Blue Lagoon Resources Inc. continues to progress toward consistent mine production and regular deliveries of mineralized material to its milling partner, Nicola Mining Inc. Following the holiday break, Dome Mountain has resumed production activity, which is set to increase as a result of several new operational measures. The mine is expecting to achieve consistent production of approximately 100 tonnes per day by month-end, positioning the Company to progress toward its fully permitted production level of 150 tonnes per day.
As outlined in the Company's President's Update of November 10, 2025, the early stages of ramping up underground mining at Dome Mountain experienced some timing delays. During this phase, a number of operational constraints typical of starting and commissioning an underground mine were encountered and the team identified and addressed these constraints. These constraints have now largely been resolved or mitigated and are no longer limiting underground activities.
Underground mining operations are expected to increase with the introduction of a second production shift, enhancing productivity and operational efficiency. Consistent production of 100 tonnes per day is expected to be achieved by month-end, positioning the Company to progress toward its next planned production level of 150 tonnes per day in the coming months. The Company is constructing a fire assay laboratory facility, expected to be fully operational by month-end and capable of processing a minimum of 40 samples per day, allowing the mine to receive rapid and timely assay results to help with grade-control and operational decision making.
Underground surveying capabilities have been strengthened with the addition of a LiDAR unit, improving accuracy, efficiency, and mine planning. Ongoing staff training and certification programs continue to support safe, compliant, and efficient operations. With the Christmas break concluded, the full operations team has returned to site and underground mining activities have resumed.
In December, the Company shipped approximately 1,300 tonnes of mineralized material to its toll milling partner, Nicola Mining Inc., for which the Company received its first payment related to the sale of approximately 1,000 tonnes, as detailed in the press release of Dec 30, 2025. The remaining 300 tonnes that were delivered to Nicola remain to be processed and settled. Approximately 150 tonnes of mineralized material is already stockpiled at Dome Mountain and ready for shipment, with trucking expected to commence this week. These shipments support continued processing activities and the establishment of a regular production and delivery cycle that underpins the Company's transition toward consistent revenue generation.
The Company also reports that several senior employees are being issued an aggregate of 116,884 common shares. The share issuance is subject to approval by the Canadian Securities Exchange. Additionally, the Company received a $500,000 unsecured, interest-free loan from its President to bridge short-term working capital requirements prior to the receipt of initial production revenues. The loan is due on December 19, 2026, or payable earlier at the option of the Company. Pursuant to the loan agreement, the Company will issue an aggregate of 151,515 bonus common shares to the lender, at a price of $0.66 per share, being the market price at the time the loan agreement was entered into.
The lender is a related party to the Company and the loan constitutes a 'related party transaction' pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions. The Company is relying on the exemptions from the formal valuation requirements contained in section 5.5(b) of MI 61-101 and the minority shareholder approval requirements contained in section 5.7(1)(b) of MI 61-101.
