An anonymous director reports

ENTREE RESOURCES ANNOUNCES THIRD QUARTER 2023 RESULTS

Entree Resources Ltd. has filed its interim financial results for the third quarter ended Sept. 30, 2023. All numbers are in U.S. dollars unless otherwise noted.

Q3 2023 highlights

Oyu Tolgoi underground development update

The Oyu Tolgoi project in Mongolia includes two separate landholdings: the Oyu Tolgoi mining licence, which is held by Entree's joint venture partner Oyu Tolgoi LLC (OTLLC) and the Entree/Oyu Tolgoi joint venture property, which is a partnership between Entree and OTLLC. Rio Tinto owns 66 per cent of OTLLC and is the manager of operations at Oyu Tolgoi:

• On Oct. 17, 2023, Rio Tinto announced it continues to see strong performance from the underground mine, with a total of 72 Lift 1 draw bells opened from Panel 0 on the Oyu Tolgoi mining licence, including 18 draw bells during the quarter ended Sept. 30, 2023. Oyu Tolgoi is set to become the world's fourth-largest copper mine by 2030, with the operation expected to deliver average mined copper production of approximately 500,000 tonnes per annum between 2028 and 2036.
• As at Sept. 30, 2023, construction of conveyor to surface works was approaching 75-per-cent completion. Construction works for the concentrator conversion also progressed during the third quarter, with the main contractor mobilized and required tie-in works completed during a planned plant shutdown.
• Shaft sinking continued during the third quarter of 2023. At the end of September, shafts 3 and 4 reached 780 metres and 879 metres below ground level, respectively. Updated final depths required for shafts 3 and 4 are 1,134 metres and 1,176 metres below ground level, respectively. Rio Tinto continues to expect both shafts to be commissioned in the second half of 2024.

Entree/Oyu Tolgoi joint venture property:

• In the third quarter of 2023, the Entree/Oyu Tolgoi joint venture management committee approved a 2023 infill drill program for Hugo North Extension comprising both underground (12 holes totalling 3,889 metres) and surface (six holes totalling 9,082 metres) diamond drilling. The underground holes are collared from underground drill stations on the Oyu Tolgoi mining licence crossing onto the Entree/Oyu Tolgoi joint venture property. On Oct. 27, 2023, OTLLC advised the company that Lift 2 underground drilling is ahead of schedule, providing OTLLC with an opportunity to accelerate the Lift 2 program by completing additional underground drilling at Hugo North Extension. The company will report further details as they are received. Full results from the 2023 infill program for Hugo North Extension are pending. The principal purpose for the 2023 drilling is to support the Lift 2 order-of-magnitude study and updated resource model.
• In the third quarter of 2023, the Entree/Oyu Tolgoi joint venture management committee also approved a budget of approximately $2,245,000 for exploration on the Entree/Oyu Tolgoi joint venture property, including three inclined diamond drill holes totalling 2,600 metres on the Heruga South and Railway targets (Javhlant licence) and four diamond drill holes totalling 2,600 metres on the Ulaan Khud South target (Shivee Tolgoi licence). On Oct. 27, 2023, OTLLC advised the company all drilling was complete. Full results are pending. Twenty per cent of the exploration expenditures will be contributed by OTLLC on Entree's behalf as a loan in accordance with the joint venture agreement.

Corporate:

• For the three-month and nine-month periods ended Sept. 30, 2023, the company's operating loss was $700,000 and $2.5-million, respectively, compared with $500,000 and $1.8-million, respectively, for the comparative periods in 2022. The increase in the three-month and nine-month periods ended Sept. 30, 2023, was due to legal costs for both commercial negotiations with OTLLC and Rio Tinto and the arbitration proceedings.
• For the three-month and nine-month periods ended Sept. 30, 2023, the company's operating cash outflow before changes in non-cash working capital items was $600,000 and $2.2 million, respectively, compared with $500,000 and $1.8-million, respectively, for the comparative periods in 2022.
• Share purchase warrants to purchase 5,139,000 common shares with an exercise price of 60 cents were exercised, resulting in gross proceeds of $3.1-million (Canadian) being received by the company since Jan. 1, 2023.
• Since January 1, 2023, stock options to purchase 1,000,000 common shares with exercise prices ranging from 55 cents to 77 cents were exercised resulting in gross proceeds of $600,000 (Canadian) being received by the company.
• As at Sept. 30, 2023, the cash balance was $6.9-million and the working capital balance was $6.9-million.
• Effective Oct. 1, 2019, the company voluntarily withdrew its common shares from listing on NYSE American and, on Sept. 5, 2023, the company voluntarily filed a Form 15 with the U.S. Securities and Exchange Commission for the purpose of terminating the registration of the company's common shares under Section 12(g) of the Securities Exchange Act of 1934, as amended, and suspending its reporting obligations under sections 13(a) and 15(d) of the exchange act. The company's shares will continue to trade in Canada on the Toronto Stock Exchange under the symbol ETG and in the United states on the over-the-counter OTCQB Venture Market under the symbol ERLFF.
• The company's primary objective for 2023 is to confirm the transfer of the Shivee Tolgoi and Javhlant mining licences from the company's Mongolian subsidiary to OTLLC as contemplated by the existing Entree/Oyu Tolgoi joint venture agreement. On July 17, 2023, the company announced it has made good progress in its previously disclosed negotiations with OTLLC and Rio Tinto to restructure or amend the existing Entree/Oyu Tolgoi joint venture agreement to streamline the operating environment for both parties and confirm the transfer of the Shivee Tolgoi and Javhlant mining licences to OTLLC. However, several key items still need to be resolved before any definitive agreement could be finalized and executed, including with respect to a potential acquisition by the government of Mongolia of 34 per cent of the company's economic interest in the Entree/Oyu Tolgoi joint venture property.
• While the company remains committed to achieving a commercial resolution with OTLLC and Rio Tinto, the previously announced binding arbitration proceedings commenced by the company on May 26, 2022, to, in part, confirm the transfer of the Shivee Tolgoi and Javhlant mining licences, also continued to progress during the third quarter of 2023. The company is seeking declarations and orders for specific performance relating to certain provisions of the equity participation and earn-in agreement with Turquoise Hill Resources Ltd. dated Oct. 15, 2004, as amended and subsequently assigned to OTLLC and the Entree/Oyu Tolgoi joint venture agreement. Both Turquoise Hill and OTLLC are respondents to the arbitration proceedings. A three-member tribunal has been appointed and a merit hearing is set for April, 2024.

Outlook and strategy

Entree's primary objective is to confirm the transfer of the Shivee Tolgoi and Javhlant mining licences to OTLLC as contemplated by the Entree/Oyu Tolgoi joint venture agreement, either in conjunction with finalization, execution and closing of an agreement with OTLLC to restructure or amend the existing Entree/Oyu Tolgoi joint venture agreement to streamline the operating environment for both parties or enforcement of certain provisions of the earn-in agreement and Entree/Oyu Tolgoi joint venture agreement pursuant to binding arbitration proceedings. The company currently is registered in Mongolia as the 100-per-cent ultimate holder of the licences. The company is also in discussions with Erdenes Oyu Tolgoi LLC (the state-owned company that holds the government's 34-per-cent interest in OTLLC) regarding a potential acquisition by the government of Mongolia of 34 per cent of the company's economic interest in the Entree/Oyu Tolgoi joint venture property. The Minerals Law of Mongolia provides the state may share in up to 34 per cent of the economic benefit derived from exploitation of a mineral deposit of strategic importance where proven reserves were determined through financing sources other than the state budget. The Hugo North Extension copper-gold deposit on the Shivee Tolgoi mining licence and the Heruga copper-gold-molybdenum deposit on the Javhlant mining licence are mineral deposits of strategic importance.

Any definitive agreement reached between the company and OTLLC to restructure or amend the existing Entree/Oyu Tolgoi joint venture agreement would be subject to TSX acceptance and the requirements of Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions, applicable to a related party transaction. There are no assurances that a definitive agreement will be finalized and executed or, if finalized and executed, that the transaction would close.

The company's interim financial statements and management discussion and analysis (MD&A) for the third quarter ended Sept. 30, 2023, are available on the company's website, on SEDAR+ and on OTC Markets.

Qualified person

Robert Cinits, PGeo, consultant to Entree and the company's former vice-president, corporate development, and a qualified person as defined by National Instrument 43-101, Standards of Disclosure for Mineral Projects, has approved the technical information in this release. For further information on the Entree/Oyu Tolgoi joint venture property, see the company's technical report titled "Entree/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report," with an effective date of Oct. 8, 2021, available on the company's website and on SEDAR+.

About Entree Resources Ltd.

Entree Resources is a well-financed Canadian mining company with a unique carried joint venture interest on a significant portion of one of the world's largest copper-gold projects -- the Oyu Tolgoi project in Mongolia. Entree has a 20-per-cent or 30-per-cent carried participating interest in the Entree/Oyu Tolgoi joint venture, depending on the depth of mineralization. Horizon Copper Corp. and Rio Tinto are major shareholders of Entree, beneficially holding approximately 25 per cent and 16 per cent of the shares of the company, respectively.

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