VANCOUVER - Entree Resources Ltd. (TSX: ETG) (OTCQB: ERLFF) (the 'Company' or 'Entree') is pleased to announce the results of an updated Feasibility Study that was completed on its interest in the Entree/Oyu Tolgoi joint venture property (the 'Entree/Oyu Tolgoi JV Property').
Entree has a 20% or 30% participating interest (depending on the depth of mineralization) in the joint venture (the 'Entree/Oyu Tolgoi JV') with Oyu Tolgoi LLC ('OTLLC') holding the remaining 80% or 70% interest. The Entree/Oyu Tolgoi JV Property comprises a significant portion of the long-life, high-grade Oyu Tolgoi copper-gold mining project in Mongolia.
Mr. Stephen Scott, Entree's President and CEO comments, 'We are pleased to report updated information that aligns Entree's disclosure with that of other Oyu Tolgoi project stakeholders on development of the first lift of the underground mine. Even more exciting is that, based on OTLLC's 2020 Oyu Tolgoi Feasibility Study, first Lift 1 development production on the Entree/Oyu Tolgoi JV Property is expected to commence in 2022. What has historically seemed like a long way out is very fast becoming a reality. Coincident with receiving first development production, Entree will retain 10% of the available cash flow from the sale of its share of production until its share of joint venture costs is repaid in accordance with the terms of the Joint Venture Agreement. We are also looking forward to completion of Panel 1 optimization studies currently underway that have potential to further improve Lift 1 economics for the Entree/Oyu Tolgoi JV.'
The updated Feasibility Study (the '2021 Reserve Case') is based on mineral reserves attributable to the Entree/Oyu Tolgoi JV from the first lift ('Lift 1') of the Hugo North Extension deposit. 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. By 2030, Oyu Tolgoi is expected to be the fourth largest copper mine in the world. The 2021 Reserve Case aligns the Company's disclosure with that of Turquoise Hill Resources Ltd. ('Turquoise Hill Resources') with respect to OTLLC's 2020 Oyu Tolgoi Feasibility Study ('OTFS20') completed on Hugo North (including Hugo North Extension) Lift 1.
Entree is also reporting the results of a Preliminary Economic Assessment ('2021 PEA') on a conceptual second lift ('Lift 2') of the Hugo North Extension deposit. 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. Lift 2 is directly below Lift 1. There is no overlap in the Mineral Reserves from the 2021 Reserve Case and the Mineral Resources from the 2021 PEA. Development and capital decisions will be required for the eventual development of Lift 2 once production commences at Hugo North Extension Lift 1.
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.
In both the 2021 Reserve Case and the 2021 PEA, Entree is only reporting the production and cash flows attributable to the Entree/Oyu Tolgoi JV Property, not production and cash flows for other Oyu Tolgoi project areas owned 100% by OTLLC. The production and cash flows from the 2021 Reserve Case and the 2021 PEA are from separate parts of the Hugo North Extension deposit and there is no overlap of the mineralization.
Both the 2021 Reserve Case and the 2021 PEA are based on information supplied by OTLLC or reported within OTFS20. OTFS20 discusses the mine plan for Lift 1 of the Hugo North (including Hugo North Extension) underground block cave on both the Oyu Tolgoi mining licence and the Entree/Oyu Tolgoi JV Property. Rio Tinto is managing the construction and eventual operation of Lift 1, as well as any future development of Lift 2 or other deposits on the Entree/Oyu Tolgoi JV Property.
The results of the 2021 Reserve Case and the 2021 PEA will be summarized by Wood Canada Limited ('Wood') in a National Instrument ('NI') 43-101 Technical Report that will be filed under the Company's SEDAR profile at www.sedar.com within 45 days of this news release and on the Company's website.
The Lift 1 mine design presented in OTFS20 and the 2021 Reserve Case are subject to future refinements and updates. Hugo North (including Hugo North Extension) Lift 1 surface and underground drilling programs are ongoing to support the evaluation by OTLLC of different design and sequencing options for Panels 1 and 2 as part of OTLLC's planned Pre-Feasibility and Feasibility level work. The Hugo North Extension deposit is located at the northern portion of Panel 1.
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 is currently scheduled for mid-2021, the development costs and schedule in OTFS20 and the 2021 Reserve Case and 2021 PEA could be negatively impacted.
Entree/Oyu Tolgoi JV Property
The Entree/Oyu Tolgoi JV Property comprises a significant portion of the overall Oyu Tolgoi project area, including the Hugo North Extension copper-gold deposit on the Shivee Tolgoi mining licence, the Heruga copper-gold-molybdenum deposit on the Javhlant mining licence and a large prospective land package with numerous priority exploration targets. Entree has a 20% participating interest in the currently defined mineralization within the Entree/Oyu Tolgoi JV with OTLLC holding the remaining 80% interest. Entree has a 30% participating interest in any new mineralization that could be discovered between surface and a depth of 560 metres ('m'). OTLLC has a 100% interest in other Oyu Tolgoi project areas, including the Oyut open pit, which is currently in production, and the Hugo North and Hugo South deposits on the Oyu Tolgoi mining licence.
The Heruga copper-gold-molybdenum deposit is at the south end of the Oyu Tolgoi trend of porphyry deposits. Approximately 93% of the Heruga deposit occurs on the Entree/Oyu Tolgoi JV Property where Inferred Mineral Resources include, 1,448 Mt grading 0.41% copper, 0.40 g/t gold, 1.5 g/t silver and 120 parts per million ('ppm') molybdenum (0.68% CuEq). While Heruga is not included in the 2021 PEA, it provides opportunity for future exploration and potential development.
Below are some of the key financial assumptions and outputs from the 2021 Reserve Case and the 2021 PEA. Both cases assume long term metal prices of $3.25/lb copper, $1,591/oz gold, and $21.08/oz silver.
ABOUT THE ENTREE/OYU TOLGOI JV PROPERTY
The Oyu Tolgoi project includes two separate land holdings: the Oyu Tolgoi mining licence, which is held 100% by OTLLC (66% Turquoise Hill Resources; 34% Government of Mongolia), and the Entree/Oyu Tolgoi JV Property, which is a partnership between Entree and OTLLC. Rio Tinto is managing the construction of Lift 1 of the Hugo North underground block cave on both the Oyu Tolgoi mining licence and the Entree/Oyu Tolgoi JV Property. The portion of the Hugo North copper-gold deposit that lies on the Entree/Oyu Tolgoi JV Property is known as Hugo North Extension. The Entree/Oyu Tolgoi JV Property also includes the Heruga copper-gold-molybdenum deposit and a large prospective land package.
ABOUT ENTREE RESOURCES LTD.
Entree 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. Entree has a 20% or 30% carried participating interest in the Entree/Oyu Tolgoi JV, depending on the depth of mineralization. Sandstorm Gold Ltd., Rio Tinto and Turquoise Hill Resources Ltd. are major shareholders of Entree, holding approximately 24%, 9% and 8% of the shares of the Company, respectively.
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 and the ability of Entree to maximize returns to shareholders; timing and status of Oyu Tolgoi underground development; the expected timing and amount of production from Lifts 1 and 2 of the Entree/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; 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 future prices of copper, gold, molybdenum and silver; 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; 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; 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 Entree's interest in the Entree/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 Entree's interest in the Entree/Oyu Tolgoi JV Property; the potential for Entree to 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 Entree'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 Entree'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 Entree 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 Entree'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 Entree 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 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.