VANCOUVER, Aug. 8, 2019 /PRNewswire/ - Entrée
Resources Ltd. (TSX:ETG; NYSE American:EGI – the
"Company" or "Entrée") has today filed its
interim financial results for the second quarter ended June 30, 2019. All numbers are in U.S. dollars
unless otherwise noted.
Q2 2019 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 July 15 and July 31, 2019, Turquoise Hill Resources Ltd.
("Turquoise Hill") provided an update on underground
development on the Oyu Tolgoi mining licence:
- Underground development progressed during Q2'19, with 3.2 total
equivalent kilometres completed during the quarter. Since the
restart of underground development in May
2016, 24.4 total equivalent kilometres and 18.9 equivalent
kilometres of lateral development have been completed.
- The focus for the construction team remains completing Shaft 2,
where works are progressing. The commissioning of Shaft 2 remains
on track for October 2019. Other
critical infrastructure components such as the control room
facility and the jaw crusher system are now complete. Construction
on Shafts 3 and 4 is progressing well and as of June 30, 2019 were 52 metres and 80 metres below
the shaft collar respectively.
- The underground mining team achieved a record performance of
over 1,000 metres of lateral development in June. Record monthly
development was also achieved in June in the convey-to-surface
decline.
- Turquoise Hill, in conjunction with Rio Tinto International
Holdings Ltd. ("Rio Tinto") as the project manager,
continues to review mine design options for the completion of the
underground development of the Oyu Tolgoi mine and assess the
impact on overall cost and schedule for the underground
development. As previously disclosed by Turquoise Hill, this review
will result in a revised development plan reflecting appropriate
risk reduction efforts.
- Improved rock mass information and geotechnical data modelling
has confirmed that there are stability risks associated with
components of the existing mine design. Therefore, to address these
risks, a number of mine design options are under consideration to
complete the project. These options include assessment of the
impact of the mid-access drives, location of the on-footprint
components of the ore handling system, the sequence of crossing the
panel boundaries during mining operations, and an option that
alters the panel boundary approach and would leave temporary
pillars in ore that would then be recovered later in the mine life,
sub-blocking the previously planned three panels into five or more
panels.
- A number of options are being evaluated to determine the final
design of Panel 0, and this work is anticipated to continue into
early 2020. Following a period of additional data collection and
model updates, two phases of geotechnical modelling work are
planned to inform staged mine design updates. The geotechnical
modelling is expected to continue into early 2020 with final design
decisions to be made at this time. A period of detailed design,
schedule and cost estimation will follow resulting in the delivery
of a final definitive estimate in the second half of 2020,
reflecting the preferred mine design approach.
- All options under consideration present a clear pathway to
sustainable first production from the Oyu Tolgoi mining licence,
albeit with different cost and schedule implications. To date,
these have been defined to a level of accuracy associated with a
conceptual study or order of magnitude study; therefore,
significantly more work is required to complete the final
assessment. Critically, all underground development to date has not
been impacted at all by pending changes to the mine design, and all
infrastructure developed to date remains usable and in the
appropriate locations for all of the mine design options under
review.
- Based on these options, 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. This range includes
contingency of up to eight months reflecting the unexpected and
challenging geotechnical issues, complexities in the construction
of Shaft 2, and reflects the detailed work still required to reach
a more precise estimate. This results in sustainable first
production from the Oyu Tolgoi mining licence now being expected
between May 2022 and June 2023 with the first drawbell now expected
between October 2021 and September 2022.
- Current information indicates that Oyu Tolgoi mineral reserves
will not be materially impacted by the mine design options being
considered; however, ongoing reviews will be considered as work
progresses.
- Turquoise Hill will continue to focus on minimizing the impact
to the project schedule and cost as it works through the detailed
analysis and testing of each mine design option, and work continues
concurrently to finalize the critical underground infrastructure
and shaft construction.
- Additionally, OTLLC is currently undertaking a feasibility
study and is in discussions with the Government of Mongolia to progress the construction of a
coal-fired power plant and related infrastructure at Tavan
Tolgoi.
Entrée/Oyu Tolgoi JV Property
Once the preferred mine
design approach is determined, Entrée will be able to assess the
potential impact on the estimated timing and amount of development
production and initial block cave production from the first lift
(Lift 1) of the Hugo North Extension deposit on the Entrée/Oyu
Tolgoi JV Property and any potential change to Entrée's estimated
share of capital and operating costs. Entrée will continue to
evaluate any information made available to it by Rio Tinto or OTLLC
and will update the market accordingly.
Corporate
- Q2 2019 operating loss was $0.4
million and is comparable to the operating loss of
$0.3 million in Q2 2018.
- Q2 2019 operating cash outflow after working capital was
$0.5 million compared to a
$0.6 million operating cash outflow
in Q2 2018 and, as at June 30, 2019,
cash and short-term investments balance was $6.1 million. The working capital balance
as at June 30, 2019 was $6.1 million.
OUTLOOK AND STRATEGY
The Company's primary objectives for the 2019 year continue to
include:
- Continuing constructive discussions with the Government of
Mongolia; and
- Working 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. 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 believes that amendments that align the
interests of all stakeholders as they are now understood, would be
in the best interests of the Company and its shareholders 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.
Corporate costs, which include Mongolian site management and
compliance costs, are now estimated between $1.4 million and $1.6
million for the full 2019 year. The Company continues to
focus its efforts on conserving cash reserves and remaining prudent
with its expenditures.
The Company's interim financial statements and Management's
Discussion and Analysis ("MD&A") for the second quarter
ended June 30, 2019 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 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 joint venture, depending on the
depth of mineralization. Sandstorm Gold Ltd., Rio Tinto and
Turquoise Hill are major shareholders of Entrée, holding
approximately 19%, 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; construction and continued development of
the Oyu Tolgoi underground mine, the development options under
consideration for the design of Panel 0 and the related cost and
schedule implications; timing for commissioning of Shaft 2;
completion of the definitive estimate review; 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; 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; 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, local and global
economic conditions and the environment in which Entrée will
operate in the future, including the price of copper, gold and
silver, projected grades, anticipated capital and operating costs,
anticipated future production and cash flows, the anticipated
location of certain infrastructure and sequence of mining in Panel
0 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; 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; projected copper, gold and silver prices and
their market demand; and production estimates and the anticipated
yearly production of copper, gold and silver at Oyu Tolgoi.
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 review; 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; 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,
2018, dated March 29, 2019
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.
View original
content:http://www.prnewswire.com/news-releases/entree-resources-announces-second-quarter-2019-results-300898581.html
SOURCE Entrée Resources