Corporate Presentation London December, 2011
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, guidance or other statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond the Company's control, and that future events and results may vary substantially from what the Company currently foresees. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration results, continued availability of capital and financing and general economic, market or business conditions. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. The information contained herein is stated as of the current date and subject to change after that date. 2
Erdene Market Facts Dec-05, 2011 Trading Info Capital Structure TSX: ERD Shares Outstanding 94.6 M Shares Fully Diluted 102.2 M Working Capital CDN ~$4.1 M (1) 52 Week High/Low CDN $0.32 / $1.84 Market Cap CDN ~$40 M (2) Website www.erdene.com (1) Royalty cash-flow of between $1 and $2 million at full production + a majority interest in Advanced Primary Minerals (2) @ $0.42 share price Top 5 Shareholders (> 4%) Directors & Management AGF Xstrata Dynamic Funds Price ($CAD) 1 Year Share Performance 2 4 1.6 3 1.2 2 0.8 0.4 1 0 0 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Volume Share Price Commodities & Regions Volume (millions) Asian Lion Aggregate Coal Coal Metals 3
Erdene Investment Highlights DONKIN COAL PROJECT (25% ERD & 75% Xstrata) Pre-feasibility completed in June 2011; Permitting initiated NPV (8%) of $1.06 Billion ZUUN MOD MOLYBDENUM-COPPER PROJECT Located on Mongolia-China border June 2011: M&I resource of 274 M lbs Mo and 331 M lbs Cu MONGOLIA METALS & COAL EXPLORATION PROJECTS Drilling new Altan Nar gold discovery Strategic alliance with Xstrata Coal ROYALTY Royalty stream of $1 - $2 Million at full production for construction aggregate project in the U.S. 4
Donkin Coal Project 25% Erdene / 75% Xstrata Coal (Manager) Located on Deep Tidewater Exclusive Port Access Significant Infrastructure in Place Large Resource Long Mine Life High Quality Coal (Coking & Thermal) Low Operating & Transportation Cost Experienced Workforce 5
Ideally Located on Deep Tidewater Cape Breton, Nova Scotia 6
Large Resource Long Life 20 year initial mine life based on saleable reserves only 48 Mt probable saleable reserves Project economics are based on probable reserves calculated on indicated resources only Seam Indicated Resource (Mt) Probable Mineable Reserve (Mt) Probable Saleable Reserve (Mt) Inferred Resource (Mt) Lloyd Cove 53 n/a n/a 82 Hub 73 28 23 57 Harbour 101 30 25 115 Total 227 58 48 254 Significant upside to mine life from inferred resources Classified as semi-soft to semi-hard coking coal 7
Strategically Located Lowest FOB Cape Size Vessel Transport Costs in North America Cost Per Tonne ($US) $100 $90 $80 $70 $60 $50 $40 $30 Transport Cost Opex Actual James River Alpha Patriot Arch Consol Donkin Source & Assumptions: -Operating expenses taken from company reports -Average distance of 270 miles for Appalachian producers (EIA), with an ave transport cost / tonne mile of $0.10 (EIA) -Port handling fee of $2/tonne (Marston 2011) added to transport cost 8
Major Global Coal Trade Routes in 2010 Low Freight Rates & Increased Coastal Demand Donkin s Advantage - Accessing Global Markets DONKIN Major Coal Exporter 2010 Trade Route Source: Hatch, Macquarie, World Coal Markets, IEA 9
Pre-Feasibility Study Completed June 2011 (Marston & Marston Inc) Annual Production Rate of 2.75 Mt of Saleable Coal 75% coking, 25% thermal High yield of 81% ERD s: Peak funding capital: $73M EBITDA, full production: $74M NPV (8%) equates to $265 M for Erdene s 25% Potential to grow production to >4 Mtpy (Longwall operation) Financial Parameters FOB Cash Cost / Tonne (avg. over LOM) Capital Expenditure Peak Funding 1. Based on Erdene management estimates (C$) $58 $497 M $331 M Initial Production 2012 Full Production 2016 Payback 5 Years EBITDA (1 st year full production) $294 M Internal Rate of Return 36 % NPV @ 8% (after tax) NPV @ 10% (after tax) $1.06 B $830 M 1 10
Donkin Project Going Forward Canadian Environmental Assessment Process for Full Production ~18 months: August 2011 February 2013 Interim Production Opportunity Permits in place for initial production to a maximum of 620,000 tonnes/annum ROM Local customer consuming >2M tonnes of imported coal Decision in 2012 on timing for start-up of initial underground development determined by progress on permitting and finalizing coal sales contract 11
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Zuun Mod Mo-Cu Project Infrastructure Building 13
Zuun Mod Mo-Cu Project Molybdenum and Copper Highlights Image/map... Sexy shot of ZM perhaps Located on the China border, next to the world s largest base metals & steel producing markets Established >450 Mlbs each of moly & copper resource Mining License granted in 2011 Access to lower capex plant & equipment Growing local infrastructure & skilled labor force 14
Zuun Mod Mo-Cu Project June 2011 NI 43-101 Resource Estimate Category Resource Tonnage (Mt) Mo Grade (% Mo) Cu Grade (% Cu) Contained Mo (M lbs) Contained Cu (M lbs) M & I 218 0.057 0.069 273.5 330.7 Inferred 168 0.052 0.065 191.8 240.5 15
Zuun Mod Regional Target Areas Khuvyn Khar Cu-Ag Discovery Limited Drilling of Large Zuun Mod Mineral Complex Copper in Soil Anomaly Khuvyn Khar Cu-Ag Discovery 34m of 1.3% Cu & 9.24 g/t Ag Cu in soil anomaly Large mineralized annular feature - 12km circumference; ~ 80% of drilling over ZM deposit Zuun Mod Mo-Cu deposit 1 km 16
Zuun Mod & Khuvyn Khar Projects Plans 4 th Quarter 2011: Runge Strategic Mine Planning Complete Environmental Study Complete 1 st Quarter 2012: Feasibility Review Mongolian Mineral Council Copper Exploration Planning 2012 Partner Discussions 2 nd Quarter 2012 Commence Copper Exploration 17
Altan Nar Gold & Base Metal Discovery Regional Location N Tsenkher Nomin License Voyager s Cu-Au Discovery Altan Nar Discovery Shinejinst coal deposit Khuvyn Khar Cu-Ag Discovery ERD License 25 km Zuun Mod Deposit 18 18
Altan Nar Gold & Base Metal Discovery Soil Sampling Survey; Gold-in-Soil N Ancient copper-gold pits initial ERD drilling 2m of 6% Cu & 2.5g/t Ag Soil: 1.4 g/t Au Soil: 0.47 g/t Au 2 km 19
Altan Nar Gold & Base Metal Discovery Rock Sampling Survey; Gold & Base Metal N 3.2 g/t Au 2.2% Cu 19 g/t Au 12 % Pb 5.2 g/t Au 3.2% Cu 11 g/t Au 41 g/t Au 11 % Pb 1% Zn 0.35% Mo 2.6% Cu 1.7% Cu 14% Cu 2 km 20
IP Gradient Array Chargeability Altan Nar Sept Drill Plan TND-11 TND-12 Drill collar with drill path TND-10 Rock chip sample (g/t gold) IP Dipole-Dipole Line Drill Collar TND-09 100m 500m 21
Altan Nar Gold & Base Metal Discovery 3D Chargeability Model 3.5 g/t Au TND-11 TND-10 TND-09 TND-12 1.5 g/t Au 41 g/t Au 3.2 g/t Au 22
Altan Nar Drill Section TND-09, -10 NW 25m 40m of 0.32g/t Au and 3 g/t Ag; including 4m of 0.96 g/t Au and 12 g/t Ag 55m of 1.02g/t Au, 12g/t Ag, 0.26% Pb & 0.5% Zn; including 23m of 2g/t Au & 23g/t Ag; with 8m of 3.9g/t Au and 17g/t Ag 23 23
Altan Nar Drill Section TND-12 25m SW 21m of 1.5% Zn and 0.4% Pb 48m of 0.51g/t Au; including 10.5m of 1.20g/t Au, 16g/t Ag and 0.41% Zn 24 24
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Altan Nar Gold & Base Metal Discovery Plans 4 th Quarter 2011: 3000m (20 hole) Drill Program 1 st Quarter 2012: Drill Results Compilation and Interpretation 2 nd Quarter 2012: Expand Detailed Surface Exploration (Geochemistry and Geophysics) Over Entire 2km x 3km Area Expanded Drill Program 26
Market Cap Peer Group Comparison Coal and Mongolia Metals (assumes current market cap split 50/50; 05-Dec, 2011) Donkin Coal Early-stage coal production/development Mongolia Metals Emerging Metals Projects $1,000 $800 $600 $400 $200 $0 $200 $150 $100 $50 $0 27
Erdene Resource Development Project Summary Advancing a large export coking coal project in Canada with Xstrata Permits in Place for ROM Production, Sales Discussions Initiated 1 st Quarter 2013: Environmental Assessment Process Complete Advancing a major Mo-Cu project near China- Mongolia border 2012 Copper Exploration and Site Feasibility Studies Partnership Discussions Initiated Drilling new gold discovery at Altan Nar in southwest Mongolia 1 st Quarter 2012 Results 2 nd Quarter 2012 Detailed Drilling 28