Erdene Gold Inc.

Erdene Gold Inc.

August 15, 2007 16:51 ET

Erdene Gold Inc.: Donkin Coal Project Advances Towards Feasibility

Norwest Appointed to Complete Independent Assessment Study

HALIFAX, NOVA SCOTIA--(Marketwire - Aug. 15, 2007) - The Donkin Coal Alliance ("DCA") announces that an internal evaluation for the Donkin coal project in Cape Breton, Nova Scotia has been completed and the project is now advancing towards the feasibility stage. The Donkin Coal Alliance is a joint venture between Xstrata Coal (75%) and Erdene Gold Inc. ("Erdene") (TSX:ERD) (25%).

A number of options, focused mainly on mining and transportation variables, have been evaluated involving producing up to 5.3 million tonnes per annum ("Mtpa") of high energy, high sulphur thermal coal for the local and export markets. The DCA further announces that Norwest Corporation, an independent engineering firm based in Calgary, Alberta, has been retained to prepare a report to confirm the internally generated project evaluation.

"This is the first major milestone of the Donkin project and we are very pleased that the project is now moving towards the underground exploration phase, which will provide crucial information to determine the long-term viability of the project," said Ken MacDonald, Erdene Vice President North America. "We have complete confidence in the project manager, Xstrata Coal, in continuing to evaluate this project to the highest standards of health, safety, environmental and community practices. Xstrata Coal has the proven technical expertise and experience to provide us and ultimately our shareholders with thorough and accurate information on which to base future investments."

Xstrata Coal's project manager Darren Nicholls, said, "We are very pleased with the progress to date of the Donkin coal project, which is in line with our original expectations. The continuing support of the local community, the recent hiring of additional senior positions, and the approval to advance towards a feasibility study are all very positive developments."

Norwest Independent Study

Norwest Corporation has been retained to prepare an independent report in light of the DCA's requirement that all publicly disclosed information be independently verified prior to release. For clarification, Erdene previously announced the anticipation of a pre-feasibility report on the Donkin coal project. It is now anticipated that the Norwest report will be a "preliminary assessment" as defined by National Instrument 43-101 because of the lower level (+/- 30%) of certainty on some components of the study. It is anticipated that the Norwest report will be available for release during the fourth quarter of 2007.

Project Status Report

Xstrata Coal Donkin Management Limited ("XCDML") is now proceeding with office and workforce expansion with a project engineer, and a project accountant now being added. In addition, the office of XCDML in Glace Bay, Nova Scotia will be extended to accommodate the additional staff. The tunnel dewatering refurbishment program is nearing completion with the base of the tunnels cleared to the 3,400 metre mark and the tunnel roof now exposed to the ceiling of the Harbour seam at the end of the 3,500 metre long twin tunnels. Extensive testing of the Harbour seam will take place via a 10,000 metre in-seam drilling program that will be initiated once access to the coal face is completed. Areas of focus for the next stage of the project include:

- Underground drilling program to better define structure, gas regime and greenhouse gas footprint and associated strategies.

- Engineering and design for the product transportation alternatives which include delivery to the domestic market via rail and to the export market either via rail through the Sydney International Pier or via a newly constructed berth near the Donkin Mine site.

- Underground design inclusive of equipment scoping

- Detailed operating costs assessments

- Product specification and marketing factors

- Environmental assessment approval conditions for the project and

- Capital cost estimates to be improved via detailed engineering

Coal Quality

As reported in a news release dated May 9, 2007, Erdene received an independent qualifying technical report containing the resource estimate for the Donkin coal project from McElroy Bryan Geological Services Pty. Ltd. of Sydney, Australia. The report states that studies have shown that the Harbour seam coal has excellent thermal as well as metallurgical properties. The characteristics that make the Donkin coal an excellent thermal coal source include its high calorific (energy) value, high volatile content, low total moisture content, low quartz content, low fly ash resistivity and low dust emissions.

The coal also has many excellent metallurgical coal properties including low ash, low phosphorus, and high fluidity and crucible swell number. Detailed studies on coke strength and viability of Donkin coal as a metallurgical coal source are planned for bulk samples from the Harbour Seam that will be accessible at the base of the tunnels after de-watering is completed this summer. Further studies, related to improving the level of understanding of the nature and distribution of sulphur in Donkin coal are also proposed. Coal marketing studies to identify the various options for the utilization of Donkin coal are ongoing.

The resource at Donkin is classified as high volatile A bituminous (greater than 14,000 BTU/lb), high sulphur (greater than 2%), medium ash (10%-15%) coal based on the American Society for Testing and Materials (ASTM) coal classification system. The high sulphur content is a feature of the Sydney Basin coals. However, processing methods (washing and flotation) are available to improve coal quality, specifically to reduce sulphur and ash content. The U.S. coal fired electrical generating plants have been gradually shifting back to many of the higher sulphur but much higher energy coals as they are refitted with desulphurization scrubber units. A 2007 report by Hill and Associates revealed that U.S. coal-fired power plants that have announced plans for construction of scrubbing units will create an estimated 301 million tons of new annual coal capacity capable of receiving high sulphur coal by 2014.

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 a strategic alliance with Xstrata Coal to develop its coal properties in Mongolia. In addition, Erdene has near-term cash flow opportunities in its North American assets, which, in addition to the Donkin coal project, include 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 $11 million with 65,706,439 common shares issued and outstanding and a fully diluted share position of 75,330,852.

About Norwest Corporation

Norwest Corporation are independent energy, mining and environmental consultants who have been engaged to prepare an independent report to confirm the internally generated project evaluation.

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