Vancouver, B.C., February 3, 2025 – Entrée Resources Ltd. (TSX:ETG; OTCQB:ERLFF – the “Company” or “Entrée”) is pleased to announce its Joint Venture Agreement with Oyu Tolgoi LLC (“OTLLC”), which the parties have been operating under since formation of the Entrée/Oyu Tolgoi joint venture on June 30, 2008 (the “Joint Venture”), has been formally executed and delivered by the parties.
Stephen Scott, the Company’s President & CEO commented, “I am extremely happy that the Joint Venture Agreement has finally been executed after 16 years of operation. Despite being a formality, execution is a necessary step to enable the parties to initiate the transfer of the Joint Venture licenses to OTLLC in accordance with applicable Mongolian laws and as provided for under the Joint Venture Agreement. We look forward to continuing to work with our partners towards potential conversion of the Joint Venture Agreement into a more efficient arrangement to the benefit of all stakeholders. I appreciate the resilience and patience of Entrée’s loyal shareholders as we continue this journey together.”
The Joint Venture Agreement is substantially in the form annexed to the 2004 Equity Participation and Earn-in Agreement (as amended and assigned by Turquoise Hills Resources Ltd. (“Turquoise Hill”) to OTLLC) and has an effective date of June 30, 2008, as amended on February 3, 2025 (the “JV Agreement”).
Execution and delivery of the JV Agreement represents the first step in the implementation of the partial final award (the “Award”) made on December 19, 2024, by the three-member international arbitration Tribunal appointed in connection with the Company’s binding arbitration proceedings against OTLLC and Turquoise Hill (see the Company’s News Release dated December 19, 2024, titled “Entrée Resources Wins Arbitration Decision”).
The next step to be undertaken by the parties to implement the Award is the transfer of title to the Shivee Tolgoi and Javkhlant mining licenses (the “Licenses”) from the Company’s wholly owned subsidiary Entrée LLC to OTLLC as Manager of the Joint Venture. All fees and taxes assessed on the transfer of the Licenses pursuant to applicable laws of Mongolia will be for the account of the Joint Venture, with OTLLC contributing Entrée’s 20% share as a loan under Section 10.1 of the JV Agreement. Timely transfer of the Licenses is required to minimize delays to Lift 1 Panel 1 lateral underground development work planned to be completed in 2025 at the Hugo North Extension deposit.
The Tribunal reserved Entrée’s claims for specific performance, and in the alternative equitable damages, and the issue of costs, to a subsequent award.
The Company has also agreed with OTLLC that, concurrently with the implementation of the Award, the parties will continue to work towards potential conversion of the JV Agreement into a more effective agreement of equivalent economic value. The agreement would include a mechanism for Entrée to fulfil any obligation under Mongolian law to share with the State up to 34% of Entrée’s economic benefit from the License area. Conversion of the JV Agreement would be subject to Toronto Stock Exchange acceptance and the requirements of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) applicable to a related party transaction.
Shivee West Property
When the Joint Venture was formed in 2008, the Company retained a 100% interest in the western portion of the Shivee Tolgoi license (the “Shivee West Property”). Between 2002 and 2012, the Company conducted extensive drilling and exploration work on the Shivee West Property. No economic zones of precious or base metals mineralization were outlined and there are no plans to undertake any exploration work in the future.
Given the significant cost associated with holding the Shivee West Property (US$350,000 per annum), in 2015 the Company assessed its options to reduce expenditures. Following extensive consultation with tax and legal advisors, the Company determined that including the Shivee West Property in the Joint Venture was preferable to relinquishing the ground, which was the only other viable option identified.
On October 1, 2015, the Company and Entrée LLC entered into a License Fees Agreement with OTLLC (the “License Fees Agreement”). Under the License Fees Agreement, the Company recorded its intention to assign an 80% or 70% (depending on the depth of mineralization) beneficial interest in the Shivee West Property to OTLLC by amending the definition of “Properties” in the JV Agreement (the “Assignment”). Following the Assignment, the 20% or 30% beneficial interest retained by the Company would become a carried interest subject to the loan provisions of the JV Agreement and all future exploration work would be undertaken by OTLLC as Manager of the Joint Venture. Since 2015, the license fees for the Shivee West Property have been for the account of the Joint Venture participants, with OTLLC contributing Entrée’s 20% share as a loan.
Effective February 3, 2025, the definitions of “Existing Licenses” and “Properties” in the JV Agreement have been amended such that the entire Shivee Tolgoi mining license area, including the Shivee West Property, is part of the Joint Venture “Properties” for all purposes under the JV Agreement. No other substantive amendments have been made to the JV Agreement.
Regulatory Approval
OTLLC is a “related party” and the Assignment is a “related party transaction” for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) by virtue of the fact that Rio Tinto International Holdings Limited (“RTIH”) is a control person of OTLLC and RTIH has beneficial ownership of, or control or direction over, directly or indirectly, common shares of the Company carrying more than 10% of the voting rights attached to all the Company’s outstanding common shares. OTLLC was not a related party at the time the other terms and conditions of the JV Agreement were negotiated and agreed, and accordingly only the Assignment is considered a related party transaction.
On January 23, 2025, the Company received Toronto Stock Exchange conditional acceptance of the Assignment.
The Assignment is exempt from the formal valuation and shareholder approval requirements provided under MI 61-101 based on the fact that at the time the Assignment was agreed to, neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the Assignment, exceeds 25% of the Company’s market capitalization.
The Company does not consider the Assignment to be material, and the Assignment does not affect control of the Company. All directors of the Company are independent of OTLLC and RTIH.
A copy of the JV Agreement will be available on the Company’s website at www.EntreeResourcesLtd.com, on SEDAR+ at www.sedarplus.ca, and on OTC Markets at www.otcmarkets.com
ABOUT ENTRÉE RESOURCES LTD.
Entrée Resources Ltd. is a 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. Horizon Copper Corp. and Rio Tinto are major shareholders of Entrée, beneficially holding approximately 24% and 16% of the shares of the Company, respectively. More information about Entrée can be found at www.EntreeResourcesLtd.com.
FURTHER INFORMATION
David Jan
Investor Relations
Entrée Resources Ltd.
Tel: 604-687-4777 | Toll Free: 1-866-368-7330
E-mail: djan@EntreeResourcesLtd.com |