The Global Coal Industry,

Nova Scotia’s Energy Plan and

the Donkin Coal Project

Erdene Resource Development Corp

November 2011

2

The information contained herein is derived from public sources including the

Donkin Project specific information available at www.sedar.com

Certain information regarding Erdene ("the Company") contained herein may

constitute forward-looking statements within the meaning of applicable securities

laws. Forward-looking statements may include estimates, plans, expectations,

opinions, forecasts, projections, guidance or other statements that are not statements

of fact. Although the Company believes that the expectations reflected in such

forward-looking statements are reasonable, it can give no assurance that such

expectations will prove to have been correct. The Company cautions that actual

performance will be affected by a number of factors, many of which are beyond the

Company's control, and that future events and results may vary substantially from

what the Company currently foresees. Factors that could cause actual results to differ

materially from those in forward-looking statements include market prices,

exploitation and exploration results, continued availability of capital and financing and

general economic, market or business conditions.

The Company's forward-looking statements are expressly qualified in their entirety by

this cautionary statement. The information contained herein is stated as of the current

date and subject to change after that date.

FORWARD-LOOKING STATEMENTS

The Donkin Project

Capitalizes on our strength in geography and natural resources

Helps maintain competitive electricity rates

Generates finances to fund the Province’s commitment to

cleaner energy

Creates long term, skilled, “family wage” employment in rural

and high unemployment regions

Increases our GDP

Injects substantial funds into the local economy

Limits the outflow of money from Nova Scotia to source foreign

fuel supply

3

4

Outline

Company

Project

Coal Consumption

Economy

Environment

Future

Conclusions

Erdene – A Nova Scotia Company

Headquartered in Nova Scotia with projects in Canada,

USA, and Mongolia

Employs 32 people full-time, internationally, with 10

based in Halifax

Ranked as top performing company on TSX in Atlantic

Canada in 2010

Has raised $55M since 2003 with greater than $25M spent

in Nova Scotia

Has invested $21M in the Donkin project (including

acquisition costs) since the project was awarded in 2005

Donkin project has employed 10 to 20 people full-time

since 2005

5

www.catapultcamp.com 6

Erdene is the Presenting Sponsor of Catapult,

a non-profit camp in NS, focused on

enhancing leadership skills in young people

before they start high school

Aiding the community through Donkin Joint-

Venture in numerous causes such as the

Donkin Veteran’s Memorial Park, and the

renovation of the Donkin Community Center

A leader in Community & Sustainable

Development activities in the mining industry

of Mongolia, including partnering with the

Canadian Government on a farming initiative

Erdene: Comitted to Improving the Lives of

Those in the Communities in which we Work

THE PROJECT

7

8

Cape Breton Coal and

The Donkin Coal Project

8

9

Highlights of the Donkin Project

WORLD CLASS LOCATION AND RESOURCE Large, high quality coking coal deposit on deep ocean globally

Well located relative to growing US coal-generated power

Strong domestic demand, forecast to exceed 1.5 Mt through 2030

Exclusive Port Access: congestion a major issue in Australia and BC

SIGNIFICANT INFRASTRUCTURE IN PLACE Greater than $100M invested in site infrastructure

Near industrial region, centered by the Port of Sydney

HIGH QUALITY COAL Coking coal blend for steel manufacturing, sold internationally

Very high energy thermal coal for power generation

LOW OPERATING COST Lowest transportation cost to port of any coal producer in Canada

EXPERIENCED WORKFORCE Over 300 years of coal mining with >300 Mt mined

Coal industry directly employed 1,650 people in 2000

Recent History of Donkin Project

2005: Donkin consortium awarded tender based on a

plan to develop the Donkin project

2007: Parliament passed the Donkin Coal Block

Development Opportunity Act in Dec 2007

2008: Permit for mining of 2,000 tonnes per day

(ROM) granted in Dec 2008 to facilitate underground

exploration

2011:

Prefeasibility completed in June 2011; confirms

robust viability of the Donkin project with a

$1.06 billion NPV (8% discount)

Federal Environmental Assessment process

initiated in August 2011

Donkin Joint-Venture has spent directly CAD $34

million to date (44% Erdene)

10

11

Donkin Project Development $34M Direct Investment To Date

12

No. 26 Colliery

Ideally Located on Atlantic Ocean

Source: ERD research, Thompson-Reuters 13

Distance to Port Operating & Transport Cost

Average Global Cash Cost

Comparison (FOB US$/t)

Major Exporting Countries

USA

Russia

South Africa

Australia

Colombia

Indonesia

Strategically Located Lowest Transport Costs in Canada (Rail Option)

$0 $20 $40 $60 $80

DONKIN

0

200

400

600

800

1,000

1,200

1,400

CLINE GRANDE CACHE

WALTER (Canada)

ERDENE

KM

$0

$20

$40

$60

$80

$100

$120

GRANDE CACHE

WALTER (Canada)

CLINE ERDENE

US$

OPERATING COST / TONNE

TRANSPORT/PORT / TONNE

Source: Hatch, Macquarie, World Coal Markets, IEA

Major Global Coal Trade Routes in 2010 Low Freight Rates & Increased Coastal Demand

Major Coal Exporter 2010 Trade Route

Donkin’s Advantage - Accessing Global Markets

14

15

Rail Option: 31km total to

International Pier (24km new line)

Site Development Plan Transport Options - Rail vs. Marine

Marine Option: 3,000 tonne barges loading off

the Donkin peninsula to vessels up to Cape Size

Source: ERD research

Thermal Coal Quality Comparison

16

Company Xstrata-

Erdene

BHP, Anglo,

Xstrata Consol

Mine Donkin Cerrejón Bailey

Location Nova Scotia Columbia PA, USA

ENERGY BTU/lb 14,500 11,150 12,950

VOLATILES % 37 33 37

ASH % 3.5 8.4 7.0

MOISTURE % 1.9 13 1.0

SULPHUR % 2 - 3 0.7 1.6

PHOSPHOROUS % 0.13 0.02 0.52

MERCURY ppm 0.15e 0.04 0.07-0.15

CHLORINE % 0.16e 0.03 na

Donkin Development Plan

17

Phase I: Requires Commitment from NSPI and Xstrata Exploration/Feasibility Phase Required Before Ramp up to Full Production

~$100M and >100 jobs

Single Continuous Miner Program

Permit in Place for ~600,000 Tonne/Year Production

Quality Meets or Exceeds Current NSPI Domestic Criteria

Construction Could Begin Immediately with Initial Production in late 2012

Potential to Replace Diminishing Domestic Supply

Quality will Improve as Coal Processing Added

Phase II: Requires Regulatory and Corporate Approval Export Coal 4 Continuous Miners

~3 Mt Production

Potential to Employ Upwards of 800 & Create Inflows of ~$80M Annually to Nova Scotia & Federal Governments

Environmental Assessment Process Underway; ~18 Months Before Approval Granted

75% Coking Export and 25% Thermal

THE COAL INDUSTRY

18

Source: BP Statistical review of world energy 2011 - http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_ publications

/statistical_ energy_review_2011/STAGING/local_assets/spreadsheets/statistical_review_of_world_energy_full_report_2011.xls. Retrieved 2011-06-10

0

1000

2000

3000

4000

5000

6000

7000

8000

2003 2004 2005 2006 2007 2008 2009 2010

Millio

n T

on

nes

Global Coal Production

China

USA

Global

Coal Use Has Increased by 2 Billion Tonnes

or 27% Over The Past Eight Years

19

Global Energy Projections (EIA, Aug’11) Demand: 5 New Donkin Projects/Month until 2032

Assuming all renewable targets are met, global coal

consumption will still grow by 50% by 2032

Requiring, on average, 15M new tonnes / month, the

equivalent of 5 new Donkin coal mines/month (currently 9)

Canada is moving towards the closure of coal-fired plants

that have not installed Carbon Capture and Sequestration

What Canada will remove over the next 20 years (35M

tonnes) will be replaced every 2 to 3 months globally

Clean coal technology & development has to

play an important role in Canada’s and the

World’s energy future

20

21

0%

20%

40%

60%

80%

2008 2009 2010 2020 2032

Coal/Petcoke Nat Gas Renewables Demand Side Mgmt

Nova Scotia Energy Consumption Past, Present, Future

Actual

The NS Dept of Energy (2010) and NSPI (2009) forecast for coal

consumption (includes ~15% petcoke) suggests 1.95 Mt in 2020 and

1.89 Mt in 2032, respectively

This equates to > $200M per year to purchase imported coal or

>$4B by 2032

Source: NS Department of Energy 2010), NSPI (2009)

NS Dept of

Energy 2010 NSPI IRP

2009

Source: http://nuclearfissionary.com/2010/04/02/comparing-energy-costs-of-nuclear-coal-gas-wind-and-solar/

$-

$0.05

$0.10

$0.15

$0.20

$0.25

Nuclear Coal Natural Gas Wind Solar Hydro

C

o

s

t

p

e

r

k

W

h

(

$

U

S

D)

22

Construction Cost

per kWh + Production Cost

per kWh + Decommissioning

Cost per kWh

(Nuclear only) =

Total Cost

per kWh

$0.039 $0.044

$0.104

$0.083

$0.220

$0.028

Base Load Renewable

Comparing Energy Costs Cost per kWh to the consumer (USA, 2010)

Source: Nova Scotia Integrated Resource Plan, 2007 & 2009

Nova Scotia’s Power Generation Key Findings

>60% of Nova Scotia’s electricity is generated by coal-

fired utilities

The majority of coal consumed in Nova Scotia is from

foreign sources

greater unpredictability in supply and pricing

major outflow of rate payer $’s (~$4B over 20 years)

Electricity generation from power plants is low cost

compared to many alternatives, even with added

investment for emission control

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THE ECONOMY

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Sources: Marston 2011 Technical Report, and Gardner Pinfold Consultants – Donkin Socio-Economic Impact Study October 2011 25

Donkin’s Economic Impact $7.6 Billion Over 30 Years

Indicators ($CAD million) 30-Yr Annual

Average 30-Yr Total

Rail Option (3.4 Mt ROM)

Capital Expenditure $28.3 $848.5

Operational Expenditure $144.4 $4,332

Provincial Taxes $41.6 $1,245.7

Federal Taxes $38.3 $1,150.9

Total Taxes $79.9 $2,396.6

TOTAL $252.6 $7,577.1

“There are very few single prospects in Nova Scotia with the potential to

provide economic impacts of this scale over a thirty year period” Gardner Pinfold Donkin Socio-Economic Impact Analyses (Oct 2011)

Sources: Marston 2011 Technical Report, and Gardner Pinfold Consultants – Donkin Socio-Economic Impact Study October 2011 26

“Cape Breton is expected to capture 63% of the

employment (505 jobs) & annual GDP ($42M) from Donkin” Gardner Pinfold Donkin Socio-Economic Impact Analyses (Oct 2011)

Indicators (all Nova Scotia) 30-Yr Annual

Average 30-Yr Total

Rail Option

Employment - Direct 382 11,458

Employment - Indirect 428 12,828

Employment - Total 801 24,286

GDP (CAD$ million) $66.4 $1,993

Donkin’s Benefit to Cape Breton $42M Annual GDP and >500 Jobs for 30 Years

Donkin to provide long term industrial development and

high-tech skills training

27

Annual Average Income to Government and NSPI Through use of Donkin Coal Over 30 Years

($CAD million) Provincial Federal 30 yr Total

Transportation Assume $25/t less for Donkin vs. Imported SA (1 Mtpy)

$25 $750

Energy Savings Donkin is ~30% higher BTU than Imported SA (1 Mtpy)

$42 $1,260

Provincial Taxes Corporate, Excise, Payroll, etc

$38.9 $1,167

Provincial Royalty $1.22/t

$2.7 $81

Federal Taxes Corporate, Excise, Payroll, etc

$38.3 $1,149

TOTAL / YEAR $109 MM $38.3 MM $147 MM

TOTAL / 30 YEARS $3.3 billion $1.1 billion $4.4 billion

Donkin Coal Project Potential for $4.4 Billion in Taxes and Savings – 30 Yrs

THE ENVIRONMENT

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Source: Nova Scotia Power

Nova Scotia Emission Control

From 1998 to 2010, emissions of major pollutants in Nova Scotia

have dropped by 31% to 74%

During that same period Nova Scotia’s coal consumption has

averaged 2.8 Mt per year (range 2.0 to 3.35 Mt)

The Province’s 2020 emission targets are achievable with further

investment in clean coal technology

The cost of a wet scrubber at Lingan is approximately $210M and it’s

estimated it will cost $6.6M per year to operate and maintain totalling $408M

over a 30 year period.

The cost of installing Activated Carbon Injection technology with Baghouse at

Lingan is roughly $66M with $8.1M per year to operate, totalling $309M over

a 30 year period

Total: $798M (30 years) for Lingan Emission Control Technology

(including $81M NOx reduction) to reduce emissions to 2020

target levels funded by ~$1 Billion savings from lower transport

costs and higher energy from using Donkin Coal over 15 years

29

Source: http://web.mit.edu/mitei/docs/reports/specker-retrofits.pdf / http://www.airwaterland.ca/article.asp?id=2476

Nova Scotia: CO2 Capture & Sequestration

Carbon Footprint (GHG’s)

Carbon content determines the amount of CO2 production and therefore coals are largely similar in their greenhouse gas impact relative to energy produced

International Energy Agency predicts a need for >3,000 CCS systems worldwide by 2050 if temperatures are not to rise by more than 2 degrees

The federal government is currently putting in place regulations which will

limit the life of coal fired power plants to their commercial life which in

Nova Scotia’s case means having to replace >40% of it’s power supply in <

20 years or employ carbon capture and sequestration

NSPI’s 2009 IRP document estimates the cost of installing two CO2

capture units at Lingan to be $433M with a $11.9M/yr operating cost

Capable of reducing CO2 emissions by up to 90%

Total: $793M over 30 years for CCS Added to Lingan to reduce

emissions to 2020 targeted levels potentially funded by ~$2

Billion in savings from using Donkin Coal over 30 years

30

Sources: NSPI 2009, ERD Research

Nova Scotia Emission Control Lingan Generating Station (2 x 160 MW units)

Control Technology

($CAD)

Capital

Cost

O&M /

yr

O&M /

30 yr

Capital Cost +

30yr O&M

Cost to Meet

Federal proposal

on CO2 emissions

at Lingan

CO2 Capture $433 $12 $360 $793

Cost to retrofit

Lingan to meet

2020 sulphur,

NOx, and

Mercury

regulations

2.5% S Wet Scrubbers (SO2) $210 $6.6 $198 $408

Activated Carbon Capture (Hg) $6 $4.8 $144 $150

Baghouse with ACI (Hg) $60 $3.3 $99 $159

Selective Catalytic Reduction (NOx) $48 $1.1 $33 $81

TOTAL $324 $16 $474 $798

31

THE FUTURE

32

Source: The Sydney coalfield of Nova Scotia, Canada Original Research Article, International Journal of Coal Geology, Volume 23, Issues 1-4, September

1993, Pages 29-42, Peter A. Hacquebard

Donkin Peninsula and the Sydney Coal Basin

Giant Resource and 300+ Year Mining History

The Southern Edge of the Giant

36,000 km2 Sydney Coal Basin Reported to

Contain More Energy Than the Alberta Oil Sands

33

Sydney Coal Basin Future Development Potential

Conventional Coal Mining – New Technology

Advances in conventional coal mining techniques over the next

several decades could provide access to currently unavailable

resources

Coal-bed Methane (CBM)

Donkin alone could produce 30MW with a rapid payback;

potential to combine CCS with CBM

Underground Coal Gassification (UCG)

Converts coal to gas while still in the coal seam in locations

otherwise inaccessible by conventional means

34

Sydney Region Related Future Development Potential

Coal Blending and Trans-shipment Facility

Tailoring export with Donkin coal for steel and thermal plants

on Atlantic

Construction of Scrubber and Other Clean Coal

Technological additions

Carbon Capture and Storage (CCS)

Developing a research and implementation project around CCS

in Cape Breton is a long term project with significant spin-off

potential (CBU) and $100’s of million in construction projects

35

THE CONCLUSIONS

36

CONCLUSIONS

Nova Scotia will continue to secure >40% of it’s

electricity from coal over the long term

Nova Scotia rate payer’s could spend $4 Billion

over the next 20 years purchasing imported coal

Nova Scotia hosts a world class coal deposit that

could satisfy Nova Scotia’s energy needs

Utilizing the Donkin resource can help fund Nova

Scotia’s green energy future

37

IMPACT OF THE DONKIN PROJECT

38

Creates one of eastern Canada’s largest

construction projects

$7.6 Billion injected into Nova Scotia’s economy

over a 30 year period

Generates annual Federal & Provincial tax revenues

of $80 Million

Creates >800 direct and in-direct jobs

Brings industry and jobs back to industrial Cape

Breton

Spurs research and investment in the energy sector

39