Ivanhoe inks deal with Entre Gold

Vancouver — Ivanhoe Mines (ivn-t) has entered into an agreement with Entre Gold (ETG-V) to explore a portion of the Shivee Tolgoi (Lookout Hill) project in the southern Gobi Desert of Mongolia. The property is adjacent to Ivanhoe’s Oyu Tolgoi (Turquoise Hill) copper-gold deposit.

Ivanhoe can earn up to a 70% interest, through stages, in the section of Shivee Tolgoi by spending US$35 million over eight years. Entre can elect to be carried through to production under the agreement, with costs being recovered by Ivanhoe from production cash flow.

In addition, Ivanhoe will buy 4.6 million units of Entre at $1 apiece. A unit consists of one share and a 2-year warrant exercisable at $1.10 per share. Assuming full exercise of the warrants, Ivanhoe would own 17% of Entre and have the right to keep that interest through participation in any future financings.

The agreement covers the strategic Copper Flats zone, which lies along strike, and just north of, Ivanhoe’s high-grade copper-gold Hugo Dummett zone.

Ivanhoe’s initial-year spending requirement is US$3 million, with US$2.5 million allocated for drilling and the remainder to geophysics. Once it fulfils these obligations, Ivanhoe will gain a long-term option on any of Entre’s surface rights on Shivee Tolgoi.

Entre Gold retains all of the Shivee Tolgoi project not included in this agreement, subject to a right of first refusal to Ivanhoe. Its exploration dollars will now be directed to other gold-copper targets on Shivee Tolgoi, as well as to its Ulziit Uul project in the Kharmagtai area of Mongolia.

Entre Gold has 46.3 million shares outstanding and a market capitalization of $39 million. The stock was recently trading at 85.

Ivanhoe has 292.3 million shares outstanding and a market cap of $2.1 billion. At presstime, the issue was trading in the range of $7.20.