In June 2006, Erdene acquired all of the outstanding shares of Kaoclay Resources Inc. in return for shares and warrants of Erdene. This acquisition has provided Erdene with North American based projects with near-term cash flow potential and significant growth potential over the longer term. The North American project portfolio includes two notable industrial mineral projects as well as a 25% interest in the Donkin coal project which provides Erdene with an opportunity to partner with Xstrata Coal Canada Ltd. again, this time in North America.

The Donkin coal project, now advancing towards feasibility stage, is located in northeastern Cape Breton, Nova Scotia. The project is ideally situated for the transport of the high quality Donkin coal to local and growing markets along the U.S eastern seaboard and/or Europe. Following an internal evaluation the Donkin Coal Alliance has recently received a positive independent preliminary assessment, a bulk sample program has been initiated and an inseam drilling program is underway.

The Company’s industrial mineral opportunities include the Primary Kaolin project in Georgia, U.S., which is operated by industry leader J.M. Huber Corporation, and the Maddox Granite Aggregate project, a royalty project in the southeast U.S. managed by another industry leader, Ready Mix USA. Erdene is actively exploring for additional industrial minerals opportunities in North America focusing on aggregate projects that are strategically located to provide market advantage to the growth areas of the eastern seaboard of the U.S.