per year at current prices. Over the projected life of the mine, Zuun Mod is expected to generate $5 billion of free cash flow under the base case and almost $10 billion of free cash flow at spot. As shown on Slide 17, in parallel with the technical work on the project, our team has been working to advance our commercial strategy to move the project forward. Over the past 2 years, we have met with many of the largest molybdenum consumers in Asia, completing site visits to several roasters and downstream processors in the region. Multiple groups have expressed interest in securing moly supply from Zuun Mod given the product location and expected specifications of the molyconcentrate produced. As the project progresses, we are well positioned to lock in supply contracts that should back required to develop the project. To that end, we have also continued dialogue with international finance institutions active in supporting the build-out of projects like ours in Asia, who have expressed a preliminary interest in the project. Finally, we've identified potential groups to assist with the design and construction of Zuun Mod, leveraging many of the relationships that we built during the development of the Bayan Khundii gold project. As Peter will describe in more detail in the next few minutes, our immediate plans to advance the project are expected to be financed through the funds currently in our treasury following our nearly $30 million equity raise earlier this year. We will provide further updates on these initiatives as we have more to share. In closing, the past economic clearly demonstrate the compelling and resilient nature of the Zuun Mod project and its impressive leverage to higher metal prices. Now let me turn it back to Peter.

Thanks, Bob. I'm on Slide 18. I'd now like to spend a few minutes on the molybdenum market because it is central to why we believe this is the right time for Zoom Molybdenum is a critical mineral and short supply in an environment of rising demand. For the past 2 years, we have worked with an age critical mineral specialist has deepened our understanding of the market, particularly the supply and demand dynamics in Asia. Molly's primary uses in specialty and stainless steels, the high-strength corrosion alloys used in construction, aerospace, oil and gas and power generation. However, as I mentioned at the start of the call, it's also finding growing use in renewable energy, defense and impacted by the growing demand for metals in the high-tech industry. Over the past 5 years, demand has grown at a compound rate of more than 4% in Asia, Zuun Mod's natural market now accounts for nearly 2/3 of global consumption. Supply is a different story. Around 60% of the world's molybdenum is produced as a byproduct of copper mining, largely in Latin America, which means supply does not respond quickly to molybdenum prices. The structural case is that byproduct molybdenum is capped by aging copper molybdenum porphyries and falling grades, while new copper growth skews towards moly pour and gold-rich deposits. Primary moly mines, particularly in China, are seeing lower grades as they approach the end of their lives and very few new primary mines are in the development pipeline. At Chinese export restrictions and industry forecasts point to a structural deficit in 2026 and growing in the years ahead. That is why we've seen prices rise significantly to more than $33 a pound. Spending a little bit more time on China, because it is the most important part of the demand story. China is the world's largest consumer of molybdenum as it is for most industrial metals. Its major domestic moly mines are maturing and restrictions on smaller operations have added to the pressure. According to the International Molybdenum Association, China consumed 338 million pounds of molybdenum in 2025, roughly half of the global total at Japan, Korea and Vietnam and Asia share approaches 65%. The China only produced 302 million pounds that year. That 36 million shortfall is about 1.8x Zuun Mod's planned annual production, with moly demand projected to grow 2.5% to 3% a year market will need more than 100 million pounds of additional supply by the time Zuun Mod's comes on stream. Most of that demand will be in Asia, mainly in China. Over more than 2 decades in Mongolia, I've watched China's approach to raw materials evolve. What I hear consistently from industry and government is that the priority is not simply the highest return project. It's about securing reliable supply from large long-life resources that can feed their industries for decades. Zuun Mod fits that need almost exactly. It is a large-scale multi-decade operation, about 200 kilometers from the Chinese border. Both governments have been investing in the roads and powered that connected to their mutual benefit with Mongolia's resources fueling a growing economy, a mine life of more than 30 years with nearly 1 billion pounds of copper alongside the moly is the kind of strategic generational supply that is becoming increasingly scarce. We believe that scale and longevity gives Zuun Mod value to strategic buyers and partners that goes well beyond the headline net present value. I'll draw two conclusions from this. First, Molly's strength is not a short-term spike. It is driven by the structural supply and demand fundamentals we've just discussed. Second, mollytan remains under followed by investors relative to its strategic importance. As the market recognizes how scarce new primary moly supply is, we believe developers like Garden with a large, well-located long-life project will be well positioned to benefit. Turning to Slide 20. Beyond the PEA itself, we see clear opportunities to add value through resource growth. In the coming weeks, we begin drilling at Zuun Mod, which will focus on both the deposit area and the Huvenhar copper target. At Zuun Mod, in late 2025, we did a sample series of close-spaced holes at the surface of the deposit and defined near-surface mineralization in areas that were previously modeled as waste. Drilling in Q4 will focus on this opportunity initially. Converting that material could meaningfully reduce the strip ratio and have a material impact on the economics, particularly in those early years. Through 2027, we will also focus on upgrading inferred resources to measured and indicated, starting with those zones scheduled for mining in the initial 5 years of the mine plan. Moving to Slide 21. Zuun Mod is part of a much larger copper modeporphyry system. Earlier this year, we reported on a broad zone of copper mineralization identified 4 kilometers west of the Zuun Mod deposit, but part of a much larger 3-kilometer long copper porphyry target. Limited drilling has taken place in this area. Additional drilling will take place later this year and continuing to 2027, testing a number of targets within the zone. In addition, a deep geophysical survey conducted by Canada's Quantech is now underway to define targets for drilling in 2027. Also, in early September, we hosted a selection of world experts in porphyry copper and epithermal gold deposits as well as some of the most experienced and successful explorers in Mongolia's modern mining era. These individuals included Kelly Cleer, Doug Kerwin, Dr. Jeffrey Hedenquist and Dr. David Burrows, who joined us visiting each of our 3 major ARC-related systems. Standing on site with them was rewarding to hear their views on the Khundii Minerals district and how they show many of the hallmarks of prolific copper and gold belts within in the areas they work globally. And the exploration remains in its infancy with tremendous room for further discovery. So what are the next steps for Zuun Mod? On Slide 22, we've laid out our high-level near-term work plan Alongside the drilling I just mentioned, which is now about to commence, work includes hydrogeological, metallurgical, geotechnical and environmental and social studies. Our indicative budget for these work streams through the end of 2027 is approximately $7 million, which we can fund from cash on hand. During this period, we'll continue our dialogue with multiple potential funding, construction and operating partners to find the right fit to advance Zuun Mod towards production. On an accelerated time line, we believe we can complete the key steps to a final investment decision within the next 2 years and reach our goal of producing molybdenum and copper in 2031. With more than $20 million in treasury, Erdene is funded to advance Zuun Mod through the next phases and into project financing or until project financing is arranged. We have no plans to raise equity to advance unmoor our other wholly owned projects. And during this period, we expect dividends from Bayan Khundii will begin to flow back to Redeem further strengthening our financial position. Turning to Slide 23. In closing, I'd like to thank our team, our consultants led by O2 Mining for the hard work that went into this preliminary economic assessment. Let me come back to where I started. Zuun Mod is a world-class ore body, a large-scale, long-life mine expected to produce nearly 700 million pounds of molybdenum and almost 1 billion pounds of copper over 34 years. It sits in a district where roads and power are now being constructed on the doorstep of the world's largest consumer of these metals at a time when China and the region are looking for exactly this kind of secure multi-decade supply. It is supported by a robust moly market and show strong economics under conservative assumptions, rising to an after-tax NPV of over $2 billion with a 28% IRR at current prices, and we see real potential to grow it both near the Zuun Mod pit and across the broader Hovenier porphyry system. Importantly, we've done this before. Just over a year ago, we poured first gold at buying and a deposit our team discovered is 35 kilometers to the west and built in under 2 years with our partner, Mongolia Mining Corporation. When we focused on this area more than 2 decades ago, we believed it had the opportunity to deliver a multi-mine, multi-commodity district. We are excited to now bring that same experience and that same team that delivered by an Khundii to advancing the Zuun Mod project. That concludes our prepared remarks. I'll hand the call back to the operator to begin the Q&A session. Thank you.

[Operator Instructions]. We have our first question over the phone lines from Don MacLean from Paradigm Capital.

Congratulations on this PEA. I'm sure it was a lot of work for those of us outside who don't necessarily appreciate the value of a project. Molly is not something that's top of mind as you pointed out, Peter, for most of us, it's very helpful to have a strong study to help inform us about what the potential for this project is and not surprising, we, along with others, probably have not attached much value to it until now. One of the things that you touched on in the discussion, Peter, and John was in China, their view about the longer term as opposed to the rate of return for a project. But we also know that the moly market spot price isn't necessarily indicative of what potential offtakers would pay. Have you had any color from your discussions with potential buyers of the concentrate what they might be willing to pay relative to the spot price and your $25 per pound assumption?

I'll jump in there, Don, and thanks for your comments and perhaps John can add to this. But given the tightness of supply that we're seeing in China today, we're seeing pricing paid by Chinese consumers close to the spot price that we're seeing at the $33 range. John has spent a considerable amount of time and actually will be returning to China in the coming weeks and has that first-hand experience. So maybe, John, you could just add some commentary to that question.

Thank you, Peter. Don, for the question. Yes, echoing the tightness of supply at the dozen or so concentrators and downstream processors with which we are now in dialogue. I would point to the terms that we're currently seeing for molybdenum concentrate often with as much as 100% advanced payment. There's a much more transparent market for pricing relative to what we had 15, 20 years ago when we first started this work at Sun mad. And many of these entities are integrated further downstream. We see this in copper as well where treatment and refining charges currently are effectively 0 or very, very low. How can that be one can surmise. But given the tightness of supply, the integrated nature of some of the supply chains and the higher margins for eventual downstream products, we think the conditions are right to achieve at or even stronger long-term pricing at the levels we are currently seeing today?

And John, when you say at or even stronger, is that relative to the $25 or the spot?

I think we wouldn't be doing this if we didn't feel like spot was where we're headed. And I think the parties with whom we continue to dialogue are similarly bullish as was demonstrated in the PEA, it's super sensitive to that price assumption with an $8 delta that's very constructive and positive.

[Operator Instructions].

Operator, it's John Vincic. I'll ask a question from the webcast and then maybe we can get Don McLean back in the queue after a couple of questions from the webcast. The first question from the web audience. The CapEx of $689 million appears low. What factors give you confidence that it can be built at that price.

Thanks, John. John Lyons is probably closest to that. So I'll pass that question over to John to give you some feedback.

Thank you, Peter. One regarding the capital cost somewhere we've been thinking a lot about the past few months. I guess I'd point to 4 main factors. To explain, I guess, the perceived difference between our estimated capital expenditures relative to recent few examples at this scale. And first, I would point to the processing equipment pricing being well supported. Already at this preliminary economic assessment stage. We've got multiple quotations for all the major mechanical equipment. So that was a big piece of the puzzle here in terms of our own confidence and belief, again, at this preliminary level given our proximity in Mongolia and the ongoing technical engagement of this team as well of our joint venture with vendors in China and international, we feel like well, we feel good about our ability to procure and install the necessary equipment at more competitive prices, at least compared to similar developments in jurisdictions that are perhaps a bit further afield from this critical equipment supply and expertise, really. Second main factor is really important that we compare apples-to-apples. So are we looking at scope of capital expenditure that is inclusive of what and who's responsible for that. So for Zuun Mod, the PEA capital cost estimate excludes any mining fleet since we've assumed that to be coming from the contract miner and our strategy to progressively develop the tailings facility also reduces the need for upfront capital intensity. Obviously, the PSF establishment is still a significant cost over the life of mine. But each deposit has its unique ratio of and material availability. So I think by progressively spreading that over time, the absence of mining fleet capital are contributing to the estimate as it's presented PEA. Thirdly, we have a track record now directly in this region, just 35 kilometers west of Zuun Mod. And with total combined PEA contingency sitting at 35% of the capital costs we're comfortable that there's a reasonable headroom as the scope and engineering advance here over the next stages. At a high level, again, looking at our experience building in Bayan Khundii. We were able to demonstrate that a mine of comparable scale can be built at a competitive rate, perhaps as little as 30% to 50% of the cost of some of the recent peer gold mines in other jurisdictions. And we're able to complete it in accordance with the schedule we had put forward at the time of construction decision. So I think that same kind of discipline and ultimately, flexibility. We're bringing to the table here at Zuun Mod already from this conceptual stage. And last but not least, so much of mining in life is about geography. And Zuun Mod, in fact, sits in a relatively favorable location when compared to other large-scale molybdenum copper porphyry deposits. So we're in -- we don't have any dramatic topography. We have fairly straightforward access to Overland logistics routes and border infrastructure. and a climate that's really mostly dry and sunny, albeit it gets a bit chilly here in the winter, as you know. So taken together, yes, we're comfortable with the capital cost estimate being reasonable for the project scope as it's defined now at the current PEA.

Thank you. Operator, I see Don McLean is back in the queue. So perhaps we can go back to him for a question.

Don, your line is now open.