Well, thank you everyone for joining this morning. I think we're just about ready to roll here. Everyone good? Darryn, you're good back there?
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 longtime 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 23rd, 2026. The secretary will append Computershare's declaration of mailing as a schedule to the minutes of this meeting. The scrutineer has completed its 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, the undersigned scrutineer from Computershare Investor Services Inc., hereby report that there are at least three shareholders and/or proxy holders present at this meeting representing, in person or by proxy, 29,110,759 shares, being 44.58% of the total outstanding shares of Erdene Resource Development.
Thanks, Colleen. Pursuant to the bylaws of the corporation, the chair is 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. I ask the scrutineer to submit its final report of attendance as soon as it is available. There are six formal items of business before the meeting today. First, to verify the minutes of the annual and special meeting of shareholders held on June 25th, 2025. Second, to receive the financial statements of the corporation for the year ended December 31st, 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.
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 25th, 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.
Aye. 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 31st, 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 five directors. The board has fixed the size of the board at five.
The five 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 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.
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 22nd, 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 three 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?
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.
Oh, there is one.
We're okay? Yeah. We're good. 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, the undersigned scrutineer, hereby report that the result of the vote by ballot in respect to the unallocated rights under the Omnibus Equity Incentive Plan is as follows: For the motion, 27,213,241 votes, being 93.48%. 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's no 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.
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. 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. 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. I've always looked at this, since we made a decision to build 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. To get to that point where we could get cash flow and dig into this amazing new minerals district, it was really that strategy that we've employed for the last several years, and now we're there.
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. This is where we wanted to be. This is the table that we set to now explore this tremendous new district. 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 six-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 three deposits and really unlimited dollars, unlimited time. What's to come is what excites me, and I'll try to focus on some of that today. Our standard forward-looking statements.
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 a positive cash flow after, what are we, seven months into it. High potential to extend Bayan Khundii. I'll share that with you. We looked at a six-year mine life and said, "It's enough to get us started." It's high grade, it's at surface. Let's get the cash flow. There was 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. That regional exploration, districts like this, I think about some areas like Ecuador that are somewhat new to it, maybe CAD 1 billion in exploration has been spent. Never mind what they've spent on building mines, we've spent CAD 25 million on exploration, a lot more into building the mines, very small amount of money that's gone into exploration. The exploration upside's tremendous. 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. We knew we needed somebody like that to help us get this thing up and running. We also recognized that we needed to make sure our shareholders had exposure to long-term upside. A key part of the negotiation was to keep back that 5% net smelter royalty that kicks in after 400,000 ounces. When you think about this development being multi-mine, you look out four or five years from now, and you do the math on a 5% NSR, it could be CAD 50 million, CAD 60 million additional dollars to our account, which shifts the economics more to a 60/40 than it does a 50/50. 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? 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 CAD 40 million in equity and CAD 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 Corporation, 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.
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 the 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. 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. 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. A partner that I've known, the chairman of MCS and the CEO of MMC, I've known them for over a decade. They're 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 five of the top 15 gold mining companies globally come to Mongolia, two 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. We've laid out a clear five-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 six years. 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 half a million to a 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's a reasonable target for us. We're very focused on that. We secondly, will look at the Altan Nar project that sits 16 km north and start to move that into the queue to bring that on later in this decade.
The concept there is that between these two projects, we could see somewhere in that 150,000 to 200,000-ounce per year production profile. That's pretty much in front of us today. Altan Nar already has over half a million ounces of gold, and I'll speak more to that. One of the real hidden gems in our company, and so 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. 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. Underlying all of this, 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. 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. I see high probability for future discoveries alongside some of the grassroots projects that we have, like Khuvyn Khar and Tereg Uul, 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 six to one 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 US 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 worths, 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 three to four times increase dollar-wise compared to where we were pre-consolidation. 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." We took that to heart.
We helped them rewrite the rules at the Financial Regulatory Commission and the Mongolian Stock Exchange, proud to say today we remain the only dual-listed company on that exchange, the 7,000 shareholders have seen a very good return on their investment. That's been a real success for us. On the cash side, Erdene is sitting with about CAD 28 million in cash at the corporate level, about equivalent to that in our subsidiary. As I mentioned earlier, it's cash flow positive. There's close to CAD 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, CAD 122 million in debt.
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. I 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 two of the senior executives in the gold subsidiary, and our partner MMC appoints two. Bilguun is one of those two, and Jon Lyons the other, who's the Chief Development Officer. The difference between Chief Operating Officer and Chief Development is he's really the person that's guiding the next projects, Altan Nar growth around the site. Tremendous two individuals. 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's with us today, alongside Michael MacDonald 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 Bayarmaa B's on the page here.
A lot of young geos, probably as many as half a dozen core people on the ground with these three gentlemen, who have been very successful, in fact, have had a technical paper printed in the Society of Economic Geologists about our district discovery. Thank you, and congratulations, gentlemen, on getting this to this point. Just moving on to the board. You've just heard all of 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 Stans, 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, with major mining companies, as you can see on the screen. Ken MacDonald and I, partners 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, it eventually worked out. Cameron McRae, the first CEO in terms of startup of Oyu Tolgoi, managed a CAD 6 billion build, and myself. 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, 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 km north of us called Shinejinst. 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 was written, there's probably another 100. The point I wanted to make is 40% of those people are local residents. 14% of those working at the mine are female.
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. 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. Let me get onto the rocks. 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.
Now on the far right, you've got Oyu Tolgoi, which is Rio Tinto's and the government of Mongolia's mine. It's a giant. It's going to be the fourth largest copper producer on the planet by the end of this decade. Here we arrived in the '90s in this area outlined in orange here, the Trans Altai. It had never seen modern exploration. We're the first geologists to go out there. We luckily had the economic means to do the exploration in, I guess it started in 2009, really. We hit it hard with regional exploration. We started from satellite imagery. This was 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.
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. It was persistence and patience and a good exploration team that were loyal and excited about this opportunity as well. Yeah, tremendous belt. We were very lucky to have arrived there at a time when it was remote. We were driving for two or three days to go look at these anomalies we'd 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. The big change for our company and the opportunity in front of us is that that exploration was in an area that was remote then.
It's no longer that. We now have rails and blacktop highways. We just brought in power 240 km from China. A road was just constructed within 25 km 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. 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. We now have that infrastructure at our doorstep to complement this great belt of rocks. I won't spend a lot of time on the technical elements here, but we've discovered the full spectrum of deposits you find in these terrains, the low sulfidation, intermediate, and porphyry at Zuun Mod.
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 km in diameter. They are exceptionally large, and they're still under explored. The majority of our work has been shallow, and 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 three license areas that need to be further explored. Let me jump over to Bayan Khundii and spend a bit of time on the mine. As I mentioned, jointly owned by Erdene and the Mongolian Mining Corporation.
It has a 650,000 ton per annum open pit, CIP plant, 33 buildings. It took us only 22 months to go from initial construction to production. This was delivered for CAD 120 million. To put that in perspective, I would estimate at least two times, if not three times 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 two, with 93% recovery. We are projecting top quartile all-in sustaining costs. 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. 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. 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. Go to places where you can get these things done quickly, which Mongolia has now demonstrated. 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. 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. Processed 296,000 tons run of mine ore, so two grams per ton.
Just to explain that a little bit, you can pretty much go out and bulk mine this deposit and get 2 grams per ton. 2 grams per ton is at least twice as high as any other open pit gold mine or average gold mine grade globally. 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 CAD 73 million in gross project revenues by the end of Q1, which is about CAD 100 million. Our gold recovers are well ahead of what we had forecast, averaging 96%. 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, 240 km power line built by our partner sister company, MCS Energy, and they took on the cost of that. They invested, it was over CAD 26 million, and we have a power purchase agreement with them that we would pay off over, I think it's seven years, Bob, and then the cost will drop by 30%-50%. 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. Quite happy with how that worked out. We're also the first dry stack tailings facility in Mongolia.
From an environmental and safety perspective, it makes a lot of sense. 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. The plant is working exceptionally well. Very pleased with how things have gone on that front. Our ore is sourced from currently just the Bayan Khundii pit. You can see in the bottom of this page, about 460,000 ounces of 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. You'll note the grade, 7 grams per ton open pit sitting at surface.
That'd 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 six-year reserve life, which you can see in this slide. For the first six 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. Targeting as we move into the middle part of this year, getting that grade up closer to the 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 CAD 1,250.
That's related to grade, so if you think at 2 grams per ton, it's almost double that, and as you move it to 4 grams per ton, it shrinks to that CAD 1,250. 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. 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. All of these fluids migrate out from the center, and typically 2 -3 km from that center, you'll see these distal gold deposits formed. We're just now mining Bayan Khundii, but you can see Dark Horse South, Altan Nar, some other discoveries here, Ulaan.
There's this ring of mineralization that needs further exploration. With the exception of Ulaan, most of our drilling has been within 150 meters of surface, plenty of upside there. Our focus is on two distinct areas, Dark Horse and Khundii West, and I'll share with you some images from that. Dark Horse is a 3 km long trend about 2.5 km North of the deposit. In March, we announced some drill results. Those text boxes at the top of your page are the drill results we announced in March. You can see at the south end or the left-hand side of the screen, at the bottom, that's our 48,000 ounces of seven grams. Beginning in September next year, we'll open that up.
We went in there late last year and announced recently some of these other results, and you can see 10 meters of 9 grams, 19 meters of nine at surface in areas that previously were not mineralized or were barren. Plenty of room to expand there. Importantly, along that entire trend, we're getting mineralization of substance. I won't spend a lot of time on this, but for those familiar with it, in the 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. 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, 25,000-30,000 ounces a year.
We're working through the studies on that. An exciting opportunity there. 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 CAD 1,850 gold. You can imagine as gold goes to CAD 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 three, 40 meters of eight, a very high-grade portion of the deposit. 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. 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. 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. I feel like we're a lot closer to it than we might have been a few years ago. 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. They can't do that without crossing our boundaries. Excited about that potential.
We have six years of reserves at Bayan Khundii in that pit and at Dark Horse. This is a future opportunity for expansion or extension. It does change the game a little bit in terms of the scale and life of this operation. 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. Plenty of other exploration. That's Bayan Khundii. Let me jump to the north to Altan Nar. Altan Nar is 16 km north. This is the first discovery we made in this area. It's a big system. I talked earlier about the scale of these systems. This is 5.5 km of mineralization within which we've really just drilled out the two areas you can see outlined, we call Discovery Zone and Union North.
Within that, in the top 150 meters, there's almost half a million ounces of gold at a couple of grams per ton. 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. 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'll be left in the ground there. 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? Great optionality and a great value add for the company as we move forward. Everything I've just talked about is 50/50, MMC, Erdene. Now I'm shifting into the 100% owned. 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. 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 by-product opportunity. Moly prices have really taken off over the last really five years. It's been CAD 20 +.
In the last week or two, it's reaching up as close as CAD 40 a pound, and we have CAD 600 and well over CAD 700 million pounds of Moly equivalent, CAD 630 million pounds of molybdenum, most of it accessible by open pit. 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 six Moly producers and upstream users over the last couple of months and just came away from that thinking, yeah, the demand is very, very strong right now.
I would have said, probably five if not all six of them said they would buy our concentrate at CAD 30 million a pound if we could deliver it today. Yeah, 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. A great time to be bringing on a new startup. That's probably the timeline we're looking at, 2029, 2030 build. Moly use is expanding greatly in renewables, specialty steels. Even though the steel consumption or the steel market's not growing gangbusters, the specialty steel side is.
When you look at China in particular, great demand for specialty steel, Moly goes into as an alloy, the specialty steel market. You'll also note just one other thing on the bottom of the page. China's by far the dominant producer, 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. Yeah, very excited about what we have there. It's not just molybdenum. This is a copper porphyry system within which we have some copper targets as well. Zuun Mod, you can see in the bottom right sits in that blue shaded area. In January, I think it was, we announced our best copper intersections to date.
You can see here that we had 60 meters of 0.6 copper, and within that, a 30-meter zone of over 1%. Very high grade. I've added to this chart the depth of the Oyu Tolgoi deposit. 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. We haven't done any exploration deep in the system. 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.
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 km from that fourth-largest copper-gold mine I've been talking about, in 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. 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.
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. We wouldn't go anywhere and drill geophysical targets, but when you're 10 km south of Oyu Tolgoi, a long trend, makes sense to get some of those targets tested. Watch for that over the next couple of months. We'll have some results. 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 six 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. That's probably the learning curve that we need to get through over the next few months. 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 startup bumps. We've seen days that are well over 4 grams per ton going through that mill. It'll ebb and flow, but ideally along that trajectory of getting us to that 3.8 grams per ton. 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. The discussions I talked about with Erdenes [inaudible] 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. That'll 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 are moving into the mining license category. Everything we own is a mining license except for Ulaan, which is exploration. There is a process there we have to go through before we get that up to the ability to mine. A bit of a sleeper as well is Altan Nar. There is half a million ounces of gold sitting at surface that is 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. Lots on our plate. Exciting times. As I said at the outset, we set this table, we planned this for five years, and now we are here, and we can start to deploy cash flow and a strong cash position to begin creating more value for our shareholders. Thank you very much. Happy to take any questions.
Peter?
Yep.
Thank you. Peter, thank you for the presentation. Can you speak to seasonality of the area, is there any seasons that we can expect due to rains or whatever that would play a role? Just cost controls and how you can put that into place, and what role would CAD 100 oil make a difference and so on. You've got the power lines in. Those costs will go down over the longer term? I'm just curious the controls around that. Thank you.
Sure, yeah. On the seasonality side, we're in a dry, arid climate with extreme temperature swings, +40 degrees Celsius would be the high in the summer and -40 degrees Celsius in the winter. This is a country and a workforce mining industry that's familiar with those conditions. We don't see a whole lot of change seasonally from a production perspective. I would say during the startup, a couple of things, training up our staff, particularly young geologists in the pit, is pretty hard to do when it's -30 degrees Celsius. 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 a high spring runoff into the pit.
You don't expect it in an arid terrain, but as the spring melt happened, we had more water in the pit than we would've liked. That slowed us down a bit in April. 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. We luckily had made that decision to tap into this opportunity to bring in 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. Bob Jenkins, I don't know if you have those numbers fresh in your head in terms of impact on our all-in sustaining cost 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. Seeing the fuel price at current levels is probably 15% more, so probably in the ballpark of CAD 100 ounce AISC cost.
I can repeat that if you want. Our exposure to diesel is about 10% of our all-in sustaining costs. Given where the price move has been, 50% increase, maybe 5% increase in our all-in sustaining costs at current diesel prices. If I get that right. In terms of cost controls, I'm not sure. Was there other specifics in there, or maybe.
Just again, just trying to get an idea what kind of costs on the road are going to be.
Sure.
Obviously the relationships you have with the Mongolian government.
Yeah.
The success of your partner and alleviates some of those concerns, but.
Yeah. 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. 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%, rounded, would be processing, and in fact, on the processing side, the largest cost in terms of hard cost is the purchase of chemicals. Our use of cyanide has been about half of what we had projected. I can't quantify the Canadian dollars on that for you, but that's been a good positive factor. I don't know if, Bob Jenkins, you have an idea, but going in the right direction.
The other probably 30% would be related to the electrical side, thereabouts. Because most of it's now coming from the grid.
Is there less cyanide used in the CIP 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.
Okay.
Yeah. Okay. Please, once a year opportunity to Hey, Dave.
I was just wondering about Zuun Mod. My assessment's 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 as 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. 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.
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. 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.
Is 2030 still the date for operational at Bayan Khundii?
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. Yeah. It took us 22 months to build Bayan Khundii, so I think I'd be fooling 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 20 x 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.