VANCOUVER, BC, May 3, 2023
/PRNewswire/ - Entrée Resources Ltd. (TSX: ETG) (OTCQB: ERLFF) –
the "Company" or "Entrée") has today filed
its interim financial results for the first quarter ended
March 31, 2023. All numbers are in
U.S. dollars unless otherwise noted.
Q1 2023 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 JV Property, which is a partnership between Entrée and
OTLLC.
- On March 13, 2023, Rio Tinto
announced the commencement of underground production from Oyu
Tolgoi Lift 1 Panel 0 on the Oyu Tolgoi mining licence. Copper is
now being produced from the underground mine. Production will ramp
up over the coming years, with Oyu Tolgoi expected to become the
fourth largest copper mine in the world by 2030.
- The Lift 1 mine plan incorporates the development of three
panels, and in order to reach the full sustainable production rate
of 95,000 tonnes per day from the underground operations all three
panels need to be in production. The Hugo North Extension deposit
on the Entrée/Oyu Tolgoi JV Property is located at the northern
portion of Panel 1.
- Design optimization work for Lift 1 Panel 1 on the Oyu Tolgoi
mining licence and the Entrée/Oyu Tolgoi JV Property continues with
the aim of minimizing risk and maximizing productivity. The Lift 1
Panel 1 design optimization study remains on track for completion
in the first half 2023 and will incorporate any ventilation-related
impacts resulting from Shaft 3 and 4 delays.
Entrée/Oyu Tolgoi JV Property
- OTLLC advised the Company that in 2022 it completed 22
underground diamond drill holes totalling 4,459.9 metres on the
Entrée/Oyu Tolgoi JV Property targeting Hugo North Extension Lifts
1 and 2. In addition, four surface diamond drill holes (including
two aborted holes terminated prior to reaching the target due to
excessive deviation) totalling 4,366.1 metres were drilled on the
Entrée/Oyu Tolgoi JV Property targeting the northern portion of the
Hugo North Extension deposit. The Company is still waiting for
OTLLC to deliver results from the bulk of the underground holes and
all the surface holes. Entrée continues to collate and model data
as it is received.
- OTLLC is planning additional underground and surface drilling
for Panel 1 on the Entrée/Oyu Tolgoi JV Property for 2023. Details
of the drilling program and budget have yet to be finalized and
presented to the Entrée/Oyu Tolgoi JV Management Committee for
approval.
- OTLLC is in the process of finalizing an exploration program
and budget for 2023 for presentation to the Entrée/Oyu Tolgoi JV
Management Committee for approval. The program is expected to
include both diamond and reverse circulation ("RC") target
drilling on the Shivee Tolgoi and Javhlant licences, including deep
diamond drilling at the Airstrip, Castle Rock and South East IP
targets, and RC drilling at Ulaan Khud.
- 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 had 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 joint venture property in Mongolia in 2008. Both Turquoise Hill and
OTLLC are respondents to the arbitration proceedings. The
commencement of arbitration proceedings followed protracted
discussions with Rio Tinto and OTLLC to confirm the transfer of the
Shivee Tolgoi and Javhlant mining licences to OTLLC, either in
conjunction with finalization and execution of a restructured or
amended agreement with OTLLC, or performance of certain provisions
of the Earn-in Agreement and Entrée/Oyu Tolgoi JVA. While the
Company remains committed to seeking a commercial resolution with
Rio Tinto and OTLLC and the parties continue to make progress, the
Company's Board of Directors concluded that given the risks
inherent with the existing structure, the already lengthy
discussions between the parties, and the long lead-time to any
arbitration award, it was in the Company's best interests to
commence proceedings to enforce the Earn-in Agreement and
Entrée/Oyu Tolgoi JVA. A three-member Tribunal has now been
appointed and a merits hearing has been set for April 2024. The Company will provide updates on
the arbitration as developments warrant.
Corporate
- Q1 2023 operating loss was $0.9
million compared to an operating loss of $0.6 million in Q1 2022.
- Q1 2023 operating cash outflow before changes in non-cash
working capital items was $0.7
million compared to operating cash outflow before changes in
non-cash working capital items of $0.5
million in Q1 2022.
- As at March 31, 2023, the cash
balance was $5.9 million and the
working capital balance was $5.9
million.
OUTLOOK AND STRATEGY
Entrée's primary objective is to confirm the transfer of the
Shivee Tolgoi and Javhlant mining licences to OTLLC as contemplated
by the Entrée/Oyu Tolgoi JVA, either in conjunction with
finalization and execution of a restructured or amended agreement
with OTLLC, or enforcement of certain provisions of the Earn-in
Agreement and Entrée/Oyu Tolgoi JVA pursuant to binding arbitration
proceedings. The Company is also advancing discussions with Erdenes
Oyu Tolgoi LLC regarding a potential acquisition by the Government
of Mongolia of 34% of the
Company's economic interest in the Entrée/Oyu Tolgoi JV Property in
connection with the transfer of the licences. The Company currently
is registered in Mongolia as the
100% ultimate holder of the Shivee Tolgoi and Javhlant mining
licences.
As previously disclosed by the Company, the contract area
defined in the 2009 Oyu Tolgoi Investment Agreement among the
Government of Mongolia, OTLLC, Rio
Tinto and Turquoise Hill (the "Oyu Tolgoi Investment
Agreement") includes the Javhlant and Shivee Tolgoi mining
licences. However, at the time of negotiation of the Oyu Tolgoi
Investment Agreement, the Company was not made a party to the Oyu
Tolgoi Investment Agreement, and as such does not have any direct
rights or benefits under the Oyu Tolgoi Investment Agreement.
Entrée has been engaged in discussions with stakeholders of the
Oyu Tolgoi project, including the Government of Mongolia, OTLLC, Erdenes Oyu Tolgoi LLC,
Turquoise Hill, and Rio Tinto, since February 2013. The discussions to date have
focused on issues arising from Entrée's exclusion from the Oyu
Tolgoi Investment Agreement, including the fact that the Government
of Mongolia does not have a full
34% interest in the Entrée/Oyu Tolgoi JV Property; the fact that
the mining licences integral to future underground operations are
held by more than one corporate entity; and the fact that Entrée
does not benefit from the stability that it would otherwise have if
it were a party to the Oyu Tolgoi Investment Agreement. In
order to receive the benefits of the Oyu Tolgoi Investment
Agreement, the Government of Mongolia may require the Company to agree to
certain concessions, including with respect to Entrée's economic
interest in the Entrée/Oyu Tolgoi JV Property.
The Company believes that amending or restructuring the
Entrée/Oyu Tolgoi JVA to align the interests of all stakeholders,
transferring the licences to OTLLC as contemplated by the
Entrée/Oyu Tolgoi JVA, and resolving outstanding issues arising
from Entrée's exclusion from the Oyu Tolgoi Investment Agreement
would be in the best interests of all stakeholders, provided there
is no material 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 first quarter
ended March 31, 2023 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,
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. Horizon Copper Corp. and
Rio Tinto are major shareholders of Entrée, beneficially holding
approximately 25% and 16% 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 arbitration proceedings; the Company's plans to
continue discussions with OTLLC and Rio Tinto regarding a potential
restructuring or amendment of the Entrée/Oyu Tolgoi JVA; the
Company's plans to advance discussions with the Government of
Mongolia regarding a potential
acquisition by the Government of Mongolia of 34% of the Company's economic
interest in the Entrée/Oyu Tolgoi JV Property; the Company's
ability to transfer the Shivee Tolgoi and Javhlant mining licences
to OTLLC either in conjunction with finalization and execution of a
restructured or amended agreement with OTLLC, or enforcement of
certain provisions of the Earn-in Agreement and Entrée/Oyu Tolgoi
JVA pursuant to binding arbitration proceedings; the potential for
Entrée to be included in or otherwise receive the benefits of the
Oyu Tolgoi Investment Agreement; the expectations set out in
OTLLC's 2020 Oyu Tolgoi Mongolian Statutory Study and the Company's
2021 Technical Report on its interest in the Entrée/Oyu Tolgoi JV
Property; timing and status of Oyu Tolgoi underground development;
the expected timing of the first Panel 1 draw bell on the Oyu
Tolgoi mining licence; the nature of the ongoing relationship and
interaction between OTLLC and Rio Tinto and the Government of
Mongolia and Erdenes Oyu Tolgoi
LLC with respect to the continued operation and development of Oyu
Tolgoi; the re-design study for Hugo
North (including Hugo North Extension) Lift 1 Panel 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; capital, financing and project
development risk; mining dilution; discussions with the Government
of Mongolia, Erdenes Oyu Tolgoi
LLC, Rio Tinto, and OTLLC 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 actions by the Government of Mongolia with respect to the Shivee Tolgoi and
Javhlant mining licences and Entrée's interest in the Entrée/Oyu
Tolgoi JV Property; 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 arbitration
proceedings; the potential benefits, timing and outcome of
negotiations with the Government of Mongolia, Erdenes Oyu Tolgoi LLC, OTLLC, and
Rio Tinto; that the Company will continue to have timely access to
detailed technical, financial, and operational information about
the Entrée/Oyu Tolgoi JV Property, the Oyu Tolgoi project, and
government relations to enable the Company to properly assess, act
on, and disclose material risks and opportunities as they arise;
local and global economic conditions 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, Erdenes Oyu Tolgoi LLC, OTLLC, and
Rio Tinto; 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, Rio Tinto,
Erdenes Oyu Tolgoi LLC 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 on the Oyu Tolgoi mining licence in
accordance with the Panel 0 mine plan and design; 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 and the availability and amount of
potential sources of additional funding; 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, including the ability to access
detailed technical, financial and operational information; risks
related to the Company's significant shareholders, and whether they
will exercise their rights or act in a manner that is consistent
with the best interests of the Company and its other shareholders;
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 or OTLLC and by
government stakeholders or authorities including Erdenes Oyu Tolgoi
LLC and 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,
2022, dated March 31, 2023
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