Entrée Gold says its joint venture mining licence with Oyu Tolgoi LLC has been temporarily suspended, not cancelled as reported in some media. The company received notification from the Mongolian Mineral Resources Authority that the suspension means Entrée cannot sell or transfer the mining licences for the time being.
An order regarding the registration of reserves for the JV deposits has been cancelled however, which is one step of the process in converting the exploration licence to a mining licence.
The company believes it followed all Mongolian laws and regulations in conjunction with the issuance of the joint venture mining licences, which were issued to Entrée as a condition precedent to the Investment Agreement between its joint venture partner Oyu Tolgoi LLC, Rio Tinto, Turquoise Hill (formerly known as Ivanhoe Mines) and the Government of Mongolia in October 2009.
To help ensure this matter is resolved as soon as possible, Entrée will work with Oyu Tolgoi LLC, who it says, as manager of the Oyu Tolgoi mining complex, is responsible for maintaining the licences in good order.
Meantime, Entrée has closed a Can$10 million private placement to Sandstorm Gold, with more than 17.8 million shares issued, giving the company a 12.17% stake in Entrée. The sale is the third component of a US$55 million financing package from Sandstorm which was announced last month which included an upfront US$40 million deposit to allow for the timely advancement of Entrée’s key assets and ongoing activities.
The package is expected to sustain the Mongolian JV and operations as well as help to advance the Ann Mason project in the United States.
Entrée’s president Greg Crowe says, “We welcome Sandstorm as an investor through this production-based financing and as a shareholder through the equity private placement. In light of the difficult capital markets environment, a financing package such as this is an effective solution to providing operating capital sufficient for the next two to three years.”
The funding agreement will see Sandstorm purchase metal credits equivalent to 25.7% or 33.8% of Entrée’s 20% share of the gold and silver by-products produced from the Heruga and Hugo North Extension deposits at Oyu Tolgoi. Sandstorm has also agreed to purchase a 0.4% NSR royalty on the future sale of any metals and minerals derived from a portion of the Ann Mason project.