Vancouver, B.C., August 9, 2021 – Entrée Resources Ltd. (TSX: ETG; OTCQB: ERLFF – the “Company” or “Entrée”) has today filed its interim financial results for the second quarter ended June 30, 2021. All numbers are in U.S. dollars unless otherwise noted.
Q2 2021 HIGHLIGHTS
Entrée/Oyu Tolgoi JV Property
On June 15, 2021, Entrée reported an updated Feasibility Study for its interest in the Entrée/Oyu Tolgoi JV Property. A National Instrument 43-101 Technical Report was filed on July 21, 2021 (“2021 Technical Report”).
•2021 Technical Report highlights include: ?Hugo North Extension Lift 1 updated Feasibility Study (“2021 Reserve Case”) after- tax NPV(8%) of $114 million attributable to Entrée(1).
?Hugo North Extension Lift 2 Preliminary Economic Assessment (“2021 PEA”) after-tax NPV(8%) of $306 million attributable to Entrée(1)(2).
?First development production from Hugo North Extension Lift 1 expected in 2022.
?Significant leverage to copper price as 2021 Reserve Case and 2021 PEA use $3.25/lb copper.
Oyu Tolgoi Underground Development Update
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 joint venture property (the “Entrée/Oyu Tolgoi JV Property”), which is a partnership between Entrée and OTLLC. On July 29, 2021, OTLLC’s 66% shareholder Turquoise Hill Resources Ltd. (“Turquoise Hill”) provided an update on underground development on the Oyu Tolgoi mining licence:
•COVID-19 impacts are ongoing. Over 98% of OTLLC’s workforce is now fully vaccinated and health and safety remain a high priority with appropriate measures being maintained to protect OTLLC’s employees, contractors and the community.
•During the second quarter 2021, COVID-19 cases increased significantly in Mongolia, causing a series of lockdowns in the country and South Gobi region which limited the ability of OTLLC to maintain normal roster changes for its workers. Limitations on the movement of international expertise also significantly impacted progress on the Oyu Tolgoi underground project.
•The scheduled mid-2021 commencement of the undercut on the Oyu Tolgoi mining licence has been delayed as a result of the delayed resolution of certain non-technical criteria. Turquoise Hill and project operator Rio Tinto continue to engage with the Government of Mongolia with a view to resolving these issues. In addition, the ongoing impacts of COVID-19 on rosters require careful management by OTLLC to ensure that the appropriate personnel are available for undercutting activities.
•At the end of the second quarter 2021, cumulative underground development progress was 57,928 equivalent metres with cumulative conveyor to surface advancement of 14,532 equivalent metres. Turquoise Hill anticipates that development rates will continue to be impacted by COVID-19 restrictions and controls into the third quarter 2021.
•Specialized personnel arrived on site on June 25, 2021 to complete Shaft 4 readiness activities prior to Shaft 3 construction activities. The Shaft 4 sinking team arrived in Mongolia on June 28, 2021.
•Progress on Shafts 3 and 4 has been impacted by travel restrictions and quarantine requirements, which reduced OTLLC’s ability to mobilize required personnel to site. Further delays to Shafts 3 and 4 could impact the production ramp up for Panels 1 and 2, although Turquoise Hill has reported that ongoing optimization activities are focused on minimizing any departure from the planned schedule. Shafts 3 and 4 are required to support production from Panels 1 and 2 during ramp up to 95,000 tonnes per day. The Hugo North Extension deposit on the Entrée/Oyu Tolgoi JV Property is located at the northern portion of Panel 1.
•Q2 2021 operating loss was $0.6 million compared to an operating loss of $0.5 million in Q2 2020.
•Q2 2021 operating cash outflow before working capital was $0.6 million compared to an operating cash outflow before working capital of $0.4 million in Q2 2020.
•As at June 30, 2021, the cash balance was $7.4 million and the working capital balance was $7.1 million. The Company holds the majority of its cash in Canadian currency.
•The Company recognizes the unprecedented situation surrounding the ongoing COVID-19 pandemic and is closely monitoring the effect of the COVID-19 pandemic on its business and operations and will continue to update the market on the impacts to the Company’s business and operations in relation to these extraordinary circumstances.
1.Long term metal prices used in the net present value economic analysis are: copper US$3.25/lb, gold US$1,591.00/oz and silver US$21.08/oz.
2.The 2021 PEA is based on Indicated and Inferred mineral resources from Lift 2 as the second potential phase of development and mining on the Hugo North Extension deposit. The economic analysis in the 2021 PEA is based on a conceptual mine plan and does not have as high a level of certainty as the 2021 Reserve Case. The 2021 PEA is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the 2021 PEA will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
3.The 2021 Reserve Case and the 2021 PEA are based on information in OTLLC’s 2020 Oyu Tolgoi Feasibility Study (“OTFS20”) or otherwise provided by OTLLC. Neither OTFS20 nor the results of the 2021 Reserve Case and 2021 PEA reflect the impacts of the COVID-19 pandemic, which are ongoing and continue to be assessed by OTLLC.
OUTLOOK AND STRATEGY
The Company’s primary objective for the 2021 year is to work 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 and upon finalization, transfer the Shivee Tolgoi and Javhlant mining licences to OTLLC as manager of the Entrée/Oyu Tolgoi joint venture (the “Entrée/Oyu Tolgoi JV”). The form of Entrée/Oyu Tolgoi JVA was agreed between the parties in 2004, prior to the execution of the 2009 Oyu Tolgoi Investment Agreement among the Government of Mongolia, OTLLC, Rio Tinto and Turquoise Hill and commencement of underground development. The Company currently is registered in Mongolia as the 100% ultimate holder of the Shivee Tolgoi and Javhlant mining licences.
The Company believes that amendments that align the interests of all stakeholders as they are now understood, would be in the best interests of all stakeholders, 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.
The Company’s interim financial statements and Management’s Discussion and Analysis (“MD&A”) for the second quarter ended June 30, 2021 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 NI 43-101, has approved the technical information in this release. For further information on the Entrée/Oyu Tolgoi JV Property, see the 2021 Technical Report titled “Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report”, with an effective date of May 17, 2021, available on SEDAR at www.sedar.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 JV, depending on the depth of mineralization. Sandstorm Gold Ltd., Rio Tinto and Turquoise Hill are major shareholders of Entrée, holding approximately 24%, 9% and 8% of the shares of the Company, respectively. More information about Entrée can be found at www.EntreeResourcesLtd.com.
Entrée Resources Ltd.
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