Erdene Gold Inc.

Erdene Gold Inc.

March 05, 2007 10:00 ET

Erdene Provides Update on Coal Projects as They Approach Development Milestones

HALIFAX, NOVA SCOTIA--(CCNMatthews - March 5, 2007) - Erdene Gold Inc. (TSX:ERD) today provided an update on its coal projects in Mongolia and eastern Canada.

The company recently completed a 2006 Technical Report on the Galshar coal project in Mongolia and results to date indicate the potential for a large thermal coal resource within 65 kilometres of rail lines with ready access to China, 200 kilometres to the south. The Galshar property is 100% owned by Erdene and Xstrata Coal Canada Limited ("Xstrata Coal") can earn a 75% interest by fully funding the project through completion of a feasibility study.

In eastern Canada, underground tunnel refurbishment at the Donkin coal project in Cape Breton, Nova Scotia has progressed to the 1,800 metre mark while a pre-feasibility report is expected by the end of March 2007. Erdene holds a 25% interest in the Donkin project with partner Xstrata Coal Donkin Limited ("Xstrata Coal Donkin").

"Both the Galshar and Donkin coal projects are reaching significant project milestones," said Peter Akerley, President and CEO. "At Galshar, Erdene and Xstrata Coal are ready to commit to a significant resource delineation drilling program designed to establish a NI 43-101 compliant resource estimate. At Donkin, tunnel preparation is well underway to establish access to this very large resource."

Galshar Coal Project, Mongolia

Based on the 2006 drilling results, Erdene and Xstrata Coal are planning to move the project to the resource delineation stage. A 30-hole drilling program is planned for the second quarter of 2007 to further define the coal seams intersected to date and confirm the coal quality. It is anticipated that this program will culminate in the establishment of a NI 43-101 compliant resource estimate for the Galshar coal project. Erdene believes that Galshar has the potential to be the site of a large-scale open-pit operation of thermal grade coal with a low stripping ratio.

Eleven holes, with an average spacing of greater than 1 kilometre and totalling 1,093 metres have been completed in the Galshar basin by Erdene. Drilling has identified one main coal seam with an average thickness of 21 metres (maximum thickness of 46.6 metres) overlain by an additional five to 10 seams, each 1 to 2 metres thick. Drilling by Erdene in 2006 confirmed the coal seams extend at least 3.6 kilometres to the northeast of Erdene's 2005 drill hole CDD-01 that returned a 21.8 metre section of greater than 10,000 BTU/lb coal with low ash (6%) and low sulfur (0.4%). Hole GHR-03, located 2.2 kilometres northeast of hole CDD-01 intersected a 17.4 metre section of the main coal seam that averaged greater than 8,000 BTU/lb. Drilling results from 2006 and historic exploration reports suggest additional seams may also occur east and south of the area currently being explored. Erdene holds a 100% ownership of three exploration licences totalling 97,000 hectares which cover a large portion of the 4.7 x 1.8 kilometre coal bearing basin at Galshar.

Erdene continues to evaluate other coal opportunities on its licenses as well as on other properties located in central, southern and southeastern Mongolia. Xstrata Coal has an option to earn a 75% interest in any Erdene owned or acquired coal project located in Mongolia by fully funding the project through completion of a feasibility study.

Donkin Coal Project, Cape Breton

Work on the Donkin coal project is progressing on schedule with an internal pre-feasibility study currently being reviewed by management and the report is expected by the end of March 2007. McElroy Bryan Geological Services have been contracted to complete a resource estimate and quality assessment of the project, marketing studies are underway and consulting engineers CBCL Limited are overseeing site engineering and permitting. A preliminary surface site layout has been prepared with a number of coal transport options being assessed.

There are currently 14 full-time equivalent employees and local contractors on site involved in the tunnel dewatering process which is at the 1,800 metre mark or approximately half of the 3.5 kilometre length of two parallel tunnels. Since the pumping started on November 13, 2006, 150 million litres has been safely discharged into the adjoining settling ponds. Additional pumping capacity has been added to accelerate the dewatering process. Clearing and refurbishment of the tunnels is well underway with debris from the main access tunnel being removed as dewatering progresses. The second access tunnel is relatively free of debris. Access to the targeted Harbour Seam coal face is anticipated during the second quarter of 2007 which will be followed by an extensive in-seam exploratory drilling and bulk sampling program. To date, the activities are on schedule and on budget for the project and conditions in the tunnels are good, as expected.

The Donkin Coal Alliance was formed to secure the exclusive right to the Donkin coal project and to explore, assess, study and, if feasible, develop the Donkin Coal Resource Block into an operating coal mine. The Donkin Coal Alliance began its exploration program and evaluation and scoping study in June, 2006 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 evaluation program is being managed by Xstrata Coal Donkin Management Limited and is expected to be completed in approximately 14 months, at which time a decision will be made whether and how to develop the Donkin resource for commercial production.

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 coal samples were analyzed by the Central Geological Laboratory in Ulaanbaatar. In addition to internal checks by 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 (coal and uranium). Erdene has strategic alliances with Xstrata Coal to develop its coal a properties in Mongolia. Xstrata Coal is Erdene's largest shareholder with a 6% ownership of the company's common shares and has representation on its board of directors. 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 cash position as of March 1st, 2007 of approximately $6.7 million with 53,951,127 common shares issued and outstanding and a fully diluted share position of 62,870,852.

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