Erdene Resource Development Corporation — Interim / Quarterly Report 2021

May 14, 2021

==> picture [402 x 81] intentionally omitted <==

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three months ended March 31, 2021 and 2020

(Canadian dollars) (Unaudited)

Prepared by management – See Notice to Reader

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the condensed consolidated interim financial statements, they must be accompanied by a notice to this effect. These unaudited condensed consolidated interim financial statements have been prepared by management of the Corporation. Management have compiled the unaudited condensed consolidated interim statements of financial position of Erdene Resource Development Corporation as at March 31, 2021 and December 31, 2020 and the unaudited condensed consolidated interim statements of comprehensive loss, changes in equity and cash flows for the three months ended March 31, 2021 and 2020. The Corporation’s independent auditors have not audited, reviewed or otherwise attempted to verify the accuracy or completeness of the March 31, 2021 and 2020 condensed consolidated interim financial statements. Readers are cautioned that these statements may not be appropriate for their intended purposes.

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 2

ERDENE RESOURCE DEVELOPMENT CORPORATION

Condensed Consolidated Interim Statements of Financial Position

(Canadian dollars)

(Canadian dollars)
			March 31,		December 31,
	Notes		2021		2020
Assets
Cash and cash equivalents		$	10,057,045	$	12,800,728
Receivables			8,666		89,344
Prepaids			604,270		212,479
Current assets			10,669,981		13,102,551
Exploration and evaluation assets	4		31,429,234		29,364,155
Right-of-use asset	5		100,351		107,693
Property, plant and equipment			254,412		239,431
Non-current assets			31,783,997		29,711,279
Total Assets		$	42,453,978	$	42,813,830
Liabilities and Equity
Trade and other payables		$	964,209	$	582,356
Leaseliability	5		28,382		27,853
Current liabilities			992,591		610,209
Lease liability	5		78,405		85,699
Convertibleloan	7		-		-
Non-current liabilities			78,405		85,699
Total Liabilities			1,070,996		695,908
Shareholders' Equity
Share capital	8	$	136,650,386	$	136,618,086
Contributed surplus			26,013,522		25,937,667
Accumulated other comprehensive loss			(3,190,677)		(2,964,666)
Deficit			(118,090,249)		(117,473,165)
Total Shareholders' Equity			41,382,982		42,117,922
Total Liabilities and Equity		$	42,453,978	$	42,813,830

Commitments (Note 6)

The accompanying notes are an integral part of these condensed consolidated interim financial statements. Approved on behalf of the Board:

Signed “John P. Byrne”

_____ Director Signed “T. Layton Croft” _______ Director

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 3

ERDENE RESOURCE DEVELOPMENT CORPORATION

Condensed Consolidated Interim Statements of Comprehensive Loss

(Canadian dollars)

==> picture [457 x 346] intentionally omitted <==

----- Start of picture text -----

For the three months ended
March 31,
Notes 2021 2020
Operating Expenses
Exploration and evaluation 9 $ 234,243 $ 177,195
Corporate and administration 10 394,604 374,074
Loss from operating activities 628,847 551,269
Finance income (21,073) (16,996)
Interest expense 1,866 611,270
-
Change in fair value of convertible loan (175,703)
Foreign exchange loss 7,444 72,150
Net Loss $ 617,084 $ 1,041,990
Other comprehensive loss (income):
Foreign currency translation difference
arising on translation of foreign subsidiaries 226,011 (1,013,176)
Other comprehensive loss (income) 226,011 (1,013,176)
Total comprehensive loss $ 843,095 $ 28,814
Basic and diluted loss per share $ - $ 0.01
Basic weighted average number
of shares outstanding 268,503,766 191,612,829
----- End of picture text -----

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 4

ERDENE RESOURCE DEVELOPMENT CORPORATION

Condensed Consolidated Interim Statements of Changes in Equity (Canadian dollars)

(Canadian dollars)
							Accumulated other
	Notes	Number of shares		Share capital	Contributed surplus		comprehensive loss			Deficit		Total equity
Balance at January 1, 2020		191,068,490	$	109,466,565	$	16,829,920	$	(1,958,616)	$	(104,356,807)	$	19,981,062
Total comprehensive loss for the period:
Net loss		-		-		-		-		(1,041,990)		(1,041,990)
Other comprehensive loss		-		-		-		1,013,176		-		1,013,176
Issue of shares from DSU plan		719,212		132,964		(132,964)						-
Share-based compensation		-		-		64,520						64,520
Total transactions with owners		719,212		132,964		(68,444)		-		-		64,520
Balance at March 31, 2020		191,787,702	$	109,599,529	$	16,761,476	$	(945,440)	$	(105,398,797)	$	20,016,768
Balance at January 1, 2021		268,450,433	$	136,618,086	$	25,937,667	$	(2,964,666)	$	(117,473,165)	$	42,117,922
Total comprehensive loss for the period:
Net loss		-		-		-		-		(617,084)		(617,084)
Other comprehensive loss		-		-		-		(226,011)		-		(226,011)
Warrants exercised	8	100,000		32,300		(2,300)						30,000
Share-based compensation	8	-		-		78,155		-		-		78,155
Total transactions with owners		100,000		32,300		75,855		-		-		108,155
Balance at March 31, 2021		268,550,433	$	136,650,386	$	26,013,522	$	(3,190,677)	$	(118,090,249)	$	41,382,982

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 5

ERDENE RESOURCE DEVELOPMENT CORPORATION

Condensed Consolidated Interim Statements of Cash Flows

(Canadian dollars)

(Canadian dollars)
			For the three months ended
			March 31,
	Notes		2021		2020
Cash flows from operating activities:
Net loss		$	(617,084)	$	(1,041,990)
Items not involving cash:
Depreciation and amortization			16,654		13,024
Share-based compensation			78,155		64,520
Finance income			(21,073)		(16,996)
Interest expense capitalized	7		-		608,876
Foreign exchange not related to cash			7,444		72,150
Fair value change on convertible loan			-		(175,703)
Change in non-cash workingcapital			68,613		27,628
Cash flows from operatingactivities			(467,291)		(448,491)
Cash flows from financing activities:
Proceeds on exercise of warrants			30,000		-
Repayment of lease liability			(6,765)		(6,221)
Cash flows from financingactivities			23,235		(6,221)
Cash flows from investing activities:
Expenditures on exploration and evaluation assets	4		(2,289,725)		(1,334,735)
Expenditures on property, plant and equipment			(27,368)		(2,718)
Interest received			21,073		16,996
Cash flows from investingactivities			(2,296,020)		(1,320,457)
Effect of exchange rate changes on cash balances			(3,607)		345,555
Increase (decrease) in cash and cash equivalents			(2,743,683)		(1,429,614)
Cash and cash equivalents,beginningofperiod			12,800,728		5,106,863
Cash and cash equivalents,end ofperiod		$	10,057,045	$	3,677,249

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 6

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

1. Nature of operations:

Erdene Resource Development Corporation (“Erdene” or the “Corporation”) is a Canadian based resource company focused on the exploration and development of precious and base metal deposits in Mongolia. The Corporation’s common shares are listed on the Toronto Stock Exchange under the symbol "ERD" and the Mongolian Stock Exchange under the symbol “ERDN”. The address of the Corporation’s registered office is 1300-1969 Upper Water Street, Halifax, Nova Scotia, B3J 2V1.

Erdene is a late exploration stage business focusing on the acquisition, exploration and development of gold and other precious and base metal properties in southwest Mongolia. Currently, the Corporation’s principal development is the Bayan Khundii Gold Project, located in Bayankhongor province in Mongolia.

In August 2020, Erdene completed a Feasibility Study for its Bayan Khundii Gold Project, titled “Bayan Khundii Gold Project Feasibility Study, NI 43-101 Technical Report”. The continued operations of the Corporation and the recoverability of the amounts capitalized for mineral properties is dependent upon the existence of economically recoverable reserves, the ability of the Corporation to obtain the necessary financing to complete the exploration and development of such properties and upon future profitable production or proceeds from the disposition of one or more of the properties.

COVID-19

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The outbreak and efforts to contain it have had a significant effect on commodity prices and global capital markets. The Corporation adopted certain operating procedures in response to COVID-19, and associated restrictions implemented by the Government of Mongolia, including remote working, travel restrictions, and increased sanitation. As a result, the Corporation has been able to continue operating safely during the pandemic. Notwithstanding the proactive and considered actions taken to maintain a safe workplace, it is possible that in the future there will be negative impacts on operations that could have a material adverse effect on the Corporation’s results of operations and financial position. The Corporation had $9,677,390 in working capital at March 31, 2021, providing sufficient liquidity to manage through this period of uncertainty.

2. Basis of presentation

These unaudited condensed consolidated interim financial statements for the three months ended March 31, 2021 (the “Interim Financial Statements”) have been prepared in accordance with IAS 34 – Interim Financial Reporting. The Interim Financial Statements should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2020 (“Annual Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).

These unaudited condensed consolidated interim financial statements were authorized for issue on behalf of the Board of Directors on May 13, 2021.

3. Seasonality

The corporation’s business experiences a seasonal pattern in which exploration expenditures and investments in exploration and evaluation assets are concentrated in the second and third quarters of the year due to weather conditions in Mongolia.

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 7

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

4. Exploration and evaluation assets

==> picture [483 x 131] intentionally omitted <==

----- Start of picture text -----

Bayan Khundii Altan Nar Zuun Mod Ulaan & Other Total
Balance, January 1, 2020 $ 16,164,725 $ 3,561,166 $ 828,799 $ 928,827 $ 21,483,517
Additions 7,436,420 391,875 64,512 980,554 8,873,361
Effect of movements in exchange rates (750,939) (125,774) (55,030) (60,980) (992,723)
Balance, December 31, 2020 $ 22,850,206 $ 3,827,267 $ 838,281 $ 1,848,401 $ 29,364,155
Balance, 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)
Balance, March 31, 2021 $ 24,799,748 $ 3,964,833 $ 827,562 $ 1,837,091 $ 31,429,234
----- End of picture text -----

The Corporation’s mineral exploration and mining licenses in Mongolia are held by its subsidiaries, Erdene Mongol LLC, Anian Resources LLC and Leader Exploration LLC. Mineral exploration licenses are valid for a period of three years and, through renewals, can be extended to a maximum of twelve years, subject to minimum work requirements. Mining licenses are issued for an initial term of 30 years with two 20-year extensions possible. These rights are held in good standing through the payment of an annual license fee.

Bayan Khundii Gold Project

The Bayan Khundii Gold Project is located in Bayankhongor province in Mongolia and is comprised of the 2,309 hectare Khundii mining license, issued in August 2019, from the Mineral Resource and Petroleum Authority of Mongolia, through the conversion of a portion of its legacy Khundii exploration license. The Khundii mining license includes the Bayan Khundii Resources and Reserves reported in “Bayan Khundii Gold Project Feasibility Study NI 43-101 Technical Report”, dated August 31, 2020 and prepared by Roma Oil and Mining Associates Limited. The Corporation is currently completing construction readiness activities on the project in advance of a decision to proceed to construction, anticipated in 2021.

Additionally, the mining license includes Erdene’s highly prospective Altan Arrow, Dark Horse, Khundii North and Khundii West targets. On July 1, 2016, the Corporation began capitalizing exploration costs on the property in accordance with its capitalization policy.

Altan Nar Gold Project

The Altan Nar Gold Project is located in Bayankhongor province in Mongolia, approximately 16km north of Erdene’s Bayan Khundii Gold Project. Erdene received the 4,669 hectare Altan Nar mining license including the Altan Nar gold, silver, lead and zinc resource, on March 5, 2020 from the Mineral Resource and Petroleum Authority of Mongolia, through the conversion of its legacy Tsenker Nomin exploration license. On January 1, 2015, having received the initial resource estimate for the Altan Nar prospect, the Corporation began capitalizing exploration costs on the property in accordance with its capitalization policy. Prior to 2015, the Corporation only capitalized licensing costs associated with Altan Nar.

Zuun Mod Copper & Molybdenum Resource

The Zuun Mod property is located in Bayankhongor province in Mongolia and is comprised of a 6,041 hectare molybdenum-copper Mining License. The mining license was issued in 2011. The Zuun Mod molybdenumcopper deposit has significant potential for development provided the molybdenum price improves. The Corporation will continue to evaluate its options in light of technological and market factors.

Ulaan & Other

The Ulaan exploration license covers an area of approximately 1,780 hectares, situated immediately adjacent to the Khundii mining license. 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. On August 30, 2017, Erdene acquired 51% of the outstanding Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 8

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

4. Exploration and evaluation assets (continued)

shares of Leader Exploration LLC, a private Mongolian company that holds the license. Erdene evaluated the acquisition considering IFRS 3, Business Combinations, and concluded that the transaction constituted the acquisition of a collection of assets, not a business. On December 10, 2020 Erdene acquired an 100% interest in the Ulaan exploration license with the purchase of the remaining 49% interest in Leader Exploration LLC for US$750,000.

The Corporation maintains an exploration license for 2,205 hectares of the legacy Khundii exploration license that were not converted to a mining license in 2019. This exploration license is in its eleventh 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.

5. Leases

The Company entered a five-year lease for its head office, with an effective date of September 1, 2019. The lease is reflected on the balance sheet as a right-of-use asset, with an associated lease liability. The discount rate applied to the lease is 7%.

Additional information on the right-of-use asset is as follows:

==> picture [305 x 119] intentionally omitted <==

----- Start of picture text -----

Balance, January 1, 2020 $ 137,064
Additions -
Depreciation (29,371)
Balance, December 31, 2020 $ 107,693
Balance, January 1, 2021 $ 107,693
Additions -
Depreciation (7,342)
Balance, March 31, 2021 $ 100,351
----- End of picture text -----

The maturity analysis of the office lease liability at March 31, 2021 is as follows:

	Within 1year	Within 1year	1 -	2years	2 -	3years	3 -	4years		Total
Lease payments	$	34,522	$	34,822	$	35,037	$	14,598	$	118,979
Finance charges		(6,140)		(4,022)		(1,879)		(151)		(12,192)
Total liability	$	28,382	$	30,800	$	33,158	$	14,447	$	106,787

The Corporation also has leases for office space and staff accommodation in Mongolia that expire within the next 12 months. The Corporation has elected not to apply the requirements of IFRS 16 to these payments and the Corporation expenses lease payments for these facilities as incurred.

6. Commitments

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.

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.

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 9

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

7. Convertible Loan

On October 11, 2019, Erdene executed a US$5 million (C$6.6 million) Convertible Loan (“Loan”) with the European Bank for Reconstruction and Development (“EBRD”). The Loan was funded by way of an initial advance of US$2.5 million on November 4, 2019, and a second advance of US$2.5 million on November 25, 2019.

On October 9, 2020, the EBRD exercised its conversion option in respect of the entire principal amount of the Convertible Loan, receiving 30,043,290 common shares of the Corporation. Additionally, the Corporation paid cash interest of US$457,639 to the EBRD, accrued to the date of extinguishment of the Loan. The carrying amount of the host liability of $5,429,703 and the fair value of the conversion option of $10,339,232, at the conversion date, were recorded as additions to share capital with the extinguishment of the liabilities.

Key terms of the Loan included:

• Principal amount of US$5.0 million

• Coupon rate of 10% payable in cash, or capitalized, at the Corporation’s option, annually

• The Loan was convertible, in whole or in part, at the election of the EBRD, into common shares of the Corporation at a conversion price (in respect of the principal amount drawn down under the Loan) of C$0.20 per share, subject to a conversion premium of 10%, 20% or 30%, respectively, if EBRD exercised its conversion option prior to or on the first, second, or third anniversary, respectively, of the date of the Loan Agreement

• Any capitalized interest on the date of the conversion was payable, at EBRD’s option, in cash or shares of the Corporation at the prevailing market price of the common shares of the Corporation (5-day Volume Weighted Average Price)

For accounting purposes, the Loan represented a hybrid financial instrument, consisting of a host loan obligation, and embedded derivative instruments comprised of the conversion and prepayment features of the Loan. The Corporation accounted for the host loan obligation at amortized cost, accreted to maturity over the term of the Loan. The embedded conversion and prepayment options were accounted for as financial liabilities measured at fair value through profit or loss.

At the dates of issue, the Loan and its components were measured at fair value as follows:

==> picture [457 x 65] intentionally omitted <==

----- Start of picture text -----

Host liability $ 4,505,902
Conversion and prepayment options 2,106,123
Financing costs (254,262)
Net proceeds from issue $ 6,357,763
----- End of picture text -----

The following table summarizes the continuity of the host liability component of the loan for the three months ended March 31, 2021 and 2020:

ended March 31, 2021 and 2020:
		2021			2020
Balance, January 1	$		-	$	4,333,370
Interest expense, capitalized			-		320,222
Accretion of discount			-		288,654
Effect of movementinexchangerates			-		420,312
Balance,March 31	$		-	$	5,362,558

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 10

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

7. Convertible Loan (continued)

The following table summarizes the continuity of the conversion option component of the loan for the three months ended March 31, 2021 and 2020:

months ended March 31, 2021 and 2020:
		2021			2020
Balance, January 1	$		-	$	1,927,151
Fair value adjustment			-		(175,703)
Balance,March 31	$		-	$	1,751,448

The fair value of the conversion option was determined using a binomial option valuation model, using the following key assumptions:

	Three Months	Three Months	Three Months
	Ended March 31,	Ended March 31,
Expected volatility	2021 n/a	2020	82%
Risk-free interest rate	n/a		0.4%
Conversion option term	n/a	2.5	years
Credit spread	n/a		27.4%
Underlying share price	n/a	$	0.150
Exchange rate (C$:US$)	n/a		0.705

8. Share Capital and Contributed Surplus

Authorized

An unlimited number of common shares with no par value.

Deferred Share Units

In 2013, the Corporation adopted a deferred share unit (“DSU”) plan to align the long-term incentive compensation of certain officers, directors and senior management with the drivers of long-term shareholder value. Under the Erdene DSU plan, the Corporation may grant DSUs to eligible plan members in such number and at such times as is determined by the Board of Directors as a bonus or in respect of services rendered by the plan member or otherwise as compensation. On the grant date, DSUs vest immediately and plan members are credited with the DSUs granted to them. Upon termination or death of the plan member, the Corporation pays the then market value of the plan member’s shares either in cash or in shares, at the sole discretion of the Corporation. Since the type of payout is at the discretion of the Corporation, and the Corporation does not intend to cash settle awards under the plan, the plan is accounted for as an equity settled plan.

During the three months ended March 31, 2021, the Corporation granted 146,636 DSUs with an average fair value of $0.37 per DSU (2020 – 348,651 DSUs with fair value of $0.17 per DSU). The fair value of $54,255 (2020 – $59,271) was charged to share based compensation included in exploration expenses and corporate and administration expenses.

	Three Months	Three Months	Three Months	Three Months
	Ended March	31,	Ended March	31,
	2021		2020
Five day volume weighted average price at grant date	$	0.37	$	0.17

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 11

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

8. Share Capital and Contributed Surplus (continued)

The following table summarizes the continuity of DSUs for the three months ended March 31, 2021 and 2020:

==> picture [465 x 87] intentionally omitted <==

----- Start of picture text -----

2021 2020
Number of DSUs Number of DSUs
Outstanding at January 1 5,032,836 4,636,850
Granted 146,636 348,651
Issued - (719,212)
Outstanding at March 31 5,179,472 4,266,289
----- End of picture text -----

Warrants

The following table summarizes the continuity of warrants for the three months ended March 31, 2021 and 2020:

==> picture [493 x 130] intentionally omitted <==

----- Start of picture text -----

2021 2020
Weighted Weighted
Number of average Number of average
warrants exercise price warrants exercise price
Outstanding at January 1 75,097,796 $ 0.55 30,252,774 $ 0.47
Exercised (100,000) 0.30 - -
Expired (12,333,972) 0.59 - -
Outstanding at March 31 62,663,824 $ 0.55 30,252,774 $ 0.47
Exercisable at March 31 62,663,824 $ 0.55 30,252,774 $ 0.47
----- End of picture text -----

The remaining contractual lives of warrants outstanding at March 31, 2021, are as follows:

==> picture [486 x 141] intentionally omitted <==

----- Start of picture text -----

Weighted average
remaining
Number of warrants contractual life
Exercise price outstanding (years)
$0.30 7,553,550 0.38
$0.50 10,265,222 0.16
$0.60 44,845,052 1.36
62,663,824 1.05
----- End of picture text -----

Stock options

The Corporation has a rolling 10% incentive stock option plan (the “Plan”) under which options to purchase common shares of the Corporation may be granted to directors, officers, employees and consultants of the Corporation. Under the Plan, the terms and conditions of each grant of options are determined by the Board of Directors. If there are no terms specified upon grant, options vest immediately on the grant date. The number of common shares subject to options granted under the Plan is limited to 10% of the issued and outstanding common shares of the Corporation and no one person may receive in excess of 5% of the outstanding common shares of the Corporation at the time of grant (on a non-diluted basis).

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 12

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

8. Share Capital and Contributed Surplus (continued)

During the three months ended March 31, 2021, 100,000 options were granted at a weighted average exercise price of $0.43.

The changes in stock options during the three months ended March 31, 2021 and 2020 were as follows:

==> picture [485 x 294] intentionally omitted <==

----- Start of picture text -----

2021 2020
Weighted average Weighted average
Number of options exercise price Number of options exercise price
Outstanding at January 1 13,790,000 $ 0.46 12,305,000 $ 0.41
Granted 100,000 0.43 50,000 0.27
Outstanding at March 31 13,890,000 $ 0.46 12,355,000 $ 0.41
Exercisable at March 31 13,890,000 $ 0.46 12,355,000 $ 0.41
The remaining contractual lives of options outstanding at March 31, 2021, are as follows:
Weighted average
Weighted average
remaining
exercise price of
Number of options contractual life
exercisable options
Range of prices exercisable (years)
$0.18 - $0.24 2,880,000 3.40 $ 0.20
$0.25 - $0.49 8,365,000 2.71 0.42
$0.50 - $0.89 2,645,000 1.03 0.86
13,890,000 2.53 $ 0.46
----- End of picture text -----

Share-Based Compensation

For the three months ended March 31, 2021, the Corporation charged a total of $78,155 of stock-based compensation expense to the statement of comprehensive loss (2020 – $64,520) of which $7,573 is attributable to exploration expenses (2020 – $4,508).

9. Exploration and evaluation expenses

The following table summarizes exploration and evaluation expenses for the three months ended March 31, 2021 and 2020:

2021 and 2020:
		For the three months	ended	March 31,
		2021		2020
Depreciation & amortization	$	7,410	$	3,662
Direct costs		156,010		101,335
Employee compensation costs		63,250		67,690
Share-based compensation		7,573		4,508
	$	234,243	$	177,195

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 13

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

10. Corporate and administration expenses

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

==> picture [477 x 159] intentionally omitted <==

----- Start of picture text -----

For the three months ended March 31,
2021 2020
Administrative services $ 99,971 $ 96,354
Depreciation and amortization 9,231 9,316
Directors fees and expenses 19,411 44,583
Investor relations and marketing 49,897 60,959
Office and sundry 23,064 21,039
Professional fees 70,286 38,456
Regulatory compliance 51,967 37,188
Share-based compensation 70,582 60,012
Travel and accommodations 195 6,167
$ 394,604 $ 374,074
----- End of picture text -----

11. Financial instruments

Credit Risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

==> picture [488 x 96] intentionally omitted <==

----- Start of picture text -----

Carrying Amount
March 31, December 31,
2021 2020
Cash and cash equivalents $ 10,057,044 $ 12,800,728
Receivables 8,666 89,344
$ 10,065,710 $ 12,890,072
----- End of picture text -----

The Corporation manages credit risk by holding the majority of its cash and cash equivalents with high quality 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 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.

a) Interest rate risk

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

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 14

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

11. Financial instruments (continued)

b) 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 as follows:

==> picture [489 x 83] intentionally omitted <==

----- Start of picture text -----

March 31, December 31,
2021 2020
Cash and cash equivalents $ 297,753 $ 292,895
Trade and other payables (365,377) (223,503)
$ (67,624) $ 69,392
----- End of picture text -----

A 10% change in the US dollar exchange rate would affect net and comprehensive loss and deficit by approximately $6,800 (December 31, 2020 - $6,900).

The Corporation’s exposure to Mongolian Tugrik currency risk was as follows:

		March 31,		December 31,
		2021		2020
Cash and cash equivalents	$	11,392	$	889
Trade and other receivables		-		5,460
Trade and otherpayables		(273,934)		(87,043)
	$	(262,542)	$	(80,694)

A 10% change in the Mongolian Tugrik exchange rate would affect net and comprehensive loss and deficit by approximately $26,300 (December 31, 2020 - $8,100).

c) 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.

Fair Value:

Assets and liabilities measured at fair value in the consolidated statements of financial position, or disclosed in the notes to the financial statements, are categorized using a fair value hierarchy that reflects the significance of the inputs used in determining the fair values:

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 15

ERDENE RESOURCE DEVELOPMENT CORPORATION Notes to Condensed Consolidated Interim Financial Statements (Canadian dollars) (Unaudited)

For the three months ended March 31, 2021 and 2020

11. Financial instruments (continued)

• a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• b) 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); and

• c) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value hierarchy of assets and liabilities measured at fair value on the consolidated statements of financial position or disclosed in the notes to the financial statements is as follows:

==> picture [489 x 64] intentionally omitted <==

----- Start of picture text -----

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 $ $
----- End of picture text -----

12. Related Parties

The Corporation has defined key management personnel as senior executive officers, as well as the Board of Directors. The total remuneration of key management personnel and the Board of Directors was as follows:

==> picture [488 x 101] intentionally omitted <==

----- Start of picture text -----

Three months ended March 31,
2021 2020
Directors' fees $ 24,317 $ 34,500
Share-based compensation to directors 34,600 42,700
Executive compensation and benefits 231,618 208,617
Share-based compensation to key management 15,144 14,422
$ 305,679 $ 300,239
----- End of picture text -----

Erdene Resource Development Corp. | Condensed Consolidated Interim Financial Statements | 16