Erdene Gold Inc.

Erdene Gold Inc.

August 15, 2007 09:11 ET

Erdene Provides 2007 Project Update

Releases Second Quarter Financial Statements

HALIFAX, NOVA SCOTIA--(Marketwire - Aug. 15, 2007) - Erdene Gold Inc. (TSX:ERD) today provided an update on its 2007 projects and an overview of second quarter financial statements. The Donkin Coal Project evaluation and the Zuun Mod molybdenum delineation drill program are the two most significant projects underway. In addition to these two projects the $12.5 million 2007 budget also includes drill testing of four copper (with gold, molybdenum and/or platinum) porphyry targets in Mongolia and the evaluation of aggregate projects in North America. Through five partnerships in North America and Mongolia, Erdene also receives the benefits of its partners' expenditures, the most significant being the Mongolian coal programs fully funded by Xstrata Coal.

"Mid-way through our 2007 exploration program, we are very pleased with the progress made to date, having successfully completed three drill programs and the necessary preparation work for four additional drill programs," said Peter Akerley, President and CEO of Erdene. "While the Zuun Mod molybdenum and Donkin coal projects remain at the forefront of our exploration work, we are very excited about the potential for several of our copper-gold projects and the coal projects in Mongolia."

Mongolian Projects Update

Erdene's Mongolian portfolio includes the Zuun Mod molybdenum project, several copper-gold exploration projects, including the Erdenet and Biger porphyry targets and the recently acquired Mogoit and Tsagaan Ovoo projects. In addition, Erdene has a strategic alliance with Xstrata Coal Canada Limited ("Xstrata Coal") who is fully funding Erdene's coal exploration activities in Mongolia through completion of a feasibility study for the right to earn a 75% interest.

Zuun Mod Porphyry Molybdenum Project

As announced in a press release dated August 9, 2007 the Phase I drill program started at Zuun Mod in early May and the initial round of Phase I drilling was completed in early June and consisted of 17 drill holes. Based on the results of this round of drilling the Phase I program was expanded with an additional 11 holes drilled in July and early August to extend the 200 metre spaced drilling to the northeast and southwest.

The Phase I drilling program has significantly extended the area of known mineralization in the area of the Racetrack Zone. The results from the Phase I program have outlined a central mineralized zone characterized by greater than 0.06% Mo over thicknesses ranging from 58 to 194 metres with many holes open at depth. This zone ranges up to 300 metres in width over a minimum strike length of 1.4 kilometres with results pending over a total distance of 2.5 kilometres. The mineralization remains open to the north, at depth and to the west where it is overlain by volcanic cover.

The drill program has now advanced to Phase II to test the 2.5-kilometre strike length identified in the Phase I program at 100 metre spacing. The objective of the Phase II drill program is to identify a National Instrument 43-101 compliant molybdenum resource for the Zuun Mod project. Two drill rigs are currently operating on site.

Mogoit and Tsagaan Ovoo Copper Gold Projects

In June and July 2007, Erdene carried out a detailed surface exploration program consisting of geological mapping, trenching, and rock, soil and stream sediment geochemical surveys. At Mogoit, in addition to geological mapping and rock sampling, six trenches were excavated for a total of 359 metres. This work has defined two zones of strong alteration with copper oxide mineralization ranging from 10 to 40 metres wide with both zones open along strike for up to 1000 metres.

At Tsagaan Ovoo five trenches, excavated over a total of 290 metres in the vicinity of the historic trenches, identified a northwest trending, 20 to 30 metres wide, mineralized alteration-zone open to the northwest and southeast. The alteration zone appears to be controlled by a northwest trending structural zone associated with a magnetic feature that averages 150 metres in width over more than 5 kilometres across the prospect area. Final results of the various geochemical surveys are pending. It is anticipated that drill targets will be generated from these surveys and that a drill program will commence near the end of August.

Biger Copper-Gold-PGE Project

A seven-hole, 1737 metre drill program, testing geochemical and geophysical targets was completed July 5, 2007. A total of 753 samples were selected and sent to SGS in Ulaanbaatar for preparation with the samples sent to SGS China to enable the analysis of platinum group elements. Receipt of all analytical data is anticipated in September, 2007.

Erdenet Ikh-Tal Porphyry Copper Project

Additional geological mapping and sampling in the Tsagaan Chuluut area, 4 kilometres northwest of Erdenet Mining Corporation's ("EMC") open pit, has outlined an area of silicification and alunite alteration coincident with a large magnetic low, high chargeability and low resistivity. An 11 kilometre dipole-dipole survey was recently completed on four 200 metre spaced lines on the Tsagaan Chuluut property. Preliminary interpretation indicated a broad (1300 metres wide) moderate chargeability anomaly and a coincident resistivity low at a depth of 250 metres on the two lines adjacent to the western boundary of the property. These anomalies are coincident with a large magnetic low anomaly which is a characteristic of the Erdenet Mine deposit. The dipole-dipole survey is in the process of being expanded. This will be followed by a drilling program to test the anomalies at Tsagaan Chuluut and to follow up mineralization intersected at Baglai and the northwest extension area, east and northwest of EMC's mine, respectively.

Energy Project - Coal

Erdene is involved in a comprehensive coal generative program in cooperation with Xstrata Coal Canada Limited evaluating numerous prospective metallurgical and high quality thermal coal deposits. On July 11, 2007 Erdene commenced the resource delineation program at its Galshar coal project. To date, a total of six diamond and 14 poly-crystaline diamond (PCD) holes, totalling 2,172 metres have been completed over the Galshar deposit area, with two additional PCD holes remaining. The diamond holes were cored and samples selected for analysis. The PCD holes were tested with downhole geophysics designed for identification of the coal seam. Final results of the coal sample analysis and interpretation of the geophysical logs are pending.

North American Projects Update

Erdene's North American project portfolio includes a 25% interest in the Donkin coal project as well as two notable industrial mineral projects. The industrial mineral opportunities include the Sparta Kaolin project in Georgia, U.S., which is operated by J.M. Huber Corporation ("Huber"), and the Granite Hill (Maddox) Aggregate project, a royalty project in the southeast U.S. managed by Rinker Materials Corporation ("Rinker").

Donkin Coal Project

Erdene is a 25% joint venture partner in the Donkin Coal Alliance with Xstrata Coal Donkin Limited. As reported on May 9, 2007, Erdene received an independent technical report on the Donkin Coal resource from McElroy Bryan Geological Services Pty Ltd. The report included a compilation of all historical information on the Donkin Coal project and an updated model of the deposit. The report identified an indicated resource of 227Mt (million metric tons) and an inferred resource of 254Mt of "High Volatile A Bituminous Coal" within the confines of the Donkin coal resource block.

The dewatering, tunnel clearing and refurbishing program at Donkin is ongoing. The tunnel access 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.

Sparta Kaolin Project

One of the assets acquired through the Kaoclay merger is a large primary kaolin resource in Georgia, U.S.A. Erdene continues to work with Huber Engineered Materials and other third parties to identify products and markets to increase utilization of the raw material and therefore increase revenues and volumes mined and produced.

Granite Hill (Maddox) Project

The Granite Hill project is being operated by Rinker Materials through a lease royalty agreement with Erdene. The project is being developed as a granite quarry, primarily to serve the southeastern U.S. markets by rail. Rinker Materials is one of the largest suppliers of construction aggregates in the southeast U.S. Granite Hill has an estimated start-up production of one million tonnes of granite aggregate per year with a design capacity of four million tonnes. Based on current production projections, the Granite Hill quarry would have a lifespan of at least 20 years. Mine permitting work is ongoing and has entered the final Federal and State approval stages with no impediments to approval anticipated. Issuance of the mining permit is expected during 2007. Upon a decision by Rinker the construction phase is expected to be completed nine to twelve months thereafter. Rinker is responsible for fully funding the project.

Second Quarter Financial Results

Erdene's quarterly financial statements have been filed with the appropriate regulatory authorities and are available on the company's website at or on SEDAR at The following are some of the financial highlights for the second quarter 2007.

- Erdene had cash and cash equivalents of $11.65 million at June 30, 2007 compared to $3.05 million at December 31, 2006. In addition, the Company had cash restricted for flow-through expenditures of $1.95 million at June 30, 2007 compared to $4.60 million at December 31, 2006.

- Exploration and operating expenses during the three months ended June 30, 2007 were $2,201,919 compared with $865,884 for the same period in 2006.

- The loss for the three months ended June 30, 2007 was $3,081,480, or $0.05 per share, compared to $1,185,664, or $0.04 per share, for the same period in 2006.

- On April 12, 2007 National Bank Financial together with syndicate partner Wellington West Capital purchased, on a private placement bought deal basis, 10,000,000 common shares of the Company at $1.00 per share resulting in gross proceeds to Erdene of $10,000,000.

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. 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 $11 million with 65,706,439 common shares issued and outstanding and a fully diluted share position of 75,330,852.

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