Related Information
From the President & CEO
Dear Shareholders:
It gives me pleasure to update you on recent events and developments at Entrée Gold, of which there are many.
Entrée Gold Inc., as a Canadian-based mineral exploration company, is working to meet the rising global demand for metals such as copper, gold and molybdenum. We are achieving this goal through concerted exploration efforts, the advancement of our main asset at Lookout Hill, Mongolia, and through acquisitions. The recently announced merger with PacMag Metals Limited will complement and enhance our existing stable of projects,
Entrée has assembled a portfolio of highly prospective projects in multiple jurisdictions; including Mongolia, the United States, Canada, China and most recently, Australia. The projects span the development pipeline from grassroots to advanced exploration to pre-production.
We have raised over CAD$100 million since our inception in 2002, and our market capitalization has grown from under CAD$4 million to over CAD$200 million. Our treasury currently stands at approximately CAD$32 million, providing us with ample funds to weather economic uncertainty and develop our diverse portfolio.
Entrée's flagship asset is the Lookout Hill property in southern Mongolia, which surrounds and forms part of the Oyu Tolgoi mining complex currently undergoing rapid development by Rio Tinto and Ivanhoe Mines. Entrée's acquisition of the Lookout Hill property in 2002 was based on its proximity to Oyu Tolgoi, recognizing that the best place to explore for a new discovery is often near a known discovery or a former mine. The discovery of high grade copper-gold mineralization on Lookout Hill in 2005 has resulted in Entrée becoming a partner in one of the most exciting mine development projects of this century.
Entrée and Ivanhoe Mines negotiated an agreement in late 2004, whereby Ivanhoe Mines could become a majority joint-venture partner in a portion of the Lookout Hill property by spending US$35 million on exploration within 8 years. However, with the discovery of rich copper-gold mineralization at Hugo North Extension on Entrée's Lookout Hill property, Ivanhoe accelerated exploration such that the maximum expenditure of US$35 million was made in just over 3 years. Continued aggressive exploration has led to the expansion of Hugo North Extension and to the discovery of the Heruga and Ulaan Khud Deposits also on the joint venture property. Mineralization along the Oyu Tolgoi mineralized trend has now been defined over a strike length in excess of 20 kilometres, with roughly half of the prospective ground located on the Entrée-Ivanhoe joint venture property. Entrée also retains 100% ownership in highly prospective ground covered by the Shivee Tolgoi mining licence (Shivee West) adjoining Oyu Tolgoi to the west.
Plans have recently been outlined in the Ivanhoe Mines Integrated Development Plan (IDP10) to advance the Oyu Tolgoi mining complex to a production stage. Mining of the Hugo North Extension and Heruga deposits are included in this plan, which will include the first Mineral Reserves for Entrée on Hugo North Extension and possible scenarios for Heruga.
The discovery of some of the rich copper-gold intersections on Entrée's Hugo North Extension in 2005 attracted the attention of Rio Tinto. Through a subsequent series of private placements and warrant exercises, Rio Tinto has become our largest shareholder with Ivanhoe Mines being our second largest shareholder. The two companies hold approximately 13% and 12% of our issued and outstanding shares, respectively.
Rio Tinto and Ivanhoe Mines signed an Investment Agreement with the Mongolian government in late 2009, which became effective in March 2010. This established a stable legal, fiscal and regulatory environment for the major investment required in the construction and initial operation of the Oyu Tolgoi mining complex. This investment is expected to exceed US$4 billion. As part of the Investment Agreement, Entrée's Shivee Tolgoi and Javhlant exploration licences were converted to mining licences. All of Javhlant and the eastern portion of Shivee Tolgoi comprise the ground subject to the Entrée-Ivanhoe Joint Venture.
Rio Tinto is also a major shareholder of Ivanhoe Mines, currently holding a 29.6% interest in that company's issued and outstanding shares. Rio has the right to further increase its position up to 46.65%. This will result in an investment into Ivanhoe of approximately US$2.5 billion. Proceeds from this investment will be applied to the development of Oyu Tolgoi. This investment in Ivanhoe Mines demonstrates a major commitment to Mongolia and the Oyu Tolgoi project.
Outside Mongolia, Entrée entered into a partnership with Empirical Discovery LLC in 2007 to explore for porphyry copper and molybdenum mineralization in Arizona and New Mexico. Our discovery of porphyry-style copper-gold mineralization near Lordsburg, NM demonstrates the validity of the exploration concepts employed by Empirical to define a number of prospective target areas. These techniques have also been successful in delineating exploration targets on Entrée's ground immediately north of Freeport McMoran's (formerly Phelps Dodge) past producing Bisbee Mine.
In keeping with our mandate to acquire premium properties that complement our current project portfolio, we now have rights to a substantial land package in the copper porphyry district near Yerington, Nevada. As part of this focus, Entrée completed the acquisition of PacMag Metals Limited in June 2010, via Australian Schemes of Arrangement. The 100% owned Ann Mason deposit acquired through this transaction contains an NI 43-101 compliant inferred resource of over 7 billion pounds of copper. The Ann Mason deposit adds a significant copper-molybdenum resource to our asset base and more than doubles Entrée's existing resource inventory.
In addition to the Ann Mason property, Entrée has also entered into agreements with HoneyBadger Exploration Inc. for the Blackjack Property and Bronco Creek Exploration Inc. (a wholly owned subsidiary of Eurasian Minerals Inc.) for the Roulette Property. Both of these properties are contiguous with the Ann Mason property, creating a large land package that contains a highly prospective group of projects within this underdeveloped, emerging copper camp.
We are also applying our expertise to exploring the Huaixi project in southeastern China, a past producing copper-pyrite mine with potential for hosting buried porphyry copper mineralization. In addition, we recently optioned the Crystal Property through an agreement with Taiga Consultants Ltd. The property is an early-stage copper-molybdenum target located southeast of the producing Endako molybdenum mine in British Columbia, Canada.
Entrée goal is to grow through a combination of organic expansion of resources and external acquisitions. This is being realized with the identification of reserves at Hugo North Extension, the expansion of resources at Heruga and the recent addition of inferred resources at Ann Mason. Entrée now holds close to 1 billion lbs of copper and 500,000 ounces of gold indicated resources at Hugo North Extension plus approximately 2 billion pounds of copper and 2.8 million ounces of gold inferred resources at Heruga in Mongolia. These resources are in addition to 7.1 billion pounds of copper resources identified to date at Ann Mason, Nevada. This gives Entrée significant reserves and resources in two distinct but promising copper camps, putting it firmly on the path to future development. Complementing these advanced projects is a number of our other high quality exploration properties which form a key part of our ongoing growth strategy.
Our shares currently trade on the following exchanges: TSX ("ETG"), NYSE Amex ("EGI") and Frankfurt ("EKA"), giving us exposure to three influential investing communities. A considerable treasury, strong partners, superior exploration properties and world class deposits grant Entrée the depth and stability necessary to succeed and grow, even in challenging economic climates.
I thank you for your interest and hope that you will participate in the continued success of Entrée Gold Inc.
Sincerely,
Gregory G. Crowe
President & CEO
