Entree Gold Secures US$55 Million Financing Package From Sandstorm Gold
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 02/15/13 -- Entree
Gold Inc. (TSX:ETG)(NYSE MKT:EGI)(FRANKFURT:EKA) ("Entree" or the
"Company") announces that it has entered into a comprehensive
financing package with Sandstorm Gold Ltd. (TSX:SSL)(NYSE MKT:SAND)
("Sandstorm") for immediate gross proceeds of approximately US$55
The financing package consists of three key components:
-- Equity participation and funding agreement ("Funding Agreement") that
provides for a US$40 million upfront deposit and ongoing payments from
Sandstorm. In return, Entree will use future payments that it receives
from its mineral property interests to purchase and deliver metal
credits, in amounts that are primarily indexed to Entree's share of gold
and silver by-products and, to a lesser extent, copper production from
the Company's joint venture property in Mongolia
-- CAD$10 million private placement under which Entree will issue
17,857,142 shares to Sandstorm at a price of CAD$0.56 per share
-- US$5 million payment for a 0.4% net smelter return ("NSR") royalty on
the Ann Mason and Blue Hill deposits in Nevada.
-- Multi-faceted financing package from a sophisticated investor with long
-- Endorsement of Entree's assets
-- Total transaction consideration, indexed to a small portion of
Entree's assets, unlocks significant value from the Company's
-- Financing package structured to:
-- Limit shareholder dilution
-- Maintain almost full exposure to the dominant copper component of
-- Retain substantial majority of proceeds from future precious metal
-- Retain corporate flexibility needed to maximize shareholder value
-- Provides sufficient funding to allow for the timely advancement of key
assets and ongoing activities
-- Sustain Mongolian joint venture and operations
-- Advance and enhance the Ann Mason Project, including Ann Mason and
Blue Hill deposits
-- Robust treasury permits Entree to carefully consider further strategic
partnerships and other transactions that would best enhance shareholder
Greg Crowe, President and CEO, noted, "This financing package lays a
solid foundation upon which Entree can further advance its core
properties. The nature of this transaction minimizes shareholder
dilution while allowing the Company to monetize a portion of its
assets. The upfront cash consideration from the funding and royalty
agreements totaling US$45 million, in exchange for a relatively small
portion of our future cash flows, provides an independent third party
valuation of our current deposits. Entree is now in a strong
financial position from which it can meet its ongoing commitments in
Mongolia and continue to advance the Ann Mason Project in Nevada.
We welcome Sandstorm as an investor through this production based
financing and as a shareholder through the equity private placement.
In light of the difficult capital markets environment, a financing
package such as this is an effective solution to providing operating
capital sufficient for the next two to three years."
Details of the Agreements
On or about February 15, 2013 (the "Funding Date"), Sandstorm will
provide a US$40 million deposit to Entree. Entree will then use
future cash flows from its mineral property interests to purchase and
deliver metal credits to Sandstorm's metal account.
Since Entree's first production payments are expected to come from
its joint venture interest in Mongolia, the amount of metal credits
that Entree is required to purchase and deliver to Sandstorm, and the
timing of such deliveries, are determined with reference to Entree's
share of production and receipt of payments from the sale of
production from the joint venture property.
Under the Funding Agreement, Entree will purchase and deliver gold,
silver and copper credits equivalent to:
-- 25.7% and 33.8% of Entree's share of gold and silver by-products
produced from the Heruga and Hugo North Extension deposits,
-- 2.5% of Entree's share of copper produced from the Heruga and Hugo North
In addition to the upfront deposit, Sandstorm will pay to Entree a
purchase price equal to the lesser of the prevailing market price and
US$220 per ounce of gold, US$5 per ounce of silver and US$0.50 per
pound of copper (subject to inflation adjustments), until
approximately 8.6 million ounces of gold, 40.3 million ounces of
silver and 9.1 billion pounds of copper have been produced from the
entire joint venture property. Thereafter, the purchase price will
increase to the lesser of the prevailing market price or US$500 per
ounce of gold, US$10 per ounce of silver and US$1.10 per pound of
copper (subject to inflation adjustments).
This arrangement does not require the delivery of actual metal, and
Entree may use revenue from any of its assets to purchase the
requisite amount of metal credits.
Under the Funding Agreement, Entree has granted to Sandstorm a right
of first refusal, subject to certain exceptions, on future
production-based funding agreements. The Funding Agreement also
contains other customary terms and conditions, including
representations, warranties, covenants and events of default. The
initial term of the Funding Agreement is 50 years, subject to
successive 10-year extensions at the discretion of Sandstorm.
Sandstorm has agreed to purchase 17,857,142 common shares of Entree
(the "Shares") at a price of C$0.56 per Share (the "Purchase Price")
for gross proceeds of C$9,999,999.52. The private placement is
expected to close on or about March 1, 2013.
Rio Tinto International Holdings Limited ("Rio Tinto") has 10
business days in which to notify the Company whether it will exercise
its pre-emptive rights to acquire from treasury, at the Purchase
Price, up to that number of common shares of Entree that will result
in Rio Tinto maintaining its percentage ownership interest in Entree.
Following the completion of the private placement, and before taking
into account any exercise by Rio Tinto of its pre-emptive rights,
Sandstorm will own 12.2% of the issued and outstanding shares of
Entree. The Shares will be subject to a 4-month hold period. The
private placement is subject to Toronto Stock Exchange and NYSE MKT
Sandstorm has agreed that it will vote its Shares as Entree's board
of directors specifies with respect to any proposed acquisition of
the Company, provided the potential acquirer agrees to execute and
deliver to Sandstorm a deed of adherence to the Funding Agreement.
Ann Mason Royalty
Pursuant to a royalty agreement (the "Royalty Agreement") between
Sandstorm and the Company's wholly owned subsidiary M.I.M. (U.S.A.)
Inc., Sandstorm has agreed to purchase a 0.4% NSR royalty on the
future sale of any metals and minerals derived from a portion of the
Ann Mason Project (which includes the Ann Mason and Blue Hill
deposits) in Nevada. Consideration for the royalty is US$5 million
payable on the Funding Date.
In addition, Entree has granted to Sandstorm a right of first refusal
in the event Entree wishes to enter int
o a future royalty or
streaming agreement on the Ann Mason Project.
Upon receipt of proceeds from the financing, the Company plans to
resume exploration activities on its key assets.
The Company anticipates that the funds from this financing will
support operations on the joint venture ground in Mongolia through to
first development production, which is expected as early as 2015.
Future work on Entree's Shivee West property is still under review.
The Company is also considering how best to advance the Ann Mason
deposit towards development, while retaining the flexibility to
evaluate various options, including a strategic partnership on the
Ann Mason Project. The Ann Mason Project hosts significant copper
resources at both the Ann Mason and Blue Hill deposits. The property
covers just over eight thousand hectares and is located in close
proximity to power, water, rail and roadways near Yerington, Nevada.
Several priority targets have been identified for inclusion in future
-- Possible northern extension to the Ann Mason deposit
-- Blackjack induced polarization anomaly
-- Area between the Ann Mason and Blue Hill deposits
-- Additional drilling to expand the Blue Hill oxide and sulphide deposits.
The Company also expects to initiate key baseline environmental
studies, including monitoring well installation, on the Ann Mason
Project area in 2013. Other exploration projects elsewhere in the
United States and Australia are under evaluation.
Entree's exclusive financial advisor in relation to the Funding
Agreement and Royalty Agreement is TD Securities Inc. ("TD
Securities"). TD Securities has provided a fairness opinion to the
board of directors of Entree that, as of the date of such opinion and
based upon and subject to the scope of review, assumptions,
limitations, qualifications and other matters described in such
opinion, the consideration to be received by Entree in connection
with the Funding Agreement and the Royalty Agreement is fair from a
financial point of view, to Entree. Fasken Martineau DuMoulin LLP and
Borden Ladner Gervais LLP acted as legal and tax counsel for Entree,
respectively, in relation to this transaction.
ABOUT ENTREE GOLD INC.
Entree Gold Inc. is a Canadian mineral exploration company balancing
opportunity and risk with key assets in Mongolia and Nevada.
Rio Tinto and Turquoise Hill Resources (formerly Ivanhoe Mines) are
major shareholders of Entree, holding approximately 12.9% and 10.7%
of issued and outstanding shares, respectively. Rio Tinto, through
its majority ownership of Turquoise Hill Resources, beneficially owns
23.6% of Entree's issued and outstanding shares.
This News Release contains forward-looking statements and
forward-looking information (together, "forward-looking statements")
within the meaning of applicable securities laws and the United
States Private Securities Litigation Reform Act of 1995, with respect
to the amount and timing of anticipated future production, the
receipt of payments from the sale of such production, the timing of
funding under the Funding Agreement and the Royalty Agreement, the
closing of the private placement to Sandstorm, Rio Tinto's
pre-emptive rights, the purchase and delivery of metal credits to
Sandstorm and the payment by Sandstorm for such metal credits, future
cash flows, plans for future exploration and/or development programs
and budgets, anticipated business activities, corporate strategies,
uses of funds and future financial performance. In certain cases,
forward-looking statements can be identified by the use of words such
as "plans", "expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates", or
"does not anticipate" or "believes" or variations of such words and
phrases or statements that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be
achieved". While Entree has based these forward-looking statements on
its expectations about future events as at the date that such
statements were prepared, the statements are not a guarantee of
Entree's future performance and are subject to risks, uncertainties,
assumptions and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. Such factors and assumptions include,
amongst others, that the size, grade and continuity of deposits and
resource and reserve estimates have been interpreted correctly from
exploration results; that the prices of copper, gold, silver and
molybdenum and foreign exchange rates will remain relatively stable;
the effects of general economic conditions, including inflation;
future actions by Rio Tinto, Turquoise Hill Resources, joint venture
partners and government authorities including the Government of
Mongolia; the availability of capital; that applicable legislation,
including legislation with respect to mining, foreign investment,
royalties and taxation, will not materially change;; uncertainties
associated with legal proceedings and negotiations; and misjudgements
in the course of preparing forward-looking statements. In addition,
there are also known and unknown risk factors which may cause the
actual results, performances or achievements of Entree to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements.
Such factors include, among others, risks related to international
operations, including legal and political risk in Mongolia; recent
global financial conditions; changes in project parameters and mine
plans as they continue to be refined; increases in capital and
operating costs; joint venture related risks; inability to upgrade
inferred mineral resources to indicated or measured mineral
resources; inability to convert mineral resources to mineral
reserves; conclusions of economic evaluations; future prices of
copper, gold, silver and molybdenum; possible variations in ore
reserves, grade recovery and rates; risks related failure of plant,
equipment or processes to operate as anticipated; accidents, labour
disputes and other risks of the mining industry; delays in obtaining
government approvals, permits or licences or financing or in the
pletion of development or construction activities; environmental
risks; title disputes; limitations on insurance coverage; as well as
those factors described in the Company's Annual Information Form for
the financial year ended December 31, 2011, dated March 29, 2012 and
the Company's most recent Management's Discussion and Analysis filed
with the Canadian Securities Administrators and available at
www.sedar.com. Although the Company has attempted to identify
important factors that could cause actual actions, events or results
to differ materially from those described in forward-looking
statements, there may be other factors that cause actions, events or
results not to be as anticipated, estimated or intended. There can be
no assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ materially
from those anticipated in such statements. Accordingly, readers
should not place undue reliance on forward-looking statements. The
Company is under no obligation to update or alter any forward-looking
statements except as required under applicable securities laws.
Entree Gold Inc.
Manager, Investor Relations
604-687-4777 or Toll Free: 866-368-7330
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