CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited - Expressed in United States dollars)
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited - Expressed in United States dollars)
Three and six month periods ended June 30, 2021
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORTING
The accompanying condensed consolidated interim financial statements of Entrée Resources Ltd. (the “Company”) have been
prepared by management in accordance with International Financial Reporting Standards (“IFRS”). Management
acknowledges responsibility for the preparation and presentation of the condensed consolidated interim financial statements,
including responsibility for significant accounting estimates and the choice of accounting principles and methods that are
appropriate to the Company’s circumstances.
NOTICE OF NO AUDITOR REVIEW OF CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
The Company’s independent auditor has not performed a review of these condensed consolidated interim financial statements
in accordance with standards established by the Canadian Institute of Chartered Professional Accountants for a review of
interim financial statements by a company’s auditor.
Entrée Resources Ltd.
Condensed Consolidated Interim Statements of Financial Position
As at June 30, 2021 and December 31, 2020 (Unaudited)
(expressed in thousands of U.S. dollars, except where indicated)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Note June 30, 2021 December 31, 2020
Assets
Current assets
Cash and cash equivalents $ 7,355 $ 7,260
Receivables and prepaid expenses 69 130
Prepaid licence fees 65 162
7,489 7,552
Non-current assets
Property and equipment 194 220
Oyu Tolgoi assets 3 213 177
Deposits and other 14 12
421 409
Total assets $ 7,910 $ 7,961
Liabilities
Current liabilities
Accounts payable and accrued liabilities 10 $ 320 $ 124
Current portion of lease liabilities 4 114 108
434 232
Non-current liabilities
Lease liabilities 4 46 100
Loan payable to Oyu Tolgoi LLC 5 9,787 9,615
Deferred revenue 6 51,538 48,222
61,371 57,937
Total liabilities 61,805 58,169
Shareholders’ deficiency
Share capital 7 177,569 176,221
Reserves 22,672 23,205
Accumulated other comprehensive loss (2,927) (1,521)
Deficit (251,209) (248,113)
Total shareholders’ deficiency (53,895) (50,208)
Total liabilities and shareholders’ deficiency $ 7,910 $ 7,961
Nature of operations (Note 1)
Commitments and contingencies (Note 9)
Subsequent events (Note 11)
Entrée Resources Ltd.
Condensed Consolidated Interim Statements of Comprehensive Loss
For the three and six months ended June 30, 2021 and 2020 (Unaudited)
(expressed in thousands of U.S. dollars, except where indicated)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Note
Three months ended June 30 Six months ended June 30
2021 2020 2021 2020
Expenses
Project expenditures $ 158 $ 80 $ 245 $ 114
General and administrative 444 387 783 707
Depreciation 27 25 57 51
Operating loss 629 492 1,085 872
Foreign exchange (gain) loss (101) (315) (194) 317
Interest income (10) (21) (18) (45)
Interest expense 5 86 82 171 169
Loss from equity investee 3 36 35 71 89
Finance costs 3 5 7 10
Deferred revenue finance costs 6 1,006 861 1,974 1,694
Loss for the period 1,649 1,139 3,096 3,106
Other comprehensive loss (income)
Foreign currency translation 768 1,838 1,406 (2,212)
Total comprehensive loss $ 2,417 $ 2,977 $ 4,502 $ 894
Net loss per common share
Basic and fully diluted $ (0.01) $ (0.01) $ (0.02) $ (0.02)
Weighted average number of common shares
outstanding
Basic and fully diluted (000’s) 187,670 175,470 187,209 175,470
Total common shares issued and outstanding
(000’s) 7 189,100 175,470 189,100 175,470
Entrée Resources Ltd.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Deficiency
For the six months ended June 30, 2021 and 2020 (Unaudited)
(expressed in thousands of U.S. dollars, except where indicated)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Note
Number of
Shares
(000’s)
Share
capital Reserves
Accumulated
other
comprehensive
(loss) income
Deficit Total
Balance at December 31, 2020 186,530 $ 176,221 $ 23,205 $ (1,521) $ (248,113) $ (50,208)
Net loss and comprehensive loss - - - (1,406) (3,096) (4,502)
Issuance of share capital – share
options exercised 7 816 270 (236) - - 34
Issuance of share capital – warrants
exercised 7 1,754 1,078 (297) - - 781
Balance at June 30, 2021 189,100 $ 177,569 $ 22,672 $ (2,927) $ (251,209) $ (53,895)
Balance at December 31, 2019 175,470 $ 173,095 $ 22,445 $ (407) $ (242,113) $ (46,980)
Net loss and comprehensive income - - - 2,212 (3,106) (894)
Balance at June 30, 2020 175,470 $ 173,095 $ 22,445 $ 1,805 $ (245,219) $ (47,874)
Entrée Resources Ltd.
Condensed Consolidated Interim Statements of Cash Flows
For the six months ended June 30, 2021 and 2020 (Unaudited)
(expressed in thousands of U.S. dollars, except where indicated)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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Note June 30, 2021 June 30, 2020
Cash flows used in operating activities
Net loss $ (3,096) $ (3,106)
Items not affecting cash:
Depreciation 57 51
Loss from equity investee 3 71 89
Interest expense 5 171 169
Finance cost, net 7 10
Unrealized foreign exchange (gains) losses (208) 232
Deferred revenue finance costs 6 1,974 1,694
(1,024) (861)
Changes in non-cash operating working capital:
Decrease in receivables and prepaids 61 68
Decrease in accounts payable and accrued liabilities 195 1
(768) (792)
Cash flows used in investing activities
Purchase of equipment (32) -
(32) -
Cash flows from (used in) financing activities
Repayment of lease liability 4 (59) (45)
Proceeds from issuance of common shares – share options 7 34 -
Proceeds from issuance of common shares – warrants 7 781 -
756 (45)
Decrease in cash and cash equivalents (43) (837)
Cash and cash equivalents - beginning of period 7,260 5,380
Effect of exchange rate changes on cash and cash equivalents 139 (85)
Cash and cash equivalents - end of period $ 7,355 $ 4,458
Cash and cash equivalents is represented by:
Cash $ 7,321 $ 4,424
Cash equivalents 34 34
Total cash and cash equivalents $ 7,355 $ 4,458
Entrée Resources Ltd.
Notes to Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2021 and 2020 (Unaudited)
(tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated)
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1 Nature of operations
Entrée Resources Ltd., together with its subsidiaries (collectively referred to as the “Company” or “Entrée”), is focused on
the development and exploration of mineral property interests. The Company is principally focused on its Entrée/Oyu Tolgoi
JV Property in Mongolia (Note 3).
The Company has its primary listing in Canada on the Toronto Stock Exchange (“TSX”) and its common shares also trade
in the United States on the Over-the-Counter OTCQB Venture Market (“OTCQB”) under the symbol “ERLFF”.
The Company’s registered office is at Suite 2900, 550 Burrard Street, Vancouver, BC, V6C 0A3, Canada.
All amounts are expressed in United States dollars, except for certain amounts denoted in Canadian dollars (“C$”).
These condensed consolidated interim financial statements have been prepared on the basis of accounting principles
applicable to a going concern which assumes that the Company will be able to continue for the foreseeable future and will
be able to realize its assets and discharge its liabilities in the normal course of business. The Company estimates it has
adequate financial resources to satisfy its obligations over the next 12 month period and beyond.
2 Basis of presentation
The Company prepares its condensed consolidated interim financial statements in accordance with International Accounting
Standards 34, Interim Financial Reporting (“IAS 34”), under International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”) and interpretation of the International Reporting Interpretations
Committee (“IFRIC”). These should be read in conjunction with the Company’s annual audited consolidated financial
statements as at and for the year ended December 31, 2020 (“annual financial statements”). The accounting policies and
critical estimates applied by the Company in these condensed consolidated interim financial statements are the same as those
applied in the Company’s annual financial statements, unless otherwise stated.
The condensed consolidated interim financial statements were approved by the Audit Committee of the Board of Directors
on August 6, 2021.
3 Oyu Tolgoi assets
Entrée/Oyu Tolgoi JV Property
The Company has a carried 20% participating joint venture interest in two of the Oyu Tolgoi project deposits, and a carried
20% or 30% participating joint venture interest (depending on the depth of mineralization) in the surrounding land package
located in the South Gobi region of Mongolia (the “Entrée/Oyu Tolgoi JV Property”). The Entrée/Oyu Tolgoi JV Property
is comprised of the eastern portion of the Shivee Tolgoi mining licence, which hosts the Hugo North Extension copper-gold
deposit, and all of the Javhlant mining licence, which hosts the majority of the Heruga copper-gold-molybdenum deposit.
The Shivee Tolgoi and Javhlant mining licences were granted by the Mineral Resources and Petroleum Authority of
Mongolia in October 2009. Title to the two licences is held by the Company.
In October 2004, the Company entered into an arm’s-length Equity Participation and Earn-In Agreement (the “Earn-In
Agreement”) with Turquoise Hill Resources Ltd. (“Turquoise Hill”). Under the Earn-In Agreement, Turquoise Hill agreed
to purchase equity securities of the Company and was granted the right to earn an interest in what is now the Entrée/Oyu
Tolgoi JV Property. Most of Turquoise Hill’s rights and obligations under the Earn-In Agreement were subsequently
assigned by Turquoise Hill to what was then its wholly-owned subsidiary, Oyu Tolgoi LLC (“OTLLC”). The Government
of Mongolia subsequently acquired a 34% interest in OTLLC from Turquoise Hill.
On June 30, 2008, OTLLC gave notice that it had completed its earn-in obligations by expending a total of $35 million on
exploration of the Entrée/Oyu Tolgoi JV Property. OTLLC earned an 80% interest in all minerals extracted below a sub-
surface depth of 560 metres from the Entrée/Oyu Tolgoi JV Property and a 70% interest in all minerals extracted from surface
Entrée Resources Ltd.
Notes to Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2021 and 2020 (Unaudited)
(tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated)
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to a depth of 560 metres from the Entrée/Oyu Tolgoi JV Property. In accordance with the Earn-In Agreement, the Company
and OTLLC formed a joint venture (the “Entrée/Oyu Tolgoi JV”) on terms annexed to the Earn-In Agreement (the “JVA”).
The portion of the Shivee Tolgoi mining licence outside of the Entrée/Oyu Tolgoi JV Property, Shivee West, is 100% owned
by the Company, but is subject to a right of first refusal by OTLLC. In October 2015, the Company entered into a License
Fees Agreement with OTLLC, pursuant to which the parties agreed to negotiate in good faith to amend the JVA to include
Shivee West in the definition of Entrée/Oyu Tolgoi JV Property. The parties also agreed that the annual licence fees for
Shivee West would be for the account of each joint venture participant in proportion to their respective interests, with OTLLC
contributing the Company’s 20% share charging interest at prime plus 2% (Note 5).
The conversion of the original Shivee Tolgoi and Javhlant exploration licences into mining licences was a condition
precedent to the Investment Agreement (the “Oyu Tolgoi Investment Agreement”) between Turquoise Hill, OTLLC, the
Government of Mongolia and Rio Tinto International Holdings Limited. The licences are part of the contract area covered
by the Oyu Tolgoi Investment Agreement, although the Company is not a party to the Oyu Tolgoi Investment Agreement.
The Shivee Tolgoi and Javhlant mining licences were each issued for a 30 year term and have rights of renewal for two
further 20 year terms.
As of June 30, 2021, the Entrée/Oyu Tolgoi JV had expended approximately $34.2 million (December 31, 2020 - $34.2
million) to advance the Entrée/Oyu Tolgoi JV Property. Under the terms of the Entrée/Oyu Tolgoi JV, OTLLC contributed
on behalf of the Company its required participation amount charging interest at prime plus 2% (Note 5).
Investment – Entrée/Oyu Tolgoi JV Property
For accounting purposes, the Company treats its interest in the Entrée/Oyu Tolgoi JV as a 20% equity investment.
Historically, all Company expenditures related to its interest in the Entrée/Oyu Tolgoi JV have been expensed as incurred
through the statement of comprehensive loss or recognized as part of the Company’s share of the loss of the joint venture.
The Company’s share of the loss of the joint venture was $0.1 million for the six months ended June 30, 2021 (2020 - $0.1
million). The joint venture has nominal current assets and liabilities, approximately $0.3 million of non-current assets and
approximately $34.2 million of non-current liabilities. The loss for the joint venture for the six months ended June 30, 2021
was approximately $0.0 million (2020 – approximately $0.1 million).
The Entrée/Oyu Tolgoi JV investment carrying value at June 30, 2021 was $0.2 million (December 31, 2020 - $0.2 million)
and was recorded in Oyu Tolgoi assets in the statement of financial position.
4 Leases
Lease liability
June 30, 2021 December 31, 2020
Lease liability $ 160 $ 208
Less: current portion (114) (108)
Long-term portion $ 46 $ 100
Undiscounted lease payments
June 30, 2021 December 31, 2020
Less than one year $ 152 $ 124
One to five years 49 97
$ 201 $ 221
Interest expense on the lease liability amounted to $0.0 million for the six months ended June 30, 2021 (2020 - $0.0 million).
During the six months ended June 30, 2021, lease payments made amounted to $0.1 million (2020 - $0.1 million).