Erdene Gold teams with Xstrata on feasibility study of Donkin N.S. coal project

By The Canadian Press

HALIFAX - Erdene Gold Inc. (TSX: ERD.TO) said Friday that it and Xstrata PLC have committed to funding a feasibility study of an evaluation and development program at the Donkin coal deposit in Cape Breton Island.

Erdene, which owns a 25 per cent stake in the project, said it will work alongside Xstrata Coal Donkin Ltd., which owns the remaining 75 per cent.

Financial details were not disclosed.

Erdene and Xstrata have been looking to reopen the Donkin underground mine and sell its coal to the domestic and export thermal coal markets.

The latest study is to be completed by the end of the year, providing "further information deemed critical to the assessment of the feasibility of the large-scale underground mining options under consideration," Erdene stated, on behalf of the Donkin Coal Alliance.

The new report will follow up on recently completed studies that "met expectations that the proposed Donkin project could generate economic returns consistent with those identified in the project's preliminary assessment report of November 2007."

Erdene added that in-seam drilling is complete and information on gas concentrations and coal quality is now being processed.

The feasibility study will focus on gaining greater certainty about geological and mining conditions, as well as market demand.