Mongolian Resource Play

[Tackler]

ERD Erdene Gold reviews results of Virgin property drilling

2004-12-23 12:38 ET - News Release

Mr. Peter Akerley reports

TEMUUJIN DRILLING IDENTIFIES SIGNIFICANT POLYMETALLIC MINERALIZATION ASSOCIATED WITH EXTENSIVE PORPHYRY-TYPE ALTERATION; DRILL WITH GREATER DEPTH CAPABILITY SECURED FOR 2005

Erdene Gold Inc. has released the results of its reconnaissance drilling campaign in the Temuujin district of the Virgin property in southeastern Mongolia. Erdene completed 19 diamond drill holes for a total of 6,196 metres from mid-August to the end of November, 2004. The drill program confirmed an extensive porphyry-type alteration system within the Temuujin II prospect area and identified other similar systems within the Temuujin district. The Virgin property is located approximately 90 kilometres west of the Trans-Mongolian railway and 40 kilometres north of the China-Mongolia border.

"Generally, what we are observing is the occurrence of polymetallic mineralization associated with a very extensive porphyry-type alteration system that now continues over at least four kilometres at Temuujin II and III. The areas tested to date display typical characteristics of the distal portion of a zoned porphyry with extensive pyrite, low-grade copper and gold over the central portion and higher silver, lead and zinc values associated with jasper and chalcedonic breccias in the extreme east and west," said Peter Akerley, president and chief executive officer. "The drill program confirms the Temuujin district and the Temuujin II and III prospects in particular, as high-potential target areas for hosting a porphyry copper-gold deposit. Further deep drilling will commence in March, 2005, to locate the source of the mineralization."

The initial 14 holes of the 19-hole Temuujin drill program tested multiple targets throughout the 20-kilometre by eight-kilometre area, and determined that the northeast portion of the district warranted more detailed evaluation based on extensive polymetallic mineralization and intense porphyry style alteration. The remaining five holes completed in 2004 were used to provide further geological information and controls on mineralization within the Temuujin II and III prospects areas to assist in designing the next phase of drilling. The 2005 follow-up drill program is planned to begin in March with a more powerful drill rig capable of deeper drilling to more thoroughly test the large mineralized area at Temuujin II and Temuujin III.

Temuujin II and III prospect areas

Drilling has confirmed the four-kilometre-long Temuujin II and Temuujin III areas represent a porphyry-related deposit environment containing significant polymetallic sulphide mineralization (pyrite, arsenopyrite, sphalerite, chalcopyrite). Nine holes were completed totalling 3,745 metres, and were collared from 400 to 800 metres apart. Average hole depth was 416 metres with the deepest hole (TDD-02) drilled to a vertical depth of 540 metres. Three distinct zones of mineralization and alteration have been identified by the drilling.

Propylitic breccia zone (Temuujin II)

Four holes tested this gold- and copper-enriched zone of pyritic- and pervasively propylitic-altered andesite breccia within the central part of the Temuujin II prospect. Initial drilling included TDD-01 and TDD-02 in the central part of the zone where phyllic (quartz-sericite-pyrite) alteration increases at depth accompanied by increased copper-gold values. TDD-02 contained gold concentrations of up to 1.1 grams per tonne, and copper values up to 0.32 per cent in the deeper sulphide zones (see news in Stockwatch dated Oct. 22). The recent drilling included holes TDD-17 and TDD-18, and tested the extreme eastern and western ends, and extended the zone over a strike distance of 1.9 kilometres. This zone remains open in both directions. TDD-17 drilled 500 metres west of the TDD-01, intersected intensely sheared and brecciated propylitic to argillic trachyandesite with weakly anomalous gold, copper and zinc values. TDD-18 collared 800 metres east of TDD-02, contained a zone of propylitic altered andesite underlain by a zone of intense argillic (clay) alteration containing disseminated and locally abundant pyrite and very minor chalcopyrite. Anomalous gold values (maximum 0.18 gram per tonne) occur throughout associated with zones of weak phyllic alteration. Anomalous zinc concentrations (maximum 0.19 per cent) are associated with the argillic alteration. Both alteration types are interpreted to represent alteration/mineralization adjacent to a buried porphyry system.

Tourmaline monzonite zone

A sulphide-rich, tourmaline monzonite and tourmaline-breccia dike located to the northwest of Temuujin II was tested over a strike distance of 1.2 kilometres by three drill holes (TDD-03, TDD-10 and TDD-15). All three drill holes intersected pyrite- and arsenopyrite-rich tourmalinized intrusive from surface to a maximum vertical depth of approximately 330 metres. The monzonite contains disseminated and vein-type pyrite and local minor chalcopyrite associated with quartz-tourmaline stockwork and tourmaline breccia zones. Sulphide content, stockwork veining and tourmaline alteration are most intense in TDD-15 with copper values up to 0.18 per cent and isolated intervals of high silver content (12 to 20 parts per million). TDD-15 is the western most hole in the mineralized intrusive which continues west for a minimum of 1.6 kilometres.

Argillic breccia zone (Temuujin III -- one kilometre east of Temuujin II)

Two holes (TDD-11 and TDD-19) tested Temuujin III and intersected argillic and silicified trachytic andesite and siliceous breccia containing fine-grained disseminated and stringer-type sulphides and jasper breccia with minor disseminated sulphides. TDD-11 intersected several zones of argillic breccia containing disseminated and stringer-type sulphides. The most significant assays occur within a 16-metre section from 197 to 215 metres containing an average of 8.6 grams per tonne silver (one to 34 grams per tonne). Also within this section is a six-metre zone which assayed 14.3 grams per tonne silver, 0.16 per cent lead, 0.29 per cent zinc with anomalous gold (average 0.041 gram per tonne). Other isolated high silver assays up to 20 grams per tonne were obtained from this hole. TDD-19 was collared 75 metres south of TDD-11 to test the down dip extensions of sulphide-bearing argillic alteration zones intersected in TDD-11. The most significant polymetallic assays from TDD-19 were obtained from a 10-metre-wide zone of siliceous breccia (220 to 230 metres), which averaged 0.2 per cent zinc (maximum 0.8 per cent), 0.1 per cent arsenic (maximum 0.5 per cent), and very anomalous lead (maximum 0.1 per cent) and gold (average 0.05 gram per tonne). Similar, but narrower zones of gold-, zinc- and arsenic-enriched breccia occur over the entire drill hole; 0.11 gram per tonne gold over one metre (254 to 255 metres), 0.1 gram per tonne gold over four metres (295 to 299 metres), 0.48 gram per tonne gold over one metre (360 to 361 metres), 0.05 gram per tonne gold over five metres (376 to 381 metres), including 0.29 per cent zinc over one metre, 0.11 gram per tonne gold and 0.4 per cent zinc over two metres (399 to 401 metres). These assays occur within much wider zones of anomalous assay results.

Togrog Uul prospect (western Temuujin district)

TDD-04 tested a pyritic hydrothermal breccia associated with tourmaline monzonite and returned anomalous gold (0.12 gram per tonne over one metre) and enrichment in zinc (maximum 0.24 per cent over six metres), lead (maximum 0.11 per cent over two metres) and arsenic (0.12 per cent over eight metres) associated with limonitic and siliceous hydrothermal breccia. The second hole (TDD-05) intersected altered rhyolite passing into discrete zones of pervasive and fracture-controlled, limonitic, argillic and silicified rhyolite breccia with results indicating significant silver enrichment with an 18-metre zone averaging 11 grams per tonne silver (114 to 132 metres).

Temuujin IV prospect

Anomalous gold values (up to 0.15 gram per tonne) were returned from argillic alteration zones characterized by angular rhyolite fragments in a black (often sooty) matrix (121 to 239 metres) in hole TDD-12. The argillic zones are characterized by pervasive, white clay alteration with the local occurrence of variably oriented barren quartz stringers.

Temuujin I prospect

Hole TDD-09 intersected 85 metres of intensely argillic altered intrusive rock containing disseminated to near massive pyrite mineralization over 33 metres (44 to 77 metres) with anomalous gold, silver, copper, zinc values.

Temuujin VI prospect

Anomalous copper values up to 0.12 per cent (one metre) were intersected in the oxide portion of the two shallow holes testing an area of copper oxide mineralization at surface.

Regional drilling results

Two vertical holes to test geophysical anomalies were also completed four kilometres south and six kilometres west of Temuujin II. TDD-13 returned several zones of gold-zinc enrichment including 0.1 per cent zinc over 14 metres (241 to 254 metres), which includes 0.1 gram per tonne gold over one metre (242 to 243 metres) and 0.1 gram per tonne gold, 0.26 per cent zinc over two metres (250 to 252 metres). Hole TDD-14, which intersected volcanic breccia containing coarse carbonate and disseminated and vein-type magnetite, and narrow jasper plus magnetite breccias, did not return any significant assays.

Summary

The Virgin property is situated within the inferred northeast continuation of the island-arc environment, which hosts significant copper-gold porphyry mineral deposits, including the world-class Hugo deposit at Oyu Tolgoi. Erdene's exploration to date has focused on the 20- by eight-kilometre Temuujin district in the northeast part of the 95-kilometre-long Virgin claim block. Drilling has confirmed a porphyry-related deposit environment within the Temuujin II prospect area. It is probable that the Temuujin II, and Temuujin III prospects are part of a single system in excess of four kilometres long. Extensive porphyry-type propylitic and phyllic alteration within andesitic volcanic rocks and sulphide-rich, tourmalinized and quartz stockworked monzonite intrusive intersected in the Temuujin II area are typical of the distal part of a zoned porphyry system. Drill results also suggest the presence of porphyry-related alteration and potential mineralized environments at the Togrug Uul, Temuujin I and Temuujin IV prospect areas.

Erdene intends to fully evaluate all exploration results from the Virgin property over the next two months in preparation for a follow-up drilling program scheduled to begin in March, 2005, within the Temuujin district using a Longyear 44 rig capable of penetrating to greater depths.

Qualified person

This news has been prepared under the supervision of Michael Corey, PGeo, who serves as the qualified person under National Instrument 43-101. All samples are assayed at SGS Laboratory in Ulan Batar, Mongolia. In addition to SGS Laboratory internal checks, Erdene Gold incorporates a QA/QC sample protocol using prepared standards, sample splits and duplicates.