Vancouver, B.C., August 2, 2018 – Entrée Resources Ltd. (TSX:ETG; NYSE American:EGI – the “Company” or “Entrée”) has today filed its interim financial results for the second quarter ended June 30, 2018. All numbers are in U.S. dollars unless otherwise noted.
Q2 2018 HIGHLIGHTS
Entrée/Oyu Tolgoi JV Property – Mongolia
As reported by Turquoise Hill Resources Ltd. ("Turquoise Hill") on July 31, 2018:
Oyu Tolgoi underground development continued to progress during Q2 2018 including underground lateral development, the fit out of Shaft 2, support infrastructure and the convey-to-surface decline.
Completion of Shaft 5 sinking in March 2018 was followed in Q2 2018 by the installation of permanent ventilation fans and commissioning of the now fully operational expanded Shaft 5 ventilation system.
During Q2 2018, Shaft 2 stripping and bracket installation was completed while cable and pipe work commenced. Fit out of Shaft 2 is expected to occur throughout 2018.
Following reduced advancement during the Shaft 5 ventilation system completion, in June 2018 a record-level of equivalent underground development was achieved with 0.9 kilometres completed.
Progress overall during Q2 2018 was 2.4 equivalent kilometres with a total of 12.7 equivalent kilometres of lateral development completed since the re-start of development. During 2018, underground development is expected to advance approximately 10.0 kilometres.
During Q2 2018, earthworks for Shafts 3 and 4 continued and the sinking package was awarded in July 2018.
Per the Oyu Tolgoi Investment Agreement, Oyu Tolgoi LLC ("OTLLC") has been exploring two domestic power options – a power plant built and operated by OTLLC at the mine site or an independent power producer located at the Tavan Tolgoi coal field. A final decision on the outcome, cost and financing of a domestic power supply has not been concluded.
Production from first draw bell remains planned for mid-2020 and sustainable first production from the Oyu Toloi mining licence in 2021.
Cañariaco Project Royalty – Peru
On June 8, 2018, the Company completed the sale of its 0.5% net smelter returns royalty (the "Royalty") on Candente Copper Corp.’s Cañariaco Copper Project in Northern Peru to Anglo Pacific Group PLC ("Anglo Pacific"), a public company listed on the London Stock Exchange and the Toronto Stock Exchange. Under the sales agreement with Anglo Pacific, the Company transferred all the issued and outstanding shares of its subsidiaries that directly or indirectly hold the Royalty to Anglo Pacific for consideration of $1.0 million, payable by the issuance of 478,951 Anglo Pacific common shares, which has resulted in a gain of $0.4 million, net of transaction costs. In addition, Entrée retains the right to a portion of any future royalty income received by Anglo Pacific in relation to the Royalty as follows:
20% of any royalty payment received for any calendar quarter up to and including December 31, 2029;
15% of any royalty payment received for any calendar quarter commencing January 1, 2030 up to and including the quarter ending December 31, 2034; and
10% of any royalty payment received for any calendar quarter commencing January 1, 2035 up to and including the quarter ending December 31, 2039.
Corporate
Q2 2018 net loss was $0.2 million as compared to Q2 2017 ($0.7 million) which is a reduction of 71% from the comparative period of 2017 and for the 2018 year to date, net loss was $0.9 million, which is a reduction of 53% compared to the comparative period of 2017 ($1.9 million). The reduction in the net loss was due to the gain on the sale of the Royalty and lower administration costs in the current periods.
Q2 2018 operating cash outflow after working capital was $0.6 million (Q2 2017 cash outflow was $1.1 million) and for the 2018 year to date, operating cash outflow after working capital was $0.7 million (2017 year to date cash outflow was $2.0 million).
The cash balance as at June 30, 2018 was $6.2 million.
OUTLOOK AND STRATEGY
Entrée/Oyu Tolgoi JV Property
With the completion and filing of its updated technical report titled "Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report" with an effective date of January 15, 2018 prepared by Amec Foster Wheeler Americas Limited (the "2018 Technical Report") in Q1 2018, the Company is now focused on:
Assessing opportunities to crystallize value ahead of production from the Entrée/Oyu Tolgoi JV Property.
Streamlining Entrée’s joint venture interest.
Educating the market about the risk profile associated with Entrée’s interest in the Entrée/Oyu Tolgoi JV Property.
Working with Entrée’s joint venture partner to advance any exploration opportunities on the Entrée/Oyu Tolgoi JV Property that may exist, including several near surface targets that have been identified.
Corporate
Throughout 2018, the Company’s focus will be to maximize investor awareness of the results of the 2018 Technical Report and what this report means to the Company and all stakeholders, both current and potential.
Corporate costs, which include Mongolian site management, marketing, and compliance costs, remained estimated to be between $1.2 million and $1.5 million for the full 2018 year.
The Company’s Interim Financial Statements and Management’s Discussion and Analysis (“MD&A”) are available on the Company website at www.EntreeResourcesLtd.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
QUALIFIED PERSON
Robert Cinits, P.Geo., Entrée’s Vice President, Corporate Development, 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
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