Updated Reserve Case NPV(8%) for Hugo North Extension Lift 1 of $111 million (C$139 million*)
Preliminary Economic Assessment of alternative development scenario for all three joint venture deposits NPV(8%) of $278 million (C$348 million*)
(All figures are in US dollars unless otherwise noted)
Vancouver, B.C., January 15, 2018 – Entrée Resources Ltd. (TSX:ETG; NYSE American:EGI – the “Company” or “Entrée”) is pleased to announce the results of an updated Feasibility Study that was completed on its interest in the Entrée/Oyu Tolgoi joint venture property (the “Entrée/Oyu Tolgoi JV Property”). Entrée has a 20% participating interest in the joint venture (the “Entrée/Oyu Tolgoi JV”) with Oyu Tolgoi LLC (“OTLLC”) holding the remaining 80% interest. The Entrée/Oyu Tolgoi JV Property comprises a significant portion of the long-life, high-grade Oyu Tolgoi copper-gold mining project in Mongolia. The updated Feasibility Study only reports on mineral resources and reserves attributable to the Entrée/Oyu Tolgoi JV.
The updated Feasibility Study discusses two development scenarios, an updated reserve case (the “2018 Reserve Case”) and a Life-of-Mine (“LOM”) Preliminary Economic Assessment (“2018 PEA”). The 2018 Reserve Case is based only on mineral reserves attributable to the Entrée/Oyu Tolgoi JV from the first lift (“Lift 1”) of the Hugo North Extension underground block cave. Lift 1 of Hugo North (including Hugo North Extension) is currently in development by project operator Rio Tinto, with first development production from Hugo North Extension expected in 2021. When completed, Oyu Tolgoi will become the world’s third largest copper mine.
The 2018 PEA is an alternative development scenario completed at a conceptual level that assesses the inclusion of the Hugo North Extension Lift 2 and Heruga deposits into an overall mine plan with Hugo North Extension Lift 1. The 2018 PEA includes Indicated and Inferred resources from Hugo North Extension Lifts 1 and 2, and Inferred resources from Heruga. Significant development and capital decisions will be required for the eventual development of the two additional Entrée/Oyu Tolgoi JV deposits (Hugo North Extension Lift 2 and Heruga) once production commences at Hugo North Extension Lift 1.
LOM highlights of the production and financial results from the 2018 Reserve Case and the 2018 PEA are summarized in Table 1.
*converted at USD: CAD exchange rate of 1.2504 (Bank of Canada Noon Rate – January 12, 2018)
Table 1. Summary LOM Production and Financial Results – Entrée/Oyu Tolgoi JV Property
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Mr. Stephen Scott, Entrée’s President and CEO comments, “It is a rare privilege for a growing company like Entrée to own a significant interest in a project like Oyu Tolgoi, one of the world’s most important new copper and gold mines, as we move into the battery revolution. We are extremely pleased with the robust results of both the 2018 Reserve Case and the 2018 PEA, which should help investors understand the tremendous underlying value of Entrée’s flagship asset. However, this is not the end of the story, as there is still significant potential for improvement with predicted higher long-term copper prices, increasing demand for copper and the tremendous long-term development optionality of the Oyu Tolgoi project. Completion of this Technical Report enables us to discuss the updated economics of our 2018 Reserve Case, and more importantly, preliminary economics for potential future phases of the Oyu Tolgoi mine, beyond Lift 1, including Hugo North Extension Lift 2 and Heruga, where a significant amount of the Entrée/Oyu Tolgoi JV’s mineralization and potential value occurs. At the throughput rate used for the 2018 PEA, the Oyu Tolgoi underground project has an expected mine life of roughly 77 years, which may be extended through future exploration success on the Entrée/Oyu Tolgoi JV Property. Entrée believes that conservative assumptions have been applied in the report, particularly with respect to future mining phases. There is potential for the value of Entrée’s share of the Oyu Tolgoi project as reported to increase as more information is confirmed by detailed future work.”
Mr. Scott continues, “We are very pleased that OTLLC and Rio Tinto have worked collaboratively with us to provide the underlying data required to develop our Technical Report. We applaud their on-going efforts to advance the Oyu Tolgoi project including the Entrée/Oyu Tolgoi JV Property to where it is today. We also look forward to working with them to deliver further exploration success along the highly prospective Oyu Tolgoi copper porphyry trend and elsewhere on the Entrée/Oyu Tolgoi JV Property. Given the manageable project development risk, low capital risk to production and our strong treasury, Entrée is very well placed to create value for shareholders as underground development continues to advance. In many ways, Entrée’s joint venture interest has the characteristics of a royalty or revenue stream with the benefits of a producer.”
Entrée/Oyu Tolgoi JV Property
The Entrée/Oyu Tolgoi JV Property comprises a significant portion of the overall Oyu Tolgoi project area, including the Hugo North Extension copper-gold deposit on the Shivee Tolgoi mining licence, the Heruga copper-gold-molybdenum deposit on the Javhlant mining licence and a large prospective land package. Entrée has a 20% participating interest in the Entrée/Oyu Tolgoi JV with OTLLC holding the remaining 80% interest. OTLLC has a 100% interest in other Oyu Tolgoi project areas, including the Oyut open pit, which is currently in production, and the Hugo North and Hugo South deposits on the Oyu Tolgoi mining licence.
The area of the Entrée/Oyu Tolgoi JV Project, which includes the Entrée/Oyu Tolgoi JV Property and the Shivee West Property is shown on Figure 1. This figure also shows the main mineral deposits that form the Oyu Tolgoi Trend of porphyry deposits and several priority exploration targets, including Castle Rock and Southwest IP.
Figure 1 – Entrée/Oyu Tolgoi JV Project