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The three executives, including CEO Terry Holohan, were freed from detention on Wednesday.
Shares of Entrée Resources (TSX: ETG) rose by nearly 20% on Monday after the company reported promising results from its 2023 drill program at the Hugo North Extension (HNE) porphyry deposit in Mongolia, part of a joint venture with Rio Tinto subsidiary Oyu Tolgoi LLC (OTLLC).
OTLLC currently holds a 66% interest in world-class Oyu Tolgoi copper-gold project, which began production last year and is expected to become one of the largest copper mines globally by the end of this decade.
Entrée’s partnership with OTLLC covers part of the Shivee Tolgoi mining licence and all of the Javhlant licence, which cover the HNE and Heruga deposits plus other exploration targets and have a combined area of nearly 400 sq. km. Entrée has a carried participating interest in the licensed area, depending on the depth of mineralization.
Under the JV agreement, Entrée has a 20% participating interest in mineralization on the property extracted below 560 metres elevation, and a 30% participating interest in mineralization identified above 560 metres elevation.
The new drill results comprise eight of the 33 drill holes completed by OTLLC during the 2023 program. Two were surface holes, each intersecting 1.62% copper equivalent (CuEq) over 448 metres, including 1.99% CuEq over 172 metres, and 1.17% CuEq over 143 metres, including 1.92% CuEq over 51 metres. The six underground holes returned grades as high as 2.37% CuEq.
These follow up on the high-grade results from 14 drill holes provided by OTLLC in July, which had up to 2.79% CuEq from surface and 5.43% CuEq underground.
“I suspect none of our shareholders will be surprised by these outstanding additional drill results, which are entirely consistent with results disclosed by the company earlier this year,” Entrée Resources’ CEO Stephen Scott said in a news release.
“From what we are seeing Hugo North, including the Hugo North Extension deposit on the JV property, continues to demonstrate the potential to be one of the best copper-gold deposits discovered in the last 50 years,” he said.
Following the announcement, Entrée Resources’ shares surged 17% to C$2.13 apiece by 1:50 p.m. in Toronto, having already hit a 52-week high of C$2.39 a month ago. The company has a market capitalization of C$437.3 million.
The 2023 drill results are expected to be included in an updated resource model for the HNE deposit, which, as of a May 2021 estimate, has probable reserves of 40 million tonnes grading 1.54% copper, 0.53 gram per tonne gold, and 3.63 g/t silver. These reserves are contained in the Hugo North Extension Lift 1 block cave, which is the northern portion of the underground block cave mine plan that is currently in development at the Oyu Tolgoi licence.
The deposit also includes Lift 2, which is directly below Lift 1 and represents the next potential phase of underground mining at the JV property. Mineral resources from Lift 2 form the basis of the 2021 mine plan, which includes 166 million tonnes of indicated and inferred resources with an average expected run-of-mine feed grade of 1.35% copper, 0.49 g/t gold and 3.6 g/t silver.
Last month, Entrée reported that Lift 1 underground development work on the joint venture property has commenced, with a maximum of 212 metres of lateral development work in the southwest corner of HNE approved, in line with the 2024 Oyu Tolgoi mine plan.
This milestone, said CEO Scott, would place the company on the path to commercial production, but acknowledged that further work remains to be done to sort out contractual complications between Entrée and OTLLC.
The companies have been operating under a JV since OTLLC completed its 80% earn-in in 2008, but Entrée believes the transfer of the Shivee Tolgoi and Javhlant licences to OTLLC is necessary to maximize operational efficiencies. In its negotiations, Entrée is seeking an “effective mechanism” for the company to fulfill any obligation under Mongolian law to share with the state up to 34% of its economic benefit (the Mongolia state currently holds 34% of OTLLC).
“The commercial relationship between Entrée and its JV partner is becoming more complicated as the Entrée/Oyu Tolgoi JV property moves beyond the exploration stage. It is very important that we have certainty around the terms and conditions the parties will adhere to going forward,” Scott said in an Oct. 29 news release.
“While Entrée’s preference has always been to achieve this contractual certainty through negotiation with OTLLC and Rio Tinto, we have had to look at other ways to ensure shareholder interests are protected, including arbitration.”
