VANCOUVER, April 1, 2019 /CNW/ - Entrée Resources Ltd.
(TSX:ETG; NYSE American:EGI – the "Company" or
"Entrée") has today filed its annual operational and
financial results for the year ended December 31, 2018. All numbers are in U.S.
dollars unless otherwise noted.
2018 HIGHLIGHTS
Entrée/Oyu Tolgoi Joint Venture
Property, Mongolia
- On January 15, 2018, the Company
reported the results of an updated Technical Report titled
"Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report" (the
"2018 Technical Report") that was completed by Wood Canada
Limited (formerly Amec Foster Wheeler Americas Limited) on its
interest in the Entrée/Oyu Tolgoi joint venture property in
Mongolia (the "Entrée/Oyu
Tolgoi JV Property"). The Entrée/Oyu Tolgoi JV Property
comprises a significant portion of the long-life, high-grade Oyu
Tolgoi copper-gold mining project in Mongolia. The 2018 Technical Report discusses
two development scenarios, an updated reserve case (the "2018
Reserve Case") and a Life-of-Mine Preliminary Economic
Assessment (the "2018 PEA"). The 2018 Reserve Case is
based only on mineral reserves attributable to the Entrée/Oyu
Tolgoi joint venture from the first lift ("Lift 1") of the
Hugo North Extension underground block cave. Lift 1 of Hugo North (including Hugo North Extension) is
in development by project operator Rio Tinto, with first
development production from Hugo North Extension currently expected
in 2021. When completed, Oyu Tolgoi will become the world's third
largest copper mine.
- On February 28, 2018, the Company
filed the 2018 Technical Report on SEDAR and on the Company's
website.
- As reported by Turquoise Hill Resources Ltd. ("Turquoise
Hill") in their News Release dated March
14, 2019:
-
- The main focus for Turquoise Hill during 2018 was Oyu Tolgoi
underground development, the fit out of Shaft 2, completion and
commissioning of Shaft 5, support infrastructure and the
convey-to-surface decline. Shaft 2 completed sinking in
January 2018, which was followed by
the completion of stripping in third quarter 2018 and commencement
of the fit-out process in the same quarter. The completed
commissioning of Shaft 5 was achieved during second quarter
2018.
- During 2018, underground lateral development at the Oyu Tolgoi
project advanced 10.3 equivalent kilometres, a 68.9% increase over
2017. Of this, 2.3 equivalent kilometres was completed during
fourth quarter 2018.
- Shaft 2-connected underground infrastructure progressed well
during the fourth quarter 2018 with the completion of the lining
installation and handover of Ore Bin 11 as well as advancement of
the new 6,000-tonne-per-day jaw crusher under construction.
- Underground expansion capital for Hugo North Lift 1 for 2018
was $1.2 billion, meeting the
upper-end of Turquoise Hill's guidance.
- Turquoise Hill has completed an independent review of Rio
Tinto's previously announced second annual schedule and cost
re-forecast for Lift 1 underground development. The review found
that project cost was expected to remain within the $5.3 billion budget but that it is likely there
will be further delays to individual activities and that this will
result in additional delays to sustainable first production from
the Oyu Tolgoi mining licence. Since completion of Turquoise Hill's
independent review, Rio Tinto, as manager of the Oyu Tolgoi
project, has advised Turquoise Hill that delays on the Shaft 2 fit
out are expected to result in an overall schedule delay to
sustainable first production from the Oyu Tolgoi mining licence
beyond the end of third quarter 2021. Additionally, Rio Tinto is
studying relocating the ore passes on the footprint and this may
modify the initiation sequence within Panel 0. The study will be
incorporated into the definitive estimate review, as will work
necessary to estimate any impact on cost and development schedule.
The definitive estimate review is expected to be complete towards
the end of 2019.
- Entrée's joint venture partner Oyu Tolgoi LLC ("OTLLC")
is currently undertaking an updated Feasibility Study on the Oyu
Tolgoi project and is in discussions with the Government of
Mongolia to progress the
construction of a coal-fired power plant and related infrastructure
at Tavan Tolgoi.
- Entrée is not currently aware of any expected delays to
development production or initial block cave production from Lift 1
of the Hugo North Extension deposit on the Entrée/Oyu Tolgoi JV
Property resulting from delays to individual activities at the Oyu
Tolgoi project. Entrée will evaluate any information made available
to it by Rio Tinto or OTLLC as the definitive estimate review and
Feasibility Study progress and will update the market
accordingly.
Cañariaco Project Royalty, Peru
On June 8,
2018, the Company completed the sale of its 0.5% net smelter
returns royalty (the "Cañariaco Project Royalty") on
Candente Copper Corp.'s Cañariaco copper project in Northern Peru to Anglo Pacific Group PLC
("Anglo Pacific"), a public
company listed on the London Stock Exchange and the Toronto Stock
Exchange. Under the sales agreement with Anglo Pacific, the Company transferred all the
issued and outstanding shares of its subsidiaries that directly or
indirectly hold the Cañariaco Project Royalty to Anglo Pacific for consideration of $1.0 million, payable by the issuance of 478,951
Anglo Pacific common shares.
In addition, Entrée retains the right to a portion of any future
royalty income received by Anglo
Pacific in relation to the Cañariaco Project Royalty.
Subsequent to the year end, the Company disposed of its investment
in Anglo Pacific common shares for
net proceeds of ~1.0 million.
Corporate
- The Company adopted IFRS in its Annual Consolidated Financial
Statements for the year ended December 31,
2018.
- On February 5, 2018, Mark Bailey was appointed to the role of
Non-Executive Chair of the Board. Mr. Bailey succeeded The Rt.
Honourable Lord Howard of Lympne, who retired from his position as
a director and Non-Executive Chair of the Board. Dr. Michael Price was also appointed to the Board of
Directors to fill the vacancy created by Lord Howard's
retirement.
- For the full 2018 year, the operating loss was $1.8 million compared to an operating loss of
$2.9 million in 2017. The
reduction was related to lower administrative costs in the 2018
year.
- For the full 2018 year, operating cash outflow after working
capital was $0.8 million compared to
a $3.0 million operating cash outflow
in 2017. The reduction in operating cash outflow after working
capital was due to one-time restructuring costs in 2017 and a lower
net loss in 2018.
- On December 19, 2018, Mason
Resources Corp. ("Mason Resources") terminated its
Administrative Services Agreement with the Company following the
acquisition of Mason Resources by Hudbay Minerals Inc.
- As at December 31, 2018, cash on
hand was $6.2 million and the working
capital balance was $6.8
million.
OUTLOOK AND STRATEGY
The Company's primary objectives
for the 2019 year include:
- Continuing constructive discussions with the Government of
Mongolia.
- Working 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. The form of Entrée/Oyu Tolgoi JVA was
agreed between the parties in 2004, prior to the execution of the
Oyu Tolgoi Investment Agreement and commencement of underground
development. The Company believes that amendments that align the
interests of all stakeholders as they are now understood, would be
in the best interests of the Company and its shareholders 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 expected 2019 full year expenditures, which
include Mongolian site management and compliance costs, is between
$1.2 million and $1.5 million. The Company continues to focus its
efforts on conserving cash and remaining prudent with its
expenditures.
SUMMARY OF OPERATING RESULTS
Operating
Loss
For the year ended December 31,
2018, the Company's operating loss was $1.8 million compared to $2.9 million for the year ended December 31, 2017.
Exploration costs in 2018 included expenditures of $0.1 million for administration costs in
Mongolia compared to $0.2 million in the comparative 2017
period. Holding costs on all other properties in 2018 and
2017 were insignificant.
Overall, general and administration expenditures in 2018 were
31% lower compared to the same period in 2017 due to the reduction
in corporate overhead costs in 2018.
Share-based compensation expense in 2018 was 25% lower compared
to the same period in 2017 due partly to adjustments made in 2017
relating to the plan of arrangement with Mason Resources.
Non-operating Items
During 2018, the Company adopted
IFRS, disposed of its Cañariaco Project Royalty to Anglo Pacific and commenced capitalizing direct
expenditures related to the development of the Oyu Tolgoi
project. As a result, there were some significant non-cash
items recognized in profit and loss.
Upon the adoption of IFRS, the Company was required to recognize
a non-cash loss of $33.6 million on
the spin-out of the US-based assets to Mason Resources in 2017,
which was the main difference between 2018 and 2017 results. The
Company also adopted IFRS 15, which required the Company to record
non-cash finance costs related to the deferred revenue balance,
specifically the Sandstorm Gold Ltd. stream, during the year.
In addition, the Company recognized a gain on the sale of the
Cañariaco Project Royalty in 2018 and subsequent to the sale, the
Company recognized an unrealized loss on held-for-trading
investments which was related to the holding of Anglo Pacific common shares. As Entrée
completed this transaction in 2018, there was no amount in
comparative periods.
The foreign exchange loss of $0.3
million in 2018 was primarily the result of movements
between the C$ and US$ as the Company holds its cash in both
currencies.
Interest expense (net) was primarily related to the loan payable
to OTLLC pursuant to the Entrée/Oyu Tolgoi JVA and was subject to a
variable interest rate.
The loss from equity investee was related to exploration costs
on the Entrée/Oyu Tolgoi JV Property. Effective January 1, 2018, the Company commenced
capitalizing direct expenditures related to the development of the
Oyu Tolgoi project. As a result, the loss from equity investee was
lower in 2018 compared to 2017 due to the change in this accounting
policy.
The Company's Annual Financial Statements and Management's
Discussion and Analysis ("MD&A"), and Annual Information
Form are available on the Company's website at
www.EntreeResourcesLtd.com and on SEDAR at www.sedar.com. The
Company's Annual Report on Form 20-F ("Annual Report") has
been filed with the U.S. Securities and Exchange Commission
("SEC"), and is available on the Company's website
at www.EntreeResoucesLtd.com and on EDGAR at
www.sec.gov. Shareholders can receive a hard copy of the
Company's audited Annual Financial Statements upon request.
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 January 15, 2018,
available on SEDAR at www.sedar.com.
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 joint venture, depending on the
depth of mineralization. Sandstorm Gold Ltd., Rio Tinto and
Turquoise Hill are major shareholders of Entrée, holding
approximately 16%, 9% and 8% 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; uses of funds and
projected expenditures; construction and continued development of
the Oyu Tolgoi underground mine; the expected timing of first
development production from Lift 1 of the Entrée/Oyu Tolgoi JV
Property; potential production delays and the impact of such
delays; 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; timing and status of a Tavan
Tolgoi-based power project; anticipated business activities; 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, local and global
economic conditions and the environment in which Entrée will
operate in the future, including the price of copper, gold and
silver, projected grades, anticipated capital and operating costs,
anticipated future production and cash flows and the status of
Entrée's relationship and interaction with the Government of
Mongolia, OTLLC, Rio Tinto and
Turquoise Hill. 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 timing and cost of the construction and expansion of mining and
processing facilities; the timing and availability of a long term
domestic power source for Oyu Tolgoi (or the availability of
financing for OTLLC to construct such a source); the ability of
OTLLC to secure and draw down on the supplemental debt under the
Oyu Tolgoi project finance facility and the availability of
additional financing on terms reasonably acceptable to OTLLC,
Turquoise Hill and Rio Tinto to further develop Oyu Tolgoi; delays,
and the costs which would result from delays, in the development of
the underground mine; projected copper, gold and silver prices and
their market demand; and production estimates and the anticipated
yearly production of copper, gold and silver at Oyu Tolgoi.
The 2018 PEA is based on a conceptual mine plan that includes
Inferred resources. Numerous assumptions were made in the
preparation of the 2018 PEA, including with respect to mineability,
capital and operating costs, production schedules, the timing of
construction and expansion of mining and processing facilities, and
recoveries, that may change materially once production commences at
Hugo North Extension Lift 1 and additional development and capital
decisions are required. Any changes to the assumptions underlying
the 2018 PEA could cause actual results to be materially different
from any future results, performance or achievements expressed or
implied by forward-looking statements and information relating to
the 2018 PEA.
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 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; geotechnical or hydrogeological
considerations during mining being different from what was assumed;
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; environmental risks; global
climate change; title disputes; limitations on insurance coverage;
competition; loss of key employees; cyber security incidents;
misjudgements in the course of preparing forward-looking
statements; as well as 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, 2018, dated March 29, 2019 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