VANCOUVER, BC, Aug. 9, 2021 /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,
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.
Corporate
- 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.
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 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.
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; the value and potential
value of assets and the ability of Entrée to maximize returns to
shareholders; timing and status of Oyu Tolgoi underground
development; the expected timing of first development
production from Lift 1 of the Entrée/Oyu Tolgoi JV Property; the
future prices of copper, gold and silver; the estimation of mineral
reserves and resources; the realization of mineral reserve and
resource estimates; projected mining and process recovery rates;
estimates of capital and operating costs, mill throughput, cash
flows and mine life; anticipated business activities; and future
financial performance.
In certain cases, forward-looking statements and information
can be identified by the use of 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; 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, anticipated future production and cash flows,
and 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; 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 or the Government of Mongolia to construct such a source); the
willingness of third parties to extend existing power arrangements;
the potential impact of COVID-19, including any restrictions
imposed by health and governmental authorities relating thereto;
the implementation and successful execution of the funding plan
that is the subject of a Heads of Agreement between Rio Tinto and
Turquoise Hill and the amount of any additional future funding gap
to complete the Oyu Tolgoi underground project as well as the
amount and potential sources of additional funding required
therefor, all as contemplated by the Heads of Agreement; the impact
of changes in, changes in interpretation to or changes in
enforcement of, laws, regulations and government practices in
Mongolia; delays, and the costs
which would result from delays, in the development of the
underground mine; the status of the relationship and interactions
and discussions between OTLLC, Rio Tinto and Turquoise Hill with
the Government of Mongolia on the
continued operation and development of Oyu Tolgoi and OTLLC
internal governance (including the outcome of any such interactions
or discussions); the willingness and ability of the parties to the
Oyu Tolgoi Investment Agreement and the 2015 Oyu Tolgoi Underground
Mine Development and Financing Plan to amend or replace either such
agreement; the nature and quantum of the current and projected
economic benefits to Mongolia
resulting from the continued operation of Oyu Tolgoi; the
anticipated location of certain infrastructure and sequence of
mining within and across panel boundaries; 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.
- The 2021 PEA is based on a conceptual mine plan that
includes Inferred resources. Numerous assumptions were made in the
preparation of the 2021 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 2021 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 2021 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 related to the
potential impact of global or national health concerns, including
the COVID-19 (coronavirus) 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 labor,
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
license to operate; accidents, labor disputes and other risks of
the mining industry; global climate change; title disputes;
limitations on insurance coverage; competition; loss of key
employees; cyber security incidents; misjudgments in the course of
preparing forward-looking statements; and those factors discussed
in the section entitled "Critical Accounting Estimates, Risks and
Uncertainties" in the Company's most recently filed Management's
Discussion & Analysis and in the section entitled "Risk
Factors" in the Company's Annual Information Form for the year
ended December 31,
2020 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. Except as required under applicable
securities legislation, the Company undertakes no obligation to
publicly update or revise forward-looking statements, whether as a
result of new information, future events, or otherwise.
Accordingly, readers should not place undue reliance on
forward-looking statements.
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SOURCE Entrée Resources