Entrée Gold Announces Fiscal Year 2015 Results and Reviews Corporate Highlights
March 30, 2016
"In the third quarter of 2015, we also released an updated Preliminary Economic Assessment for our 100% owned Ann Mason copper-molybdenum porphyry deposit in
"As market conditions remain depressed, the Company continued implementing plans to significantly reduce its cash burn rate ensuring that we are positioned to meet all challenges as they emerge and at the same time identify strategic growth opportunities with the potential to deliver value to the Company and our shareholders. Following closing of the Sandstorm transaction, the Company had approximately
All dollar figures in this news release are in
Highlights for the year ended
Entrée/Oyu Tolgoi Joint Venture,
Entrée has a 20% carried interest in the Hugo North Extension and Heruga deposits, which are included in the 12 kilometre-long Oyu Tolgoi series of copper-gold-molybdenum deposits in
In 2015, Entrée's joint venture partner,
Updated Technical Report
Entrée today filed a technical report titled "Lookout Hill Feasibility Study Update" and dated
The Reserve Case is the most likely mining scenario for reserves exploited in the initial ("Lift 1") underground block cave mining operation, including Lift 1 of the Entrée/Oyu Tolgoi joint venture's Hugo North Extension deposit. LHTR16 also discusses several alternative production cases that would include resources from other Oyu Tolgoi deposits including the joint venture's Hugo North Extension Lift 2 and Heruga, and allow for continuous improvement in plant throughput and potential plant expansions up to 350 thousand tonnes per day ("ktpd"). Due to the nature of the deposits associated with Oyu Tolgoi, the project has the flexibility to consider several options for optimizing the overall mine plan for the benefit of stakeholders. Separate development decisions will need to be made based on future prevailing conditions and the experience obtained from developing and operating the initial phases of the project.
Key results from LHTR16 include:
- Hugo North Extension Probable reserve is 35 million tonnes ("Mt") grading 1.59% copper, 0.55 grams per tonne ("g/t") gold and 3.72 g/t silver.
- Hugo North Extension net smelter returns ("NSR") is
$100.57/t (calculated from the financial model). 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 U.S. 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.
- Reserve Case after tax net present value (using an 8% discount) for Entrée's 20% interest is
- Hugo North Extension mineral resources are updated, and:
- The Hugo North Extension Indicated mineral resource estimate is very similar to the previously reported (2013) resource estimate. The local improvement in resources on the joint venture side has increased the reserve tonnage and contained copper.
- The Hugo North Extension Inferred mineral resource estimate has increased substantially from the previously reported estimate. This increase is largely due to new, more refined geological modelling, but a change to the copper equivalency formula has also had a small effect.
- The change to the formula used to calculate copper equivalency for Heruga Inferred mineral resources has resulted in a 7% drop in tonnage and an overall 10% drop in copper equivalent metal relative to the previously reported (2013) resource estimate.
- Underground block cave mine production is 95 ktpd.
- The plant rate for the Reserve Case remains the nominal 100 ktpd.
- Underground ore handling will be conveyed to surface via decline, which opens the project to additional production flexibility and future optionality. The mine plan still makes use of the existing shafts and the planned shafts that were defined in the previous report. The combined capacity of the decline conveyor and shafts is 130-140 ktpd.
In LHTR16, Lift 1 Entrée/Oyu Tolgoi joint venture development ore starts in 2021 and joint venture cave production commences in 2027. In the Reserve Case, production from Lift 1 at Hugo North Extension totals 34.8 Mt averaging 1.59% copper and 0.55 g/t gold and is estimated to last until 2034. Development and sustaining capital costs for the joint venture's portion of the Hugo North Extension Lift 1 block cave are estimated at
The Company's technical report, titled "Lookout Hill Feasibility Study Update", with an effective date of
In 2014, the Company retained
Key results from the 2015 PEA can be summarized as follows:
- Base case, pre-tax net present value (using a 7.5% discount rate) ("NPV7.5") of
$1,158 million, internal rate of return ("IRR") of 15.8% and payback of 6.4 years, based on long term metal prices of $3.00/lb copper, $11.00/lb molybdenum, $1,200/oz gold and $20/oz silver (the "Base Case").
- Base Case post-tax NPV7.5 of
$770 million, IRR of 13.7% and payback of 6.9 years.
- Development capital costs of approximately
$1.35 billion, including $103 millioncontingency.
- Pre-production development of three years.
- Mine production for 21 years, followed by four years of reclamation (Life of Mine or "LOM").
- Average LOM cash costs (net of by-product sales) pre-tax of
$1.49/lb copper (see Non-U.S. GAAP Performance Measurement below).
- Average LOM all-in sustaining costs ("AISC") (net of by-product sales) pre-tax of
$1.57/lb copper (see Non-U.S. GAAP Performance Measurement below).
- Net average pre-tax undiscounted cash flow over Years 1 to 21 of approximately
$298 millionper year (and post-tax of $238 millionper year).
- LOM payable production of approximately:
- 5.1 billion pounds of copper,
- 46 million pounds of molybdenum,
- 0.4 million ounces of gold, and
- 8.8 million ounces of silver.
- Average annual payable production of approximately:
- 241 million pounds of copper,
- 2.2 million pounds of molybdenum,
- 20,000 ounces of gold, and
- 421,000 ounces of silver.
- Strip ratio of 2.01:1 waste to mineralized material (including pre-strip).
- LOM average copper recovery of 92%.
- Copper concentrate grading 30%.
The 2015 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 PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
The 2015 PEA, titled "Updated Preliminary Economic Assessment on the
The Agreement to Amend provides for a 17% reduction in the metal credits that Entrée is required to sell and deliver to Sandstorm under the 2013 Agreement. Concurrently, Entrée refunded a portion of the refundable deposit (thereby reducing the deposit to
In addition to reducing the Company's future obligation to sell metal credits to Sandstorm, Entrée immediately benefited from greater control over its treasury and an increased ability to preserve cash. See the Company's news release dated
OTHER CORPORATE HIGHLIGHTS
- In efforts to conserve cash reserves, the Company has made, and continues to make, adjustments to operations including rationalizing land holdings in
Mongolia, reducing staff levels in each of Mongolia, Canadaand the United States, as well as reducing other overhead expenditures.
July 14, 2015, Anna Stylianideswas appointed to the Company's Board of Directors.
November 16, 2015, Stephen Scottwas appointed Interim Chief Executive Officer of the Company, succeeding Gregory Crowefollowing his resignation as President, Chief Executive Officer and a director of the Company effective November 13, 2015.
April 1, 2016, Mr. Scott will be appointed President and Chief Executive Officer of the Company, and will concurrently be appointed to the Company's Board of Directors.
- In 2015, the Company acquired a 0.5% net smelter returns royalty on
Candente Copper Corp.'s100% owned Cañariaco project in Perufor $500,000. The Cañariaco project includes the Cañariaco Norte copper-gold-silver deposit, as well as the adjacent Cañariaco Sur and Quebrada Verde prospects, located within the western Cordillera of the Peruvian Andes in the Department of Lambaveque, Northern Peru.
The Company is pleased to announce that
For the year ended
Entrée's average monthly operating expenses for the year ended
SELECTED FINANCIAL INFORMATION
|Working capital (1)||$||21,844,252||$||32,603,711|
|Total long term liabilities (2)||39,315,880||44,269,904|
|(1)||Working Capital is defined as Current Assets less Current Liabilities.|
|(2)||Long term liabilities include $28,924,857 of deferred revenue related to a deposit on a metal credit delivering obligation.|
The Company's Annual Financial Statements, management's discussion and analysis ("MD&A") and Annual Information Form are available on the Company website, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The Company's Annual Report on Form 20-F has been filed with the
Robert Cinits, P.Geo., Entrée's Vice President, Corporate Development, a Qualified Person as defined by NI 43-101, has approved the technical information in this release.
NON-U.S. GAAP PERFORMANCE MEASURMENT
"Cash costs" and ASIC are non-U.S. GAAP performance measurements. These performance measurements are included because these statistics are widely accepted as the standard of reporting cash costs of production in
ABOUT ENTRÉE GOLD INC.
This News Release contains forward-looking statements and forward-looking information (together, "forward-looking statements") within the meaning of applicable securities laws and the United States Private Securities Litigation Reform Act of 1995 with respect to the future prices of copper, gold, molybdenum and silver; the estimation of mineral reserves and resources; the realization of mineral reserve and resource estimates; anticipated future production, capital and operating costs, cash flows and mine life; completion of a Pre-Feasibility study on the
In certain cases, forward-looking statements and information can be identified by the use of 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, legal proceedings and negotiations and the environment in which the Company will operate in the future, including the status of the Company's relationship and interaction with the Government of
Other uncertainties and factors which could cause actual results to differ materially from future results expressed or implied by forward-looking statements and information include, amongst others, whether the size, grade and continuity of deposits and resource and reserve estimates have been interpreted correctly from exploration results; whether the results of preliminary test work are indicative of what the results of future test work will be; fluctuations in commodity prices and demand; changing foreign exchange rates; actions by Rio Tinto, Turquoise Hill and/or
In addition, there are also known and unknown risk factors which may cause the actual results, performances or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements and information. Such factors include, among others, risks related to international operations, including legal and political risk in
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