Erdene Gold Inc.
TSX : ERD

Erdene Gold Inc.

April 24, 2007 13:02 ET

Erdene Announces Start of Resource Delineation Drilling on the Zuun Mod Molybdenum Project

Minarco Provides Project Recommendations

HALIFAX, NOVA SCOTIA--(CCNMatthews - April 24, 2007) - Erdene Gold Inc. (TSX:ERD) today announced that it is commencing its 2007 drilling program at its wholly owned Zuun Mod molybdenum project in Mongolia based on advice from Minarco Asia Pacific Pty Limited ("Minarco"), who have recommended a two-stage delineation drilling program. The company has signed contracts with drilling, surveying and logistical companies with two drill rigs now being mobilized to the project site to begin drilling in early May.

"With the current infrastructure build-up in the south Gobi region as a result of the pending development of world-class ore bodies, a booming Chinese steel industry and the resultant strong growth in molybdenum consumption, we believe the Zuun Mod molybdenum project is well positioned for future development," said Peter Akerley, President and CEO. "We have carried out an extensive exploration program at Zuun Mod and we are very excited to now advance the project more aggressively to further define the resources in the main target zones while testing additional anomalies within this very large area of molybdenum mineralization."

Minarco Review and Recommendations

As announced on February 22, 2007, Erdene appointed Minarco to evaluate strategic options and advise on project planning and design for the Zuun Mod molybdenum project. Minarco is a prominent mining and energy industry advisor in the Asia Pacific region and has recently been involved in assisting China Molybdenum with the technical aspects of its Initial Public Offering. As well, Minarco has worked on various projects with many of China's major coal and steel producers.

Minarco's review, based on the drill results and other data, indicates the Zuun Mod molybdenum project has the potential to host reserves in the two most advanced zones (Racetrack and Stockwork zones), and their extensions, of similar tonnage to other major molybdenum projects being currently developed else where in the world with average grades equal to or greater than 0.05% Mo. In addition, Minarco suggests that there is the potential for a large portion (approximately 40%) of the resource to be equal to or greater than 0.07% Mo. Proximity to surface varies in each target area ranging from surface in the less explored Intersection zone and starting from 50 to 96 metres of surface continuing to a maximum tested depth of 435 metres in the Racetrack and Stockwork zones where most of the work to date has been concentrated. In addition, Minarco believes there is reasonable potential to identify additional targets within the identified 7.5 kilometre long by 600 metre wide molybdenum-in-rock surface geochemical anomaly.

Minarco has recommended a two-phase program:

Phase I

Phase I drilling will include a 200 metre spaced grid drilling program on the Stockwork and Racetrack Zones. This drilling is expected to provide sufficient detail for the definition of the extent of mineralization already identified in these areas. This phase will also include further work intended to identify and test additional targets within the 7.5 kilometre long molybdenum-in-rock surface geochemical anomaly. It is anticipated that a minimum of 15 holes will be drilled at an average depth of 250 metres in Phase I. This program will provide greater certainty for focusing the Phase II 100 metre spaced grid drilling program which will be the basis for generating an anticipated resource estimate for the Zuun Mod molybdenum project during 2007.

Phase II

The objective of Phase II is to define a resource estimate based on 100 metre spaced drill holes to a depth of approximately 250 metres. The goal is to identify a minimum 250 million tonnes with an average grade greater than or equal to 0.05% Mo. Targets would be determined based on Phase I results with a focus on infilling areas with higher grade, nearest surface mineralization while defining the boundary to the resource areas.

Project Contracts

Two diamond core drill rigs have been mobilized and are expected to begin drilling by the first week of May 2007. Erdene has signed a contract with Falcon Drilling Mongolia LLC for a minimum 3,500 metres drill project in Phase I. Surveying contractor Monmet Engineering Co., Ltd has been retained to establish a grid at 100 metre spacing over the southern portion of the Zuun Mod target area. This grid will be used for drill hole placement as well as a detailed geophysical survey (magnetics) to be completed in the immediate area of the two main zones. The field-camp set up is now being completed.

Zuun Mod Summary

(The reader is referred to the Zuun Mod plan map and drill results that have been posted on the Erdene home page at www.erdene.com)

The Zuun Mod molybdenum project is located in southwestern Mongolia, approximately 160 kilometres north of the Chinese Mongolia border and approximately 200 kilometres from the Nariin Sukhait Coal Mine, Mongolia's largest exporter of coal to China. Rail has been constructed from the Chinese industrial city of Jiayuguan, Gansu Province, to the Mongolian border near the Nariin Sukhait Coal Mine. More than $4 million has been spent on exploration at Zuun Mod since discovery including 30 diamond drill holes totaling 9,313 meters.

Molybdenum exploration at Zuun Mod is focused on the southern half of the porphyry complex where a semi-circular shaped continuous molybdenum-in-rock surface geochemical anomaly has been traced over 7.5 kilometres over a width of approximately 600 metres. Sixteen of the 30 holes drilled throughout the Zuun Mod porphyry complex have been completed within this anomalous zone. Drill hole spacing ranges from approximately 100 metres to 2.5 kilometres within this zone with all but one of the holes intersecting thick sequences of altered and quartz stock-worked lithologies with highly anomalous to potentially economic molybdenum mineralization. To date, exploration within this area has focused on two main zones, the Racetrack and Stockwork Zones.

Racetrack Zone

The core mineralized area within the Racetrack zone has been intersected in four holes spaced over a distance of 330 metres. The molybdenum mineralization comes within 54 metres of surface and has an average grade of 0.06% Mo over an average 123 metre thickness. A slightly lower average grade of 0.05% Mo continues throughout each of the holes to depth, averaging 295 metres. This zone has been tested to a maximum of 416 metres and all holes ended in significant molybdenum mineralization. The southern most hole in the Racetrack zone (ZMD-13) returned a 20 metre section at 72 metres depth averaging 0.11% Mo within a 194 metre zone from 56 metres to 250 metres of 0.06% Mo. The area from this hole to hole KKMD-09, 1.6 kilometres to the southwest remains untested. Hole KKMD-09 is located on the western edge of the Stockwork zone and returned 56 metres of 0.04% Mo starting at 70 metre depth.

Stockwork Zone

The Stockwork zone, located 1.6 kilometres southwest of the Racetrack zone, includes several holes that have intersected highly anomalous to potentially economic molybdenum mineralization. KKMD-03 returned 280 metres of 0.06% Mo from 46 metres to the bottom of the hole terminating in a 53 metre zone averaging 0.09% Mo. This higher grade zone included a 20 metre section that averaged 0.15% Mo. In addition to the molybdenum mineralization, hole KKMD-03 returned an average grade of 0.3g/t rhenium ("Re") from 98 metres to 228 metres, a 130 metre interval. KKMD-03 was the only hole to date analyzed for rhenium which is a valuable heavy metal by-product of some molybdenum ores used in the manufacture of microchip processors.

Two holes have been drilled immediately north (100 to 150 metres) of KKMD-03 that intersected highly anomalous molybdenum mineralization throughout, locally returning 0.1% to 0.4% Mo over 2 metres. Holes ZMD-14 and KKMD-09 were drilled 150 metres and 550 metres west of KKMD-03, respectively. Hole ZMD-14 retuned a 62-metre intersection of 0.05% Mo and KKMD-09 returned 56 metres of 0.04% Mo starting at 70 metres depth. The Stockwork zone remains open to the west and southwest.

Other Target Areas

The Intersection zone is located to the northeast of the Racetrack zone and covers an area approximately 1.5 kilometres by 1.3 kilometres in which three widely spaced drill holes have been completed to date. Strongly anomalous results have been returned from each of the three holes including a 10 metre intersection from surface of 0.05% Mo, 32 metres of 0.07% Mo and 2 metre intervals up to 0.27% Mo.

All of the mineralized zones described above lie within the eastern half of a 7.5 kilometre long semi-circular shaped molybdenum-in-rock surface geochemical anomaly located in the southern half of the Zuun Mod property. The western half of this anomaly has only been tested by two drill holes in the extreme northwestern portion, one of which returned anomalous molybdenum throughout. This geochemical anomaly remains untested over a 2.3 kilometre area extending from hole KKMD-09 located in the Stockwork zone, to the northwest, an area that is partially covered by younger sediments.

Molybdenum

Global molybdenum consumption has increased approximately 80% in the past 15 years and global molybdenum consumption continues to grow at approximately 4.5% annually. A number of factors support continued growth in consumption at a similar level over the longer term. These factors include continued strong growth in China's demand, strong global growth in nearly all steel end-use sectors, in particular, oil and gas pipelines, stainless steel, aircraft and construction markets, and continued strong demand in both metallurgical and chemical segments. Molybdenum oxide is currently trading at approximately US$30 per pound.

About Erdene Gold Inc.

Erdene is a diversified mineral company with exploration properties focused on high-growth commodities and near-production assets. The company has a strong portfolio of exploration properties in Mongolia focused on base metals (copper and molybdenum), precious metals (gold and palladium) and energy (coal and uranium). Erdene has strategic alliances with Xstrata Coal to develop its coal properties in Mongolia. Xstrata Coal is a significant Erdene shareholder with a 4% ownership of the company's common shares and has representation on its board of directors. In addition, Erdene has near-term cash flow opportunities in its North American assets, which includes its 25% interest in the Donkin Coal Alliance in Nova Scotia with Xstrata Coal Donkin Limited and agreements with J.M. Huber Corporation and Rinker Materials as operators and developers in the southeast U.S. for its kaolin clay and aggregate projects respectively. Erdene has a current cash and equivalent position of approximately $14.8 million with 64,311,127 common shares issued and outstanding and a fully diluted share position of 73,230,852.

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.

Contact Information

  • Erdene Gold Inc.
    Peter C. Akerley, President and CEO
    Ken W. MacDonald, Vice-President North America and CFO
    902-423-6419
    info@erdene.com
    www.erdene.com