- 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$162 million*)
(All figures are in US dollars unless
otherwise noted; *converted at USD:CAD exchange rate of
1.233)
VANCOUVER, BC, Oct. 21, 2021 /PRNewswire/ - Entrée Resources
Ltd. (TSX: ETG) (OTCQB: ERLFF) (– the "Company" or
"Entrée") has filed an amended technical report on its
interest in the Entrée/Oyu Tolgoi joint venture property (the
"Entrée/Oyu Tolgoi JV Property") in Mongolia titled, "Entrée/Oyu Tolgoi Joint
Venture Project, Mongolia, NI
43-101 Technical Report" with an original effective date of
May 17, 2021, and an amended
effective date of October 8, 2021
(the "Amended Report").
The Amended Report discusses a Feasibility Study (the "2021
Reserve Case") based on mineral reserves attributable to the
Entrée/Oyu Tolgoi joint venture (the "Entrée/Oyu Tolgoi JV")
from the first lift ("Lift 1") of the Hugo North Extension
copper-gold deposit ("Hugo North Extension" or
"HNE"). The Amended Report reflects updated information
provided by Entrée's joint venture partner Oyu Tolgoi LLC
("OTLLC") on the concentrate tonnes and grade to be produced
from HNE Lift 1. The updated information results in an increase in
payable copper in copper concentrate, which positively impacts
Entrée's 20% attributable financial interest.
The following is a summary of the changes to the financial
results and outputs from the 2021 Reserve Case:
Table 1. Changes to Financial Results and Outputs
for 2021 Reserve Case (HNE Lift 1)
2021 Reserve Case
(HNE Lift 1)
|
Units
|
Amended
Number
(October 8,
2021)
|
Original
Number
(May 17,
2021)
|
%
Change
(+/-)
|
Attributable
Financial Results
|
|
|
|
|
Cash Flow,
pre-tax
|
US$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.
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; the value and
potential value of assets; the expectations set out in OTFS20 and
the Amended Report on the Company's interest in the Entrée/Oyu
Tolgoi JV Property; timing and status of Oyu Tolgoi underground
development; 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; 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 and gold 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 Resources and Mineral Reserves; projected
mining and process recovery rates; estimates of capital and
operating costs, mill throughput, cash flows and mine life;
capital, financing and project development risk; mining dilution;
discussions with the Government of Mongolia, Rio Tinto, OTLLC and Turquoise Hill
Resources 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; the
potential for Entrée to be included in or otherwise receive the
benefits of the Oyu Tolgoi Investment Agreement or another similar
agreement; the potential for the Government of Mongolia to seek to directly or indirectly
invest in Entrée's interest in the Hugo North Extension and Heruga
deposits; 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 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 Resources.
- 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 Resources 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
Resources 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 Resources and Mineral Reserves 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 Resources 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
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