Erdene Resource Development Corporation · TSX:ERD
Erdene Resource Development — Shareholder Meeting (June 2006)
68 slides from Erdene Resource Development's shareholder meeting presentation, June 2006
Slide 1: Erdene
Epedanet “Erdenet Tkh Tal
Slide 2: Peter Akerley, President and CEO
P e t e r A k e r l e y >> President and CEO
Slide 3: Forward-Looking Statements
Forward-Looking Statements Certain information regarding Erdene ("the Company") contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidan
Slide 4: Recent Timeline
Recent Timeline IUC Kaoclay Kaoclay IUC -- Uranium Uranium IPO IPO Raised Raised Acquisition Acquisition Joint Joint Venture Venture Post Post Merger Merger $10.6 $10.6 Million Million Proposed Proposed Market Market Cap: Cap: $46 $46 million million Xstrata Xstrata Acquired Acquired Coal Coal Galla
Slide 5: Diversified Mineral Exploration & Royalty Company
Diversified Mineral Exploration & Royalty Company Disciplined growth strategy Portfolio of high-growth commodity properties Strategic alliances with industry leaders Long-term opportunities in Asia – China Factor Near-term cash flow potential in North America
Slide 6: Capital Structure Post-Merger
Capital Structure Post-Merger Trading Info: TSX: ERD Shares Outstanding: 46.6 million Market Cap: C$ 42 million Cash Position: C$ 6.6 million
Slide 7: Strategic Goal: Maximize Shareholder Value
Strategic Goal Maximize Shareholder Value through discovery, acquisition and/or value added exploration of mineral resources and ultimately generating a strong cash flow from royalty and minority interests while continuing with our search for world class ore deposits
Slide 8: Focus on High Growth Commodities
Focus on High Growth Commodities Strong Long-Term Potential Upside Precious Metals Base Metals Energy Industrial Minerals Molybdenum Molybdenum Coal Coal Aggregate Aggregate Gold Gold Copper Copper Uranium Uranium Kaolin Kaolin
Slide 9: Slide 9
Slide 10: Xstrata plc
Xstrata plc Xstrata plc Mick Davis Zug Xstrata Alloys Xstrata Coal Xstrata Copper Xstrata Zinc Peet Nienaber Peter Coates Charlie Sartain Santiago Zaldumbide South Africa Sydney Australia Brisbane Australia Madrid Spain • A major global diversified mining group • Headquartered in Switzerland • Liste
Slide 11: Xstrata's Global Operations
Xstrata’s Global Operations
Slide 12: Xstrata Donkin Coal Alliance
Xstrata Donkin Coal Alliance Donkin Coal Alliance Partnership 14% Atlantic Green Energy Development 66% 20% Xstrata Kaoclay
Slide 13: Background
Background In December 2005, the Donkin Alliance was granted rights to apply for a special license to develop the Donkin coal resource block in Cape Breton, Nova Scotia. The Licence: approximately 100 km22, three year period
Slide 14: Xstrata Donkin Coal Alliance
Xstrata Donkin Coal Alliance Kaoclay 20% interest 200 million tonne high grade tidewater coal resource in Cape Breton, Nova Scotia 12 major coal seams (11 mined): Thickness Thickness varies varies from from 0.9m 0.9m to to 2.1m 2.1m (up (up to to 3.0m) 3.0m) Close proximity to large U.S. market Prod
Slide 15: Coal – Fundamentals
Coal – Fundamentals Demand from U.S. coal-fired plants increasing 110 million tonnes over the next 10 years* Declining production Infrastructure & regulatory constraints Market demand for high quality thermal and metallurgical coal * Source: U.S. Energy Information Administration
Slide 16: Estimated location of the Donkin Coal Resource Block
Estimated location of the Donkin Coal Resource Block
Slide 17: Background
Background Exploration in 1977-79 (drill ship) Total of 11 drill holes 2 access tunnels driven (mid 80s) Access to Harbour seam (top economic seam) Water filled (early 90s) 3.5km in length 7.6m in diameter Tunnel portals sealed
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Slide 21: The Project
The Project The first 2 years of the project will be aimed at exploration activities to determine the business case for coal mining options and to identify and assess environmental issues. Work on the project has begun. Much of the work will involve minimal site based activity in the initial stages.
Slide 22: What are the proposed activities?
What are the proposed activities? ¾ Access to the Donkin site has been gained ¾ Accessing the Harbour Seam in the Mining Museum at Glace Bay and obtaining coal samples ¾ Breach and reclaim the existing tunnels ¾ Obtaining bulk coal samples (2000t) from within the existing drifts to evaluate the coal
Slide 23: Involving the Community
Involving the Community Community engagement is an important part of the project. We will develop a Community Consultation Plan which aims to facilitate effective engagement with the community and ensure that information is communicated accurately and in a timely manner. A range of mechanisms will b
Slide 24: Community Newsletters
Community Newsletters
Slide 25: Timeframe & Approval Process
Timeframe & Approval Process Outcomes of: exploration activities, mining assessment, infrastructure planning, market development and environmental constraints analysis will all need to be considered before the alliance asks for an independent environmental assessment and seeks approval for any comme
Slide 26: Project Timeline-Major Milestones
Project Timeline-Major Milestones March 06 June 06 Jan 07 June 07 Jan 08 Mar 08 Establish office, gain approvals, sample miners museum Pump and reclaim tunnels Drilling and Bulk Sampling from Harbour Seam Using all gathered information, review mine base case and proceed for approval if supported by
Slide 27: Mining in Mongolia – The New Frontier
Mining in Mongolia – The New Frontier Tavan Tolgoi Oyu Tolgoi
Slide 28: Mining in Mongolia – The New Frontier
Mining in Mongolia – The New Frontier Hosts world-class deposits On China’s doorstep Educated labour force Low cost exploration
Slide 29: China Factor
China Factor Mongolia ideally located to feed China’s large & growing demand for commodities Both countries’ governments support developing relationship Strong growth expected to continue over long term
Slide 30: Exploration Properties
Exploration Properties
Slide 31: Properties in Mongolia
Properties in Mongolia 20 Exploration Projects (>1.6 million hectares) C$4 Million Exploration Program in 2006
Slide 32: Gold – Fundamentals
Gold – Fundamentals Global Gold ETF Demand & Price Tonnes Gold price US$ per oz. 600 $650 497 500 $600 400 $550 341 286 284 284 300 $500 207 200 $450 100 $400 57 0 $350 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Investment factors Physical demand
Slide 33: Gold Properties
Gold Properties Multiple gold targets Excellent geologic environment Aggressive program to generate new opportunities
Slide 34: Gold Properties - Tsenkher Gol
Gold Properties - Tsenkher Gol Exploration 180 Km east of Gold in Soil Ulaanbaatar Anomalies Abundance of gold Khond mineralization Uul Placer gold mine Altan Suult operating in drainage Drilling planned for 2006 11 Km Km
Slide 35: Tsenkher Gol Proposed Drill Hole Locations on Geology
LEGEND Geology Interpretation Breccia Feise dike internediate ake Caro mecrogranite Carb granke PC metarnorphics Landsat interp faults qiz-ser-sulfide+i-fald-FeOx alteration Gold in Sat ( 30-2030ppb ) IP chargeable anomaly rit notes - propased Teenkher Got Licenses itl a] = roa) L] = co j= aA co} ES
Slide 36: Molybdenum – Fundamentals
Molybdenum – Fundamentals 200 200 USA USA W. W. Europe Europe Japan Japan China China Other Other 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 00 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 Key ingredient in stainle
Slide 37: Molybdenum Properties
Molybdenum Properties Zuun Mod
Slide 38: Molybdenum Properties – Zuun Mod
Molybdenum Properties Zuun Mod Large bulk tonnage open pit potential Strategically located near China’s steel industry Close to rail and power grid Scoping study underway
Slide 39: Geology
@ Di ill Hole GEOLOGY Cover | Cretaceous ni arsection z Sedimets Volcanics & Racet r at ck Quartz Porphyry Granodiorite Quartz Monzonite Syenite Rhyolite wW
Slide 40: Zuun Mod Racetrack Zone
Zuun Mod Racetrack Zone Line 51700E {looking west) & oD b-] pe $ 3 2 Molybdenum Mineralization (average % Mo) >0.07% >0.05% Geology Quartz Monzonite Granodiorite Ci Andesite Syenite NWOOSESBt NWOOBSSBIr NwoOBSoBr re 8 3 5 z NWwOOPESBY 7 >. co > NwoOgEoEr % co % ed 1100mRL f000mRL
Slide 41: Copper – Fundamentals
Copper – Fundamentals China driving demand World inventories at lowest point in 30 years China’s need forecast to grow by 70% over next decade China consumes 22% of world supply but only produces 5%
Slide 42: Copper – Fundamentals
Copper – Fundamentals LME Daily Cash Price & Stocks tonnes tonnes US¢/lb. US¢/lb. (000’s) (000’s) 220¢ 220¢ 900 900 200¢ 200¢ 800 800 180¢ 700 700 180¢ 600 600 160¢ 160¢ 500 500 140¢ 140¢ 400 400 120¢ 120¢ 300 300 100¢ 100¢ 200 200 80¢ 80¢ 100 100 60¢ 60¢ 00 Jan-03 Jan-03 May-03 May-03 Sep-03 Sep-03
Slide 43: Copper Properties
Copper Properties Erdenet Major porphyry copper district 168 km22 immediately surrounding Erdenet Mine, one of the world’s largest copper mines
Slide 44: Copper Properties: Identified Drill Targets for 2006
Copper Properties Working Relationship with Erdenet Mine Northwest Extension Baglai Possible Open Pit Expansion Interjacent Erdenet Copper Mine Identified Drill Targets for 2006
Slide 45: Northwest Extension
Northwest Extension ne : =] ers = Paanct Mine Erdene License Are North Baglai @}) South Baglai — Interjacent 2.5 a kilometres
Slide 46: Erdenet Pit
ERDENET PIT i] 4 “f} Pe] ||| iPtines 4 Y frrstene] : fu
Slide 47: Partnership Strategy
Partnership Strategy Leading producer of export thermal coal Experienced uranium producer Established relationships worldwide Joint venture agreement Jeff Gerard, Chief Operating Vancouver based with Officer of the Americas, joined joined deposits in NA & Mongolia Erdene’s board this year Over $500
Slide 48: Uranium – Fundamentals
Uranium – Fundamentals Long-term supply & demand imbalance driving prices Increasing energy needs in China & India driving demand Current global production only 55% of total needs* Inventories at historically low levels * Source: World Nuclear Association
Slide 49: In-situ recovery diagram
Monitor Wells. ‘From Plant Unconsolidated Sediments Solution Permeable Layer B= ed Uranium Deposit
Slide 50: Uranium Properties
Rk i etdenet_ ‘WIT Mountain 4d O N G 8) Lk J e Springs Biger h Gob Zuun Mod J <s Erdene Properties MONGOLIA Gansu Jit _ Steel Complex “hbaatar mI is Tsen kher'Gol ° >. Baga Nuur 5 Underkhaa: Bus est . Galshar Uul Ney) Shivee Me AB © hndalgovi y FRA N 9 Yan ills . y te Virgin 9 ia bu faint SK eg Ovoo
Slide 51: International Uranium Corporation Partnership
International Uranium Corporation Partnership PRODUCT Uranium INVESTMENT $1 M in mid-2005 TERMS IUC to spend $6 M over 4 yrs (start in 2005) to earn 65% of uranium properties
Slide 52: Coal – Fundamentals
Coal – Fundamentals 3500 3500 3000 3000 2500 2500 Millions Millions 2000 2000 of of Tonnes 1500 Tonnes 1500 1000 1000 500 500 0 0 China China U.S. U.S. Europe Europe India India Russia Russia Other Other 2005 2005 2025 2025 Source: National Geographic
Slide 53: Xstrata Coal Alliance
Xstrata Coal Alliance PRODUCT Coal INVESTMENT $3 M 9.8% Erdene Ownership (Pre-Kaoclay Acquisition) TERMS Option to earn up to 75% of any coal opportunity in Mongolia Must fund all work through to completion of feasibility study
Slide 54: Coal Properties
Tsenkher’Gol “ ~ R’'Nuur = ag Underkhaa Seedy yn Gos a ‘er denet “4 ee Galshar, tee Galshar Coal xo MONGOL) % eal Virgin , a Wild Mountail . As +i, BIG® Springs a “ ‘ Biger Hakan teen eC va % ‘Durfainul za. oe Zuun Mod ar as Ove BR Erdene Properties ae Se MONGOLIA : seit Teagan 93 f. CHIN ee ‘ ’ joi
Slide 55: Coal Properties - Regional
Coal Properties - Regional Mongolian Coal Opportunities Evaluation Underway Aggressive exploration program planned for 2006 with Xstrata
Slide 56: Resource Assets in the U.S.A.
Resource A s s e t s in the U.S.A.
Slide 57: Kaolin – Fundamentals
Kaolin – Fundamentals Primarily used to coat high quality paper Also used in plastics, rubber, paints, pharmaceuticals and ceramics U.S. is world’s largest kaolin producer Georgia is kaolin centre, producing $1 billion of kaolin annually* * Source: US Geological Survey
Slide 58: Kaolin Asset
Kaolin Asset Sparta Kaolin – Georgia, U.S. Control over large primary kaolin resource Operated by industry leader, Huber Engineered Materials Commercial production started in 2005 Huber has pre-paid royalties
Slide 59: Granite Aggregate – Fundamentals
Granite Aggregate – Fundamentals Used primarily for building & road construction Concrete & pavement Strong demand in southeastern U.S.
Slide 60: Producing Assets in North America
Producing Assets in North America Maddox Granite Aggregate – Royalty Operated under royalty agreement by industry leader, Rinker Materials Quarry adjacent to rail Up to 4 million tonnes per annum for 20 years, starting 2007
Slide 61: Proposed Area to be Mined
Proposed Area to be Mined Maddox Property (342 acres) ¥ \ Permit Boundary Pes, i :
Slide 62: Kaoclay Merger – Potential Cash Flow
Kaoclay Merger – Potential Cash Flow Net Net Cash Cash Flow Flow Case Case 11 Net Net Cash Cash Flow Flow Case Case 22 Net Net Cash Cash Flow Flow Case Case 33 $M ($13.4M ($13.4M NPV NPV (10%) (10%) ($21.8M ($21.8M NPV NPV (10%) (10%) ($71M ($71M NPV NPV (10%) (10%) 20 15 10 5 0 -5 -10 2006 2006 200
Slide 63: Erdene – 2006 Program
Erdene – 2006 Program Negotiate Negotiate long- long- May May 25 25 term term agreement agreement Kaoclay Kaoclay with with Huber Huber shareholders shareholders vote vote Donkin Donkin Pre-feasibility Pre-feasibility Permitting Permitting for for study study underway underway Drilling Drilling & &
Slide 64: Outlook
Outlook Build on Positive Cash Flow Starting in 2007 Advance Top Priority Exploration Projects Remain Focused on Significantly Increasing Shareholder Value through Discovery
Slide 65: Erdene vs. DJ-S&P-IVN – 2 Years and 6 Months
Erdene vs. DJ-S&P-IVN – 2 Years and 6 Months
Slide 66: Experienced Management Team & Board
Experienced Management Team & Board Board with Vast Experience in Mining and Mining Finance Experienced Management Team in global exploration, mining and financing Strong relationships with financial, government & industry professionals
Slide 67: Aurelian Resources (ARU)
Historic Chart for Cdn: ARU by Stockwatch.com 604.687.1500 - (c) 2006 Tue Jun 13 2006 Op=18.25 Hi=19.70 Lo=17.09 ClE19.50 Vol=301,928 Year hi=21.30 lo=0.45 Cdn: ARU __—— ~ J. — = ee ee + ———— : 28.50 27.00 25.50 24.00 22.50 21.00 19.50 18.00 16.50 15.00 13.50 12.00 10.50 9.00 7.50 6.00 4.50 3.00 1.5
Slide 68: Erdene
Epedanet “Erdenet Tkh Tal
Erdene Resource Development — Shareholder Meeting (June 2006) on 6ix