VANCOUVER, BC, Nov. 9, 2022 /PRNewswire/ - Entrée Resources Ltd.
(TSX: ETG) (OTCQB: ERLFF) (the "Company" or
"Entrée") has today filed its interim financial results
for the third quarter ended September 30,
2022. All numbers are in U.S. dollars unless otherwise
noted.
Q3 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 October 17, 2022, OTLLC's 66% shareholder
Turquoise Hill Resources Ltd. ("Turquoise Hill") provided an
update on Oyu Tolgoi underground development:
- Safety continues to be OTLLC's top priority and COVID-19
controls remain in place at site to protect OTLLC's work force.
COVID-19 cases identified at Oyu Tolgoi continued at low levels in
the third quarter 2022 and the testing regime has been eased.
Following the recent relaxation of COVID-19 government-initiated
restrictions in Mongolia, OTLLC
has progressively restarted work on project facilities with
workforce numbers now at full capacity.
- Construction of the final major stage of materials handling
infrastructure continues, including civil and underground works for
the conveyor to surface. Undercut blasting and on-footprint
construction work continued to progress during the third quarter
2022. Commissioning of the second truck chute has commenced, and
the 8th draw bell was fired on October 13, 2022, both ahead of schedule.
Sustainable production from Panel 0 on the Oyu Tolgoi mining
licence is now anticipated in the first quarter 2023.
- The Shaft 3 headframe was commissioned and sinking commenced on
March 31, 2022, with the cumulative
sinking level at 298 metres below ground level as at October 2, 2022. Shaft 4 advancement was 418
metres below ground level as at October 2,
2022. The rate of progress in shafts improved during the
quarter due to the optimization work program to maximize the
productivity of their development. Continued progress on the
program is necessary to remain aligned with the 2022 cost and
schedule update, which 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 progress continues to be closely monitored. 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. Turquoise Hill
currently expects the first Panel 1 draw bell in the first half
2027. The Hugo North Extension deposit on the Entrée/Oyu Tolgoi JV
Property is located in the northern portion of Panel 1.
- 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. The Lift 1
Panel 1 design optimization study remains on track for completion
in the first half 2023.
- On September 5, 2022, Turquoise
Hill announced it has entered into an arrangement agreement with
Rio Tinto plc and Rio Tinto International Holdings Limited ("Rio
Tinto") pursuant to which Rio Tinto will acquire the
approximately 49% of the issued and outstanding shares of Turquoise
Hill that Rio Tinto does not currently own for C$43.00 in cash per share, subject to approval by
Turquoise Hill minority shareholders and other customary closing
conditions. The special meeting of Turquoise Hill shareholders to
consider and approve the statutory plan of arrangement is currently
scheduled for November 15, 2022. Rio
Tinto's stated purpose for the acquisition is to strengthen its
copper portfolio and create a more efficient ownership and
governance structure for the Oyu Tolgoi project. If the transaction
is successfully completed, Rio Tinto will have a 66% interest in
deposits on the Oyu Tolgoi mining licence and a 52.8% interest in
the Hugo North Extension and Heruga deposits on the Entrée/Oyu
Tolgoi JV Property.
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 2022 budget with diamond drill holes targeting Hugo
North Extension Lifts 1 and 2. The holes are collared from
underground drill stations along the eastern boundary of the
porphyry mineralized footprint on the Oyu Tolgoi mining licence
crossing onto the Entrée/Oyu Tolgoi JV Property. As at the end of
October 2022, 14 underground holes
have been drilled on the Entrée/Oyu Tolgoi JV Property totalling
6,083.3 metres. In addition, two surface diamond drill holes
totalling ~3,550 metres are in progress, with hole EGD173 currently
at a depth of 1,698 meters (planned depth 1,800 metres) and hole
EGD161 currently at a depth of 364 metres (planned depth 1,750
metres). The two surface holes will be entirely on the Entrée/Oyu
Tolgoi JV Property and will target the northern portion of the Hugo
North Extension deposit. The Lift 1 Panel 1 geological model is
expected to be finalized in the first quarter 2023, following which
a decision will be made as to whether more Lift 1 drilling will be
required. The Company has received preliminary results from a
portion of the underground holes and is in the process of collating
and modelling the data.
- With the relaxation of COVID-19 related restrictions in
Mongolia, exploration drilling
programs resumed in 2022. On the Shivee Tolgoi mining licence, six
reverse circulation ("RC") holes totalling 1,500 metres and
one 800 metre diamond drill hole have been completed at the Ulaan
Khud target. In addition, three diamond drill holes totalling 2,200
metres have been completed at the Airstrip target. Analytical
results are pending. On the Javhlant mining licence, five RC holes
totalling 1,500 metres were planned for each of the Bumbat Ulaan
and West Mag targets in 2022. Two RC holes totalling 600 metres
were completed at the West Mag target; the remaining three holes
were cancelled following engagement with one of the local herders.
The five RC holes planned for the Bumbat Ulaan target were not
completed due to the recent commissioning of the Tavan
Tolgoi-Gashuunsukhait railway.
- 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 $0.5 million
and $1.8 million for the three and
nine month periods of 2022, respectively, compared to $0.5 million and $1.6
million in the comparative periods of 2021.
- Operating cash outflow before changes in non-cash working
capital items was $0.5 million and
$1.7 million for the three and nine
month periods of 2022, respectively, compared to $0.5 million and $1.5
million in the comparative periods of 2021.
- As at September 30, 2022, the
cash balance was $7.1 million and the
working capital balance was $7.1
million.
OUTLOOK AND STRATEGY
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 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 the Entrée/Oyu Tolgoi JVA to
align the interests of all stakeholders as they are now understood,
transferring the licences to OTLLC as manager of the Entrée/Oyu
Tolgoi JV, 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 third quarter
ended September 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. Horizon Copper Corp., 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 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 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 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 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; 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 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 the arbitration proceedings,
including the potential benefits, timing and outcome of the
arbitration proceedings; the potential benefits, timing and outcome
of negotiations with the Government of Mongolia, Erdenes Oyu Tolgoi LLC, OTLLC,
Turquoise Hill and Rio Tinto; 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, 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 and the availability and
amount of potential sources of additional funding; the eventual
pre-payment arrangement between Turquoise Hill and OTLLC; 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 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