Erdene Gold Inc.

Erdene Gold Inc.

November 15, 2006 11:07 ET

Erdene Provides Third Quarter Project Updates

Drilling Confirms Porphyry Copper Mineralization at Erdenet Donkin Coal Interest Increased; Dewatering and Refurbishments of Tunnels Underway

HALIFAX, NOVA SCOTIA--(CCNMatthews - Nov. 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 third quarter ended September 30, 2006. The following are highlights; for full details please refer to the company's website, and for Third Quarter Financial Statements and Management Discussion and Analysis.

Mineral Project Highlights:


- Erdenet:

- During the quarter Erdene carried out an exploration-drilling program to test a number of targets identified by geophysical surveys (IP and magnetics) in association with geological and alteration mapping on the Erdene property adjacent to the Erdenet Mining Corporation ("EMC") open pit. Nine wide-spaced diamond drill holes were completed for a total of 1,773.8 metres.

- At the present time analytical testing is incomplete with results available from selected holes. Drill hole, ITDD 4 in the South-Central Baglai area, located 200 metres from the EMC property boundary intersected a mineralized zone starting at 36 metres that returned 0.2% copper over 32 metres, including an eight metre section of 0.3% copper and up to 0.65% over two metres. Occasionally samples exceeding 0.2% over two metres were returned deeper in the hole. ITDD-08, collared 200 metres southeast of ITDD-04 intersected 32 metres of 0.27% including 0.33% over 12 metres, starting at 34 metres from surface. In addition sulfide zones were intersected deeper in the hole including eight metres of 0.3% at 125 metres and 25 metres of 0.23% at 215 metres to the bottom of the hole. A broad high chargeability anomaly has been traced for 400 metres southeast of ITDD-08 along with surface porphyry style alteration. These preliminary drilling results now confirm the extension of porphyry copper mineralization onto the adjoining Erdene properties and demonstrate potential for economic concentrations of near-surface copper oxide zones and deeper copper sulfide ore-bodies.

- Additional geological mapping and sampling in the Tsagaan Chuluut area in the north central part of the Ikh Tal 1 license, four kilometres northwest of the Erdenet open pit has outlined an area of silicification and alunite alteration coincident with a large magnetic low, high chargeability and low resistivity. It is anticipated that this new target area will be drill tested in 2007 along with follow-up of the positive results from the South Baglai area.

- Biger:

- Initial property examination and rock sampling identified copper values up to 2.8%, accompanied by elevated palladium (1.37 g/t), gold (0.5 g/t), and platinum (0.29 g/t). The strongest mineralized zones are coincident with composite ground magnetic high and low circular and annular anomalies, up to 1500 metres in diameter. Three scout drill holes drilled in 2005 to test coincident geochemical and geophysical anomalies, intersected several copper mineralized intercepts hosted within potassic altered diorite and gabbros-diorite in the eastern part of the property and in an outlier of altered granosyenite and diorite in the centre of the large Biger pediment called Altan Khad. The drill hole testing Altan Khad intersected a 24 metre section that assayed 0.5% copper with elevated gold (0.1g/t) and palladium (0.1g/t) values.

- In October 2006, an extensive gradient IP survey followed by a targeted dipole-dipole IP survey was completed over the main Biger copper-gold-PGE (platinum group element) prospect. This area includes the central Altan Khad mineralized outlier in the buried pediment area and an adjacent mineralized gabbro/diorite located seven kilometres to the east. In addition, a mobile metal ion (MMI) geochemical orientation survey was also completed over the central Altan Khad mineralized outlier and the mineralization intersected in the 2005 drill hole in an attempt to identify buried mineralized bodies. Results and interpretation leading to drill target definition is anticipated in the fourth quarter 2006.

- Bayan Kharaat:

- In June 2006, a systematic soil survey was carried out on a 200 metre grid over portions of the property. A total of 473 soil samples on 50 metre centres and 24 scattered rock samples were collected and analyzed for copper and gold. Two target areas of co-incident silicification, sericite/pyrite alteration and elevated copper and gold in soil, with associated resistivity and chargeability highs have been outlined on the NE-SW trending structure in granite porphyry in the southwest central area and in felsic volcanics in the west central area. Grab samples in the southwest central area have returned values up to 0.2% copper. Additional exploration including drilling is planned for 2007.


- Tsenkher Gol:

- As a follow-up to the results of the Phase I drilling program reported in the press release of September 7, 2006 "Erdene Drilling Confirms Extensive Gold-Mineralized System at Tsenkher Gol", Erdene completed a technical review of all exploration to date. In mid-October Erdene started a follow-up, six hole, 1,200 metre drilling program to test the most promising zones identified to date in the Altan Suult zone. This drilling program is ongoing, and results will be reported once the program has been completed and assay results received.


- The 2006 uranium exploration program is being managed by International Uranium Corporation ("IUC") who initiated an extensive drill program in June to evaluate the uranium potential on a number of Erdene controlled licenses including Galshar, Yant and Tsagaan Del. A 164 hole rotary reconnaissance drilling program totalling 13,720 metre has now been completed on the properties with a number of target areas now identified for follow-up evaluation. All holes were logged using radiometric geophysical equipment (natural gamma and resistivity) using an in-hole probe.

- Galshar: Significant results were returned from the southern and central parts of the Ikh-Khet depression in the western Galshar area where uranium mineralization is hosted in grey sandy clayey sediments and sandy clayey carbonaceous sediments with associated surface and subsurface oxidation. One hole in the southern area intersected 0.01 to 0.02% uranium over seven metres at a depth of 7-14 metres. Another hole in the central part of the basin intersected 0.01 to 0.02% uranium over 5 metres at a depth of 20 metres. Drilling on one profile in the Delger Khiid depression returned grey coloured clayey samples which may have further potential for uranium mineralization.

o At Yant, a surface radiometric survey covering 1008 line kilometres was completed by IUC in the third quarter with several low level uranium anomalies outlined which were followed up by rotary drilling. In the southern part of the Sainshand basin, drilling tested a small (200 metre x 300 metre) surface radiometric anomaly which returned low level gamma intensities (500 - 1500) in the drilled profile. Final reports from IUC for the Yant and Tsagaan Del properties are pending.

- As a result of the 2006 program, further work is warranted on three licenses in the Ikh Khet and Delger Khiid depressions in the Galshar area. IUC is spending $6 million over four years to earn a 65% interest in Erdene's uranium properties in Mongolia.

Coal Mongolia:

- Galshar:

- The Galshar coal project is located 65 kilometres from rail, 250 kilometres north of China. Erdene has recently completed a widely spaced, nine hole, 895 metre diamond drilling program designed to determine the aerial extent of the coal bearing lithologies on its Galshar Coal property. Analytical results from drill core are still pending however the drilling has shown that coal seams extend at least 3.6 kilometres to the northeast of Erdene's 2005 drill hole, CDD-1, that returned a 21 metre section of 11,400 btu/lb coal with low ash and sulphur.

- Compilation of geological information and field evaluations of coal opportunities in Mongolia continued during the quarter with the objective of identifying deposits with the greatest potential as targets for possible joint venture or acquisition. This program in being fully funded by Xstrata Coal to enable them to earn a 75% interest in any coal project that is developed.

Coal North America:

- Donkin, Cape Breton:

- Erdene announced on October 30, 2006 that it has entered into an agreement to increase its interest in the Donkin project to 25% from 20% to become the exclusive joint venture partner with Xstrata Coal who also increased their interest to 75%.

- During the quarter considerable work has been carried out on the site in preparation for the dewatering and tunnel access program. The two 3.5 kilometre access tunnel entrances have been reopened, refurbished and secured. Excavation work has been carried out on the property to provide settling ponds for the water pumped from the tunnels. A "code of conduct" was submitted to provincial and federal regulatory departments for approval before the dewatering process could commence. Final approval has been received and the dewatering process was started on November 1, 2006. Access to the targeted Harbour Seam coal face is anticipated by early 2007 with an extensive in-seam drilling campaign and bulk sampling program to follow.


- During the third quarter, Huber mined 62,083 tons from two open pits on the Company's Lucky Area holdings in Hancock County, Georgia bringing the total year to date tons kaolin mined in 2006 to 164,057 tons. In addition, Huber has cleared approximately 100 additional acres at Lucky Strike and is carrying out in-fill drilling at 100 ft. centres, prior to the start of mining in this area. The permitting preparation process for several properties located in McDuffie County was ongoing during the quarter. Economic and environmental impact studies are being carried out in support of the requirement for special use permit applications to counter concerns expressed by residents within close proximity of the proposed pit development area.

- The company continues to work with Huber 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.


- Maddox: Rinker Materials Corporation ("Rinker") has submitted permitting applications to Hancock County and expects the project to be approved by the County regulatory agencies in late November. A development decision by Rinker is anticipated in late 2006. Rinker 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 with a design capacity of four million tonnes per annum and anticipated first year production of one million tonnes per annum. Rinker has advised Erdene that it expects the pre-production development period to be nine to 12 months from the date development commences. The project has an estimated lifespan of at least 20 years.

Financial Highlights:

- Erdene had cash and cash equivalents of $10,138,666 million at quarter-end compared to $4,269,991 million at December 31, 2005.

- Exploration and operating expenses during the nine months ended September 30, 2006 were $1,706,542 compared with $2,963,262 for the same period in 2005.

- Total expenses for the nine months ended September 30, 2006 decreased to $3,781,486 from $4,019,752 for the same period in 2005. Included in total expenses are non-cash stock based compensation charges in 2006 of $893,913 compared with $297,601 for the same period in 2005.

- The loss for the three months ended September 30, 2006 was $1,503,853 or $0.04 per share compared with a loss of $1,573,211 or $0.06 per share during the same period in 2005. The loss for the nine months ended September 30, 2006 was $3,366,483 or $0.09 per share compared with a loss of $3,772,141 or $0.14 per share for the nine months ended September 30, 2005.

- Erdene holds 533,334 free trading and 66,666 escrowed shares of Acadian Gold Corp. which has recently entered into several transactions relating to zinc developments in eastern Canada. Erdene views this as a strategic investment in gold and zinc assets in eastern Canada.

- Erdene purchased 202 hectares of land in McDuffie County during the quarter at a price of US$436,000 and had an appraisal completed valuing the property at US$808,000. This brings Erdene's total real estate holdings in Georgia to 764 acres, all associated with kaolin and aggregate mineral rights as well as the Sparta Kaolin industrial lab facility.

- During the third quarter the company completed a $6 million flow-through share financing to meet its financial commitment to the Donkin Coal Alliance. Six million shares were issued at $1 per share.

Investor Relations:

- Erdene will be presenting and exhibiting at each of the upcoming conferences:

- Hard Assets Conference: San Francisco, November 27 -29, 2006

- Prospectors and Developers Association of Canada Convention: Toronto, March 4 - 7, 2007

- Asia Mining Congress: Singapore, March 27-30, 2007

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 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% 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 southeast U.S. for its kaolin clay and aggregate projects respectively. Erdene has a current cash position of approximately $9.1 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. Aker
    President and CEO
    Erdene Gold Inc.
    Ken W. MacDonald
    Vice-President and CFO
    (902) 423-6419