Erdene Gold Inc.

Erdene Gold Inc.

August 15, 2006 13:59 ET

Erdene Provides Second Quarter Project Updates

Successful Financing Provides Strong Cash Position; Significant Developments in Mongolia and North America Projects

HALIFAX, NOVA SCOTIA--(CCNMatthews - Aug. 15, 2006) - Erdene Gold Inc. (TSX:ERD) today provided updates on the development of its Mongolia and North America projects as well as financial results for the second quarter, ended June 30, 2006. The following are highlights; for full details please refer to the company's website, and for Second Quarter Financial Statements and Management Discussion and Analysis.


Mineral Projects:

- Uranium:

- Galshar Uul: International Uranium Corporation's (IUC) first of
three uranium drill projects has returned highly anomalous values
in three holes ranging from 0.013% to 0.016% uranium over 1.4 to
5 metres at shallow depths.
- Yant and Tsagaan Del: Approximately 600 to 1000 kilometres of
autogamma survey and 9500 metres of drilling is planned for
August and September of this year on these other priority Erdene
joint venture projects.
- IUC is spending $6 million over four years to earn a 65% interest
in Erdene's uranium properties in Mongolia.

- Coal:

- Galshar: Analytical results from drill core have returned a 21
metre section of 11,400 btu, with low ash and sulphur. These
results exceed those of samples collected from an adjacent
operating coal mine.Based on these results drilling will resume
on the Galshar coal project, located 65 kilometres from rail, 250
kilometres north of China in September 2006.
- Xstrata Coal is fully funding all coal exploration in Mongolia to
earn a 75% interest in any coal project brought to a development
- Donkin, Cape Breton: The Xstrata managed exploration project has
been implemented with a bulk sample collected and submitted for
analysis and preparation of the site underway for dewatering and
tunnel access expected to begin in September.

- Copper:

- Erdenet: An eight hole diamond drill program is underway on
targets adjacent to the Erdenet copper mine. Four holes have been
completed to date with all assay results pending. The remaining
holes will be drilled in the Baglai area east of the mine site
and in the north-west boundary area, north of the existing open
- Biger: Recently completed geophysical modelling and field
evaluations have provided further definition of drill targets at
the Biger coppergold-PGE (platinum group element) prospect. IP
surveys will be used to delineate sulfide bearing targets within
the circular magnetic anomalies prior to a decision on additional
drilling at Biger.

- Gold:

- Tsenkher Gol: Extensive soil geochemistry and ground geophysics
(magnetic and IP) surveys were completed over the Tsenkher Gol
property during the quarter. The gold in soil concentrations in
the Altan Suult zone are highly anomalous, containing up to 2g/t
gold, and detailed sampling indicates that gold mineralization is
controlled along NW trending structures. Furthermore, anomalous
gold in soil concentrations indicate that the Khond Uul
mineralized zone can now be traced geochemically for over seven
kilometres. An eight hole diamond drill program, totalling 1363
metres was recently completed. Results for 709 drill core samples
are anticipated prior to the end of August, 2006.

- Kaolin:

- Lucky Mine: During the quarter Huber mined 57,510 tons from two
open pits on Erdene's holdings in Hancock County, Georgia,
bringing the total annual tons mined in 2006 to 101,974 tons.
Huber also paid US$300,000 to the company to purchase future
tonnage. Predevelopment work is underway on a second deposit area
and new product testing by potential customers is being

- Aggregate:

- Maddox: Rinker Materials Corporation has submitted permitting
applications and expects the project to be approved by the state
regulatory agencies. The development decision is anticipated in
late 2006. Rinker Materials has planned for the construction of a
rail spur under Georgia State Highway 16, construction of the
crushing plant, all equipment and all site preparation. Rinker
Materials has advised Erdene that it expects the pre-production
development period to be nine to twelve months from the date the
quarry permit is issued. The project has an estimated lifespan of
at least 20 years.

Financial Highlights:

- Erdene had cash and cash equivalents of $6.47 million at quarter-
end compared to $6.37 million at the end of the same quarter last
- Subsequent to quarter-end, the company completed a flow-through
share financing to meet its financial commitment to the Donkin Coal
Alliance. Six million shares were issued at $1 per share resulting
in current cash and cash equivalents of approximately $11.2

Corporate Developments:

- The company completed the acquisition of Kaoclay Resources Inc.
during the quarter, which included the three North American assets,
Donkin coal, kaolin and aggregate, as well as real estate and a
commercial laboratory in Georgia, inthe U.S.
- A new corporate structure was created with new Vice President
positions for North America and Asia, along with additional board

Future Activity-Acquisitions:

- Erdene is currently evaluating opportunities and reviewing
submissions for mineral properties in Mongolia, Eastern Canada, the
U.S., Southeast Asia and South America. The company will disclose
additional information on these projects if developments become

Investor Relations:

- Erdene will be presenting and exhibiting at each of the upcoming
- Discover Mongolia, Ulaanbaatar, September 12-14, 2006
- Global Resources Conference: London, October 17, 2006
- Global Resources Conference: Zurich, October 19, 2006.
- Hard Assets Conference: San Francisco, November 27 -29, 2006

Qualified Person

This press release has been prepared under the supervision of J. C. (Chris) Cowan, P.Eng., who serves as the qualified person under National Instrument 43-101. All samples are assayed at SGS Laboratory in Ulaanbaatar, Mongolia or Perth Australia with the exception of coal samples which were sent to the Central Geological Laboratory in Ulaanbaatar. In addition to internal checks by SGS Laboratory and the Central Geological Laboratory, the Company incorporates a QA/QC sample protocol utilizing prepared standards, sample splits and duplicates.

About Erdene Gold Inc.

Erdene Gold Inc. is a diversified mineral company with exploration properties focused on high-growth commodities and near-production assets. Erdene has near-term cash flow opportunities in its North American assets acquired from Kaoclay Resources Inc., which includes a 20 per cent 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. In addition, Erdene has a strong portfolio of exploration properties in Mongolia focused on base metals (molybdenum and copper), precious metals (gold and palladium) and energy (uranium and coal). Drill programs are pending results or currently underway on its Erdenet copper, Tsenkher Gol gold and Central Basin uranium projects. Erdene also 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 $11.2 million with 52,705,127 common shares issued and outstanding and a fully diluted share position of 61,490,852.

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
    (902) 423-6419
    Erdene Gold Inc.
    Ken W. MacDonald
    Vice-President and CFO
    (902) 423-6419