Vancouver, B.C., November 13, 2019 – Entrée Resources Ltd. (TSX: ETG; OTCQB: ERLFF – the “Company” or “Entrée”) has today filed its interim financial results for the third quarter ended September 30, 2019. All numbers are in U.S. dollars unless otherwise noted.
Q3 2019 HIGHLIGHTS
Oyu Tolgoi Underground Development Update – Mongolia
The Oyu Tolgoi project in Mongolia includes two separate land holdings: the Oyu Tolgoi mining licence, which is held by Entrée’s joint venture partner Oyu Tolgoi LLC (“OTLLC”) and the Entrée/Oyu Tolgoi JV Property, which is a partnership between Entrée and OTLLC. On November 4 and November 12, 2019, OTLLC’s 66% shareholder Turquoise Hill Resources Ltd. (“Turquoise Hill”) provided an update on underground development on the Oyu Tolgoi mining licence:
Shaft 2 construction is completed and has entered the final stages of commissioning. The shaft uses the world’s largest production hoist motor and can carry 300 people in the service hoist and lift 60 tonne skips in the production hoist. When operating at maximum capacity, the production hoist has the ability to lift 35,000 tonnes of material to the surface daily. This is a critical piece of infrastructure that also provides additional ventilation capacity and will enable the acceleration of underground development.
Shafts 3 and 4 pre sink work is complete with both shafts at 80 metres below the shaft collar as of September 30, 2019. The sinking headframes and sinking stages for the shafts are being assembled to enable the hard rock sinking to commence over the coming months.
Underground development progressed successfully during Q3 2019, achieving 3.6 total equivalent kilometres, the best quarterly result to date.
Since the restart of underground development in May 2016, 28.0 total equivalent kilometres and 22.1 kilometres of lateral development has been completed. In September 2019, a record 1,385 equivalent metres of lateral underground development was achieved.
As previously announced by Turquoise Hill on July 15, 2019, improved information with respect to rock mass and geotechnical data modelling has confirmed that there are stability risks associated with components of the mine design in the 2016 Oyu Tolgoi Feasibility Study. Preliminary estimates indicate that sustainable first production from the Oyu Tolgoi mining licence could be delayed by 16 to 30 months compared to Turquoise Hill’s original feasibility study guidance in 2016, and the development capital spend for the Oyu Tolgoi underground project may increase by $1.2 billion to $1.9 billion over the $5.3 billion previously disclosed by Turquoise Hill. To address these risks, a number of refinements are under review to determine the final mine design.
The first of the key decisions that has been made is to retain a mid-access drive only on the apex level of the mine design of Panel 0. This is an integral step towards completing the final mine design, however it is too early to accurately determine the potential impact on the cost or schedule. Decisions on productivity levels and key underground infrastructure such as the location and design of the ore passes and options for panel sequencing, will need to be completed before an update on the development capital or schedule can be provided. Turquoise Hill expects decisions regarding the sequencing of the first panel of mining, Panel 0, productivity inputs and ore pass locations to be completed by April 2020. The resulting Pre-Feasibility Study designs being detailed to Feasibility Study standard, then scheduled and costed to form a definitive estimate (the “Definitive Estimate”) are due in the second half of 2020.
Entrée/Oyu Tolgoi JV Property
Once OTLLC, Turquoise Hill and Rio Tinto International Holdings Ltd. (“Rio Tinto”) have determined the preferred mine design approach and delivered the Definitive Estimate, Entrée will be able to assess the potential impact on the estimated timing and amount of development production and initial block cave production from the first lift (Lift 1) of the Hugo North Extension deposit on the Entrée/Oyu Tolgoi JV Property and any potential change to Entrée’s estimated share of capital and operating costs. Entrée will continue to evaluate any information made available to it by Rio Tinto or OTLLC and will update the market accordingly.
Q3 2019 operating loss was $0.4 million and is comparable to the operating loss of $0.4 million in Q3 2018.
Q3 2019 operating cash outflow after working capital was $0.3 million compared to a $0.2 million operating cash outflow in Q3 2018 and, as at September 30, 2019, the cash balance was $5.7 million. The working capital balance as at September 30, 2019 was $5.8 million.
On October 1, 2019, the Company’s common shares commenced trading on the Over-the-Counter OTCQB Venture Market (“OTCQB”) under the trading symbol “ERLFF” and discontinued trading on the NYSE American LLC (“NYSE American”).
OUTLOOK AND STRATEGY
The Company’s primary objectives for the 2019 year continue to include:
Continuing constructive discussions with the Government of Mongolia; and
Working with other Oyu Tolgoi stakeholders to advance potential amendments to the joint venture agreement (the “Entrée/Oyu Tolgoi JVA”) that currently governs the relationship between Entrée and OTLLC. The form of Entrée/Oyu Tolgoi JVA was agreed between the parties in 2004, prior to the execution of the Oyu Tolgoi Investment Agreement and commencement of underground development. The Company believes that amendments that align the interests of all stakeholders as they are now understood, would be in the best interests of the Company and its shareholders provided there is no net erosion of value to Entrée. No agreements have been finalized and there are no assurances agreements may be finalized in the future.
Corporate costs, which include Mongolian site management and compliance costs, remain estimated to be between $1.4 million and $1.6 million for the full 2019 year. The Company continues to focus its efforts on conserving cash reserves and remaining prudent with its expenditures. Voluntarily delisting from the NYSE American is a clear demonstration of Entrée’s commitment to eliminating non value adding expenditure.
The Company’s interim financial statements and Management’s Discussion and Analysis (“MD&A”) for the third quarter ended September 30, 2019 are available on the Company’s website at www.EntreeResourcesLtd.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Robert Cinits, P.Geo., consultant to Entrée and the Company’s former Vice President, Corporate Development, and a Qualified Person as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects, has approved the technical information in this release. For further information on the Entrée/Oyu Tolgoi JV Property, see the Company’s Technical Report, titled “Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report”, with an effective date of January 15, 2018, available on SEDAR at www.sedar.com.
ABOUT ENTRÉE RESOURCES LTD.
Entrée Resources Ltd. is a well-funded Canadian mining company with a unique carried joint venture interest on a significant portion of one of the world’s largest copper-gold projects – the Oyu Tolgoi project in Mongolia. Entrée has a 20% or 30% carried participating interest in the Entrée/Oyu Tolgoi joint venture, depending on the depth of mineralization. Sandstorm Gold Ltd., Rio Tinto and Turquoise Hill are major shareholders of Entrée, holding approximately 19.6%, 9.5% and 7.9% of the shares of the Company, respectively. More information about Entrée can be found at www.EntreeResourcesLtd.com.
Entrée Res. don't need money.