Erdene Gold Inc.

Erdene Gold Inc.

May 15, 2008 15:15 ET

Erdene Reports First Quarter Operating and Financial Results

HALIFAX, NOVA SCOTIA--(Marketwire - May 15, 2008) - Erdene Gold Inc. (TSX:ERD), a diversified minerals company with assets in Canada, the U.S. and Mongolia, today provided an update on the Company's principal projects and plans for 2008 in conjunction with the release of its first quarter financial results.

First Quarter Operating Highlights:

- Reported multiple intervals of over 200 metres of molybdenum mineralization in many holes within the Racetrack zones at the Zuun Mod project in Mongolia;

- Significantly expanded the Racetrack North and Racetrack South zones at Zuun Mod;

- National Instrument 43-101 (NI 43-101) compliant resource estimate at Zuun Mod expected to be complete by the end of the second quarter 2008

- Pre-feasibility evaluation at the Donkin Coal project in Nova Scotia is nearing completion

Zuun Mod Molybdenum Project

During the first quarter 2008, Erdene received the final assay results from the 2007 resource delineation drilling program for the Zuun Mod molybdenum project. The molybdenum mineralization identified to date remains open in several areas, including west of the Racetrack South Zone and northeast of the Racetrack North Zone and at depth.

Erdene's independent technical consultants, Minarco MineConsult ("Minarco") are in the final stages of completing the NI 43-101 compliant resource estimate for the Zuun Mod project. The results of Minarco's study which includes geological modeling, geostatistical analysis, grade modeling and a mineral resource estimate for the Zuun Mod molybdenum deposit are expected to be released before the end of the second quarter 2008.

Also in the first quarter 2008, final results were received for the detailed surface exploration geochemical (rock and soil) and geophysical (gradient Induced Polarization and Dipole) program across the entire Zuun Mod porphyry complex. This program has identified broad zones of anomalous molybdenum and copper mineralization in addition to precious metal targets. These results support management's belief that the Zuun Mod porphyry complex, which covers an area of approximately 20 square kilometres, remains highly prospective for the identification of additional mineral resources. These targets are described in more detail in the Company's press release of February 7, 2008. The budget for the 2008 exploration program at Zuun Mod includes plans for drill testing of a number of geochemical and geophysical targets identified within the Zuun Mod porphyry complex.

Minarco has also been retained to undertake a preliminary assessment or scoping study into the potential economic viability of the Zuun Mod molybdenum deposit which is expected to be delivered during the third quarter 2008. This study is currently underway and will describe many pertinent issues related to the project. Some topics include: metallurgy, marketing, mining and processing options, workforce requirements, environmental issues, capital and operation costs, and will culminate in a preliminary economic analysis of the Zuun Mod project.

Donkin Coal Project

The Donkin Coal project, located in Cape Breton, Nova Scotia, Canada, is a joint venture project between Erdene and Xstrata Coal Canada ("Xstrata") who own 25% and 75% of the Donkin Coal Alliance ("DCA"), respectively. The DCA holds the rights to the Donkin coal resource block which includes the Habour coal seam which has been targeted for development.

The Harbour seam containing an indicated resource of 101 million tonnes and an inferred resource of 115 million tonnes and was accessed in late 2007 following the dewatering and refurbishment of twin 3.5 kilometre long tunnels. The resource is classified as high volatile-A bituminous (approximately 14,000 BTU/lb), high-sulphur, medium-ash coal. A positive preliminary assessment was completed in November 2007.

The DCA is in the final stages of completing work related to the pre-feasibility study on the Donkin coal project. This work includes analysis of a large channel sample from the coal seam, a 10,000 metre in-seam drilling program designed to determine the methane liberation rate, an important factor in ventilation systems design work, market evaluations for both thermal and metallurgical grade coal, as well as surface and underground infrastructure design studies. It is anticipated that the results of the pre-feasibility study will released shortly along with a decision about moving forward to a feasibility study on the project.

Additional Projects

Erdene and Xstrata continue to work together to identify, explore and develop coal resources in Mongolia. The parties have entered into a Strategic Alliance agreement whereby Xstrata can earn 75% interest in any coal projects by fully funding exploration costs through to completion of a project feasibility study. Through the Company's extensive Mongolian coal database, Erdene has been able to identify highly prospective areas where the Company is in the process of prioritizing property acquisition targets. Erdene also holds the mineral rights to a number of base and precious metal exploration projects in Mongolia. All of these projects are under review to determine the best options for moving the projects forward.

Erdene's management continues to investigate opportunities to advance the Company's kaolin and construction aggregate business with the goal of maximizing shareholder value for these projects. Kaolin production continues through a lease-royalty arrangement on the Company's kaolin properties with KaMin LLC (the company formed by IMin Partners after the recent purchase of the kaolin business of Huber Engineered Materials) and Deepstep Kaolin Company LLC who have partnered with Erdene to develop a ceramic clay product line. The Company's Granite Hill project continues to move forward as the project operators, Ready Mix USA, progress towards final mine permitting which will be followed by a production decision. Erdene continues to investigate additional construction aggregate opportunities in the Southeast U.S.

First Quarter Financial Results

Erdene's first quarter financial statements and management's discussion and analysis were filed today 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 first quarter 2008.

- Erdene had cash and cash equivalents of $6.9 million at quarter-end compared to $8.7 million at December 31, 2007. In addition, the Company had cash restricted for flow-through expenditures of $1.6 million at quarter-end compared to $2.7 million at December 31, 2007.

- Exploration and operating expenses during the three months ended March 31, 2008 were $664,395 compared with $442,672 for the same period in 2007.

- The loss for the three months ended March 31, 2008 was $1,553,612 or $0.02 per share compared with a loss of $253,047 or $0.01 per share during the same period in 2007.

Annual Meeting

The Annual and Special Meeting of the shareholders of Erdene will be held on May 28, 2007 in Halifax. The meeting will be in the Acadia B & C rooms of the Halifax Marriott Harbourfront Hotel at 5:30 p.m. Atlantic time. Peter Akerley, President and CEO will provide shareholders with an update on the Company's activities and all shareholders are encouraged to attend.

About Erdene Gold Inc.

Erdene is a diversified resource development company with multiple projects at various stages of development from exploration to production all focused on high-growth commodities. The Corporation has a strong portfolio of exploration properties in Mongolia where it has a strategic alliance with Xstrata Coal to develop its coal properties and a strong focus on base metals (copper and molybdenum), precious metals (gold) and energy (coal). Minarco-MineConsult, of Sydney, Australia, is currently carrying out a NI 43-101 compliant independent resource estimate for the Zuun Mod molybdenum project. In addition, Erdene has near-term cash flow opportunities in its North American assets, which include a 25% interest in the Donkin Coal Alliance with Xstrata Coal, agreements with KaMin LLC (formerly J.M. Huber Corporation) and Ready Mix USA as operators and developers in the southeast U.S. for its kaolin clay and construction aggregate projects, respectively. Erdene has a cash position of approximately $7.4 million with 70,644,877 common shares issued and outstanding and a fully diluted share position of 80,447,352 common shares.

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