Erdene receives first resource estimate for Mongolian moly project

Erdene Gold‘s (ERD-T) Zuun Mod project in southwestern Mongolia contains more than 400 million pounds of molybdenum in the measured and indicated categories, according to its first National Instrument 43-101 compliant resource estimate.

The company’s 100%-owned Zuun Mod deposit contains a measured and indicated resource of 467 million metric tonnes at a cut-off grade of 0.03% molybdenum. That equates to 453 million lbs of contained metal at an average grade of 0.044% molybdenum.

In addition, the deposit has an inferred resource of 141 metric tonnes, which at an average grade of 0.039% represents an additional 121 million lbs of molybdenum.

Mineralization remains open at depth and starts just 18 metres below the surface. The Zuun Mod molybdenum resource area lies within an area that makes up just 10% of the total Zuun Mod porphyry system.

Calling Zuun Mod "one of the largest and most advanced pre-development molybdenum projects in the North Asia region," the company noted that an independent preliminary assessment or scoping study will be completed by the middle of the year and will likely be followed by a pre-feasibility study.

The Zuun Mod porphyry complex measures 12 km in circumference and hosts broad zones of molybdenum mineralization. In a 3-km long portion of the system, referred to as the South Corridor, Erdene has identified three mineralized zones known as the Racetrack North, Racetrack South and the Stockwork zones.

"Probably the most exiting things we have in front of us is the whole west side of the southern part of Racetrack and with increasing copper and moly grades we think we’re trending towards what we believe is the higher grade porphyry system," Peter Akerley, president and chief executive said in an interview. "It’s a very significant sized resource and based on the work we’ve completed this year we see tremendous potential for additional discoveries."

Zuun Mod is in Bayankhongor Province about 950 km southwest of Mongolia’s capital city, Ulaanbaatar. The property consists of a single exploration license covering 49,538 hectares.

It is also strategically located just 180 km north of Mongolia’s border with China. According to the company’s estimates, Chinese demand for molybdenum will exceed supply by 2012 and the supply deficit will only worsen, reaching about 30 million lbs by 2017.

Erdene has a portfolio of properties in Mongolia focused on base and precious metals, as well as a strategic alliance with Xstrata Coal to develop its coal properties in the country. Xstrata Coal, based in Sydney, Australia, is Erdene’s largest shareholder, owning 5.5% of the company’s stock.

Akerley, who has worked in the country for a decade, says that while there has been uncertainty in recent years about the tack the government is taking on mining and the delays surrounding the massive Oyu Tolgoi project, he is convinced that the government will eventually get it right.

"The political leaders I have dealt with realize they have to structure an environment that provides a win-win structure for all parties," he argues.

"It’s a desperately poor country that needs the mining industry to prosper to see improvements in their way of life. Their laws are evolving but ultimately they recognize that they have to have foreign investment in there."Mongolia’s national elections are slated for June 29.

At mid-day in Toronto, Erdene was trading up 10 a share at 99 on a trading volume of 79,600.

The stock has a 52-week trading window of 70 to $2.05.

Erdene holds about $6.45 million in cash and has 70.6 million shares outstanding.