Entre Gold continues to bank in-ground copper assets

Vancouver — Entrée Gold (ETG-T, EGI-N) has amassed an impressive collection of copper resources and reserves in Nevada and Mongolia, but getting it out of the ground may be the rub.  

The company released an updated resource estimate on its 100%-owned Ann Mason copper-molybdenum project at the end of March, which will form the foundation for a preliminary economic assessment (PEA) pegged for release in the third quarter.

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

Entrée has been exploring the Ann Mason project since June 2010. The historic copper deposit was the main target when the company acquired Australian-based PacMag Metals, and the updated resource estimate follows 30,000 metres of new drilling on the site.

“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 30 years,” President and chief executive officer Greg Crowe said in January during a presentation in New York, “And it’s only beginning to see the light of day again following the recent rise in copper prices.”

Ann Mason’s mineralization covers 1.3 km 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 in-fill 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 carrying 0.35% copper from 244 metres depth, 718 metres of 0.37% copper from 314 metres depth, and 570 metres grading 0.38% copper from 484 metres depth.

According to the updated numbers Ann Mason now has indicated resources totalling 1.1 billion tonnes grading 0.35% copper equivalent, containing 8 billion lbs. of copper and 160 million lbs. of 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 lbs. of contained copper and 110 million lbs. of contained moly.

According to Crowe consulting engineers recently conducted a site visit, and the assessment is on schedule for delivery later this year.

“We like the fact 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 with financing the eventual re-ignition of production at the site.”

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

Rio Tinto (RIO-N, RIO-L, RIO-A) holds 13% of the company’s outstanding shares, with Ivanhoe Mines (IVN-T, IVN-N) owning an additional 10%. Rio also holds a first-rights agreement to any future placement that guarantees it maintains a minimum 12% stake.

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

Under the terms of the agreement Entrée retains conditional 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 grading 0.48% copper, and 0.49 gram gold for 9.6 million lbs. contained copper and 14 million oz. contained 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 — 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 to begin until late 2016.

The wait has taken a toll on Entrée’s shareholders, as prices have dropped 58% over the last 52-weeks from highs of $3.07 last March, to a $1.27 close 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 numbers from the two projects, Entrée has total indicated and inferred resources of 12.3 billion oz. of copper equivalent, including 3.5 million oz. contained gold.

According to a report released in early March Entrée retains US$18 million in its treasury, which should carry the company through its PEA phase later this year.

“We think that when you combine the updated resource statement with the preliminary economic assessment 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 JV partners in Mongolia can only help the cause.”