VANCOUVER, March 16, 2020 /PRNewswire/ - Entrée
Resources Ltd. (TSX: ETG; OTCQB :ERLFF – the "Company" or
"Entrée") has today filed its annual operational and financial
results for the year ended December 31,
2019. All numbers are in U.S. dollars unless otherwise
noted.
2019 HIGHLIGHTS
Oyu Tolgoi Underground Development
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
November 12, 2019 and January 16, 2020, OTLLC's 66% shareholder
Turquoise Hill Resources Ltd. ("Turquoise Hill") provided an update
on underground development on the Oyu Tolgoi mining licence:
- Construction of Shaft 2 was completed in October 2019 allowing for the movement of 300
people per cage cycle versus a maximum of 60 people per cage cycle
through Shaft 1. Underground development material is also being
lifted to surface via the Shaft 2 production hoist.
- Productivity improvements resulted in increased underground
lateral development rates during the fourth quarter of 2019, with
an average rate of 1,607 equivalent meters ("eqm") compared to
1,214 eqm in the third quarter of 2019, with December seeing a
record 1,809 eqm.
- Construction is progressing on Shafts 3 and 4 with both collars
now installed. Final preparations are now underway to enable
commencement of main sinking operations for both shafts during the
second quarter of 2020.
- As previously announced by Turquoise Hill on July 15, 2019, improved information with respect
to rock mass and geotechnical data modelling has confirmed that
there are stability risks associated with components of the mine
design in the 2016 Oyu Tolgoi Feasibility Study. Preliminary
estimates indicate that sustainable first production from the Oyu
Tolgoi mining licence could be delayed by 16 to 30 months compared
to Turquoise Hill's original feasibility study guidance in 2016,
and the development capital spend for the Oyu Tolgoi underground
project may increase by $1.2 billion
to $1.9 billion over the $5.3 billion previously disclosed by Turquoise
Hill. To address these risks, a number of refinements are under
review to determine the final mine design.
- The first of the key decisions that has been made is to retain
a mid-access drive only on the apex level of the mine design of
Panel 0. This is an integral step towards completing the final mine
design, however it is too early to accurately determine the
potential impact on the cost or schedule. Decisions on productivity
levels and key underground infrastructure such as the location and
design of the ore passes and options for panel sequencing, will
need to be completed before an update on the development capital or
schedule can be provided.
- Turquoise Hill anticipates detailed analysis work on the mine
design to be completed during the first half of 2020, and a
definitive estimate (the "Definitive Estimate"), which will include
the estimate of cost and schedule for the underground project based
on the updated design of Panel 0, is expected to be delivered in
the second half of 2020.
Entrée/Oyu Tolgoi JV Property
Once OTLLC, Turquoise
Hill and project operator Rio Tinto International Holdings Ltd.
("Rio Tinto") have determined the preferred mine design approach
and delivered the Definitive Estimate, Entrée will be able to
assess the potential impact on mineral resources and reserves
estimates and underground development cost and schedule for the
Entrée/Oyu Tolgoi JV Property. Entrée will continue to evaluate any
information made available to it by Rio Tinto or OTLLC and will
update the market accordingly.
Corporate
- During Q1 2019, the Company disposed of its share investment in
Anglo Pacific Group PLC ("Anglo Pacific") for net proceeds of
$1.0 million and realized a
$0.1 million gain.
- On October 1, 2019, the Company's
common shares commenced trading on the Over-the-Counter OTCQB
Venture Market ("OTCQB") under the trading symbol "ERLFF" and
discontinued trading on the NYSE American LLC.
- For the full 2019 year, the operating loss was $2.1 million compared to an operating loss of
$1.8 million in 2018.
- For the full 2019 year, operating cash outflow before working
capital was $1.5 million.
Operating cash outflow for 2019 was higher than 2018 mostly due to
no receipts in 2019 associated with the Administrative Services
Agreement with Mason Resources Corp. ("Mason Resources") which was
terminated at the end of 2018. Entrée also incurred a modest amount
of one-time external advisor costs relating to the Entrée/Oyu
Tolgoi joint venture (the "Entrée/Oyu Tolgoi JV").
- As at December 31, 2019, cash was
$5.4 million and the working capital
balance was $5.5 million.
OUTLOOK AND STRATEGY
The Company's primary objective
for the 2020 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 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's expected 2020 full year expenditures, which
include Mongolian site management and compliance costs, are between
$1.5 million and $1.65 million.
SUMMARY OF OPERATING RESULTS
Operating
Loss
For the full 2019 year, the operating loss was
$2.1 million compared to an operating
loss of $1.8 million in 2018.
Exploration costs in 2019 included expenditures of $0.2 million for administration costs in
Mongolia compared to $0.1 million in the comparative 2018
period. Holding costs on all other properties in 2019 and
2018 were insignificant.
Overall, general and administration expenditures in 2019 were
30% higher compared to the same period in 2018 primarily due to no
receipt of cost-recovery reimbursements from Mason Resources which
were received in 2018. Beginning in the first quarter 2019,
the Company no longer received these reimbursements. The
Company also incurred a modest increase in travel and external
advisor costs related to active discussions with other Oyu Tolgoi
stakeholders aimed at improving the efficiency and effectiveness of
the Entrée/Oyu Tolgoi JV. For further information on the
Administrative Services Agreement with Mason Resources, reference
should be made to the Company's annual audited consolidated
financial statements for the year ended December 31, 2018 and the related
MD&A.
Depreciation expenses in 2019 were higher compared to the
comparative period in 2018 due to the adoption of new IFRS
accounting standard relating to leases effective January 1, 2019.
Non-operating Items
The gain on sale of investments of
$0.1 million in 2019 is related to
the disposal of common shares of Anglo
Pacific for net proceeds of $1.0
million.
The foreign exchange gain in 2019 was primarily the result of
movements between the C$ and U.S. dollar as the Company holds its
cash in both currencies and the loan payable is denominated in U.S.
dollars.
Interest expense was primarily related to the loan payable to
OTLLC pursuant to the Entrée/Oyu Tolgoi JVA and is subject to a
variable interest rate.
The amount recognized as a loss from equity investee is related
to exploration costs on the Entrée/Oyu Tolgoi JV Property.
The total assets as at December 31,
2019 were comparable to the balance at December 31, 2018 while total non-current
liabilities were higher due to recording the non-cash deferred
revenue finance costs for the 2019 year.
The Company's Annual Financial Statements and Management's
Discussion and Analysis ("MD&A"), and Annual Information Form
are available on the Company's website at
www.EntreeResourcesLtd.com and on SEDAR at www.sedar.com. The
Company's Annual Report on Form 20-F ("Annual Report") has been
filed with the U.S. Securities and Exchange Commission ("SEC"), and
is available on the Company's website
at www.EntreeResoucesLtd.com and on EDGAR at
www.sec.gov. Shareholders can receive a hard copy of the
Company's audited Annual Financial Statements upon request.
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, 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
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, 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; timing and status of Oyu Tolgoi underground
development, the development options under consideration for the
design of Panel 0 and the related implications for mineral reserves
and resources estimates, costs and schedules; timing of completion
of the Definitive Estimate; 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 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, 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 to construct such a source); 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
and Turquoise Hill with the Government of Mongolia on the continued operation and
development of Oyu Tolgoi and OTLLC internal governance; the
anticipated location of certain infrastructure and sequence of
mining; the potential impact of the COVID-19 (coronavirus)
pandemic; 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