Erdene Reports 2009 First Quarter Financial Results
and Provides Project Updates
Halifax,
Nova Scotia - May 19, 2009 - Erdene Resource Development Corp.
("Erdene") (TSX:ERD), today provided an update on its principal
projects in conjunction with the release of its 2009 first quarter financial
results.
2009 First Quarter Highlights
- Completed
the Beta Minerals Reverse Takeover transaction, giving Erdene a
controlling interest in Beta Minerals (now Advanced Primary Minerals
Corp. (TSX.V:APD))
- Continued
Exploration and Development Phase implementation plans for the Donkin
coal project
- Began
work on the new Zuun Mod molybdenum project resource estimate that
incorporates data from drilling completed in 2008
- Working
capital of $18.8 million as at March 31, 2009, including Erdene's
controlled subsidiary Advanced Primary Minerals Corp.
"During
the first quarter we continued to make progress on our Exploration and
Development phase implementation plans for the Donkin coal project and the
completion of an updated resource estimate at the Zuun Mod molybdenum
project," said Peter Akerley, President and CEO. "We are also
pleased to see our kaolin division operate as a new public company with
established production, which we expect will ultimately reward our
shareholders."
Project
Summaries and Updates
Donkin Coal Project
The
Donkin coal project is located on the Donkin peninsula in Cape Breton Island,
Nova Scotia, Canada. The project is a joint venture between Xstrata Coal
Donkin (75%) and Erdene (25%) managed by Xstrata Coal Donkin Management
Limited.
Current
plans are to complete a feasibility study in conjunction with sales
agreements for an interim Exploration and Development Phase program utilizing
a continuous miner, which would see up to 350,000 tonnes of coal produced
from the Harbour Seam, which contains the largest volume and highest quality
resource within a total 227Mt (Indicated) resource of high volatile A
bituminous coal. It is anticipated the initial phase would require a capital
investment of approximately $65M of which Erdene is responsible for 25%, less
$10M which will be funded by Xstrata under the terms of the joint venture
agreement between the parties.
During
the latter part of 2008 and the first quarter of 2009, work continued on the
Exploration and Development Phase implementation with requests for pricing
issued for the long lead-time items and major contracts associated with the
project. The final feasibility of the Exploration and Development Phase will
be released following conclusion of sales agreements. The project currently
employs 10 full time or part time site personnel.
The
final stage of the feasibility study for the Exploration and Development
Phase involves the negotiations for domestic and international sales
contracts. With respect to domestic sales, discussions revolve around coal
quality details and acceptable volumes to be able to meet government
regulated emissions standards for 2010 since the coal produced during the
Exploration and Development Phase will be unwashed. The supply of an unwashed
product is an interim step during the evaluation phase with the long term
goal being longwall production of a higher quality washed product. The
Exploration and Development Phase is a critical part of the overall project
approval process. It will provide additional, essential information on
geology, geotechnical data, coal quality and mineability aspects of the
Donkin coal deposit. Once the feasibility study and sales agreements are
finalized, it will be presented to the Donkin Coal Management Committee and
then to the respective boards of the joint venture partners for approval.
Zuun
Mod Molybdenum Project
Located
within 200 kilometres of China's border in Mongolia's Bayankhongor Province,
the Zuun Mod project measures 12 kilometres in circumference and hosts broad
zones of molybdenum/copper mineralization. The project is wholly owned by
Erdene.
During
the first quarter of 2009, Minarco-MineConsult began work on a new Zuun Mod
molybdenum/copper project resource estimate incorporating the drilling
completed in 2008. Several of these holes, located in the central part of the
deposit, returned intersections of up to 400 metres in width averaging 0.06%
molybdenum with multiple higher grade zones, including one 70-metre
intersection averaging 0.11% molybdenum in the northeastern portion of the
deposit. These data add to an initial resource estimate, reported in May
2008, which totalled 110 million tonnes averaging 0.061% molybdenum in the
Measured and Indicated category. Additional drilling will eventually be
required to better define the higher grade zones and have them reflected in
the overall resource. The current focus is on completing the resource
estimate, evaluating a revised mine plan and preliminary economics and
applying for a mining license.
In
regards to the mining license application, the Zuun Mod exploration license
is due to expire in May 2010 and work has been proceeding to complete the
requirements for an application for a mining license. Under the Minerals Law
of Mongolia, a mining license has an initial term of 30 years, renewable
twice for 20 years each. Field work commenced in October 2008 by Ecotrade
XXK, a Mongolian company, to collect data for an Environmental and Social
Economic baseline study required as part of the application for a mining
license. A final report for submission to the Ministry of Environment and
Tourism was received in early May 2009. In addition, a contract was signed
with AMC XXK to carry out a 1:2000 topographic survey, a hydro geological
study of the Zuun Mod site and a geological report and resource estimate for
submission to the Mongolian Mineral Resource Council as a prerequisite for
granting of a mining license. The topographic survey and hydro geology study
including the completion of a 25-cemtimetre diameter drill hole for pump
tests and water sampling were completed in January 2009. Work on the AMC
geological report and resource estimate began in the first quarter of 2009
and is expected to be completed by the end of July 2009.
Advanced Primary Minerals Corp.
On
February 27, 2009, Erdene and Beta Minerals Inc. ("Beta") announced
the closing of the transaction outlined in an Amended and Restated Letter
Agreement dated January 23, 2009 (the "Agreement"), among the
Company, Beta and Deepstep Kaolin Company LLC ("Deepstep").
Pursuant to the Agreement, the Company and Deepstep exchanged all of the outstanding
common shares of Erdene Materials Corporation ("EMC") for common
shares of Beta, giving the Company a controlling interest in Beta (the
"Transaction"). Following the closing, Beta changed its name to
Advanced Primary Minerals Corporation ("APM") and on March 6, 2009 began
trading on the TSX Venture exchange under the ticker symbol APD. The
Transaction constituted an arms length "Reverse Takeover" under the
applicable policies of the TSX Venture Exchange.
APM's
goal is to become North America's leading specialized primary kaolin
producer. To this end, a new state-of-the-art processing facility has been
constructed in Dearing, Georgia and the first shipment of product from the
new plant took place on May 11, 2009. The new Dearing plant is ideally
located along the Augusta Highway, adjacent to rail with existing access to
all required utilities. Extensive product development and testing has been
carried out over the past five years and APM has advanced commercial trials
underway to complement production commitments already in place.
APM is
targeting value added products that benefit from the unique attributes of the
Company's high quality primary kaolin resource under a two phase development
program. Target markets under the phase one program, currently underway, are
focused primarily on primary kaolin products for the North American ceramics
and whitewares industries as well as conducting toll processing of a
non-kaolin product for a third party under a contract that guarantees minimum
monthly production volumes. The toll processing circuit within the Dearing
plant is scheduled to commence June 1, 2009.
During
the phase one program, a phase two feasibility program will be completed
along with further product development and trials for an expanded product
line targeting the paint, coatings and catalysts industries as well as other
specialty industrial applications. Product trials have shown that APM's
primary kaolin products meet or exceed the quality of comparable foreign
imports. Proximity to the U.S. domestic market and elimination of foreign
exchange risk add a strong competitive advantage.
Granite Hill
The
Company's Granite Hill project is a former producing granite aggregate quarry
in central Georgia. The Company owns the 342-acre property, through a wholly
owned subsidiary, which holds in excess of a 120-million ton resource and is
situated on an existing rail line. Ready Mix USA ("RMU") holds,
through a lease with the Company, an exclusive right to mine, process, and
sell aggregate from the Granite Hill property and is responsible for all
associated capital and operating costs. The Company has a carried,
percent-of-sales royalty interest in the sale of all aggregate from the
property.
RMU's
quarry development plan provides for an estimated start-up production rate of
one million tons of granite aggregate per year, with a design capacity of up
to 2.5 million tons. Based on current production projections, the Granite
Hill quarry will have an estimated lifespan in excess of 30 years. RMU has
designed a quarry mining plan, processing plant and facilities, and produced
an environmental impact plan. RMU has also acquired additional land adjacent
to the Granite Hill property to secure rail access to the site. During the
quarter a new county access road was approved allowing for direct access for
development of the site from existing roads while the initial development
area is being prepared for clearing. The construction phase is expected to be
completed nine to twelve months after a production decision by RMU. RMU is
responsible for fully funding the development and operating program.
Production
from the Granite Hill project will target markets in the southeastern U.S.
where urban sprawl, depleted resources and the shutdown of mining in
Florida's Lake Belt aggregate district have combined to create a pending
shortage of crushed stone. At the same time the U.S. government stimulus
package is expected to initiate over $90 billion in infrastructure spending
over the next 12 to 18 months expected to spark demand for aggregate material.
The Lake Belt district is in northwestern Miami-Dade County and on average
produces approximately 45M tons of limestone or about half the state of
Florida's annual production. There is currently no mining taking place in
this area as a U.S. District Judge has stayed (pulled) all mining permits
over concerns regarding impact on the Everglades' watershed and the
environment.
2009
First Quarter Financial Results Summary
Erdene's
2009 first quarter financial statements and Management's Discussion and Analysis
were filed with regulatory authorities on May 15, 2009 and are available on
the Company's website at www.erdene.com and on SEDAR at www.sedar.com. These statements are provided on a
consolidated basis incorporating that of its controlled subsidiary, Advanced
Primary Minerals Corp.
For the
three months ended March 31, 2009, exploration and operating expenses
amounted to $437,595 compared to $664,395 in the first quarter 2008. Including
capitalized costs, exploration expenses were $840,435, net write-offs, for
the first quarter of 2009 and $2,206,519 for the first quarter of 2008
respectively.
Erdene's
first quarter expenditures were primarily directed toward the continued
advancement of the Company's primary projects, namely the Donkin coal project
and Zuun Mod molybdenum project as well as approximately $564,000 in
purchases of plant and equipment for a new processing plant being constructed
by Erdene's controlled subsidiary APM.
Administrative
expenses totalled $459,395 for the first quarter of 2009, compared to
$969,099 in first quarter 2008 (including $464,475 in stock based
compensation).
The
Company recorded income of $681,223, or $0.01 per share, in the first quarter
of 2009 compared with a loss of $1,553,612, or $0.02 per share, in the first
quarter of 2008. Erdene recognized an $879,869 dilution gain on the
disposition of an interest in its subsidiary Erdene Materials Corporation. At
March 31, 2009, Erdene had approximately $17,689,316 million of cash and cash
equivalents on hand, including cash acquired on closing of the Beta
Transaction, compared with $16,195,175 million at December 31, 2008.
About
Erdene
Erdene Resource Development Corp. is a diversified resource 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 $17.8 million, including that of
its controlled subsidiary APM, with 89,230,877 common shares issued and
outstanding and a fully diluted position of 97,825,852 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
Peter C. Akerley
President and CEO
or
Ken W. MacDonald
Vice President Business Strategy and CFO
Phone: (902) 423-6419
e-mail: info@erdene.com
www.erdene.com