VANCOUVER, BC,
March 25, 2022 /CNW/ -
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, 2021. All numbers are in
U.S. dollars unless otherwise noted.
2021 HIGHLIGHTS
Entrée/Oyu Tolgoi JV Property
On October 21, 2021, Entrée filed an amended
Technical Report (the "2021 Technical Report") for its
interest in the Entrée/Oyu Tolgoi joint venture property in
Mongolia (the "Entrée/Oyu
Tolgoi JV Property"). The 2021 Technical Report has an original
effective date of May 17, 2021, and
an amended effective date of October 8,
2021.
- The 2021 Technical Report discusses an updated reserve case
(the "2021 Reserve Case") based on mineral reserves
attributable to the Entrée/Oyu Tolgoi joint venture (the
"Entrée/Oyu Tolgoi JV") from the first lift ("Lift
1") of the Hugo North Extension deposit and a Preliminary
Economic Assessment on a conceptual second lift ("Lift 2")
of the Hugo North Extension deposit ("2021 PEA").
- Life-of-mine ("LOM") financial highlights attributable
to Entrée from the 2021 Reserve Case and the 2021 PEA include:
|
|
|
|
|
|
2021 Reserve
Case
|
2021
PEA
|
|
|
HNE Lift
1
|
HNE Lift
2
|
LOM cash flow,
pre-tax
|
$ M
|
$449
|
$1,982
|
Net present value,
after tax
|
|
|
|
•
|
5%
|
$ M
|
$185
|
$541
|
•
|
8%
|
$ M
|
$131
|
$306
|
Mine
life
|
Years
|
17
|
22
|
LOM Metal
recovered
|
|
|
|
•
|
Copper
|
Mlb
|
1,249
|
4,564
|
•
|
Gold
|
Koz
|
549
|
2,025
|
•
|
Silver
|
Koz
|
3,836
|
15,067
|
Notes:
|
1.
|
Long term metal prices
used in the net present value ("NPV") economic analyses are:
copper $3.25/lb, gold $1,591.00/oz and silver $21.08/oz.
|
2.
|
The mineral reserves
that form the basis of the 2021 Reserve Case are from a separate
portion of the Hugo North Extension deposit than the mineral
resources in the 2021 PEA. The 2021 Reserve Case and the 2021 PEA
are therefore exclusive of each other.
|
3.
|
The economic analysis
in the 2021 PEA 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.
|
4.
|
2021 Reserve Case cash
flows are discounted to the beginning of 2021.
|
5.
|
2021 PEA cash flows are
discounted to the beginning of 2027, the assumed beginning of Hugo
North Lift 2 development. Attributable Entrée/Oyu Tolgoi JV
production is assumed to begin in 2031 and ramps up to stable
production in 2043. Final Entrée/Oyu Tolgoi JV attributable
production is assumed to conclude in 2056.
|
6.
|
Entrée has a 20%
attributable interest in the recovered metal.
|
7.
|
2021 Reserve Case mine
life includes 4-years development production followed by 13-years
block cave production. 2021 PEA mine life includes 4-years
development production followed by 18-years block cave
production.
|
- Both the 2021 Reserve Case and the 2021 PEA are based on
information supplied by Entrée's joint venture partner Oyu Tolgoi
LLC ("OTLLC") or reported within the 2020 Oyu Tolgoi
Mongolian Statutory Study (previously referred to as the 2020 Oyu
Tolgoi Feasibility Study) ("OTMSS20"), which was completed
by OTLLC on the Oyu Tolgoi project in July
2020 (refer to the July 2,
2020 press release from Turquoise Hill Resources Ltd.
("Turquoise Hill")). OTMSS20 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 Entrée/Oyu Tolgoi JV Property. 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
("tpd") from the underground operations, all three panels
need to be in production. Hugo North Extension on the Entrée/Oyu
Tolgoi JV Property is located in the northern portion of Panel
1.
- The Lift 1 mine design presented in OTMSS20 and the 2021
Reserve Case is subject to future refinements and updates. Hugo
North (including Hugo North Extension) Lift 1 surface and
underground drilling programs will support the evaluation by OTLLC
of different design and sequencing options for Panels 1 and 2. As
reported by Turquoise Hill, during 2021 a total of 10,494 metres of
Panel 1 drilling was undertaken to increase orebody knowledge. The
data collected has been used to refine the structural and
geotechnical models which form the basis of the mine design. From
2022 onwards, the focus of drilling will shift to Lift 2 and
peripheral areas of Lift 1. In 2021, 1,009 metres of Lift 2 Panel 1
drilling was completed. The Panel 1 study is scheduled for
completion in the first half of 2023. Entrée has not yet received
any details or results of OTLLC's surface and underground drilling
programs from 2021.
- The 2021 Technical Report assumes first development production
from Hugo North Extension Lift 1 in H2 2022. Turquoise Hill has
reported that Panels 1 and 2 are expected to be delayed as a result
of the delay in commencement of the Panel 0 undercut, COVID-19
related work restrictions impacting progress on Shafts 3 and 4 and
underground development, and changes to mining scope. Turquoise
Hill has reported that efforts to minimize delays to Panels 1 and 2
due to ventilation constraints ahead of Shaft 3 and 4 commissioning
continue. Shafts 3 and 4 are required to provide ventilation to
support production from Panels 1 and 2 during ramp up to 95,000
tpd. An approximately 9-month delay to Shafts 3 and 4 is currently
anticipated with the first Panel 1 draw bell now expected by
Turquoise Hill in H1 2027 rather than H2 2026.
- Turquoise Hill reported that a reforecast of cost and schedule
for the remaining Lift 1 underground project scope is now expected
in the second quarter 2022. The Company continues to monitor the
situation in Mongolia including
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.
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 OTLLC and the Entrée/Oyu
Tolgoi JV Property, which is a partnership between Entrée and
OTLLC. On March 2, 2022, OTLLC's 66%
shareholder Turquoise Hill provided an update on Oyu Tolgoi
underground development:
- COVID-19 impacts in Mongolia
are ongoing. During the fourth quarter 2021, COVID-19 restrictions
adversely impacted underground development and OTLLC's ability to
maintain normal roster changes for workers remained challenged.
- OTLLC continues to implement multiple COVID-19 controls at site
and maintains a 5-day mandatory isolation for workers prior to
entering site. With the arrival of the Omicron variant of COVID-19,
cases increased at site during early 2022, however shorter
quarantine periods have been maintained and cases are being managed
well. Some interruption to work progress is expected in the first
quarter 2022.
- Although COVID-19 related restrictions continued to impact
Shaft 3 and 4 activities, progress was made during the fourth
quarter 2021. Shaft 4 sinking activities re-commenced in
October 2021, with advancement now at
148 metres below ground level. Shaft 3 readiness works continued,
with sinking commencement expected by the end of the first quarter
2022. In response to slower than planned sinking rates at Shaft 4,
a productivity improvement program is underway and outcomes will be
applied to activities in both shafts.
- The underground project progressed well during the fourth
quarter 2021 with breakthrough of the service decline achieved and
caving related development and construction continuing. Material
Handling System 1 ("MHS1") construction was completed in the
fourth quarter 2021. MHS1 commissioning and construction of the
first on-footprint truck chute, a key enabler for production, was
achieved in February 2022, and
sustainable production from Lift 1 Panel 0 is still expected in H1
2023.
- Ahead of the first Lift 1 Panel 0 drawbell blast, expected in
the third quarter 2022, development and construction work on the
extraction level continues with drawbell drives in the initiation
area being excavated, drawpoint construction underway and concrete
roadways laid, as well as continued construction work on truck
chutes supporting Panel 0.
- At the end of the fourth quarter 2021, cumulative underground
development progress was 63,418 equivalent metres ("eqm")
and cumulative conveyor to surface advancement was 15,862 eqm.
- On January 24, 2022, Turquoise
Hill announced the resolution of key outstanding issues related to
the Oyu Tolgoi underground mine:
-
- Turquoise Hill and the Government of Mongolia reached a mutual understanding for a
renewed partnership.
- Turquoise Hill and Rio Tinto entered into a binding agreement
that delineates a comprehensive funding arrangement to address
Turquoise Hill's estimated incremental funding requirements to
complete the project (the "Amended HoA").
- The OTLLC board approved the signing of an Electricity Supply
Agreement to provide Oyu Tolgoi with a long-term source of power
from the Mongolian grid on terms fully agreed with the Government
of Mongolia.
- Following progress in negotiations with the Government of
Mongolia, all undercut readiness
criteria were considered to be achieved on January 24, 2022 with the OTLLC board having
unanimously approved commencement of the undercut.
- On March 14, 2022, Rio Tinto
announced it has made a non-binding proposal to Turquoise Hill to
acquire the approximately 49% of the issued and outstanding shares
of Turquoise Hill that Rio Tinto does not currently own for
approximately $2.7 billion. In
addition to strengthening Rio Tinto's copper portfolio, the
acquisition would create a more efficient ownership and governance
structure for the Oyu Tolgoi project. Following the successful
completion of a transaction, Rio Tinto would have a 66% interest in
deposits on the Oyu Tolgoi mining licence and a 52.8% interest in
the Hugo North Extension and Heruga deposits on the Entrée/Oyu
Tolgoi JV Property.
Corporate
- For the 2021 fiscal year, the operating loss was $3.0 million compared to an operating loss of
$2.3 million in 2020.
- For the 2021 fiscal year, operating cash outflow before working
capital was $2.1 million compared to
an operating cash outflow before working capital of $1.5 million in 2020.
- As at December 31, 2021, the cash
balance was $7.1 million and the
working capital balance was $7.2
million.
- The Company recognizes 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
With the commencement of the Lift 1 Panel 0 undercut, Turquoise
Hill's renewed partnership with the Government of Mongolia and execution of a comprehensive
funding plan for the world class Oyu Tolgoi underground mine,
Entrée's primary objective for the 2022 year is 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 joint venture (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.
SUMMARY OF OPERATING RESULTS
Operating Loss
For the full 2021 year, the operating
loss was $3.0 million compared to an
operating loss of $2.3 million in
2020. Project expenditures in 2021 included expenditures of
$0.5 million for administration costs
in Mongolia compared to
$0.2 million in the comparative 2020
period. The increase in the current year was due to professional
and advisory fees related to advancing potential amendments to the
Entrée/Oyu Tolgoi JVA. Holding costs on all other properties in
2021 and 2020 were insignificant.
General and administration expenditures in 2021 was $1.6 million compared to $1.4 million in the comparative 2020 period. The
increase in 2021 was due to increased advisory costs related to
potential amendments to the Entrée/Oyu Tolgoi JVA.
Depreciation expenses in 2021 were consistent with the same
period in 2020.
Non-operating Items
The foreign exchange gain in 2021
was primarily the result of movements between the C$ 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.
Deferred revenue finance costs are related to recording the
non-cash finance costs associated with the deferred revenue
balance, specifically the Sandstorm Gold Ltd. stream.
The total assets as at December 31,
2021 were lower than at December 31,
2020 due to a lower cash balance from operating activities.
Total non-current liabilities were higher due to recording the
non-cash deferred revenue finance costs for the 2021
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 40-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 October 8, 2021,
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 25%, 9% and 7% 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; requirements for
additional capital; uses of funds and projected expenditures; the
expectations set out in OTMSS20 and the 2021 Technical Report on
the Company's interest in the Entrée/Oyu Tolgoi JV Property; timing
and status of Oyu Tolgoi underground development; the expected
timing of sustainable production from Panel 0 on the Oyu Tolgoi
mining licence; the nature of the ongoing relationship and
interaction between Oyu Tolgoi project stakeholders and the
Government of Mongolia with
respect to the continued operation and development of Oyu Tolgoi
following the implementation of the comprehensive new agreement
entered into between Turquoise Hill, Rio Tinto and the Government
of Mongolia along with the
implementation of Resolution 103; 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 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 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; 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 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, 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 and
interaction with the Government of Mongolia, OTLLC, Rio Tinto and Turquoise Hill;
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, Turquoise
Hill and Rio Tinto and the Government of Mongolia with respect to the continued
operation and development of Oyu Tolgoi following the
implementation of the comprehensive agreement with the Government
of Mongolia along with the
implementation of Resolution 103; the continuation of undercutting
in accordance with the mine plan and design; actual timing of first
sustainable production from Panel 0 as well as 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 Oyu Tolgoi project; liquidity, Oyu Tolgoi project
funding sources and Oyu Tolgoi project funding requirements; the
implementation and successful execution of the funding plan that is
the subject of the Amended HoA and potential delays in the ability
of Turquoise Hill or OTLLC to proceed with the funding elements
contemplated by the Amended HoA; the timing and cost of the
construction and expansion of mining and processing facilities; the
ability of OTLLC 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 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 mineral 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 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; 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; 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; global conflicts; 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,
2021, dated March 25, 2022
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