Erdene Gold Inc.

Erdene Gold Inc.

April 12, 2007 12:00 ET

Erdene Closes $10 Million Private Placement

HALIFAX, NOVA SCOTIA--(CCNMatthews - April 12, 2007) - Erdene Gold Inc. ("Erdene") (TSX:ERD) is pleased to announce that it has it has completed the private placement of 10,000,000 common shares at a price of $1.00 per share resulting in gross proceeds of $10,000,000.

Erdene paid the underwriters, National Bank Financial Inc. and Wellington West Capital Markets Inc. a commission equal to 6.00% of the aggregate gross proceeds and issued 600,000 brokers' warrants representing 6.00% of the number of shares issued under the offering. One brokers' warrant entitles the holder to acquire one share for $1.15 at any time until the date that is 12 months from closing.

All of the securities issued in connection with the offering are subject to a four month hold period from the date of issue. The net proceeds of the offering will be used to advance Erdene's Zuun Mod molybdenum project and for general exploration and corporate purposes.

Xstrata Arrangement

On February 14, 2006, Erdene announced it entered into an alliance agreement ("Alliance Agreement") with Xstrata Coal Canada Limited ("Xstrata Coal"), a subsidiary of Xstrata plc., whereby Xstrata Coal was granted 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. Xstrata Coal funded exploration costs of $546,000 during 2006 and has approved an initial program for 2007 which includes a definition drill program on the Galshar coal project with a budget of $1.3 million. 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 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, if it wishes to participate in the project, to negotiate the terms of its participation before Erdene may make the opportunity available to another party or develop the property itself. As a result of the private placement, Xstrata Coal's equity position has been diluted to 4.7%. However, due to current discussions involving Xstrata Coal with respect to participation in certain mineral projects, Erdene has waived, until September 30, 2007 ("Waiver Date"), the requirement that Xstrata Coal maintain a 5% equity position in order to be able to exercise its rights under the Alliance Agreement. Erdene has agreed that Xstrata Coal may, prior to the Waiver Date, increase its equity interest to in excess of 5% by way of an issuance from treasury at an issue price to be agreed between Erdene and Xstrata Coal.

About Erdene Gold Inc.

Erdene is a diversified mineral company with exploration properties focused on high-growth commodities and near-production assets. The Corporation 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 Erdene's largest shareholder with a 4.7% ownership of the Corporation'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 cash position as of March 1st, 2007 of approximately $6.7 million and, following the private placement, has 63,951,127 common shares issued and outstanding and a fully diluted share position of 72,870,852.

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
    Erdene Gold Inc.
    Ken W. MacDonald
    Vice-President North America and CFO