Mongolia borders the largest coal consuming nation with estimates suggesting that over the next 25 years, China needs to secure approximately six million tonnes per month in new coal production to meet demand. The Erdene-Xstrata coal alliance is positioning itself to become a major participant in the coal industry of Mongolia. In 2010, our exploration efforts will focus on eight (8) newly acquired exploration licenses covering over 407,000 hectares which will be explored for the coal potential while our program of project evaluation and acquisition will continue. Our coal exploration program in Mongolia is designed to identify and secure large tonnage thermal and metallurgical coal deposits.
In cooperation with Xstrata, Erdene is involved in a comprehensive coal generative and acquisition program that evaluates numerous prospective metallurgical and high quality thermal coal deposits throughout Mongolia. In February, 2006 Erdene and Xstrata Coal entered into an agreement ("Alliance Agreement") whereby Erdene granted Xstrata Coal certain rights, including a first option to enter into a joint venture and earn a 75% interest in any coal opportunity in Mongolia identified by Erdene by funding all work through completion of a feasibility study and by maintaining a minimum 5% equity position in Erdene. All of Erdene's coal exploration in Mongolia is being fully funded by Xstrata and is being carried out in consultation with Xstrata.
Since 2006, Erdene has visited hundreds of coal sites throughout Mongolia and in the process has compiled an extensive database on coal deposits, occurrences, prospective stratigraphy and sedimentary basins allowing for a prioritization of targets. In 2008 and 2009, Erdene’s property evaluation and acquisition program was designed to identify and secure access to additional exploration licenses in Mongolia with the potential to host large tonnage thermal and metallurgical coal resources. In 2008, three properties were drill tested with 13 drill holes totaling 1,586 metres. Results do not warrant follow-up exploration for coal on these properties. In 2009, Erdene acquired eight (8) new exploration licenses totaling over 407,000 hectares with potential to host significant coal deposits. These licenses will be the focus of the 2010 exploration work together with our continuing program of project evaluation and acquisition.
