Erdene teams with EMC in Mongolia

Halifax-based Erdene Gold (ERD-V) has inked an agreement with Erdenet Mining Corp. (EMC), Mongolia’s largest mining company, to explore for economic deposits in that country.

The two will explore for new porphyry-style copper deposits or extensions to mineralization at EMC’s copper-molybdenum mine. Work has already begun immediately west of the open pit. The initial wave of exploration, including diamond drilling, will be jointly funded.

Erdenet is Central Asia’s second-largest porphyry copper deposit, and one of the world’s largest copper producers.

The joint effort will focus on a 30-sq.-km area immediately west of Erdenet’s pit, where geophysical work has identified induced-polarization anomalies near the surface. Indications are that these geophysical signatures extend at depth.

Nine rock samples from the area returned 0.08-1.03% copper, 0.02% moly and 0.15 gram gold per tonne. The partners believe the results suggest the presence of a buried, mineralized porphyry system.

EMC is owned 51-49 by the Mongolian and Russian governments. The Erdenet mine, 220 km northwest of Ulaanbaatar, started producing in 1978 and now cranks out 450,000-480,000 tonnes copper concentrate (grade: 27% copper) and 2,800 tonnes molybdenum concentrate (50% moly) annually.

The latest deal follows a similar one inked in early April that will see Erdene team with International Uranium (IUC-T) to stake additional ground prospective for uranium mineralization in Mongolia over three years. IUC will also subscribe to 1 million shares of Erdene at a price of $1 apiece.

IUC can also take a 65% interest in some of Erdene’s Mongolian uranium assets by spending $6 million over four years; Erdene will act as operator during the first year of the agreement. Initial drilling will target previously identified radiometric and geochemical targets.

Combined, the two companies will control more than 13,000 sq. km in Mongolia’s central sedimentary basins, which hosts significant uranium resources. The Cretaceous-age sediments are derived from weathered crystalline basement rocks that typically grade around 0.05-0.5% U3O8. The relatively thin tabular bodies generally occur at depths of less than 150 metres. Pilot plant testing has confirmed that the material is amenable to in situ leaching techniques.

Erdene’s land package contains several uranium occurrences, radiometric anomalies, and favourable geology for sediment-hosted near-surface uranium deposits.

Erdene ended 2004 with a loss of $4.4 million (or 19 per share), compared with a year-earlier loss of $629,091 (14 per share).

The 2004 result includes $3.4 million in exploration expenses in Mongolia.