Entrée Resources Announces First Quarter 2023 Results
ENTRÉE RESOURCES ANNOUNCES FIRST QUARTER 2023 RESULTS
Vancouver, B.C., May 3 , 20 23 – Entrée Resources Ltd. (TSX:ETG; OTCQB:ERLFF – the “Company” or
“Entrée”) has today filed its interim financial results for the first quarter ended March 31, 2023 . All
numbers are in U.S. dollars unless otherwise noted.
Q1 2023 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 JV
Property, which is a partnership between Entrée and OTLLC.
• On March 13, 2023, Rio Tinto announced the commencement of underground production from
Oyu Tolgoi Lift 1 Panel 0 on the Oyu Tolgoi mining licence. Copper is now being produced from
the underground mine. Production will ramp up over the coming years, with Oyu Tolgoi expected
to become the fourth largest copper mine in the world by 2030.
• 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. The Hugo North Extension deposit on the Entrée/Oyu Tolgoi JV
Property is located at the northern portion of Panel 1.
• Design optimization work for Lift 1 Panel 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 and will
incorporate any ventilation-related impacts resulting from Shaft 3 and 4 delays.
Entrée/Oyu Tolgoi JV Property
• OTLLC advised the Company that in 2022 it completed 22 underground diamond drill holes
totalling 4,459.9 metres on the Entrée/Oyu Tolgoi JV Property targeting Hugo North Extension
Lifts 1 and 2. In addition, four surface diamond drill holes (including two aborted holes terminated
prior to reaching the target due to excessive deviation) totalling 4,366.1 metres were drilled on
the Entrée/Oyu Tolgoi JV Property targeting the northern portion of the Hugo North Extension
deposit. The Company is still waiting for OTLLC to deliver results from the bulk of the underground
holes and all the surface holes. Entrée continues to collate and model data as it is received.
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• OTLLC is planning additional underground and surface drilling for Panel 1 on the Entrée/Oyu Tolgoi
JV Property for 2023. Details of the drilling program and budget have yet to be finalized and
presented to the Entrée/Oyu Tolgoi JV Management Committee for approval.
• OTLLC is in the process of finalizing an exploration program and budget for 2023 for presentation
to the Entrée/Oyu Tolgoi JV Management Committee for approval. The program is expected to
include both diamond and reverse circul ation (“ RC”) target drilling on the Shivee Tolgoi and
Javhlant licences, including deep diamond drilling at the Airstrip, Castle Rock and South East IP
targets, and RC drilling at Ulaan Khud.
• The Company continues to monitor the situation in Mongolia inclu ding 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 had 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 subsequen tly 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 joint venture property in Mongolia in 2008. Both Turquoise
Hill and OTLLC are respondents to the arbitration proceedings. The commencement of arbitration
proceedings followed protracted discussions with Rio Tinto and OTLLC to confirm the transfer of
the Shivee Tolgoi and Javhlant mining licences to OTLLC, either in conjunction with finalization
and execution of a restructured or amended agreement with OTLLC, or performance of certain
provisions of the Earn-in Agreement and Entrée/Oyu Tolgoi JVA . While the Company remains
committed to seeking a commercial resolution with Rio Tinto and OTLLC and the parties continue
to make progress, the Company’s Board of Directors concluded that given the risks inherent with
the existing structure, the already lengthy discussions between the parties, and the long lead-time
to any arbitration award, i t was in the Company’s best interests to commence proceedings to
enforce the Earn -in Agreement and Entrée/Oyu Tolgoi JVA. A three -member Tribunal has now
been appoint ed and a merits hearing has been set for April 2024. The Company will provide
updates on the arbitration as developments warrant.
Corporate
• Q1 2023 operating loss was $0.9 million compared to an operating loss of $0.6 million in Q1 2022.
• Q1 2023 operating cash outflow before changes in non -cash working capital items was $ 0.7
million compared to operating cash outflow before changes in non-cash working capital items of
$0.5 million in Q1 2022.
• As at March 31, 2023, the cash balance was $5.9 million and the working capital balance was $5.9
million.
OUTLOOK AND STRATEGY
Entrée’s primary objective is to confirm the transfer of the Shivee Tolgoi and Javhlant mining licences to
OTLLC as contemplated by the Entrée/Oyu Tolgoi JVA, either in conjunction with finalization and execution
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of a restructured or amended agreement with OTLLC, 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 Gove rnment
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 Javhl ant 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 licenc es 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 recei ve 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 or restructuring the Entrée/Oyu Tolgoi JVA to align the interests of
all stakeholders, transferring the licences to OTLLC as contemplated by the Entrée/Oyu Tolgoi JVA, 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 first quarter ended March 31, 2023 are av ailable 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, titled “Entrée/Oyu Tolgoi Joint
Venture Project, Mongol ia, NI 43 -101 Technical Report” , with an effective date of October 8, 2021,
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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. and Rio Tinto are major shareholders of Entrée,
beneficially holding approximately 25% and 16% of the shares of the Company, respectively. More
information about Entrée can be found at www.EntreeResourcesLtd.com.
FURTHER INFORMATION
David Jan
Investor Relations
Entrée Resources Ltd.
Tel: 604-687-4777 | Toll Free: 1-866-368-7330
E-mail: [email protected]
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 arbitration proceedings; the Company’s plans to continue discussions with OTLLC and Rio Tinto regarding a potential restructuring or
amendment of 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 licence s to OTLLC either in conjunction with finalization and execution of a restructured or
amended agreement with OTLLC, 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 Company’s 2021 Technical Report on its interest in the
Entrée/Oyu Tolgoi JV Property; timing and status of Oyu Tolgoi underground development; the expected timing of the first Panel 1 d raw bell on
the Oyu Tolgoi mining licence; the nature of the ongoing relationship and interaction between OTLLC and Rio Tinto and t he Government of
Mongolia and Erdenes Oyu Tolgoi LLC with respect to the continued operation and development of Oyu Tolgoi; the re-design study for Hugo North
(including Hugo North Extension) Lift 1 Panel 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, Erdenes Oyu Tolgoi LLC, Rio Tinto , and OTLLC 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 an d 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 numero us assumptions regarding present and
future business strategies; the correct interpretation of agreements, laws and regulations; the commencement and conclusion o f arbitration
proceedings, including the potential benefits, timing and outcome of arbitration proceedings; the potential benefits, timing and outcome of
negotiations with the Government of Mongolia, Erdenes Oyu Tolgoi LLC, OTLLC, and Rio Tinto; that the Company will continue to have timely
access to detailed technical, financial, and operational i nformation about the Entrée/Oyu Tolgoi JV Property, the Oyu Tolgoi project, and
government relations to enable the Company to properly assess, act on, and disclose material risks and opportunities as they arise; 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 an d interaction with the
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Government of Mongolia, Erdenes Oyu Tolgoi LLC, OTLLC, and Rio Tinto; 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, Rio Tinto, Erdenes Oyu Tolgoi LLC and the Government of
Mongolia with respect to the continued operation and development of Oyu Tolgoi as and when the key agreements entered into be tween
Turquoise Hill, Rio Tinto and the Government of Mongolia are implemented along with the implementation of Resolution 103; the continuation of
undercutting on the Oyu Tolgoi mining licence in accordance with the Panel 0 mine plan and design; 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 Oy u Tolgoi project
and the availability and amount of potential sources of additional funding; the ti ming 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 OTLL C 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 in frastructure 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 mate rially 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 res ources 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, including the ability to access detailed technical, financial and operational
information; risks related to the Company’s significant shareholders, and whether they will exercise their rights or act in a manner that is consistent
with the best interests of the Company and its other shareholders; inability to upgrade Inferred mineral resources to Indicated or Measured mineral
resources; inability to convert mineral resources to mineral reserves; conclusions of economic evaluat ions; 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 or OTLLC and by government stakeholders or authorities including Erdenes Oyu Tolgoi LLC
and the Government of Mongolia; the availability of funding on reasonable terms; the impact of changes in interpretation to o r 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 avai lability 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 conf licts; 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, 20 22, dated March 31, 2023 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 i ntended.
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.