Entre Gold adds to copper assets in Nevada, Mongolia

Entrée Gold (ETG-T, EGI-X) has amassed an impressive collection of copper resources and reserves in Nevada and Mongolia, but getting any of it out of the ground is at least a few years away.

At its fully owned Ann Mason copper-molybdenum project in Nevada at the end of March, the company released an updated resource estimate that will be the foundation for a preliminary economic assessment (PEA) pegged for release in the third quarter. The updated resource estimate follows 30,000 metres of new drilling by Entrée on the site.

Ann Mason is in the historic Yerington district, which contains five known deposits with resources and reserves in excess of 20 billion lbs. copper. The nearby Yerington mine produced over 1.8 billion lbs. copper before its closure in the early 1980s.

Entrée has been exploring Ann Mason since June 2010, with the deposit having been the driver of its acquisition of Australian-based PacMag Metals. 

“It’s an underdeveloped asset insomuch as following its closure by Anaconda Copper in the early 1980s, the property was dormant for much of the last thirty years,” Entrée president and CEO Greg Crowe said during a presentation in New York in January. “And it’s only beginning to see the light of day again following the recent rise in copper prices.”

Ann Mason’s copper-moly mineralization covers 1.3 by 2 km and runs to a depth in excess of 1 km.

“The deposit is already large relative to other copper-porphyry projects around the world,” Crowe commented. “We’ll need to continue to drill before we have a real sense of its ultimate boundaries. The latest results continue to show good grade mineralization to the west. There has really been limited drilling in that direction, and we want to focus on defining the area.”

During recent infill drilling at the western Ann Mason deposit, Entrée reported what it classified as the “best results yet at the site,” which include: 898 metres grading 0.33% copper starting from 132 metres depth, 783 metres of 0.35% copper from 244 metres depth, 718 metres of 0.37% copper from 314 metres depth and 570 metres of 0.38% copper from 484 metres depth.

Ann Mason has an indicated resource totalling 1.1 billion tonnes grading 0.35% copper equivalent, containing 8 billion lbs. copper and 160 million lbs. moly at a 0.2% copper-equivalent cut-off. The project contains additional inferred resources of 1.13 billion tonnes grading 0.31% copper equivalent, or 7.31 billion contained lbs. copper and 110 million contained lbs. moly.

Crowe noted that consulting engineers had recently visited the site, and their assessment is on schedule for delivery later this year. 

“We like that there is no other involvement in the project.” Crowe said. “It’s really a prime opportunity to introduce a senior partner during the development phase in the form of a joint-venture agreement that will help finance the eventual reignition of production at the site.”

And there is certainly no shortage of major copper players with a vested interest in Entrée’s success.

Rio Tinto (RIO-N) and Ivanhoe Mines (IVN-T, IVN-N) hold 13% and 10%, respectively, of Entrée’s shares, with Rio also holding a first-rights agreement to future placements that guarantee it can maintain a minimum 12% stake. 

Entrée is a 20% partner in a joint-venture agreement with Ivanhoe on a portion of the Oyu Tolgoi copper-gold mine in Mongolia. Construction on the project is reportedly 75% complete, with production to start by early 2013. 

Entrée retains rights to gold and copper production from its Heruga, Hugo North and Shivee West deposits, which have a combined inferred resource of 910 million tonnes of 0.48% copper and 0.49 gram gold, for  a contained 9.6 million contained lbs. copper and 14 million  oz. gold. 

“We have some of the richest mineralization on the property,” Crowe said. “The bulk of Ivanhoe’s southern deposits average around that one-percent copper range. Well, in the Hugo North extension, we’ve hit drill intercepts as high as four percent. So it’s a strong asset going forward.”

The current development plan has Ivanhoe initiating underground operations at Oyu Tolgoi in 2014, with expansion into Entrée’s Hugo North extension not expected until late 2016. 

The wait has taken a toll on Entrée’s shareholders, as the share price has dropped 58% over the last 52 weeks from highs of $3.07 last March, to $1.27 at presstime. 

“We continue to see grounds for increasing copper demand,” Crowe said. “We foresee some serious upcoming shortages in the next few years that will drive production, and once the current economic turmoil passes, we think we’ll see shares rebound.”

Combining the two projects, Entrée has total indicated and inferred resources of 12.3 billion oz. copper equivalent, including 3.5 million contained oz. gold. 

As of early March, Entrée had US$18 million in its treasury, which should carry the company through its PEA phase this year at Ann Mason.

“We think that when you combine the updated resource statement with the PEA later this year in Nevada, we’ll be in a very strong position to acquire any additional financing,” Crowe said. “Further development progress by our joint-venture partners in Mongolia can only help the cause.”