Entrée's 20% carried interest stays cashless as licence transfer stalls Shivee Tolgoi work. Tax resubmission and government talks on 34% state equity claim are next.
On May 14, 2026, Entrée Resources (TSX:ETG; OTCQB:ERLFF) disclosed that the transfer of the Shivee Tolgoi and Javkhlant mining licences to OTLLC remained stalled, a blockage that directly postpones lateral development of Oyu Tolgoi’s Lift 1 Panel 1. President and CEO Stephen Scott announced his intention to retire in the second half of 2026, adding a leadership transition to a company whose entire asset value hinges on resolving a two-year-old tax impasse and an unresolved state equity claim.
What this means: The licence transfer is not bureaucratic friction. It is the operational gate that separates Entrée’s 20% carried interest from first cash flow. Every day of delay pushes that window further out.
Under the December 2024 arbitration award, OTLLC gained the exclusive right to hold the licences. Transferring them from Entrée’s Mongolian subsidiary to OTLLC is the next contractual step required before OTLLC can legally begin lateral development on the Shivee Tolgoi area. The transfer requires a corporate income tax payment at 10% of the licences’ value, calculated according to Decree No. 302, and a tax clearance certificate from the Mongolian tax authority (MTA).
In February 2025, OTLLC and Entrée lodged the licence transfer agreements and supporting documents. The MTA did not confirm the valuation calculations within the statutory timeframe. Entrée’s subsidiary then filed a claim with the Administrative Court of Mongolia seeking an order that the MTA review the calculations before payment. At the hearing, the MTA argued there is no legal provision allowing taxpayers to wait for confirmation. Entrée withdrew the claim on March 24, 2026, and the JV partners are now preparing to pay the tax first and resubmit the calculations.
Paying the tax without a pre-clearance introduces valuation risk. If the MTA later disputes the calculation, the JV could face additional tax demands or penalties. Because the arbitration award designated all transfer taxes as an Entrée/Oyu Tolgoi JV cost, OTLLC will front Entrée’s 20% share as a loan under Section 10.1 of the joint venture agreement. Any higher-than-expected tax liability therefore raises Entrée’s future repayable obligations without accelerating cash flow.
The Shivee Tolgoi and Javkhlant licences cover the Hugo North Extension of the Oyu Tolgoi copper-gold deposit, where Entrée’s entire mineral resource and reserve sit. Under the mine plan, Lift 1 Panel 1 lateral development requires physical access to that licence area. The company’s own filing states: “ongoing delays in completion of the transfer of the Licences to OTLLC will result in delays, which may be significant, to Oyu Tolgoi Lift 1 Panel 1 lateral development work on the Shivee Tolgoi mining licence area.”
OTLLC can continue development in other panels. The Shivee Tolgoi panel, however, is integral to the full production profile. Blocking it now defers the first revenue window for Entrée, erodes net present value, and stretches the timeline over which political and regulatory risks can materialise.
Stephen Scott navigated the company through the arbitration, early licensing conversations, and the relationship with Rio Tinto and the Mongolian government for more than a decade. His planned retirement triggers a board-led CEO search while he remains as an advisor during a transition. The leadership change coincides with two parallel sets of negotiations: the tax resubmission process and the Government Working Group discussions on the state’s equity interest.
A new CEO will need time to build credibility with OTLLC and the Minister of Industry and Mineral Resources, who chairs the working group. The reappointment of G. Damdinnyam as minister under Prime Minister N. Uchral provides some continuity. The composition and schedule of the working group, however, remain unconfirmed. Delay in the top executive transition could slow the group’s progress just when momentum is needed.
The Minerals Law of Mongolia permits the state to take up to a 34% equity interest, without compensation, in a Strategic Deposit where reserves were proven without state funds. On April 9, 2025, the government adopted Resolution No. 170, establishing the boundaries of Strategic Deposits including Oyu Tolgoi. The Shivee Tolgoi and Javkhlant licences fall inside those boundaries. The state already holds 34% of OTLLC’s economic benefit via Erdenes Oyu Tolgoi LLC’s shareholding and now seeks the equivalent from Entrée’s 20% (or 30% depending on depth) contractual interest.
On December 26, 2025, Parliament Resolution No. 120 directed the government to develop proposals ensuring “the people hold the majority of the benefits” and to avoid future obligations that could reduce Mongolia’s share. The wording signals a political appetite for extracting more value, not less.
On March 25, 2026, Entrée delivered a non-binding proposal offering a negotiated royalty on gross sales value in lieu of a 34% equity stake. The document aims to form the basis for further discussions. Whether the new cabinet under Prime Minister Uchral accepts a royalty settlement or pushes for direct equity remains the critical binary. The government working group’s composition and timeline are not yet confirmed, adding uncertainty to any near-term resolution.
Entrée’s carried interest structure means it does not fund the underground development; OTLLC covers capital expenditure and recovers it from future production. That protects Entrée from dilution. It also leaves the company without cash flow until ore from its property is processed. A delay in the licence transfer postpones that cash flow, reduces the present value of the asset, and makes the carried interest less attractive as a development-stage holding.
Royal Gold, Inc. (through its subsidiary) holds approximately 24% of Entrée’s shares. Rio Tinto holds about 16%. On AlphaScala’s proprietary scoring framework, Rio Tinto (RTNTF) carries an Alpha Score of 62 (Moderate), while Royal Gold (RGLD) sits at 70 (Moderate). Both grades reflect moderate risk profiles that could shift if the Oyu Tolgoi development timeline stretches. A prolonged stall at Shivee Tolgoi would directly pressure Entrée’s equity. It would also mark a frictional cost within a project central to Rio Tinto’s copper growth and to Royal Gold’s stream-and-royalty portfolio. Any markdown in Entrée’s valuation flows through Royal Gold’s carrying value of its investment.
Bottom line for traders: Entrée’s entire asset is binary. Either the licence transfer clears and the carried interest revalues toward the NPV of its share of reserves, or the stall persists and the interest discounts toward zero.
Traders should monitor three signals that will separate a resolution scenario from a structural impasse. The first is the issuance of the MTA tax certificate after the resubmission. The second is a formal meeting between the Government Working Group and the Entrée/OTLLC partners under the new cabinet. The third is the appointment of a CEO who brings direct Mongolian operating experience. Any one of those would reduce the event risk premium. Failure to advance on all three would increase it materially.
On AlphaScala’s proprietary framework, Rio Tinto (RTNTF) scores 62 (Moderate), and Royal Gold (RGLD) scores 70 (Moderate). RTNTF stock page · RGLD stock page · commodities analysis · gold profile
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.