VANCOUVER, BC, Aug. 8, 2022
/CNW/ - 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, 2022. All numbers are in U.S. dollars
unless otherwise noted.
Q2 2022 HIGHLIGHTS
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
August 4, 2022, OTLLC's 66%
shareholder Turquoise Hill Resources Ltd. ("Turquoise Hill")
provided an update on Oyu Tolgoi underground development:
- COVID-19 cases identified at Oyu Tolgoi continued at low levels
in the second quarter 2022 and the testing regime has been eased.
OTLLC has continued to progressively increase on-site personnel
numbers with the workforce in the second quarter 2022 approaching
full capacity. OTLLC's major focus continues to be the safety and
wellbeing of its workers. Ongoing monitoring of COVID-19 cases
continues, and controls will continue to be reviewed, as
necessary.
- During the second quarter 2022, the underground project
achieved a significant milestone with the blasting of the first two
Panel 0 draw bells on the Oyu Tolgoi mining licence ahead of
schedule. The third draw bell subsequently fired on July 29, 2022. The timing of sustainable
production from Panel 0 on the Oyu Tolgoi mining licence is
trending earlier in the first half 2023.
- Underground production activities, including undercut blasting
and on-footprint construction work such as roadways and steel set
construction, continue to progress well. During the second quarter
2022, a total of 26,098 metres of undercut drilling, 2,071 metres
of draw bell drilling and 8,061 square metres of undercut blasting
were completed.
- Turquoise Hill has completed its review of the 2022 cost and
schedule update for the underground project. The 2022 cost and
schedule update has resulted in an increase of the total expected
underground development capital from $6.75
billion to $7.06 billion. The
increase incorporates known and future incremental COVID-19 costs,
escalation, associated taxes, and minor impacts of changes in labor
laws.
- The Shaft 3 headframe was commissioned and sinking commenced on
March 31, 2022, with the cumulative
sinking level at 183 metres below ground level as at July 3, 2022. Shaft 4 advancement was 288 metres
below ground level as at July 3,
2022. The rate of progress in Shafts 3 and 4 improved during
the quarter due to the optimization work program to maximize the
productivity of their development. The 2022 cost and schedule
update identified an approximate 15-month delay in the
commissioning of Shafts 3 and 4 from the schedule in the Definitive
Estimate. As previously disclosed, Turquoise Hill now expects
Shafts 3 and 4 to be commissioned in the first half 2024, and it
continues to monitor progress closely against the 2022 schedule
update. Shafts 3 and 4 are required to provide ventilation to
support production from Panels 1 and 2 during ramp up to 95,000
tonnes per day. The impact of the shaft delays on the commencement
of Panels 1 and 2 is currently under assessment by OTLLC. The Hugo
North Extension deposit on the Entrée/Oyu Tolgoi JV Property is
located in the northern portion of Panel 1.
- At the end of June 2022,
cumulative underground development on the Oyu Tolgoi mining licence
is 70,939 equivalent metres and cumulative Conveyor to Surface
advancement is 16,088 equivalent metres.
- Design optimization work for Lift 1 on the Oyu Tolgoi mining
licence and the Entrée/Oyu Tolgoi JV Property continues with the
aim of minimizing risk and maximizing productivity. To support
ongoing mining studies, additional data continues to be collected
from surface and underground drilling. During the second quarter
2022, drilling was focused on the northern part of Panel 1, the
southern part of Panel 2 and Lift 2. For the remainder of 2022,
drilling is designed to target Lift 2 and future mining areas which
are on the Lift 1 horizon and currently excluded from the mineral
reserve. OTLLC has scheduled the Lift 1 Panel 1 design optimization
study for completion in early 2023.
Entrée/Oyu Tolgoi JV Property
Update
- For Panel 1 drilling on the Entrée/Oyu Tolgoi JV Property, the
Entrée/Oyu Tolgoi joint venture (the "Entrée/Oyu Tolgoi
JV") has approved a budget with diamond drill holes
targeting Hugo North Extension Lifts 1 and 2. Drilling in 2022 is
now expected to comprise ~15 underground holes that will all be
collared from underground drill stations along the eastern boundary
of the porphyry mineralized footprint on the Oyu Tolgoi mining
licence but crossing onto the Entrée/Oyu Tolgoi JV Property.
As of early August, 11 of the underground holes have been drilled,
which includes ~1,575 metres of Lift 1 drilling and ~1,823 metres
of Lift 2 drilling out of a total ~5,085 metres expected to be
drilled on the Entrée/Oyu Tolgoi JV Property. In addition, two
surface diamond drill holes totalling ~3,560 metres are scheduled
to be drilled starting in August. These two holes will be entirely
on the Entrée/Oyu Tolgoi JV Property and will target the northern
portion of the Hugo North Extension deposit. Analytical results of
all drillholes are pending. The timing and scope of the Panel 1
drilling is still subject to change.
- With the relaxation of COVID-19 related restrictions in
Mongolia, exploration drilling
programs resumed in 2022. On the Shivee Tolgoi mining licence,
three reverse circulation ("RC") holes totalling 900 metres and one
800 metre diamond drill hole have been completed at the North Ulaan
Khud target. Analytical results are pending. An additional three
planned RC holes totalling 900 metres at North Ulaan Khud, as well
as three planned diamond drill holes totalling 2,200 metres at the
Airstrip target are underway. On the Javhlant mining licence,
five RC holes totalling 1,500 metres are planned for each of the
Bumbat Ulaan and West Mag targets, with drilling expected to
commence in the third quarter 2022.
- The Company continues to monitor the situation in Mongolia including with respect to possible
delays to commencement of Panel 1. The Company will assess the
potential impact of any delays as it becomes aware of them and will
update the market accordingly.
- On May 26, 2022, the Company
announced it has commenced binding arbitration proceedings to seek
declarations and orders for specific performance relating to
certain provisions of the Equity Participation and Earn-in
Agreement (the "Earn-in Agreement") with Turquoise Hill
dated October 15, 2004, as amended
and subsequently assigned to OTLLC and the Joint Venture Agreement
appended to the Earn-in Agreement (the "Entrée/Oyu Tolgoi
JVA"). The parties have been operating under the terms of the
Entrée/Oyu Tolgoi JVA since OTLLC completed its earn-in obligations
on the Entrée/Oyu Tolgoi JV Property in 2008. The Company will
provide updates on the arbitration as developments warrant.
Corporate
- Operating loss was $0.7 million
and $1.3 million for the three and
six month periods of 2022, respectively, compared to $0.6 million and $1.1
million in the comparative periods of 2021.
- Operating cash outflow before changes in non-cash working
capital items was $0.7 million and
$1.2 million for the three and six
month periods of 2022, respectively, compared to $0.6 million and $1.0
million in the comparative periods of 2021.
- As at June 30, 2022, the cash
balance was $7.7 million and the
working capital balance was $7.6
million.
- In Q2 2022, the Company welcomed Teresa
Conway, Allan Moss and
Paula Rogers to its Board of
Directors (the "Board"), to join Alan Edwards, Michael
Price and Stephen Scott.
Mark Bailey, Anna El-Erian and James
Harris did not stand for re-election at the Company's Annual
General Meeting held on June 16, 2022
(the "AGM"). Following the AGM, Alan
Edwards was appointed Non-Executive Chair of the Board.
OUTLOOK AND STRATEGY
With the commencement of the Lift 1 Panel 0 undercut, Turquoise
Hill's renewed partnership with the Government of Mongolia and execution of a comprehensive
funding plan for the world class Oyu Tolgoi underground mine,
Entrée's primary objective for the 2022 year is to confirm the
transfer of the Shivee Tolgoi and Javhlant mining licences to OTLLC
as manager of the Entrée/Oyu Tolgoi JV, either in conjunction with
finalization and execution of amendments to the Entrée/Oyu Tolgoi
JVA, or enforcement of certain provisions of the Earn-in Agreement
and Entrée/Oyu Tolgoi JVA pursuant to binding arbitration
proceedings. The parties have been operating under the terms of the
Entrée/Oyu Tolgoi JVA since OTLLC completed its earn-in obligations
on the Entrée/Oyu Tolgoi JV Property in 2008. 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, 2022 are available on
the Company's website at www.EntreeResourcesLtd.com, on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov.
QUALIFIED PERSON
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
(the "2021 Technical Report"), titled "Entrée/Oyu Tolgoi
Joint Venture Project, Mongolia,
NI 43-101 Technical Report", with an effective date of October 8, 2021, available on the Company's
website at www.EntreeResourcesLtd.com, on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov.
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.
Royalty North Partners, Rio Tinto and Turquoise Hill are major
shareholders of Entrée, holding approximately 25%, 9% and 7% of the
shares of the Company, respectively. More information about
Entrée can be found at www.EntreeResourcesLtd.com.
This News Release contains forward-looking statements within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and forward-looking information within the
meaning of applicable Canadian securities laws with
respect to corporate strategies and plans; requirements for
additional capital; uses of funds and projected expenditures;
arbitration proceedings, including the potential benefits, timing
and outcome of the arbitration proceedings; the Company's plans to
continue discussions with OTLLC and Turquoise Hill regarding
potential amendments to the Entrée/Oyu Tolgoi JVA; the expectations
set out in OTLLC's 2020 Oyu Tolgoi Mongolian Statutory Study and
the 2021 Technical Report on the Company's interest in the
Entrée/Oyu Tolgoi JV Property; timing and status of Oyu Tolgoi
underground development; the expected timing of sustainable
production from Panel 0 on the Oyu Tolgoi mining licence; the
nature of the ongoing relationship and interaction between Oyu
Tolgoi project stakeholders and the Government of Mongolia with respect to the continued
operation and development of Oyu Tolgoi as and when the key
agreements entered into between Turquoise Hill, Rio Tinto and the
Government of Mongolia are
implemented along with the implementation of Resolution 103; the
mine design for Hugo North Lift 1 Panel 0 and the related cost and
production schedule implications; the re-design studies for Panels
1 and 2 of Hugo North (including
Hugo North Extension) Lift 1 and the possible outcomes, content and
timing thereof; the timing and progress of the sinking of Shafts 3
and 4 and any delays in that regard in addition to previously
disclosed delays; timing and amount of production from Lift 1 of
the Entrée/Oyu Tolgoi JV Property, potential production delays and
the impact of any delays on the Company's cash flows, expected
copper, gold and silver grades, liquidity, funding requirements and
planning; future commodity prices; the potential impact of COVID-19
on Oyu Tolgoi underground development and the Company's business,
operations and financial condition; the estimation of mineral
reserves and resources; projected mining and process recovery
rates; estimates of capital and operating costs, mill and
concentrator throughput, cash flows and mine life; the content of
the Definitive Estimate; capital, financing and project development
risk; mining dilution; discussions with the Government of
Mongolia, Rio Tinto, OTLLC and
Turquoise Hill on a range of issues including Entrée's interest in
the Entrée/Oyu Tolgoi JV Property, the Shivee Tolgoi and Javhlant
mining licences and certain material agreements; potential size of
a mineralized zone; potential expansion of mineralization;
potential discovery of new mineralized zones; potential
metallurgical recoveries and grades; plans for future exploration
and/or development programs and budgets; permitting time lines;
anticipated business activities; proposed acquisitions and
dispositions of assets; and future financial performance.
In certain cases, forward-looking statements and information
can be identified by words such as "plans", "expects" or "does not
expect", "is expected", "budgeted", "scheduled", "estimates",
"forecasts", "intends", "anticipates", or "does not anticipate" or
"believes" or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might", "will be taken", "occur" or "be achieved". While the
Company has based these forward-looking statements on its
expectations about future events as at the date that such
statements were prepared, the statements are not a guarantee of
Entrée's future performance and are based on numerous assumptions
regarding present and future business strategies, the correct
interpretation of agreements, laws and regulations; the
commencement and conclusion of arbitration proceedings, including
the potential benefits, timing and outcome of the arbitration
proceedings; local and global economic conditions and negotiations
and the environment in which Entrée will operate in the future,
including commodity prices, projected grades, projected dilution,
anticipated capital and operating costs, including inflationary
pressures thereon resulting in cost escalation, and anticipated
future production and cash flows; the anticipated location of
certain infrastructure and sequence of mining within and across
panel boundaries; the construction and continued development of the
Oyu Tolgoi underground mine; the status of Entrée's relationship
and interaction with the Government of Mongolia, OTLLC, Rio Tinto and Turquoise Hill;
and the Company's ability to operate sustainably, its community
relations and its social licence to operate.
With respect to the construction and continued development of
the Oyu Tolgoi underground mine, important risks, uncertainties and
factors which could cause actual results to differ materially from
future results expressed or implied by such forward-looking
statements and information include, amongst others, the nature of
the ongoing relationship and interaction between OTLLC, Turquoise
Hill and Rio Tinto and the Government of Mongolia with respect to the continued
operation and development of Oyu Tolgoi as and when the key
agreements entered into between Turquoise Hill, Rio Tinto and the
Government of Mongolia are
implemented along with the implementation of Resolution 103; the
continuation of undercutting in accordance with the mine plan and
design; actual timing of first sustainable production from Panel 0
as well as the lifting of restrictions by the Government of
Mongolia on the ability of OTLLC
to incur additional indebtedness; the amount of any future funding
gap to complete the Oyu Tolgoi project; the approval or
non-approval by the OTLLC board of any future necessary additional
investment, and the likely consequences on the timing and overall
economic value of the Oyu Tolgoi project, including slowdown of the
underground development; Turquoise Hill's liquidity, Oyu Tolgoi
project funding requirements, and the sources, availability, and
amount of potential Oyu Tolgoi project funding; the implementation
and successful execution of the funding plan delineated in a
binding agreement between Turquoise Hill and Rio Tinto (the
"Amended HoA") and potential delays in the ability of
Turquoise Hill or OTLLC to proceed with the funding elements
contemplated by the Amended HoA; the accuracy of the Definitive
Estimate; the timing and cost of the construction and expansion of
mining and processing facilities; inflationary pressures on prices
for critical supplies for Oyu Tolgoi including fuel, power
explosives and grinding media resulting in cost escalation; the
ability of OTLLC or the Government of Mongolia to deliver a domestic power source
for Oyu Tolgoi (or the availability of financing for OTLLC or the
Government of Mongolia to
construct such a source) within the required contractual timeframe;
sources of interim power; OTLLC's ability to operate sustainably,
its community relations, and its social licence to operate in
Mongolia; the potential impact of
COVID-19, including any restrictions imposed by health and
governmental authorities relating thereto; the impact of changes
in, changes in interpretation to or changes in enforcement of,
laws, regulations and government practises in Mongolia; delays, and the costs which would
result from delays, in the development of the underground mine; the
anticipated location of certain infrastructure and sequence of
mining within and across panel boundaries; international conflicts
such as the ongoing Russia-Ukraine conflict; projected commodity prices
and their market demand; and production estimates and the
anticipated yearly production of copper, gold and silver at the Oyu
Tolgoi underground mine.
Other risks, uncertainties and factors which could cause
actual results, performance or achievements of Entrée to differ
materially from future results, performance or achievements
expressed or implied by forward-looking statements and information
include, amongst others, unanticipated costs, expenses or
liabilities; discrepancies between actual and estimated production,
mineral reserves and resources and metallurgical recoveries;
development plans for processing resources; matters relating to
proposed exploration or expansion; mining operational and
development risks, including geotechnical risks and ground
conditions; regulatory restrictions (including environmental
regulatory restrictions and liability); risks related to
international operations, including legal and political risk in
Mongolia; risks related to the
potential impact of global or national health concerns, including
the COVID-19 pandemic; risks associated with changes in the
attitudes of governments to foreign investment; risks associated
with the conduct of joint ventures; inability to upgrade Inferred
mineral resources to Indicated or Measured mineral resources;
inability to convert mineral resources to mineral reserves;
conclusions of economic evaluations; fluctuations in commodity
prices and demand; changing foreign exchange rates; the speculative
nature of mineral exploration; the global economic climate;
dilution; share price volatility; activities, actions or
assessments by Rio Tinto, Turquoise Hill or OTLLC and by government
authorities including the Government of Mongolia; the availability of funding on
reasonable terms; the impact of changes in interpretation to or
changes in enforcement of laws, regulations and government
practices, including laws, regulations and government practices
with respect to mining, foreign investment, royalties and taxation;
the terms and timing of obtaining necessary environmental and other
government approvals, consents and permits; the availability and
cost of necessary items such as water, skilled labour,
transportation and appropriate smelting and refining arrangements;
unanticipated reclamation expenses; changes to assumptions as to
the availability of electrical power, and the power rates used in
operating cost estimates and financial analyses; changes to
assumptions as to salvage values; ability to maintain the social
licence to operate; accidents, labour disputes and other risks of
the mining industry; global climate change; global conflicts; title
disputes; limitations on insurance coverage; competition; loss of
key employees; cyber security incidents; misjudgements in the
course of preparing forward-looking statements; and those factors
discussed in the Company's most recently filed
MD&A and in the Company's Annual Information Form for the
financial year ended December 31,
2021, dated March 25, 2022
filed with the Canadian Securities Administrators and available at
www.sedar.com. Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on
forward-looking statements. The Company is under no obligation to
update or alter any forward-looking statements except as required
under applicable securities laws.
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SOURCE Entrée Resources