Vancouver — Erdene Gold (ERD-T, ERDGF-O) is getting closer to Swiss-based mining giant Xstrata (XSRAF-O, XTA-L), with a position on Erdene’s board going to the major.
Following its recent $3-million investment in Erdene, Xstrata will place Jeffrey Gerard on the junior’s board. 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 a 75% interest in any coal project in Mongolia identified by Erdene by funding all work through to feasibility. 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 expected to enter the prefeasibility stage soon, which will evaluate the 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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