Hallgarten & Company
Entrée Gold (EGI) is, in our view, strongly undervalued in light of the potential for the likely sale of its Mongolian assets to its deep-pocketed partner Ivanhoe Mines (or “partner-in-law,” Rio Tinto). Our recent trip to visit the Nevada assets was eye opening for the sheer size of the district and “prospectivity” to uncover massive copper deposits. The company seriously views the potential to get one or more of its deposits in Nevada into production.
The very name Entrée Gold is somewhat of a misnomer as the company’s focus is mainly copper and becoming more so. The company is a Canadian mineral exploration company focused on the exploration and development of copper and gold prospects.
Its flagship Lookout Hill property in Mongolia completely surrounds the 8,500-hectare Oyu Tolgoi project of Ivanhoe Mines. A portion of the Lookout Hill property is subject to a joint venture with Ivanhoe Mines, through its subsidiary Oyu Tolgoi LLC. The joint venture property hosts the Hugo North Extension copper-gold deposit and the Heruga copper-goldmolybdenum deposit.
Meanwhile, in North America, Entree is exploring for porphyry-related copper systems in Nevada, Arizona and New Mexico. The primary asset in Nevada is the Ann Mason property, which contains an inferred mineral resource and considerable potential for additional targets.
Entrée optioned two contiguous properties to Ann Mason, Blackjack and Roulette, through agreements with Honey Badger Exploration Ltd. and Bronco Creek Exploration Inc. The Ann Mason deposit adjoins several past-producing copper properties of substantial size so consolidation of the district is a theme that the company espouses. The company has heavyweight shareholders in the form of Rio Tinto and Ivanhoe Mines, holding approximately 13% and 12% of issued and outstanding shares, respectively.
Exeter Resource Corp. (XRA) announced it is evaluating a new development strategy for its Caspiche (100%) gold/copper project in Chile. The company is now assessing open pit mining of the near surface oxide zone and subsequent underground mining of the central, high grade portion of the underlying sulphide deposit. The company expects to announce the scheduling of formal economic studies in Q1’14.
We believe the new development strategy may provide an option for the company to independently advance the project into production, with a scaleable mine plan that would substantially lower upfront capex requirements (compared to the January 2012 financial statement). The new approach is to consider both a standalone open pit oxide operation as well as a similar operation that would then include underground mining of the central high grade core of the sulphide deposit.
Additional details are expected to be released in Q1’14. In the interim, we expect the company to provide an update on water exploration activities at Caspiche next quarter, along with drill results from the La Buena exploration property by year-end. We note the company currently has $43 million in its treasury, more than sufficient in our view to support its current exploration and development program at Caspiche and cover its relatively small spending commitments in Mexico.