Entrée Resources Files Amended Technical Report for its Interest in the Entrée/Oyu Tolgoi Joint Venture Property

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Beleggingsadvies 21/10/2021 15:13
Updated information results in 15% increase to Hugo North Extension Lift 1 Reserve Case After-Tax NPV(8%) from $114 million to $131 million (CAD$162 million*)
(All figures are in US dollars unless otherwise noted; *converted at USD:CAD exchange rate of 1.233)

Vancouver, B.C., October 21, 2021 – Entrée Resources Ltd. (TSX: ETG; OTCQB: ERLFF – the “Company” or “Entrée”) has filed an amended technical report on its interest in the Entrée/Oyu Tolgoi joint venture property (the “Entrée/Oyu Tolgoi JV Property”) in Mongolia titled, “Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report” with an original effective date of May 17, 2021, and an amended effective date of October 8, 2021 (the “Amended Report”).

The Amended Report discusses a Feasibility Study (the “2021 Reserve Case”) based on mineral reserves attributable to the Entrée/Oyu Tolgoi joint venture (the “Entrée/Oyu Tolgoi JV”) from the first lift (“Lift 1”) of the Hugo North Extension copper-gold deposit (“Hugo North Extension” or “HNE”). The Amended Report reflects updated information provided by Entrée’s joint venture partner Oyu Tolgoi LLC (“OTLLC”) on the concentrate tonnes and grade to be produced from HNE Lift 1. The updated information results in an increase in payable copper in copper concentrate, which positively impacts Entrée’s 20% attributable financial interest.

The following is a summary of the changes to the financial results and outputs from the 2021 Reserve Case:

Table 1. Changes to Financial Results and Outputs for 2021 Reserve Case (HNE Lift 1)

2021 Reserve Case (HNE Lift 1) Units Amended Number
(October 8, 2021) Original Number
(May 17, 2021) % Change
(+/-)
Attributable Financial Results
Cash Flow, pre-tax US$M 449 381 +18
NPV(5%), after-tax US$M 185 160 +16
NPV(8%), after-tax US$M 131 114 +15
NPV(10%), after-tax US$M 104 91 +14

Smelting
Payable copper in copper concentrate klb 1,162,783 1,027,547 +13

Attributable Mine Costs
Total cash costs before credits $/lb payable copper 1.57 1.74 -10
Total cash costs after credits (“C1”) $/lb payable copper 0.79 0.85 -7
Total all-in sustaining costs after credits (“AISC”) $/lb payable copper 1.26 1.36 -7

Notes (no changes between amended and original notes):

Long term metal prices used in the net present value (“NPV”) economic analyses for the 2021 Reserve Case are: copper $3.25/lb, gold $1,591.00/oz, silver $21.08/oz.
2021 Reserve Case cash flows are discounted to the beginning of 2021.
Payable copper in copper concentrate is reported on a 100% basis. Entrée has a participating interest of 20% and OTLLC has a participating interest of 80%. Notwithstanding the foregoing, in respect of products extracted from the Entrée/Oyu Tolgoi JV Property pursuant to mining carried out at depths from surface to 560 metres below surface, the participating interest of OTLLC is 70% and the participating interest of Entrée is 30%.
There are no other significant changes to the key financial assumptions or outputs from the 2021 Reserve Case. Lift 1 of Hugo North (including Hugo North Extension) is currently in development by project operator Rio Tinto as an underground block cave with first development production from Hugo North Extension expected in 2022.

The Amended Report also includes a Preliminary Economic Assessment (“2021 PEA”) on a conceptual second lift (“Lift 2”) of the Hugo North Extension deposit. There are no changes to the results of the 2021 PEA as the updated information provided by OTLLC on the concentrate tonnage and grade only applied to Hugo North Extension Lift 1.

LOM highlights of the production and financial results from the 2021 Reserve Case and the 2021 PEA reported in the Amended Report are summarized in Table 2.

Table 2. Summary LOM Production and Financial Results – Entrée/Oyu Tolgoi JV Property

Entrée/Oyu Tolgoi JV Property Units 2021 Reserve Case
(HNE Lift 1) 2021 PEA
(HNE Lift 2)
Attributable Financial Results
Cash Flow, pre-tax US$M 449 1,982
NPV(5%), after-tax US$M 185 541
NPV(8%), after-tax US$M 131 306
NPV(10%), after-tax US$M 104 213

LOM Recovered Metal
Copper Recovered Mlb 1,249 4,564
Gold Recovered koz 549 2,025
Silver Recovered koz 3,836 15,067

LOM Processed Material
Probable Reserve Feed 40 Mt @ 1.54% Cu, 0.53 g/t Au, 3.63 g/t Ag ----
Indicated Resource Feed ---- 77.9 Mt @ 1.35% Cu, 0.49 g/t Au, 3.6 g/t Ag (1.64% CuEq)
Inferred Resource Feed ---- 87.8 Mt @ 1.35% Cu, 0.49 g/t Au, 3.6 g/t Ag (1.64% CuEq)

Notes (no changes between amended and original notes):

Long term metal prices used in the NPV economic analyses for the 2021 Reserve Case and the 2021 PEA are: copper $3.25/lb, gold $1,591.00/oz, silver $21.08/oz.
Mineral Reserves in the 2021 Reserve Case, and Mineral Resources in the 2021 PEA mine plan are reported on a 100% basis.
Entrée has a 20% interest in the above processed material and recovered metal.
The Mineral Reserves that form the basis of the 2021 Reserve Case are from a separate portion of the Hugo North Extension deposit than the Mineral Resources in the 2021 PEA.
The copper equivalent formula (“CuEq”) is CuEq = Cu + ((Au * 35.7175) + (Ag * 0.5773)) / 67.9023 taking into account differentials between metallurgical performance and price for copper, gold and silver. Metal prices used for CuEq calculation are: $3.08/lb copper, $1,292.00/oz gold and $19.00/oz silver. Metallurgical recoveries used for CuEq calculation are 93% for copper, 80% for gold and 81% for silver.
2021 Reserve Case cash flows are discounted to the beginning of 2021.
2021 PEA cash flows are discounted to the beginning of 2027, the beginning of Hugo North Lift 2 development. Attributable Entrée/Oyu Tolgoi JV production begins in 2031 and ramps up to stable production in 2043. Final Entrée/Oyu Tolgoi JV attributable production concludes in 2056.
The 2021 Reserve Case and 2021 PEA are exclusive of each other.
Indicated and Inferred Resource average expected run-of-mine feed grade of 1.35% copper, 0.49 g/t gold, and 3.6 g/t silver (1.64% CuEq) includes dilution and mine losses.
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.

Both the 2021 Reserve Case and the 2021 PEA are based on information supplied by OTLLC, including the latest information on the concentrate tonnes and grade to be produced from HNE Lift 1, or reported within OTLLC’s 2020 Oyu Tolgoi Feasibility Study (“OTFS20”). The Lift 1 mine design presented in OTFS20 and the 2021 Reserve Case are subject to future refinements and updates as OTLLC evaluates different design and sequencing options for Panels 1 and 2 as part of its planned Pre-Feasibility and Feasibility level work. The Hugo North Extension deposit is located at the northern portion of Panel 1.

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. In particular, progress on Shafts 3 and 4 has been delayed and the overall impact of these delays is under review by OTLLC. Shafts 3 and 4 are required to support production from Panels 1 and 2 during ramp up to 95,000 tonnes per day.

On December 18, 2020, Turquoise Hill Resources announced that a Definitive Estimate that refines the analysis in OTFS20 and broadly confirms the economics and assumptions presented therein has been completed and delivered to OTLLC by Rio Tinto. The Company has not received a copy of the Definitive Estimate and it was not reviewed or relied upon in the preparation of the 2021 Reserve Case or the 2021 PEA. According to Turquoise Hill Resources, the Definitive Estimate assumes COVID-19 related restrictions in 2021 that are no more stringent than those experienced in September 2020. Should COVID-19 constraints continue beyond 2021, should the COVID-19 situation escalate in 2021 leading to additional restrictions, or should COVID-19 related restrictions or other non-technical criteria result in a delay in commencement of the undercut, which was originally scheduled for mid-2021, the development costs and schedule in OTFS20 and the 2021 Reserve Case and 2021 PEA could be negatively impacted.

In addition to information provided by OTLLC, the cash flows in the 2021 Reserve Case and 2021 PEA are based on Entrée’s interpretation of the commercial terms applicable to the Entrée/Oyu Tolgoi JV, and certain assumptions regarding taxes and royalties. The cash flows have not been reviewed or endorsed by OTLLC.

AMENDED REPORT

Further technical information supporting the disclosure in this news release, including data verification, key assumptions, parameters, risks and other factors, is provided in the Amended Report. The Amended Report was completed independently by Wood Canada Limited and is available on SEDAR at www.sedar.com and on the Company’s website. There are no changes to the Mineral Resource or Mineral Reserve estimates based on the updated information provided by OTLLC on the concentrate tonnes and grade to be produced from HNE Lift 1.

NON-IFRS PERFORMANCE MEASUREMENT

Non-IFRS Performance Measurement: “cash costs after credits” (C1) and all-in sustaining cost (ASIC) are non-IFRS performance measurements. These performance measurements are included because these statistics are widely accepted as the standard of reporting cash costs of production in North America. These performance measurements do not have a meaning within IFRS and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance measurements should not be considered in isolation as a substitute for measures of performance in accordance with IFRS.

QUALIFIED PERSONS

Chris Wright, P.Geo, Kirk Hanson, P.E., Piers Wendlandt, P.E, Dean David, FAusIMM, and Peter Yuan, P.E from Wood are all Qualified Persons as defined by National Instrument 43-101, and have approved the scientific and technical information in this release.

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 JV, depending on the depth of mineralization. Sandstorm Gold Ltd., Rio Tinto and Turquoise Hill Resources Ltd. are major shareholders of Entrée, holding approximately 25%, 9% and 8% 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.




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