ERD-Interview-transcriptWyse Road, Suite 1480
Dartmouth, Nova Scotia, CAN B3A 4S5
Phone:902 423 6419
Fax:902 423 6432
OFFICERSPeter C. Akerley
President and CEO
Kenneth W. MacDonald
Vice President, Finance, Director
J.C. (Chris) Cowan
Managing Director
D. Suzan Frazer
Secretary
Michael C. Corey
Exploration Manager
Michael X. Gillis
Manager, Corporate Development
CORPORATE INFODuring the past two years Erdene Gold has established itself as one of the leading copper and gold exploration companies in Mongolia. Erdene was formed in 2002 by principals having extensive experience in the country since 1996. As one of the earliest companies to recognize Mongolia's tremendous potential, we have acquired 100 per cent interests in a large and rich portfolio of properties covering more than 400,000 hectares. Erdene is also solidly financed, through our recent initial public offering, with approximately $9.8 million in cash (as of Sept 30, 2004). This financial strength provides flexibility for Erdene to advance a disciplined exploration program on each of its properties.
LINKSHomepage
TRANSCRIPT OF INTERVIEWWSR: What does the recent Erdenet alliance mean for the company going forward?
ERD: This is a very exciting relationship for our company. The Erdenet mine is the largest mine in Mongolia and actually produces about 30% of the total export revenues of Mongolia. We control a land package immediately surrounding the Erdenet mine, within 300 meters of their current open pit. Our properties contain a number of targets, which are of interest to the Erdenet mine people. As a result we’ve struck a strategic alliance with Erdenet which will allow us to jointly explore these properties and ideally see Erdenet bring some of these discoveries to production fairly rapidly. That’s one of the key aspects of this for Erdene. We are not in a remote area. We are in an area that is built up with a rail that feeds China. By the way, all of Erdenet’s copper concentrate currently is shipped to China. They generated US$152 million in profit on sales of US$318 million in 2004, so this is a giant operation and opportunities for them to expand lie with the Erdene property surrounding the current pit.
WSR: Will the company look to additional strategic alliances and perhaps joint ventures similar to the Erdenet play?
ERD: I think we are always open to other opportunities. In many places in Mongolia where we were active -- and maybe we’ll talk a little bit about some of these other properties -- we recognize the need for a major partner. So our intent is to create more value in some of these early stage properties to get them to a resource stage and then entertain interested parties and potential joint ventures or strategic alliances. In fact, we recently entered another strategic alliance with IUC, International Uranium Corporation, on our uranium properties in the southeastern part of Mongolia.
WSR: Talk a bit more about some of your other projects and properties and where you are in terms of exploration and studies, etc?
ERD: Since I touched on the uranium properties we’ll start there. The arrangement with International Uranium was signed April 4, 2005, and we expect to close that deal within the next couple of weeks. Basically it allows for International Uranium to earn a 65% interest in a very large land area we have in the south-eastern part of Mongolia. IUC is currently drilling about 35,000 meters on adjoining properties and has already identified almost 23 million pounds of uranium in the ground. So what we have are a number of adjacent properties where Russian/Mongolian surveys have identified potential resources and we are out there now in a big way. We have four camps and approximately 100 people out there doing work on these uranium properties, which straddle the rail line feeding China. If you follow the uranium story, China is playing a big part in driving future prices on uranium, which has doubled in the last year. So that’s a brief snapshot on the uranium. We also have a drill program under way in southwestern Mongolia called the Zuun Mod program. This is a molybdenum copper porphyry, which was drilled by a predecessor company of one of our acquisitions. They had intersected some very significant grades of molybdenum, in fact, 0.1 molybdenum over approximately 80 meters. This translates, for those that don’t understand the molybdenum price, to over 3% copper at current prices, so quite a high grade. So we are now testing the area surrounding that original drill hole and this location is looking good as well. This target is about 175 kilometers from new rail and power being constructed from China up to the Gobi Desert to source raw material. So we are quite excited about Zuun Mod and expect some results in the next few weeks.
WSR: It seems as though the company is fairly well positioned in terms of infrastructure.
ERD: Our approach to Mongolia is that we recognize much of the country is extremely remote and therefore, unless it’s a gold-only type play, you need to restrict yourself to areas where there is available rail and/or power and water in reasonable distance. So if you look at our maps that are available on our Web site, you’ll find that the majority of our non-gold projects are strategically located to be within reasonable distance from these infrastructure facilities. By the way, just to give a broader view of our properties, the company currently has 24 projects. These were brought together by Erdene’s initial work back in the late 90’s. Also, our acquisition of Mohamed Al Fayed’s company, Gallant Minerals, which occurred earlier this year -- they had a very large portfolio of property, which they worked on over a seven-year period. So when you look at the combination of these two assets, Erdene has screened down to these 24 properties through hundreds and hundreds of site visits. So all of our properties I consider to be of very high quality.
WSR: What is unique about Erdene Gold? What differentiates this company from others in the industry?
ERD: I think when you look at the current situation in the world, but certainly in the junior mining sector -- to be next door to China; to be in a country like Mongolia, which has a geologic prospectivity; the ability to work in terms of government regulations; it’s a unique opportunity and there are not many companies that were in early in Mongolia that have the land position that we do. So we stand apart from others in that respect. When you add in the management team that we have and the financial wherewithal, it’s a very strong package and as somebody’s who’s been involved in the junior sector for going on 20 years now, I have not seen a position where so many of the elements you look for in our sector come together. So we are very excited about the opportunities in front of us right now.
WSR: Tell us about the management team in place, the key players on board at Erdene Gold?
ERD: To start with myself, and one of our directors, Chris Cowan: we managed the largest regional exploration program in Mongolia in the mid- to late-90’s. So we have a very strong depth of knowledge and experience in the country and we’ve brought that to Erdene in 2002 when we started this company. In addition to Chris and myself, we have two very strong field people. We brought in the exploration manager from Gallant Minerals, Greg Leonard. We also have our exploration manager, Michael Corey, both with very strong experience in Asia and Mongolia. On the corporate side Ken MacDonald and Mike O’Keefe run our financial and admin side here in Halifax. They’re added to by Mike Gillis who is in corporate development. All of these people have very strong experience in their field so it’s a very tight knit and very strong team all around.
WSR: Do you feel the investment community understands this company and the direction and the potential here, given the current stock price?
ERD: I think at this point the investment community is failing to recognize the potential of our company and the value. If you look at us in comparison to our peers and you look at us relative to what’s happening in China and the properties we have in Mongolia, there is a huge upside in our value and I think we’ll see that as time goes by, perhaps even in the short term. We currently have a share price in the 80- to 85-cent range and we have 26 million shares outstanding. So our market capitalization is quite low. Again, if you look at our peers in Mongolia, we would certainly be on the low end of the spectrum. So I feel very bullish about the direction of our share price.
WSR: Is the company making any efforts in that regard to get the message out?
ERD: We continuously carry out a strong awareness program. We make a point of visiting our major shareholders and getting out to the major cities where the base of our shareholders reside. So it is an ongoing process. In addition to that, if you would like to visit our Web site, www.erdene.com, you’ll see that we really make an effort there as well to keep a large amount of our detailed information available and keep it up to date.
WSR: Very briefly in closing, let’s recap a bit here. Why should investors consider Erdene Gold as a long-term investment opportunity?
ERD: I’ve been involved in the exploration sector for 20 years. You always hope to be involved in a situation like Erdene, where all of the elements that create a successful company come together: location, high quality properties, strong commodity markets, and we’re next door to China. When you look at commodities -- copper prices at 16-year highs. You can look at uranium and molybdenum and gold and see the same thing. It’s an exciting period and I think Erdene is perfectly situated to benefit from this current event in the mineral sector.
END
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