Erdene Gold Inc.
TSX : ERD

Erdene Gold Inc.

October 31, 2006 12:00 ET

Erdene Increases Ownership in Donkin Coal Alliance to 25%

HALIFAX, NOVA SCOTIA--(CCNMatthews - Oct. 31, 2006) - Erdene Gold Inc. (TSX:ERD) today announced that it has entered into agreements with minority partners to increase Erdene's ownership in the Donkin Coal Alliance to 25 per cent from 20 per cent in exchange for cash consideration of US$9400 and 360,000 common shares of Erdene. Closing of the transaction is subject to receipt of all necessary regulatory approvals, including approval of the Toronto Stock Exchange. Xstrata Coal Donkin Limited ("Xstrata Coal") has also increased its interest in the Donkin Coal Alliance to 75 per cent from 66 per cent in exchange for cash.

"These agreements have enabled Erdene to significantly increase its interest in the Donkin Coal Project and become the exclusive joint venturer with Xstrata Coal," said Peter Akerley, Erdene President and CEO. "We are very optimistic about the potential of the Donkin Coal Project and, together with Xstrata Coal, we look forward to the ongoing evaluation of this exciting project."

The Donkin Coal Alliance was formed to secure the exclusive right to the Donkin Coal Project; namely to explore, assess, study and, if feasible, develop the Donkin Coal Resource Block into an operating coal mine. The Donkin Coal Alliance began as an exploration program and evaluation and scoping study in June, 2006. This program is necessary in order to obtain enough information to make a decision as to whether or not to develop a mine.

With an estimated 200 million tonnes of thermal and metallurgical coal, the Donkin Coal Resource Block is considered the last remaining undeveloped block of high quality coal offshore Cape Breton. The continued growth of the Atlantic seaborne coal market bodes well for future marketing of Donkin coal. The exploration program is being managed by Xstrata Coal Donkin Management Limited (a related party to Xstrata Coal Pty Limited) and is expected to be completed in approximately 18 months, at which time a decision will be made whether to develop the Donkin resource for commercial production.

About Erdene

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 (uranium and coal). Exploration programs are currently underway with drilling on its Erdenet copper and Tsenkher Gol Gold projects and geophysical and geochemical surveys at its Biger, copper-gold-platinum project. Drill programs were just recently completed on the central-basin coal and uranium projects. Erdene has strategic alliances with Xstrata Coal Canada Limited and International Uranium Corporation to develop its coal and uranium properties in Mongolia. In addition, Erdene has near-term cash flow opportunities in its recently acquired North American assets, which includes its 25 percent interest in the Donkin Coal Alliance in Nova Scotia, Canada and royalty agreements with JM Huber Corporation and Rinker Materials as operators and developers in the south-eastern United States for its kaolin clay and aggregate projects respectively. Erdene has a current cash position of approximately $9.7 million with 53,041,127 common shares issued and outstanding and a fully diluted share position of 62,780,852.

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
    or
    Erdene Gold Inc.
    Ken W. MacDonald
    Vice-President and CFO
    902-423-6419
    info@erdene.com
    www.erdene.com