First Mineral Reserves for Entree's Hugo North Extension Included in Initial Underground Mining at Oyu Tolgoi, Mongolia
By Entree Gold Inc., PRNEMonday, May 10, 2010
VANCOUVER, May 11, 2010 - Entree Gold Inc. (TSX:ETG; NYSE AMEX:EGI; Frankfurt:EKA - "Entree" or
the "Company") is pleased to report the first ore reserves defined under
NI 43-101 criteria on the Hugo North Extension deposit in Mongolia.
The release of the 2010 Integrated Development Plan ("IDP10") for the Oyu
Tolgoi mining complex was announced by Ivanhoe Mines Ltd. (TSX:IVN; NYSE:IVN;
NASDAQ:IVN - "Ivanhoe Mines") on May 11, 2010. IDP10 declares the first
underground mineral reserves for the Hugo North deposit, including Entree's
Hugo North Extension deposit. The Probable Reserve for Hugo North Extension
totals 27 million tonnes grading 1.85% copper and 0.72 g/t gold. Entree holds
a 20% carried interest to production in this reserve through a joint venture
with Oyu Tolgoi LLC, a subsidiary of Ivanhoe Mines.
IDP10 has presented two main mining scenarios: the Reserve Case ("Reserve
Case") and the Life of Mine Sensitivity Case ("LOM Sensitivity Case"). The
Reserve Case is the most likely scenario for reserves exploited in the
initial ("Lift 1") underground block cave mining operation, including the
reserve for Hugo North Extension. Probable Reserves and Inferred and
Indicated Resources at Hugo North Extension and at the Heruga deposit are
part of the LOM Sensitivity Case development and mining scenario. See the
discussion below and attached figures for additional details regarding the
two main mining scenarios.
Greg Crowe, Entree's president and CEO commented, "The release of IDP10
is a crucial milestone in the history of Entree. It confirms the near-term
production and long-term importance of the Entree-Ivanhoe Mines joint venture
deposits to the overall development of the Oyu Tolgoi porphyry system. Few
junior resource companies have the opportunity to participate in the
development of a mine complex the size and caliber of Oyu Tolgoi."
In addition to the two main mining scenarios, IDP10 presents two
alternative mine production plans for the development and mining of the
deposits along the Oyu Tolgoi mineralized trend including the Southern Oyu,
Hugo South and Hugo North, Hugo North Extension and Heruga deposits. Due to
the nature of the deposits associated with Oyu Tolgoi, the project operators
have the flexibility to consider several options for maximizing the deposits
for the benefit of their stakeholders. See the attached figures for
additional details pertaining to the two alternative mine production plans
presented in IDP10.
Highlights from the IDP10 in relation to Entree include:
- First reported mineral reserves on Entree's joint venture ground
- Hugo North Extension reserves have the highest value of all the Oyu
Tolgoi deposits; measured as net smelter return ("NSR"),
- Development mining of Hugo North Extension (Lift 1) to begin Year 4,
with main production commencing in Year 11
- Mining of Heruga as proposed in LOM Sensitivity Case could commence
in Year 27
- Other alternative mining scenarios consider earlier production from
Heruga - as early as Year 7.
- Entree's ground is a key component of the development and potential
further exploration success of the Oyu Tolgoi porphyry system
- Commitment to ongoing exploration of the Oyu Tolgoi trend, with up to
13 km of untested potential on Entree joint venture ground
- Based on long term metal prices, Entree's current share of reserves
give an NPV(8%) of US$79 million while using current metal prices
give an NPV(8%) of US$134 million
- The conceptual LOM Sensitivity Case gives Entree's production share
using long term metal prices an NPV(8%) of US$176 million while
current metal prices give an NPV(8%) of US$344 million
- A Real Option evaluation of Entree's production share of the LOM
Sensitivity Case using Monte Carlo simulation and forecast real long-
term metal prices of US$2.00/lb copper and US$850/oz gold estimates
Real Option NPV at US$264 million.
Entree has contracted AMEC Minproc to prepare a separate NI 43-101
compliant technical report for Entree that incorporates the relevant portions
of IDP10 covering the Company's Hugo North Extension and Heruga deposits.
AMEC Minproc also prepared the IDP10 for Ivanhoe Mines. Ernst & Young was
retained to advise on the development of a Real Option economic analysis of
the LOM Sensitivity Case. Entree's technical report will be filed on
www.sedar.com within 45 days.
Greg Crowe noted, "The two main mining scenarios are important for Entree
in that they include not only mining the Lift 1 reserves at Hugo North
Extension but also bring into consideration mining of the indicated and
inferred mineralization at Hugo North Extension and Heruga. It must be
emphasized that these mine plans are somewhat fluid and the actual production
time frame may be subject to changes brought about by various factors such as
a change in throughput or changes in economic parameters. The flexibility to
bring Heruga production forward, as proposed in the second alternative
production case, may be a significant benefit to Entree's shareholders."
Reserve Case
The Reserve Case, using Proven and Probable mineral reserves, sets out
the likely path of initial mine development and includes nine open pit stages
at Southern Oyu and the initial underground block cave at Hugo North
(including Entree's Hugo North Extension). The Reserve Case in relation to
both the Hugo North and Southern Oyu deposits assumes the processing of 1.4
billion tonnes of ore over a 27 year period. A mill expansion, from 100,000
to 160,000 tonnes per day ("tpd"), is contemplated by the end of the fifth
year of operations.
The Probable Mineral Reserve for Entree on the Hugo North Extension
portion of the Hugo Dummett Deposit is the economically mineable portion of
the Mineral Resources (Table 1) outlined in the 2010 Technical Report (see
Entree news release of March 31, 2010). The Probable Mineral Reserve
presented in the IDP10 is summarized in Table 2.
-------------------------------------------------------------------------
Table 1. Entree-Ivanhoe Mines Joint Venture Mineral Resources
(0.6% CuEq cut-off), based on Technical Report March 2010
-------------------------------------------------------------------------
Deposit Tonnage Copper Gold CuEq Contained Metal
(t) (%) (g/t) (%) -------------------------------
Copper Gold CuEq
(000 lb) (oz) (000 lb)
-------------------------------------------------------------------------
Hugo North Extension Deposit
-------------------------------------------------------------------------
Indicated
Shivee
Tolgoi
(Hugo
North) 117 000 000 1.80 0.61 2.19 4 640 000 2 290 000 5 650 000
-------------------------------------------------------------------------
Inferred
Shivee
Tolgoi
(Hugo
North) 95 500 000 1.15 0.31 1.35 2 420 000 950 000 2 840 000
-------------------------------------------------------------------------
Heruga Deposit
-------------------------------------------------------------------------
Heruga
Javh-
lant 910 000 000 0.48 0.49 0.87 9 570 000 14 300 000 17 390 000
-------------------------------------------------------------------------
Notes:
- Copper Equivalent (CuEq) has been calculated using assumed metal
prices of US$1.35/pound for copper, US$650/ounce for gold, and US
$10.50 for molybdenum. The equivalence formula was calculated
assuming that gold was 91% of copper recovery. CuEq was calculated
using the formula:
CuEq (equal sign) %Cu + ((g/t Au(x)18.98)+(Mo(x)0.01586))/29.76.
- The contained copper, gold, copper and molybdenum in the tables has
not been adjusted for metallurgical recovery.
- The 0.6% CuEq cut-off is highlighted as the base case resource for
underground bulk mining.
- The mineral reserves are not additive to the mineral resources.
- Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
- Entree - Ivanhoe Mines Joint Venture includes a portion of the Shivee
Tolgoi licence and the Javhlant licence. The Shivee Tolgoi and
Javhlant JV licences are held by Entree Gold and are planned to be
operated by Oyu Tolgoi LLC. Oyu Tolgoi LLC will receive 80% and
Entree Gold will receive 20% of cash flows after capital and
operating costs.
-------------------------------------------------------------------------
Table 2. Hugo North Extension Mineral Reserve, May 2010
Entree - Ivanhoe Mines Joint Venture
-------------------------------------------------------------------------
Deposit Ore NSR Cu Au Recovered Metal
(Mt) (US$/t) (%) (g/t) --------------------------
Copper (lb) Gold (oz)
-------------------------------------------------------------------------
Hugo Dummett Deposit
-------------------------------------------------------------------------
Probable Shivee
Tolgoi (Hugo
North Extension) 27 55.57 1.85 0.72 1 032 000 000 531 000
-------------------------------------------------------------------------
Notes:
- Metal prices used for calculating the Hugo North Underground NSR are
copper US$1.50/lb, gold US$640/oz, and silver US$10.50/oz based on
long term metal price forecasts at the beginning of the mineral
reserve work. The analysis indicates that the mineral reserve is
still valid at these metal prices.
- The NSR has been calculated with assumptions for smelter refining and
treatment charges, deductions and payment terms, concentrate
transport, metallurgical recoveries and royalties.
- For the underground block cave, all material within the shell has
been converted to mineral reserve; this includes low grade Indicated
and Inferred material assigned zero grade and treated as dilution.
- Only indicated resources were used to report probable reserves.
- Entree - Ivanhoe Mines Joint Venture includes a portion of the Shivee
Tolgoi licence and the Javhlant licence. The Shivee Tolgoi licence is
held by Entree Gold and is planned to be operated by Oyu Tolgoi LLC.
Oyu Tolgoi LLC will receive 80% and Entree Gold will receive 20% of
cash flows after capital and operating costs.
The NSR calculation reflects the net value received for the ore by the
mine (after all costs and charges). An NSR has been calculated on a US Dollar
per tonne basis for each of the Mineral Reserve areas. The Hugo North
Extension has the highest NSR calculated for all the deposits at Oyu Tolgoi.
The NSR of US$55.57 per tonne for Hugo North Extension is in comparison to
US$51.12 per tonne for Hugo North - Ivanhoe and an overall Mineral Reserve
(proven plus probable) NSR for all of Oyu Tolgoi of US$24.52 per tonne
(includes open pit reserves at Southern Oyu Deposits). The NSR value for the
27 million tonnes of probable mineral reserves on Entree's Shivee Tolgoi
Licence is projected to be over US$1.5 billion.
Production commencement (Year 1) of the Reserve Case for all of Oyu
Tolgoi is anticipated to be 2013 at the Southern Oyu open pit. Peak
production from all Oyu Tolgoi deposits in the LOM Sensitivity Case is
reached in Year 8 with 58 million tonnes/year, estimated to produce 1.7
billion pounds of copper and 1.1 million ounces of gold in that year.
In the Reserve Case, for the Entree - Ivanhoe Mines Joint Venture, ore
from development at Hugo North Extension is expected to enter the production
stream in Year 4 with full block cave production commencing in Year 11. Peak
production from Hugo North Extension is in Year 14 with an estimated
production of 6.8 million tonnes at 1.82% copper and 0.69 g/t gold. In the
Reserve Case, production from Lift 1 at Hugo North Extension is estimated to
last until Year 18. Total capital costs for development of Hugo North
underground block cave are estimated at $1.1 billion - a portion of which
will be the responsibility of Entree. Entree is carried to production under
the terms of the Entree-Ivanhoe Mines joint venture and capital costs need
only be repaid from 90% of production revenues.
The NPV(8%) of the Entree share of Lift 1 at Hugo North Extension is
estimated at US$79 million (using US$2.00/lb copper,US$850/oz gold and
US$13.50/oz silver), while at current metal prices of US$3.13/lb copper and
US$1208/oz gold Entree's production has an NPV(8%) of US$134 million (silver
and molybdenum prices unchanged.)
Life of Mine Sensitivity Case
A separate LOM Sensitivity Case is intended to show the significant,
long-term potential of all classifications of current mineral resources at
Oyu Tolgoi and extends the mine inventory to add Inferred Resource material
from the planned second lift ("Lift 2") in Hugo North (to include Hugo North
Extension), Hugo South and an underground block cave for the Heruga deposit.
This scenario projects a 59 year mine life and processing 3.01 billion tonnes
of ore.
The LOM Sensitivity Case includes the Lift 1 mineral reserves plus Lift
2 indicated and inferred mineral resources. The LOM Sensitivity Case produces
over 100% more copper and gold than the Reserve Case and adds an additional
revenue stream from molybdenum produced from a potential Heruga block cave.
The LOM Sensitivity Case is a preliminary assessment that includes an
economic analysis based, in part, on inferred mineral resources. It does not
have as high a level of certainty as the Reserve Case. Inferred mineral
resources are considered too speculative geologically to have the economic
considerations applied to them that would allow them to be categorized as
mineral reserves, and there is no certainty that the LOM Sensitivity Case
will be realized.
If this LOM Sensitivity Case is implemented, production from Hugo North
Extension Lift 2 would commence around Year 15 and reach a potential maximum
production around Year 22 of approximately 14.8 million tonnes/year
comprising 500 million pounds of copper, 200,000 ounces of gold and 1.75
million ounces of silver. Production from Hugo North Extension Lift 2 is
estimated to continue until year 32 and total 122 million tonnes averaging
1.42% copper and 0.44 g/t gold.
Heruga would come on stream around Year 27, with maximum production
reached around year 54. In Year 54, Heruga is estimated to produce around
24.5 million tonnes to yield approximately 150 million pounds of copper,
450,000 ounces of gold, 900,000 ounces of silver and 3.5 million pounds of
molybdenum. Molybdenum production is estimate to peak around Year 56 at
approximately 7.25 million pounds. Production at Heruga (assuming no
additional economic mineralization is outlined) is projected to continue
until Year 59 and to total 615 million tonnes averaging 0.41% copper,
0.46 g/t gold and 127 ppm molybdenum.
Greg Crowe further noted, "This increased resource at Heruga is
extremely significant in that it clearly demonstrates the upside potential
to this growing deposit. Heruga hosts some of the highest gold-copper ratios
at Oyu Tolgoi along with significant molybdenum content. It has been traced
northwards onto Ivanhoe's Oyu Tolgoi concession and remains open to the
north. More importantly for Entree, geological and geophysical data suggests
a potential offset to the Heruga deposit southwest of the area of the drilled
inferred resource. There remains an additional 4 kilometres of highly
prospective untested ground on Entree's Javhlant mining license. Testing of
this area is part of Ivanhoe's 2010 exploration program."
Joint Venture resource inventories used in the LOM Sensitivity Case are
summarized in Table 3 below:
-------------------------------------------------------------------------
Table 3. Life of Mine Sensitivity Case - Mineral Resource Inventory
Entree-Ivanhoe Mines Joint Venture only
-------------------------------------------------------------------------
Cut off Tonnes Cu Au Mo Cu Au
(CuEq%) (M t) % g/t (ppm) (Billion (Million
lb) oz)
-------------------------------------------------------------------------
HNE-Lift 1 27 1.85 0.72 - 1.03 0.53
-------------------------------------------------------------------------
-------------------------------------------------------------------------
HNE-Lift 2 122 1.42 0.44 - 3.48 1.44
-------------------------------------------------------------------------
Heruga 615 0.41 0.46 127 4.54 6.60
-------------------------------------------------------------------------
TOTAL-HNE
Lift 2 &
Heruga 737 8.02 8.04
-------------------------------------------------------------------------
Notes:
- Hugo North Extension ("HNE") Lift 1 is a Probable Mineral Reserve.
HNE Lift 2 and Heruga reflect conceptual block caves within Inferred
Mineral Resources. Mineral Resources that are not Mineral Reserves do
not have demonstrated economic viability.
- The Mineral Reserves are not additive to the Mineral Resource.
- For the underground block cave, all material within the shell has
been converted to mineral reserve; this includes low grade Indicated
and Inferred material assigned zero grade and treated as dilution.
- Entree Gold - Ivanhoe Mines Joint Venture holds the Shivee Tolgoi and
Javhlant licences. The Shivee Tolgoi and Javhlant JV licences are
held by Entree Gold and are planned to be operated by Oyu Tolgoi LLC.
Oyu Tolgoi LLC will receive 80% and Entree Gold will receive 20% of
cash flows after capital and operating costs.
Heruga would be a completely stand alone underground operation,
independent of other Oyu Tolgoi underground development, and provides
considerable flexibility for mine planning and development.
Ongoing exploration efforts at Oyu Tolgoi are directed at upgrading
Inferred Resources to categories with higher confidence levels. A substantial
amount of the Inferred Resources to be upgraded lie within the Entree-Ivanhoe
Mines Joint Venture ground. In addition, the Oyu Tolgoi mineralized trend
covers 20 kilometres, approximately 12 kilometres on the Entree-Ivanhoe Joint
Venture ground, and much of the trend has not been extensively drill tested.
The LOM Sensitivity Case, which is effectively a preliminary assessment
that includes an economic analysis based, in part, on inferred mineral
resources, does not have as high a level of certainty as the Reserve Case.
There is no certainty that the LOM Sensitivity Case will be realized.
Production and financial results from the two scenarios are summarized in
Table 4 below.
-------------------------------------------------------------------------
Table 4. IDP10 Summary Production and Financial Results - Entree Gold
-------------------------------------------------------------------------
Description Units Reserve Case Life of Mine
Sensitivity Case
(includes Inferred
Resource)
-------------------------------------------------------------------------
Inventory Mineral Reserve Mineral Reserve and
Inferred Resources
-------------------------------------------------------------------------
Production Rate
(average) Mt/a 51.6 51.1
-------------------------------------------------------------------------
Total Processed Mt 1 393 3 013
-------------------------------------------------------------------------
Entree-Ivanhoe Mines Joint Venture Property Results
-------------------------------------------------------------------------
Processed Mt 27 765
-------------------------------------------------------------------------
NSR US$/t 55.57 20.77
-------------------------------------------------------------------------
Cu Grade % 1.85 0.62
-------------------------------------------------------------------------
Au Grade g/t 0.72 0.47
-------------------------------------------------------------------------
Copper Recovered Billion lb 1.0 9.1
-------------------------------------------------------------------------
Gold Recovered Moz 0.5 8.6
-------------------------------------------------------------------------
NPV (8%) After
Tax (long term
prices) US$M 79 176
-------------------------------------------------------------------------
NPV (8%) After
Tax (current
prices) US$M 134 344
-------------------------------------------------------------------------
Notes:
- Metal prices used for calculating the underground NSR are: copper US
$1.50/lb, gold US$640/oz, silver US$10.50/oz, and molybdenum US
$10.50/lb. Based on long-term metal price forecasts at the beginning
of the mineral reserve work and still believed to be valid.
- The NSR has been calculated with assumptions for smelter refining and
treatment charges, deductions and payments terms, transport costs,
metallurgical recoveries and royalties.
- Long term metal prices used in the NPV economic analyses are: copper
US$2.00/lb, gold US$850/oz, silver US$13.50/oz, molybdenum US
$13.50/lb.
- Current metal prices used in the NPV economic analyses are: copper
US$3.13/lb, gold US$1,208/oz, (silver US$13.50/oz, and molybdenum
US$13.50/lb - unchanged from long term pricing).
- Under the NI 43-101 guidelines, inferred mineral resources are
considered too speculative geologically to have the economic
considerations applied to them that would allow them to be
categorized as mineral reserves, and there is no certainty that the
LOM Sensitivity Case will be realized.
The NPV(8%) of the Entree share in the LOM Sensitivity Case is estimated
at US$176 million (using US$2.00/lb copper, US$850/oz gold, US$13.50/oz
silver, US$13.50/lb molybdenum), while at current metal prices of US$3.13/lb
copper and US$1208/oz gold Entree's production has an NPV(8%) of US$344
million (silver and molybdenum prices unchanged.)
Real Option Analysis of the LOM Sensitivity Case
A Dynamic Discounted Cash Flow ("Dynamic DCF")and Real Option evaluation
model was constructed to investigate whether the explicit recognition of
price reversion and other metal price uncertainty characteristics affect the
long-term cash flows generated by Entree's production share from the
conceptual LOM Sensitivity Case and the uncertainty characteristics
associated with this cash flow. This evaluation model uses stochastic Monte
Carlo simulation to approximate the uncertainty characteristics of copper,
gold, and molybdenum prices. The model is based on the same assumptions,
production and cost forecasts, discount rates and long-term metal-price
forecasts of the LOM Case presented in the previous section.
The Real Option method is an alternative approach for estimating project
net present value ("NPV"). There is extensive academic literature regarding
the Real Option method and it is being studied by some mining companies as an
alternative to the DCF method. The DCF and Real Option methods are
differentiated by how each method adjusts uncertain cash flows for risk
during the NPV calculation. A single risk-adjusted discount rate reflecting
aggregate project risk is used by the DCF method to adjust project net cash
flows for risk and time. In contrast, the Real Option method adjusts the
primary individual sources of cash flow uncertainty (e.g., metal price) for
risk before calculating net cash flow and adjusting for the time value of
money. Both of these methods may be extended to recognize the value benefits
of management flexibility.
The long-term nature of the cash flows from Entree's production share in
the LOM Sensitivity Case may require modeling of price reversion in copper
and molybdenum prices. Metal-price reversion is a characteristic whereby spot
metal prices fluctuate around a long-term equilibrium level in constant
(real) dollar terms. The metal spot price tends to decrease when the spot
price is above the equilibrium level and increase when it is below this
level. Price reversion causes long-term metal price uncertainty to be
confined to a narrower range than would prevail without reversion as the
possibility of sustained periods of very high or low prices with respect to
the equilibrium level is reduced. Reversion in copper and molybdenum prices
was confirmed with econometric statistical analysis of historic metal prices.
This analysis was combined with general market information and the Entree
metal-price forecasts to estimate parameters for the metal-price-uncertainty
models and the associated risk adjustments used in the Real Option analysis.
-------------------------------------------------------------------------
Table 5. LOM Sensitivity Case Results of The Real Option And Dynamic
DCF Analysis Using Monte Carlo Simulation
-------------------------------------------------------------------------
NPV or cumulative net cash flow
Cash flow type (US$ million; real; after-tax)
-------------------------------------------------------------------------
Cumulative net cash flow 1 687
Cumulative time-discounted net
cash flow 722
-------------------------------------------------------------------------
Dynamic DCF Real Option IDP10 DCF
-------------------------------------------------------------------------
Net present value 187 264 176
-------------------------------------------------------------------------
The Real Option and Dynamic DCF NPV results are not the same because of
differences related to risk adjustment and the ability to recognize the
effect of price reversion on cash-flow uncertainty. Price reversion and its
impact on project NPV is recognized by the Real Option method but not by the
Dynamic DCF method when using a single discount rate. In this evaluation
situation, the Real Option method tends to value each dollar of project net
cash flow more highly than the Dynamic DCF method.
The Dynamic DCF NPV from the Monte Carlo analysis is slightly higher than
the DCF NPV reported in previous sections because it uses the (higher) copper
spot prices on December 31, 2009, to start the simulation of metal prices.
The copper price reverts from this starting point to Entree's long-term
forecast price over time, such that the expected copper price during the
first 10 years of production is higher than forecast.
It is not asserted that either the Real Option method or Dynamic DCF
method provides more insightful evaluation results than the other. In
addition, the Real Option and Dynamic DCF NPVs provided in this section
cannot be considered a fair market value or fair value estimate under the
guidelines of the Canadian Institute of Chartered Business Valuators as there
may be other factors and risks that should be considered and other analyses
to be performed when estimating such values.
Alternative Scenarios
Two additional indicative options (alternative cases) were also discussed
under the LOM Sensitivity Case scenario. These options highlight the
considerable flexibility with respect to mine development available to the
project operators and could significantly benefit Entree if the joint venture
deposits are mined earlier than contemplated within the Reserve Case scenario.
One scenario ("Alternative Production Case A") examined the operation of
Hugo South as an open pit, along with a 25,000 tpd underground operation at
Heruga. This option could increase mine production levels to 213,000 tpd.
Production at Heruga could commence approximately 10 years after first
production of the open-pit Southern Oyu deposits, currently expected around
2013.
The second alternative ("Alternative Production Case B") retained Heruga
as a 75,000 tpd operation (as was proposed in the LOM Sensitivity Case
scenario) resulting in production levels of 265,000 tpd. Under this scenario,
the production from Heruga would be moved forward to commence approximately 7
years after first production of the open-pit Southern Oyu deposits.
Moving Heruga production forward would have a significant impact on the
economics of the deposit. No economic parameters are provided for the
indicative options described above, as under NI 43-101 guidelines inferred
resources are too speculative to have economic considerations applied to them
that would allow categorization as mineral reserves, and as such there is no
certainty that the preliminary assessment will be realized.
Entree-Ivanhoe Mines Joint Venture
Entree's joint venture with Ivanhoe Mines (through its subsidiary Oyu
Tolgoi LLC) provides that Entree holds a 20% interest in any mineralization
lying below a depth of 560 metres and a 30% interest in any mineralization
occurring from surface to a depth of 560 metres. Entree may choose to be
carried through to production by way of debt financing from Ivanhoe Mines
with interest accruing at prime plus 2%. This debt can be repaid in whole or
in part from time to time or repayable by Entree monthly from (and only from)
90% of the available cash flow arising from the sale of its share of products
as defined within the joint venture agreement. This arrangement ensures that
Entree cannot be diluted down from its 20% or 30% position.
Preparation of IDP and Qualified Persons
The IDP10 was prepared under the supervision of AMEC Minproc Limited.
Bernard Peters, as Oyu Tolgoi Study Director for AMEC Minproc Limited and
Qualified Person as defined in National Instrument 43-101, has reviewed,
verified and approved the technical contents of this news release.
The Qualified Persons and their areas of responsibility in relation to
the Technical Report are:
- Bernard Peters, B.Eng. (Mining), M. AusIMM (201743), employed by AMEC
Minproc Limited as Principal Mining Consultant, was responsible for
the overall preparation of the report and, in particular, the open-
pit mineral reserve estimate of the Technical Report.
- Scott Jackson, B.Sc. (Hons), CFSG, M. AusIMM (201735), employed by
Quantitative Geoscience Pty. Ltd. (trading as "Quantitative Group"
and "QG") as Principal Consultant, was responsible for preparation of
the Mineral Resources.
- John Vann, B.App.Sc., B.Sc. (Hons), M.Sc., F.Aus.I.M.M. (103352),
F.A.I.G., M.S.E.G, employed by Quantitative Geoscience Pty. Ltd.
(trading as "Quantitative Group" and "QG") as Principal Consultant,
was responsible for preparation of the Mineral Resources.
- Albert Chance, B.App.Sc., Association of Professional Engineers of
the Province of British Columbia (no. 16370), an employee of Golder
Associates Ltd., was responsible for preparation of the subsection on
Open Pit Mine Geotechnical.
- George R Stephan, E.M. (Engineer of Mines), MBA, Qualified
Professional Member Mining and Metallurgical Society of America an
employee of Stantec Mining (formerly McIntosh Engineering), was
responsible for the underground mineral reserve estimate of the
Technical Report.
- Jarek Jakubec, C.Eng., an employee of SRK Consulting Inc., was
responsible for preparation of the subsection on Underground Mine
Geotechnical Sections
- Dean David, B.App.Sc. (Metallurgy), AusIMM.(102351), employed by AMEC
Minproc Limited as Process Consultant, was responsible for
preparation of the Processing Sections.
- Bruce Brown, PE.PhD., employed by Rio Tinto Technology and Innovation
as Principal Advisor - Water, Waste and Tailings, was responsible for
preparation of the Tailing Storage Facility Sections.
FIGURES
To view figures pertaining to this release please visit:
files.newswire.ca/838/entreefigures.pdf
About Entree Gold Inc.
Entree Gold Inc. is a Canadian mineral exploration company focused on the
worldwide exploration and development of gold and copper prospects. The
Company flagship property is in Mongolia, where it holds two mining licences
(Shivee Tolgoi and Javhlant) and one exploration licence (Togoot). Lookout
Hill completely surrounds the 8,500-hectare Oyu Tolgoi project of Ivanhoe
Mines, and hosts the Hugo North Extension copper-gold deposit and the Heruga
copper-gold-molybdenum deposit. A portion of the Shivee Tolgoi mining licence
and the entirety of the Javhlant mining licence are subject to a joint
venture with Ivanhoe Mines, through its subsidiary Oyu Tolgoi LLC (formerly
known as Ivanhoe Mines Mongolia Inc. XXK - "IMMI").
Under the terms of the joint venture, Entree is carried through to
production, at its election, by debt financing from Ivanhoe Mines with
interest accruing at Ivanhoe Mines' actual cost of capital or prime +2%,
whichever is less, at the date of the advance. Debt repayment may be made in
whole or in part from (and only from) 90% of monthly available cash flow
arising from its sale of product. Such amounts will be applied first to
payment of accrued interest and then to repayment of principal. Available
cash flow means all net proceeds of sale of Entree's share of products in a
month less Entree's share of costs of operations for the month.
The Company continues to explore its landholdings in Mongolia while also
evaluating new opportunities throughout eastern Asia. Entree is exploring the
Huaixi copper project in Zhejiang Province in China, under the terms of an
agreement with the No. 11 Geological Brigade.
In North America, the Company is exploring for porphyry-related copper
systems in Arizona and New Mexico under two agreements with Empirical
Discovery LLC. In 2009, Entree optioned two contiguous properties, Blackjack
and Roulette, in the Yerington porphyry copper district of Nevada through
option agreements with HoneyBadger Exploration Ltd. and Bronco Creek
Exploration Inc.
In November 2009, Entree announced an agreement with PacMag Metals
Limited to implement Australian Schemes of Arrangement to acquire all of the
issued shares and options of PacMag. PacMag holds the rights to land
contiguous with the Blackjack and Roulette properties and hosts the Ann Mason
deposit. In British Columbia, Entree has the right to earn 100% interest in
the early stage copper-molybdenum Crystal property through an agreement with
Taiga Consultants Ltd.
The Company is also seeking additional opportunities to utilize its
expertise in exploring for deep and/or concealed ore deposits. With a
treasury of approximatelyC$40 million, the Company is well funded for future
activities.
Rio Tinto and Ivanhoe Mines are major shareholders of Entree, holding
approximately 15% and 14% of issued and outstanding shares, respectively.
This News Release contains forward-looking statements. Forward-looking
statements are statements which relate to future events. In some cases, you
can identify forward-looking statements by terminology such as "may",
"should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These include, but are not limited to: timing for
first production; expansion of processing plant from 36.5 mtpy to 58 mtpy by
the sixth year; expected payback period of capital; mine life under the
Reserve and Life of Mine Sensitivity Case and the anticipated yearly
production, including average annual production; peak single year production;
the ability of the mine development to support an expansion to 265,000 tonnes
per day; anticipated production and financial results; statements respecting
anticipated business activities; the timing of commencement of full
construction of the Oyu Tolgoi Project; the estimated timing and cost of
bringing the Oyu Tolgoi Project into commercial production; anticipated
future production and cash flows; target milling rates; the ability of the
partners to arrange financing for construction of the Oyu Tolgoi Project;
the impact of amendments to the laws of Mongolia and other countries in
which Entree carries on business; and other statements that are not
historical facts. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors that may cause our or
our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
While these forward-looking statements, and any assumptions upon which
they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always
vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested herein. Except as required
by applicable law, including the securities laws of the United States, the
Company does not intend to update any of the forward-looking statements to
conform these statements to actual results. Readers are referred to the
sections entitled "Risk Factors" in the Company's periodic filings with the
British Columbia Securities Commission, which can be viewed at www.SEDAR.com,
and with the United States Securities and Exchange Commission, which can be
viewed at www.SEC.gov.
For further information: Monica Hamm, Manager, Investor Relations, Entree
Gold Inc., Tel: +1-604-687-4777, Toll Free: +1-866-368-7330, E-mail:
mhamm@Entreegold.com
For further information: Monica Hamm, Manager, Investor Relations, Entree Gold Inc., Tel: +1-604-687-4777, Toll Free: +1-866-368-7330, E-mail: mhamm at Entreegold.com
Tags: canada, Entree Gold Inc., May 11, Vancouver
