Erdene Resource Development Corporation - Interim / Quarterly Report 2021

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MANAGEMENT’S DISCUSSION AND ANALYSIS

For the three months ended March 31, 2021 and 2020

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three months ended March 31, 2021

Contents
	Page No.
Company Overview	3
Highlights and Significant Subsequent Events	4
Strategy and Outlook	5
Development and Exploration Projects	7
NI 43-101 Technical Reports – Resources and Reserves	7
Khundii Gold District	7
District Scale Exploration	14
Acquisitions	16
Discussion of Operations	17
Summary of Quarterly Results	19
Liquidity and Capital Resources	19
Outstanding Share Data	19
Contractual Obligations	20
Other Financing Arrangements and Commitments	20
Off-Balance Sheet Arrangements	20
Critical Accounting Estimates	20
Financial Instruments and Other Risks	21
Disclosure Controls and Internal Controls Over Financial Reporting	22
Qualified Person	23
Other Information	23

This Management Discussion and Analysis (“ MD&A ”), dated May 13, 2021, relates to the operating results and financial condition of Erdene Resource Development Corporation (“ Erdene ” or the “ Company ” or the “ Corporation ”) and should be read in conjunction with the Corporation’s unaudited condensed consolidated interim financial statements for the three months ended March 31, 2021 and 2020, audited consolidated financial statements for the years ended December 31, 2020 and 2019, and the notes thereto. The consolidated financial statements of the Corporation have been prepared in Canadian dollars in accordance with International Financial Reporting Standards (“ IFRS ”).

This discussion includes certain statements that may be deemed “forward-looking statements”. All statements in this discussion, other than statements of historical fact, that address reserve potential, exploration drilling, exploitation activities, budgeted financial results and events or developments that the Corporation expects, are forward-looking statements. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions (including, but not limited to, assumptions in connection with the continuance of the Corporation and its subsidiaries as a going concern, general economic and market conditions, mineral prices, and the accuracy of mineral resource estimate), such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploration and evaluation results, continued availability of capital and financing and general economic, market or business conditions.

The risk factors identified above are not intended to represent a complete list of the factors which could affect the Corporation. Additional factors are noted under “Risk Factors” in the Corporation’s latest Annual Information Form, a copy of which is available on the Corporation’s SEDAR document page at www.sedar.com .

Any financial outlook or future-oriented financial information in this MD&A, as defined by applicable securities legislation, has been approved by management of the Corporation as of the date of this MD&A. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such outlook or information should not be used for purposes other than for which it is disclosed in this MD&A.

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Company Overview

Erdene Resource Development Corporation is a Canadian based resource company focused on the acquisition, exploration, and development of high-grade, near surface, precious and base metals deposits in underexplored and highly prospective Mongolia. The Company has interests in three mining licenses and two exploration licenses in southwest Mongolia, where exploration success has led to the discovery of the Khundii Gold District. The Company is focused on advancing its high-grade, open-pit Bayan Khundii gold project (“Bayan Khundii” or “BK”) to production, while expanding resources in the Khundii Gold District. Erdene is listed on the Toronto Stock Exchange (TSX: ERD) and Mongolian Stock Exchange (MSE: ERDN).

Erdene’s deposits are located in the Edren Terrane, within the Central Asian Orogenic Belt, host to some of the world’s largest gold and copper-gold deposits. Although epithermal gold and porphyry copper-gold deposits are well documented in China and along the Belt’s western trend, exploration in Mongolia was limited until the mid-1990’s, when the country opened to foreign investment. Since that time, the Oyu Tolgoi copper-gold deposit has been developed in Southeast Mongolia, and Erdene has discovered the Khundii Gold District in the country’s southwest. Within the Khundii Gold District (“KGD”), the Company has discovered multiple high-grade gold and base metal prospects, two of which are being developed: Bayan Khundii and Altan Nar (“AN”). In addition, the Company holds a large molybdenum-copper resource at its 100% owned Zuun Mod project, 33 kilometres east of Bayan Khundii.

Erdene is advancing BK towards construction and gold production. On July 20, 2020, the Company announced results of an independent Bankable Feasibility Study (“BFS”), incorporating detailed mine design and scheduling, front-end engineering design for the processing plant and site infrastructure, a hydrogeological assessment, mineral waste facility design, comprehensive capital and operating cost estimation. An Environmental and Social Impact Assessment (“ESIA”), led by Sustainability East Asia LLC, has also been completed for the Project. In October 2020, the Company executed a mandate letter with Export Development Canada (“EDC”) for an up to US$55 million senior secured debt facility to develop BK, subject to satisfactory diligence. Erdene is undertaking construction readiness activities and has recently placed an order for the comminution circuit, in advance of a construction decision in 2021; however, the Company will consider the potential impacts of COVID-19 on the movement of people and equipment prior to commencing construction.

While focused on development of the Bayan Khundii Gold Project, Erdene continues to explore the broader Khundii Gold District. The KGD hosts the full spectrum of arc-related base and precious metal systems, including copper-molybdenum porphyries, intermediate sulphidation/carbonate base metal gold deposits, and low sulphidation epithermal gold and gold-silver systems. In late 2020, Erdene intersected high-grade gold in multiple holes at its Dark Horse prospect, located 3.5 km north of Bayan Khundii. Since that time, the Company has defined a 1.4 km mineralized trend at Dark Horse, that remains open along strike, confirming Dark Horse is the most significant zone of gold mineralization in the KGD since the discovery of the Bayan Khundii gold deposit.

COVID-19

In late January 2020, the Government of Mongolia instituted limitations on public gatherings, suspended in-person classroom learning, and implemented international border controls in response to COVID-19. The Canadian Government adopted similar measures in March 2020, as have most governments globally during 2020. With the first community transmission of COVID-19 in November 2020, the Government of Mongolia has further restricted the movement of people and the delivery of goods and services. While restrictions were eased in mid-Q1 2021, preventive measures were reintroduced in early Q2 2021 following an increase in the number of reported cases. Additionally, in March 2021, Bayankhongor Province, where Erdene’s Projects are located, reported its first confirmed case of community transmission of COVID-19, imposing restrictions on the movement of people within and to/from the province. In response, Erdene provided emergency funding and supplied personal protective equipment to the Bayankhongor Emergency Commission to support its efforts to contain the spread of COVID-19 within the Company’s host province.

Although the impact of COVID-19 on the Company’s operations has been modest to date, the pandemic continues to evolve. The Company is monitoring the situation and assessing potential disruptions to the Bayan Khundii Gold Project construction schedule. Concurrently, the Company continues construction readiness work, including detailed engineering and design, procurement, negotiation of a local co-operation agreement with Bayankhonger provincial government, and project finance due diligence with Export Development Canada. Additionally, the Company’s Mongolian exploration team has been able to continue field exploration without significant disruption, while adopting enhanced health and safety protocols. Erdene’s Corporate and Administrative teams in Canada and Mongolia have worked remotely throughout the pandemic with minimal disruption.

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It is expected that a relaxation of government restrictions and widespread vaccine distribution will allow the Mongolian economy to gradually reopen in late Q2 2021 and permit the Company’s Canadian staff and consultants to travel to Mongolia. With re-opening, activity in our local communities can resume, including employee safety and job training and consultative stakeholder meetings required as part of the Company’s Detailed Environmental Impact Assessment (“DEIA”) submission. Approval of the DEIA is a key milestone in the permitting process, is required to commence construction, and is currently expected in Q3 2021.

Assuming approval of the DEIA in Q3 2021, the Company expects to commence early works, including establishing a permanent camp, warehousing facility, bore-field and basic road works as early as the second half of 2021. Given Mongolian winter conditions, significant concrete and steel works are not expected until 2022, resulting in a first pour of gold in H1 2023. During this period, exploration results from both the Dark Horse and Ulaan prospects will be evaluated to determine possible adjustments to the development plans.

The Company will provide further details on the impact of COVID-19 on its operations and the Bayan Khundii Gold Project schedule as they become available.

Highlights and Significant Subsequent Events

Bayan Khundii Gold Project – 100% Erdene

Progressed construction readiness activities for the Bayan Khundii Gold Project:
Detailed design and engineering for the Carbon-in-Pulp (“CIP”) processing plant was completed in Q1 2021 – regulatory review will commence in Q2 2021
Contract for SAG and Ball mills awarded to CITIC in March 2021
Detailed drawings for major non-process facilities received regulatory approval, pending issuance of final documentation
Balance of facilities is expected to be ready for regulatory submission by Q3 2021
Construction, procurement, and health and safety manuals and job descriptions for key roles drafted in advance of the launch of construction
Launched an Employment Orientation program at the Bayan Khundii Project camp for local residents
Two cohorts of 36 received training from Erdene’s HSEC team, with a further 140 residents registered for upcoming sessions
Topics included Project development plans, environmental management, and opportunities for local participation in the Project
Future programs planned to support local residents to attain the skills to earn employment with the Project, including internship and trades certification programs
Obtained certain key permits and advanced regulatory approvals required for mine development:
Received key regulatory approvals for five key non-process facilities
Granted an extension for the Detailed Environmental Impact Assessment until September 30, 2021 due to COVID-19 restrictions preventing travel and public gatherings

Exploration

Discovered high grade gold, near surface at the new Dark Horse gold prospect.
Drilled 5,657 metres at the new Dark Horse prospect during Q1 and April 2021, confirming a 1.4 km north-south mineralized structure that remains open along strike
Highlights from Dark Horse drilling since late 2020 include:
- AAD-57 – 16 metres of 0.6 g/t gold, beginning 52 metres downhole, and 48 metres of 1.2 g/t gold, beginning 194 metres downhole, including 30 metres of 1.7 g/t gold
- AAD-58 – 45 metres of 5.97 g/t gold, beginning 10 metres downhole, including 1 metre of 82.5 g/t gold within 8 metres of 27.1 g/t gold
- AAD-61 – 130 metres of 0.53 g/t gold, beginning 10 metres downhole, located 500 metres north of AAD-58

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  - AAD-65 – 7 metres of 1.15 g/t gold, beginning 113 metres downhole

  - AAD-66 – 14 metres of 1.31 g/t gold, beginning 53 metres downhole, as well as 20 metres of 1.74 g/t gold, beginning 112 metres downhole

  - AAD-70 – 2 metres of 4.24 g/t gold, beginning 64 metres downhole

  - AAD-79 – 4 metres of 3.23 g/t gold, beginning 32 metres downhole

  - AAD-81 – 35 metres of 2.67 g/t gold, beginning 4 metres from surface, including 12 metres of 5.1 g/t gold, including metre intervals of 14 and 19 g/t gold

Dark Horse evaluation and interpretation program largely completed, including geophysics, clay mineral analysis, petrography, mineralogy, fluid inclusion work and 3-D modelling
Results were incorporated into targeting for recent drilling and will inform upcoming exploration

Corporate

Progressed due diligence for the Bayan Khundii Project Finance with EDC
Site visits completed in Q1 and draft diligence reports received
EDC mandate letter contemplates a senior secured debt facility of up to US$55 million, subject to the satisfactory completion of due diligence and documentation
Recorded a net loss of $617,084 for the three months ended March 31, 2021, compared to a net loss of $1,041,990 for the three months ended March 31, 2020
Exploration and evaluation expenditures, including capitalized expenditures, totaled $2,523,968 for the three months ended March 31, 2021, compared to $1,511,929 for the three months ended March 31, 2020, primarily due to increased exploration. Erdene drilled 3,100 metres in the current period, while no drilling was undertaken in the comparative prior year quarter. Additionally, expenditures on construction readiness activities in the current quarter exceeded costs associated with the Bayan Khundii Feasibility Study and Detailed Engineering and Design in the prior year quarter.
Corporate and administrative expenses totaled $394,604 for the three months ended March 31, 2021, compared to $374,074 for the three months ended March 31, 2020 due to higher professional fees, regulatory costs and share-based compensation costs, partially offset by reduced directors’ fees and investor relations costs.

Strategy and Outlook

Erdene is focused on two strategic priorities – advancing the Bayan Khundii Gold Project to production and expanding precious and base metal resources in the Khundii Gold District through exploration and acquisition.

In July 2020, Erdene announced positive results of an independent BFS for the Bayan Khundii Gold Project. The Study envisions a high-grade, open-pit mine, beginning at surface in the southern portion of the Bayan Khundii deposit (Striker and Gold Hill), and expanding northward into adjacent zones at Midfield and Midfield NE. The development incorporates conventional crushing and grinding, leach and a Carbon in Pulp (“CIP”) plant with processing capacity of 1,800 tonnes per day. The Bayan Khundii Gold Project Feasibility Study NI 43-101 Technical Report, dated August 31, 2020, was filed on SEDAR on September 1, 2020.

In June 2020, the Company completed an independent ESIA in accordance with the Performance Requirements of the EBRD. The study was led by Sustainability East Asia LLC, in consortium with Eco Trade LLC and Ramboll Australia Pty Ltd. The EBRD disclosed the ESIA for public comment on June 12, and on August 12, 2020, the disclosure period concluded. Concurrently, the Mongolian statutory Detailed Environmental Impact Assessment (“DEIA”) for the Project has been prepared by Eco Trade LLC in accordance with the applicable national standards. Local stakeholder consultations on the DEIA are ongoing but have been impacted by COVID-19 restrictions on public gatherings. The Company expects to submit its statutory DEIA to the Ministry of Environment and Tourism of Mongolia for approval in mid-2021. However, in light of the current COVID-19 situation, which is preventing public meetings, the Company has been granted an extension to the DEIA filing deadline to September 30, 2021.

Erdene has obtained many of the key permits required to construct the Bayan Khundii Gold Project over the past eighteen months. Erdene received Mining License MV-021444 for its Bayan Khundii resource on August 5, 2019 from the Mineral Resource and Petroleum Authority of Mongolia (“MRPAM”). The Khundii

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mining license covers 2,309 hectares, including the Bayan Khundii Reserve and the highly prospective Dark Horse, Altan Arrow, Khundii North and Khundii South targets. The mining license is valid for an initial term of 30 years with the ability to extend to 70 years. Erdene maintains an exploration license for the remaining 2,205 hectares of the legacy Bayan Khundii exploration license that were not converted to a mining license as part of its application. On November 1, 2019 MRPAM council approved Erdene’s Altan Nar resource registration application and the Company received the Altan Nar mining license on March 5, 2020.

The Company’s Statutory Technical and Economic Assessment (“Mongolian Feasibility Study”) was approved by the Mineral Resource and Petroleum Authority in early 2020. The Mongolian Ministry of Environment and Tourism approved a water reserve and flow rate to be utilized for the planned processing plant and infrastructure of the Bayan Khundii Gold Project. Additionally, the Project’s Land Arrangement Plan and associated land use permissions have been approved by the local government, granting access to the 100-hectare area required to construct the BK open-pit and associated surface infrastructure.

Detailed design and engineering for the Carbon-in-Pulp (“CIP”) Leach processing plant was completed in Q1 2021 and design work for the mine support infrastructure is progressing on schedule, with expected completion in mid-2021, including utilities reticulation and control systems. In March 2021, the Company contracted with CITIC for the plant’s comminution circuit for the plant.

The general arrangement for the site has gone through regulatory review, alongside which the detailed drawings for key mine support facilities, including offices, mine dry, security guard house, workshop, warehouse, and permanent camp, have been submitted for approval. The balance of the technical drawings are expected to be submitted by mid-2021, allowing a rapid construction ramp up. Upon approval of the drawings as well as the Project’s statutory DEIA, the Company may apply for permission to commence construction. Concurrently, constructability, value engineering, and HAZOPS review are underway, and tender and contracting for critical facilities and services has begun.

The Company engaged HCF International to act as Project Finance advisor, with primary responsibility for securing debt. Erdene executed a project finance mandate letter with EDC on November 4, 2020 for senior secured debt financing of up to US$55 million. EDC’s financing is conditional upon the satisfactory completion of due diligence, which is currently underway and expected to conclude in the mid-2021. During the first quarter, EDC’s technical and environmental and social consultants completed their site visits and preliminary diligence findings were received by Erdene near the end of the quarter. Erdene closed a $20 million equity financing, led by a $15 million investment by Eric Sprott in August 2020, providing the funds to initiate early construction works at Bayan Khundii and continue exploration in the Khundii Gold District.

During the first quarter of 2021, Erdene completed a 1,900-metre scout drill program at Dark Horse, followed by a further 3,575 metres of drilling in April 2021. An evaluation and interpretation program, including geophysics, clay mineral analysis, petrography, mineralogy, fluid inclusion work and 3-D modelling was also completed over the past few months to refine targeting in advance of further drilling.

Recent exploration at Dark Horse has established the prospect as the most significant zone of gold mineralization in Erdene’s Khundii District, since the discovery of Bayan Khundii. Erdene has traced mineralization along a 1.4 km N-S trending structure, that remains open along strike, with the intersection of high-grade mineralization in multiple holes in a previously untested area. Highlight intersections from recent drilling include 45 metres of 5.97 g/t gold, beginning 10 metres downhole, including 1 metre of 82.5 g/t gold within 8 metres of 27.1 g/t gold at hole AAD-58 and , and 35 metres of 2.67 g/t gold at hole AAD81 located 100 metres south of AAD-58. Results are pending from 27 holes, totaling approximately 2,700 metres.

Results from the Dark Horse drilling, as well as recently completed geophysical, surface mapping, spectral analysis and other technical programs continue to improve Erdene’s geologic understanding of the larger Ulaan-Khundii alteration system. The Company plans to commence additional drilling in late Q2 to further define the controls on the gold mineralization within the system.

Erdene continues to evaluate acquisition opportunities throughout the Khundii District. Over the past decade Erdene has developed the largest proprietary geologic database of Southwest Mongolia’s mineralization that has led to the identification of more than 20 high-priority targets for acquisition.

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Development and Exploration Projects

NI 43-101 Technical Reports – Resources and Reserves

On September 15, 2018, the Company announced a resource estimate for the Bayan Khundii and Altan Nar deposits. On October 21, 2019, Erdene announced an updated Bayan Khundii Resource as well as a Bayan Khundii Mineral Reserve, as part of the PFS prepared by Tetra Tech. The reserve announced October 21, 2019 has been superseded by a Mineral Reserve estimate, dated July 1, 2020, prepared by Auralia Mining Consulting. Apart from Zuun Mod, the Company’s other targets are early stage and do not contain any mineral resource estimates, as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). Except for those deposits already delineated, potential quantities and grades disclosed in this MD&A are conceptual in nature, and there has been insufficient exploration to define a mineral resource estimate for other targets disclosed herein. It is uncertain if further exploration will result in these targets being delineated as a mineral resource. Additional information about our projects is also summarized in our AIF and the respective NI 43-101 Technical Reports and can be viewed under the Company’s issuer profile on SEDAR at www.sedar.com.

Khundii Gold District

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The Khundii Gold District includes the Company’s high-grade, near-surface Bayan Khundii and Altan Nar deposits. The Bayan Khundii gold project is located on Erdene’s 100%-owned, 2,309 hectare Khundii mining license. The Khundii mining license includes the Bayan Khundii Mineral Resources reported in “Khundii Gold Project NI 43-101 Technical Report”, dated December 4, 2019 and prepared by Tetra Tech, Inc., and an updated Mineral Reserve estimate, dated July 1, 2020, prepared by Auralia Mining Consulting and reported in “Bayan Khundii Gold Project Feasibility Study NI 43-101 Technical Report”, dated August 31, 2020. In addition, the Khundii mining license hosts Erdene’s highly prospective Dark Horse, Altan Arrow and Khundii North targets.

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Bayan Khundii

The Bayan Khundii deposit was discovered in Q2 2015, with initial drill results reported in Q4 2015; the first hole returned 7 metres of 27.5 g/t gold at 14 metres depth. Definition drill programs completed in 2016 through 2018 identified three main areas, over an 800 metre strike length and within 150 metres of surface. These areas of very high-grade gold mineralization over significant widths include: Striker Zone, where mineralization starts from surface, and Midfield and North Midfield Zones that extend to the northeast under younger, post-mineralization cover. The Midfield and North Midfield Zones have returned some of the highest grades and widest mineralized intervals at Bayan Khundii. BKD-98 returned 80 metres of 6.0 g/t gold from 42 metres depth and BKD-261, 112 metres of 5.9 g/t gold both in the Midfield Zone, and BKD231 in North Midfield, returned 14 metres of 158 g/t gold, including one metre of 2,200 g/t gold. Drilling , with intervals including.

Bayan Khundii is the highest priority project for the Corporation based on its grade, proximity to surface, and favorable metallurgy. The Corporation has completed 55,691 metres of diamond drilling at Bayan Khundii over a series of 350 diamond drill holes and advanced the project through independent studies to the bankable feasibility stage.

In June 2020, the Company completed a 925-metre drill program in near-surface areas of the Midfield SE and Striker SW zones of the Bayan Khundii deposit. This program was designed to test for mineralization in zones otherwise classified as waste or low-grade stockpile material with the potential to add significant value at the earliest stages of mining. Results from this program were very positive. Highlights of the program include the intersection of 5.5 metres of 125.9 g/t gold, including 1 metre of 581.6 g/t gold, in BKD288, beginning 11.5 metres down hole, 15 metres of 25.6 g/t gold including 1 metre of 338 g/t gold beginning at 14.9 metres in BKD-274, and BKD-292 intersected 15 metres of 29 g/t gold beginning 0.9 metres from drill collar, including one metre of 353 g/t gold.

In August 2020, the Company launched a follow up Bayan Khundii program utilizing two rigs. In total, the follow up program comprised 9,346 metres over 54 holes (including four extension holes), in areas peripheral to the Bayan Khundii economic pit. Drilling at the North Midfield and Striker West zones included several high-grade intersections outside the current BK economic pit that have the potential to meaningfully add to Project resources. Highlighted intersections from 2020 drilling include:

3.9 g/t gold over 22.4 metres, including 2 metres of 27.5 g/t gold beginning 127 metres down hole (vertical 115m) in BKD-302 (North Midfield);
3.9 g/t gold over 12 metres, including 1 metre of 38.9 g/t gold beginning 206 metres down hole (vertical 144m) in BKD-304 (North Midfield);
4.0 g/t gold over 10 metres, including 1 metre of 24.5 g/t gold beginning 14 metres down hole in BKD310 (Striker SW);
44 metres of 1.0 g/t gold, including 1 metre of 16.2 g/t starting 64 metres down hole in BKD-312 (Striker SW);
28 metres of 2.5 g/t gold, including 1 metre of 36.9 g/t gold within 14 metres of 4.5 g/t gold starting 122 metres downhole in hole BKD-334 (Striker West);
38 metres of 1.8 g/t gold, including 1 metre of 23.3 g/t gold within 9 metres of 5.5 g/t gold starting 108 metres downhole in hole BKD-338 (Striker West); and
54 metres of 1.2 g/t gold, including 1 metre of 13.1 g/t gold starting 129 metres downhole in hole BKD339 (Striker West).

With the conclusion of this program, no further drilling is planned in the immediate vicinity of the Bayan Khundii gold deposit at this time. Results to date are being incorporated into a mineral resource update, being prepared by TetraTech, Inc., anticipated to be finalized in Q2 2021.

Dark Horse

In early Q4 2019 Erdene discovered the Dark Horse (Khar Mori) prospect area, 3.5 km north of the BK deposit, on a previously underexplored portion of the Khundii Mining License. Surface exploration in late 2019, including detailed geologic mapping and geochemical sampling (rock chip and soil) identified multiple samples grading over 5 g/t gold, including an 87.8 g/t gold rock chip sample hosted within comb quartzadularia veins. In June 2020, the Company trenched new gold zones at Dark Horse, with assays returning 6 metres grading 8.8 g/t gold, including 1 metre of 50.8 g/t gold, and 4 metres of 14 g/t gold, including 1 metre of 45.3 g/t gold,

Initial drilling at the Dark Horse prospect, consisting of 25 holes totaling 4,660 metres, was completed in the second half of 2020. Results from the exploration program defined a N-S trending, 1.4 km long

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mineralized structure, referred to as the Dark Horse Mane prospect, establishing Dark Horse as the most significant area of gold mineralization in Erdene’s Khundii Gold District since the discovery of the Bayan Khundii gold deposit. Highlight intersections from the drill campaign along this trend include:

16 metres of 0.6 g/t gold beginning 52 metres downhole, and 48 metres of 1.2 g/t gold beginning 194 metres downhole, including 30 metres of 1.7 g/t gold in hole AAD-57;
45 metres of 5.97 g/t gold, beginning 10 metres downhole, including 1 metre of 82.5 g/t gold within 8 metres of 27.1 g/t gold in hole AAD-58; and
130 metres of 0.53 g/t gold beginning 10 metres downhole in hole AAD-61.

During the first quarter of 2021, Erdene completed a 1,900-metre scout drill program at Dark Horse, followed by a further 3,575 metres of drilling in April 2021. Though results are pending for approximately 2,700 metres of drilling, the exploration program confirmed the southern extension of the Dark Horse Mane prospect, particularly AAD-81, that intersected 35 metres of 2.67 g/t gold, starting almost at surface.

Concurrently, an evaluation and interpretation program at Dark Horse, including geophysics, clay mineral analysis, petrography, mineralogy, fluid inclusion work and 3-D modelling was largely completed during Q1 2021 to refine targeting in advance of further drilling. The Company plans to commence a significant follow up drill program at Dark Horse during the second half of Q2 2021.

Altan Nar

The 100%-owned Altan Nar deposits are located on the Corporation’s 4,669 hectare Altan Nar mining license, 16 kilometres northwest of Bayan Khundii. The AN mining license was received on March 5, 2020 and is valid for an initial 30-year term with provision to renew the license for two additional 20-year terms. The license hosts 18 mineralized (gold, silver, lead, zinc) target areas within a 5.6 by 1.5 kilometre mineralized corridor. Two of the early discoveries, Discovery Zone (“DZ”) and Union North (“UN”), host wide zones of high-grade, near-surface mineralization, and are the focus of a Resource Estimate released in Q2 2018.

Altan Nar is an intermediate sulphidation, carbonate-base metal gold (“CBMG”) deposit, with similarities to prolific gold deposits such as Barrick Gold’s Porgera mine (Papua New Guinea), Rio Tinto’s formerly producing Kelian mine (Indonesia), Lundin Gold’s Fruta Del Norte deposit (Ecuador), and Continental Gold’s Buritica project (Colombia). CBMG deposits generally occur above porphyry intrusions in arc settings and may extend for more than 500 metres vertically.

Altan Nar received limited exploration over the past two years as the Company’s resources were focused on the Bayan Khundii discovery. In late Q4 2019, the Company drilled five holes totaling 667 metres in DZ. Four holes tested the high-grade core area of the Discovery Zone, over a 130-metre strike length, 70 metres of which remains untested by drilling (“Gap Zone”). The fifth hole tested the southern extension of the deposit. Results from the 2019 program, including the intersection of 45.7 g/t gold, 93.4 g/t silver, 1.54% lead and 3.40% zinc over 7 metres beginning at approximately 70 metres vertical depth, within 23 metres grading 17 g/t gold, are amongst the strongest to date. Many of the 2019 high-grade intersections are locally outside or in areas of previously low-grade resource blocks and therefore expand the DZ high-grade core indicating consistency in high-grade mineralization within the identified ore horizon. These results are expected to positively impact the resource at Altan Nar and open the way for further expansion along strike and elsewhere in the district. The program also demonstrated continuity of anomalous gold and base metals along the structural corridor to the south of the DZ, which will be tested further in upcoming programs.

To date, Indicated Mineral Resources have been established for the Discovery Zone and Union North prospects. The remaining 16 targets at Altan Nar appear very prospective and the Company intends to complete further drilling on the license to increase its understanding of the system.

Mineral Resources and Reserves

Khundii Gold District

Erdene announced an updated resource estimate for the Khundii Gold District, dated October 1, 2019, prepared in accordance with NI 43-101 by Tetra Tech. The total Khundii Gold District resource was calculated by adding the resource from both the Bayan Khundii and Altan Nar deposits and calculating the weighted average grades. The Bayan Khundii Mineral Resource estimate, prepared by Tetra Tech, has an effective date of October 1, 2019. The Altan Nar Mineral Resource estimate, prepared by RPMGlobal, has an effective date of May 7, 2018.

A summarized sensitivity analysis of the grade and tonnage relationships at various cut-off grades for the Khundii Gold District is shown in the table below[1] :

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Cut-Off Grade(1,2)	Resource Classification	Quantity (Mt)	Grade(Aug/t)	Gold(Koz)
0.4	Measured & Indicated Inferred	14.0 4.8	1.91 1.91	863 295
Recommended(3)	Measured & Indicated Inferred	10.1 4.3	2.59 2.10	839 289
1.0	Measured & Indicated Inferred	6.5 3.6	3.65 2.38	762 275
1.4	Measured & Indicated Inferred	5.2 3.2	4.33 2.56	727 266

(1) Combined resources from Bayan Khundii and Altan Nar.
(2) Cut-off grades for Altan Nar are AuEq2 and for Bayan Khundii are gold only. For the AN resource estimate, Gold Equivalent (“AuEq2”) calculations assume metal prices of US $1,310 per ounce gold, US $18 per ounce silver, and US $2,400 per tonne lead and US $3,100 per tonne zinc.
(3) Tetra Tech recommended cut-off grade for Bayan Khundii is 0.55 g/t gold and RPM recommended cut-off grade for Altan Nar is 0.7 g/t AuEq2 above a pit and 1.4 g/t AuEq2 below the same pit shell.

Bayan Khundii Gold Deposit

The 2019 Bayan Khundii Mineral Resource estimate, prepared by Tetra Tech, is based on the combination of geological modeling, geostatistics, and conventional block modeling using the Ordinary Kriging method of grade interpolation in Datamine Studio RM™ software. The QAQC sampling protocols and corresponding sample preparation and shipment procedures have been reviewed by Tetra Tech.

The Mineral Resource estimate has been constrained to a conceptual pit shell and is reported at a cut-off grade of 0.55 g/t gold. The assumptions and parameters utilized to establish the cut-off grade and pit shell are reported in notes following the table below and support reasonable prospects for eventual economic extraction. Mineral Resources are inclusive of Mineral Reserves (reported below).

Cut-off Grade(1) 0.55	Resource Classification	Quantity (Mt)	Grade (Au g/t)	Gold (Koz)
	Measured Indicated Measured & Indicated	1.4 3.7 5.1	3.77 2.93 3.16	171 350 521 103
	Inferred	0.9	3.68

(1) The Statement of Estimates of Mineral Resources has been compiled under the supervision of Mr. Cameron Norton who is a full-time employee of Tetra Tech and a P. Geo. Mr. Norton has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity that he has undertaken to qualify as a Qualified Person as defined in the CIM Standards of Disclosure.

(2) All Mineral Resource figures reported in the table above represent estimates based on drilling completed up to April 22, 2019. Mineral Resource estimates are not precise calculations, being dependent on the interpretation of limited information on the location, shape and continuity of the occurrence and on the available sampling results. The totals contained in the above table have been rounded to reflect the relative uncertainty of the estimate. Rounding may cause some computational discrepancies.

(3) Mineral Resources are reported on a dry in-situ basis.

(4) The Mineral Resources is reported at a 0.55 g/t Au cut-off. Cut-off parameters were selected based on Tetra Tech’s internal cut-off calculator, which indicated that a break-even cut-off grade of 0.55 g/t Au, assuming an open cut mining method, a gold price of USD $1,350 per ounce, an open mining cost of USD $2 per tonne, a processing cost of USD $16 per tonne milled, a G&A cost of $5 per tonne, and a gold recovery of 95%.
(5) The mineral resource estimate has been constrained to a preliminary optimized pit shell which assumed a gold price of USD $2,000 and the economic potential tested using the above parameters.

(6) The mineral resource estimate assumes an average density of 2.66 t/m3 for the mineralized domains.

(7) Mineral Resources referred to above, have not been subject to detailed economic analysis and therefore, have not been demonstrated to have actual economic viability.
(8) Measured and Indicated mineral resources do not have demonstrated economic viability. Inferred mineral resources have a greater amount of uncertainty as to their existence and potential economic and legal feasibility, do not have demonstrated economic viability, and are exclusive of mineral reserves.

The total Bayan Khundii Mineral Reserve is shown below, as reported in Erdene’s press release dated July 20, 2020. The Bayan Khundii July 1, 2020, BFS Mineral Reserve has been estimated by Qualified Person, Mr. Anthony Keers, Director, Auralia Mining Consulting, using the 2014 CIM Definition Standards for Mineral Resources and Mineral Reserves to conform to the Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects. The Mineral Reserve is based on the October 1, 2019, Mineral Resource, reported herein. The Mineral Reserve includes both Proven and Probable Mineral Reserves that were converted from Measured and Indicated Mineral Resources. Tonnes and grades were calculated for the mining blocks, and allowances for dilution and mining recovery were applied to estimate the Mineral Reserve Statement. The effective date of the Mineral Reserve statement is July 1, 2020.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 10

	Tonnage (Mt)	Grade (g/t Au)	Contained Au (Koz)
Proven Mineral Reserves Probable Mineral Reserves Mineral Reserve	1.2 2.2 3.4	4.2 3.5 3.7	166 244 409

Notes:

(1) The effective date of the Mineral Reserve estimate is July 1, 2020. The QP for the estimate is Mr. Anthony Keers of Auralia Mining Consulting
(2) The Mineral Reserve estimates were prepared with reference to the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards (2014 CIM Definition Standards) and the 2003 CIM Best Practice Guidelines.
(3) Reserves estimated assuming open pit mining methods
(4) Waste to ore cut-offs were determined using a NSR for each block in the model. NSR is calculated using prices and process recoveries for each metal accounting for all off-site losses, transportation, smelting and refining charges.
(5) Reserves are based on a gold price of $1400/oz.
(6) Mineral Reserves were calculated from a diluted “mining” block model which included average dilution of 9% and losses of 1%.

Altan Nar Gold-Polymetallic Deposit

RPMGlobal calculated the Mineral Resource estimate for Altan Nar in May 2018 at a number of gold cutoffs, however, RPM recommends reporting the Altan Nar Mineral Resource at cut-off of 0.7 g/t AuEq2 (see definition for AuEq2 in note 8 below) above a pit and 1.4 g/t AuEq2 below the same pit shell. For further details on the Altan Nar Mineral Resource estimate, please see the Company’s Altan Nar GoldPolymetallic Project NI 43-101 Technical Report dated March 29, 2021.

Cut-off AuEq2 g/t	Resource		Grade	Grade	Grade	Grade	Grade	ContainedMetal	ContainedMetal	ContainedMetal	ContainedMetal	ContainedMetal
	Classi-	Quantity (Mt)	Au	Ag	Zn	Pb	AuEq2	Au	Ag	Zn	Pb	AuEq2
	fication		g/t	g/t	g/t	g/t	g/t	Koz	Koz	Kt	Kt	Koz
0.7	Indicated	5.0	2.0 14.8 0.6 0.6 2.8					318 2,350 31.6 29.0 453
	Inferred	3.4	1.7 7.9 0.7 0.7 2.5					186 866 23.7 22.3 277

Notes:

(1) The Mineral Resources have been constrained by topography and a cut-off of 0.7 g/t AuEq2 above a pit and 1.4 g/t AuEq2 below the same pit shell.
(2) The Mineral Resource Estimate Summary was compiled under the supervision of Mr. Jeremy Clark who is a full-time employee of RPM and a Member of the Australian Institute of Geoscientists. Mr. Clark has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity that he has undertaken to qualify as a Qualified Person as defined in the CIM Standards of Disclosure.
(3) All Mineral Resource figures reported in the table above represent estimates as at May 7, 2018. Mineral Resource estimates are not precise calculations, being dependent on the interpretation of limited information on the location, shape and continuity of the occurrence and on the available sampling results. The totals contained in the above table have been rounded to reflect the relative uncertainty of the estimate. Rounding may cause some computational discrepancies.
(4) Mineral Resource grades are reported in accordance with the CIM Standards.
(5) Mineral Resources reported on a dry in-situ basis.
(6) No dilution or ore loss factors have been applied to the reported Resource Estimate
(7) No allowances have been made for recovery losses that may occur should mining eventually result.
(8) For the AN resource estimate Gold Equivalent (“AuEq2”) calculations assume metal prices of US $1,310 per ounce gold, US $18 per ounce silver, and US $2,400 per tonne lead and US $3,100 per tonne zinc.

Economic Studies

On July 20, 2020, Erdene announced the results of an independent Bankable Feasibility Study for the Bayan Khundii gold deposit. The report, titled “Bayan Khundii Gold Project Feasibility Study, NI 43-101 Technical Report”, dated August 31, 2020, was prepared by international and Mongolian firms with significant experience operating in Mongolia. The study incorporates detailed mine design and scheduling, front-end engineering and design for the processing plant and site infrastructure, a hydrogeological assessment, mineral waste facility design, comprehensive capital and operating cost estimation, and an updated economic model.

The BFS envisions a high-grade, open-pit mine beginning at surface in the southern portion of the BK deposit (Striker and Gold Hill), expanding northward into adjacent zones at Midfield and North Midfield. The Project incorporates conventional crushing and grinding, leach and a Carbon in Pulp plant with processing capacity of 1,800 tonnes per day. The BFS includes 3.4 million mineable tonnes from the BK resource at an average diluted head grade of 3.7 g/t gold, all of which are Proven and Probable Reserves.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 11

Project highlights are presented in the table below (results at US$1,400/oz gold price, unless noted):

Production Profile
Average Head Grade Over Life of Mine1	g/tgold	3.7
Project Life2	years	8
OperatingLife	years	6
Target Production Rate Per Day3	tpd	1,800
Average Annual Saleable Gold4	oz	63,500
Peak Annual Saleable Gold4	oz	79,100
Average Gold RecoveryRate Over Life of Mine	%	93%
StripRatio	t:t	9.1
OperatingCosts
Life of Mine(“LOM”)Average Cash Cost5	US$/oz	731
LOM Cash Costplus SustainingCost(AISC)5	US$/oz	733
Pre-Tax Net Present Value
5% discount rate	US$M	145
7.5% discount rate	US$M	126
10% discount rate	US$M	109
After-Tax Net Present Value
5% discount rate	US$M	100
7.5% discount rate	US$M	86
10% discount rate	US$M	73
Internal Rate of Return and Payback
Pre-Tax Internal Rate of Return	%	55%
After-Tax Internal Rate of Return	%	42%
Payback Period Post-Construction(After-Tax)5	years	1.9
Capital Requirements
Pre-production Capital Cost,includingcontingency	US$M	59
LOM SustainingCapital Cost	US$M	5

Notes:

(1) Average diluted head grade of mineralized rock fed to process plant.

(2) Project life comprising one year pre-production period, approximately nine years operating life and one year mine closure.

(3) Assumes process plant operates for 8,000 hours per annum to achieve the target production rate of 600 ktpa.

(4) Reported numbers for saleable gold for Bayan Khundii.

(5) Operating costs reported in terms of saleable gold ounces includes Royalty and Charges of US$77/oz.

The following table shows the change in the after-tax NPV and IRR over a range of gold prices and discount rates, demonstrating the impact of higher gold prices and the Project’s resiliency to lower prices:

Technical Report Sensitivities – After-Tax Gold Price Sensitivity Analysis – BK BFS

Price SensitivityAnalysis	Units	US$1,200	US$1,400	US$1,600	US$1,800	US$2,000
NPV(5% discount rate)	US$M	43	100	158	216	274
NPV(7.5% discount rate)	US$M	33	86	138	190	242
NPV(10% discount rate)	US$M	25	73	120	168	215
IRR	%	22%	42%	60%	77%	93%

The BK BFS is based on an open-pit mining operation targeting 600,000 tonnes per year of feed material for the processing plant. The total mineable mineralized plant feed is 3.4 million tonnes at an average diluted head grade of 3.7 g/t gold and average strip ratio of 9.1:1 (waste tonne: plant feed tonne). Mineralization starts at surface, with the majority of the deposit contained within the top 100 metres. The deposit structure, grades and depth suggest selective open cut mining will be utilized. Mining will use hydraulic excavators in backhoe configuration. Drilled and blasted material will be loaded into haul trucks, with waste rock deposited in an engineered Integrated Waste Facility (“IWF”) adjacent to the pit, and ore hauled to a crusher or runof-mine (“ROM”) pad adjacent to the processing plant.

The BK BFS has assumed contract mining based on methodology and costing contained in proposals received from contractors with suitable experience in Mongolia in similar open-pit mining environments. In this scenario the contractor provides the full fleet and personnel to operate the project on a schedule of rates (US$/tonne material moved) basis. The contractor is proposing a total of 4 x excavators (2 x ore, 2 x

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 12

waste), 10 x 55t payload trucks, 3 x blasthole drills and a fleet of ancillary and support equipment to deliver the required material movement. The contractor’s workforce peaks at approximately 190 personnel to deliver the required schedule of production.

The BK BFS assumes processing of ROM material via a conventional crush and grind circuit and a carbon in pulp plant. Plant design by 360-Global has been based on testing at Blue Coast Research which has established optimal processing parameters, including; grind size of 80% passing 60 microns; design inputs for comminution circuit, low cyanide concentration in leach circuit (0.5 g/litre sodium cyanide); 36 hour retention time; carbon adsorption parameters and detoxification reagent dosages. The process circuit has been designed to maximize water recovery with the most efficient dewatering process (ceramic disc filters) to achieve targeted 15% moisture in tailings, minimize chemical and reagent usage and minimize environmental impact.

The ore-processing plant will be located adjacent to the Bayan Khundii open pit and throughput will target 600,000 ore-tonnes per year, nominally 1,800 tonnes per day. Total mineralized material from BK, processed in the plant over the course of the mine life, is 3.4 million tonnes at an average diluted head grade of 3.7 g/t gold. Using an estimated mill recovery of 93.1%, total recovered gold over the life of the Bayan Khundii deposit is 381,700 ounces .

Operating costs are based on the mining and processing scenarios outlined above and assumes contract mining. Power for operations will be generated through a hybrid diesel and solar generation solution, provided under a power purchase agreement for the duration of the Project. All other activities are assumed to be owner operated. The AISC for Bayan Khundii is estimated at $733/oz.

	Bayan Khundii BFS	Bayan Khundii BFS	Bayan Khundii BFS
	LOM
		US$/oz	US$/tonne
	(US$M)

Mine OperatingCost	133	350	39
ProcessingCost	96	252	28
G&A	13	33	4
Total Site Operating Costs	242	635	71
Royaltyand Charges	32	86	10
SustainingCapital & Closure Costs	5	12	1
All-In Sustaining Cost	279	733	82

Construction costs (Year 0), primarily comprising the process plant and supporting infrastructure, accommodation village, and associated engineering and indirect costs is estimated at US$46 million. Preproduction costs, including construction readiness, mobile site equipment and pre-strip total $8M. The capital cost estimate includes a 10% contingency. Sustaining capital of US$4 million has been included in the mine plan and net mine closure costs are estimated at US$1 million, including salvage values. Total life of mine capital expenditures for the Bayan Khundii Gold Project are estimated at US$64 million.

	BK BFS
	(US$M)
Process Plant	24
Non-Process Infrastructure	10
Accommodation Village	2
Construction Indirects	6
Engineering& Support	4
Construction Costs	46
Pre-Production Costs	8
Contingency	5
Subtotal Plant and Infrastructure	59
SustainingCapital	4
Reclamation and Mine Closure	3
Salvage	(2)
Total	64

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 13

The Company sees the following opportunities to enhance value at the Khundii Gold District:

Additional Resources at Bayan Khundii:
The Bayan Khundii Resource includes Measured and Indicated resources of 521,000 ounces at an average grade of 3.16 g/t gold, and an additional 103,000 ounces at a grade of 3.68 g/t gold of Inferred Resources which could potentially be added to reserves through both additional drilling and rising gold prices.
Recent drilling at the Midfield SE and Striker SW zones intersected exceptionally high grade gold, including one metre of 582 g/t gold within an intersection of 5.5 metres grading 126 g/t gold at Midfield SE, in areas of the resource currently classified as waste or sub-grade material. These areas are expected to provide additional high-grade feed in the early phases of development.
Very high gold grades observed in drilling in the Striker West portion of the deposit have the potential to add high-grade resources should closer spaced drilling improve continuity.
The reported resource is pit constrained based on multiple parameters including a US$1,350/oz gold price. Multiple high-grade intersections outside the pit provide expansion targets requiring additional drilling in a rising gold price environment.
In August 2020, Erdene commenced a 18,000 metre drill program at its Khundii Gold District. The drilling completed to the end of the year in the area of the Bayan Khundii deposit consisted of 54 holes, including four extension holes, totaling 9,345 metres. Results included several high-grade intersections outside the Bayan Khundii economic pit in the North Midfield, Striker SW and Striker West areas that have the potential to meaningfully add to Project resources.
Erdene has engaged Tetra Tech Inc. to prepare an updated resource estimate, incorporating results from recent drilling, utilizing current gold prices. The technical report is expected to be completed in Q2 2021.
Exploration: The Bayan Khundii deposit is situated in a highly prospective region that has received minimal historical exploration. On the Bayan Khundii property, multiple high-grade targets have been established through limited shallow drilling and surface sampling within 4 kilometres of the deposit, including the Dark Horse prospect identified in late 2019.Recoveries: Although a 93% gold recovery has been utilized for the BFS, testing of a recent master composite sample, representative of the BK ore, with a head grade of 3.6 g/t gold, returned recoveries averaging 95% indicating an opportunity for increased recoveries in the plant.
Higher Grade Upside: The very high-grade nature of the Bayan Khundii deposit provides upside should continuity of the ultra-high-grade zones (greater than 20 g/t gold) be established during mining.
Underground Potential: Further underground mining potential has been identified in conceptual studies for Midfield North and Striker West which, if proven economical through further studies, could lead to a further increase in the economic reserve of the Bayan Khundii Project.
Additional Resources at Altan Nar: Erdene’s Altan Nar deposit, located approximately 16km north of Bayan Khundii, has an established Indicated Resource of 5.0 Mt grading 2.0 g/t gold (318,000 ounces of contained gold) and an Inferred Resource of 3.4 Mt grading 1.7 g/t gold (186,000 ounces of contained gold). Approximately 250,000 ounces of the current Altan Nar resource could potentially be processed by the Bayan Khundii Project processing facility at modest incremental capital cost (see “KGP 2019 Technical Report”). A number of development options for Altan Nar are under consideration.

District Scale Exploration

Erdene continues to evaluate opportunities throughout the Edren Terrane, within our licenses and elsewhere in the mineralized belt. This has led to the identification of prospects that are being explored through surface surveys on the Company’s five licenses, drilling of selected targets and evaluation of acquisition targets on private and government held ground.

Exploration within the licenses has identified significant gold mineralization. Approximately 70% of regional drill holes have intersected anomalous gold mineralization (defined as >0.1 g/t gold), with three holes intersecting greater than 20 g/t gold over 1 to 2 metre intervals. Regional drilling has been restricted to shallow targets with average drill depths of about 100 metres. Success has been driven by the abundance of untested, near surface geochemical and geophysical targets in a region that has had no previous modern exploration. Recent exploration successes testing shallow targets, and the definition of three deposits, exposed at surface, are testament to the discovery potential of this new district.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 14

Altan Arrow Gold Target

The Altan Arrow target is located 4.0 kilometres north of the Bayan Khundii gold deposit, along a gold bearing structure in the central portion of the Khundii mining license. Drilling has concentrated in an area along and south of the main structure, where several high-grade zones have been intersected, including 39 g/t gold over 1 metre and 24 g/t gold and 70 g/t gold over 2 metres. Overall, 77% of the 21 holes (2,605 metres) drilled at Altan Arrow have intersected anomalous gold.

Drill testing of the main mineralized structure indicates a broad corridor of anomalous gold over a 1.2 kilometre trend (open along strike) and up to 400 metres south of the main structure in what is interpreted as secondary structural splays. In addition, drill testing of these structural splays, south of the main zone, returned multiple intersects at deeper levels then typically tested (approximately 100 metres vertical depth) with gold grades ranging from 0.2 to 2.6 g/t with anomalous silver, molybdenum, lead, zinc and antimony (AAD-25). Exploration results suggest gold mineralization within the district is controlled by a structure associated with zones of major dilatancy and structural intersections. Such zones commonly have associated alteration events that are magnetite destructive, resulting in zones of low magnetic response. In advance of future drilling the Corporation will complete a comprehensive geophysical interpretation of the Altan Arrow prospect, including high resolution magnetics, IP dipole-dipole and gravity datasets.

Khundii North Gold Target

The Khundii North target is located 4 kilometres northeast of the Bayan Khundii gold deposit, on the Khundii mining license, and was initially drill tested in 2018. The area was identified through surface exploration in late 2017, when sampling of quartz vein material returned high grade gold mineralization of up to 22 g/t gold from a structurally controlled quartz vein stockwork and breccia zone traced over a 1,500 metre strike length. Six holes, totaling 970 metres and averaging 93 metres vertical depth have now tested the stockwork-breccia body, comprised of three collars in the south and two in the north, separated by approximately 500 metres. Although the northern holes returned only minor levels of anomalous gold, the southern holes intersected wide zones of intense multi-phase epithermal quartz stockwork and breccia at depth within an altered monzonite. These stockwork zones are continuous, with up to 35-metre widths (AAD-29) and have associated anomalous gold, locally up to 2.1 g/t over one metre intervals (AAD-30) and locally anomalous copper (>500ppm). In Q3 2019, a single 253 metre drill hole (AAD-38) was completed to test the Khundii North quartz breccia body at depth. Assay results from the drill hole returned modest but anomalous gold values of up to 0.25 g/t gold over 2 metres. Gold anomalism appears to be associated within intervals of quartz stockwork veins intersected throughout the drill hole.

Ulaan Copper-Gold Porphyry Target

On August 30, 2017, the Corporation acquired a 51% interest in the 1,780-hectare Ulaan exploration license (“Ulaan Property”), immediately west of its high-grade Bayan Khundii deposit. In December 2020, Erdene acquired the remaining 49% interest in the property. The exploration license is in its sixth year of a maximum 12-year term and can be converted to a mining license at any time prior to the end of the twelfth year by meeting the requirements prescribed under the Minerals Law of Mongolia.

Ulaan is a porphyry copper prospect primarily based on the broad (5km by 4km) zone of phyllic (quartzsericite-pyrite) alteration at surface, with characteristics thought to be related to a porphyry intrusion at depth. Rock chip and stream sediment geochemical sampling identified anomalous concentrations of gold, copper and molybdenum in the surrounding area, and recently completed geophysical surveys have produced a number of follow-up targets.

Three wide spaced holes were drilled in 2018, totaling 1,050 metres over a 1.3 kilometre area in the central portion of the license. These holes intersected volcanic to sub-volcanic rocks exhibiting propylitic to phyllic quartz-sericite-pyrite (“QSP”) alteration with varying concentrations of pyrite and locally low-level copper mineralization (100 to 300 ppm over 60 metres).

A 700-metre, three-hole drilling program was completed in 2019 to test the alteration system at depth (to 650 metres), by extending a previous drill hole, and to investigate two shallower moderate IP chargeability targets (to 200 metres). The extension hole showed continuity at depth of the phyllic style alteration and ended within elevated copper, averaging 130 ppm over 22 metres. The entire second hole exhibited sericite alteration and pyrite mineralization with localized zones of tourmaline alteration and quartz veining within an andesite host, however no anomalous geochemistry was encountered. The final hole intersected a broad zone of intense tourmaline-silica-sericite alteration which hosts localized gold bearing quartz-tourmaline breccia and breccia veins from 140 to 202 metres (end of hole). Anomalous gold bearing intervals include: 2 metres of 1.3 g/t gold, 4 metres of 0.29 g/t gold, 2 metres of 0.5 g/t gold and 2 metres of 0.23 g/t gold or 40 metres of 0.15 g/t gold average grade. Anomalous copper, exceeding 400 ppm, was also intersected

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 15

within the anomalous zone. The Erdene technical team is reviewing these results along with associated geology, geochemistry and geophysics to establish the basis for future drill testing on the Ulaan license.

Zuun Mod Molybdenum Project

The Zuun Mod Molybdenum Project is a porphyry molybdenum-copper deposit located in southwest Mongolia on the Company’s Khuvyn Khar license. This project is approximately 950 kilometres southwest of Ulaanbaatar and 215 kilometres from railhead on the Mongolia-China border at Ceke. The property consists of a mining license totaling 6,041 hectares. The mining license is registered in the name of Anian Resources LLC , a wholly owned subsidiary of the Corporation, and has an initial term of 30 years. This project was acquired from Gallant Minerals Limited in 2005 and is subject to a net smelter returns royalty (“NSR Royalty”) of 1.5%, subject to a buy-down provision.

In Q2 2011, the Corporation released a NI 43-101 compliant resource estimate for Zuun Mod containing a Measured and Indicated Resource of 218 million tonnes ("Mt") at an average grade of 0.057% molybdenum, and 0.069% copper at a cut-off grade ("COG") of 0.04% molybdenum. This equates to 273.5 million pounds ("M lbs") of contained molybdenum metal and 330.7 M lbs of contained copper metal. In addition, there is a 168 Mt Inferred Resource at an average grade of 0.052% molybdenum and 0.065% copper, equating to a further 191.8 M lbs of contained molybdenum metal and 240.5 M lbs of contained copper metal.

The Zuun Mod molybdenum-copper deposit has significant potential for development provided the molybdenum price improves. Market demand for molybdenum has recently improved, with the price of molybdenum oxide currently trading at approximately US$12.00 per pound, compared to approximately US$7.25 per pound in 2017. The Corporation will continue to evaluate its options in light of technological and market factors. Discovery of additional copper mineralization at Khuvyn Khar could provide synergies for the advancement of the Zuun Mod molybdenum deposits.

Further details on the Zuun Mod resource can be found in the "Technical Report Zuun Mod Porphyry Molybdenum-Copper Project, South-Western Mongolia, National Instrument 43-101 Independent Technical Report" dated June 2011, filed on SEDAR.

Khuvyn Khar Copper-Silver Project

The Khuvyn Khar copper-silver project is located on Khuvyn Khar license, approximately 2.2 kilometres north of the Zuun Mod molybdenum-copper porphyry deposit. Exploration work at Khuvyn Khar has included geological mapping, vein density mapping, geochemical sampling, geophysical surveys, and wide spaced drilling. Previous drilling intersected 34 metres of 1.3% copper and 9.24 g/t silver from 308 to 342 metres (ZMD-121). The Project has a very large copper mineralized zone trending over 900 metres with multiple zones in three drill holes returning assays in excess of 0.2% copper over significant widths (12 to 42 metres).

Acquisitions

Mongolia’s Ministry of Mining and Heavy Industry periodically issues areas for exploration. Erdene has established the largest proprietary geologic database of Southwest Mongolia with a priority list of acquisition targets. The Company will participate in the tendering process as its priority targets are opened for tender. The Company has also been evaluating privately held licenses for acquisition.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 16

Discussion of Operations

Three months ended March 31, 2021 and 2020

The tables below detail exploration and evaluation expenditures for the three months ended March 31, 2021 and 2020. The Bayan Khundii Gold Project was the focus of the Corporation’s efforts during these periods.

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Zuun Mod,
Period ended March 31, 2021 Bayan Khundii Altan Nar Ulaan & Other General & Admin Total
E&E expenditures
Exploration and field support $ 1,008,890 $ 73,764 $ 32,051 $ 76,909 $ 1,191,614
Mining studies and permitting 1,042,209 64,801 3,530 8,526 1,119,066
- - -
Mongolian office costs 105,365 105,365
- - -
Share-based compensation 7,573 7,573
Stakeholder relations 71,345 27,000 5 - 98,350
Travel and other - - - 2,000 2,000
Total exploration expenditures 2,122,444 165,565 35,586 200,373 2,523,968
Capitalized expenditures (2,122,444) (165,565) - (1,716) (2,289,725)
Expensed exploration costs 2021 $ - $ - $ 35,586 $ 198,657 $ 234,243
E&E assets, January 1, 2021 $ 22,850,206 $ 3,827,267 $ 838,281 $ 1,848,401 $ 29,364,155
Additions 2,122,444 165,565 - 1,716 2,289,725
Effect of movements in exchange rates (172,902) (27,999) (10,719) (13,026) (224,646)
E&E assets, March 31, 2021 $ 24,799,748 $ 3,964,833 $ 827,562 $ 1,837,091 $ 31,429,234
Zuun Mod,
Period ended March 31, 2020 Bayan Khundii Altan Nar Ulaan & Other General & Admin Total
E&E expenditures
Exploration and field support $ 290,712 $ 106,010 $ 26,112 $ 20,549 $ 443,383
Mining studies and permitting 840,033 45,234 792 1,373 887,432
- -
Mongolian office costs 94,550 94,550
- -
Share-based compensation 4,508 4,508
Stakeholder relations 18,664 2,840 92 28,237 49,833
Travel and other 25,990 3,995 1,117 1,121 32,223
Total exploration expenditures 1,175,399 158,079 28,113 150,338 1,511,929
Capitalized expenditures (1,175,399) (158,079) - (1,256) (1,334,734)
Expensed exploration costs 2020 $ - $ - $ 28,113 $ 149,082 $ 177,195
E&E assets, January 1, 2020 $ 16,164,725 $ 3,561,166 $ 828,799 $ 928,827 $ 21,483,517
Additions 1,175,399 158,079 - 1,256 1,334,734
Effect of movements in exchange rates 745,266 159,464 61,975 38,320 1,005,025
E&E assets, March 31, 2020 $ 18,085,390 $ 3,878,709 $ 890,774 $ 968,403 $ 23,823,276
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Exploration and evaluation expenditures, including capitalized expenditures, totaled $2,523,968 for the three months ended March 31, 2021, compared to $1,511,929 for the three months ended March 31, 2020.

Exploration and field support expenses of $1,191,614 in Q1 2021 were well ahead of prior year expenses of $443,383 as the Company drilled 3,100 metres in the current year quarter, while exploration effort was focused on desktop studies in Q1 2020.

Mining studies and permitting costs for the three months ended March 31, 2021 totaled $1,119,066, $231,634 greater than for the three months ended March 31, 2020, as expenditures on the Bayan Khundii Gold Project Construction Readiness activities in the year exceeded the costs associated with the Bayan Khundii Gold Project Feasibility Study and Detailed Engineering & Design work in the comparative prior year quarter.

Mongolian office costs of $105,365 for the three months ended March 31, 2021 were $10,815 higher than the prior year quarter primarily due to an increase in legal fees associated with long-lead procurement.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 17

Stakeholder relations costs of $98,350 for the three months ended March 31, 2021 were $48,517 greater than for the three months ended March 31, 2020, due to increased community outreach, including two cohorts of employment readiness training for the Bayan Khundii Gold Project.

Travel and other costs of $2,000 for the three months ended March 31, 2021 were $30,223 below the prior year quarter, as international travel was permitted for a portion of the first quarter of 2020 but was suspended due to COVID-19 during the current quarter.

Erdene began capitalizing exploration costs for its Altan Nar Project in 2015 and commenced capitalizing costs for its Bayan Khundii Gold Project in 2016. For the three months ended March 31, 2021 and 2020, Erdene has capitalized all exploration costs associated with these projects.

The following table summarizes corporate and administration expenses for the three months ended March 31, 2021 and 2020.

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For the three months ended March 31,
2021 2020 Change
Administrative services $ 99,971 $ 96,354 $ 3,617
Depreciation and amortization 9,231 9,316 (85)
Directors fees and expenses 19,411 44,583 (25,172)
Investor relations and marketing 49,897 60,959 (11,062)
Office and sundry 23,064 21,039 2,025
Professional fees 70,286 38,456 31,830
Regulatory compliance 51,967 37,188 14,779
Share-based compensation 70,582 60,012 10,570
Travel and accommodations 195 6,167 (5,972)
$ 394,604 $ 374,074 $ 20,530
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Corporate and administrative expenses totaled $394,604 for the three months ended March 31, 2021, compared to $374,074 for the three months ended March 31, 2020.

Director’s fees and expenses of $19,411 for the three months ended March 31, 2021 were $25,172 lower than the prior year comparative period as several Directors elected to receive compensation in deferred share units, which are reported as Share Based Compensation. Additionally, fewer meetings were held during the current year quarter, reducing meeting related Director fees.

Investor relations and marketing expenses for the three months ended March 31, 2021 were $11,062 lower than the three months ended March 31, 2020 as several events transitioned to an online format in the current year at a lower cost.

Professional fees of $70,286 for the three months ended March 31, 2021 were $31,830 greater than the prior year due to increased financial advisory work in the current year quarter.

Regulatory compliance expenses for the current year quarter were $14,779 greater than for the three months ended March 31, 2020, largely due to increased public company filing fees due to an increase in Erdene’s market capitalization compared to the prior year.

Non-cash share-based compensation for the first quarter of 2021 was $10,570 higher than the previous year as a greater portion of Director compensation was paid in share-based instruments.

Administrative services, Depreciation and amortization, Office and sundry, and Travel and accommodations expenditures for the period ended March 31, 2021 were not material or significantly different from those incurred in the prior year comparative period.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 18

Summary of Quarterly Results

Expressed in thousands of Canadian dollars except per share amounts

	Fiscal 2021		Fiscal	2020			Fiscal 2019
	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2
	Mar	Dec	Sep	Jun	Mar	Dec	Sep	Jun
Net loss	$617	$1,525	$3,871	$6,678	$1,042	$773	$638	$755
Basic loss per share	$0.00	$0.00	$0.02	$0.03	$0.01	$0.01	$0.00	$0.01
Total assets	$42,454	$42,814	$44,918	$27,155	$27,826	$26,973	$20,942	$19,365

For the three months ended March 31, 2021, the Corporation recognized a net loss of $617,084 compared to a net loss of $1,041,990 for the comparative period in 2020.

The Corporation’s expenditures vary from quarter to quarter, largely due to the timing of its Mongolian exploration and evaluation programs. The Corporation is not aware of any other specific trends which account for fluctuations in financial results from period to period.

Liquidity and Capital Resources

At the date of this MD&A, the Corporation had approximately $8.6 million in working capital.

Funds raised have been used to advance the Corporation’s projects in Mongolia and to meet administrative costs in support of those programs (see Development and Exploration Projects and Discussion of Operations). The ability of the Corporation to continue with its exploration and development programs beyond this point is contingent upon securing additional funds through asset sales, formation of alliances, option and/or joint venture agreements, equity financing and/or expenditure reductions. The timing and availability of additional financing will be determined largely by market conditions and the results of the Corporation’s ongoing exploration programs.

The Corporation has minimal sources of income. It is therefore difficult to identify any meaningful trends or develop an analysis from the Corporation’s cash flows. The Corporation is dependent primarily on the issuance of share capital and debt to finance its exploration and development programs.

Other than as discussed herein, the Corporation is not aware of any trends, demands, commitments, events or uncertainties that may result in the Corporation’s liquidity or capital resources materially increasing or decreasing at present or in the foreseeable future. Material increases or decreases in the Corporation’s liquidity and capital resources will be substantially determined by the success of the Corporation’s Mongolian exploration and development programs and its ability to obtain sufficient financing.

Outstanding Share Data

Authorized

An unlimited number of common shares with no par value.

Issued and Outstanding Share Capital

Issued and Outstanding Share Capital
	May 13, 2021	December 31, 2020
Common shares issued and outstanding	268,550,433	268,450,433
Options outstanding	13,890,000	13,790,000
Warrants outstanding	62,663,824	75,097,796
DSU's oustanding	5,179,472	5,032,836
Total instruments outstandingat end ofperiod	350,283,729	362,371,065

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 19

Contractual Obligations

The following table summarizes the Corporation’s contractual obligations at March 31, 2021:

			Less than		1 - 3		4 - 5	More than	More than
		Total	oneyear		years		years		5years
Office leases	$	118,980	34,522 $	$	69,859	$	14,599	$	-
Accountspayable and accrued liabilites		964,209	964,209		-		-		-
	$	1,083,189	998,731 $	$	69,859	$	14,599	$	-

Other Financing Arrangements and Commitments

Sandstorm Gold Ltd. Royalty Agreement

Sandstorm Gold Ltd. (“Sandstorm”) holds a 1% net smelter returns royalty (“NSR Royalty”) on Erdene’s Altan Nar, Khundii and Ulaan licenses. Sandstorm has been given a right of first refusal on future stream or royalty financings related to these licenses.

Other

Gallant Minerals Limited is entitled to a 1.5% NSR Royalty on the Zuun Mod License, subject to a buy-down provision. There are no minimum exploration work commitments for the Zuun Mod mining license.

Off-Balance Sheet Arrangements

As at March 31, 2021, the Corporation had no off-balance sheet arrangements such as guarantee contracts, contingent interests in assets transferred to an entity, derivative instruments obligations or any obligations that trigger financing, liquidity, market or credit risks to the Corporation.

Critical Accounting Estimates

The preparation of financial statements in conformity with IFRS requires Erdene to establish accounting policies and to make estimates that affect both the amount and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain.

A detailed summary of all of the Corporation’s significant accounting policies and the key sources of estimation uncertainty that have a risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next twelve months are included in Note 2 to the consolidated financial statements for the year ended December 31, 2020. While all of the key sources are important to the Corporation’s consolidated financial statements, the following key sources have been identified as being critical:

Recoverability of exploration and evaluation assets; and
Share-based compensation.

Recoverability of exploration and evaluation assets

In accordance with the Corporation’s accounting policy, at the end of each reporting period, the Corporation assesses its exploration and evaluation assets to determine whether any indication of impairment exists. Judgment is required in determining whether indicators of impairment exist, including factors such as the period for which the Corporation has the right to explore, expected renewals of exploration rights, whether substantive expenditures on further exploration and evaluation of resource properties are budgeted and results of exploration and evaluation activities on the exploration and evaluation assets.

Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the greater of the fair value less cost of disposal and value in use. The impairment analysis requires the use of estimates and assumptions, such as long-term commodity prices, discount rates, future capital expenditures, exploration potential and operating costs. Fair value of exploration and evaluation assets is generally determined as the present value of estimated future cash flows arising from the continued use of the asset, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Cash flows are discounted to their present value using a pre-tax discount rate that reflects current market

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 20

assessment of the time value of money and risks to the asset. If the Corporation does not have sufficient information about a particular mineral resource property to meaningfully estimate future cash flows, the fair value is estimated by management through comparison to similar market assets and, where available, industry benchmarks.

Share-based payments

Equity-settled share-based payments issued to employees and directors are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. Fair value is measured using the Black-Scholes pricing model and requires the exercise of judgment in relation to variables such as expected volatilities and expected lives based on information available at the time the fair value is measured. The Corporation charged a total of $78,155 of non-cash share-based compensation to the statement of comprehensive loss for the three months ended March 31, 2021 (2020 - $64,520).

Financial Instruments and Other Risks

Financial Instruments

The fair values of the Corporation’s financial instruments are considered to approximate the carrying amounts. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes levels to classify the inputs to valuation techniques used to measure fair value.

Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs are unobservable (supported by little or no market activity).

Fair Value

During the three months ended March 31, 2021 and during the year ended December 31, 2020, there were no transfers between level 1, level 2 and level 3 classified assets and liabilities. The following table provides the disclosures of the fair value of financial assets and liabilities which are recorded at fair value through profit and loss, and the level in the hierarchy.

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March 31, 2021 December 31, 2020
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets and liabilities measured at fair value:
- - - -
Cash and cash equivalents $ 10,057,044 $ $ $ 12,800,728 $ $
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Credit Risk

The Corporation manages credit risk by holding the majority of its cash and cash equivalents with reputable financial institutions in Canada, where management believes the risk of loss to be low. At March 31, 2021, $216,834 or 2% of the balance of cash was held in banks outside Canada (December 31, 2020 – $133,130 or 1%).

Liquidity Risk

Liquidity risk is the risk that the Corporation will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Corporation’s approach to managing liquidity is to ensure, to the extent possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions.

Market Risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.

Interest rate risk

As of March 31, 2021, the Corporation has no interest-bearing debt and is not exposed to any significant interest rate risk.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 21

Foreign Currency Risk

The functional currency of the Corporation is the Canadian dollar, and the functional currency of the Corporation’s subsidiaries is the Mongolian tugrik. Additionally, the Corporation incurs expenses and has received financing in US dollars. Consequently, fluctuations of the Canadian dollar in relation to other currencies impacts the fair value of financial assets, liabilities and operating results. Financial assets and liabilities subject to currency translation risk primarily include US dollar denominated cash, accounts payable and accrued liabilities, as well as Mongolian tugrik denominated cash, accounts payable and accrued liabilities. The Corporation maintains Canadian and US dollar bank accounts in Canada.

The Corporation’s exposure to US dollar currency risk was ($67,624) as at March 31, 2021 (December 31, 2020 - $69,392). A 10% change in the US dollar exchange rate would affect net loss and comprehensive loss and deficit by approximately $6,800 (December 31, 2020 - $6,900).

The Corporation’s exposure to Mongolian Tugrik currency risk was ($262,542) as at March 31, 2021 (December 31, 2020 – ($80,694)). A 10% change in the Mongolian Tugrik would affect net loss and comprehensive loss and deficit by approximately $26,300 (December 31, 2020 - $8,100).

Price Risk

The Corporation’s financial instruments are not exposed to direct price risk other than that associated with commodity price fluctuations impacting the mineral exploration and mining industries as the Corporation has no significant revenues.

Other Risks

In conducting its business, the principal risks and uncertainties faced by the Corporation relate primarily to exploration results, permitting, financing and, to a lesser extent, metal and commodity prices. Exploration for minerals and development of mining operations involve many risks, many of which are outside the Corporation’s control. In addition to the normal and usual risks of exploration and mining, the Corporation works in remote locations that lack the benefit of infrastructure and easy access. More information on risks is available in the Corporation’s Annual Information Form available on SEDAR at www.sedar.com.

Disclosure Controls and Internal Controls over Financial Reporting

Erdene has established and maintains disclosure controls and procedures over financial reporting, as defined under the rules adopted by the Canadian Securities Regulators in instrument 52-109. The Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have evaluated the design and effectiveness of Erdene’s disclosure controls and procedures as of March 31, 2021 and have concluded that such procedures are adequate and effective to provide reasonable assurance that material information relating to Erdene and its consolidated subsidiaries would be made known to them by others within those entities to allow for accurate and complete disclosures in annual filings.

The Management of Erdene, with the participation of the CEO and CFO (collectively “Management”), is responsible for establishing and maintaining adequate internal controls over financial reporting. Erdene’s internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements in accordance with IFRS.

Management evaluated the design and effectiveness of Erdene’s internal controls over financial reporting as of March 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its report “Internal Control – Integrated Framework (2013). This evaluation included reviewing controls in key risk areas, assessing the design of these controls, testing these controls to determine their effectiveness, reviewing the results and then developing an overall conclusion.

Based on management’s evaluation, the CEO and the CFO have concluded that as of March 31, 2021, Erdene’s internal controls over financial reporting were effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS.

However, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 22

Qualified Person

Peter Dalton, P.Geo. (Nova Scotia) is a qualified person under NI 43-101 and supervises all of the Corporation’s exploration programs. Samples are assayed at SGS Laboratory in Ulaanbaatar, Mongolia or Tianjin China, Central Geological Laboratory in Ulaanbaatar, Blue Coast Research Ltd in Parksdale British Columbia, Canada, or ALS Chemex in Vancouver, Canada. In addition to internal checks by SGS Laboratory, Central Geological Laboratory and ALS Chemex, the Corporation incorporates a QA/QC sample protocol utilizing prepared standards, field and laboratory splits, and blanks.

The disclosure in this MD&A of scientific or technical information about mineral projects on the Corporation’s properties has been reviewed and approved by Peter Dalton, P. Geo, who is not independent of the Corporation.

The information in this MD&A that relates to the financial models for the Bayan Khundii Feasibility Study is based on information compiled and reviewed by Kenny Li, CFA, who is an employee of ROMA Group Ltd. The information in this MD&A that relates to the capital and operating cost estimation for the Bayan Khundii Feasibility Study is based on information compiled and reviewed by Julien Lawrence, who is a FAusIMM and the Director of O2 Mining Ltd. The information in this MD&A that relates to the process design and recovery methods for the Bayan Khundii Feasibility Study is based on information compiled and reviewed by Jeffrey Jardine, who is a FAusIMM. and is engaged through O2 Mining Ltd. The information in this MD&A that relates to the Bayan Khundii resource estimate is based on information compiled and reviewed by Mr. Cam Norton, who is a P.Geo, and is an employee of Tetra Tech Inc. The information in this MD&A that relates to the Bayan Khundii reserve estimate is based on information compiled and reviewed by Mr. Anthony Keers, who is an MAusIMM (CP Mining) and a Director, Auralia Mining Consulting. Each of Mr. Li, Mr. Lawrence, Mr. Jardine, Mr. Norton and Mr. Keers has sufficient experience, which is relevant to the style of mineralization and type of deposit under consideration and to the activity which they have undertaken to qualify as a Qualified Person, as that term is defined by National Instrument 43-101. Each of Mr. Li, Mr. Lawrence, Mr. Jardine, Mr. Norton and Mr. Keers is not aware of any potential for a conflict of interest in relation to this work with Erdene.

Other Information

Additional information regarding the Corporation, including the Corporation’s Annual Information Form, is available on SEDAR at www.sedar.com and on the Corporation’s website at www.erdene.com.

Erdene Resource Development Corp. | Management’s Discussion and Analysis | 23

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Erdene Resource Development Corporation — Interim / Quarterly Report 2021

45373_rns_2021-05-14_adf7f1e5-c47e-401a-86e1-ee60e3b946f2.pdf

MANAGEMENT’S DISCUSSION AND ANALYSIS

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three months ended March 31, 2021

Contents

Company Overview

COVID-19

Highlights and Significant Subsequent Events

Bayan Khundii Gold Project – 100% Erdene

Exploration

Corporate

Strategy and Outlook

Development and Exploration Projects

NI 43-101 Technical Reports – Resources and Reserves

Khundii Gold District

Bayan Khundii

Dark Horse

Altan Nar

Mineral Resources and Reserves

Khundii Gold District

Bayan Khundii Gold Deposit

Altan Nar Gold-Polymetallic Deposit

Economic Studies

District Scale Exploration

Altan Arrow Gold Target

Khundii North Gold Target

Ulaan Copper-Gold Porphyry Target

Zuun Mod Molybdenum Project

Khuvyn Khar Copper-Silver Project

Acquisitions

Discussion of Operations

Three months ended March 31, 2021 and 2020

Summary of Quarterly Results

Liquidity and Capital Resources

Outstanding Share Data

Authorized

Issued and Outstanding Share Capital

Contractual Obligations

Other Financing Arrangements and Commitments

Sandstorm Gold Ltd. Royalty Agreement

Other

Off-Balance Sheet Arrangements

Critical Accounting Estimates

Recoverability of exploration and evaluation assets

Share-based payments

Financial Instruments and Other Risks

Financial Instruments

Fair Value

Credit Risk

Liquidity Risk

Market Risk

Interest rate risk

Foreign Currency Risk

Price Risk

Other Risks

Disclosure Controls and Internal Controls over Financial Reporting

Qualified Person

Other Information

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Erdene Resource Development Corporation Interim / Quarterly Report 2021