Entrée Resources Reports Updated Feasibility Study for its Interest in the Entrée/Oyu Tolgoi Joint Venture Property

2018-01-15

TSX - Toronto Stock Exchange · Copper · Gold · Silver · Molybdenum · Canada

Canada NewsWire

VANCOUVER, Jan. 15, 2018

Updated Reserve Case NPV(8%) for Hugo North Extension Lift 1 of $111 million(C$139 million*) Preliminary Economic Assessment of alternative development scenario for all three joint venture deposits NPV(8%)of $278 million(C$348 million*)

(All figures are in US dollars unless otherwise noted)

VANCOUVER, Jan. 15, 2018/CNW/ - Entrée Resources Ltd. (TSX:ETG; NYSE American:EGI – the "Company" or "Entrée") is pleased to announce the results of an updated Feasibility Study that was completed on its interest in the Entrée/Oyu Tolgoi joint venture property (the "Entrée/Oyu Tolgoi JV Property"). Entrée has a 20% participating interest in the joint venture (the "Entrée/Oyu Tolgoi JV") with Oyu Tolgoi LLC ("OTLLC") holding the remaining 80% interest. The Entrée/Oyu Tolgoi JV Property comprises a significant portion of the long-life, high-grade Oyu Tolgoi copper-gold mining project in Mongolia. The updated Feasibility Study only reports on mineral resources and reserves attributable to the Entrée/Oyu Tolgoi JV.

The updated Feasibility Study discusses two development scenarios, an updated reserve case (the "2018 Reserve Case") and a Life-of-Mine ("LOM") Preliminary Economic Assessment ("2018 PEA"). The 2018 Reserve Case is based only on mineral reserves attributable to the Entrée/Oyu Tolgoi JV from the first lift ("Lift 1") of the Hugo North Extension underground block cave. Lift 1 of Hugo North (including Hugo North Extension) is currently in development by project operator Rio Tinto, with first development production from Hugo North Extension expected in 2021. When completed, Oyu Tolgoi will become the world's third largest copper mine.

The 2018 PEA is an alternative development scenario completed at a conceptual level that assesses the inclusion of the Hugo North Extension Lift 2 and Heruga deposits into an overall mine plan with Hugo North Extension Lift 1. The 2018 PEA includes Indicated and Inferred resources from Hugo North Extension Lifts 1 and 2, and Inferred resources from Heruga. Significant development and capital decisions will be required for the eventual development of the two additional Entrée/Oyu Tolgoi JV deposits (Hugo North Extension Lift 2 and Heruga) once production commences at Hugo North Extension Lift 1.

LOM highlights of the production and financial results from the 2018 Reserve Case and the 2018 PEA are summarized in Table 1.

| _ converted at USD: CAD exchange rate of 1.2504 (Bank of Canada Noon Rate – January 12, 2018) |

Table 1. Summary LOM Production and Financial Results – Entrée/Oyu Tolgoi JV Property

0.55 g/t Au, 3.72 g/t Ag

(1.93% CuEq) | ---- | | Indicated Resource Feed | | ---- | 113 Mt @ 1.42% Cu,

0.50 g/t Au, 3.63 g/t Ag (1.73% CuEq) | | Inferred Resource Feed | | ---- | 708 Mt @ 0.53% Cu,

0.44 g/t Au, 1.79 g/t Ag

(0.82 % CuEq) | | Copper Recovered | Mlb | 1,115 | 10,497 | | Gold Recovered | koz | 514 | 9,367 | | Silver Recovered | koz | 3,651 | 45,378 | | Entrée Attributable Financial Results | | | | | LOM Cash Flow, pre-tax | US$M | 382 | 2,078 | | NPV(5%), after-tax | US$M | 157 | 512 | | NPV(8%),after-tax | US$M | 111 | 278 | | NPV(10%), after-tax | US$M | 89 | 192 |

| Notes: | | - Long term metal prices used in the net present value ("NPV") economic analyses are: copper $3.00/lb, gold $1,300.00/oz, silver $19.00/oz Mineral reserves and mineral resources are reported on a 100% basis Entrée has a 20% interest in the above processed material and recovered metal The mineral reserves in the 2018 Reserve Case are not additive to the mineral resources in the 2018 PEA Copper equivalent ("CuEq") is calculated as shown in the footnote to Table 7 – Entrée/Oyu Tolgoi JV Property Mineral Resources in this press release |

The economic analysis in the 2018 PEA does not have as high a level of certainty as the 2018 Reserve Case. The 2018 PEA is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the 2018 PEA will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

In both development options (2018 Reserve Case and 2018 PEA) Entrée is only reporting the production and cash flows attributable to the Entrée/Oyu Tolgoi JV Property, not production and cash flows for other Oyu Tolgoi project areas owned 100% by OTLLC. Note the production and cash flows from these two development options are not additive.

Both the 2018 Reserve Case and the 2018 PEA are based on information reported within the 2016 Oyu Tolgoi Feasibility Study ("OTFS16"), completed by OTLLC on the Oyu Tolgoi project (refer to Turquoise Hill Resources press release dated October 21, 2016). OTFS16 discusses the mine plan for Lift 1 of the Hugo North (including Hugo North Extension) underground block cave on both the Oyu Tolgoi mining licence and the Entrée/Oyu Tolgoi JV Property. Rio Tinto is managing the construction and eventual operation of Lift 1 as well as any future development of deposits included in the 2018 PEA.

The results of the 2018 Reserve Case and the 2018 PEA will be summarized by Amec Foster Wheeler Americas Limited ("Amec Foster Wheeler") in a National Instrument ("NI") 43-101 Technical Report that will be filed under the Company's SEDAR profile atwww.sedar.comwithin 45 days of this news release and on the Company's website.

Mr. Stephen Scott, Entrée's President and CEO comments, "It is a rare privilege for a growing company like Entrée to own a significant interest in a project like Oyu Tolgoi, one of the world's most important new copper and gold mines, as we move into the battery revolution. We are extremely pleased with the robust results of both the 2018 Reserve Case and the 2018 PEA, which should help investors understand the tremendous underlying value of Entrée's flagship asset. However, this is not the end of the story, as there is still significant potential for improvement with predicted higher long-term copper prices, increasing demand for copper and the tremendous long-term development optionality of the Oyu Tolgoi project. Completion of this Technical Report enables us to discuss the updated economics of our 2018 Reserve Case, and more importantly, preliminary economics for potential future phases of the Oyu Tolgoi mine, beyond Lift 1, including Hugo North Extension Lift 2 and Heruga, where a significant amount of the Entrée/Oyu Tolgoi JV's mineralization and potential value occurs. At the throughput rate used for the 2018 PEA, the Oyu Tolgoi underground project has an expected mine life of roughly 77 years, which may be extended through future exploration success on the Entrée/Oyu Tolgoi JV Property. Entrée believes that conservative assumptions have been applied in the report, particularly with respect to future mining phases. There is potential for the value of Entrée's share of the Oyu Tolgoi project as reported to increase as more information is confirmed by detailed future work."

Mr. Scott continues, "We are very pleased that OTLLC and Rio Tinto have worked collaboratively with us to provide the underlying data required to develop our Technical Report. We applaud their on-going efforts to advance the Oyu Tolgoi project including the Entrée/Oyu Tolgoi JV Property to where it is today. We also look forward to working with them to deliver further exploration success along the highly prospective Oyu Tolgoi copper porphyry trend and elsewhere on the Entrée/Oyu Tolgoi JV Property. Given the manageable project development risk, low capital risk to production and our strong treasury, Entrée is very well placed to create value for shareholders as underground development continues to advance. In many ways, Entrée's joint venture interest has the characteristics of a royalty or revenue stream with the benefits of a producer."

Entrée/Oyu Tolgoi JV Property

The Entrée/Oyu Tolgoi JV Property comprises a significant portion of the overall Oyu Tolgoi project area, including the Hugo North Extension copper-gold deposit on the Shivee Tolgoi mining licence, the Heruga copper-gold-molybdenum deposit on the Javhlant mining licence and a large prospective land package. Entrée has a 20% participating interest in the Entrée/Oyu Tolgoi JV with OTLLC holding the remaining 80% interest. OTLLC has a 100% interest in other Oyu Tolgoi project areas, including the Oyut open pit, which is currently in production, and the Hugo North and Hugo Southdeposits on the Oyu Tolgoi mining licence.

The area of the Entrée/Oyu Tolgoi JV Project, which includes the Entrée/Oyu Tolgoi JV Property and the Shivee West Property is shown on Figure 1. This figure also shows the main mineral deposits that form the Oyu Tolgoi Trend of porphyry deposits and several priority exploration targets, including Castle Rock and Southwest IP.

Figure 1 – Entrée/Oyu Tolgoi JV Project

| Notes: | Entrée has a 20% carried interest in the Hugo North Extension and Heruga resources and reserves. | | | * Shivee West is subject to a License Fees Agreement between Entrée and OTLLC and may ultimately be included in the Entrée/Oyu Tolgoi JV Property. | | | Outline of mineralization projected to surface |

The Hugo North Extension deposit (Lift 1 and Lift 2)

Figure 2 shows a north-south oriented, west-looking cross section through the 12.4 kilometre-long trend of porphyry deposits that comprise the Oyu Tolgoi project. The Entrée/Oyu Tolgoi JV Property is to the right (north) and left (south) of the central portion, the Oyu Tolgoi mining licence, held 100% by OTLLC. The deposits that are included in the mine plans for the two alternative cases, the 2018 Reserve Case and the 2018 PEA, are shown on Figure 2.

Figure 2 – Cross Section Through the Oyu Tolgoi Trend of Porphyry Deposits

Below are some of the key financial assumptions and outputs from the two alternative cases, the 2018 Reserve Case and the 2018 PEA. All figures shown for both cases are reported on a 100% Entrée/Oyu Tolgoi JV basis, unless otherwise noted, where it is for Entrée's 20% attributable interest. Both cases assume long term metal prices of $3.00/lb copper, $1,300.00/oz gold, and $19.00/oz silver.

2018 Reserve Case Outputs:

Entrée/Oyu Tolgoi JV Property development production from Hugo North Extension Lift 1 starts in 2021 with initial block cave production starting in 2026 14-year mine life (5-years development production and 9-years block cave production; Figure 3) Maximum production rate of approximately 24,000 tonnes per day ("tpd"), which is blended with production from OTLLC's Oyut open pit deposits and Hugo North deposit to reach an average mill throughput of approximately 110,000 tpd Total direct development and sustaining capital expenditures of approximately $262 million($52 millionattributable to Entrée) Entrée LOM average cash cost $1.25/lb payable copper Entrée LOM average cash costs after credits ("C1") $0.56/lb payable copper Entrée LOM average all-in sustaining costs ("AISC") $1.03/lb payable copper

Figure 3 – 2018 Reserve Case (Lift 1) Mine Production

2018 PEA Outputs:

Mineralization mined from the Entrée/Oyu Tolgoi JV Property is blended with production from other deposits on the Oyu Tolgoi mining licence to reach a mill throughput of 110,000 tpd Development schedule assumes for Entrée/Oyu Tolgoi JV Property (refer to Figure 4): Total direct development and sustaining capital expenditures of approximately $8,637 million($1,727 millionattributable to Entrée) Entrée LOM average cash cost $1.97/lb payable copper Entrée LOM average C1 $0.68/lb payable copper Entrée LOM average AISC $1.83/lb payable copper

Figure 4 – 2018 PEA Mine Production

Note, the 2018 PEA and the 2018 Reserve Case are not mutually exclusive; if the 2018 Reserve Case is developed and brought into production, the mineralization from Hugo North Extension Lift 2 and Heruga is not sterilized or reduced in tonnage or grades. Heruga could be a completely standalone underground operation, independent of other Oyu Tolgoi project underground development, and provides considerable flexibility for mine planning and development. Although molybdenum is present in the Heruga deposit (refer to Table 7), the 2018 PEA does not include the construction of a molybdenum circuit for its recovery, but it could be added in the future if economic conditions for molybdenum improve. As noted in the Turquoise Hill Resources press release dated October 21, 2016, there are also potential opportunities for increasing the underground mining rate (and mill throughput), which would require further development and sustaining capital and different operating costs, however it would likely result in Lift 2 and Heruga mineralization being mined earlier in the overall Oyu Tolgoi mine plan and potentially improved economics for Entrée.

Mining Methods

Underground mining on the Entrée/Oyu Tolgoi JV Property (for both the 2018 Reserve Case and the 2018 PEA), is planned to be by large-scale panel caving, which is a variation of block caving. The size, geotechnical characteristics and depth of mineralization at the deposits on the Entrée/Oyu Tolgoi JV Property make block caving the best suited mining method, and although the method has large, early capital investment requirements, it is highly productive and has low operating costs.

The overall Hugo North and Hugo North Extension mine design in OTFS16 for Lift 1 consists of 203 kilometres ("km") of lateral development, five shafts (for access for mining personnel and equipment, for production, and for intake and exhaust ventilation) and a decline tunnel from surface. Of this development, only Shaft 4* (for ventilation) occurs on the Entrée/Oyu Tolgoi JV Property and approximately 16.4 km of lateral development. The caved material will primarily be transported to surface along conveyors in the decline tunnel, however a portion may be hauled to surface through one of the shafts. The underground mine will operate at a nominal 95 ktpd, which will be a blend of mineralization from other Oyu Tolgoi project deposits with mineralization from the Entrée/Oyu Tolgoi JV Property at rates ranging from approximately 300 to 23,000 tpd over the life of the 2018 Reserve Case and at rates ranging from approximately 260 to 92,000 tpd over the 2018 PEA (note these ranges of feed production rates include the years of low-tonnage development production for Lift 1, Lift 2 and Heruga).

The mineral deposits on the Entrée/Oyu Tolgoi JV Property will be developed, operated and processed by Rio Tinto on behalf of OTLLC, the manager of the Entrée/Oyu Tolgoi JV.

Processing and Metallurgy

Various phases of metallurgical testing have been completed on samples of drill core from Hugo North Extension and Heruga. For Hugo North Extension this work has consisted of mineralogical characterization, grindability testing, and batch and locked cycle flotation testing. Locked cycle flotation testing has demonstrated that a conventional flotation flow sheet with moderate grinds, two stages of cleaning, and low reagent additions are able to generate a saleable copper concentrate, with levels of potential penalty elements identified that can be managed through blending or occasional penalty charges. Payable by-product levels of gold and silver are present in the copper concentrates.

| _ *Note: In mid-December 2017 OTLLC notified Entrée the most likely location of Shaft 4 would be moved a short distance south, just within the boundaries of the Oyu Tolgoi mining licence. As of the date of this press release, no engineering plans nor updated capital and operating cost estimates had been provided to Entrée to support this decision and therefore for the purposes of the Technical Report Shaft 4 is still assumed to be on the Entrée/Oyu Tolgoi JV Property. Movement of the shaft will result in lower direct capital costs for the Entrée/Oyu Tolgoi JV in both the 2018 Reserve Case and the 2018 PEA. |

Metallurgical predictions for the three deposits are summarized in Table 2 below.

Table 2. Summary of Entrée/Oyu Tolgoi JV Property Metallurgical Results

| Deposit | Copper Concentrate Grades | Recovery (%) | | | | | | | Cu (%) | Au (g/t) | Ag (g/t) | Cu | Au | Ag | | HNE1,2- Lift 1 Reserve | 31 | 10 | 71 | 90.6 | 82.3 | 87.3 | | HNE1,2- Lift 1 Resource | 31 | 10 | 71 | 91.7 | 83.4 | 88.6 | | HNE1- Lift 2 | 29 | 10 | 76 | 90.5 | 82.2 | 87.2 | | Heruga | 25 | 24 | 87 | 86.2 | 78.6 | 81.9 |

| 1HNE = Hugo North Extension. | | 2Note differences in Lift 1 reserve and resource recoveries are due to differences in the mine production schedule feed rates and grades. |

The process plant is sized at 110,000 tpd of mill feed which will be fed by a mix of mineralization from the Entrée/Oyu Togoi JV Property and from other Oyu Tolgoi project deposits and will consist of conventional SAG mill / ball mill / grinding circuit (SABC) followed by flotation. A fifth ball mill will be added to the current plant to achieve a finer primary grind P80of 150–160 µm for mineralization from Hugo North and Hugo North Extension. Copper concentrate will be bagged on site and trucked to a smelter in China.

Capital and Operating Costs

Under the terms of the Entrée/Oyu Tolgoi JV, OTLLC is responsible for 80% of all costs incurred on the Entrée/Oyu Tolgoi JV Property for the benefit of the Entrée/Oyu Tolgoi JV, including capital expenditures, and Entrée is responsible for the remaining 20%. In accordance with the terms of the Entrée/Oyu Tolgoi JV, Entrée has elected to have OTLLC debt finance Entrée's share of costs for approved programs and budgets, with interest accruing at OTLLC's actual cost of capital or prime +2%, whichever is less, at the date of the advance. Debt repayment may be made in whole or in part from (and only from) 90% of monthly available cash flow arising from the sale of Entrée's share of products. Available cash flow means all net proceeds of sale of Entrée's share of products in a month less Entrée's share of costs of Entrée/Oyu Tolgoi JV activities for the month that are operating costs under Canadian generally-accepted accounting principles.

The following is a description of how Entrée recognizes its share of Oyu Tolgoi project capital costs, specifically, the timing of recognition under the terms of the Entrée/Oyu Tolgoi JV and generally accepted accounting principles.

Under the terms of the Entrée/Oyu Tolgoi JV, any mill, smelter and other processing facilities and related infrastructure will be owned exclusively by OTLLC and not by Entrée. Mill feed from the Entrée/Oyu Tolgoi JV Property will be transported to the concentrator and processed at cost (using industry standards for calculation of cost including an amortization of capital costs). Underground infrastructure on the Oyu Tolgoi mining licence is also owned exclusively by OTLLC, although the Entrée/Oyu Tolgoi JV will eventually share usage once underground development crosses onto the Entrée/Oyu Tolgoi JV Property. As a result of this, Entrée recognizes those capital costs incurred by OTLLC on the Oyu Tolgoi mining licence as an amortization charge for capital costs that will be calculated in accordance with Canadian generally accepted accounting principles determined yearly based on the estimated tonnes of concentrate produced for Entrée's account during that year relative to the estimated total life-of-mine concentrate to be produced (for processing facilities and related infrastructure), or the estimated total life-of-mine tonnes to be milled from the relevant deposit(s) (in the case of underground infrastructure). The charge is made to Entrée's operating account when the Entrée/Oyu Tolgoi JV mine production is actually milled.

For direct capital cost expenditures on the Entrée/Oyu Tolgoi JV Property, Entrée will recognize its proportionate share of costs at the time of actual expenditure.