Entrée Resources reported no progress on the Shivee Tolgoi licence transfer that would unlock underground development at the Oyu Tolgoi copper-gold project in Mongolia.
Entrée Resources filed its second-quarter results Thursday with no progress on the licence transfer that would let underground development begin on the Shivee Tolgoi portion of the Oyu Tolgoi copper-gold project.
The company's main objective remains unchanged: move the Shivee Tolgoi and Javkhlant mining licences from its Mongolian subsidiary Entrée LLC into Oyu Tolgoi LLC, the Rio Tinto-controlled joint venture that operates the mine. Without that transfer, lateral development on the Shivee Tolgoi licence area cannot proceed. Entrée has been working on this for years.
Entrée sent a non-binding proposal to Mongolia's Minister of Industry and Mineral Resources on March 25. The offer proposes a negotiated royalty on the gross sales value of the company's concentrate instead of the State taking a 34% equity position in the licence area, which the Minerals Law permits. The company said it is "continuing to monitor" when discussions with the Government Working Group might resume. No date was given.
Mongolian law allows the State to take up to 34% of a strategic deposit without compensation, or accept royalty payments instead. The State already holds 34% of the economic benefit from OTLLC's interest through Erdenes Oyu Tolgoi LLC's shareholding in the operating company and the 2009 Investment Agreement. Entrée said it has consistently stated it will fulfill any obligation to give the State 34% of the benefit from its own 20% or 30% carried interest in the licence area, depending on depth of mineralization.
Entrée is also still working with OTLLC to convert the existing joint venture agreement into "a more effective agreement of equivalent economic value." Any conversion would require TSX acceptance and compliance with MI 61-101 related-party transaction rules. The company has been discussing this with Rio Tinto and OTLLC for some time. No timeline was given.
The Shivee Tolgoi licence area sits within the broader Oyu Tolgoi deposit, which Rio Tinto operates and plans to make the world's fourth-largest copper mine by 2030. Oyu Tolgoi already produces from the Hugo Dummett underground mine under the main Oyu Tolgoi mining licence, which OTLLC owns outright. The Entrée/Oyu Tolgoi JV Property covers the Shivee Tolgoi and Javkhlant licence areas, where development cannot start until the licences move to OTLLC.
Royal Gold Inc. holds about 24% of Entrée through its Canadian subsidiary. Rio Tinto holds about 16%. Both are listed as major shareholders in the filing.
Entrée's RTNTF stock page carries an Alpha Score of 62 out of 100, rated Moderate. The score reflects the binary nature of the catalyst: either the licence transfer happens and the carried interest in a world-class copper asset starts generating value, or it stalls indefinitely. The royalty proposal is a concrete step, the lack of a resumed meeting date keeps the timeline uncertain.
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