VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 9, 2016) - Entrée Gold Inc. (TSX:ETG)(NYSE MKT:EGI)(FRANKFURT:EKA)("Entrée" or the "Company") welcomes the May 5, 2016 announcements that formal notice to proceed approval has been given for the next stage in the development of the world-class Oyu Tolgoi mine in Mongolia by the boards of Turquoise Hill Resources Ltd. ("Turquoise Hill"), Rio Tinto and Entrée's joint venture partner, Oyu Tolgoi LLC ("OTLLC"). This was the final requirement for the re-start of underground development at the Hugo North Lift 1 block cave, including Lift 1 of the Entrée/Oyu Tolgoi joint venture's Hugo North Extension deposit. The announcements also noted that an updated Oyu Tolgoi Feasibility Study (the "2016 Feasibility Study") has been completed including a re-estimate of capital, and all necessary permits have been granted. Underground construction is expected to re-commence in mid-2016.
Stephen Scott, President & CEO of Entrée said, "We are very pleased and excited by these announcements which represent very significant milestones for the project and all stakeholders, including the people of Mongolia and Entrée shareholders. This historic decision is another step towards realizing the significant value from this world class project and is a clear signal of improved investor confidence in Mongolia as an attractive place to do business."
According to Rio Tinto and Turquoise Hill the notice to proceed decision follows the December 2015 signing of a $4.4 billion project financing agreement with international financial institutions and export credit agencies representing the Governments of the United States, Canada and Australia, along with 15 commercial banks, for the development of the underground mine, including Lift 1 of the Entrée/Oyu Tolgoi joint venture's Hugo North Extension deposit.
Turquoise Hill further reported that pre-start activities for the underground started in August 2015 and have included ramp-up of the owners and engineering procurement and construction management teams, re-estimation activities, detailed engineering and early procurement for equipment and materials required for necessary critical works that are key enablers for recommencement of underground lateral development mining activity. Appointments to key roles in the underground team are well underway, with key staff starting in Q1 2016.
Entrée has a carried interest in two of the Oyu Tolgoi project deposits - the Hugo North Extension copper-gold deposit and the Heruga copper-gold-molybdenum deposit (the "Entrée/Oyu Tolgoi JV Property"). These deposits are the northern-most and southern-most, respectively, in the 12 kilometre-long Oyu Tolgoi series of deposits. The resources at Hugo North Extension include a Probable reserve, which is included in the first phase ("Lift 1") of underground mine development. The Probable reserve (September 20, 2014) for Hugo North Extension totals 35 million tonnes grading 1.59% copper, 0.55 grams per tonne ("g/t") gold, and 3.72 g/t silver. Entrée holds a 20% carried interest in this mineral reserve through the Entrée/Oyu Tolgoi joint venture.
A second lift for the Oyu Tolgoi underground block cave operation, including additional resources from Hugo North Extension, has been proposed but has not yet been modeled within the existing mine plan.
Under the terms of the joint venture, Entrée elected to have OTLLC debt finance Entrée's share of costs with interest accruing at OTLLC's actual cost of capital or prime plus 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 sale of Entrée's share of products.
Turquoise Hill expects to publish an updated National Instrument 43-101 ("NI 43-101") independent technical report relating to the project in the second half of 2016. Once Entrée receives all required information relating to the Entrée/Oyu Tolgoi JV Property, it will report on the impact of the 2016 Feasibility Study.