Erdene Resource Dev (TSX:ERD) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Erdene Resource Dev has transitioned from a developer to a producer with strong cash flows from the Bayan Khundii gold mine and repaid US $30 million of debt in Q3 2026.
The company is advancing several exploration projects, including the Zuun Mod molybdenum-copper project, which has demonstrated strong economics with an NPV of US $745 million in its PEA, potentially rising to US $2 billion with current metal prices.
Q3 2026 financial highlights include revenues of $71 million from gold and silver sales, with cash costs at $1,742 per ounce and all-in sustaining costs at $1,848 per ounce.
Erdene is expanding exploration efforts with a 16,500-meter drill program targeting gold, molybdenum and copper, and plans to finalize a heap leach operation to extend mine life.
The company reports net income of $10 million in Q3, with a focus on debt repayment and exploration investment. It anticipates higher grades and increased production in Q4 2026 and beyond.
Full Transcript
OPERATOR
Erdene Mongol LLC, a 50:50 joint venture between Erdene Resource Dev and Mongolian Mining Corporation. It is also important to note 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. The conference call will also make reference to results from the Company’s recent preliminary economic assessment for the Zuun Mod molybdenum-copper project and mineral resource estimates for several of the Company’s properties.
Please review Erdene Resource Dev’s latest disclosure materials, including 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 finally, all dollar amounts mentioned on today’s call are in Canadian dollars unless otherwise noted. Today’s speakers from Erdene Resource Dev are Peter Akerly, President and Chief Executive Officer, and Robert Jenkins, Chief Financial Officer.
Peter, please go ahead.
Peter Akerley (Chief Executive Officer)
Thank you, John. Hello everyone, and thank you for joining us today. I’ll start on slide 4. Over a year ago, Erdene made the transition from developer to producer with the first gold pour at the Bayan Khundii gold mine. That came just 10 years after our greenfield discovery in what was then a relatively isolated corner of southwestern Mongolia. During this period, that region has changed: new mines, roads including blacktop highways, power transmission, and border infrastructure.
Yet exploration in the Khundii Minerals District is still in its early days, and in my view and that of many others, the district has exceptional potential for further discoveries of gold and copper deposits. That was clear in September when we hosted field evaluations by some of the global leaders in exploration. Our strategy has been consistent for many years: generate cash flow at the Bayan Khundii gold mine, then use that cash to ramp up exploration and fully test the potential of this district.
Bayan Khundii is now generating strong cash flow. We’re paying down debt, and the mine continues to make improvements, putting us in a strong position to act on our opportunities. In addition to the operations at Bayan Khundii, our exploration efforts have already advanced a number of prospects to deposits. Three of those displayed on Slide 5 are now entering the economic evaluation stage, with studies recently completed or underway on the Zuun Mod molybdenum-copper project, the Dark Horse heap leach gold project, and the Altan Nar gold deposit. At the same time, Mongolia’s government is recognizing that change is needed to stimulate exploration and bring new projects on stream.
To that end, Parliament approved amendments to the Minerals Law in October, including a more competitive copper royalty and clearer rules for exploration and license issuance and approvals. With near-mine growth at Bayan Khundii, three projects moving toward investment decisions, and a strong pipeline of new discoveries, we are entering a very exciting period for our company with a compelling multi-decade growth platform. Moving on to Slide 6, I’ll start with the highlights for Q3 2026. The Bayan Khundii gold mine, which we co-own with our strategic partner Mongolia Mining Corporation, produced nearly 12,000 ounces of gold in the third quarter, slightly ahead of Q2. In Q3, Bayan Khundii continued to generate positive cash flows with US $30 million of debt repaid. The plant continues to perform very well and mining operations made significant strides in Q3, providing access to higher-grade ore and positioning us for a stronger Q4.
On October 14, we delivered a preliminary economic assessment for Zuun Mod, our wholly owned molybdenum-copper project. The study confirmed Zuun Mod is one of Asia’s largest undeveloped molybdenum deposits with strong economics at current metals prices. Finally, we launched a 16,500 meter drill program to test gold, molybdenum, and copper targets across the Khundii Minerals District. As shown on slide 7, the Bayan Khundii plant processed 164,000 tons of ore in the third quarter, an average of 1,788 tons per day, a 6% increase in throughput over the second quarter. Gold recoveries of 96% were consistent with the prior quarter and continued to exceed our projected 93% target. Bayan Khundii produced 11,853 ounces of gold in the quarter at an average realized price of $4,313.
Turning to Slide 8, mining performance continued to improve. In Q3, the team moved 4 million tons of material, 7% more than in Q2. We mined 415,000 tons of lower-grade ore, a 68% increase in ore tons over Q2. As we positioned the mining team to access higher-grade ore in Q4, we sent the higher-grade ore averaging 2.3 grams per tonne to the plant and stockpiled the lower-grade material for later processing. The mine is also changing shape, moving away from the single-level operation employed during the startup phase, with mining now advancing into the deeper, higher-grade Stryker and Midfield zones.
As the photo shows on this slide, our feed grades are close to double that of your average open pit gold mine. However, they remain lower than we would like. Although the Bayankhundii deposit has wide zones of low-grade ore, the high-grade gold mineralization is highly concentrated. Roughly 80% of the value sits in about 20% of the ore. Getting the full value depends on precise mining accuracy in identifying high-grade, low-grade, and waste, and grade blending, and keeping dilution and ore loss to a minimum is all of critical importance to achieving target grades.
While the overall geometry of the mineralized zones is relatively consistent, at the scale of individual high-grade mining blocks, their location and continuity can differ from what the resource model predicts. These learnings allow us to continually inform and upgrade our models moving forward, improving our accuracy. Our response has been to build the capability to mine this deposit selectively and to blend plant feed to the target grade. The Erdene Mongol team has brought in experienced specialists to work alongside our mine geologists and engineers on resource modeling, grade control program design, and drilling and blasting techniques that control ore movement; ore definition; dig lines that protect grade; and, supported by a high-precision GPS fleet management system, that work is starting to show results. The match between our grades predicted by our grade control drilling and the grades delivered to the plant is improving, and we expect that trend to continue as we move into 2027.
We will continue to refine our modeling-reconciliation effort and update mine plans with an improved understanding of the deposit. With mining in Stryker and Midfield, where the high-grade zones are modeled to be more consistent, we are working towards higher head grades in Q4. Higher grades should drive increased metal production and lower unit costs. The results over the coming months will be the real measure of our progress. We are building the same approach into the 2027 mine plan, which is now being finalized, with plans to introduce the high-grade Dark Horse South ore body mid-year and, further out, considering the timing for expansion into the Bayan Khundii West area, both of which offer further grade upside. I’m now on slide 9. Our Q4 exploration is well underway, with three diamond drill rigs turning at Bayan Khundii, Dark Horse, and Zuun Mod, completing 16,500 meters of drilling this quarter.
Our immediate focus is on two expansion areas next to the Bayan Khundii gold mine: the Bayan Khundii West and Dark Horse areas. They are part of the same Bayan Khundii hydrothermal system, and we expect them to add ounces that support a longer mine life and potentially an expansion of the Bayan Khundii complex. The Khundii West expansion offers substantial upside to push the Bayan Khundii pit westward, laying the groundwork for a much larger pit over time that could extend toward the Khurem Saar and Ulaan resources, subject to agreement with the adjacent license holder.
The broader Khundii-Ulaan hydrothermal system covers some 4,000 hectares and includes more than 10 kilometers of mineralized structure from Ulaan southwest onto the northeast Khundii license. It’s still early in its exploration life, with excellent growth potential. Turning to slide 10, we’re currently in the midst of a 9,000 meter drill program to expand resources in the Bayan Khundii West expansion area. We are about halfway through the program, with results anticipated in Q1 2027. The Khundii West resource is now part of the planned BK development through a revised pit that reflects today’s gold prices. However, the area has seen little close-spaced, step-out, and extension drilling despite the substantial mineralized zones shown in the table and significant zones outside the defined resource.
The program’s goal is to improve confidence in those high-grade zones and, in some cases, bring new zones into resources and reserves. That will let us finalize plans and designs in the first half of 2027 to feed Bayan Khundii West ore into the Bayan Khundii plant. As shown on slide 11, about two and a half kilometers north of the Bayan Khundii mine is the Dark Horse area. It hosts the Dark Horse resource, a high-grade gold deposit of about 67,000 ounces with an average resource grade of 4.8 grams per tonne, exposed at surface. In Q3 we completed grade-control drilling at that deposit, supporting plans to bring it into the mill feed in the second half of 2027, ahead of its original year-three schedule in 2028.
Dark Horse South sits within a three-kilometer mineralized trend that remains open, with multiple gold-bearing structures exposed at surface and exceptional exploration potential. We recently started a 3,000 meter program in the Dark Horse South and Altan Arrow area. It will extend the shallow oxide resource for the CIP plant and for a potential heap leach operation, and test new targets identified during the recent expert field visits. The Dark Horse–Altan Arrow area has a substantial volume of lower-grade gold oxide. Heap leach amenability testing by Blue Coast Research on low-grade samples from Dark Horse is complete, and the results appear supportive for heap leaching. We are also evaluating low-grade Bayan Khundii stockpile material and Altan Nar oxides as additional heap leach feed. An internal scoping study will be completed in Q4 to develop plans for a heap leach development, leading to a development decision later next year.
Together, Dark Horse South, Dark Horse North, and Altan Arrow give us excellent potential to keep adding ounces and extend mine life at the CIP plant and a very real opportunity to expand production through a heap leach operation. Everything we’ve just reviewed sits within the Khundii-Ulaan system, but what we see as perhaps our most significant gold growth opportunity, and likely our second mine, is 16 km north at Altan Nar. As shown on slide 12, Altan Nar is already a substantial part of our total high-grade gold resource base: measured and indicated resources totaling 835,000 ounces at 2.9 grams per tonne, and an inferred resource of a further 265,000 ounces at 1.5 grams.
Of that total, Altan Nar hosts close to half of the district’s combined gold resources and almost all of its silver, with tremendous growth potential. Altan Nar sits on a granted mining license with a 30-year initial term, and production there would also fall under Erdene’s 5% NSR royalty once the first 400,000 ounces have been recovered. We believe we’ve only scratched the surface at Altan Nar. The majority of the resource comes from just two of the 18 mineralized targets shown in red on slide 13 along a 5.5 kilometer corridor.
Those two targets are Discovery Zone and Union North. Altan Nar is a deposit type of the same family as some of the largest and highest-grade gold deposits globally. Porgera, Kelian, and Fruta del Norte are examples. These systems can extend more than 500 meters vertically. While most of our drilling has been very shallow, our most recent drilling added continuity but also provided targets for additional drilling, with up to 23 meters of 17 grams per tonne in the Gap Zone of the Discovery deposit.
Recent metallurgical testing returned gold recoveries of about 89%, with potential to produce separate lead and zinc concentrates. We are planning a large drill program at Altan Nar in 2027 aimed at significantly expanding these resources. Moving on to our wholly owned Zuun Mod molybdenum project. On October 14th we announced the results of the preliminary economic assessment. Slide 14 summarizes the highlights of the study. The PEA outlines a large, long-life operation, including a 34-year mine life, processing about 25 million tonnes a year through a conventional flotation plant. Over its life the project is expected to recover about 670 million pounds of molybdenum and almost a billion pounds of copper.
In regards to the economics, the PEA base case of $25 per pound and $5 copper results in an after-tax NPV at an 8% discount of US $745 million with a 16% IRR. This is on capital expenditures of approximately $687 million. However, at recent prices of about $33 molybdenum and $6.50 copper, that NPV rises to about $2 billion and the IRR increases to 28%. The deposit and the broader license have significant exploration potential, and we have started a 4,500 meter drill program to add further value.
More on that in just a moment. The scale of Zuun Mod makes it a world-class deposit, but that is only part of the story. There are two other elements that make this project truly compelling. The first is location—a strategic location. Going back to the earlier map, slide 15, Zuun Mod is about 280 km by road from the Shivee Khuren–Seikh (Shivee Khuren/Seikho) border crossing and railhead, providing access to key Asian markets including China, Korea, and Japan. Within the past year, a coal haul road has been built within 35 kilometers of the project.
And the 240 kilometer power line that was built for the Bayan Khundii gold mine runs within about 30 km of Zuun Mod. As shown on slide 16, the second element is the molybdenum market itself, which is very supportive. Molybdenum is a critical mineral in short supply, with demand rising. Its main use is in high-strength, corrosion-resistant specialty alloys, and it’s increasingly used in renewable energy, defense, and electronics. Over the past five years, demand has grown at more than 4% a year.
Asia—Zuun Mod’s natural market—now accounts for roughly two-thirds of global consumption. Supply, however, is a different story. Around 60% of the world’s molybdenum is produced as a byproduct of copper mining, so supply does not respond quickly to price. That byproduct supply is constrained by aging copper-molybdenum porphyries with falling grades and operational issues at many of the largest operations in South America. At primary molybdenum mines, particularly in China, we are seeing lower grades as they approach end of their lives, and very few new primary mines in development.
Industry forecasts point to a structural deficit of about 13,000 tonnes in 2026, growing in the years ahead. That is why we’ve seen prices rise to the $33 a pound range. With the PEA in hand, we are now advancing discussions with potential downstream consumers, financing, and strategic partners, with members of our own management team in China in the coming days. Its economics, location, scale, and longevity, together with the long-term dynamics of the molybdenum market, are why we believe the time is right to advance the Zuun Mod project.
I’m now on slide 17. Zuun Mod sits in our wholly owned 6,000-hectare Khuvyn Khar mining license. It lies within a large porphyry system roughly 16 km in circumference, which hosts multiple targets, including the Khuvyn Khar copper prospect, where drilling has returned 34 meters of 1.3% copper and 30 meters of 1.25%. Recently, several porphyry copper experts visited the site and reinforced our view that Zuun Mod and Khuvyn Khar have exceptional potential for additional discovery.
At Zuun Mod, a 4,500 meter drill program is underway, with the majority dedicated to confirming mineralization in the upper hundred meters of the molybdenum deposit, including areas previously modeled as waste, and to test extensions adjacent to the current resource. Converting that material could improve the economics, particularly in the early years, with the potential to significantly impact payback and NPV. In 2027 we will start technical and infrastructure studies and begin upgrading inferred resources to measured and indicated, starting with the first five years of the PEA mine plan resources.
At Khuvyn Khar, we are testing shallow copper targets this quarter, while Quantec Geoscience carries out an advanced 3D geophysical survey across the entire Zuun Mod–Khuvyn Khar license. This will define deeper targets for drilling in 2027, building on this year’s high-grade copper intersections. As you can see, Erdene Resource Dev is very well positioned to pursue growth on several fronts in the emerging Khundii Minerals District. I’ll now turn the call over to Bob for the financial highlights.
Robert Jenkins (Chief Financial Officer)
Thank you, Peter. Moving to Slide 18, let me provide the financial highlights for the quarter ended September 30, 2026. Before I start, let me remind everyone that Erdene’s investment in Bayan Khundii is held through its 50% joint venture stake in the Mongolian company Erdene Mongol LLC with our strategic partner, the Mongolian Mining Corporation. Included on this slide are financial highlights representing 100% of the joint venture financial performance as well as consolidated results for Erdene Resource Dev, representing our proportionate share of Erdene Mongol’s performance and our corporate operations.
All figures are in Canadian dollars unless otherwise noted. Starting with Erdene Mongol in Q3, the business generated $71 million of revenue on sales of nearly 12,000 ounces of gold and over 3,000 ounces of silver. Revenues were 5% lower than the prior quarter as slightly softer metal prices offset the impact of a modest increase in production. Total cost of sales for the quarter was $32 million, largely in line with the prior period. Cash costs for the quarter were $1,742 an ounce and all-in sustaining costs were $1,848 per ounce, compared to $1,899 and $1,991 per ounce respectively in the prior quarter.
Erdene Mongol ended the quarter with US $19 million of cash, and during the quarter the company repaid US $30 million of debt, reducing the total balance outstanding to $93 million, or $132 million CAD. The business will continue to prioritize debt repayment while investing in the exploration and development programs Peter discussed earlier. Turning to Erdene’s consolidated financial performance in Q3, our share of income from Erdene Mongol totaled $10.6 million, in line with the income from the second quarter. Exploration and evaluation expenses for Erdene Resource Dev, representing the work by our team on our controlled properties, totaled approximately $500,000 compared to $700,000 for Q2 2026. The quarter-over-quarter reduction was primarily due to the timing of exploration programs, and our team completed the maiden drill program at Tarragoul during the second quarter.
Corporate and administrative expenses, representing Erdene’s public company costs, totaled $700,000 in Q3, largely in line with the second quarter. In total, Erdene generated net income of just under $10 million, or $0.14 per share, largely in line with second quarter. Erdene ended the quarter with just over $25 million Canadian cash, sufficient to advance our Zuun Mod project and finance corporate operations in the period until we start returns of capital from our investment in Erdene Mongol.
On June 30, the company launched a normal course issuer bid. In Q3 we bought back 130,000 shares at an average price of just under $5.60 per share. A further 68,000 shares were repurchased in October at an average price of just under $5.70. We will continue to be active under the NCIB where we view our shares as trading at a discount to intrinsic value. That concludes my review of our financial performance for Q3. I’ll turn the call back to Peter now.
Peter Akerley (Chief Executive Officer)
Thanks, Bob. Turning to slide 19. The health and safety of our employees, the contractors and local communities is our top priority and the core foundation of our operational success. At the end of Q3 there were 580 staff and contractors on site with a total of 572,000 person-hours worked during the quarter. The 12-month rolling average lost-time injury frequency was 1.4 million person-hours. While this is a respectable result, we continually strive towards zero.
One of our many ongoing community initiatives is our operator training program conducted in partnership with Mongolian Mining Corporation and focused on local employment, a high priority for us. More than 180 people have now completed the training and most have been employed at the Bayan Khundii gold mine. Over 40% of Erdene Mongol site personnel are residents of our host province, Bayanhongor. Erdene Mongol also supports community development through microfinance, local procurement, public health services, youth education and agricultural initiatives.
In addition, as part of our expert site visit, we worked with the Government of Canada to bring Mongolian geology professors and students to the field, followed by a one-day symposium in Ulaanbaatar for industry, academics, students and regulators. The goal is to build expertise in Mongolia’s university and industry to strengthen the country’s ability to make the next exploration discoveries. 2026 has been a year of delivery. Erdene is now a gold producer with an attractive future as an explorer. Bayan Khundii is Mongolia’s newest gold mine and its cash flow funds our growth without relying only on the equity markets. On the operating front, with mining now in the higher-grade Striker and Midfield zones, we anticipate an increase in feed grade and expect the fourth quarter to be our strongest quarter of the year. The district behind the Bayan Khundii gold mine has scale.
Dark Horse, Bayan Khundii West, Altan Nar and the potential for heap leaching all point to more ounces and a longer mine life as the district grows. Erdene also holds a 5% net smelter royalty return on all production from the Khundii, Altan Nar, Ulaan licenses once the first 400,000 ounces of gold have been recovered. At Zuun Mod, the PEA positions us as a supply option for Asia’s critical minerals. Japan and Korea both treat molybdenum as a critical or strategic mineral and are large net importers. Zuun Mod would supply about 20 million pounds a year just as aging primary mines elsewhere decline and demand grows. Mongolia itself is changing. Infrastructure that was once a constraint is now an advantage. The government has reformed the mining law to encourage exploration and investment.
About 10 km from our Tarragoul property shows that world-class mines can be built and operated here. With our listing on the Mongolian Stock Exchange, Erdene is also a bridge between Canadian and Mongolian investors. Looking ahead on slide 21, our catalysts include continued progress at BK achieving higher feed grades, results from the 16,500 meters of drilling now underway, the Quantec survey results at Hooven har in early 2027, the heap leach evaluation at Dark Horse, final plans for Bayan Khundii West expansion in the first half of 2027 and high-grade ore from Dark Horse South entering the mill feed in the second half of the year, continued progress with partners on Zuun Mod, including our visits to China this month.
As we deliver on each of these, we expect to continue to unlock substantial value for our shareholders. Thank you. With that, I’ll hand it back to the operator to begin the Q&A session.
OPERATOR
Thank you, ladies and gentlemen. As a reminder, to join the queue, you may press star one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing 0. Participants on the webcast may type in their questions in the chat feature of the webcast. One moment please for your first question. Ladies and gentlemen, as a reminder, if you have a question, please press star one.
John Vincik (Investor Relations)
Operator, it’s John Vincik. I’ll take the first question from the webcast if there’s nobody in the queue. Okay. First question from the webcast. You’ve spoken at a high level about the potential for a heap leach facility and how that might fit into the Dark Horse and BK expansion. Can you provide a bit more detail about which resources would lead to a longer life for the CIP facility and which would lead to expansion of the total annual ounces from a heap leach?
OPERATOR
Yeah, sure, go ahead.
Peter Akerley (Chief Executive Officer)
Sure. Thanks for that, John. So just to think about the staged approach that we have for the heap leach evaluation. The first part of that is to establish the resource base from the oxide zones along the Dark Horse–Altan Arrow trend. So we have a substantial amount of low grade, in addition to that being delivered to the CIP plant in 2027. But we’re expanding on that with the drilling that’s underway. So we’re testing about a kilometer and a half of strike length as Altan Arrow joins into Dark Horse, and we’ll have the results for that as we move into the early part of 2027.
Ideally, we get up into that 100,000-ounce low-grade resource base coming from the Dark Horse–Altan Arrow area to form the foundation for the heap leach. But in addition to that, we have the low-grade stockpile that’s being built up at Bayan Khundii, which we’re also doing test work on. We currently believe that the Dark Horse oxides should give us somewhere in the mid-60s in terms of recoveries. Bayan Khundii won’t achieve that—perhaps it’s in the 40-ish range—but nonetheless that’s a large value ore stockpile that’s sitting there for as much as 10 years that could potentially earn money earlier put into the heap.
So those two sources are also complemented by what we believe to be a very large oxide blanket that sits over top of Altan Nar. Currently, over 60,000 ounces are in that category. So when you combine all of that, we may have as much as 150,000 to 200,000 ounces of low-grade material available to us without further exploration, which we believe gives us the substance required from a resource base to move forward. The next step is the testing. As I talked about in the presentation, we’ve been doing the column leach testing on Dark Horse. Results look good. So we’ll now take all of that information and move that into a decision point with our boards in Q4 of this year. Assuming that’s a go decision, then we move into definitive studies in 2027 and ideally be moving into engineering late next year and construction in 2028. There’s a number of gateways involved in that, but I’d just cap it off with saying it looks very positive to date.
In terms of scale, we’ll know better as we get through the scoping study, but we’re thinking about something in that 15,000 to 25,000 ounce per year range over a five-year plus period would be sort of the bookmarks I’d put on that for now. But again, it’s a bit early from a detail perspective, but certainly looks very promising.
John Vincik (Investor Relations)
Thank you, Peter. Next question from the webcast. What average head grade are you anticipating in Q4 and what is your target in 2027 H1?
Peter Akerley (Chief Executive Officer)
So what we’d like to see in Q4 is in the range of about 3 grams per tonne. As I talked during the call, as we move into the deeper, more consistent high-grade zones in Striker and Midfield, we believe that’s achievable. As we look out into 2027, that’ll be somewhat influenced by the timing within which we can bring on the Dark Horse material. As, again, I mentioned during the presentation, the grades of that in the resource are close to 5 grams per tonne, so it can have a significant impact on the overall grade.
But I’d say use the 3 grams per tonne that we’ll see in Q4 as a base, and ideally we’d be able to outperform that number.
John Vincik (Investor Relations)
And what was the mining dilution in Q3 and how did that compare versus Q2?
Peter Akerley (Chief Executive Officer)
So maybe to add a little bit more color to that question, when we first began the process of operating the Bayan Khundii mine, dilution was very high and losses as well. As we moved into the second half of this year, we’ve seen the dilution reduce significantly. We are now running at around 15% dilution. We’re assuming losses at about 2.5%, but both figures are well down from earlier this year.
John Vincik (Investor Relations)
And another question from the webcast, Peter: is the mine grade consistent on average with the geologic model and the resource estimate?
Peter Akerley (Chief Executive Officer)
You know, I think it’s important to separate some of that from what’s delivered to the mill and what’s in the model. But it’s important to remember that we’re modeling a very high-grade ore body that has grades that range up to as high as 2,000 grams per. So there is a high degree of variability. The grade control program that takes us down to as close spaced as 5 meters is what lets us define the deposit more precisely as we mine it. And I’d say that too has been a learning curve.
And just now we’re getting to the point where we’re comfortable in the reconciliation between the global resource model, the grade control model, and the delivered-to-mill grades. And I’d say that variability ranges around -10% over the last month. But that also is a significant improvement over what we saw earlier. And one of the issues that we saw in the early days is that the dilution of the high grade moving into the low grade material is very hard to track. You’ve got a very large stockpile that has likely consumed some of your high-grade material, and it’s very difficult to come up with an average grade on that coarse material. So that was a challenge for reconciliation early on. But as I said, at this point we’re seeing significant improvement.
And as we get towards the end of this year, we’ll have a much better body of work to look at the entire grade control database for at least that period from mid-2026 and be able to start to compare that back to the global resource, inform the model, and make adjustments where necessary. But yeah, it’s moving in the right direction, particularly with the results we’ve seen over the past month.
John Vincik (Investor Relations)
Another question from the webcast, Peter. There are many molybdenum deposits of similar grade as Zun Mod. Why should investors get excited about Zun Mod, and what are the key differences?
Peter Akerley (Chief Executive Officer)
So Zun Mod is probably—many of the callers familiar with molybdenum would recognize some of the British Columbia deposits, and there are some down into the southern or western U.S. as well. It’s not unusual to see them in a similar grade range of 0.04 to 0.07, which would be considered a medium- to low-grade molybdenum deposit. But we’re sitting next door to the largest consumer of molybdenum, which is currently in deficit. We can say the same about Japan and Korea.
This area consumes, I think, 66% of the world’s molybdenum and can’t find enough of it. So, you know, that’s the first thing: a very strong market and us sitting right next door to it. The other thing I would mention that sets us apart is scale. You know, Zun Mod currently in the PEA is going to produce over 650 million pounds of molybdenum and a billion pounds of copper over 34 years. But it’s a deposit that’s open in all directions. We’re proving that up as we do some drilling today. So when you think about those key consumers or producers of molybdenum in the Asia region, particularly in China, they’re looking for that long-life, multi-decade opportunity that has growth potential, and Zun Mod serves up that opportunity.
So it’s scale, life of mine, market, and location relative to market that sets Zun Mod apart from those projects in the western U.S. and Canada. And I’d also say one final thing, and that is the geography that we sit in. We’re in a relatively flat area with workable, reasonable weather conditions that don’t interrupt mining, where if you look at some of the other moly projects that are reportedly in the queue today, they’re in very challenging weather or geographic locations. So I’m really optimistic that those things set us apart, and Zun Mod’s really in a great place to move forward and supply that deficit of supply in the Asia region.
John Vincik (Investor Relations)
We have another question from the webcast. This one comes from Dom McLean, analyst at Paradigm Capital. Don asks, the Zun Mod PEA highlighted how this 100% owned asset could be a major value creator largely overlooked by the market. The NPV is sensitive to the molybdenum price assumed, and the spot moly market is not a highly liquid one like copper is. A big spread exists now between the current spot price for moly and the 3-year average. In consensus amongst analysts in Q3, your team continued to engage with potential buyers.
Moly, are you able to share with us what buyers’ indications have been about pricing and how different these indications were to the spot price?
Peter Akerley (Chief Executive Officer)
Yes. So as I mentioned, our team is on the ground in China in the next week or so, but they have been visiting multiple purchasers of molybdenum over the past 18 months. And so we do have probably as good a firsthand understanding of that market as anyone else in the moly space. And we’re seeing a very strong demand for molybdenum, effectively a demand that would be paying spot prices that we see reported in the public domain today, in that $33 a pound range.
There’s a number of upstream producers of ferromolybdenum that just can’t get enough supply. Some of them are working on 60% of the molybdenum supply that they require to keep their plants at full capacity. So yeah, we can share with the audience that we’re seeing that spot price confirmed on the ground. I’d also use an example that we saw recently in Mongolia where the Mongolian Stock Exchange has been selling commodities to traders directly. They’ve opened up auctions for coking coal and copper and recently held one on molybdenum. And the spot price that was paid, or the price that was paid in that auction, was bid up 20% from the starting price and actually achieved a $34 a pound price, largely from Asian buyers. Molybdenum from Mongolia is currently sold into China and Korea, and that spot price was for a concentrate that was inferior to what we would have produced at Zun Mod.
I think it was mid-40s moly conc. So yeah, we can say there’s some real solid touch points that we’re seeing in current time for moly pricing in this range. I’d also say that based on the potential for supply to come on that could meet demand, we just don’t see those major primary moly deposits coming on, with the exception of one in China that comes on at the end of the decade, that can fill that deficit. We’ll continue to see that supply deficit exist even with future supply coming on from other producers. So a very encouraging set of events on the moly market side.
John Vincik (Investor Relations)
Another question from the webcast, Peter, what is your anticipated time frame for identifying parties for offtake agreements and/or a potential joint venture partner at Zun Mod?
Peter Akerley (Chief Executive Officer)
I don’t know if I could put a time frame on it. I think I can say that we have a number of very interesting discussions going on with parties that include financial partners, operating partners, offtake partners. And those discussions will continue until we find a partner that works for all parties. But yeah, it’s certainly a high priority for us to move forward with that type of engagement.
John Vincik (Investor Relations)
Another question from the webcast, where do you see all-in sustaining costs settling as grades increase?
Peter Akerley (Chief Executive Officer)
I’ll let Bob speak to that. He’s across those numbers.
Robert Jenkins (Chief Financial Officer)
Thanks, Sean. We continue to expect our AISC on a per-ounce basis to come down. You would have seen between Q2 and Q3 there was a relatively significant reduction. This is driven primarily by an increase in the overall production, given somewhere in the neighborhood of half of our costs are fixed. Overall, ahead to next year, our team at Erdene Mongol is undergoing their business planning and budgeting process as we speak. So we expect that we’ll have good numbers from them in the coming month or so and release that as part of our guidance in the first quarter of next year.
John Vincik (Investor Relations)
Thank you, Bob. Operator, that looks like that’s all the questions we have currently from the webcast. Did you want to repoll for the live call?
OPERATOR
Sure. Ladies and gentlemen, just a reminder, if you have a question, please press star one. We don’t have any other questions on the queue right now.
John Vincik (Investor Relations)
Okay, well, thank you, operator, and Peter and Bob. There’s no more questions from the webcast, so I’m going to turn the call back to Peter for closing remarks.
Peter Akerley (Chief Executive Officer)
Well, thank you, John. I just wanted to reiterate, I guess, the exciting year we have in front of us. We’ve set the stage with a commercial operation at Bayan Khundii, but I think the value that can be created through exploration is tremendous. So thank you all for joining us. And if you have any questions in the future, please reach out directly. Thank you.
OPERATOR
Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. And you may now disconnect.
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