Erdene Resource Development Corporation

Erdene Resource Development Corporation

November 17, 2008 17:17 ET

Erdene Reports Third Quarter Financial Results and Provides Project Updates

HALIFAX, NOVA SCOTIA--(Marketwire - Nov. 17, 2008) - Erdene Resource Development Corp. ("Erdene") (TSX:ERD), today provided an update on the Company's principal projects in conjunction with the release of its third quarter financial results.


- Cash and cash equivalents as of September 30, 2008 totaled $20.6 million compared with $8.7 million at December 31, 2007

- Advanced Donkin coal project, managed by Xstrata Coal, with the continuous miner feasibility study slated for completion in the fourth quarter 2008

- Resource delineation drilling completed at the Zuun Mod molybdenum project; announced extension of mineralization

- Formation of a majority owned, producing industrial minerals company through the reverse takeover of TSX Venture listed Beta Minerals Inc. ("Beta") anticipated in fourth quarter

- Completed drilling programs of multiple coal projects in Mongolia under fully-funded Xstrata Coal alliance

"The past several weeks have been one of the most turbulent times in the history of capital markets," said Peter Akerley, President and CEO. "Until we gain some clarity in regards to this near term outlook our company will be balancing the current economic conditions with our long term outlook and strategy. Erdene has committed to immediate expenditure reductions by decreasing administrative overhead and reducing or postponing early stage or grassroots programs. Current economic conditions notwithstanding, the world is growing and industrializing at a faster pace than ever before and demand for commodities will grow accordingly. Erdene remains focused on creating value by prudently advancing its core commodity projects. Our strong cash position will enable the company to fully fund its projects through 2011 and guided by a strong management team remain opportunistic in this period of uncertainty."

Donkin Coal Project


The Donkin coal project is a joint venture project between Erdene and Xstrata Coal Canada ("Xstrata") who respectively own 25% and 75% of the Donkin Coal Alliance ("DCA"). Located in Cape Breton, Nova Scotia, on Canada's east coast, the Donkin coal project is within 35 kilometers of a coal-fired electrical generating plant and a deep water coal loading facility to facilitate seaborne shipping into the major markets in North America's east coast and Europe. The DCA is evaluating the development of the Donkin coal resource, specifically the Harbour seam which contains an Indicated resource of 101 million tonnes and an Inferred resource of 115 million tonnes classified as high volatile-A bituminous, high-sulphur, medium-ash coal. The Donkin coal resource block was accessed by the DCA in late 2007 following the dewatering and refurbishment of twin 3.5 kilometre long tunnels. An underground drilling program was successfully completed during the second quarter of 2008 with coal cores and roof and floor information secured for evaluation and testing. During the quarter, the DCA continued work on a feasibility study of an Exploration and Development Program utilizing a continuous miner. The program would be an interim step toward establishing a large scale underground longwall mining operation. This feasibility study is expected to be completed before the end of 2008. Subsequent to quarter-end, Xstrata filed an environmental assessment study for the project with the Nova Scotia Environment Department.


The Donkin project is ideally situated to take advantage of the coal loading marine terminal in Sydney Harbour that will facilitate export of the Donkin coal to international markets. Over the past decade, international seaborne trade in coal has expanded faster than trade in any other commodity. International trade is forecast to grow 44% between 2004 and 2030. Much of this growth will be from developing economies such as China and India but demographic trends point toward continued growth in metropolitan areas worldwide, including those along the U.S. Eastern seaboard. A large, high energy coal resource proximal to a deep water port is unique and positions Donkin with potential to be a top competitor for domestic and Atlantic seaborne markets in the future.

Zuun Mod Molybdenum Project


The Zuun Mod molybdenum project was established as one of the largest and most advanced pre-development molybdenum projects in the North Asia region during 2008. The initial resource, reported in May 2008, averaged 0.05% Mo and includes 272 million pounds of Mo in the Measured and Indicated category and a further 51 million pounds of Mo in the Inferred category.

A resource expansion and definition drill program was completed in the fourth quarter of 2008. Several holes drilled to test the central area of the deposit indicated a deposit thickness of at least 400 metres averaging 0.06% Mo with multiple higher grade zones including 70 metres of 0.11% Mo in the north eastern portion of the deposit. Mineralization has now been traced over a three kilometer strike length and comes within 22 metres of surface. Zuun Mod continues to provide tremendous potential for additional expansion and discovery. With the 2008 drilling campaign now complete, Erdene anticipates that the final analytical results will be received by mid December and a revised resource estimate is expected to be completed in the first quarter of 2009. With the revised resource estimate in hand, Minarco MineConsult ("Minarco") will revise the Zuun Mod mine plans and develop financial models around various scenarios to determine the economics in a new pricing environment. During 2009 the project will be advanced at a pace reflecting the current environment with limited studies focused on moving the project to a mining licence stage. During this period Erdene will continue to assess the market to determine at which point the project should be accelerated towards feasibility and, at the same time, will be evaluating options to secure a strategic partner.


Zuun Mod is the most significant new metals discovery in Mongolia since Oyu Tolgoi and perhaps one of the largest new primary molybdenum discoveries globally in the past two decades. The size and continued growth of the deposit provides for greater flexibility in varying the grade mined reflecting the price of molybdenum at any given time. Although molybdenum prices have recently decreased significantly, the long-term fundamentals for growth have remained the same. In fact, the delay of a number of advanced molybdenum projects and the curtailing of production in some existing mines will accelerate the supply-demand imbalance as the industry exits the current downturn. Based on historic growth rates of approximately 4%, the world will require one new major molybdenum mine annually. Zuun Mod, located on the doorstep of the world's largest steel producing and fastest growing molybdenum consuming region, is uniquely positioned to take advantage of this future growth.

Industrial Minerals Spin-out


Erdene controls through it's wholly owned U.S. subsidiary, Erdene Materials Corporation ("EMC"), a unique kaolin resource in central Georgia, USA along with significant real estate holdings and an industrial mineral laboratory. Mining of EMC's deposits is currently being carried out by KaMin LLC which processes the raw kaolin into a high performance coating clay for high brightness papers. On July 17, 2008, Erdene announced it entered into a binding letter agreement with Beta and Deepstep Kaolin LLC whereby Erdene will exchange all of its outstanding common shares of EMC, for common shares of Beta, giving Erdene controlling interest in Beta. The objective of this transaction is to create a focused public vehicle to develop specialty products from these unique primary kaolins ultimately resulting in a boutique industrial minerals business with several high quality product lines.

Upon completion of the proposed transaction, Beta, whose name will be changed to Advanced Primary Minerals Corp. ("APM"), will control the Sparta kaolin project, one of the highest quality kaolin resources in North America. On closing, the reverse takeover will provide initial funding to advance EMC's clay projects and pursue other growth opportunities.

EMC has secured production commitments sufficient to justify construction of a production facility for processing of specialty kaolin products that are targeted to niche markets that demand the unique characteristics of EMC's primary kaolin resource that cannot be met by existing North American sources. In addition, EMC has entered into a three year toll processing agreement with Active Minerals Inc. of Hunt, Maryland to process a guaranteed minimum annual tonnage of a specialized industrial mineral product over the three year term. Further details will be announced upon closing of the Beta transaction. Assuming all conditions of the Agreement are met, the transaction is anticipated to close before the end of December 2008.


The kaolin business of central Georgia is a billion dollar per year enterprise and, as such, the cornerstone of the local economy. Mined over the past century, Georgia has seen its high quality kaolins depleted and has seen much of the hi-performance specialty and high priced part of the business secured by international competitors and in its effort to stay profitable, have become high volume bulk commodity producers. APM looks to take advantage of that situation with its unique, high quality primary clay deposits to focus on small to moderate volume opportunities and high margin specialty products.

Construction Aggregate Projects


The Granite Hill project is a former producing granite aggregate quarry located in Central Georgia directly on rail with in excess of a 120 million ton resource. It is in the final stage of issuance of federal, state and local operating permits to enable development as a granite quarry, primarily to serve the southeastern U.S. markets by rail. Granite Hill has an estimated start-up production rate of one million tonnes of granite aggregate per year with a proposed design capacity of four million tonnes. Based on current production projections, the Granite Hill quarry will have a lifespan of at least 20 years. Initial production is dependent on the company's partner, Ready Mix USA LLC's timing for expansion in the southeastern U.S.


Erdene continues to evaluate several opportunities in the construction aggregate sector in eastern Canada and the southeastern US. Growth in this area is now flat due to the current economic environment, most severely impacting the U.S. housing industry. However, the long term growth projections and potential for economic stimuli packages that are anchored in "rock and steel" have the potential to rapidly accelerate demand for crushed stone. As a result, Erdene continues to position itself with projects in the south-eastern U.S. and in Atlantic Canada where tidewater prospects continue to have competitive advantages particularly in light of the rapidly declining costs of seaborne freight.

Coal Projects in Mongolia


In cooperation with Xstrata, Erdene is involved in a comprehensive coal generative and acquisition program that evaluates numerous prospective metallurgical and high quality thermal coal deposits throughout Mongolia. All of Erdene's coal exploration in Mongolia is being fully funded by Xstrata and is being carried out in consultation with Xstrata.

In the third quarter of 2008, Erdene continued with a property evaluation and acquisition program designed to identify and secure access to additional exploration licenses in Mongolia with the potential to host large tonnage thermal and metallurgical coal resources. Three properties have been drill tested with 13 drill holes totaling 1,586 metres. Complete drill results are pending. The program is expected to continue throughout the year with the valuation of additional properties.


Mongolia borders the largest coal consuming nation with estimates suggesting that over the next 25 years China needs to secure approximately six million tonnes per month in new coal production to meet demand. The Erdene-Xstrata coal alliance is positioning itself to become a major participant in the coal industry of Mongolia

Third Quarter Financial Results

Erdene's third quarter financial statements and Management's Discussion and Analysis were filed on November 14, 2008 with the appropriate regulatory authorities and are available on the company's website at or on SEDAR at

During the third quarter, Erdene incurred costs for exploration and operating expenses (including capitalized costs) of $2,079,924, compared to $3,753,812 for the same period in 2007. For the nine months ended September 30, 2008, exploration and operating expenses amounted to $7,227,064, compared to $8,878,835 in 2007. The expenditures were directed toward the continued advancement of the Company's projects, primarily the Donkin coal project and Zuun Mod molybdenum project.

Specifically, expenditures by project were as follows:

- Zuun Mod: $1,509,190 for the quarter and $2,537,093 for the nine months ended September 30, 2008.

- Donkin: No advances were made to the project manager during the quarter and $3,156,644 for the nine months ended September 30, 2008.

- Coal exploration in Mongolia fully funded by Xstrata: $438,104 for the quarter and $622,951 for the nine months ended September 30, 2008.

Administrative expenses totalled $439,754 for the quarter and $1,906,994 for the nine-month period, compared to $387,275 and $1,999,097 for the comparable periods in 2007, respectively.

The Company recorded a loss in the amount of $887,425 or $0.01 per share for the three-month period, compared with a loss of $986,456 or $0.02 during the same period in 2007. For the nine months ended September 30, 2008 the loss was $3,165,608 compared with a loss of $4,320,983 for the same period in 2007. At the end of the quarter, Erdene had approximately $20.6 million of cash and cash equivalents on hand compared with $8.7 million as of December 31, 2007.

About Erdene Resource Development Corp.

Erdene (formerly Erdene Gold Inc.) is a diversified resource development company with multiple projects at various stages of development from exploration to production all focused on high-growth commodities. Erdene has a current working capital position of approximately $18.7 million with 89,230,877 common shares issued and outstanding and a fully diluted share position of 98,633,352 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.

For additional information visit Erdene's website at or contact the company via email at

Contact Information

  • Erdene Resource Development Corp.
    Peter C. Akerley
    President and CEO
    Erdene Resource Development Corp.
    Ken W. MacDonald
    Vice-President North America and CFO