Erdene Gold Inc.

Erdene Gold Inc.

December 24, 2007 09:28 ET

Erdene Announces Closing of Private Placement Xstrata Coal Canada Increases Ownership to 6%

HALIFAX, NOVA SCOTIA--(Marketwire - Dec. 24, 2007) - Erdene Gold Inc. ("Erdene") (TSX:ERD) today announced the closing of the private placement with Xstrata Coal Canada Limited ("Xstrata Coal") previously announced on October 3, 2007. Xstrata Coal acquired one million common shares of Erdene at $1.05 per share for aggregate proceeds of $1,050,000, bringing Xstrata Coal's ownership interest in Erdene to approximately 6%.

Pursuant to a subscription agreement dated September 28, 2007, Xstrata Coal agreed to acquire one million common shares of Erdene effective 16 full trading days on the Toronto Stock Exchange ("TSX") following the issuance of a news release by the Corporation announcing the findings of the preliminary assessment prepared by Norwest Corporation ("Norwest Report") with respect to the Donkin Coal Project. Details of the Norwest Report were announced on November 26, 2007 and the Norwest Report was filed on SEDAR on the same day. The subscription price of $1.05 per share is the volume weighted average trading price per common share on the TSX for the five full trading days immediately preceding the effective date of closing, being December 19, 2007.

Alliance Agreement between Erdene and Xstrata Coal

On February 13, 2006, Erdene and Xstrata Coal entered into an agreement ("Alliance Agreement") whereby Erdene granted Xstrata Coal certain rights, including a first option to enter into a joint venture and earn a 75% interest in any coal opportunity in Mongolia identified by Erdene by funding all work through completion of a feasibility study. In addition, Erdene agreed that so long as Xstrata Coal held a 5% equity position in Erdene, Xstrata Coal would have the right to name a nominee to Erdene's board of directors and that if Erdene elects to develop or pursue third party participation in any non-coal projects or properties in Mongolia or elsewhere, Xstrata Coal has a sixty-day right to review all supporting project information and determine whether it wishes to participate in the project prior to Erdene making the opportunity available to another party or developing the property itself. Concurrent with the execution of the Alliance Agreement, Xstrata acquired 3,000,000 shares of Erdene at $1.00 per share, which represented 9.8% of Erdene's then issued and outstanding share capital. Following a private placement by Erdene in April of 2007, Xstrata's interest in Erdene was diluted to less than five percent (5%). Because of ongoing discussions between the parties with respect to participation in mineral projects, Erdene extended the deadline by which Xstrata Coal was required to increase its equity position to greater than 5% in order to maintain its rights under the Alliance Agreement.

Company Overview

Erdene is a diversified mineral exploration and development company with projects focused on high-growth commodities and near-production assets. In addition to the coal projects underway in Mongolia which are fully funded by Xstrata, the Company is advancing metals projects in Mongolia led by the Zuun Mod molybdenum project, the Donkin coal project in eastern Canada, currently at the prefeasibility stage and a number of industrial minerals projects in North America. A key focus of the industrial minerals division is on aggregate projects that are located to provide strategic market advantage to the growth areas of the eastern seaboard of the U.S. Developments at the Zuun Mod molybdenum project, located near the Chinese border in southwestern Mongolia, include the completion of 63 holes totalling greater than 20 kilometres of core drilling during 2007. A 43-101 independent resource is expected to be completed prior to the end of the 1st quarter 2008. Following the issuance of the shares in connection with today's private placement, Erdene has a current cash and equivalent position of approximately $11.7 million with 70,200,939 common shares issued and outstanding and a fully diluted share position of 79,807,352.

Forward-Looking Statements

Certain information regarding Erdene contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although Erdene believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Erdene cautions that actual performance will be affected by a number of factors, most of which are beyond its control, and that future events and results may vary substantially from what Erdene currently foresees. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration results, continued availability of capital and financing and general economic, market or business conditions. The forward-looking statements are expressly qualified in their entirety by this cautionary statement. The information contained herein is stated as of the current date and subject to change after that date.

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