VANCOUVER, BC, Oct. 30, 2020 /CNW/ - 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, 2020. All numbers are in U.S.
dollars unless otherwise noted.
Q3 2020 HIGHLIGHTS
Oyu Tolgoi Underground Development Update – Mongolia
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 JV Property, which is a partnership between
Entrée and OTLLC. On October 15,
2020, OTLLC's 66% shareholder Turquoise Hill Resources Ltd.
("Turquoise Hill") provided an update on underground
development:
- Work on the Oyu Tolgoi underground project has continued to
progress despite COVID-19 controls and ongoing international travel
restrictions issued by the Government of Mongolia. 40 of OTLLC's expatriates were able
to return to Mongolia in July.
Further flights are planned in order to return the required
specialists to site.
- Care and maintenance activities continue at Shafts 3 and 4 but
some commissioning activities have advanced in preparation for
shaft sinking, including rope installation and no-load testing of
the Shaft 4 hoisting system. Further substantial progress will
require the remobilisation of international shaft-sinking
specialists, and subject to local border restrictions, preparation
is underway by OTLLC to mobilise these contractors before the end
of the fourth quarter 2020. Shafts 3 and 4 will provide ventilation
to support the ongoing development associated with production ramp
up for Panels 1 and 2. OTLLC and Rio Tinto International Holdings
Ltd. ("Rio Tinto") continue to review the impacts of the
Shaft 3 and 4 delays.
- Overall, underground development on the Oyu Tolgoi mining
licence has now reached 48,604 equivalent metres.
- All surface infrastructure required for first sustainable
production from Panel 0 on the Oyu Tolgoi mining licence is
complete and OTLLC is focused on the safe and efficient delivery of
the critical underground Material Handling System 1
("MHS1"). The balance of project infrastructure to be
delivered after the completion of MHS1 is not needed for first
sustainable production from Panel 0. However, it is needed to
support the production ramp-up profile and the life of mine
material handling infrastructure capacity.
- On July 2, 2020, Turquoise Hill
announced the completion of an updated Oyu Tolgoi Feasibility Study
("OTFS20") that incorporates the new mine design for the
first lift ("Lift 1") of Hugo North Panel 0 announced by
Turquoise Hill on May 13, 2020. The
Lift 1 mine plan incorporates the development of three panels and
in order to reach the full sustainable production rate of 95,000
tonnes per day from the underground operations, all three panels
need to be in production. On August 28,
2020, Turquoise Hill announced that it had filed an updated
technical report for the Oyu Tolgoi project ("2020 OTTR").
OTFS20 and the 2020 OTTR do not reflect the impacts of the COVID-19
pandemic, which continue to be assessed by OTLLC, Rio Tinto and
Turquoise Hill.
- OTFS20 and the 2020 OTTR incorporate an update to the first
sustainable production schedule and capital cost estimates for the
underground mine development based on the new block cave mine
design for Panel 0. The new design anticipates a base case
development capital cost of $6.8
billion, with a range of $6.6
billion to $7.1 billion, and a
target to first sustainable production from the Oyu Tolgoi mining
licence of February 2023, with a
target range between October 2022 and
June 2023, inclusive of an allowance
for schedule contingency. The mine design for Panel 0 is now
undergoing detailed study, design, engineering and optimization
work to support the definitive estimate cost and schedule update
for Panel 0 (the "Definitive Estimate"), expected to be
completed by OTLLC, Rio Tinto and Turquoise Hill in the fourth
quarter of 2020. Turquoise Hill has been advised that preliminary
indications from the Definitive Estimate process are that first
sustainable production is trending towards the earlier months of
the target range, and that the forecast development capital cost
remains within the range of $6.6
billion to $7.1 billion.
Entrée/Oyu Tolgoi JV Property
- Entrée's 2018 Technical Report completed on its interest in the
Entrée/Oyu Tolgoi JV Property discusses two development scenarios,
a 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 (the "Entrée/Oyu Tolgoi JV")
from Lift 1 of the Hugo North Extension underground block cave
located at the northern portion of Panel 1. Both the 2018 Reserve
Case and the 2018 PEA are based on information reported within the
2016 Oyu Tolgoi Feasibility Study.
- The Company has not yet been provided with OTFS20 or any of the
data or assumptions underlying OTFS20, the block cave designs in
OTFS20 or Turquoise Hill's updated mineral resources and reserves
and the Company is therefore unable to verify such data or the
scientific and technical disclosures made by Turquoise Hill at this
time. For information on the Company's interest in Entrée/Oyu
Tolgoi JV Property, see the 2018 Technical Report available on
SEDAR at www.sedar.com.
- Once the Definitive Estimate and the ongoing Panel 1
optimization studies have been completed and delivered to Entrée
with OTFS20, the Company expects to be able to assess the potential
impact on Entrée/Oyu Tolgoi JV Property resources and reserves as
well as production and financial assumptions and outputs from the
two alternative cases, the 2018 Reserve Case and the 2018 PEA.
Entrée will continue to evaluate any information made available to
it by Rio Tinto or OTLLC and will update the market
accordingly.
Corporate
- On September 14, 2020, the
Company closed a non-brokered private placement of 10,278,000 units
of the Company at a price of C$0.43
per unit for gross proceeds of approximately C$4.4 million. Each unit consists of one common
share and one-half of one transferable common share purchase
warrant (each whole warrant, a "Warrant"). Each Warrant
entitles the holder to purchase one additional common share of the
Company at a price of C$0.60 per
share for a period of three years following the date of
issuance.
- Q3 2020 operating loss was $0.4
million and was consistent with the comparative quarter of
Q3 2019.
- Q3 2020 operating cash outflow after working capital was
$0.3 million and was consistent with
the $0.3 million operating cash
outflow in Q3 2019.
- As at September 30, 2020, the
cash balance was $7.4 million and the
working capital balance was $7.5
million. The Company holds the majority of its cash in
Canadian currency.
- The Company recognises 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.
OUTLOOK AND STRATEGY
The Company's primary objective for the 2020 year continues to
be 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 JV. 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 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 continues to expect 2020 full year expenditures,
which include Mongolian site management and compliance costs, to be
between $1.5 million and $1.7 million.
The Company's interim financial statements and Management's
Discussion and Analysis ("MD&A") for the third quarter
ended September 30, 2020 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 Company's Technical Report
(the "2018 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 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 21%, 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; the expectations set out in OTFS20; 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 of completion of the Definitive Estimate and the
scope 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; the
potential impact of COVID-19 (coronavirus) on Oyu Tolgoi
underground development and the business, operations and financial
condition of the parties to the Entrée/Oyu Tolgoi JV; the
estimation of mineral reserves and resources; 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
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; permitting time lines; 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; 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;
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
potential impact of COVID-19; 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; 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
status of the relationship and interaction between OTLLC, Rio
Tinto, Turquoise Hill and the Government of Mongolia on the continued operation and
development of Oyu Tolgoi, future funding plans and requirements
and OTLLC internal governance; the anticipated location of certain
infrastructure and sequence of mining within and across panel
boundaries; projected copper, gold and silver 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; the outcome of the
Definitive Estimate; 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;
risks related to the potential impact of global or national health
concerns, including the COVID-19 (coronavirus) pandemic; 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; 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,
2019, dated March 13, 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.
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