Mr. Robert Cinits reports

ENTREE RESOURCES ANNOUNCES FISCAL YEAR 2023 RESULTS and REVIEWS CORPORATE HIGHLIGHTS

Entree Resources Ltd. today filed its annual operational and financial results for the year ended Dec. 31, 2023. All numbers are in United States dollars unless otherwise noted.

2023 highlights

Oyu Tolgoi underground development update

The Oyu Tolgoi project in Mongolia includes two separate landholdings: the Oyu Tolgoi mining licence, which is held by Oyu Tolgoi LLC (OTLLC) and the Entree/Oyu Tolgoi JV (joint venture) property, which is a joint venture partnership between Entree and OTLLC. Rio Tinto International Holdings Ltd. owns 66 per cent of OTLLC and is the manager of operations at Oyu Tolgoi.

• Ramp-up of the Oyu Tolgoi Lift 1 underground mine, which incorporates the development of three panels (panels 0, 1 and 2), continued during 2023. Oyu Tolgoi is set to become the fourth-largest copper mine in the world by 2030, with the operation expected to deliver average mined copper production of approximately 500,000 tpa (tonnes per annum) between 2028 and 2036.
• On March 13, 2023, Rio Tinto announced the commencement of underground production from Oyu Tolgoi lift 1 panel 0 on the Oyu Tolgoi mining licence. As at Dec. 31, 2023, 86 lift 1 panel 0 draw bells had been opened, including 67 draw bells during 2023.
• Construction of conveyor to surface works continued to plan and was approaching 88-per-cent completion at the end of the year. Commissioning is expected in the second half 2024. Construction works for the concentrator conversion also remains on schedule. Commissioning is expected to be progressively completed between the fourth quarter 2024 through to the second quarter 2025. Construction of Primary Crusher 2 commenced in December, 2023, and is expected to be completed by the end of 2025.
• shaft sinking continued during 2023. At the end of December, shaft 3 reached 923 metres below ground level (82 per cent sunk) and shaft 4 reached 1,013 metres below ground level (86 per cent sunk). Final depths required for shafts 3 and 4 are 1,130 metres and 1,176 metres below ground level, respectively. OTLLC expects both shafts to be commissioned in the second half 2024.
• Technical studies for panels 1 and 2 mine design and schedule optimization were completed by OTLLC during the second quarter 2023. The Hugo North extension (HNE) deposit on the Entree/Oyu Tolgoi JV property is located at the northern portion of panel 1. According to Rio Tinto:
  • The technical studies have resulted in substantially derisked, resilient mine designs that provide a pathway to ramp-up, flexibility to pursue value creating opportunities and react to future risks, and improved stability, constructability and operability. The studies also provide a pathway to bring the panels into production faster and maximize the use of the ventilation system.
  • Identified risks associated with the previous panel 1 mine design have been resolved by increasing draw point and rim drive spacing, relocating the central material handling system and return raises outside of the active caving area, and optimally orienting the extraction drives and drill drives.
  • Panel 1 production on the Oyu Tolgoi mining licence is anticipated to commence in approximately 2027.
• The technical studies have been incorporated into OTLLC's 2023 Oyu Tolgoi feasibility study (OTFS23) which has been submitted to and is under review by applicable regulatory bodies in Mongolia. Entree is currently reviewing OTFS23 but does not anticipate any material changes to underground development cost or schedule for the Entree/Oyu Tolgoi JV property.
• Rio Tinto reported during its July 11, 2023, investor site visit that with the technical studies for panels 1 and 2 completed, attention is shifting to the design of lift 2. Drilling programs to support a lift 2 prefeasibility study are in progress. An updated resource model for Hugo North (including Hugo North extension) is expected to be completed in 2024 and will include mineralization from lift 2.

Entree/Oyu Tolgoi JV property

• First lift 1 panel 1 development work on the Shivee Tolgoi mining licence is expected to commence in 2024. Development work will start in the southwest corner of the HNE deposit and will establish the initial panel 1 western ore handling truck chute, including extraction level tipple development, the truck chute chamber on the haulage level and the supporting ventilation loop with the return air level. OTLLC has advised the company all 2024 development will be in rock classified as waste which will be stockpiled separately and sampled in accordance with OTLLC's standard sampling protocols and procedures.
• In 2023, OTLLC completed an infill diamond drilling program at HNE comprising both underground holes (25 holes totalling approximately 6,577 metres drilled on the Shivee Tolgoi mining licence) and surface holes (seven holes totalling approximately 6,753 metres). Additional HNE underground and surface infill diamond drilling on the Shivee Tolgoi mining licence is planned for 2024 (approximately 14,128 metres of underground drilling in 25 holes and approximately 6,840 metres of surface drilling in four holes). The principal purpose for the drilling is to support the lift 2 prefeasibility study and the updated resource model for Hugo North (including Hugo North extension).
• OTLLC is also proposing approximately 8,785 metres of diamond drilling in five surface holes on the Heruga deposit (Javhlant mining licence) in 2024 to increase ore body knowledge and support an order of magnitude study. No drilling has been conducted on the Heruga deposit since 2008.
• In 2023, OTLLC completed an exploration program on the Shivee Tolgoi mining licence that included 2,880 metres of diamond drilling in four holes and a 40.4-line-kilometre dipole-dipole induced polarization geophysical survey at Ulaan Khud South. OTLLC also completed integrated geological-geophysical 3-D modelling at the Airstrip and Ductile shear targets.
• Two thousand twenty-three exploration on the Javhlant mining licence included 2,263.4 metres of diamond drilling in three holes and a 39.6-line-kilometre dipole-dipole induced polarization geophysical survey at the Railway target. Integrated geological-geophysical 3-D modelling was completed at the SEIP, West Mag and East Bumbat Ulaan targets.
• OTLLC is in the process of finalizing an exploration program and budget for 2024. On the Shivee Tolgoi mining licence, the program is expected to focus on the Airstrip and Ulaan Khud South targets, including approximately 2,500 metres of diamond drilling at Ulaan Khud South and geological and geophysical studies. On the Javhlant mining licence, work will be conducted on the Bumbat Ulaan, East Bumbat Ulaan and West Heruga targets, and will include approximately 1,800 metres of reverse circulation drilling at Bumbat Ulaan, diamond drilling at West Heruga and geological studies.

Corporate

• For the 2023 fiscal year, the company's operating loss was $4.5-million compared with $3.6-million in 2022. The increase from 2023 was mainly due to legal costs for both commercial negotiations with OTLLC and Rio Tinto and the arbitration proceedings.
• For the 2023 fiscal year, the operating cash outflow before changes in non-cash working capital items was $3.1-million compared with $2.4-million in 2022.
• Share purchase warrants to purchase 5,139,000 common shares with an exercise price of 60 Canadian cents were exercised resulting in gross proceeds of $3.1-million being received by the company for the 2023 fiscal year.
• Stock options to purchase 1.2 million common shares with exercise prices ranging from 55 Canadian cents to 77 Canadian cents were exercised resulting in gross proceeds of $700,000 (Canadian) being received by the company.
• As at Dec. 31, 2023, the cash balance was $6.1-million and the working capital balance was $6.1-million.
• On Sept. 5, 2023, the company voluntarily filed a Form 15 with the United States Securities and Exchange Commission for the purpose of terminating the registration of the company's common shares under Section 12(g) of the Securities Exchange Act of 1934, as amended, and suspending its reporting obligations under sections 13(a) and 15(d) of the exchange act. The company's common shares have not traded on a national securities exchange in the United States since the company voluntarily withdrew its common shares from listing on NYSE American LLC in 2019. The company's shares continue to trade in Canada on the Toronto Stock Exchange (TSX) under the symbol ETG and in the United States on the over-the-counter OTCQB Venture Market under the symbol ERLFF.

Outlook and strategy

Entree's primary objective is to confirm the transfer of the Shivee Tolgoi and Javhlant mining licences to OTLLC as contemplated by the Entree/Oyu Tolgoi joint venture agreement, either in conjunction with finalization, execution and closing of an agreement with OTLLC to restructure or amend the existing Entree/Oyu Tolgoi JVA to streamline the operating environment for both parties, or enforcement of certain provisions of the 2004 equity participation and earn-in agreement and Entree/Oyu Tolgoi JVA pursuant to binding arbitration proceedings commenced by the company in 2022. The company currently is registered in Mongolia as the 100-per-cent ultimate holder of the licences.

The commencement of arbitration proceedings followed protracted discussions with Rio Tinto and OTLLC to confirm the transfer of the Shivee Tolgoi and Javhlant mining licences to OTLLC. The arbitration was commenced in Vancouver, B.C., under the International Commercial Arbitration Act (British Columbia). A three-member tribunal has been appointed and a merits hearing has been set for April, 2024.

Notwithstanding the commencement of arbitration proceedings, the company remains committed to seeking a commercial resolution with Rio Tinto and OTLLC and the parties continue to make progress. Any definitive agreement reached between the company and OTLLC to restructure or amend the existing Entree/Oyu Tolgoi JVA would be subject to TSX acceptance and the requirements of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions applicable to a related party transaction. There are no assurances that a definitive agreement will be finalized and executed, or if finalized and executed, that the transaction would close.

The company is also in discussions with Erdenes Oyu Tolgoi LLC (the state-owned company that holds the government's 34-per-cent interest in OTLLC) regarding the potential for the government of Mongolia and Erdenes Oyu Tolgoi LLC to conclude an agreement with the company for the State to share in 34 per cent of the economic benefit of the company's interest in the Entree/Oyu Tolgoi JV property. The Minerals Law of Mongolia provides the State may share in up to 34 per cent of the economic benefit derived from exploitation of a mineral deposit of strategic importance where proven reserves were determined through funding sources other than the state budget. The Hugo North extension copper-gold deposit on the Shivee Tolgoi mining licence and the Heruga copper-gold-molybdenum deposit on the Javhlant mining licence are mineral deposits of strategic importance.

Summary of operating results

Operating loss

During the year ended Dec. 31, 2023, the company's operating loss was $4.5-million compared with $3.6-million for the year ended Dec. 31, 2022.

Project expenditures in 2023 included expenditures for professional and advisory fees related to advancing a potential restructuring of, or amendments to, the Entree/Oyu Tolgoi JVA. The increase from 2022 to 2023 was due to legal costs for both commercial negotiations with OTLLC and Rio Tinto and the arbitration proceedings.

General and administration expenditures in 2023 was comparable with 2022 with cost increases related to inflation.

Depreciation expense in 2023 was consistent with 2022.

Non-operating items

The foreign exchange (gain) loss in 2023 was primarily the result of movements between the Canadian dollar and United States dollar as the company holds its cash in both currencies and the loan payable is denominated in U.S. dollars.

Interest expense was primarily related to the loan payable to OTLLC pursuant to the Entree/Oyu Tolgoi JVA and is subject to a variable interest rate.

The amount recognized as a loss from equity investee is related to exploration costs on the Entree/Oyu Tolgoi JV property.

Deferred revenue finance costs are related to recording the non-cash finance costs associated with the deferred revenue balance, specifically the Sandstorm Gold Ltd. stream.

The total assets as at Dec. 31, 2023, were lower than at Dec. 31, 2022, due to a lower cash balance from operating activities. Total non-current liabilities have increased since Dec. 31, 2022, due to recording the non-cash deferred revenue finance costs each quarter.

The company's annual financial statements and management's discussion and analysis (MD&A), and annual information form are available on the company's website, on SEDAR+ and on OTC Markets. Shareholders can receive a hard copy of the company's audited annual financial statements upon request.

Qualified person

Robert Cinits, PGeo, a qualified person as defined by National Instrument 43-101 -- Standards of Disclosure for Mineral Projects, has approved the technical information in this release. For further information on the Entree/Oyu Tolgoi JV property, see the company's technical report, titled "Entree/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report," with an effective date of Oct. 8, 2021, available on SEDAR+.

About Entree Resources Ltd.

Entree Resources is a well-financed Canadian mining company with a unique carried joint venture interest on a significant portion of one of the world's largest copper-gold projects -- the Oyu Tolgoi project in Mongolia. Entree has a 20-per-cent or 30-per-cent carried participating interest in the Entree/Oyu Tolgoi joint venture, depending on the depth of mineralization. Horizon Copper Corp. and Rio Tinto are major shareholders of Entree, beneficially holding approximately 24 per cent and 16 per cent of the shares of the company, respectively.

We seek Safe Harbor.