Erdene Gold Inc.
TSX : ERD

Erdene Gold Inc.

May 25, 2006 16:37 ET

Erdene Merger Approved by Kaoclay Shareholders

HALIFAX, NOVA SCOTIA--(CCNMatthews - May 25, 2006) - Erdene Gold Inc. (TSX:ERD) announced that the proposed plan of arrangement with Kaoclay Resources Inc. ("Kaoclay") was approved by Kaoclay shareholders today, with 99.41% of the Kaoclay shareholders who voted in person or by proxy voting in favour of the arrangement. Kaoclay will now seek the required regulatory approvals and the approval of the Supreme Court of Nova Scotia. The transaction is expected to close on or about June 7, 2006.

"We are very pleased with the overwhelming support from Kaoclay shareholders in favour of the combination of our two companies. The merger provides a significant company transformation and strengthening through Kaoclay's cash flow opportunities in North America and Erdene's high potential mineral and energy properties in Mongolia," said Peter Akerley, President and CEO of Erdene Gold.



Erdene Post-Merger Highlights

This is another step in the transformation and strengthening of
Erdene through its:

- TSX listing in December, 2005;
- Alignment with strategic partners
- International Uranium Corporation in June, 2005 and
- Xstrata Coal, plc in February, 2006
- Access to cash flow potential
- Commodity and geographical diversification
- Precious metal, base metal and energy projects in Mongolia;
- 20% interest in the Donkin Coal project with Xstrata in Cape
Breton, N.S.;
- Premium kaolin clay project in Georgia, USA, and
- Granite aggregate project in Georgia, USA.


Peter Akerley added, "The new Erdene has been designed to provide our shareholders with a strong balance of stability and growth."

Please refer to the Erdene press release of February 21st, 2006 for further details of the Kaoclay merger.

About Erdene Gold Inc.

Erdene Gold Inc. is a diversified mineral exploration company focused on Mongolia with over 20 mineral exploration projects that include 68 licences and cover approximately 1.6 million hectares. Erdene's Mongolia projects are focused on high-growth commodities in base metals (molybdenum and copper), precious metals and energy (uranium and coal). The Company has strategic alliances with Xstrata Coal Canada Limited and International Uranium Corporation to develop its coal and uranium properties in Mongolia. Erdene has a current cash position of approximately $6.6 million with 31,868,210 common shares issued and outstanding (before the issuance to Kaoclay shareholders) and a fully diluted share position of 35,868,210 common shares. Following the close of the acquisition, Erdene is expected to have 46,685,127 common shares issued and outstanding and 55,175,102 on a fully diluted basis.

Forward-Looking Statements

Certain information regarding Erdene and Kaoclay 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 the Company 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. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond the Company's control, and that future events and results may vary substantially from what the Company 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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