Vancouver – Erdene Gold’s (ERD-T, ERDGF-O) relationship with Swiss-based mining giant Xstrata (XSRAF-O, XTA-L) is getting closer, with a board position going to the major.
Following its recent $3-million investment into Erdene, Xstrata will place Jeffrey Gerard on the junior’s board. Mr Gerard is general manager of business strategy for Xstrata’s coal division.
The private placement of 3 million Erdene shares at $1.00 apiece gives Xstrata a 9.8% equity interest in the company. Under the new alliance, the major’s subsidiary, Xstrata Coal, will hold an option to enter into a joint venture and earn 75% interest in any coal project in Mongolia identified by Erdene by funding all work through to feasibility study. Xstrata also holds right of first refusal on any non-coal projects.
Primarily focused on its Mongolian mineral projects, Erdene is expanding opportunities closer to home by recently announcing plans to acquire private Nova Scotia-based Kaoclay Resources in a share transaction. The acquisition will have Erdene issuing 1.65 shares and a half-warrant for each of Kaoclay’s almost 9 million shares, valuing the transaction at about $15 million.
Kaoclay holds 20% of the advanced-stage Donkin coal project in Nova Scotia’s Cape Breton region, with Xstrata holding 66% and Atlantic Green Energy Development owning 14%. The project is soon to enter pre-feasibility stage to evaluate potential mining of about 200 million tonnes of thermal and metallurgical grade coal.
The company also holds a number of kaolin projects in central Georgia, one of which is under a sublease to a major producer that has prepaid royalties of almost US$3 million to Kaoclay.
Erdene Gold posts a $32 million market capitalization based on its recent $1.05 trading level and 30.6 million shares outstanding.
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