2019 HIGHLIGHTS
The Oyu Tolgoi project in
- Construction of Shaft 2 was completed in
October 2019 allowing for the movement of 300 people per cage cycle versus a maximum of 60 people per cage cycle through Shaft 1. Underground development material is also being lifted to surface via the Shaft 2 production hoist. - Productivity improvements resulted in increased underground lateral development rates during the fourth quarter of 2019, with an average rate of 1,607 equivalent meters ("eqm") compared to 1,214 eqm in the third quarter of 2019, with December seeing a record 1,809 eqm.
- Construction is progressing on Shafts 3 and 4 with both collars now installed. Final preparations are now underway to enable commencement of main sinking operations for both shafts during the second quarter of 2020.
- As previously announced by Turquoise Hill on
July 15, 2019 , improved information with respect to rock mass and geotechnical data modelling has confirmed that there are stability risks associated with components of the mine design in the 2016 Oyu Tolgoi Feasibility Study. 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, and the development capital spend for the Oyu Tolgoi underground project may increase by$1.2 billion to$1.9 billion over the$5.3 billion previously disclosed by Turquoise Hill. To address these risks, a number of refinements are under review to determine the final mine design. - The first of the key decisions that has been made is to retain a mid-access drive only on the apex level of the mine design of Panel 0. This is an integral step towards completing the final mine design, however it is too early to accurately determine the potential impact on the cost or schedule. Decisions on productivity levels and key underground infrastructure such as the location and design of the ore passes and options for panel sequencing, will need to be completed before an update on the development capital or schedule can be provided.
- Turquoise Hill anticipates detailed analysis work on the mine design to be completed during the first half of 2020, and a definitive estimate (the "Definitive Estimate"), which will include the estimate of cost and schedule for the underground project based on the updated design of Panel 0, is expected to be delivered in the second half of 2020.
Entrée/Oyu Tolgoi JV Property
Once OTLLC, Turquoise Hill and project operator
Corporate
- During Q1 2019, the Company disposed of its share investment in Anglo Pacific Group PLC ("Anglo Pacific") for net proceeds of
$1.0 million and realized a$0.1 million gain. - On
October 1, 2019 , the Company's common shares commenced trading on the Over-the-Counter OTCQB Venture Market ("OTCQB") under the trading symbol "ERLFF" and discontinued trading on theNYSE American LLC . - For the full 2019 year, the operating loss was
$2.1 million compared to an operating loss of$1.8 million in 2018.
- For the full 2019 year, operating cash outflow before working capital was
$1.5 million . Operating cash outflow for 2019 was higher than 2018 mostly due to no receipts in 2019 associated with the Administrative Services Agreement withMason Resources Corp. ("Mason Resources") which was terminated at the end of 2018. Entrée also incurred a modest amount of one-time external advisor costs relating to the Entrée/Oyu Tolgoi joint venture (the "Entrée/Oyu Tolgoi JV"). - As at
December 31, 2019 , cash was$5.4 million and the working capital balance was$5.5 million .
OUTLOOK AND STRATEGY
The Company's primary objective for the 2020 year is to work 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 and upon finalization, transfer the Shivee Tolgoi and Javhlant mining licences to OTLLC as manager of 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
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.
The Company's expected 2020 full year expenditures, which include Mongolian site management and compliance costs, are between
SUMMARY OF OPERATING RESULTS
Operating Loss
For the full 2019 year, the operating loss was
Overall, general and administration expenditures in 2019 were 30% higher compared to the same period in 2018 primarily due to no receipt of cost-recovery reimbursements from Mason Resources which were received in 2018. Beginning in the first quarter 2019, the Company no longer received these reimbursements. The Company also incurred a modest increase in travel and external advisor costs related to active discussions with other Oyu Tolgoi stakeholders aimed at improving the efficiency and effectiveness of the Entrée/Oyu Tolgoi JV. For further information on the Administrative Services Agreement with Mason Resources, reference should be made to the Company's annual audited consolidated financial statements for the year ended
Depreciation expenses in 2019 were higher compared to the comparative period in 2018 due to the adoption of new IFRS accounting standard relating to leases effective
Non-operating Items
The gain on sale of investments of
The foreign exchange gain in 2019 was primarily the result of movements between the C$ and
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.
The total assets as at
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 20-F ("Annual Report") has been filed with the
QUALIFIED PERSON
Robert Cinits,
ABOUT ENTRÉE RESOURCES LTD.
Entrée
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; timing and status of Oyu Tolgoi underground development, the development options under consideration for the design of Panel 0 and the related implications for mineral reserves and resources estimates, costs and schedules; timing of completion of the Definitive Estimate; 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; 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
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, anticipated future production and cash flows, the anticipated location of certain infrastructure and sequence of mining, the construction and continued development of the Oyu Tolgoi underground mine and the status of Entrée's relationship and interaction with the Government of
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; 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
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SOURCE Entrée Resources
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