Erdene CEO Peter Akerley revealed the company would continue to pursue the development of its 25%-owned Donkin project with partner Xstrata Coal Canada (75%).
“However, one outstanding matter that must be finalised before the commencement of mining is to have a coal offtake agreement signed with potential domestic and international customers with whom the joint venture is currently in discussions,” Canada-based Erdene said yesterday in its 2008 annual results.
The project is currently in the feasibility stage of a continuous miner exploration and development program designed to test the suitability of the deposit for longwall production.
A workforce of 12 continues to advance tunnel refurbishment and maintain the site in advance of a development decision.
Erdene said regulatory requirements, including environmental approval, for the project had been cleared, requests for tenders had been distributed and negotiations entered into with potential customers.
“Thermal coal is expected to remain the principal fuel for long-term growth of electricity production in the industrialised Western nations. A large, high-energy coal resource proximal to a deepwater port is unique and positions Donkin to be competitive in the Atlantic seaborne thermal coal markets,” Erdene said.
During 2008, Erdene spent almost $C4 million on the Donkin project out of total exploration expenses, including capitalised costs, of $9.4 million.
Further away from home, Erdene is concentrating its exploration efforts with Xstrata in Mongolia.
Erdene is carrying out a “coal generative and acquisition program” in Mongolia that evaluates prospective metallurgical and high-quality thermal coal deposits. The program is fully funded by Xstrata.
Last year Erdene said it had conducted numerous property evaluations, with three properties reaching the drill-tested stage.
Erdene said although results on the properties did not warrant follow-up exploration, it would continue property evaluation work during 2009 to identify and secure large-tonnage coal deposits.
Looking ahead, Erdene said it was in a strong position with $16.2 million in cash and would be able to meet its share of the Donkin commitments.
The company said it had introduced cost-cutting measures to reduce expenses during 2009, by decreasing administrative overheads and scaling down or postponing early-stage and grassroots exploration programs.
“Going forward, Erdene will remain focused on developing projects associated with the company's core commodities, which consist of coal, base metals, gold and industrial minerals. Management continues to believe that these commodities, especially in Asia and North America, have strong long-term market fundamentals,” Erdene said.
“At the same time, Erdene will investigate opportunities for further expansion through organic growth, joint ventures and acquisitions.”
