Entree Resources provides update on Rio Tinto, OTLLC discussions

The Company has been engaged in discussions with Rio Tinto (RIO) and OTLLC to finalize either the execution and delivery of the existing JV Agreement or conversion to an alternative agreement of equivalent economic value to govern their relationship during the development and mining stages. CEO Stephen Scott commented, “The commercial relationship between Entree and its JV partner is becoming more complicated as the Entree/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. While Entree’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”. Key points in the discussions have been the transfer of the Shivee Tolgoi and Javhlant mining licenses to OTLLC, the treatment of taxes payable in Mongolia in connection with such license transfers, and ensuring there is an effective mechanism for Entree to fulfil any obligation under Mongolian law to share with the State up to 34% of Entree’s economic benefit. Entree believes transfer of the licenses to OTLLC, as Manager and owner of an 80% participating interest in the Entree/Oyu Tolgoi JV, is necessary to maximize operational efficiencies and provide certainty with respect to taxes and royalties. Scott added, “Over the last couple of years, all parties have worked extremely diligently to achieve a commercial resolution that will benefit the Oyu Tolgoi project, the State of Mongolia and its people, and the JV partners and other stakeholders. The parties have identified a potential pathway forward, however, any definitive alternative agreement reached between the Company and OTLLC require the approval of the OTLLC board”. Of the nine members of the OTLLC board, six are appointed by Rio Tinto and three are appointed by Erdenes Oyu Tolgoi. Given the importance of the Oyu Tolgoi project to the people of Mongolia, the Company understands OTLLC wants to ensure all board members are supportive before proceeding any further.”