EnviTec Biogas
Annual Report 2017

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 40-F (cid:134) (cid:95)(cid:3) REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 OR ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017 Commission file number: 001-32570 ENTRÉE RESOURCES LTD. (Exact Name of Registrant as Specified in its Charter) British Columbia (Province or other jurisdiction of incorporation or organization) 1040 (Primary Standard Industrial Classification Code) N/A (I.R.S. Employer Identification No.) Suite 1650 – 1066 West Hastings Street Vancouver, British Columbia, Canada V6E 3X1 (604) 687-4777 (Address and Telephone Number of Registrant’s Principal Executive Offices) National Registered Agents, Inc. 1090 Vermont Avenue NW, Suite 910 Washington, DC 20005 (888) 505-5229 (Name, address (including zip code) and telephone number (including area code) of agent for service in the United States) Copies to: Kenneth G. Sam Dorsey & Whitney LLP 1400 Wewatta Street, Suite 400 Denver, Colorado 80202 (303) 629-3400 Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of Each Class: Name of Each Exchange On Which Registered: Common Shares, no par value NYSE American Securities registered or to be registered pursuant to Section 12(g) of the Act: N/A Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: N/A For annual reports, indicate by check mark the information filed with this form: Annual Information Form Audited Annual Financial Statements Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: As at December 31, 2017, 173,573,572 common shares of the Registrant were issued and outstanding. Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the file number assigned to the Registrant in connection with such Rule. Yes No Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act. If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. Emerging growth company 2 EXPLANATORY NOTE Entrée Resources Ltd. (the “Company” or the “Registrant”) is a Canadian issuer eligible to file its annual report pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on Form 40-F pursuant to the multi-jurisdictional disclosure system of the Exchange Act. The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act. The equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3. FORWARD-LOOKING STATEMENTS This annual report on Form 40-F and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned exploration and development of its properties, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Forward-looking statements include, but are not limited to, the future price of copper, gold, silver and molybdenum, the estimation of mineral reserves and resources, the realization of mineral reserve and resource estimates, the timing and amount of estimated future production, costs of production, capital expenditures, cost and timing of the development of new deposits, success of exploration activities, permitting time lines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. 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 the Company has based these forward-looking statements on its expectations about future events as at the date that such statements were prepared, the forward-looking statements are not a guarantee of the Company’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, among others, risks related to international operations, including legal and political risk in Mongolia; risks associated with changes in the attitudes of governments to foreign investment; risks associated with the conduct of joint ventures; discrepancies between actual and anticipated production, mineral reserves and resources and metallurgical recoveries; global financial conditions; changes in project parameters as plans continue to be refined; 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; 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 completion of development or construction activities; environmental risks; title disputes; limitations on insurance coverage, as well as those factors discussed in the section entitled “Risk Factors” in the Company’s Annual Information Form (“AIF”), filed as Exhibit 99.1 to this annual report on Form 40-F and incorporated herein by reference. 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. Except as required under applicable 1 securities legislation, the Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements. NOTE TO UNITED STATES READERS DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES The Company is permitted, under the multi-jurisdictional disclosure system adopted by the United States Securities and Exchange Commission (the “SEC” or “Commission”), to prepare this annual report in accordance with Canadian disclosure requirements, which differ from those of the United States. RESOURCE AND RESERVE ESTIMATES The Company’s AIF, filed as Exhibit 99.1 to this annual report on Form 40-F and management’s discussion and analysis for the fiscal year ended December 31, 2017 filed as Exhibit 99.3 to this annual report on Form 40-F have been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws. The terms “mineral reserve”, “Proven mineral reserve” and “Probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in SEC Industry Guide 7 under the United States Securities Act of 1933, as amended (the “Securities Act”). Under SEC Industry Guide 7 standards, a “final” or “bankable” Feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. In addition, the terms “mineral resource”, “Measured mineral resource”, “Indicated mineral resource” and “Inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred mineral resources may not form the basis of Feasibility or Pre-Feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an Inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures. Accordingly, information contained in this annual report and the documents incorporated by reference herein contain descriptions of the Company’s mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder. CURRENCY Unless otherwise indicated, all dollar amounts in this annual report on Form 40-F are in United States dollars. The exchange rate of Canadian dollars into United States dollars, on December 29, 2017, based upon the daily average exchange rate as quoted by the Bank of Canada was U.S.$1.00 = Cdn.$1.2545. 2 ANNUAL INFORMATION FORM The Company’s AIF for the fiscal year ended December 31, 2017 is filed as Exhibit 99.1 and incorporated by reference in this annual report on Form 40-F. AUDITED ANNUAL FINANCIAL STATEMENTS The audited consolidated financial statements of the Company for the years ended December 31, 2017, 2016 and 2015, including the report of the independent auditor with respect thereto, are filed as Exhibit 99.2 and incorporated by reference in this annual report on Form 40-F. MANAGEMENT’S DISCUSSION AND ANALYSIS The Company’s management’s discussion and analysis (“MD&A”) is filed as Exhibit 99.3 and incorporated by reference in this annual report on Form 40-F. Purchasing, holding, or disposing of the Company’s securities may have tax consequences under the laws of the United States and Canada that are not described in this annual report on Form 40-F. TAX MATTERS CONTROLS AND PROCEDURES Disclosure Controls and Procedures At the end of the period covered by this annual report for the fiscal year ended December 31, 2017, an evaluation was carried out under the supervision of, and with the participation of, the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, the Company’s CEO and CFO have concluded that the disclosure controls and procedures were effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting The Company’s management, including the Company's CEO and CFO, is responsible for establishing and maintaining adequate internal control over the Company's internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. The Company's internal control over financial reporting includes policies and procedures that: pertain to the maintenance of records that, in reasonable detail accurately and fairly reflect the transactions and disposition of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with U.S. GAAP and that receipts and expenditures are being made only in accordance with authorization of management and directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. 3 Because of their inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company's management (with the participation of the CEO and the CFO) conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2017. This evaluation was based on the criteria set forth in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, management has concluded that the Company's internal control over financial reporting was effective as at December 31, 2017, and management's assessment did not identify any material weaknesses. Auditor’s Attestation Report This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), which permits the Company to provide only management’s report in this annual report. The Dodd-Frank Act permits a “non-accelerated filer” to provide only management's report on internal control over financial reporting in an annual report and omit an attestation report of the issuer's registered public accounting firm regarding management's report on internal control over financial reporting. Changes in Internal Control over Financial Reporting There have been no changes in the Company’s internal control over financial reporting during its fiscal year ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. CORPORATE GOVERNANCE The Company’s Board of Directors (the “Board”) is responsible for the Company’s Corporate Governance policies and has a separately designated standing Compensation Committee, Corporate Governance and Nominating Committee, Audit Committee, and Technical Committee. The Board has determined that all the members of the Compensation Committee, Corporate Governance and Nominating Committee, and Audit Committee are independent, based on the criteria for independence and unrelatedness prescribed by section 803A of the NYSE American Company Guide. Compensation Committee The primary objective of the Compensation Committee is to discharge the Board’s responsibilities relating to compensation and benefits of the executive officers and directors of the Company to ensure that such compensation realistically reflects the responsibilities and risks of such positions. In addition, the Compensation Committee makes recommendations for grants made under the Company’s Stock Option Plan, determines the recipients of, and the nature and size of share compensation awards granted from time to time, and determines any bonuses to be awarded from time to time. The Company’s Compensation Committee is comprised of Mark Bailey (chair), Alan Edwards and James Harris. The Company’s CEO cannot be present during the Compensation Committee’s deliberations or vote. Corporate Governance and Nominating Committee The Corporate Governance and Nominating Committee: (1) assists the Board, on an annual basis, by identifying individuals qualified to become Board members, and recommends to the Board the director 4 nominees for the next annual meeting of shareholders; (2) assists the Board in the event of any vacancy on the Board by identifying individuals qualified to become Board members, and recommends to the Board qualified individuals to fill any such vacancy; and (3) recommends to the Board, on an annual basis, director nominees for each Board committee. The members of the Corporate Governance and Nominating Committee are James L. Harris (chair), Alan Edwards and Anna Stylianides. Technical Committee The Technical Committee consists of Alan Edwards (chair), Mark Bailey and Stephen Scott. In the judgement of the Board, Mr. Edwards and Mr. Bailey are independent directors. Mr. Scott is not independent, by virtue of the fact that he is the President and Chief Executive Officer of the Company. The mandate of the Technical Committee is to exercise all the powers of the Board (except those powers specifically reserved by law to the Board itself) during intervals between meetings of the Board pertaining to the Company’s mining properties, programs, budgets, and other related activities and the administration thereof. AUDIT COMMITTEE The Company has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Company’s Audit Committee is comprised of Anna Stylianides (chair), Mark Bailey and James Harris. In the opinion of the Company’s Board, all members of the Audit Committee are independent (as determined under Rule 10A-3 of the Exchange Act and section 803A of the NYSE American Company Guide) and are financially literate. Additionally, the Audit Committee meets the composition requirements set forth by section 803(B)(2) of the NYSE American Company Guide. The members of the Audit Committee are appointed or reappointed on an annual basis by the Board. The Audit Committee meets with the President, the CEO, the CFO and the Company’s independent auditors to review and inquire into matters affecting financial reporting, the system of internal accounting and financial controls, as well as audit procedures and audit plans. The Audit Committee also recommends to the Board which independent registered public auditing firm should be appointed by the Company. In addition, the Audit Committee reviews and recommends to the Board for approval the annual financial statements, the MD&A, and undertakes other activities required by exchanges on which the Company’s securities are listed and by regulatory authorities to which the Company is held responsible. The full text of the Company’s Audit Committee Charter is attached to the Company’s AIF, filed as an appendix and incorporated by reference in this annual report on Form 40-F. Audit Committee Financial Expert The Company’s Board has determined that Anna Stylianides qualifies as a financial expert (as defined in Item 407(d)(5) of Regulation S-K under the Exchange Act), is financially sophisticated, as determined in accordance with Section 803B(2)(iii) of the NYSE American Company Guide, and is independent (as determined under Exchange Act Rule 10A-3 and section 803A of the NYSE American Company Guide). PRINCIPAL ACCOUNTING FEES AND SERVICES – INDEPENDENT AUDITORS The following table shows the aggregate fees billed to the Company by Davidson & Company LLP and its affiliates, Chartered Professional Accountants, the Company’s independent registered public auditing firm, in each of the last two years. 5 Audit Fees(1) Audit Related Fees(2) Tax Fees(3) All other fees Total: 2017 (US$) $34,485 $24,173 $Nil $Nil $58,658 2016 (US$) $37,820 $Nil $Nil $Nil $37,820 (1) Audits of the Company’s consolidated financial statements, meetings with the Audit Committee and management with respect to annual filings, consulting and accounting standards and transactions, issuance of consent in connection with Canadian and United States securities filings. (2) Audit-related fees paid for assurance and related services by the auditors that were reasonably related to the performance of the audit or the review of the Company’s quarterly financial statements that are not included in Audit Fees. (3) Tax compliance, taxation advice and tax planning for international operations. PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES PROVIDED BY INDEPENDENT AUDITORS The Audit Committee pre-approves all audit services to be provided to the Company by its independent auditors. Non-audit services that are prohibited to be provided to the Company by its independent auditors may not be pre-approved. In addition, prior to the granting of any pre-approval, the Audit Committee must be satisfied that the performance of the services in question will not compromise the independence of the independent auditors. All non-audit services performed by the Company’s auditor for the fiscal year ended December 31, 2017 were pre-approved by the Audit Committee of the Company. No non-audit services were approved pursuant to the de minimis exemption to the pre-approval requirement. OFF-BALANCE SHEET TRANSACTIONS The Company does not have any off-balance sheet financing arrangements or relationships with unconsolidated special purpose entities. CODE OF ETHICS The Company has adopted a Code of Business Conduct and Ethics (the “Code”) for all of the Company’s stakeholders, including the Chief Executive Officer, Chief Financial Officer and Controller. The Code addresses general business ethical principles, conflicts of interest, special ethical obligations for employees with financial reporting responsibilities, insider trading laws, reporting of any unlawful or unethical conduct, anti-corruption measures, political contributions and other relevant issues. The Code applies to the Company as well as any joint venture controlled by the Company. A copy of the Code is available to any person, without charge, by written request to the Company at its principal executive office, located at Suite 1650 – 1066 West Hastings Street, Vancouver, British Columbia, Canada V6E 3X1. The Code is also available on the Company’s website at www.EntreeResourcesLtd.com. The Code meets the requirements for a “code of ethics” within the meaning of that term in General Instruction 9(b) of the Form 40-F. All amendments to the Code, and all waivers of the Code with respect to any of the officers covered by it, will be posted on the Company’s website, www.EntreeResourcesLtd.com within five business days of the amendment or waiver and provided in print to any shareholder who requests them. On December 6, 2017, the Company updated the Code. However, during the fiscal year ended December 31, 2017, the Company did not substantively amend, waive or implicitly waive any provision of the Code with respect to any of the directors, executive officers or employees subject to it. 6 CONTRACTUAL OBLIGATIONS The required tabular disclosure is included under the heading “Liquidity and Capital Resources – Contractual Obligations” in the Company’s MD&A for the fiscal year ended December 31, 2017, filed as Exhibit 99.3 to this annual report on Form 40-F and is incorporated herein by reference. NOTICES PURSUANT TO REGULATION BTR There were no notices required by Rule 104 of Regulation BTR that the Registrant sent during the year ended December 31, 2017 concerning any equity security subject to a blackout period under Rule 101 of Regulation BTR. NYSE AMERICAN CORPORATE GOVERNANCE The Company’s common shares are listed on the NYSE American. Section 110 of the NYSE American Company Guide permits the NYSE American to consider the laws, customs and practices of foreign issuers in relaxing certain NYSE American listing criteria, and to grant exemptions from NYSE American listing criteria based on these considerations. A company seeking relief under these provisions is required to provide written certification from independent local counsel that the non-complying practice is not prohibited by home country law. A description of the significant ways in which the Company’s governance practices differ from those followed by domestic companies pursuant to NYSE American standards is as follows: Shareholder Meeting Quorum Requirement: The NYSE American minimum quorum requirement for a shareholder meeting is one-third of the outstanding shares of common stock. In addition, a company listed on the NYSE American is required to state its quorum requirement in its bylaws. The Company’s quorum requirement is set forth in its Memorandum and Articles. A quorum for a meeting of members of the Company is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the shares entitled to be voted at the meeting. Proxy Delivery Requirement: The NYSE American requires the solicitation of proxies and delivery of proxy statements for all shareholder meetings, and requires that these proxies shall be solicited pursuant to a proxy statement that conforms to SEC proxy rules. The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act, and the equity securities of the Company are accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange Act. The Company solicits proxies in accordance with applicable rules and regulations in Canada. Shareholder Approval of Certain Transactions: The NYSE American Company Guide requires shareholder approval in connection with the establishment of an equity compensation arrangement pursuant to which options or stock may be acquired by officers, directors, employees, or consultants of a company. The Company will follow the shareholder approval requirements of the Toronto Stock Exchange in connection with the establishment of equity compensation arrangements pursuant to which its officers, directors, employees, or consultants may acquire options or common shares. Compensation Committee Requirements: The NYSE American Company Guide requires that additional independence criteria be applied to each member of the Compensation Committee. The NYSE American Company Guide also mandates that the Compensation Committee must have the authority to hire compensation consultants, independent legal counsel and other compensation advisors and exercise the sole responsibility to oversee the work of any compensation advisors retained to advise the Compensation Committee. In addition, before engaging a compensation 7 advisor, the Compensation Committee must consider at least six factors that could potentially impact compensation advisor independence. The Company follows Canadian Securities Administrators and Toronto Stock Exchange requirements for Compensation Committee charters, independence and authority. The Compensation Committee's Charter includes a requirement that each member of the Compensation Committee be independent and that the Compensation Committee have the authority to retain outside advisors and determine the extent of funding necessary for payment of consultants. The foregoing are consistent with the laws, customs and practices in Canada. In addition, the Company may from time-to-time seek relief from NYSE American corporate governance requirements on specific transactions under Section 110 of the NYSE American Company Guide by providing written certification from independent local counsel that the non-complying practice is not prohibited by the Company’s home country law, in which case, the Company shall make the disclosure of such transactions available on the Company’s website at www.EntreeResourcesLtd.com. Information contained on its website is not part of this annual report. MINE SAFETY DISCLOSURE Pursuant to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the fiscal year ended December 31, 2017, the Company had no such specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events in relation to the Company’s United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act. UNDERTAKING The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities. CONSENT TO SERVICE OF PROCESS The Company filed an Appointment of Agent for Service of Process and Undertaking on Form F-X with the SEC on Form 10-SB on October 12, 2004, with respect to the class of securities in relation to which the obligation to file this annual report on Form 40-F arises. The following exhibits have been filed as part of the annual report on Form 40-F: EXHIBIT INDEX Exhibit Description Annual Information 99.1. 99.2. Annual Information Form of the Company for the year ended December 31, 2017 The following audited consolidated financial statements of the Company, are exhibits to and form a part of this annual report: 8 Independent Registered Public Accounting Firm’s Report on Consolidated Financial Statements Consolidated Statements of Comprehensive Loss for the years ended December 31, 2017, 2016 and 2015 Consolidated Balance Sheets as of December 31, 2017 and 2016 Consolidated Statement of Stockholders’ Deficiency for the years ended December 31, 2017, 2016 and 2015 Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015 Notes to Consolidated Financial Statements 99.3. Management Discussion and Analysis for the year ended December 31, 2017 Certifications 99.4. 99.5. 99.6. 99.7. Consents 99.8 99.9 99.10 99.11 99.12 Certificate of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act Certificate of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act Certificate of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Certificate of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Consent of Davidson & Company LLP, Chartered Professional Accountants Consent of Amec Foster Wheeler Americas Limited Consent of Ian Loomis Consent of Peter Oshust Consent of Robert Cinits 9 SIGNATURES Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized. ENTRÉE RESOURCES LTD. By: /S/Stephen Scott Name: Stephen Scott Title: Chief Executive Officer Date: March 9, 2018 10 Exhibit 99.1 1 ENTRÉE RESOURCES LTD. Annual Information Form FOR THE YEAR ENDED DECEMBER 31, 2017 DATED March 8, 2018 2 TABLE OF CONTENTS DATE OF INFORMATION, DEFINED TERMS AND ABBREVIATIONS .........................................................4 FORWARD LOOKING STATEMENT .......................................................................................................4 CURRENCY AND EXCHANGE ................................................................................................................6 CANADIAN DISCLOSURE STANDARDS FOR MINERAL RESOURCES AND MINERAL RESERVES ..................6 CORPORATE STRUCTURE ....................................................................................................................6 NAME, ADDRESS AND INCORPORATION ....................................................................................................................... 6 INTERCORPORATE RELATIONSHIPS .............................................................................................................................. 9 GENERAL DEVELOPMENT OF THE BUSINESS ........................................................................................9 THREE YEAR HISTORY ............................................................................................................................................ 13 DESCRIPTION OF THE BUSINESS ........................................................................................................ 17 MINERAL RESOURCE BUSINESS ................................................................................................................................ 17 BUSINESS OF ENTRÉE ............................................................................................................................................. 17 TURQUOISE HILL, RIO TINTO AND OTLLC .................................................................................................................. 20 AGREEMENTS WITH SANDSTORM ............................................................................................................................. 26 NON-BROKERED PRIVATE PLACEMENT ...................................................................................................................... 28 ARRANGEMENT .................................................................................................................................................... 28 ENVIRONMENTAL COMPLIANCE................................................................................................................................ 29 COMPETITION ...................................................................................................................................................... 29 SPECIALIZED SKILLS AND KNOWLEDGE ....................................................................................................................... 29 BUSINESS CYCLES .................................................................................................................................................. 29 ECONOMIC DEPENDENCE ........................................................................................................................................ 30 FOREIGN OPERATIONS ........................................................................................................................................... 30 EMPLOYEES ......................................................................................................................................................... 30 MATERIAL MINERAL PROPERTY ........................................................................................................ 30 ENTRÉE/OYU TOLGOI JV PROJECT, MONGOLIA ........................................................................................................... 30 INTRODUCTION .................................................................................................................................................... 30 PROJECT AREA ..................................................................................................................................................... 31 MINERAL TENURE, ROYALTIES AND AGREEMENTS ........................................................................................................ 32 GEOLOGY AND MINERALIZATION .............................................................................................................................. 34 HISTORY ............................................................................................................................................................. 35 DRILLING AND SAMPLING ....................................................................................................................................... 35 DATA VERIFICATION .............................................................................................................................................. 37 METALLURGICAL TESTWORK.................................................................................................................................... 37 MINERAL RESOURCE ESTIMATION ............................................................................................................................ 38 MINERAL RESOURCE STATEMENT ............................................................................................................................. 40 MINERAL RESERVE ESTIMATION ............................................................................................................................... 42 MINERAL RESERVE STATEMENT ............................................................................................................................... 42 MINING METHODS ............................................................................................................................................... 43 RECOVERY METHODS ............................................................................................................................................ 45 PROJECT INFRASTRUCTURE ...................................................................................................................................... 46 ENVIRONMENTAL, PERMITTING AND SOCIAL CONSIDERATIONS ....................................................................................... 46 MARKETS AND CONTRACTS ..................................................................................................................................... 48 CAPITAL COST ESTIMATES ....................................................................................................................................... 49 3 OPERATING COST ESTIMATES .................................................................................................................................. 50 ECONOMIC ANALYSIS – 2018 RESERVE CASE .............................................................................................................. 51 SENSITIVITY ANALYSIS – 2018 RESERVE CASE ............................................................................................................. 54 PRELIMINARY ECONOMIC ASSESSMENT...................................................................................................................... 54 RECOMMENDATIONS ............................................................................................................................................. 62 NON-MATERIAL PROPERTIES ............................................................................................................ 63 RISK FACTORS .................................................................................................................................. 64 DIVIDENDS....................................................................................................................................... 80 CAPITAL STRUCTURE ........................................................................................................................ 80 MARKET FOR SECURITIES ................................................................................................................. 80 ESCROWED SECURITIES .................................................................................................................... 83 DIRECTORS AND OFFICERS ............................................................................................................... 83 PROMOTERS .................................................................................................................................... 89 LEGAL PROCEEDINGS AND REGULATORY ACTIONS ............................................................................ 89 INTEREST IN MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS .......................................... 90 TRANSFER AGENTS AND REGISTRARS ............................................................................................... 92 MATERIAL CONTRACTS .................................................................................................................... 92 INTEREST OF EXPERTS ...................................................................................................................... 92 ADDITIONAL INFORMATION ............................................................................................................. 93 APPENDIX ENTRÉE RESOURCES LTD. ANNUAL INFORMATION FORM 4 DATE OF INFORMATION, DEFINED TERMS AND ABBREVIATIONS Unless otherwise specified in this Annual Information Form (the “AIF”), the information herein is presented as at December 31, 2017, the last date of the Company’s most recently completed financial year. As used in this AIF, the term the “Company” refers only to Entrée Resources Ltd. The term “Entrée” may include, collectively or individually, one or more of the direct or indirect subsidiaries of Entrée Resources Ltd. FORWARD LOOKING STATEMENT This AIF contains “forward-looking statements” and “forward looking information” (together the “forward looking statements”) within the meaning of securities legislation and the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date of this AIF and the Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable securities laws. Forward-looking statements include, but are not limited to, statements with respect to corporate strategies and plans; requirements for additional capital; uses of funds; the value and potential value of assets and the ability of the Company to maximize returns to shareholders; potential types of mining operations; construction and continued development of the Oyu Tolgoi underground mine; the expected timing of first development production from Lift 1 of the Entrée/Oyu Tolgoi joint venture property; anticipated future production and mine life; the future prices of copper, gold, molybdenum and silver; the estimation of mineral reserves and resources; the realization of mineral reserve and resource estimates; projected mining and process recovery rates; anticipated future production, capital and operating costs, cash flows and mine life; capital, financing and project development risk; mining dilution; closure costs and requirements; discussions with the Government of Mongolia, Rio Tinto, Oyu Tolgoi LLC and Turquoise Hill Resources Ltd. on a range of issues including Entrée’s interest in the Entrée/Oyu Tolgoi joint venture property, the Shivee Tolgoi and Javhlant mining licences and certain material agreements; potential actions by the Government of Mongolia with respect to the Shivee Tolgoi and Javhlant mining licences and Entrée’s interest in the Entrée/Oyu Tolgoi joint venture property; the potential for Entrée to be included in or otherwise receive the benefits of the Oyu Tolgoi Investment Agreement or another similar agreement; the potential for the Government of Mongolia to seek to directly or indirectly invest in Entrée’s interest in the Hugo North Extension and Heruga deposits; the potential application of the Government of Mongolia’s Resolution 81, Resolution 140 and Resolution 175 to the Shivee Tolgoi and Javhlant licences; potential size of a mineralized zone; potential expansion of mineralization; potential discovery of new mineralized zones; potential metallurgical recoveries and grades; plans for future exploration and/or development programs and budgets; permitting time lines; anticipated business activities; proposed acquisitions and dispositions of assets; and future financial performance. In certain cases, forward-looking statements and information can be identified by words such as "plans", "expects" or "does not expect", "is expected", "budgeted", "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", "will be taken", "occur" or "be achieved". While the Company 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 Entrée’s future performance and are based on numerous assumptions regarding present and future business strategies, local and global economic conditions, legal proceedings and negotiations and the environment in which Entrée will operate in the future, including the price of copper, gold, silver and molybdenum, and the status of Entrée’s relationship and interaction with the 5 Government of Mongolia, Oyu Tolgoi LLC, Rio Tinto and Turquoise Hill Resources Ltd. With respect to the construction and continued development of the Oyu Tolgoi underground mine, important risks, uncertainties and factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements and information include, amongst others, the timing and cost of the construction and expansion of mining and processing facilities; the timing and availability of a long term power source for the Oyu Tolgoi underground mine; the ability of Oyu Tolgoi LLC to draw down on the supplemental debt under the Oyu Tolgoi project finance facility and the availability of additional financing on terms reasonably acceptable to Oyu Tolgoi LLC, Turquoise Hill Resources Ltd. and Rio Tinto to further develop Oyu Tolgoi; delays, and the costs which would result from delays, in the development of the underground mine; projected copper, gold, silver and molybdenum prices and demand; and production estimates and the anticipated yearly production of copper, gold, silver and molybdenum at the Oyu Tolgoi underground mine. The 2018 PEA (as defined below) is based on a conceptual mine plan that includes Inferred resources. Numerous assumptions were made in the preparation of the 2018 PEA, including with respect to mineability, capital and operating costs, production schedules, the timing of construction and expansion of mining and processing facilities, and recoveries, that may change materially once production commences at Hugo North Extension Lift 1 and additional development and capital decisions are required. Any changes to the assumptions underlying the 2018 PEA could cause actual results to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements and information relating to the 2018 PEA. Other uncertainties and factors which could cause actual results to differ materially from future results expressed or implied by forward-looking statements and information include, amongst others, unanticipated costs, expenses or liabilities; discrepancies between actual and estimated production, mineral reserves and resources and metallurgical recoveries; the size, grade and continuity of deposits not being interpreted correctly from exploration results; fluctuations in commodity prices and demand; changing foreign exchange rates; actions by Rio Tinto, Turquoise Hill Resources Ltd. or Oyu Tolgoi LLC and by government authorities including the Government of Mongolia; the availability of funding on reasonable terms; the impact of changes in interpretation to or changes in enforcement of laws, regulations and government practices, including laws, regulations and government practices with respect to mining, foreign investment, royalties and taxation; the terms and timing of obtaining necessary environmental and other government approvals, consents and permits; the availability and cost of necessary items such as water, skilled labour, transportation and appropriate smelting and refining arrangements; unanticipated reclamation expenses; geotechnical or hydrogeological considerations during mining being different from what was assumed; changes to assumptions as to the availability of electrical power, and the power rates used in operating cost estimates and financial analyses; changes to assumptions as to salvage values; ability to maintain the social licence to operate; 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, performance or achievements of Entrée to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements and information. Such factors include, among others, risks related to international operations, including legal and political risk in Mongolia; risks associated with changes in the attitudes of governments to foreign investment; risks associated with the conduct of joint ventures; discrepancies between actual and anticipated production, mineral reserves and resources and metallurgical recoveries; global financial conditions; changes in project parameters as plans continue to be refined; 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; 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 completion of development or construction activities; environmental risks; title disputes; limitations on insurance coverage; as well as those factors discussed in the section entitled “Risk Factors” in this AIF. 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 and information, 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 6 statements and information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements and information. Except as required under applicable securities legislation, the Company undertakes no obligation to publicly update or revise forward-looking statements and information, whether as a result of new information, future events, or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements and information. CURRENCY AND EXCHANGE Entrée’s financial statements are stated in United States dollars and are prepared in conformity with United States Generally Accepted Accounting Principles (“U.S. GAAP”). In this AIF, all dollar amounts are expressed in United States dollars unless otherwise specified. Because Entrée’s principal executive office is located in Canada, many of its obligations are and will continue to be incurred in Canadian dollars (including, by way of example, salaries, rent and similar expenses). Where the disclosure is not derived from the annual financial statements for the year ended December 31, 2017, the Company has not converted Canadian dollars to United States dollars for purposes of making the disclosure in this AIF. CANADIAN DISCLOSURE STANDARDS FOR MINERAL RESOURCES AND MINERAL RESERVES Canadian disclosure standards for the terms “mineral reserve,” “Proven mineral reserve” and “Probable mineral reserve” are Canadian mining terms as defined in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), which adopts the definitions of the terms ascribed by the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) in the CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014, as may be amended from time to time by the CIM. The definitions of Proven and Probable reserves used in NI 43-101 differ from the definitions in the United States Securities and Exchange Commission (“SEC”) Industry Guide 7. Under SEC Guide 7 standards, a “final” or “bankable” Feasibility study is required to report reserves, the three year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. In addition, the terms “mineral resource”, “Measured mineral resource”, “Indicated mineral resource” and “Inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and normally are not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. “Inferred mineral resources” may only be separately disclosed, have a great amount of uncertainty as to their existence, and have great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred mineral resources may not form the basis of Feasibility or Pre-Feasibility studies, except in rare cases. Accordingly, descriptions in this AIF of Entrée’s mineral deposits may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder. CORPORATE STRUCTURE Name, Address and Incorporation Entrée is an exploration stage company that has an interest in an advanced project located in Mongolia. The Company’s executive office is located at: 7 Suite 1650 – 1066 West Hastings Street Vancouver, British Columbia, Canada V6E 3X1 Phone: 604.687.4777 Fax: 604.687.4770 Website: www.EntreeResourcesLtd.com. Information contained on the Company’s website does not form part of this AIF. The Company’s registered and records office is located at 2900-550 Burrard Street, Vancouver, British Columbia, Canada V6C 0A3 and its agent for service of process in the United States of America is National Registered Agents, Inc., 1090 Vermont Avenue NW, Suite 910, Washington, DC 20005. Entrée maintains an administrative office in Ulaanbaatar, the capital of Mongolia, to support Mongolian operations. The address of the Mongolian office is: Suite 409 Gurvan Gal office center 8/1, Chinggis Avenue Sukhbaatar District 1st County Ulaanbaatar, Mongolia Phone: 976.11.318562 Fax: 976.11.319426 The Company was incorporated in British Columbia, Canada, on July 19, 1995, under the name “Timpete Mining Corporation”. On February 5, 2001, the Company changed its name to “Entrée Resources Inc.”. On October 9, 2002 the Company changed its name from “Entrée Resources Inc.” to “Entrée Gold Inc.” and, on January 22, 2003, changed its jurisdiction of domicile from British Columbia to the Yukon Territory by continuing into the Yukon Territory. On May 27, 2005, the Company changed the governing jurisdiction from the Yukon Territory to British Columbia by continuing into British Columbia under the Business Corporation Act (British Columbia) (the “BCBCA”). On May 9, 2017, the Company changed its name to “Entrée Resources Ltd.” The Company’s common shares traded on the TSX Venture Exchange until April 24, 2006. On April 24, 2006, the Company’s common shares began trading on the Toronto Stock Exchange (“TSX”) under the symbol “ETG”. At inception the Company’s Memorandum and Articles authorized it to issue up to 20 million common shares without par value. On September 30, 1997, the Company subdivided its authorized capital on a two new shares for one old share basis, resulting in authorized capital of 40 million common shares without par value. On February 5, 2001, the Company subdivided its common shares on a four new shares for one old share basis, thus increasing its authorized capital to 160 million common shares without par value and simultaneously reduced its authorized capital to 100 million common shares without par value. On October 9, 2002 the Company consolidated its authorized capital, both issued and unissued, on the basis of one new share for each two old shares, resulting in authorized capital of 50 million common shares without par value and simultaneously increased the authorized capital from 50 million common shares without par value to 100 million common shares without par value. On May 20, 2004, the Company received approval from its shareholders to increase its authorized share capital from 100 million common shares without par value to an unlimited number of common shares, all without par value. This increase became effective June 16, 2004, the date the Company filed the amendment to its Articles. At the Company’s Annual General Meeting of shareholders held on June 27, 2013, shareholders confirmed the alteration of the Company’s Articles by the addition of advance notice provisions as Part 14B (the “Advance Notice Provisions”). The Advance Notice Provisions provide shareholders, directors and management of the Company with a clear framework for nominating directors of the Company. Only persons who are eligible under the BCBCA and who are nominated in accordance with the following procedures set forth in the Advance Notice Provisions shall be eligible for election as directors of the Company. At any annual general meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called is the election of 8 directors, nominations of persons for election to the Company’s board of directors (the “Board”) may be made only: (a) by or at the direction of the Board, including pursuant to a notice of meeting; (b) by or at the direction or request of one or more shareholders pursuant to a “proposal” made in accordance with Part 5, Division 7 of the BCBCA, or pursuant to a requisition of the shareholders made in accordance with section 167 of the BCBCA; or (c) by any person (a “Nominating Shareholder”): (A) who, at the close of business on the date of the giving by the Nominating Shareholder of the notice provided for in the Advance Notice Provisions and at the close of business on the record date for notice of such meeting, is entered in the securities register of the Company as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting and provides evidence of such ownership that is satisfactory to the Company, acting reasonably; and (B) who complies with the notice procedures set forth in the Advance Notice Provisions. On February 28, 2017, the Company announced that the Board had approved a spin-out of Entrée’s Ann Mason Project in Nevada and Lordsburg property in New Mexico into a newly incorporated wholly-owned subsidiary, Mason Resources Corp. (“Mason”), through a plan of arrangement under Section 288 of the BCBCA (the “Arrangement”). The Arrangement closed on May 9, 2017. Entrée shareholders received common shares of Mason by way of a share exchange, pursuant to which each existing common share of Entrée was exchanged for one “new” common share of Entrée (a “Common Share”) and 0.45 of a common share of Mason. A total of 77,805,786 common shares of Mason were distributed to Entrée shareholders. Mason’s common shares commenced trading on the TSX on May 12, 2017 under the symbol “MNR”, and on the OTCQB Venture Market on November 9, 2017 under the symbol “MSSNF”. The Company’s Common Shares also trade on the NYSE American under the symbol “EGI”. 9 Intercorporate Relationships The Company conducts its business and owns its property interests through the seven subsidiaries set out in the organizational chart below. All of the Company’s subsidiaries are 100% owned. Entree International Holdings Inc. (Barbados) Entree Peru Holdings Inc. (Barbados) Exploraciones Apolo Resources S.A.C. (Peru) (28.91%)* Red Gold Australia Pty Ltd (Australia) Entrée Resources Ltd. (British Columbia) Entrée Resources International Ltd. (British Columbia)* Entrée LLC** (Mongolia) Entrée Resources LLC (Mongolia) *The remaining 71.09% is held by Entrée Resources International Ltd. **Entrée LLC holds the Shivee Tolgoi and Javhlant mining licences in Mongolia. A portion of the Shivee Tolgoi mining licence area and all of the Javhlant mining licence area are subject to a joint venture with Oyu Tolgoi LLC. Oyu Tolgoi LLC is owned as to 66% by Turquoise Hill Resources Ltd. and as to 34% by the Government of Mongolia (through Erdenes Oyu Tolgoi LLC). See “Description of the Business” below. GENERAL DEVELOPMENT OF THE BUSINESS Entrée is an exploration stage resource company with interests in exploration and advanced properties in Mongolia, Australia and Peru. On February 28, 2017, the Company announced that the Board had approved a spin-out of Entrée’s Ann Mason Project in Nevada and Lordsburg property in New Mexico into a newly incorporated wholly-owned subsidiary, Mason, through a court approved plan of arrangement under Section 288 of the BCBCA. The Arrangement closed on May 9, 2017. The Company’s shareholders received common shares of Mason in proportion to their shareholdings in the Company by way of a share exchange, pursuant to which each existing common share of the Company held as of the effective date of the Arrangement was exchanged for one “new” Common Share of the 10 Company and 0.45 of a common share of Mason. A total of 77,805,786 common shares of Mason were distributed to the Company’s shareholders. There was no change to shareholders’ interests in the Company. The Company transferred to Mason all of the issued and outstanding shares of Entrée U.S. Holdings Inc., which indirectly holds the Ann Mason Project and the Lordsburg property, along with $8.84 million in cash. The result of the Arrangement is two separate and focused, well-capitalized entities, each with a high quality advanced project providing new and existing shareholders with optionality as to investment strategy and risk profile. Optionholders and warrantholders of the Company received replacement options and warrants of the Company and options and warrants of Mason which are proportionate to, and reflective of the terms of, their original options and warrants of the Company. Mason’s common shares commenced trading on the TSX on May 12, 2017 under the symbol “MNR”, and on the OTCQB Venture Market on November 9, 2017 under the symbol “MSSNF”. Following the Arrangement, Entrée’s primary asset is its carried 20% joint venture interest in the Entrée/Oyu Tolgoi joint venture property (the “Entrée/Oyu Tolgoi JV Property”). Entrée’s joint venture partner, Oyu Tolgoi LLC (“OTLLC”), holds 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 Entrée/Oyu Tolgoi JV Property includes the Hugo North Extension copper-gold deposit and the Heruga copper- gold-molybdenum deposit. The resources at Hugo North Extension include a Probable reserve, which is included in the first lift (“Lift 1”) of the Oyu Tolgoi underground block cave mining operation. Lift 1 is currently in development by project operator Rio Tinto, with first development production from the Entrée/Oyu Tolgoi JV Property expected in 2021. When completed, Oyu Tolgoi will become the world’s third largest copper mine. On January 15, 2018, the Company announced the results of an updated Technical Report that was completed on its interest in the Entrée/Oyu Tolgoi JV Property. The updated Technical Report 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 joint venture (the “Entrée/Oyu Tolgoi JV”) from Lift 1 of the Hugo North Extension underground block cave. The 2018 PEA is an alternative development scenario completed at a conceptual level that assesses the inclusion of mineral resources from Hugo North Extension Lift 2 and Heruga into an overall mine plan with mineral resources from 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 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 below. 11 Table 1 – Summary LOM Production and Financial Results – Entrée/Oyu Tolgoi JV Property Entrée/Oyu Tolgoi JV Property Units 2018 Reserve Case 2018 PEA LOM Processed Material Probable Reserve Feed Indicated Resource Feed Inferred Resource Feed Copper Recovered Gold Recovered Silver Recovered Entrée Attributable Financial Results LOM Cash Flow, pre-tax NPV@5%, after-tax NPV@8%, after-tax NPV@10%, after-tax Mlb koz koz $M $M $M $M 35 Mt @ 1.59% Cu, 0.55 g/t Au, 3.72 g/t Ag (1.93% CuEq) ---- ---- ---- 1,115 514 3,651 382 157 111 89 113 Mt @ 1.42% Cu, 0.50 g/t Au, 3.63 g/t Ag (1.73% CuEq) 708 Mt @ 0.53% Cu, 0.44 g/t Au, 1.79 g/t Ag (0.82 % CuEq) 10,497 9,367 45,378 2,078 512 278 192 Long term metal prices used in the net present value (“NPV”) economic analyses are: copper $3.00/lb, gold $1,300.00/oz and silver $19.00/oz. Notes: (cid:120) (cid:120) Mineral reserves and mineral resources are reported on a 100% basis. (cid:120) (cid:120) (cid:120) Copper equivalent (“CuEq”) is calculated as shown in the footnotes to Table 2 and Table 3 below. 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. 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) the Company 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. 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: (cid:120) (cid:120) 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 1). 12 (cid:120) 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. (cid:120) (cid:120) (cid:120) Total direct development and sustaining capital expenditures of approximately $262 million ($52 million attributable 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. (cid:120) Entrée LOM average all-in sustaining costs (“AISC”) $1.03/lb payable copper. Figure 1 – 2018 Reserve Case (Lift 1) Mine Production 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 ) s e n n o t k ( d e s s e c o r P d n a d e n M i 2018 PEA Outputs: 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 t / g g A , t / g u A , u C % Year kt Cu % Au g/t Ag g/t (cid:120) 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. (cid:120) Development schedule assumes for Entrée/Oyu Tolgoi JV Property (refer to Figure 2): (cid:16) 2021 start of Lift 1 development production and in 2026 initial Lift 1 block cave production (cid:16) 2028 Lift 2 development production and in 2035 initial Lift 2 block cave production (cid:16) 2065 Heruga development production and in 2069 initial block cave production Total direct development and sustaining capital expenditures of approximately $8,637 million ($1,727 million attributable 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. (cid:120) (cid:120) (cid:120) (cid:120) Figure 2 – 2018 PEA Mine Production Lift 1 Lift 2 Heruga ) s e n n o t k ( d e s s e c o r P d n a d e n M i 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 13 6.00 5.00 4.00 3.00 2.00 1.00 0.00 t / g g A , t / g u A , u C % 8 1 0 2 1 2 0 2 4 2 0 2 7 2 0 2 0 3 0 2 3 3 0 2 6 3 0 2 9 3 0 2 2 4 0 2 5 4 0 2 8 4 0 2 1 5 0 2 4 5 0 2 7 5 0 2 0 6 0 2 3 6 0 2 6 6 0 2 9 6 0 2 2 7 0 2 5 7 0 2 8 7 0 2 1 8 0 2 4 8 0 2 7 8 0 2 0 9 0 2 3 9 0 2 6 9 0 2 Year kt Cu % Au g/t Ag g/t 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 3), 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 Ltd. (“Turquoise Hill”) 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. The updated Technical Report has been filed on SEDAR and is available for review under the Company’s profile on SEDAR (www.sedar.com) or on www.EntreeResourcesLtd.com. Three Year History The following is a timeline summarizing the general development of Entrée’s business over the last three completed financial years: January – March 2015 May 2015 July 2015 The Company reports the assay results from its 40-hole Pre-Feasibility infill drill program at the Ann Mason Project in Nevada. Turquoise Hill, OTLLC, Rio Tinto International Holdings Ltd. (“Rio Tinto”) and the Government of Mongolia execute an Underground Mine Development and Financing Plan (the “Mine Plan”), which signals the firm commitment of the parties to move forward with underground development of the Oyu Tolgoi copper-gold project. The Mine Plan resolves a number of issues between the parties and provides a pathway forward to the eventual restart of Phase 2 underground development, including Lift 1 of the Entrée/Oyu Tolgoi JV's Hugo North Extension deposit. Anna Stylianides is appointed to the Board. 14 September 2015 October 2015 November 2015 December 2015 January 2016 – current March 2016 April 2016 May 2016 August 2016 The Company announces the results of an updated Preliminary Economic Assessment (“2015 PEA”) for its 100%-owned Ann Mason copper-molybdenum porphyry deposit in Nevada. The 2015 PEA incorporates the results of Entrée’s infill drill program and a new resource estimate. Approximately 95% of the mineralization constrained within the ultimate Phase 5 pit is now classified as either Measured or Indicated resources with the remaining 5% as Inferred resources. The 2015 PEA also includes preliminary results of a detailed metallurgical program, designed to better characterize the metallurgical processes and recoveries in the 2015 PEA and to support a future Pre-Feasibility study. The Company files a NI 43-101 Technical Report entitled “Updated Preliminary Economic Assessment on the Ann Mason Project, Nevada, U.S.A.”, with an effective date of September 9, 2015. Stephen Scott is appointed interim Chief Executive Officer of the Company. OTLLC signs a $4.4 billion finance facility (with provision for up to $6 billion) for underground mine development at the Oyu Tolgoi project, including Lift 1 of the Entrée/Oyu Tolgoi JV’s Hugo North Extension deposit. The facility is being provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the United States and Australia, along with 15 commercial banks. Entrée takes significant steps to reduce its cash burn rate ensuring that it is positioned to meet all challenges as they emerge and at the same time identify strategic growth opportunities with the potential to deliver value to the Company and its shareholders. The Company announces it has entered into an agreement with Sandstorm Gold Ltd. (“Sandstorm”) to amend its February 14, 2013 Equity Participation and Funding Agreement. The Agreement to Amend provides for a 17% reduction in the metal credits that Entrée is required to sell and deliver to Sandstorm. Concurrently Entrée will refund 17% of the refundable deposit by paying $5.5 million in cash and issuing $1.3 million of common shares of the Company. At closing, the parties enter into an Amended and Restated Equity Participation and Funding Agreement. The Company files a NI 43-101 Technical Report entitled “Lookout Hill Feasibility Study Update”, with an effective date of March 29, 2016. The Technical Report aligns the mine plan for the Entrée/Oyu Tolgoi JV Property with Turquoise Hill’s Technical Report entitled “Oyu Tolgoi 2014 Technical Report”, filed on October 28, 2014. Stephen Scott is appointed President, Chief Executive Officer and a director of the Company. Duane Lo is appointed interim Chief Financial Officer of the Company. The Company announces that it has received an approved Waters of the United States/Wetlands jurisdictional determination from the U.S. Army Corps of Engineers, that the water drainages on the Ann Mason Project are considered “isolated waters with no apparent interstate or foreign commerce connection” and as a result, no permit under Section 404 of the Clean Water Act is required for Ann Mason. Turquoise Hill and Rio Tinto announce that formal ‘notice to proceed’ approval was given for the next stage of development of the Oyu Tolgoi mine by the boards of OTLLC, Turquoise Hill and Rio Tinto. This was the final requirement for the re-start of underground development at the Hugo North Lift 1 block cave, including Lift 1 of the Entrée/Oyu Tolgoi JV’s Hugo North Extension deposit. The announcements also noted that an updated Oyu Tolgoi Feasibility Study has been completed including a re-estimate of capital, and all necessary permits have been granted. Underground construction is expected to re-commence in mid-2016. Turquoise Hill announces that OTLLC has drawn down approximately $4.3 billion of the project finance facility and has signed an engineering, procurement and construction management services contract with Jacobs Engineering Group, which paves the way for underground construction to begin. Shaft 2 has approximately 100 metres of development remaining and is expected to be completed in 2016. OTLLC signed a contract with mining services provider Thiess and Mongolian contractor Khishig Arvin for development of twin October 2016 December 2016 January 2017 February 2017 May 2017 15 declines, incorporating both a service and conveyor tunnel. The Company announces it is evaluating options to potentially restructure its business, which may include splitting synergistic assets into two separate publicly traded companies. Turquoise Hill announces that work has begun for Shaft 5 sinking and the convey-to-surface box cut excavation. OTLLC had signed an additional underground mining and support services contract with Dayan Contract Mining for the sinking of Shafts 2 and 5. The underground workforce has reached approximately 1,600 people. Turquoise Hill announces it has filed an updated NI 43-101 Technical Report relating to the Oyu Tolgoi project. The Technical Report includes a Preliminary Economic Assessment of potential later phases of the Oyu Tolgoi deposits utilizing four Alternative Production Cases. Two of these deposits, Hugo North (including Hugo North Extension) Lift 2 and Heruga include Entrée/Oyu Tolgoi JV resources. The Alternative Production Cases take advantage of productivity improvements in plant throughput that have begun to be recognized in the process plant and evaluate plant capacity expansions as high as 120 million tonnes per annum. Variations in operating and capital costs are also evaluated. The Company announces a non-brokered private placement of up to 17,000,000 units at a price of C$0.41 per unit. Each unit consists of one common share and one-half of one transferable common share purchase warrant. Each whole warrant entitles the holder to purchase one additional common share at a price of C$0.65 for five years. The proceeds of the private placement will support the restructuring of Entrée’s business into two well- funded, separately traded companies. The private placement, which closed in January 2017, was over-subscribed. The Company issued 18,529,484 units for gross proceeds of C$7,597,088. Turquoise Hill announces that by the close of 2016, the underground Oyu Tolgoi project workforce had ramped up to over 2,000 people and progress was made in key areas including Shafts 2 and 5 related activities and construction of critical on-site facilities while the bulk excavation component for the convey-to-surface work stream was completed. Turquoise Hill also advised that lateral development rates are progressing well with a further increase expected in 2017 when additional underground crushing capacity is added. The Company announces its Board has approved a strategic reorganization of its business. Pursuant to the Arrangement, Entrée’s Ann Mason Project in Nevada and Lordsburg property in New Mexico and $8.84 million will be transferred to a newly incorporated company, Mason Resources Corp. Shareholders of the Company will receive common shares of Mason in proportion to their shareholdings in the Company. There will be no change to shareholders’ existing interests in the Company. The Arrangement is expected to result in two separate and focused, well-capitalized, debt-free entities, each with a high quality advanced project providing new and existing shareholders with optionality as to investment strategy and risk profile. The Company announces that its shareholders voted 97.93% in favour of approving the spin- out of Mason, subject to final court approval and TSX acceptance. The Arrangement closes on May 9, 2017. Concurrent with the closing, the Company changes its name from “Entrée Gold Inc.” to “Entrée Resources Ltd.”. On May 12, 2017, Mason’s shares commence trading on the TSX under the symbol “MNR”. Turquoise Hill reports that the focus of underground development activities continues to be lateral development, sinking of Shafts 2 and 5, support infrastructure and the convey-to- surface system. Sinking of Shaft 2 is expected to reach its final depth of 1,284 metres later in 2017. Completion of Shaft 5 sinking is likely in early 2018. Supporting infrastructure progressed with Oyut II Camp construction activities increasing. The new development crusher and dewatering system are on target to enable an additional development crew to be added in the third quarter of 2017. Development of the convey-to-surface decline continued to progress following completion of bulk excavation at the end of 2016. The 16 August 2017 October 2017 November 2017 January 2018 February 2018 convey-to-surface system is the eventual route of the full 95,000 tonne per day underground ore delivery system to the concentrator. Turquoise Hill expects production from the first draw bell on the Oyu Tolgoi mining licence in mid-2020. The Company announces that it has engaged Amec Foster Wheeler Americas Limited (“Amec Foster Wheeler”) to complete an initial data review to be followed up by an updated Technical Report which will include a Preliminary Economic Assessment of the Entrée/Oyu Tolgoi JV’s Hugo North Extension Lift 2 and Heruga. The Company also announces that development of the Oyu Tolgoi project continues to advance. Sinking of Shaft 4, which Entrée expects to commence in 2018 based on the anticipated completion date, will be the first physical development on the Entrée/Oyu Tolgoi JV Property. Turquoise Hill has previously announced that Shaft 4 should be complete in 2021. Turquoise Hill and the Company expect first development production from the Entrée/Oyu Tolgoi JV Property in approximately 2021. The Company announces that Amec Foster Wheeler has completed its initial data review, and has commenced work on an updated NI 43-101 Technical Report relating to Entrée’s 20% participating interest in the Entrée/Oyu Tolgoi JV. The Technical Report is expected to be completed by January 2018. Following a visit by management to the Oyu Tolgoi underground development project in September 2017, the Company reports that project development, including both direct production and supporting infrastructure, appears to be on track and is being completed to the highest safety and operating standards. The site visit provides Company management with an opportunity to tour some of the main surface infrastructure, including the concentrator and tailings facilities and to also go underground to observe some of the development work completed to date. In addition, management was able to review plans with OTLLC for the immediate and medium-term future. Turquoise Hill announces that since the re-start of development, a total of 5.4 equivalent kilometres of lateral development has been completed. During the third quarter of 2017, the third development crew was deployed. Crews four and five are in training and are expected to be deployed during the fourth quarter of 2017. Also during the third quarter of 2017, commissioning of the new 3,500 tonne per day development crusher was completed. With the deployment of crews four and five, a step up in lateral development rates is expected to begin in the fourth quarter of 2017. The Company announces the results of an updated Technical Report that was completed on its interest in the Entrée/Oyu Tolgoi JV Property. The updated Technical Report discusses two development scenarios, an updated reserve case and a LOM Preliminary Economic Assessment. The 2018 Reserve Case is based only on mineral reserves attributable to the Entrée/Oyu Tolgoi JV from Lift 1 of the Hugo North Extension underground block cave. The 2018 PEA is an alternative development scenario completed at a conceptual level that assesses the inclusion of mineral resources from Hugo North Extension Lift 2 and Heruga into an overall mine plan with mineral resources from Hugo North Extension Lift 1. Turquoise Hill announces the sinking of Shaft 5 is expected to be complete in the first quarter of 2018. In December 2017, the fifth development crew became fully operational. OTLLC has completed the sinking of Shaft 2, including reaching final depth, shaft bottom mass excavation and concrete floor installation, marking an early milestone in the development progress of Lift 1. The fit out of Shaft 2 will take place throughout 2018. Turquoise Hill continues to expect the first draw bell in mid-2020 and sustainable first production from the Oyu Tolgoi mining licence in 2021. The Company announces that Lord Howard has retired from his positions as director and Non-Executive Chairman of the Board. Mark Bailey has been appointed Non-Executive Chairman and Michael Price has been appointed to the Board to fill the vacancy created by Lord Howard’s retirement. 17 DESCRIPTION OF THE BUSINESS Mineral Resource Business Entrée is in the mineral resource business. This business generally consists of three stages: exploration, development and production. Mineral resource companies that are in the exploration stage have not yet found mineral resources in commercially exploitable quantities, and are engaged in exploring land in an effort to discover them. Mineral resource companies that have located mineral resources in commercially exploitable quantities and are preparing to extract them are in the development stage, and the properties are referred to as being “advanced”. Companies engaged in the extraction of those mineral resources are in the production stage. Entrée has interests in exploration and advanced properties in Mongolia, Australia and Peru. Mineral resource exploration can consist of several stages. The earliest stage usually consists of the identification of a potential prospect through either the discovery of a mineralized showing on that property or as the result of a property being in proximity to another property on which exploitable resources have been identified, whether or not they are or have in the past been extracted. After the identification of a property as a potential prospect, the next stage would usually be the acquisition of a right to explore the area for mineral resources. This can consist of the outright acquisition of the land and mineral rights or the acquisition of specific, but limited mineral rights to the land (e.g. a licence, lease or concession). After acquisition, exploration typically begins with a surface examination by a professional geologist with the aim of identifying areas of potential mineralization, followed by detailed sampling and mapping of rock exposures along with possible geophysical and geochemical grid surveys over un-exposed portions of the property (i.e. underground), and possibly trenching in these covered areas to allow sampling of the underlying rock. Exploration also commonly includes systematic regularly-spaced drilling in order to determine the extent and grade of the mineralized system at depth and over a given area, and in sufficiently-advanced properties, gaining underground access by ramping or shafting in order to obtain bulk samples that would allow one to determine the ability to recover various commodities from the rock. A mineral resource may be identified and estimated through detailed exploration, drilling and sampling to establish geological and grade continuity followed by a geostatistical analysis of the data. The results are supported by a Technical Report prepared in accordance with NI 43-101. A mineral resource company may then choose to have a Preliminary Economic Assessment (“PEA”) prepared, based on the mineral resource estimate. Once exploration is sufficiently advanced, and if the resource estimate is of sufficient quality (i.e. with mineralization classified in the Indicated and/or Measured categories), the next step would be to undertake a Pre- Feasibility study followed by a Feasibility Study. Business of Entrée Entrée’s principal asset is its joint venture interest in the Entrée/Oyu Tolgoi JV Property in Mongolia, which forms a significant portion of the overall Oyu Tolgoi project area. The Entrée/Oyu Tolgoi JV Property comprises the eastern portion of the Shivee Tolgoi mining licence and all of the Javhlant mining licence, and hosts: (cid:120) The Hugo North Extension copper-gold porphyry deposit (Lift 1 and Lift 2): (cid:16) Lift 1 is the upper portion of the Hugo North Extension copper-gold porphyry deposit and forms the basis of the 2018 Reserve Case. It is the northern portion of the Hugo North Lift 1 underground block cave mine plan that is currently in development on the Oyu Tolgoi mining licence. Starting in approximately 2021, the development will cross north onto the Entrée/Oyu Tolgoi JV Property. Hugo North Extension Lift 1 Probable reserves include 35 million tonnes (“Mt”) grading 1.59% copper, 0.55 18 grams per tonne (“g/t”) gold, and 3.72 g/t silver. Lift 1 mineral resources are also included in the alternative development scenario, as part of the mine plan for the 2018 PEA. (cid:16) Lift 2 is immediately below Lift 1 and is the next potential phase of underground mining, once Lift 1 mining is complete. Lift 2 is currently included as part of the alternative, 2018 PEA mine plan. Hugo North Extension Lift 2 resources included in the 2018 PEA mine plan are: 78 Mt (Indicated), grading 1.34% copper, 0.48 g/t gold, and 3.59 g/t silver; plus 88.4 Mt (Inferred), grading 1.34% copper, 0.48 g/t gold, and 3.59 g/t silver. (cid:120) The Heruga copper-gold-molybdenum porphyry deposit is at the south end of the Oyu Tolgoi Trend of porphyry deposits. Approximately 94% of the Heruga deposit occurs on the Entrée/Oyu Tolgoi JV Property. The 2018 PEA includes Heruga as the final deposit to be mined, as two separate block caves, one to the south and a slightly deeper block cave to the north. The portion of the Heruga mineral resources that occur on the Entrée/Oyu Tolgoi JV Property are part of the alternative, 2018 PEA mine plan and include 620 Mt (Inferred) grading 0.42% copper, 0.43 g/t gold, and 1.53 g/t silver. (cid:120) A large prospective land package. Entrée has a 20% or 30% (depending on the depth of mineralization) participating interest in the Entrée/Oyu Tolgoi JV with OTLLC holding the remaining 80% (or 70%) 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 South deposits on the Oyu Tolgoi mining licence. Entrée also has a 100% interest in the western portion of the Shivee Tolgoi mining licence, which is referred to as the “Shivee West Property”. The Shivee West Property is subject to a License Fees Agreement between Entrée and OTLLC and may ultimately be included in the Entrée/Oyu Tolgoi JV Property. The Entrée/Oyu Tolgoi JV Property and the Shivee West Property, known together as the “Entrée/Oyu Tolgoi JV Project” or the “Project”, are shown on Figure 3. 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 3 – Entrée/Oyu Tolgoi JV Project 19 Notes: (cid:120) *The Shivee West Property 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. Entrée has a 20% participating interest in the Hugo North Extension and Heruga resources and reserves. (cid:120) (cid:120) For further details regarding the Entrée/Oyu Tolgoi JV Project, see the “Material Mineral Properties” section below. Aside from its principal asset, Entrée has royalty and other interests in properties in Australia and Peru. See the “Non-Material Properties” section for more information. Entrée’s exploration activities are under the supervision of Robert Cinits, P.Geo., Entrée's Vice President, Corporate Development. Mr. Cinits is a qualified person (“QP”) as defined in NI 43-101. Mr. Cinits has approved all scientific and technical information in this AIF. 20 Turquoise Hill, Rio Tinto and OTLLC In October 2004, the Company entered into an arm’s-length Equity Participation and Earn-In Agreement (the “Earn-In Agreement”) with Turquoise Hill. Under the Earn-In Agreement, Turquoise Hill agreed to purchase equity securities of the Company, and was granted the right to earn an interest in the Entrée/Oyu Tolgoi JV Property. The Earn-In Agreement was amended in November 2004, to append the form of joint venture agreement (the “Entrée/Oyu Tolgoi JVA”) that the parties are required to enter into at such time as the earn-in obligations are completed. Most of Turquoise Hill’s rights and obligations under the Earn-In Agreement, including its right of first refusal on the Shivee West Property, were subsequently assigned by it to what was then its wholly-owned subsidiary, OTLLC. OTLLC is also the title holder of the Oyu Tolgoi mining licence, illustrated in Figure 3 above. OTLLC undertook an exploration program which established the presence of two significant mineral deposits on the Entrée/Oyu Tolgoi JV Property: the Hugo North Extension deposit and the Heruga deposit. These deposits form the northernmost and southernmost parts of the Oyu Tolgoi project, which is a series of porphyry deposits containing copper, gold, silver and molybdenum. The deposits stretch over 12 kilometres, from the Hugo North Extension deposit on the Entrée/Oyu Tolgoi JV Property in the north, through the Hugo North and Hugo South deposits and Oyut deposit on OTLLC’s Oyu Tolgoi mining licence, to the Heruga deposit in the south, the majority of which occurs on the Entrée/Oyu Tolgoi JV Property (Figure 4). Figure 4 – Cross Section Through the Oyu Tolgoi Trend of Porphyry Deposits Additional information regarding the Entrée/Oyu Tolgoi JV Property is discussed under “Material Mineral Properties” below. On June 30, 2008, OTLLC gave notice to Entrée that it had completed its earn-in obligations by expending a total of $35 million on exploration on the Entrée/Oyu Tolgoi JV Property. As a consequence, OTLLC earned an 80% interest in all minerals extracted below a sub-surface depth of 560 metres from the Entrée/Oyu Tolgoi JV Property and a 70% interest in all minerals extracted from surface to a depth of 560 metres from the Entrée/Oyu Tolgoi JV Property, and the parties were required to enter into the Entrée/Oyu Tolgoi JVA. While the parties have not formally executed the Entrée/Oyu Tolgoi JVA, the Entrée/Oyu Tolgoi JV is operating under those terms. Under the terms of the Entrée/Oyu Tolgoi JVA, Entrée elected to have OTLLC debt finance Entrée’s share of costs with interest accruing at OTLLC’s actual cost of capital or prime plus 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 21 flow arising from the sale of Entrée’s share of products. Such amounts will be applied first to payment of accrued interest and then to repayment of principal. 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 operations for the month. The debt financing and repayment provisions limit dilution of Entrée’s interest as the project progresses. Since formation, and as of December 31, 2017, the Entrée/Oyu Tolgoi JV has expended approximately $30.1 million to advance the Entrée/Oyu Tolgoi JV Property. As of December 31, 2017, OTLLC has contributed on Entrée’s behalf the required cash participation amount equal to 20% of the $30.1 million incurred to date, plus accrued interest at prime plus 2%, for a total of $7.8 million. At December 31, 2017, Turquoise Hill owned approximately 7.95% of the Company’s issued and outstanding Common Shares acquired pursuant to the Earn-In Agreement. In addition, Rio Tinto, Turquoise Hill’s majority shareholder, owned approximately 9.54% of the Company’s issued and outstanding Common Shares as at December 31, 2017. Execution of Oyu Tolgoi Investment Agreement, Heads of Agreement and Memorandum of Agreement The Minerals Law of Mongolia, which became effective on August 26, 2006, defines a mineral deposit of strategic importance (a “Strategic Deposit”) as a mineral resource that may have the potential to impact national security, or the economic and social development of the country, or that is generating or has the potential to generate more than five percent (5%) of Mongolia’s gross domestic product in any given year. Under Resolution No 57 dated July 16, 2009 of the State Great Khural, the Oyu Tolgoi series of deposits were declared to be Strategic Deposits. The Minerals Law of Mongolia provides that the State may be an equity participant with any private legal entity, up to a 34% equity interest, in the exploitation of any Strategic Deposit where the quantity and grade of the deposit have been defined by exploration that has not been funded from the State budget. On October 6, 2009, Turquoise Hill, its wholly-owned subsidiary OTLLC, and Rio Tinto signed an investment agreement (the “Oyu Tolgoi Investment Agreement”) with the Mongolian Government, which regulates the relationship among the parties and stabilizes the long-term tax, legal, fiscal, regulatory and operating environment to support the development of the Oyu Tolgoi project. The Oyu Tolgoi Investment Agreement specifies that the Government of Mongolia will own 34% of the shares of OTLLC (and by extension, 34% of OTLLC’s interest in the Entrée/Oyu Tolgoi JV Property) through its subsidiary Erdenes Oyu Tolgoi LLC. A shareholders’ agreement was concurrently executed to establish the Government’s 34% ownership interest in OTLLC and to govern the relationship among the parties. On December 8, 2010, Rio Tinto and Turquoise Hill entered into a Heads of Agreement (the “Heads of Agreement”), which provides for the management structure of OTLLC and the project management structure of the Oyu Tolgoi project, among other things. Under the Heads of Agreement, Rio Tinto is entitled to appoint three of the nine directors of OTLLC (with Turquoise Hill appointing three and Erdenes Oyu Tolgoi LLC appointing three (as directed within the Amended and Restated Shareholders Agreement among the parties (the “Shareholders Agreement”) dated June 8, 2011)) and Rio Tinto assumes management of the building and operation of the Oyu Tolgoi project, which includes the Hugo North Extension and Heruga deposits on the Entrée/Oyu Tolgoi JV Property. On April 18, 2012, Rio Tinto announced that it had signed a memorandum of agreement (the “MOA”) with Turquoise Hill, under which Rio Tinto agrees to support and provide certain elements of a comprehensive funding package that will underpin the development of the Oyu Tolgoi project. In accordance with the MOA, Rio Tinto assumed responsibility for all exploration operations on behalf of OTLLC, including exploration on the Entrée/Oyu Tolgoi JV Property. Oyu Tolgoi Development and Funding As reported by Turquoise Hill, overall construction of the first phase of the Oyu Tolgoi project (OTLLC’s Oyut open pit) was essentially complete at the end of 2012. First ore was processed through the concentrator on January 2, 22 2013 and production of the first copper-gold concentrate followed on January 31, 2013. The first shipment of copper concentrate was sent to customers in China on July 9, 2013. On October 14, 2013, Turquoise Hill reported that the concentrator was operating at name-plate capacity of approximately 100,000 tonnes of ore processed per day. As reported by Turquoise Hill, on April 17, 2013, Rio Tinto signed commitment letters with 15 global banks that locked in pricing and terms for long-term project financing for Oyu Tolgoi. On July 28, 2013, following receipt of notification from the Government of Mongolia that project financing for the Oyu Tolgoi underground mine would require approval by the Mongolian Parliament, Turquoise Hill announced that funding and all work on the underground development of Oyu Tolgoi would be delayed. On August 12, 2013, development of the underground mine, including Lift 1 of the Entrée/Oyu Tolgoi JV’s Hugo North Extension deposit, was suspended. The commitments from the commercial bank consortium formally expired on September 30, 2014. On May 18, 2015, the Government of Mongolia, OTLLC, Turquoise Hill and Rio Tinto signed the Mine Plan addressing certain key Oyu Tolgoi shareholder issues, including tax matters, a 2% NSR royalty held by Turquoise Hill, the Oyu Tolgoi 5% sales royalty calculation, management services payments and the sourcing of power for Oyu Tolgoi from within Mongolia. The Mine Plan states that the principles of a comprehensive financing plan including for the underground stage have been agreed on and include that up to $6 billion of external funding will be raised through third party project financing (including for the underground stage) and other bank finance, product off-take arrangements or other forms of financing. On December 14, 2015, Turquoise Hill announced that OTLLC had signed a $4.4 billion project finance facility (with provision for up to $6 billion) provided by a syndicate of international financial institutions and export credit agencies. This was followed by formal ‘notice to proceed’ approval from the boards of Rio Tinto, Turquoise Hill and OTLLC in May 2016, which was the final requirement for the re-start of underground development at the Hugo North Lift 1 block cave, including Lift 1 of the Entrée/Oyu Tolgoi JV’s Hugo North Extension deposit. OTLLC drew down approximately $4.3 billion of the project finance facility and underground construction re-commenced in the second half of 2016. As reported by Turquoise Hill: (cid:120) The main focus of underground development programs during 2017 was underground development, sinking of Shafts 2 and 5, support infrastructure and the convey-to-surface system. lateral (cid:120) By the end of 2017, five development crews had been deployed, and the commissioning of a new 3,500 tonne per day development crusher was completed in the third quarter of 2017. (cid:120) (cid:120) (cid:120) Shaft 5 is expected to be complete in the first quarter of 2018. When completed, Shaft 5 will be dedicated to ventilation thereby increasing the capacity for underground activities. The sinking of Shaft 2 has been completed, including reaching final depth, shaft bottom mass excavation and concrete floor installation, marking an early milestone in the development progress of Lift 1. The fit out of Shaft 2 will take place throughout 2018. Shaft 2 will be used for access, production and ventilation. Turquoise Hill continues to plan for first draw bell on the Oyu Tolgoi mining licence in mid-2020 and sustainable first production from the Oyu Tolgoi mining licence in 2021. In August 2014, Turquoise Hill announced that OTLLC had signed a Power Sector Cooperation Agreement (“PSCA”) with the Government of Mongolia for the exploration of a Tavan Tolgoi-based independent power provider. Participation in the PSCA met OTLLC’s obligation in the Oyu Tolgoi Investment Agreement to establish a long-term power supply within Mongolia within four years from the commencement of commercial production. Signing of the PSCA reset the four year period while the opportunity for the establishment of an independent power provider at Tavan Tolgoi was studied. Subsequent to the effective date of the updated Technical Report, Turquoise Hill announced that OTLLC had received notification the Government of Mongolia has canceled the PSCA, indicating 23 that the Tavan Tolgoi power project is no longer a viable option. As a result of the Government’s cancellation, effective February 15, 2018 long-term power for Oyu Tolgoi must be domestically sourced within four years. Turquoise Hill stated that OTLLC, Turquoise Hill and Rio Tinto are committed to fulfilling all requirements under the Oyu Tolgoi Investment Agreement and are continuing to evaluate all viable power options, including construction of an Oyu Tolgoi based power plant. A final decision on the outcome, cost or financing of a permanent domestic power supply has not been concluded. The cost of a power solution for Oyu Tolgoi is not included in the capital cost estimate under “Material Mineral Property – Entrée Oyu/Tolgoi JV Project, Mongolia – Capital Cost Estimates” below. Oyu Tolgoi Investment Agreement and Entrée The contract area defined in the Oyu Tolgoi Investment Agreement includes the Javhlant and Shivee Tolgoi mining licences, including the Shivee West Property, which is 100% owned by Entrée and not currently subject to the Entrée/Oyu Tolgoi JV. The conversion of the original Shivee Tolgoi and Javhlant exploration licences into mining licences was a condition precedent to the Oyu Tolgoi Investment Agreement coming into effect. The Shivee Tolgoi and Javhlant mining licences were issued on October 27, 2009, and the Oyu Tolgoi Investment Agreement took legal effect on March 31, 2010. The Ministry of Mining has advised Entrée that it considers the deposits on the Entrée/Oyu Tolgoi JV Property to be part of the series of Oyu Tolgoi deposits, which were declared to be Strategic Deposits under Resolution No 57 dated July 16, 2009 of the State Great Khural. However, at the time of negotiation of the Oyu Tolgoi Investment Agreement, Entrée was not made a party to the Oyu Tolgoi Investment Agreement, and as such does not have any direct rights or benefits under the Oyu Tolgoi Investment Agreement. OTLLC agreed, under the terms of the Earn-In Agreement, to use its best efforts to cause Entrée to be brought within the ambit of, made subject to and to be entitled to the benefits of the Oyu Tolgoi Investment Agreement or a separate stability agreement on substantially similar terms to the Oyu Tolgoi Investment Agreement. Entrée has been engaged in discussions with stakeholders of the Oyu Tolgoi project, including the Government of Mongolia, OTLLC, Erdenes Oyu Tolgoi LLC, Turquoise Hill and Rio Tinto, since February 2013. The discussions to date have focussed on issues arising from Entrée’s exclusion from the Oyu Tolgoi Investment Agreement, including the fact that the Government of Mongolia does not have a full 34% interest in the Entrée/Oyu Tolgoi JV Property; the fact that the mining licences integral to future underground operations are held by more than one corporate entity; and the fact that Entrée does not benefit from the stability that it would otherwise have if it were a party to the Oyu Tolgoi Investment Agreement. In order to receive the benefits of the Oyu Tolgoi Investment Agreement, the Government of Mongolia may require Entrée to agree to certain concessions, including with respect to the ownership of the Entrée/Oyu Tolgoi JV, Entrée LLC or the economic benefit of Entrée’s interest in the Entrée/Oyu Tolgoi JV Property, or the royalty rates applicable to Entrée’s share of the Entrée/Oyu Tolgoi JV Property mineralization. No agreements have been finalized. Entrée/Oyu Tolgoi JV Property and the Mongolian Government In June 2010, the Government of Mongolia passed Resolution 140, the purpose of which is to authorize the designation of certain land areas for “state special needs” within certain defined areas, some of which include or are in proximity to the Oyu Tolgoi project. These state special needs areas are to be used for Khanbogd village development and for infrastructure and plant facilities necessary in order to implement the development and operation of the Oyu Tolgoi project. A portion of the Shivee Tolgoi licence is included in the land area that is subject to Resolution 140. In June 2011, the Government of Mongolia passed Resolution 175, the purpose of which is to authorize the designation of certain land areas for “state special needs” within certain defined areas in proximity to the Oyu Tolgoi project. These state special needs areas are to be used for infrastructure facilities necessary in order to 24 implement the development and construction of the Oyu Tolgoi project. Portions of the Shivee Tolgoi and Javhlant licences are included in the land area that is subject to Resolution 175. It is expected, but not yet formally confirmed by the Government, that to the extent that a consensual access agreement exists or is entered into between OTLLC and an affected licence holder, the application of Resolution 175 to the land area covered by the access agreement will be unnecessary. OTLLC has existing access and surface rights to the Entrée/Oyu Tolgoi JV Property pursuant to the Earn-In Agreement. If Entrée is unable to reach a consensual arrangement with OTLLC with respect to the Shivee West Property, Entrée’s right to use and access a corridor of land included in the state special needs areas for a proposed power line may be adversely affected by the application of Resolution 175. While the Mongolian Government would be responsible for compensating Entrée in accordance with the mandate of Resolution 175, the amount of such compensation is not presently quantifiable. The Oyu Tolgoi Investment Agreement contains provisions restricting the circumstances under which the Shivee Tolgoi and Javhlant licences may be expropriated. As a result, Entrée considers that the application of Resolution 140 and Resolution 175 to the Entrée/Oyu Tolgoi JV Property will likely be considered unnecessary. In March 2014, the Government of Mongolia passed Resolution 81, the purpose of which is to approve the direction of the railway line heading from Ukhaa Khudag deposit located in the territory of Tsogttsetsii soum, Umnugobi aimag, to the port of Gashuunshukhait and to appoint the Minister of Roads and Transportation to develop a detailed engineering layout of the base structure of the railway. On June 18, 2014, Entrée was advised by the Mineral Resources Authority of Mongolia (“MRAM”) that the base structure overlaps with a portion of the Javhlant licence. By Order No. 123 dated June 18, 2014, the Minister of Mining approved the composition of a working group to resolve matters related to the holders of licences through which the railway passes. The Minister of Mining has not yet responded to a request from Entrée to meet to discuss the proposed railway, and no further correspondence from MRAM or the Minister of Mining has been received. It is not yet clear whether the State has the legal right to take a portion of the Javhlant licence, with or without compensation, in order to implement a national railway project, and if it does, whether it will attempt to exercise that right. While the Oyu Tolgoi Investment Agreement contains provisions restricting the circumstances under which the Javhlant licence may be expropriated, there can be no assurances that Resolution 81 will not be applied in a manner that has an adverse impact on Entrée. Investment by Rio Tinto in Entrée and Turquoise Hill In June 2005, following the announcement in May 2005 of the discovery of high grade mineralization at Hugo North Extension, Rio Tinto indirectly took part in a private placement in the Company and became its then largest shareholder. Following Rio Tinto’s investment in the Company in June 2005, Rio Tinto acquired, through a series of transactions, approximately 49% of Turquoise Hill’s issued and outstanding shares. On January 24, 2012, Rio Tinto announced that it had increased its ownership interest in Turquoise Hill to approximately 51%. At that time, Rio Tinto was deemed to have acquired beneficial ownership over the Common Shares of the Company owned by Turquoise Hill. At December 31, 2017, Rio Tinto directly owned approximately 9.54% of the Company’s issued and outstanding Common Shares. When combined with the Common Shares owned by Turquoise Hill, at December 31, 2017 Rio Tinto beneficially owned approximately 17.49% of the Company’s issued and outstanding Common Shares (17.43% as at March 8, 2018). Legislation On November 1, 2013, an Investment Law came into effect in Mongolia. The law was aimed at reviving foreign investment by easing restrictions on investors (including foreign and domestic) in key sectors such as mining and by providing greater certainty on the taxes they must pay and certain guarantees in relation to their investments in 25 Mongolia. The law replaced two previous laws, including the Law of Mongolia on the Regulation of Foreign Investment in Business Entities Operating in Sectors of Strategic Importance (“SEFIL”), which were restrictive in nature and had proven to be a deterrent to foreign investment in Mongolia. Most importantly, the Investment Law stabilizes the tax environment by way of issuing “stabilization certificate(s)” to investors who meet the criteria stated in the law. Within the scope of tax stabilization, the following four taxes will be stabilized: (i) legal entity income tax; (ii) customs duties; (iii) value added tax; and (iv) mineral royalties. The Investment Law also provides for the ability of investors in major projects to enter into an investment agreement with the Government of Mongolia, which can provide additional protections to an investor beyond those covered by a tax stabilization certificate. The full impact of the Investment Law is still not yet known. On January 16, 2014, the Mongolian Parliament adopted a new State Minerals Policy until 2025. The main focus of the policy is to establish a stable investment environment; improve the quality of mineral exploration, mining and processing; encourage the use of environmentally friendly and modern technology; and strengthen the competitiveness of the Mongolian mining sector on the international market. The State Minerals Policy is also intended to serve as the basis for amendments to the existing Minerals Law and other laws relating to the mining sector. The State Minerals Policy contemplates the establishment of a “Policy Council” with representatives of the State, investors, professional associations and the public, to make recommendations and support the implementation of the State Minerals Policy. The State Minerals Policy sets out a broad timetable for implementation of its objectives, with legislative reform to be implemented in 2014 and 2015, implementation of the principles of the State Minerals Policy to take place between 2014 and 2025, and assessment of the implementation of the Minerals Policy to occur between 2020 and 2025. On July 1, 2014, the Mongolian Parliament passed the Law on the Amendments to the Minerals Law which amends the 2006 Minerals Law (the “2014 Amendments”). In addition, the Mongolian Parliament also passed a separate law which repealed the 2010 statute which imposed a moratorium on the granting of new exploration licences and the transfer of existing licences. The 2014 Amendments extend the maximum period for an exploration licence from 9 years to 12 years (although it ended the three year pre-mining period sometimes given to licence holders upon the expiration of their exploration rights), extend the requirement for holders of mining licences to ensure that 90% of their workforce is comprised of Mongolian nationals to the mining licence holder’s subcontractors as well, make clearer the roles and responsibilities of government ministries and departments with respect to mineral matters, modify the definition of Strategic Deposit to reflect its impact on the national economy and not regional economy, and provide for some instances where a tender may not be required to obtain minerals licences where state funding has been used if related to compensation for declaring a special needs area, among other changes. On February 18, 2015, the Mongolian Parliament adopted the Amendment Law to the Minerals Law of 2006 (the “2015 Amendment”), which permits a licence holder to negotiate with the Government of Mongolia with respect to an exchange of the Government’s 34% (50% in cases where exploration has been funded by the State budget) equity interest in a licence holder with a Strategic Deposit for an additional royalty payable to the Government. The amount of the royalty payment would vary depending on the particulars of the Strategic Deposit but cannot exceed 5 percent. The rate of this royalty payment shall be approved by the Government of Mongolia. The full impact of the 2015 Amendment is not yet known. On November 10, 2016, the Mongolian Parliament adopted the Amendment Law to the Minerals Law of 2006 (the introduces the term “derivative deposit” and applicable regulations for “2016 Amendment”), which mining/exploitation of derivative deposits. Mining/exploitation of a derivative deposit by a licence holder or any other contracted third party (with the licence holder) is subject to licence. Further, the 2016 Amendment sets the royalty payment for mining/exploitation of a derivative deposit at 2.5% of the sales value, with an additional royalty of between 0% and 5% for gold if it is sold other than to the Central Bank of Mongolia. 26 The Ministry of Mining is currently working on a draft mining law, aimed at regulating the mining sector in greater detail in Mongolia. If adopted, the draft mining law could adversely affect Entree’s interests. It is not possible to determine when, if ever, this draft law will be adopted and in what form. The Ministry of Finance and certain Members of Parliament have released draft laws and draft amendments to the tax legislation of Mongolia which include provisions related to the taxation of foreign legal entities operating in Mongolia and minerals companies in general. If certain provisions of these amendments were adopted by Parliament as currently drafted, they could adversely affect Entree's interests. It is not possible to determine when, if ever, these amendments would be adopted and in what form. On December 9, 2017, the Parliament of Mongolia amended the General Tax Law, the Corporate Income Tax Law, the Personal Income Tax Law, the Minerals Law, the Land Law and the Legal Entities Registration, to introduce the concept of an “ultimate holder” of a legal entity for tax purposes. Any change of an ultimate holder of a legal entity that maintains a minerals licence is deemed to be a sale of the minerals licence and is subject to a 30% corporate income tax on the total income earned. The legal entity holding the minerals licence bears the tax obligation, not the person who earns the income from the transaction. In general, taxable income will be assessed based on the value of the minerals licence, pro-rated to the number or percentage of shares transferred from the ultimate holder. On December 25, 2017, the Ministry of Finance passed Decree No. 380 setting out the methodology to determine the value of minerals licences. The full impact of the amendments is not yet known. There is no assurance that the amendments will not adversely affect the Company and its share price. Agreements with Sandstorm Amended and Restated Equity Participation and Funding Agreement On February 14, 2013, the Company entered into an Equity Participation and Funding Agreement (the “2013 Agreement”) with Sandstorm. Pursuant to the 2013 Agreement, Sandstorm provided an upfront refundable deposit (the “Deposit”) of $40 million to the Company. The Company will use future payments that it receives from its mineral property interests to purchase and deliver metal credits to Sandstorm. The amount of metal credits that the Company is required to purchase and deliver to Sandstorm, and the timing of such deliveries, are determined with reference to Entrée’s share of production and receipt of payments from the sale of product from the Entrée/Oyu Tolgoi JV Property. Upon the delivery of metal credits, Sandstorm will also make the cash payment outlined below. In addition, the 2013 Agreement provides for a partial refund of the Deposit and a pro rata reduction in the number of metal credits deliverable to Sandstorm in the event of a partial expropriation of Entrée’s economic interest, contractually or otherwise, in the Entrée/Oyu Tolgoi JV Property. On February 23, 2016, the Company and Sandstorm entered into an Agreement to Amend the 2013 Agreement, pursuant to which the Company refunded 17% of the Deposit ($6.8 million) (the “Refund”) thereby reducing the Deposit to $33.2 million for a 17% reduction in the metal credits that the Company is required to deliver to Sandstorm. The Refund was paid with $5.5 million in cash and the issuance of $1.3 million of Common Shares. At closing on March 1, 2016, the parties entered into an Amended and Restated Equity Participation and Funding Agreement (the “Amended Funding Agreement”). Under the terms of the Amended Funding Agreement, the Company will purchase and deliver gold, silver and copper credits equivalent to: (cid:120) 28.1% of Entrée’s share of gold and silver, and 2.1% of Entrée’s share of copper, produced from the Shivee Tolgoi mining licence (excluding the Shivee West Property); and (cid:120) 21.3% of Entrée’s share of gold and silver, and 2.1% of Entrée’s share of copper, produced from the Javhlant mining licence. Upon the delivery of metal credits, Sandstorm will make a cash payment to the Company equal to the lesser of the prevailing market price and $220 per ounce (“/oz”) of gold, $5/oz of silver and $0.50 per pound (“/lb”) of copper (subject to inflation adjustments). After approximately 8.6 million ounces of gold, 40.3 million ounces of silver and 27 9.1 billion pounds of copper have been produced from the entire Entrée/Oyu Tolgoi JV Property (as currently defined), the cash payment will be increased to the lesser of the prevailing market price and $500/oz of gold, $10/oz of silver and $1.10/lb of copper (subject to inflation adjustments). To the extent that the prevailing market price is greater than the amount of the cash payment, the difference between the two will be credited against the Deposit (the net amount of the Deposit being the “Unearned Balance”). This arrangement does not require the delivery of actual metal, and the Company may use revenue from any of its assets to purchase the requisite amount of metal credits. Under the Amended Funding Agreement, Sandstorm has a right of first refusal, subject to certain exceptions, on future production-based funding agreements. The Amended Funding Agreement also contains other customary terms and conditions, including representations, warranties, covenants and events of default. The initial term of the Amended Funding Agreement is 50 years, subject to successive 10-year extensions at the discretion of Sandstorm. In addition, the Amended Funding Agreement provides that the Company will not be required to make any further refund of the Deposit if Entrée’s economic interest is reduced by up to and including 17%. If there is a reduction of greater than 17% up to and including 34%, the Amended Funding Agreement provides the Company with the ability to refund a corresponding portion of the Deposit in cash or Common Shares or any combination of the two at the Company’s election, in which case there would be a further corresponding reduction in deliverable metal credits. If the Company elects to refund Sandstorm with Common Shares, the value of each Common Share will be equal to the volume weighted average price (“VWAP”) for the five (5) trading days immediately preceding the 90th day after the reduction in Entrée’s economic interest. In no case will Sandstorm become a “control person” under the Amended Funding Agreement. In the event an issuance of Common Shares would cause Sandstorm to become a “control person”, the maximum number of Common Shares will be issued, and with respect to the value of the remaining Common Shares, 50% will not be refunded (and there will not be a corresponding reduction in deliverable metal credits) and the remaining 50% will be refunded by the issuance of Common Shares in tranches over time, such that the number of Common Shares that Sandstorm holds does not reach or exceed 20%. All Common Shares will be priced in the context of the market at the time they are issued. In the event of a full expropriation, the remainder of the Unearned Balance after the foregoing refunds must be returned in cash. Securities Held By Sandstorm On March 1, 2013, Sandstorm purchased 17,857,142 common shares of the Company at a price of C$0.56 per common share for gross proceeds of approximately C$10 million. On March 1, 2016, the Company issued 5,128,604 common shares to Sandstorm at a price of C$0.3496 per common share pursuant to the Agreement to Amend described under “Amended and Restated Equity Participation and Funding Agreement” above. The price was calculated using the VWAP of the Company’s common chares on the TSX for the 15 trading days preceding February 23, 2016, the effective date of the Agreement to Amend. On January 11, 2017, Sandstorm acquired 914,634 units of the Company at a price of C$0.41 per unit as part of a larger non-brokered private placement. See “Description of the Business – Non-Brokered Private Placement” below. As at December 31, 2017, Sandstorm held 23,900,380 Common Shares, or approximately 13.77% of the outstanding Common Shares of the Company (March 8, 2018 – 13.72%), and Replacement Warrants (as defined below) to purchase an additional 457,317 Common Shares. 28 Under the Amended Funding Agreement, Sandstorm is required to vote its Common Shares of the Company as the Company’s Board 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 Amended Funding Agreement. Non-Brokered Private Placement On January 11, 2017, the Company closed the first of two tranches of a non-brokered private placement of units at a price of C$0.41 per unit (the “Private Placement”). The Company issued 17,309,971 units for gross proceeds of C$7,097,088. A second tranche of 1,219,513 units closed on January 13, 2017 for additional gross proceeds of C$500,000. Each unit (a “Unit”) consisted of one common share of the Company and one-half of one transferable common share purchase warrant. Each whole warrant entitled the holder to acquire one additional common share of the Company for a period of five years at a price of C$0.65. No commissions or finders’ fees were payable in connection with the Private Placement. As part of the Arrangement, warrantholders of the Company received Mason common share purchase warrants (“Mason Warrants”) which were proportionate to, and reflective of the terms of, their existing warrants of the Company. In exchange for each existing warrant, the holder was issued one replacement Common Share purchase warrant of the Company (a “Replacement Warrant”) and 0.45 of a Mason Warrant. On May 23, 2017, warrantholders of the Company received an aggregate 4,169,119 Mason Warrants each with an exercise price of C$0.23, and an aggregate 9,264,735 Replacement Warrants each with an exercise price of C$0.55. The exercise prices assigned to the Replacement Warrants and the Mason Warrants reflect the allocation of the original exercise price of the existing warrants between the Replacement Warrants and the Mason Warrants issued, based on the relative market value of Mason and the Company following completion of the Arrangement. Net proceeds from the Private Placement were used to support the restructuring of the Company’s business into two well-funded, separate publicly traded companies, for the advancement of Entrée’s core assets in Mongolia, and for general corporate purposes. Directors and officers of the Company and their associates acquired an aggregate 1,144,902 Units on the same terms and conditions as other subscribers. Other insiders of the Company and their associates acquired an aggregate 5.5 million Units, including 914,634 Units acquired by Sandstorm. See “Description of the Business – Agreements with Sandstorm – Securities Held by Sandstorm” above and “Interest in Management and Others in Material Transactions – Non-Brokered Private Placement” below. Arrangement On May 9, 2017, the Company completed a spin-out of Entrée’s Ann Mason Project in Nevada and Lordsburg property in New Mexico into a newly incorporated wholly-owned subsidiary, Mason, through a court approved plan of arrangement under Section 288 of the BCBCA. The Company’s shareholders received common shares of Mason in proportion to their shareholdings in the Company by way of a share exchange, pursuant to which each existing common share of the Company held as of the effective date of the Arrangement was exchanged for one “new” Common Share of the Company and 0.45 of a common share of Mason. A total of 77,805,786 common shares of Mason were distributed to the Company’s shareholders. There was no change to shareholders’ interests in the Company. The Company transferred to Mason all of the issued and outstanding shares of Entrée U.S. Holdings Inc., which indirectly holds the Ann Mason Project and the Lordsburg property, along with $8.84 million in cash. The result of the Arrangement is two separate and focused, well-capitalized entities, each with a high quality advanced project providing new and existing shareholders with optionality as to investment strategy and risk profile. 29 Optionholders and warrantholders of the Company received replacement options and Replacement Warrants of the Company and Mason Warrants and options of Mason which are proportionate to, and reflective of the terms of, their original options and warrants of the Company. Mason’s common shares commenced trading on the TSX on May 12, 2017 under the symbol “MNR”, and on the OTCQB Venture Market on November 9, 2017 under the symbol “MSSNF”. Environmental Compliance Any current and future exploration and development activities, as well as future mining and processing operations, if warranted, are subject to various federal, state and local laws and regulations in the countries in which Entrée and its partners conduct their activities. These laws and regulations govern the protection of the environment, prospecting, development, production, taxes, labour standards, occupational health, mine safety, toxic substances and other matters. Entrée expects that it and its partners will be able to comply with these laws and does not believe that compliance will have a material adverse effect on its competitive position. Entrée intends to obtain all licences and permits required by all applicable regulatory agencies in connection with its operations and activities. Entrée intends to maintain standards of compliance consistent with contemporary industry practice. Holders of an exploration or mining licence in Mongolia must comply with environmental protection obligations established in the Environmental Protection Law of Mongolia, Law of Environmental Impact Assessment and the Minerals Law. These obligations include: preparation of an Environmental Impact Assessment for exploration and mining proposals; submitting an annual environmental protection plan; posting an annual bond against completion of the protection plan; and submitting an annual environmental report. Environmental bonds have been paid to the local governments, Khanbogd and Bayan-Ovoo soums, together equal to approximately 3,049,000 tugriks (approximately $1,230). These bonds cover current environmental liabilities for exploration work undertaken at the Shivee West Property. These amounts are refundable to Entrée on request once all environmental work has been completed to the satisfaction of the local soums. Entrée also pays to the local soums annual fees for water, land and road usage. Development and exploration on the Entrée/Oyu Tolgoi JV Property is controlled and managed by Rio Tinto on behalf of OTLLC, which is responsible for all environmental compliance. Competition Entrée operates in a very competitive industry and competes with other companies, many of which have greater financial resources and technical facilities for the identification, acquisition and development of mineral properties and assets, as well as for the recruitment and retention of qualified employees and consultants. Specialized Skills and Knowledge Entrée’s business requires specialized skills and knowledge in the areas of geology, financial modelling, logistical planning, geophysics, metallurgy and mineral processing, mining, engineering and accounting and compliance, among others. To date, Entrée has been able to locate and retain such professionals, employees and consultants and believes it will continue to be able to do so. Business Cycles The mining business is subject to mineral price cycles. The marketability of minerals and mineral concentrates is also affected by worldwide economic cycles. If the global economy stalls and commodity prices decline as a result, a continuing period of lower prices could significantly affect the economic potential of Entrée’s current property interests and result in Entrée or its partners determining to cease work on, or drop their interests in, some or all of 30 such properties. In addition to commodity price cycles and recessionary periods, activity may also be affected by seasonal and irregular weather conditions in the areas where Entrée has property interests. Economic Dependence Entrée is heavily dependent upon the results obtained under agreements, including the Entrée/Oyu Tolgoi JVA, for the exploration and extraction of minerals. Foreign Operations Entrée’s property interests are all located in foreign countries. Employees At December 31, 2017, Entrée had six full-time employees and two part-time consultants based in Vancouver, British Columbia and two full-time employees based in Ulaanbaatar, Mongolia. Following the Arrangement, the Company and Mason entered into an Administrative Services Agreement pursuant to which the Company provides office space, furnishings and equipment, communications facilities and personnel necessary for Mason to fulfill its basic day-to-day head office and executive responsibilities on a pro-rata cost-recovery basis. MATERIAL MINERAL PROPERTY Entrée/Oyu Tolgoi JV Project, Mongolia The Company engaged Amec Foster Wheeler to prepare an independent NI 43-101 Technical Report which summarizes the results of an updated reserve case, based only on mineral reserves attributable to the Entrée/Oyu Tolgoi JV from Lift 1 of the Hugo North Extension underground block cave, and a LOM PEA, which is an alternative development scenario completed at a conceptual level that assesses the inclusion of mineral resources from Hugo North Extension Lift 2 and Heruga into an overall mine plan with mineral resources from Hugo North Extension Lift 1. Information set out below of a scientific or technical nature regarding the Entrée/Oyu Tolgoi JV Project is derived from the NI 43-101 Technical Report with an effective date of January 15, 2018, titled “Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report” prepared by Amec Foster Wheeler (the “2018 Technical Report”). Readers are cautioned that the information below is a summary only. For additional information regarding the assumptions, qualifications and procedures associated with the scientific and technical information regarding the Entrée/Oyu Tolgoi JV Project, reference should be made to the full text of the 2018 Technical Report, which is available for review on SEDAR located at www.sedar.com or on www.EntreeResourcesLtd.com. Introduction The Project consists of two contiguous mining licences, Shivee Tolgoi (ML 15226A) and Javhlant (ML 15225A), and completely surrounds the Oyu Tolgoi mining licence held by OTLLC. The Shivee Tolgoi mining licence hosts the Hugo North Extension copper-gold deposit, and the Javhlant mining licence hosts the majority of the Heruga copper-gold-molybdenum deposit. The Shivee Tolgoi mining licence and Javhlant mining licence are held by Entrée’s wholly-owned Mongolian subsidiary, Entrée LLC. The Entrée/Oyu Tolgoi JV Project is currently divided into two contiguous areas, referred to as “properties”. Entrée is in joint venture with OTLLC over the eastern portion of the Shivee Tolgoi mining licence and all of the Javhlant mining licence. This is referred to as the Entrée/Oyu Tolgoi JV Property. The western portion of the Shivee Tolgoi mining licence forms the Shivee West Property, where Entrée currently has a 100% interest. The 31 Shivee West Property is the subject of a License Fees Agreement with OTLLC, and may ultimately become part of the Entrée/Oyu Tolgoi JV Property. Entrée’s joint venture partner, OTLLC, is jointly owned by the Mongolian Government and Turquoise Hill. Rio Tinto, which holds the majority interest in Turquoise Hill, is the operator for both the Oyu Tolgoi mining licence and the Entrée/Oyu Tolgoi JV Property. The Hugo North Extension deposit is at the north end of the 12.4 km long Oyu Tolgoi series of porphyry copper- gold deposits, and the Heruga deposit is at the south end (Figures 3 and 4 above). OTLLC’s Oyu Tolgoi mining licence contains the Oyut, Hugo North and Hugo South deposits, and the northern portion of the Heruga deposit. OTLLC is currently mining the Oyut deposit by open pit methods, and the first lift (Lift 1) of the Hugo North/Hugo North Extension deposits are under development to be mined from underground. The Oyu Tolgoi mining operation is being developed by OTLLC in two phases. Phase 1 was designed to treat open pit material mined from the Oyut pit, and was completed with concentrator commissioning in 2013. Phase 2 is under construction. It will consist of Lift 1 of the Hugo North/Hugo North Extension deposits, which will be mined by panel caving, a variant of the block caving mining method. Phase 2 will include construction of infrastructure to support the underground mining operations such as shafts and conveyors, and modifications to the process plant such as addition of a fifth ball mill, and additional roughing and column flotation, and concentrate dewatering and bagging capacity. The Phase 2 mine plan is at Feasibility level and is based on mineral reserves only. The evaluation of the mine plan for Hugo North Extension Lift 1 within the Entrée/Oyu Tolgoi JV Property is referred to by Entrée as the 2018 Reserve Case. In the 2018 Technical Report, the portion of the 2018 Reserve Case that pertains to Entrée is referred to as Entrée’s 20% attributable interest. OTLLC has conceptually proposed a second lift (Lift 2) for the Hugo North/Hugo North Extension area, in conjunction with mining of the Hugo South and Heruga deposits, as potential future development phases. A mine plan, at a PEA level, has been prepared for the Hugo North Extension Lift 1, Lift 2, and Heruga mineralization within the Entrée/Oyu Tolgoi JV Property. This PEA is referred to by Entrée as the 2018 PEA. The 2018 PEA is based upon Indicated and Inferred mineral resources only. In the 2018 Technical Report, the portion of the 2018 PEA that pertains to Entrée is referred to as Entrée’s 20% attributable interest. The 2018 Technical Report presents the mine plan and financial analysis for the mineral reserves (Entrée’s 2018 Reserve Case) and the 2018 PEA. Entrée’s 20% attributable interest in production is provided for the mineral reserves and for the 2018 PEA. To meet Form 43-101F1 requirements, the Oyu Tolgoi mine facilities that the mineral reserves and the 2018 PEA rely upon are summarized in the 2018 Technical Report, even though the majority of the facilities are located on the Oyu Tolgoi mining licence that Entrée has no ownership interest in. However, Entrée does have access to these facilities for processing its share of production through the Entrée/Oyu Tolgoi JVA. The 2018 Technical Report does not discuss the mineral resources or mineral reserves on the Oyu Tolgoi mining licence, where Entrée does not have an attributable interest. Project Area The Entrée/Oyu Tolgoi JV Project is located in the South Gobi region of Mongolia, 570 kilometres (“km”) south of the capital city of Ulaanbaatar and 80 km north of the Mongolian border with China. The Project can be accessed by road and air. A railway route is under construction by the Government of Mongolia and will pass through the southwest corners of the Shivee Tolgoi and Javhlant mining licences. OTLLC will make use of the Port of Tianjin in China for freight. The South Gobi region has a continental, semi-desert climate. Mining operations are conducted year-round. Exploration activities can see short curtailments during storm activity. 32 Mineral Tenure, Royalties and Agreements Amec Foster Wheeler did not independently review ownership of the Project area and any underlying property agreements, mineral tenure, surface rights, or royalties. Amec Foster Wheeler fully relied upon information derived from Entrée and legal experts retained by Entrée for this information. Mineral Tenure The Shivee Tolgoi and Javhlant mining licences cover a total of about 62,920 hectares (“ha”) and completely surround the Oyu Tolgoi mining licence. The Shivee Tolgoi and Javhlant mining licences are valid until 2039, assuming statutory payments and reporting obligations are met, and can be extended for two subsequent 20 year terms. The Shivee Tolgoi and Javhlant mining licences are currently divided as follows: (cid:16) Entrée/Oyu Tolgoi JV Property: 39,807 ha consisting of the eastern portion of the Shivee Tolgoi mining licence and all of the Javhlant mining licence are subject to a joint venture between Entrée and OTLLC. The Entrée/Oyu Tolgoi JV Property is contiguous with, and on three sides (to the north, east, and south) surrounds OTLLC’s Oyu Tolgoi mining licence. The Entrée/Oyu Tolgoi JV Property hosts the Hugo North Extension deposit and the majority of the Heruga deposit, and several exploration targets. OTLLC is the manager of the Entrée/Oyu Tolgoi JV. Through various agreements, Rio Tinto has assumed management of the building and operation of Oyu Tolgoi, including access to and exploitation of the Hugo North Extension deposit. Rio Tinto will also manage any development of the portion of the Heruga deposit on the Entrée/Oyu Tolgoi JV Property. Exploration operations on behalf of OTLLC, including exploration on the Entrée/Oyu Tolgoi JV Property, are conducted under the supervision of Rio Tinto. (cid:16) Shivee West Property: 23,114 ha comprising the western portion of the Shivee Tolgoi mining licence. While the Shivee West Property is currently 100% owned by Entrée, since 2015 it has been subject to a License Fees Agreement between Entrée and OTLLC and may ultimately be included in the Entrée/Oyu Tolgoi JV Property. OTLLC also has a first right of refusal with respect to any proposed disposition by Entrée of an interest in the Shivee West Property. Joint Venture Agreement On October 15, 2004, Entrée entered into the Earn-In Agreement with Ivanhoe Mines Ltd. (now Turquoise Hill). On November 9, 2004, Turquoise Hill and Entrée entered into an Amendment to Equity Participation and Earn-In Agreement, which appended the form of joint venture agreement that the parties were required to enter into on the date upon which the aggregate earn-in expenditures incurred by Turquoise Hill equalled or exceeded the amount of earn-in expenditures required in order for Turquoise Hill to earn the maximum participating interest available (80%). On March 1, 2005, Turquoise Hill and Entrée entered into an Assignment Agreement, pursuant to which Turquoise Hill assigned most of its rights and obligations under the Earn-In Agreement, as amended, to Ivanhoe Mines Mongolia Inc. (now OTLLC). On June 30, 2008, OTLLC gave notice to Entrée that it had completed the earn-in expenditures required in order to earn the maximum participating interest available. As a consequence, a joint venture was formed. OTLLC has an initial joint venture participating interest of 80% in the Entrée/Oyu Tolgoi JV, and Entrée has an initial joint venture participating interest of 20%. In respect of products extracted from the Entrée/Oyu Tolgoi JV property pursuant to mining carried out at depths from surface to 560 metres (“m”) below surface, the OTLLC has an initial participating interest of 70% and Entrée has an initial participating interest of 30%. On October 1, 2015, Entrée and Entrée LLC entered into a License Fees Agreement with OTLLC, pursuant to which the parties agreed to negotiate in good faith to amend the Entrée/Oyu Tolgoi JVA to include the Shivee West Property in the definition of the Entrée/Oyu Tolgoi JV Property. In addition, under the Entrée/Oyu Tolgoi JVA, 33 OTLLC has a right of first refusal with respect to any proposed disposition by Entrée of an interest in the Shivee West Property. Strategic Deposits Under Resolution No 57 dated July 16, 2009 of the State Great Khural, the Oyu Tolgoi series of deposits were declared to be Strategic Deposits. The Ministry of Mining has advised Entrée that it considers the deposits on the Entrée/Oyu Tolgoi JV Property to be part of the series of Oyu Tolgoi deposits. Investment Agreement On October 6, 2009, Turquoise Hill, its wholly-owned subsidiary OTLLC, and Rio Tinto signed the Oyu Tolgoi Investment Agreement with the Mongolian Government, which regulates the relationship among the parties and stabilizes the long-term tax, legal, fiscal, regulatory and operating environment to support the development of the Oyu Tolgoi project. The Oyu Tolgoi Investment Agreement took legal effect on March 31, 2010. The Oyu Tolgoi Investment Agreement specifies that the Government of Mongolia will own 34% of the shares of OTLLC (and indirectly by extension, 34% of OTLLC’s interest in the Entrée/Oyu Tolgoi JV Property) through its subsidiary Erdenes Oyu Tolgoi LLC. A shareholders’ agreement was concurrently executed to establish the Government’s 34% ownership interest in OTLLC and to govern the relationship among the parties. Although the contract area defined in the Oyu Tolgoi Investment Agreement includes the Javhlant and Shivee Tolgoi mining licences, Entrée is not a party to the Oyu Tolgoi Investment Agreement, and does not have any direct rights or benefits under the Oyu Tolgoi Investment Agreement. OTLLC agreed, under the terms of the Earn-In Agreement, to use its best efforts to cause Entrée to be brought within the ambit of, made subject to and to be entitled to the benefits of the Oyu Tolgoi Investment Agreement or a separate stability agreement on substantially similar terms to the Oyu Tolgoi Investment Agreement. Entrée has been engaged in discussions with stakeholders of the Oyu Tolgoi project, including the Government of Mongolia, OTLLC, Erdenes Oyu Tolgoi LLC, Turquoise Hill and Rio Tinto, since February 2013. The discussions to date have focused on issues arising from Entrée’s exclusion from the Oyu Tolgoi Investment Agreement, including the fact that the Government of Mongolia does not have a full 34% interest in the Entrée/Oyu Tolgoi JV Property; the fact that the mining licences integral to future underground operations are held by more than one corporate entity; and the fact that Entrée does not benefit from the stability that it would otherwise have if it were a party to the Oyu Tolgoi Investment Agreement. No agreements have been finalized. Royalties The Minerals Law of Mongolia provides for the payment of a royalty for exploitation of a mineral resource (the regular royalty). In general, the regular royalty is calculated on the basis of the sales value of all extracted products sold or loaded to be sold, and of all products utilized. Depending on the type of mineral, the regular royalty ranges from a base rate of 2.5% to 5%. The applicable regular royalty rate for copper, silver, molybdenum and exported gold is 5%. In addition, an additional royalty amount may be payable depending on the market value in excess of a designated base value of the relevant product (the surtax royalty). If the State is an equity participant in the exploitation of a Strategic Deposit, the licence holder is permitted to negotiate with the Government of Mongolia to exchange the Government’s equity interest in the licence holder for an additional royalty payable to the Government (a special royalty), the percentage of which would vary depending on the particulars of the Strategic Deposit, but which cannot exceed 5%. The special royalty would be paid in addition to the regular royalty and, if applicable, a surtax royalty. 34 Geology and Mineralization The Oyu Tolgoi deposits, including those within the Entrée/Oyu Tolgoi JV Property, host copper-gold porphyry and related high-sulphidation copper-gold deposit styles. Mineralization identified in the Shivee West Property consists of low-sulphidation epithermal mineralization styles. The Oyu Tolgoi porphyry deposits are hosted within the Palaeozoic Gurvansayhan Terrane. Lithologies identified to date in the Gurvansayhan Terrane include Silurian to Carboniferous terrigenous sedimentary, volcanic-rich sedimentary, carbonate, and intermediate to felsic volcanic rocks. The sedimentary and volcanic units are intruded by Devonian granitoids and Permo-Carboniferous diorite, monzodiorite, granite, granodiorite, and syenite bodies, which can range in size from dykes to batholiths. The Hugo Dummett deposits (Hugo North/Hugo North Extension and Hugo South) contain porphyry-style mineralization associated with quartz monzodiorite intrusions, concealed beneath a sequence of Upper Devonian and Lower Carboniferous sedimentary and volcanic rocks. The deposits are highly elongated to the north- northeast and extend over at least 3 km. The Hugo North/Hugo North Extension deposits occur within easterly- dipping homoclinal strata contained in a north-northeasterly elongated, fault-bounded block. The northern portion of this block is cut by several northeast-striking faults near the boundary between the Oyu Tolgoi mining licence and the Shivee Tolgoi mining licence. Deformation is dominated by brittle faulting. Host rocks at Hugo North/Hugo North Extension deposits consists of an easterly-dipping sequence of volcanic and volcaniclastic strata correlated with the lower part of the Devonian Alagbayan Group, and quartz monzodiorite intrusive, rocks that intrude the volcanic sequence, and a large post-mineral biotite granodiorite. The highest- grade copper mineralization in the Hugo North/Hugo North Extension deposits is related to a zone of intensely stockworked to sheeted quartz veins. The high-grade zone is centred on thin, east-dipping quartz monzodiorite intrusions or within the apex of the large quartz monzodiorite body, and extends into adjacent basalt. Bornite is dominant in the highest-grade parts of the deposit (3-5% copper) and is zoned outward to chalcopyrite (2% copper). At grades of <1% copper, pyrite-chalcopyrite dominates. Elevated gold grades in the Hugo North/Hugo North Extension deposits occur within the up-dip (western) portion of the intensely-veined, high-grade core, and within a steeply-dipping lower zone cutting through the western part of the quartz monzodiorite. The Hugo North Extension occurs within moderately east dipping (65° to 75°) strata contained in a north- northeasterly-elongate fault-bounded block. The deposit is cut by several northeast-striking faults and fault splays near the boundary with the Oyu Tolgoi mining licence. Other than these northeasterly faults, the structural geometry and deformation history of the Hugo North Extension is similar to that of Hugo North. The Heruga deposit is the most southerly of the currently known deposits within the Oyu Tolgoi Trend. The deposit is a copper-gold-molybdenum porphyry deposit and is zoned with a molybdenum-rich carapace at higher elevations overlying gold-rich mineralization at depth. The top of the mineralization starts 500-600 m below the present ground surface. Quartz monzodiorite bodies intrude the Devonian augite basalts as elsewhere in the district. Non-mineralized dykes, comprising about 15% of the volume of the deposit, cut all other rock types. The deposit is transected by a series of north-northeast-trending vertical fault structures that step down 200 m to 300 m at a time to the west and have divided the deposit into at least two structural blocks. High-grade copper and gold intersections show a strong spatial association with contacts of the mineralized quartz monzodiorite porphyry intrusion in the southern part of the deposit. At deeper levels, mineralization consists of chalcopyrite and pyrite in veins and disseminated within biotite-chlorite-albite-actinolite-altered basalt or sericite- albite-altered quartz monzodiorite. The higher levels of the orebody are overprinted by strong quartz-sericite- tourmaline-pyrite alteration where mineralization consists of disseminated and vein-controlled pyrite, chalcopyrite and molybdenite. 35 A number of prospects have been identified in the Entrée/Oyu Tolgoi JV Project through reconnaissance evaluation, geochemical sampling and geophysical surveys. Some targets have preliminary drill testing. The Entrée/Oyu Tolgoi JV Project retains exploration potential for porphyry and epithermal-style mineralization. History Entrée’s interest in the Project commenced in 2002, when an option agreement was signed with a private Mongolian company over the Shivee Tolgoi and Javhlant exploration licences. Entrée subsequently purchased the licences in 2003, and they were converted to mining licences in 2009. The details of the Entrée/Oyu Tolgoi JV are summarized above under “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Mineral Tenure, Royalties and Agreements – Joint Venture Agreement”. Work completed in the Project area has included: surface reconnaissance mapping; geochemical sampling (trenching, conventional and mobile metal ion soil sampling, rock chip and grab sampling, and stream sediment and pan concentrate sampling); geophysical surveys (induced polarization, regional magnetic, ground magnetometer, and high-resolution magnetotelluric surveys); imagery; reverse circulation (“RC”), polycrystalline (“PCD”), and core drilling; metallurgical testwork; mining, geotechnical, and hydrogeological studies; and social and environmental studies. interpretation of satellite Drilling and Sampling Approximately 250,000 m of drilling in approximately 250 holes has been completed within the Shivee Tolgoi and Javhlant mining licences since 2004. Core drill holes are the principal source of geological and grade data. A small percentage of the drilling total comes from RC or combined RC/core drilling and from PCD drilling. Core drilling includes 71 drill holes totalling 97,252 m on the Hugo North Extension deposit and 46 drill holes totalling 67,844 m on the Heruga deposit. Entrée has completed 65 core holes totalling 38,244 m and 34 RC holes totalling 4,145 m within the Shivee West Property. There has been no drilling within the Shivee West Property since 2011. There has been no drilling on the Entrée/Oyu Tolgoi JV Property since 2016. Entrée/Oyu Tolgoi JV Property Drilling Most holes at Hugo North and Hugo North Extension were collared with PQ drill rods (85 millimetre (“mm”) core diameter) and were reduced to HQ size drill rods (63.5 mm) at depths of around 500 m prior to entering the mineralized zone. A small percentage were reduced to NQ size (47.6 mm) and a few holes have continued to depths of about 1,300 m using PQ diameter. Many of the deeper holes were drilled as “daughter” holes (wedges) from a PQ diameter “parent” drill hole. Collar survey methods were similar for core and RC drill holes. Proposed drill hole collars and completed collars are surveyed by a hand-held global positioning system (“GPS”) unit for preliminary interpretations. After the hole is completed, it is re-surveyed using a Nikon theodolite instrument. RC drill holes were typically not down-hole surveyed. In general, most RC holes are less than 100 m in depth and therefore unlikely to experience excessive deviations in the drill trace. OTLLC uses down-hole survey instruments to collect the azimuth and inclination at specific depths of the core drill holes for most of the diamond drilling programs. Six principal types of survey method have been used over the duration of the drilling programs, including Eastman Kodak, Flexit, Ranger, gyro, and north-seeking gyro methods. Recovery data were not collected for the RC drill programs. OTLLC’s geology staff measure core recovery and rock quality designation (“RQD”) during core drilling programs. In general, OTLLC reports that core recoveries obtained by the various drilling contractors have been very good, averaging between 97% and 99% for all of the deposits. RQD was not recorded for Heruga core, nor was geotechnical logging undertaken. 36 The logging comprised capture of geological, alteration, and mineralization data. In August 2010, OTLLC implemented a digital logging data capture using the acQuire system, replacing the earlier paper logging. Density data have been collected using water immersion methods, with a calliper method used as a quality assurance/quality control check. Entrée/Oyu Tolgoi JV Property Sampling Drill core was halved using a saw, and sampled on 2 m intervals. Independent analytical laboratories used during the analytical programs have included SGS, ALS (primary laboratories) and Bondar Clegg, Chemex, Genalysis, and Actlabs (secondary laboratories). ALS and SGS currently act as the secondary laboratories for each other. The on-site sample preparation facility has been managed by SGS and its predecessor companies since 2002. Sample preparation protocols were in line with industry norms, consisting of crushing to a nominal 90% at 3.35 mm, and pulverizing to a nominal 90% at 75 micrometres (“μm”) (200 mesh). Until September 2011, all samples submitted to SGS (Mongolia) were routinely assayed for gold, copper, iron, molybdenum, arsenic and silver. Copper, molybdenum, silver, and arsenic were determined by acid digestion followed by an atomic absorption spectroscopy (“AAS”) finish. Gold was determined using a 30 gram (“g”) fire assay fusion. After 2011, fluorine assays were requested. ALS (Vancouver) was appointed the primary laboratory for the high-resolution multi-element inductively-coupled plasma-mass spectroscopy (ICP-MS) suite, and LECO sulphur and carbon analyses. A trace element composites (“TEC”) program was undertaken in addition to routine analyses. The composites were subject to multi-element analyses comprising a suite of 47 elements determined by inductively-coupled plasma optical emission spectroscopy/mass spectrometry (“ICP-OES/MS”). Additional element analyses included mercury by cold vapour AAS, fluorine by KOH fusion/specific ion electrode, and carbon/sulphur by LECO furnace. All programs since 2003 have included submission of QA/QC samples, consisting of blank samples, standard reference materials (“SRMs”), duplicate samples, and check samples. For most of the drill programs, OTLLC has maintained a check assay program sending approximately 5% of assayed pulps to secondary laboratories. Samples were always attended or locked in a sample dispatch facility. Sample collection and transportation have always been undertaken by company or laboratory personnel using company vehicles. Chain-of-custody procedures consisted of filling out sample submittal forms that were sent to the laboratory with sample shipments to make certain that all samples were received by the laboratory. Shivee West Property Drilling Core holes were either completely drilled at PQ or HQ sizes, although some holes were PQ reduced to HQ, and others PQ reduced to HQ to NQ. Drill hole collars were surveyed at the end of each field season by Geocad Co. Ltd., a surveying company based in Ulaanbaatar, using differential GPS equipment. Entrée downhole-surveyed all core holes at approximately 50 m intervals using a Sperry Sun instrument. No downhole surveys were undertaken for RC holes. Most RC holes are shallow and vertical, and unlikely to have significant deviation. Core recoveries obtained by the drilling contractor were very good, except in localized areas of faulting or fracturing. 37 Core was logged for lithology, mineralization and alteration, and geological structures. Shivee West Property Sampling The 2011 RC holes were sampled on 1 m intervals from collar to planned depth. Drill core was halved using a saw, and sampled on 2 m intervals. Independent analytical laboratories used during the analytical programs included SGS for the core drilling, and Actlabs for RC samples. Sample preparation of drill core consisted of crushing to 85% passing 3.35 mm, followed by pulverizing to 90% passing 75 μm. Gold analysis was undertaken using a 30 g fire assay method. Copper, silver, and molybdenum were determined by AA. RC samples were pulverized to at least 95% passing 75 μm. Gold and silver analyses were undertaken using a 30 g fire assay method. Field blank, commercial SRMs, and quarter-core duplicate samples (for RC programs, field duplicates) were included in the sample submissions. Unsampled core was never left unattended at the rig; boxes are transported to the core logging facility at the camp site twice daily under a geologist or geologist-technician’s supervision. Sampled core was immediately sealed and stored in a fenced facility at the camp site. Samples were delivered under lock and key by Entrée personnel directly to the laboratory in Ulaanbaatar on an approximate weekly basis and using a chain-of-custody form to record transport and receipt of samples. Data Verification OTLLC and its predecessor Ivanhoe Mines reviewed assay quality control sample results supporting drill hole sample assaying on a monthly basis and prepared monthly and quarterly QA/QC reports. These reports describe a systematic monitoring and response to identified issues. In 2011 Ivanhoe Mines reported on an internal review, including laboratory audits, quality assurance procedures, quality control monitoring, and database improvements at Oyu Tolgoi for the period 2008 to 2010. Recommendations from this review were implemented or under advisement. No material issues were identified in these reports. A number of data reviews have been undertaken by independent consultants as part of preparation of technical reports on the Project. Amec Foster Wheeler reviewed drilling, sampling, and QA/QC procedures, and inspected drill core, core photos, core logs, and QA/QC reports during 2011 site visits. During this period, the QP also led the preparation of updated geological models related to the Oyut and Hugo North deposits, including the Hugo North Extension. The data verification completed by OTLLC and its predecessor companies, and the independent data verification completed by others, including the current QP, are sufficient to conclude the drill hole database is reasonably free of errors and suitable to support mineral resource estimation. Metallurgical Testwork Detailed metallurgical testwork has been completed on the Oyut (within the Oyu Tolgoi mining licence) and Hugo North/Hugo North Extension deposits, and includes flotation, comminution, locked cycle and mineralogical studies. Metallurgical studies for Heruga include liberation analysis, and bulk flotation and open circuit cleaning testwork. Included in the flotation testwork program was some work on ore hardness and grindability. 38 The first phase of the development of the Oyu Tolgoi mine process facilities was completed with concentrator commissioning in 2013. Testwork results and operations data have been used to develop and update the throughput models and metallurgical predictions, as well as to guide designs for the second development phase. The second phase will include a concentrator conversion, consisting of additional equipment required to process the changing semi-autogenous grind (“SAG”):ball mill power ratio and higher-grade Hugo North/Hugo North Extension ore. Throughput algorithms were developed during comminution modelling. The volumetric capacity limit in base data template 31 (“BDT31”) that was used in OTLLC’s 2014 Oyu Tolgoi Feasibility Study was 5.5 kilotonnes per hour (“kt/h”) (121 kilotonnes per day (“kt/d”), 44.3 million tonnes per annum (“Mt/a)). After a review of the volumetric capacity in OTLLC’s 2016 Oyu Tolgoi Feasibility Study, this was reduced to 5.0 kt/h (110 kt/d, 40 Mt/a). As a result, for the preparation of the 2016 Oyu Tolgoi Feasibility Study production schedule for the Oyu Tolgoi operation, the plant throughput volumetric limit was changed from 5.5 kt/h to 5.0 kt/h and the instantaneous throughput was increased by 2.2%. Further elevation and revision of the limit is quite likely as de-bottlenecking and optimization of the plant continues. The 2016 Oyu Tolgoi Feasibility Study limit has already been reached and may be exceeded as the Oyut ore is treated. For Heruga, throughput is not modeled, but instead is limited to 33.25 Mt/a. Hugo North/Hugo North Extension recoveries for copper, gold, and silver are based on BDT31, and derived equations. For Heruga, copper recoveries are based on the KM2133 testwork results with recoveries ranging up to 86.5% copper and producing concentrate grades of 25% by weight copper. The gold and silver recoveries are based on the Hugo North/Hugo North Extension projections. Copper assays vary with higher-grade Hugo North/Hugo North Extension production and increased bornite content early in the block cave. The peak grades from underground bornite-bearing ores are moderated by simultaneous treatment of large amounts of Oyut ore in 2022-2026. The high copper content, especially with a high copper:sulphur ratio, is attractive to most smelters as it provides high copper yield while not taxing acid recovery and handling systems. The peak anticipated concentrate grades of 30%-35% copper are projected from 2022 through 2030. The average grades presented in the 2016 Oyu Tolgoi Feasibility Study after concentrator conversion are expected to be competitive with other imports to the Chinese market at 28% copper. The significant variability in precious metals content may require shifts in concentrate allocations to smelters. Arsenic and fluorine are the only penalty elements that have been identified in the Oyut, Hugo North/Hugo North Extension deposits. Enargite is the primary arsenic carrier in these deposits, although tennantite is locally important. For arsenic in copper concentrate, the production model assigns a rate of $2/t/1,000 parts per million (“ppm”) above a 3,000 ppm threshold up to the rejection level of 5,000 ppm. For fluorine, the production model assigns a rate of $2/t/100 ppm above a 300 ppm threshold up to the rejection level of 1,000 ppm. The penalties are in line with terms from custom smelters. It has been reported that no fluorine penalties have been applied under the contract terms in operation since sales commenced in late 2013, so some conservatism is inherent in the NSR estimates. Bismuth and fluorine were present at penalty levels for testwork concentrates generated for the Heruga mineralization. Mineral Resource Estimation The database used for the estimation of mineral resources for the Hugo North Extension deposit consists of samples and geological information from 37 drill holes, including wedge (daughter) holes, totalling approximately 54,546 m. The database was closed for estimation purposes as of February 14, 2014. The database used to estimate the mineral resources for the Heruga deposit consists of samples and geological information from 43 drill holes, including wedge holes, totalling 58,276 m. The database was closed for estimation purposes as of June 21, 2009. 39 OTLLC produced three-dimensional (“3D”) geological models of the major structures and lithological units. The lithological shapes and faults, together with copper and gold grade shells and deposit zones, constrain the grade analysis and interpolation. Typically, the faults form the first order of hard boundaries constraining the lithological interpretation. Drill hole assay composites of 5 m lengths were used for both Hugo North/Hugo North Extension and Heruga. Bulk density values were composited into 5 m fixed-length downhole values for Heruga. A straight composite was used for Hugo North/Hugo North Extension. A strategy of soft, firm, and hard (“SFH”) boundaries was implemented to account for domain boundary uncertainty (dilution) and to reproduce the input grade sample distribution in the block model. Variographic analysis was completed. Both copper and gold in the Hugo North/Hugo North Extension area displayed short ranges for the first variogram structure and moderate to long ranges for the second variogram structure (where modelled). The nugget variance tended to be low to moderate in all the domains assessed. At Heruga, copper, gold, and molybdenum showed relatively short first variogram structures and long second variogram structures of 250-300 m. Copper and gold showed relatively low nuggets, whereas molybdenum was moderate to high. The block caving method envisioned for the Hugo North/Hugo North Extension area does not allow for consideration of selectivity. A sub-celled model with parent block dimensions equal to 15 m x 15 m x 15 m and minimum sub-block dimensions down to 5 m x 5 m x 5 m was used for resource estimation. The actual sub-block sizes in the Hugo North/Hugo North Extension model vary as necessary to fit the specified boundaries of the wireframes used to tag the block model. The block models were coded according to zone, lithological domain, and grade shell. For Hugo North/Hugo North Extension, sub-celling was used to honour lithology, grade, and structural contacts. Blocks above topography were removed from the block model. Non-mineralized units were flagged using a lithology code and were excluded during the interpolation process. Blocks in the Hugo North/Hugo North Extension model were assigned an estimation domain using a combination of grade shells or alteration and lithology. Modelling of Hugo North/Hugo North Extension consisted of grade interpolation by ordinary kriging (“OK”), except for bulk density, which was interpolated using a combination of simple kriging and inverse distance weighting to the second power (“ID2”). Restricted and unrestricted grades were interpolated to allow calculation of the metal removed by outlier restriction. Grades were also interpolated using nearest-neighbour (“NN”) methods for validation purposes. Blocks and composites were matched on estimation domain. Three estimation passes were used. The Heruga block model was coded according to zone, lithological domain, and grade shell. Modelling consisted of grade interpolation by OK. As part of the model validation, grades were also interpolated using NN, inverse distance weighting to the third power (“ID3”), and OK of uncapped composites. Density was interpolated by ID3. Three estimation passes were used. Measured, Indicated, and Inferred confidence classifications were assigned to blocks at Hugo North/Hugo North Extension using a combination of a preliminary block classification using a script based on distance to a drill hole and number of drill holes used to estimate a block, generation of probability model for the three confidence categories, and manual cleaning using polygons generated in sectional view. There are no Measured or Indicated mineral resources at Heruga. Interpolated cells were classified as Inferred mineral resources if they fell within 150 m of a drill hole composite. All mineralization at Heruga is currently classified as Inferred mineral resources. Once the underground 3D constraining shapes were generated, mineral resources were stated for those model cells within the constraining underground stope-block shapes that met a given copper equivalent cut-off grade. The optimized block cave shape used for the considerations of reasonable prospects for eventual economic 40 extraction was created in 2012, using assumptions contained in base data template 29 (“BDT29”), comprising metal prices of $3.00/lb copper and $970/oz gold. The current mineral resource estimate uses pricing developed in BDT31 during 2014. BDT31 has not been updated. The BDT31 copper equivalent formula incorporates copper, gold, silver, and molybdenum. The assumed metal prices are $3.01/lb for copper, $1,250/oz for gold, $20.37/oz for silver and $11.90/lb for molybdenum. Metallurgical recoveries for gold, silver, and molybdenum are expressed as percentages relative to copper recovery. Different metallurgical recovery assumptions lead to slightly different copper equivalent formulas for each of the deposits. In all cases, the metallurgical recovery assumptions are based on metallurgical testwork. All elements included in the copper equivalent calculation have a reasonable potential to be recovered and sold except for molybdenum. Molybdenum grades are only considered high enough to potentially support construction of a molybdenum recovery circuit at Heruga, and hence the recoveries of molybdenum are zeroed out for Hugo North Extension. Cut-off grades were determined using BDT31 assumptions. The NSR per tonne of mill feed material was required to be equal to or exceed the production cost of a tonne of mill feed for an operation to break even or make money. For the underground mine, the break-even cut-off grade needs to cover the costs of mining, processing, and general and administrative (“G&A”). A NSR of $15.34/t would be required to cover costs of $8.00/t for mining, $5.53/t for processing and $1.81/t for G&A. This translates to a CuEq break-even underground cut-off grade of approximately 0.37% CuEq for Hugo North Extension mineralization. Inferred mineral resources at Heruga have been constrained using a CuEq cut-off of 0.37% Mineral Resource Statement Mineral resources are reported using the 2014 CIM Definition Standards for Hugo North Extension in Table 2 below and for Heruga in Table 3. OTLLC staff prepared the estimates. The QP responsible for the estimates is Mr. Peter Oshust, P.Geo., an Amec Foster Wheeler employee. Mineral resources are reported for the Entrée/Oyu Tolgoi JV Property inclusive of those mineral resources that have been converted to mineral reserves, and on a 100% basis. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimates have an effective date of January 15, 2018. Areas of uncertainty that could materially affect the mineral resource estimates include the following: commodity pricing; interpretations of fault geometries; effect of alteration as a control on mineralization; lithological interpretations on a local scale, including dyke modelling and discrimination of different quartz monzodiorite phases; geotechnical assumptions related to the proposed block cave design and material behaviour; metal recovery assumptions; additional dilution considerations that may be introduced by a block cave mining method; assumptions as to operating costs used when assessing reasonable prospects of eventual economic extraction; and changes to drill spacing assumptions and/or the number of drill hole composites used to support confidence classification categories. Table 2 – Mineral Resource Summary Table, Hugo North Extension Classification Indicated Inferred Classification Indicated Inferred CuEq Cut-Off Tonnage Grade Cu Grade Au Grade Ag Grade CuEq (%) 0.37 0.37 (Mt) 122 174 (%) 1.68 1.00 (g/t) 0.57 0.35 (g/t) 4.21 2.73 (%) 2.03 1.21 CuEq Cut-Off Tonnage Contained Cu Contained Au Contained Ag (%) 0.37 0.37 (Mt) 122 174 (Mlb) 4,515 3,828 (koz) 2,200 2,000 (koz) 16,500 15,200 Notes to accompany Hugo North Extension mineral resource table: 41 1. Mineral resources have an effective date of January 15, 2018. Mr. Peter Oshust, P. Geo, an Amec Foster Wheeler employee, is the QP responsible for the mineral resource estimate. 2. Mineral resources are reported inclusive of the mineral resources converted to mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. 3. Mineral resources are constrained within three-dimensional shapes and above a CuEq grade. The CuEq formula was developed in 2016, and is CuEq16 = Cu + ((Au*AuRev) + (Ag*AgRev) + (Mo*MoRev)) ÷ CuRev; where CuRev = (3.01*22.0462); AuRev = (1250/31.103477*RecAu); AgRev = (20.37/31.103477*RecAg); MoRev = (11.90*0.00220462*RecMo); RecAu = Au recovery/Cu recovery; RecAg = Ag recovery/Cu recovery; RecMo = Mo recovery/Cu recovery. Differential metallurgical recoveries were taken into account when calculating the copper equivalency formula. The metallurgical recovery relationships are complex and relate both to grade and copper:sulphur ratios. The assumed metal prices are $3.01/lb for copper, $1,250.00/oz for gold, $20.37/oz for silver, and $11.90/lb for molybdenum. Molybdenum grades are only considered high enough to support potential construction of a molybdenum recovery circuit at Heruga, and hence the recoveries of molybdenum are zeroed out for Hugo North Extension. A NSR of $15.34/t would be required to cover costs of $8.00/t for mining, $5.53/t for processing and $1.81/t for G&A. This translates to a CuEq break-even underground cut-off grade of approximately 0.37% CuEq for Hugo North Extension mineralization. 4. Considerations for reasonable prospects for eventual economic extraction included an underground resource-constraining shape that was prepared on vertical sections using economic criteria that would pay for primary and secondary development, block-cave mining, ventilation, tramming, hoisting, processing, and G&A costs. A primary and secondary development cost of $8.00/t and a mining, process, and G&A cost of $12.45/t were used to delineate the constraining shape cut-off. 5. Mineral resources are stated as in situ with no consideration for planned or unplanned external mining dilution. The contained copper, gold, and silver estimates in the mineral resource table have not been adjusted for metallurgical recoveries. 6. Mineral resources are reported on a 100% basis. OTLLC has a participating interest of 80%, and Entrée has a participating interest of 20%. Notwithstanding the foregoing, in respect of products extracted from the Entrée/Oyu Tolgoi JV Property pursuant to mining carried out at depths from surface to 560 m below surface, the participating interest of OTLLC is 70% and the participating interest of Entrée is 30%. 7. Figures have been rounded as required by reporting guidelines, and may result in apparent summation differences. Table 3 – Mineral Resource Summary Table, Heruga Inferred Classification Heruga within the Entrée/Oyu Tolgoi JV Property Inferred Classification Heruga within the Entrée/Oyu Tolgoi JV Property CuEq Cut-Off Tonnage Cu Grade Au Grade Ag Grade (%) (Mt) (%) (g/t) (g/t) Mo Grade (g/t) CuEq Grade (%) 0.37 1,700 0.39 0.37 1.39 113.2 0.64 CuEq Cut-Off Tonnage Contained Cu Contained Au Contained Ag Contained Mo (%) (Mt) (Mlb) (koz) (koz) (Mlbs) 0.37 1,700 14,604 20,410 75,932 424 Notes to accompany Heruga mineral resource table: 1. Mineral resources have an effective date of January 15, 2018. Mr. Peter Oshust, P. Geo, an Amec Foster Wheeler employee, is the QP responsible for the mineral resource estimate. 2. Mineral resources are constrained within three-dimensional shapes and above a CuEq grade. The CuEq formula was developed in 2016, and is CuEq16 = Cu + ((Au*AuRev) + (Ag*AgRev) + (Mo*MoRev)) ÷ CuRev; where CuRev = (3.01*22.0462); AuRev = (1250/31.103477*RecAu); AgRev = (20.37/31.103477*RecAg); MoRev = (11.90*0.00220462*RecMo); RecAu = Au recovery/Cu recovery; RecAg = Ag recovery/Cu recovery; RecMo = Mo recovery/Cu recovery. Differential metallurgical recoveries were taken into account when calculating the copper equivalency formula. The metallurgical recovery relationships are complex and relate both to grade and copper:sulphur ratios. The assumed metal prices are $3.01/lb for copper, $1,250.00/oz for gold, $20.37/oz for silver and $11.90/lb for molybdenum. A NSR of $15.34/t would be required to cover costs of $8.00/t for mining, $5.53/t for processing and $1.81/t for G&A. This translates to a CuEq break-even underground cut-off grade of approximately 0.37% CuEq for Heruga mineralization. 42 3. Mineral resources are stated as in situ with no consideration for planned or unplanned external mining dilution. The contained copper, gold, silver, and molybdenum estimates in the mineral resource table have not been adjusted for metallurgical recoveries. 4. Mineral resources are reported on a 100% basis. OTLLC has a participating interest of 80%, and Entrée has a participating interest of 20%. Notwithstanding the foregoing, in respect of products extracted from the Entrée/Oyu Tolgoi JV Property pursuant to mining carried out at depths from surface to 560 m below surface, the participating interest of OTLLC is 70% and the participating interest of Entrée is 30%. 5. Figures have been rounded as required by reporting guidelines, and may result in apparent summation differences. Mineral Reserve Estimation The mineral reserve for the Entrée/Oyu Tolgoi JV Property is contained within the Hugo North Extension Lift 1 block cave mining plan. The Hugo North/Hugo North Extension underground deposit is to be mined by a variant of the block cave method, panel caving. This approach is to manage the risk of drift and pillar damage associated with high abutment stresses and the high fractured rock mass (orebody). The mine planning work conducted by OTLLC was completed using industry-standard mining software and techniques, and smelter terms as set forth in the 2016 Oyu Tolgoi Feasibility Study. The mineral reserve estimate is based on what is deemed minable when considering factors such as the footprint cut-off grade, the draw column shut-off grade, maximum height of draw, consideration of planned dilution and internal barren rock. Key assumptions used by OTLLC in estimation included: (cid:120) Metal prices used for calculating the Hugo North/Hugo North Extension underground NSR are $3.01/lb copper, $1,250.00/oz gold, and $20.37/oz silver, based on long-term metal price forecasts. (cid:120) The NSR has been calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries and royalties. (cid:120) A footprint cut-off of $46.00/t NSR and column height shut-off of $17.00/t NSR were used to maintain grade and productive capacity. It is anticipated that further mine planning will examine lower shut-offs scenarios. Mineral Reserve Statement Mineral reserves for Hugo North Extension Lift 1 were estimated by OTLLC personnel during 2014, reviewed by OTLLC as part of the 2016 Oyu Tolgoi Feasibility Study, and summarized in the 2016 OTLLC Competent Person’s Annual Report (OTLLC, 2016g). The QP has reviewed the estimate, and notes that there has been no depletion or additional drilling or engineering that would affect the mineral reserve estimate for the Hugo North Extension Lift 1, and therefore the effective date of the mineral reserve estimate is the date of finalization of the QP review, which is January 15, 2018. The mineral reserves for Hugo North Extension Lift 1 are summarized in Table 4 below. Factors that may affect the mineral reserve estimates include commodity market conditions and pricing; unknowns with respect to the overall interpretation of the Hugo North/Hugo North Extension geology, including faulting and lithology; assumptions related to the design and geotechnical behaviour of the cave mining system, including, but not limited to, the flow of material (ore and dilution) relative to the upward progression and lateral advance of the cave and assumptions of the long-term performance of the mine infrastructure (both support and production); and assumptions related to the metal recovery in the mill and downstream processing, including, but not limited to, metal recovery, mill throughput, contaminant elements (particularly arsenic and fluorine). 43 Table 4 – Mineral Reserves Statement, Hugo North Extension Lift 1 Classification Tonnage (Mt) Cu (%) Au (g/t) Ag (g/t) Probable Total Entrée/Oyu Tolgoi JV Property 35 35 1.59 1.59 0.55 0.55 3.72 3.72 Notes to accompany mineral reserves table: 1. Mineral reserves were estimated by OTLLC personnel, and have an effective date of January 15, 2018. Dr. Ian Loomis, P.E., an Amec Foster Wheeler employee, is the QP who reviewed the mineral reserve estimate. 2. 3. For the underground block cave, all mineral resources within the cave outline have been converted to Probable mineral reserves. No Proven mineral reserves have been estimated. This includes low-grade Indicated mineral resource, and Inferred mineral resource assigned zero grade that is treated as dilution. A footprint cut-off NSR of $46.00/t and column height shut-off NSR of $17.00/t were used define the footprint and column heights. An average dilution entry point of 60% of the column height was used. The NSR calculation assumed metal prices of $3.01/lb copper, $1,250.00/oz gold, and $20.37/oz silver. The NSR was calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries, and royalties using base data template 31. Metallurgical assumptions in the NSR include recoveries of 90.6% for copper, 82.3% for gold, and 87.3% for silver. 4. Mineral resources are reported on a 100% basis. OTLLC has a participating interest of 80%, and Entrée has a participating interest of 20%. Notwithstanding the foregoing, in respect of products extracted from the Entrée/Oyu Tolgoi JV Property pursuant to mining carried out at depths from surface to 560 m below surface, the participating interest of OTLLC is 70% and the participating interest of Entrée is 30%. 5. Figures have been rounded as required by reporting guidelines, and may result in apparent summation differences. Mining Methods The weak, massive nature of the Hugo North/Hugo North Extension deposit and the location between 700 m and 1,400 m below surface make it well suited, both geotechnically and economically, to large-scale cave mining methods. Caving methods require large, early capital investment but are generally highly productive with relatively low operating costs. The long operating life of the mine is supportive of the initial capital investment and results in a very low total cost on a production basis. Hugo North/Hugo North Extension Lift 1, which has high copper and gold grades, will be mined as three panels. A panel is a defined contiguous portion of the overall cave footprint that is treated as a more-or-less independent and sequenced mining/production area. The Hugo North Extension area is located at the northern portion of Panel 1. Production will ramp up to an average of 95,000 t/d of ore to the mill during the planned peak production period for the combined Hugo North/Hugo North Extension Lift 1 from 2027 through 2035. Overall production from the combined Hugo North/Hugo North Extension Lift 1 is planned to ramp down from 2035 to completion in 2039. During the production life of the Hugo North Extension portion of Lift 1, the pre-production period is planned to begin in 2021 with the first drawbell in 2026, and production is to be completed in 2034. The majority of the mine infrastructure required to support the successful extraction of the mineral reserves within the Entrée/Oyu Tolgoi JV Property will be located within the Oyu Tolgoi mining licence; however, the mining method is consistent across both Hugo North Lift 1 and Hugo North Extension Lift 1. The primary life-of-mine material handling system (conveyor to surface) will transport ore to the surface by means of a series of conveyors. To support overall mining of Hugo North/Hugo North Extension Lift 1, five shafts, approximately 203 km of lateral development, 6.8 km of vertical raising (raisebore and drop-raise) and 137,000 m3 of mass excavations will be undertaken. The Lift 1 levels are approximately 1,300 m below surface. Of the 2,231 drawpoints planned for Hugo North/Hugo North Extension Lift 1 and accessed from 52 extraction drifts, 238 drawpoints are located within the 44 Hugo North Extension area. For Hugo North Extension portion of Lift 1, approximately 15.4 km of lateral development and approximately 781 m of vertical raising will be required. From the geotechnical perspective, Hugo North/Hugo North Extension is considered highly suitable for cave mining methods, and the risks associated with caveability and propagation are considered to be low. Fine fragmentation is expected with all geotechnical domains, thus secondary breakage requirements are not expected to pose a risk to the production schedule ramp-up or full production rates. The Hugo North Extension portion of Lift 1 is anticipated to have a higher proportion of ‘Good’ ground conditions relative to Hugo North/Hugo North Extension Lift 1 as a whole. The costing of the underground has used a 60% Good ground and 40% Poor ground assumption as a more conservative estimate of ground control costs. The mine shafts and permanent infrastructure are all planned to be located outside of, or under, the predicted facture limits and “subsidence cone”. The mining layout will include: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) Apex and undercut levels to provide access drifts for production drills, blasting and mucking for the purpose of undercutting the ore deposit on the associated lift. The undercut drifts are planned to be spaced on 28 m intervals, situated 17 m above and half-way between the extraction drifts. The apex drifts will be situated 34 m above the extraction drifts at the top of the major apex pillars. Extraction drifts and drawbells for efficient load-haul-dump (“LHD”) operation to draw ore from the associated drawpoints, using an El Teniente-style (straight-through) drawbell layout on a 15 m spacing. The extraction drifts are planned to be spaced 28 m apart, on centre. The overall drawbell spacing layout is 28 m x 15 m. Within the drawbells, a drawcone centroid spacing of 10 m is used to promote interactive draw from the cave. Haulage levels to collect development and production ore material from the extraction and undercut levels, and transport it, using road trains, to crushers for size reduction. The haulage level will be located 44 m below the extraction level. Intake ventilation system to provide fresh air to the mining footprint levels, main travel ways, mine working areas and to underground fixed facilities. Fresh air to the footprint levels is planned to be supplied through two sets of twin intake tunnels to the extraction fringe (perimeter) drifts. Exhaust ventilation system to remove vitiated air from the mine. Exhaust drifts in the exhaust level will run the length of the deposit along the centre of the deposit axis. Road trains will haul from the loading chutes to the primary crushers on the west side of the mining footprint. Crushed material will be transferred by a series of conveyors directly to the surface or to the Shaft 2 hoisting system. Shaft 2 is intended to serve as the initial material handling route to surface until the conveyor-to-surface is commissioned. Overall vertical development will include shaft development, ore/waste passes and ventilation raises. With the exception of the shafts, vertical development is planned to use several methods, including raise bore, boxhole, and drop-raise. The underground mine requires a number of surface facilities to support the underground operations. At Hugo North/Hugo North Extension Lift 1 these include: Shaft 1 area, production shaft farm, Shaft 4 area, and conveyor- to-surface portal area. For the purposes of the 2018 Technical Report, Shaft 4 was anticipated to be sunk on the Entrée/Oyu Tolgoi JV Property, to a depth below surface of 1,149 m. To reach the Hugo North Lift 1 exhaust gallery, approximately 1,020 m of lateral development will be required on the Entrée/Oyu Tolgoi JV Property. A batch plant may also be constructed within the property area. 45 The underground mobile equipment fleet is classified into seven broad categories, including: mucking (LHDs); haulage (road trains and articulated haul trucks); drilling (jumbos, production drills and bolting equipment); raise bore and boxhole; utilities and underground support (flatbeds, boom trucks, fuel and lube trucks, explosive carriers, shotcrete transmixers and sprayers, etc.); surface support; and light vehicles (personnel transports, “jeeps”, tractors, etc.). Major fixed equipment will include: material handling (crushing and conveying); fans and ventilation equipment; pumping and water handling equipment; power distribution equipment; data and communications equipment; and maintenance equipment (fixed shop furnishing). The overall processing schedule was balanced to meet the available mill hours. The forecast production schedule for Hugo North Extension Lift 1 is included in Figure 5. Figure 5 – Hugo North Extension Lift 1 – Underground Material Movement and Average Grade Note: Figure prepared by Amec Foster Wheeler, 2017. Hugo North EJV refers to Hugo North Extension Lift 1 within the Entrée/Oyu Tolgoi JV Property. Year 6 = 2021. Recovery Methods Entrée’s share of products will, unless Entrée otherwise agrees, be processed at the OTLLC facilities by paying milling and smelting charges. The OTLLC facilities are not intended to be profit centres and therefore, minerals from the Entrée/Oyu Tolgoi JV Property will be processed at cost. OTLLC will also make the OTLLC facilities available to Entrée at the same terms if spare processing capacity exists to process other suitable mill feed. The Phase 1 concentrator was commissioned in early 2013. The nameplate processing capacity of 96 kt/d was achieved in August 2013. The process plant employs a conventional SAG mill/ball mill/grinding circuit (“SABC”) followed by flotation. Phase 1 uses two grinding lines (Lines 1 and 2), each consisting of a SAG mill, two parallel ball mills, and associated downstream equipment to treat up to 100 kt/d of ore from the Oyut open pit. Operating data have been used in Phase 2 design, which addresses the delivery of Hugo North/Hugo North Extension underground plant feed via Lift 1 in conjunction with open pit mining. 46 The intent of Phase 2 is to treat all the high-value Hugo North/Hugo North Extension Lift 1 ore delivered by the mine, supplemented by OTLLC’s open pit ore to fill the mill to its capacity limit. The Phase 2 concentrator development program will optimize the concentrator circuit to enable it to maximise recovery from the higher- grade Hugo North/Hugo North Extension Lift 1 ore and to allow it to handle higher tonnage throughput. Components that require upgrading to accommodate the gradual introduction of ore from underground include: the ball mill; rougher flotation circuit; flotation columns; concentrate filtration, thickening, and bagging areas; and bagged storage facilities. Reagents and media required will include lime, primary collector, secondary collector, frother, tailings flocculant, water treatment chemicals, and grinding media. With the addition of the concentrator conversion loads, the peak operating load demand from the existing 220 kilovolt (“kV”) concentrator substation will increase by an estimated 20 megawatts (“MW”) (from 116-136 MW), and the nominal operating (diversified) load will increase by an estimated 19 MW (from 106-125 MW). The concentrator raw water demand varies seasonally. Annual average raw water demand is projected to be 0.45 cubic metre per tonne (“m3/t”) ore processed. Project Infrastructure Infrastructure required for Phase 1 of the Oyu Tolgoi project has been completed, and includes: access roads, airport, accommodation, open pit and quarries, tailings and waste rock storage facilities, process plant, batch plants, administration, warehousing, emergency, and maintenance facilities, power and water supply and related distribution infrastructure, water and waste management infrastructure, heating and fuel storage. Additional infrastructure that will be required to support Phase 2, or modifications to the Phase 1 infrastructure, includes: construction of conveyor decline and shafts; construction of permanent underground facilities including crushing and materials handling, workshops, services, and related infrastructure; concentrator conversion; modifications to the electrical shaft farm substation, and upgrades to some of the distribution systems; expanded logistical and accommodations infrastructure; underground maintenance and fuel storage facilities; expanded water supply and distribution infrastructure; and expanded tailings storage (“TSF”) capacity. OTLLC has a power purchase agreement with the Inner Mongolia Power Corporation to supply power to the Oyu Tolgoi project. The term of this agreement covers the commissioning of the business, plus the initial four years of commercial operations. In August 2014, Turquoise Hill announced that OTLLC had signed the PSCA with the Government of Mongolia for the exploration of a Tavan Tolgoi-based independent power provider. Participation in the PSCA met OTLLC’s obligation in the Oyu Tolgoi Investment Agreement to establish a long-term power supply within Mongolia four years from the commencement of commercial production. Signing of the PSCA reset the four years obligation while the opportunity for the establishment of an independent power provider at Tavan Tolgoi was studied. Environmental, Permitting and Social Considerations Environmental Considerations OTLLC has completed a comprehensive Environmental and Social Impact Assessment (“ESIA”) for the Oyu Tolgoi project, including the Entrée/Oyu Tolgoi JV Property. The ESIA is a summary of several research programs and reports, including the following baseline studies: climate and climate change; air quality; noise and vibration; topography, geology, and topsoil; water resources; biodiversity and ecosystems; population and demographics; employment and livelihoods; land use; transport and infrastructure; archaeology; cultural heritage; and community health, safety, and security. The ESIA also sets out measures through all project phases to avoid, minimise, mitigate, and manage potential adverse impacts to acceptable levels established by Mongolian regulatory requirements and good international industry practice, as defined by the requirements of the Equator Principles, and the standards and policies of the International Finance Corporation (“IFC”), European Bank for Reconstruction and Development (“EBRD”), and other financing institutions. 47 In addition to the project elements identified above, certain other activities and facilities are expected to be developed over time, either as part of or in support of the project, that do not constitute part of the project for the purposes of the ESIA. These include project expansion to support an increase in plant feed throughput from 100,000 t/d to 160,000 t/d and the long-term power supply. While the impacts of these project elements, and their mitigation and management, are not directly addressed in the ESIA they are considered in the cumulative impact assessment of the ESIA. OTLLC has posted environmental bonds to the Mongolian Ministry of Environment, Green Development and Tourism (“MEGDT”) in accordance with the Minerals Law of Mongolia for restoration and environmental management work required for exploration and the limited development work undertaken at the site. OTLLC has implemented and audited an environmental management system (“EMS”) that conforms to the requirements of ISO 14001:2004. The management plans developed for the Oyu Tolgoi project address the management of health, safety, environment, and social aspects associated with the project. The management plans form part of the mine’s Integrated Health, Safety, Environment and Community Management System (“HSECMS”). The HSECMS has been audited and is certified to ISO 14001 and OHSAS 18001. Tailings Storage Facility The existing TSF is located 2 km east of the Oyut open pit, about 5 km southeast of the process plant, and within the Oyu Tolgoi mining licence. Conventional thickened tailings are currently deposited. For the first 18 years of production, the TSF will consist of two cells, each approximately 4 km2 in size, to store a total of 670 Mt of tailings. The facility will be constructed in two stages, starting with Cell 1 and then continuing with Cell 2. Conventional thickened tailings are currently deposited in Cell 1. The TSF receives thickened (60% to 64% solids density) tailings from the tailings thickeners at the Oyu Tolgoi concentrator. A floating barge pump station returns all supernatant reclaim water to the main process water pond at the concentrator for reuse. The TSF embankment is raised each year using a downstream methodology to ensure that sufficient storage capacity for ongoing tailings deposition, with flood storage and freeboard, is retained at all times. Water Management The Gunii Hooloi basin extends 35 km to 70 km north of the Oyu Tolgoi site, and is the source of raw water for the mining operations. Water demand for the Oyu Tolgoi facilities has been calculated at between 588 litres per second (“L/s”) and 785 L/s, with an average yearly demand of 696 L/s, to meet a production rate of 100,000 t/d. The Gunii Hooloi aquifer can meet the mine water requirements. Updated hydrogeological modelling, completed in 2013, demonstrates that the Gunii Hooloi aquifer is capable of providing 1,475 L/s. Water management and conservation were given the highest priority in all aspects of the Oyu Tolgoi project design. The current water budget is based on the use of 550 L/s and operating performance of the concentrator suggests this is a reasonable estimate. The water consumption compares favourably with other large operations in similar arid conditions. Due to its proximity to the Oyut open pit, the Undai River has been diverted. The river diversion system consists of three components: a dam, diversion channel, and subsurface diversion 48 Closure and Reclamation Planning Current closure planning is based on a combination of progressive rehabilitation and closure planning. The Oyu Tolgoi Mine Closure Plan for OTLLC was completed in June 2012, updated in 2014, and is based on the design status at that time. Permitting Considerations The Minerals Law of Mongolia (2006) and Mongolian Land Law (2002) govern exploration, mining, and land use rights for the Oyu Tolgoi project. Water rights are governed by the Mongolian Water Law and the Minerals Law. OTLLC has studied and continues to study the permitting and approval requirements for the development of the Oyu Tolgoi project including the Entrée/Oyu Tolgoi JV Property, and maintains a permit and licencing register. OTLLC personnel, working with the Mongolian authorities, have developed descriptions of the permitting processes and procedures for the Oyu Tolgoi project, including the underground development of the Entrée/Oyu Tolgoi JV Property. OTLLC has stated that permits have been obtained for underground mining. Social Considerations A social analysis was completed through the commissioning of a Socio-Economic Baseline Study and the preparation of a Social Impact Assessment (“SIA”) for the Oyu Tolgoi project. The cumulative impact assessment examined geographical areas, communities, and regional stakeholders that could be subject to cumulative impacts from further developments at Oyu Tolgoi together with other existing or planned projects, trends, and developments within the South Gobi region. Community and social management plans, procedures and strategies have been developed. The surrounding community (predominantly herders) and local government are kept fully informed about mine developments and provide input and review of implementation of plans, procedures and strategies that directly affect them. Markets and Contracts Commodity pricing is based on pricing from the Turquoise Hill’s October 2016 Technical Report titled “2016 Oyu Tolgoi Technical Report”, which uses the 2016 Oyu Tolgoi Feasibility Study as a basis, and which in turn is based on reviews of long-term consensus estimates reported in public reports. OTLLC has developed a marketing strategy for the Oyu Tolgoi project, including their portion of the mineralization within the Entrée/Oyu Tolgoi JV Property. Under the terms of the Entrée/Oyu Tolgoi JVA (Article 12), Entrée retains the right to take the product in kind. For the purposes of the 2018 Technical Report, it has been assumed that Entrée takes control of its portion of the bagged concentrate and that the sales of concentrate will use the same approximate smelter terms, transport and other marketing costs as for the OTLLC concentrate. Amec Foster Wheeler did not review contracts, pricing studies, or smelter terms developed by OTLLC or its third- party consultants as these were considered by OTLLC to be confidential to OTLLC. Instead, Amec Foster Wheeler relied on summary pricing and smelting information provided by OTLLC within the 2016 Oyu Tolgoi Feasibility Study and OTLLC’s BDT31. Based on the review of this summary information, the OTLLC smelter terms are similar to smelter terms that Amec Foster Wheeler is familiar with, and the metal pricing is in line with Amec Foster Wheeler’s assessment of industry-consensus long-term pricing estimates. 49 Capital Cost Estimates Phase 2 capital cost and sustaining cost estimates were prepared as separate and independent estimates. The overall Phase 2 capital cost and sustaining cost estimates are from the Phase 2 estimates in the 2016 Oyu Tolgoi Feasibility Study. The capital cost estimate represents the overall development for the Hugo North/Hugo North Extension Lift 1 underground mine, supporting shafts, the concentrator conversion project, and the infrastructure expansion project. The capital estimate also includes the costs associated with the engineering, procurement and construction management (“EPCM”) and owner’s project costs. Costs include value-added tax (“VAT”) and duties. The overall estimated capital cost to design, procure, construct, and commission the complete expansion, inclusive of an underground block cave mine, supporting shafts, concentrator conversion, and supporting infrastructure expansion, is $5.093 billion. Table 5 provides a summary of the overall capital cost estimate. Sustaining capital costs were estimated for Hugo North/Hugo North Extension Lift 1 in the 2016 Oyu Tolgoi Feasibility Study for tailings, processing and underground mining, and infrastructure/other. Table 6 provides the overall sustaining capital cost estimate for each area on a dollar-per-tonne processed basis. Amec Foster Wheeler reviewed the 2016 Oyu Tolgoi Feasibility Study overall capital and sustaining capital cost estimates, and then apportioned the estimates between the Oyu Tolgoi mining licence and the Entrée/Oyu Tolgoi JV Property and derived Entrée’s 20% attributable portion based on the Entrée/Oyu Tolgoi JVA. The resulting attributable portions of the capital cost/sustaining capital cost estimates are discussed below in “Material Mineral Property – Entrée Oyu/Tolgoi JV Project, Mongolia – Economic Analysis – 2018 Reserve Case”. 50 Table 5 – Overall Capital Cost Estimate Summary $ Millions Concentrator expansion Mine Shaft #2 Mine Shaft #3 Mine Shaft #4 Mine Shaft #5 Total 2016 2017 2018 2019 2020 2021 2022 145 — — — 29.2 62.6 53.0 194 31.7 85.5 209 246 — — 9.7 6.0 63 11.4 28.2 46.9 46.3 75.5 23.2 30.2 — — 69.8 66.8 16.8 66.6 80.3 17.1 — — — — — — — — Hugo North/Hugo North Extension Lift #1 U/G construction 1,730 159.0 358.1 428.0 440.9 224.3 97.3 22.2 Infrastructure and CHP Misc Indirects Detailed engineering PMC / EPCM Owners PM Total expansion capital cost (excluding VAT and duty and cont.) VAT and duties 404 50.1 93.5 76.8 70.1 78.6 33.8 1.5 902 44.1 159.6 191.0 224.3 171.5 84.7 26.6 79 28.0 22.9 295 35.1 57.4 501 71.9 53.1 21.5 62.8 98.9 1.9 2.5 1.3 58.7 45.9 28.4 0.6 6.5 88.5 98.7 54.6 34.9 4,767 431.3 874.0 1,070.9 1,080.3 831.2 387.1 92.4 326 27.2 70.2 71.5 60.1 64.2 29.1 3.5 Expansion capital costs total expansion capital cost (including VAT and Duty and Cont.) 5,093 458.5 944.2 1,142.4 1,140.4 895.3 416.2 95.8 Notes: 1. 2. 3. The overall capital cost estimate presented is for Hugo North/Hugo North Extension Lift 1. Capital costs include only direct project costs and exclude interest expense, capitalized interest, debt repayments, tax pre-payments and forex adjustments. The 2016 Oyu Tolgoi Feasibility Study total capital cost above includes capital costs for the year 2016. 4. Misc = miscellaneous, UG = underground, CHP = central heating plant, PMC = project management and construction, EPCM = engineering, procurement and construction management, EPMC = engineering project management and construction, PM = project management, VAT = value-added tax, cont. = contingency. Table 6 – Overall Sustaining Capital Cost Estimate Description Unit Value Tailings storage facility construction $/t processed 0.91 Concentrator $/t processed 0.12 Underground mining $/t processed 6.69 Infrastructure Total Note: $/t processed 0.18 $/t processed 7.90 1. The overall sustaining capital cost estimate presented is for Hugo North/Hugo North Extension Lift 1. Operating Cost Estimates The overall operating costs are based on a mine plan that consists of both the Oyut open pit material and Hugo North/Hugo North Extension Lift 1 underground ore in the 2016 Oyu Tolgoi Feasibility Study. The Oyut open pit supplies the initial source of ore to the mill at a nominal capacity of 100 kt/d. 51 Once production from underground commences, the open pit feed to the mill is continually displaced by the higher-grade ore from Hugo North/Hugo North Extension Lift 1. Production of ore from Hugo North/Hugo North Extension Lift 1 ramps up from 2020 until 2027 when it reaches a steady-state production level. Feed from the underground mine is planned to commence from 2020 and then ramp up to the full underground design tonnage of 95 kt/d. The mill operating rate at that time will be a nominal 110 kt/d, due to the softer and higher processing throughput rate of the Hugo North/Hugo North Extension Lift 1 ore. Operating costs for the concentrator and infrastructure represent a combined open pit and underground mining operation post-2015, assuming the Phase 2 underground operation is undertaken in conjunction with open pit mining. The overall operating cost estimates includes all expenses to operate and maintain the Oyu Tolgoi plant plus the sustaining capital required to keep the plant running at its design capacity. Escalation is excluded from the operating costs per Rio Tinto guidelines. No cost of financing is included. No royalties or joint venture fees are included. Power has been treated as a purchased utility from a third-party provider. Table 7 provides a summary of the overall operating cost estimate. The operating costs for the Entrée/Oyu Tolgoi JV Property, and Entrée’s 20% attributable portion of the operating cost estimate, is discussed below in “Material Mineral Property – Entrée Oyu/Tolgoi JV Project, Mongolia – Economic Analysis – 2018 Reserve Case”. Table 7 – Overall Phase 2 Operating Cost Estimate Summary Description Unit Value Mining $/t processed Processing $/t processed Infrastructure $/t processed 6.19 8.41 2.04 $/t processed 16.64 Total Note: 1. The overall operating cost estimate presented is for Hugo North/Hugo North Extension Lift 1. Economic Analysis – 2018 Reserve Case The results of the economic analyses discussed below and in “Material Mineral Property – Entrée Oyu/Tolgoi JV Project, Mongolia – Preliminary Economic Analysis – Economic Analysis – 2018 PEA” constitute forward-looking statements that are based on Entrée’s expectations about future events as at the date that such statements were prepared. The statements are not a guarantee of Entrée’s future performance, and they are based on numerous assumptions and are subject to numerous risks and uncertainties which are more fully described under the “Forward Looking Statement” and “Risk Factors” sections in this AIF. There can be no assurance that such forward- looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The cash flows are based on data provided by OTLLC, including mining schedules and annual capital and operating cost estimates, as well as Entrée’s interpretation of the commercial terms applicable to the Entrée/Oyu Tolgoi JV, and certain assumptions regarding taxes and royalties. The cash flows have not been reviewed or endorsed by OTLLC. There can be no assurance that OTLLC or its shareholders will not interpret certain terms or conditions, or attempt to renegotiate some or all of the material terms governing the joint venture relationship, in a manner which could have an adverse effect on Entrée’s future cash flow and financial condition. The cash flows also assume that Entrée will ultimately have the benefit of the standard royalty rate of 5% of sales value, payable by OTLLC under the Oyu Tolgoi Investment Agreement. Unless and until Entrée finalizes 52 agreements with the Government of Mongolia or other Oyu Tolgoi stakeholders, there can be no assurance that Entrée will be entitled to all the benefits of the Oyu Tolgoi Investment Agreement, including with respect to taxes and royalties. If Entrée is not entitled to all the benefits of the Oyu Tolgoi Investment Agreement, it could have an adverse effect on Entrée’s future cash flow and financial condition. For example, Entrée could be subject to the surtax royalty which came into effect in Mongolia on January 1, 2011. To become entitled to the benefits of the Oyu Tolgoi Investment Agreement, Entrée may be required to negotiate and enter into a mutually acceptable agreement with the Government of Mongolia or other Oyu Tolgoi stakeholders, with respect to Entrée’s direct or indirect participating interest in the Entrée/Oyu Tolgoi JV or the application of a special royalty (not to exceed 5%) to Entrée’s share of the Entrée/Oyu Tolgoi JV Property mineralization or otherwise. Amec Foster Wheeler apportioned the overall capital and sustaining capital costs for Phase 2 of the Oyu Tolgoi project according to Entrée’s interpretation of the terms of the Entrée/Oyu Tolgoi JVA for use in the economic assessment. This interpretation includes: (cid:120) OTLLC is responsible for 80% of all capital expenditures incurred on the Entrée/Oyu Tolgoi JV Property for the benefit of the Entrée/Oyu Tolgoi JV and Entrée is responsible for the remaining 20%. (cid:120) 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). (cid:120) 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. (cid:120) Entrée recognizes those capital costs incurred by OTLLC on the Oyu Tolgoi mining licence (facilities and underground infrastructure) 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. (cid:120) 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. (cid:120) 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 Entrée/Oyu Tolgoi JV Property total capital and sustaining capital cost is estimated at $261.7 million. The total amortized capital cost is estimated at $395.7 million. Entrée’s 20% attributable portion of the Hugo North Extension Lift 1 development/sustaining and amortized capital cost is $52.3 million and $79.1 million respectively. The Entrée/Oyu Tolgoi JV Property total operating costs average $37.08/t processed, and are inclusive of the amortized capital, refining and smelting charges, and a 2% administrative fee. 53 Entrée’s 20% attributable portion of the operating costs for Hugo North Extension Lift 1 on a per tonne milled basis averages $37.08 over the LOM. Based on the above inputs, Amec Foster Wheeler completed an economic analysis for Entrée’s 20% attributable portion of the Entrée/Oyu Tolgoi JV Property using both pre-tax and after-tax discounted cash flow analyses. The economic analysis was prepared using the following long-term metal price estimates: copper at $3.00/lb; gold at $1,300.00/oz and silver at $19.00/oz. Entrée’s 20% attributable portion of pre-tax cash flow is $382 million and after-tax cash flow is $286 million. Entrée’s 20% attributable portion of after-tax cash flow using a discount rate of 8% (“NPV@8%”) is $111 million. A summary of the financial results is shown in Table 8. Internal rate of return (“IRR”) and payback are not presented, because, with 100% financing, neither is applicable. Mine site cash costs, total cash costs (C1), and all-in sustaining costs are shown in Table 9 for Entrée’s 20% attributable portion. Cash costs are those costs relating to the direct operating costs of the mine site including: (cid:120) On site operating costs (direct mining, processing, and tailings). (cid:120) Capital carrying costs (amortization charge). (cid:120) Administrative fees. (cid:120) Refining, smelting, and transportation costs. Total cash costs (C1 costs) are the cash costs less by product credits for gold and silver. All-in sustaining costs after credits are the total cash costs plus mineral royalties, reclamation accrual costs, and sustaining capital charges. Table 8 – Summary Production and Financial Results for Entrée’s 20% Attributable Portion (basecase is bolded) LOM processed material (Entrée/Oyu Tolgoi JV Property) Units Value Probable mineral reserve feed 34.8 Mt grading 1.59% Cu, 0.55 g/t Au, 3.72 g/t Ag (1.93% CuEq) Copper recovered Gold recovered Silver recovered Mlb koz koz Entrée’s 20% attributable portion financial results LOM cash flow, pre-tax NPV@5%, after-tax NPV@8%, after-tax NPV@10%, after-tax Notes: $M $M $M $M 1,115 514 3,651 382 157 111 89 1. 2. Long-term metal prices used in the NPV economic analyses are: copper $3.00/lb, gold $1,300.00/oz and silver $19.00/oz. The mineral reserves within Hugo North Extension Lift 1 are reported on a 100% basis. OTLLC has a participating interest of 80%, and Entrée has a participating interest of 20%. Notwithstanding the foregoing, in respect of products extracted from the Entrée/Oyu Tolgoi JV Property pursuant to mining carried out at depths from surface to 800 m below surface, the participating interest of OTLLC is 70% and the participating interest of Entrée is 30%. 3. Figures have been rounded. 54 Table 9 – Mine Cash and All-in Sustaining Costs for Entrée’s 20% Attributable Portion Description Unit LOM Average Mine site cash cost $/lb payable copper 0.95 TC/RC, royalties and transport $/lb payable copper 0.29 Total cash costs before credits $/lb payable copper 1.25 Gold credits Silver credits $/lb payable copper 0.62 $/lb payable copper 0.06 Total cash costs after credits $/lb payable copper 0.56 Total all-in sustaining costs after credits $/lb payable copper 1.03 Note: TC/RC = treatment and refining charges. Sensitivity Analysis – 2018 Reserve Case Entrée’s 20% attributable portion was evaluated for sensitivity to variations in capital costs, operating costs, copper grade, and copper price. Entrée’s 20% attributable portion is most sensitive to changes in copper price and grade and less sensitive to changes in operating and capital costs. Figure 6 is an after-tax NPV sensitivity graph for Entrée’s 20% attributable portion. The copper grade sensitivity mirrors the copper price and plots on the same line. Figure 6 – After-Tax NPV@8% Sensitivity Analysis for Entrée’s 20% Attributable Portion Note: Figure prepared by Amec Foster Wheeler, 2018. Preliminary Economic Assessment Introduction The PEA that follows is an alternative development option done at the conceptual level based on mineral resources, which assesses the inclusion of Hugo North Extension Lift 2 and the portion of the Heruga deposit within the Javhlant mining licence into an overall mine plan with Hugo North Extension Lift 1. 55 The mine plan is partly based on 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 PEA based on these mineral resources will be realized. The sections “Material Mineral Property – Entrée Oyu/Tolgoi JV Project, Mongolia – Introduction” through to “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Mineral Resource Statement” and “Material Mineral Property – Entrée/Oyu Tolgoi Project, Mongolia – Recommendations also apply to the 2018 PEA. Years presented in the 2018 PEA are for illustrative purposes only. Mineral Resource Subset within the 2018 PEA Mine Plan The 2018 PEA is based on the subset of mineral resources in Table 10. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Table 10 – Subset of Mineral Resources within the 2018 PEA Mine Plan Classification by Deposit NSR ($/t) Tonnage (kt) Grades CuEq (%) Cu (%) Au (g/t) Ag (g/t) Mo (ppm) Hugo North Extension, Lift 1 Indicated 100.57 34,800 1.93 1.59 0.55 3.72 — Hugo North Extension, Lift 2 Indicated Inferred Heruga – Javhlant ML 83.80 78,400 1.64 1.34 0.48 3.59 — 83.80 88,400 1.64 1.34 0.48 3.59 — Inferred 32.19 619,718 0.71 0.42 0.43 1.53 124 Note: The tabulation was derived by Amec Foster Wheeler at a conceptual level from data supplied by OTLLC. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mine Plan For planning purposes, the 2016 Oyu Tolgoi Feasibility Study assumes that the overall underground production is capped at approximately 33 Mt/a for the foreseeable mine life, and that this cap is based on the mill capacity; this capping assumption is used in the 2018 PEA. Since the subset of the mineral resources within the Entrée/Oyu Tolgoi JV Property is planned to be mined as part of an overall strategy for the mineralization within the Oyu Tolgoi mining licence combined with that in the Entrée/Oyu Tolgoi JV Property, there are gaps in the planned production periods. Figure 7 shows the production forecast for the subset of the mineral resources within the 2018 PEA mine plan. The subset of the mineral resource in the mine plan is separated into three mining areas within the Entrée/Oyu Tolgoi JV Property: Hugo North Extension Lift 1, Hugo North Extension Lift 2, and the portion of the Heruga deposit within the Javhlant mining licence. The current level of knowledge regarding these areas suggests that panel cave mining is appropriate for all three areas. Mineralized material delivery from Hugo North Extension Lift 1 is anticipated to begin in 2021, when development commences within this area. Production from the cave is expected in 2026 when the first drawbelling occurs. Production is projected to occur for nine years (2026 to 2034) with a peak production (8.3 Mt/a) occurring in 2031. The Hugo North mine planning and optimization indicated that the ideal elevation for the second lift (Lift 2) is approximately 400 m below Lift 1. The mine plan assumes that 723 drawpoints will be constructed between 2035 and 2046 in the Hugo North Extension Lift 2 area. Figure 7 – 2018 PEA Production Forecast for the Subset of Mineral Resources within the 2018 PEA Mine Plan 56 Note: Figure prepared by Amec Foster Wheeler, 2017. Abbreviations: HN1-EJV = Hugo North Extension Lift 1 within the Entrée/Oyu Tolgoi JV Property; HN2-EJV = Hugo North Extension Lift 2 within the Entrée/Oyu Tolgoi JV Property; Heruga-EJV = Heruga within the Entrée/Oyu Tolgoi JV Property. Initial mill feed delivery from Hugo North Extension Lift 2 is assumed to begin in 2028 when development commences in the Hugo North Extension Lift 2 area. Production from Hugo North Extension Lift 2 is anticipated to begin in 2035 with the completion of the first drawpoints. The peak production from Hugo North Extension Lift 2 is expected to be approximately 41,500 t/d in 2046, and the average production rate (2028–2053) is planned at about 17,800 t/d. Access to the Lift 2 mining horizon will be by extension of the Lift 1 facilities, including extending the conveyor decline system for mineralized material and waste haulage, and providing a service decline for personnel, equipment and material. The main ventilation shafts would be extended down to the Lift 2 horizon. Given the overall similarities to Lift 1, the overall layout and support facilities will be, likewise, similar to Lift 1. A 2014 study separated Heruga into a north and south zone for mine planning purposes, and assumed that these would be at separate elevations (-20 metres above sea level (“masl”) and -350 masl respectively). The 2018 Technical Report considers a total of 2,606 drawpoints to be included for both caves; of these 2,265 would be within the Entrée/Oyu Tolgoi JV Property, while the remainder would be within the Oyu Tolgoi mining licence. Mineralized material will be removed by means of a conveyor to surface. Four shafts will be needed to accommodate the ventilation requirements and access for personnel, material and equipment into/out of the mine. The production rate from Heruga is considered to be the same as the Hugo North/Hugo North Extension complex (~95,000 t/d) to meet the capacity of the mill. Hence, the overall scale of the underground and surface infrastructure will be similar to that associated with Hugo North/Hugo North Extension. In the 2018 PEA mine plan, development in mill feed material would begin from the southern Heruga zone in 2065. The first drawbell would be fired in 2069, and the mine would achieve rated capacity in 2083. Production from the Entrée/Oyu Tolgoi JV Property would cease in 2097. Average production from the Entrée/Oyu Tolgoi JV Property between 2069 and 2097 (inclusive) would be approximately 59,200 t/d. 57 All three mines in the 2018 PEA case are anticipated to use a similar equipment fleet based on the requirements of the common block cave technique. The following equipment will be required: mucking (LHDs); haulage (road trains and articulated haul trucks); drilling (jumbos, production drills and bolting equipment); raise bore and boxhole; utilities and underground support (flatbeds, boom trucks, fuel and lube trucks, explosive carriers, shotcrete transmixers and sprayers, etc.); surface support; and light vehicles. Major fixed equipment will include: material handling (crushing and conveying); fans and ventilation equipment; pumping and water handling equipment; power distribution equipment; data and communications equipment; and maintenance equipment (fixed shop furnishing). Recovery Methods The 2018 PEA assumes that no changes will be required to the process plant from those contemplated in the Phase 2 concentrator development program (see “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Recovery Methods”), and that the same mill throughput will be maintained. Project Infrastructure The majority of the primary infrastructure and facilities required for the Oyu Tolgoi project were completed during Phase 1. The 2018 PEA assumes that the infrastructure in place for Hugo North/Hugo North Extension Lift 1 will be available for Hugo North/Hugo North Extension Lift 2, and that a similar design will be employed for the underground mining operation. For the purposes of the 2018 PEA mine plan, it was assumed that Heruga will be a completely new mine that does not take account of pre-existing mine and support infrastructure associated with the Hugo North/Hugo North Extension Lift 1 and Lift 2 mines. Key additional infrastructure assumptions that would be needed to support the 2018 PEA mine plan in addition to that contemplated in Phase 2 include: (cid:120) Access roads (Heruga). (cid:120) Electrical substation and power distribution line (Heruga). (cid:120) Construction of conveyor decline and shafts (Heruga). (cid:120) Construction of permanent underground facilities including crushing and materials handling, workshops, services, and related infrastructure (Hugo North Extension Lift 2 and Heruga). (cid:120) Modifications to the electrical shaft farm substation, and upgrades to some of the distribution systems (Hugo North Extension Lift 2 and Heruga). (cid:120) Expanded logistical and accommodations infrastructure (Hugo North Extension Lift 2 and Heruga). (cid:120) Underground maintenance and fuel storage facilities (Hugo North Extension Lift 2 and Heruga). (cid:120) Expanded water supply and distribution infrastructure (Hugo North Extension Lift 2 and Heruga). (cid:120) Expanded TSF capacity (Hugo North Extension Lift 2 and Heruga). Market Studies and Contracts For the purposes of the 2018 PEA, it was assumed that the marketing provisions and contracts entered into for Hugo North Extension Lift 1 production would be maintained (see “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Markets and Contracts”). 58 Commodity pricing for the 2018 PEA estimate is based on pricing from Turquoise Hill’s 2016 Oyu Tolgoi Technical Report, which uses the 2016 Oyu Tolgoi Feasibility Study as a basis, and incorporates a long-term industry- consensus estimate derived from public reports. The smelter terms used were from the 2016 Oyu Tolgoi Feasibility Study as reported in Turquoise Hill’s 2016 Oyu Tolgoi Technical Report and OTLLC’s BDT31. Environmental, Permitting and Social Considerations Information relating to environmental studies, permitting, and social or community impact remain the same for the 2018 PEA as discussed for Hugo North Extension Lift 1 (see “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Environmental, Permitting and Social Considerations” above). Tailings Considerations The 2018 PEA assumes that additional tailings cells that have a similar design and capacity to the operating Cell 1 would be used for deposition of conventional thickened tailings: (cid:120) Future cells to support the 2018 PEA case are assumed to use similar embankment configurations as in the current TSF design. (cid:120) The same concepts for tailings deposition and reclaim water return will continue to be used. (cid:120) Improvements to water reclaim mechanisms to recycle as much water as practicable will continue. These additional cells would have the capacity to contain the life-of-mine tailings under the 2018 PEA assumptions. However, the cost of constructing additional cells may increase as the haul distances for mine waste and other embankment materials increase. Closure Considerations No closure considerations were evaluated as part of the 2018 PEA plan, due to the long timeframe envisaged before closure would be needed. It was anticipated that the closure planning would be similar to that proposed for the 2014 OTLLC closure plan. Capital Costs The 2016 Oyu Tolgoi Feasibility Study initial capital cost estimate to develop Hugo North/Hugo North Extension Lift 1 and design, procure, construct, and commission the complete Phase 2 expansion, inclusive of an underground block cave mine, supporting shafts, concentrator conversion, and supporting infrastructure expansion is $5.093 billion (see “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Capital Cost Estimates”). The additional capital to develop Hugo North/Hugo North Extension Lift 2 and the entire Heruga deposit is estimated at $1.801 billion and $2.541 billion respectively. Table 11 provides a summary of the overall capital cost projections for Hugo North/Hugo North Extension Lift 1, Hugo North/Hugo North Extension Lift 2 and the entire Heruga deposit. Overall sustaining capital costs are based on extrapolations from the 2016 Oyu Tolgoi Feasibility Study costs (see “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Capital Cost Estimates”) with adjustments made for: (cid:120) Tailings management facility costs that were increased to account for longer hauling distances; and a higher contingency due to lack of designs. 59 (cid:120) Hugo North/Hugo North Extension Lift 2 and Heruga development costs that were increased by approximately 8% and 10% respectively compared to Hugo North/Hugo North Extension Lift 1 only. Table 12 provides an overview of the overall sustaining capital cost estimate for Hugo North/Hugo North Extension Lift 1, Hugo North/Hugo North Extension Lift 2 and the entire Heruga deposit. Amec Foster Wheeler apportioned the capital cost and sustaining capital cost estimates to the Entrée/Oyu Tolgoi JV Property and to Entrée’s 20% attributable portion based on Entrée’s interpretation of the Entrée/Oyu Tolgoi JVA (see “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Economic Analysis”). Entrée’s 20% attributable portion of the capital cost and sustaining capital cost estimates is discussed in “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Preliminary Economic Assessment – Economic Analysis”. Table 11 – Overall Capital Costs Area Hugo North/Hugo North Extension Lift 1 and concentrator expansion Hugo North/Hugo North Extension Lift 2 Heruga Total capital cost (including VAT and duty and contingency) Note: Units Value $ $ $ $ 5,093 1,801 2,541 9,434 1. The overall capital cost presented is for Hugo North/Hugo North Extension Lift 1, Hugo North/Hugo North Extension Lift 2 and the entire Heruga deposit. Table 12 – Overall Sustaining Capital Costs Description Unit Value Tailings storage facility construction $/t processed 1.09 Concentrator $/t processed 0.10 Underground mining $/t processed 7.40 Infrastructure Total Note: $/t processed 0.18 $/t processed 8.76 1. The overall sustaining capital cost presented is for Hugo North/Hugo North Extension Lift 1, Hugo North/Hugo North Extension Lift 2 and the entire Heruga deposit. Operating Costs Table 13 provides a breakdown of the projected operating costs for Hugo North/Hugo North Extension Lift 1, Hugo North/Hugo North Extension Lift 2 and the entire Heruga deposit. Anticipated operating costs on a per tonne milled basis averages $17.07. Entrée’s 20% attributable portion of the operating cost estimate is discussed in “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Preliminary Economic Assessment – Economic Analysis”. 60 Table 13 – Overall Operating Costs Description Unit Value Mining $/t processed Processing $/t processed Infrastructure $/t processed 5.67 9.37 2.04 $/t processed 17.07 Total Note: 1. The overall operating cost presented is for Hugo North/Hugo North Extension Lift 1, Hugo North/Hugo North Extension Lift 2 and the entire Heruga deposit. Economic Analysis – 2018 PEA This section provides the results of the 2018 PEA. See “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Economic Analysis” above regarding cautionary statements, which also applies to this section. The PEA mine plan is partly based on 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 based on these mineral resources will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The PEA that follows is an alternative development option done at the conceptual level based on mineral resources, which assesses the inclusion of Hugo North Extension Lift 2 and the portion of the Heruga deposit within the Entrée/Oyu Tolgoi JV Property into an overall mine plan with Hugo North Extension Lift 1. Amec Foster Wheeler apportioned the capital and sustaining capital costs according to Entrée’s interpretation of the Entrée/Oyu Tolgoi JVA (summarized in “Material Mineral Property – Entrée/Oyu Tolgoi JV Project, Mongolia – Economic Analysis” above) for use in the 2018 PEA. The Entrée/Oyu Tolgoi JV Property total capital and sustaining capital cost for the 2018 PEA is estimated at $8,637.3 million. The total amortized capital cost is estimated at $1,846.7 million. Entrée’s 20% attributable portion of the development/sustaining and amortized capital cost is $1,727.4 million and $369.3 million respectively. The Entrée/Oyu Tolgoi JV Property operating costs used in the 2018 PEA average $23.35/t processed and are inclusive of the amortized capital, refining and smelting charges, and a 2% administrative fee. Entrée’s 20% attributable portion of the operating costs on a per tonne milled basis averages $23.35 over the LOM. Based on the above inputs, Amec Foster Wheeler completed an economic analysis for Entrée’s 20% attributable portion of the Entrée/Oyu Tolgoi JV Property using both pre-tax and after-tax discounted cash flow analysis. The economic analysis has been prepared using the following long-term metal price estimates: copper at $3.00/lb; gold at $1,300.00/oz and silver at $19.00/oz. Entrée’s 20% attributable portion of pre-tax cash flow is $2,078 million and after-tax cash flow is $1,522 million. Entrée’s 20% attributable portion of after-tax cash flow using NPV@8% is $278 million. A summary of the production and financial results for Entrée’s 20% attributable portion are shown in Table 14. Mine site cash costs, C1 cash costs, and all-in sustaining costs for Entrée’s 20% attributable portion are shown in Table 15. IRR and payback are not presented because with 100% financing, neither is applicable. The NPV@8% pre-tax and after-tax sensitivity to Heruga for Entrée’s 20% attributable portion is relatively small, since Heruga’s NPV@8% pre-tax and after-tax is approximately $1.8 million and $1.5 million respectively. Table 14 – 2018 PEA Production and Financial Results for Entrée’s 20% Attributable Portion (basecase is bolded) 61 LOM processed material (Entrée/Oyu Tolgoi JV Property) Units Item Subset of Indicated mineral resources in the 2018 PEA mine plan 113 Mt grading 1.42% Cu, 0.50 g/t Au, 3.63 g/t Ag (1.73% CuEq) Subset of Inferred mineral resources in the 2018 PEA mine plan 708 Mt grading 0.53% Cu, 0.44 g/t Au, 1.79 g/t Ag (0.82 % CuEq) Copper recovered Gold recovered Silver recovered Mlb koz koz Entrée’s attributable portion financial results LOM cash flow, pre-tax NPV@5%, after-tax NPV@8%, after-tax NPV@10%, after-tax Notes: $M $M $M $M 10,497 9,367 45,378 2,078 512 278 192 1. 2. Long-term metal prices used in the NPV economic analyses are: copper $3.00/lb, gold $1,300.00/oz and silver $19.00/oz. The Mineral resources are reported on a 100% basis. OTLLC has a participating interest of 80%, and Entrée has a participating interest of 20%. Notwithstanding the foregoing, in respect of products extracted from the Entrée/Oyu Tolgoi JV Property pursuant to mining carried out at depths from surface to 560 m below surface, the participating interest of OTLLC is 70% and the participating interest of Entrée is 30%. 3. Figures have been rounded. Table 15 – 2018 PEA Mine Cash and All-in Sustaining Costs for Entrée’s 20% Attributable Portion Description Unit LOM Average Mine site cash cost $/lb payable copper 1.66 TC/RC, royalties and transport $/lb payable copper 0.32 Total cash costs before credits $/lb payable copper 1.97 Gold credits Silver credits $/lb payable copper 1.22 $/lb payable copper 0.08 Total cash costs after credits $/lb payable copper 0.68 Total all-in sustaining costs after credits $/lb payable copper 1.83 Sensitivity Analysis Entrée’s 20% attributable portion is most sensitive to changes in copper price and grade and less sensitive to changes in operating and capital costs. Figure 8 shows the after-tax sensitivity results for NPV@8% for Entrée’s 20% attributable portion. The copper grade sensitivity generally mirrors the copper price. Figure 8 – 2018 PEA After-Tax NPV@8% Sensitivity Analysis for Entrée’s 20% Attributable Portion 62 Note: Figure prepared by Amec Foster Wheeler, 2017. Recommendations The QPs were not given access by OTLLC to information on the portions of the Oyu Tolgoi project that Entrée does not have an ownership interest in, with the exception of: (cid:120) Information on, and site visits to the process plant, TSF, and underground access development. (cid:120) Access to OTLLC operations site personnel to discuss information relevant to Entrée’s joint venture interest in the Entrée/Oyu Tolgoi JV Property. The QPs are therefore not in a position to make meaningful recommendations for further work for areas other than exploration and strategic planning expansion scenarios. A work program is recommended for the Entrée/Oyu Tolgoi JV Property in the area of the Castle Rock and Southeast IP targets, and is termed the Phase 1 work program. Drilling should be considered for Hugo North Extension Lift 2 (Phase 2 work program). Strategic planning expansion scenario evaluations should also be conducted during the Phase 2 work program. The Phase 2 work program is independent of the Phase 1 work program, and the two work program phases could be conducted concurrently. In the Phase 1 work program, eight widely-spaced core holes for each of the Castle Rock and Southeast IP targets drilled to depths averaging about 400 m, for a total program of 16 core holes totaling 6,400 m, are recommended to test these targets. The exact locations and depths of the holes should be determined through a detailed review of the existing exploration results, and access considerations. Assuming an all-in drilling cost of $275/m, the proposed program is estimated at $1.75 million. For the Phase 2 work program, Amec Foster Wheeler recommends an infill drill campaign be conducted within Lift 2 of the Hugo North Extension deposit with the objective of potentially converting the Inferred mineral resources to higher confidence categories. A drill program could also be conducted to investigate a potential further northern continuation of the mineralized zone. These targets are best tested from underground drill stations. Access to any such suitable underground drill stations will not be available until 2021 at the earliest. Therefore, it is not considered to be currently feasible to provide a meaningful drill layout or budget for such programs. 63 Turquoise Hill’s 2016 Oyu Tolgoi Technical Report published multiple development options for Oyu Tolgoi including a plant expansion to 50 Mt/a, 100 Mt/a, and 120 Mt/a. Amec Foster Wheeler recommends that Entrée independently complete strategic planning expansion scenarios as part of the Phase 2 work program in order to understand the impact to value that these scenarios could bring to Entrée. This work could be completed at a cost of approximately $150,000 to $200,000. NON-MATERIAL PROPERTIES Entrée has interests in other non-material properties in Australia and Peru as follows. For additional information regarding these non-material properties, including Entrée’s ownership interest and obligations, see the Company’s Management’s Discussion and Analysis for the financial year ended December 31, 2017, which is available on SEDAR at www.sedar.com. (cid:120) Blue Rose Joint Venture, Australia. The Blue Rose silver-iron-gold-copper property is located in the Olary Region of South Australia, 300 kilometres northeast of Adelaide and 130 kilometres west- southwest of Broken Hill. Entrée (operator) has a 56.53% interest in a joint venture to explore for minerals (other than iron ore) on the property, with Giralia Resources Pty Ltd., now a subsidiary of Atlas Iron Limited, retaining a 43.4769% interest. The property consists of one exploration licence, EL6006, totalling 257 square kilometres, expiring on July 18, 2019. The Braemar Iron Formation is the host rock to magnetite mineralization on both EL6006 and Magnetite Mines Limited’s Razorback immediately west of EL6006. Iron project, Aeromagnetic anomalies coincident with the outcropping and sub-cropping magnetite units extend from Razorback into EL6006. The mineralization within the Braemar Iron Formation forms a simple dipping tabular body with only minor faulting, folding and intrusives. Grades, thickness, dip, and outcropping geometry remain very consistent over kilometres of strike. While the bedded magnetite has the highest iron content, the tillitic unit is diluted by the inclusion of lithic fragments, such as iron- poor granite and metasedimentary dropstones. located On April 18, 2017, the Blue Rose joint venture partners entered into a Deed of Consent, Sale and Variation (the “Deed”) with Lodestone Equities Limited and Fe Mines Limited (formerly Braemar Iron Pty Ltd) (“FML”). FML has certain rights in respect of the exploration for, and development of, iron ore on EL6006 pursuant to a prior agreement. In accordance with the Deed, the Blue Rose joint venture partners transferred title to EL6006 and assigned their native title agreements to FML, and agreed to vary a payment required to be made to the Blue Rose joint venture partners under the prior agreement. FML paid to the Blue Rose joint venture partners an aggregate A$100,000 at completion, and granted to them (a) the right to receive an additional payment(s) upon completion of an initial or subsequent iron ore resource estimate on EL6006, to a maximum of A$2 million in aggregate; and (b) a royalty equal to 0.65% of the free on board value of iron ore product extracted and recovered from EL6006. Under the Deed, an additional A$285,000 must also be paid to the Blue Rose joint venture partners upon the commencement of Commercial Production (as such term is defined in the Deed). The Blue Rose joint venture partners retain their existing rights to explore for, develop and mine all minerals other than iron ore on EL6006. (cid:120) Cañariaco Royalty, Peru. The Company has a 0.5% NSR royalty on the Cañariaco project in Peru. The Cañariaco project includes the Cañariaco Norte copper-gold-silver porphyry deposit, as well as the adjacent Cañariaco Sur and Quebrada Verde porphyry prospects, located within the western Cordillera of the Peruvian Andes in the Department of Lambayeque, Northern Peru. 64 RISK FACTORS This AIF contains forward-looking statements, and any assumptions upon which they are based are made in good faith and reflect Entrée’s current judgment regarding the direction of its business. Actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this AIF. Except as required by applicable law, including the securities laws of the United States, Entrée does not intend to update any of the forward-looking statements to conform these statements to actual results. An investment in the Company’s Common Shares involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this AIF in evaluating Entrée and its business before purchasing the Company’s Common Shares. Entrée’s business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are not the only ones facing Entrée. Additional risks not presently known to Entrée may also impair its business operations. You could lose all or part of your investment due to any of these risks. Legal and Political Risks Entrée may have to make certain concessions to the Government of Mongolia. The Minerals Law of Mongolia provides that the State may be an equity participant with any private legal entity, up to a 34% equity interest, in the exploitation of any Strategic Deposit where the quantity and grade of the deposit have been defined by exploration that has not been funded from the State budget. Under Resolution No 57. dated July 16, 2009 of the State Great Khural, the Oyu Tolgoi series of deposits were declared to be Strategic Deposits. The Ministry of Mining has advised Entrée that it considers the deposits on the Entrée/Oyu Tolgoi JV Property to be part of the Oyu Tolgoi series of deposits. Entrée has been in discussions with stakeholders of the Oyu Tolgoi project, including the Government of Mongolia, OTLLC, Erdenes Oyu Tolgoi LLC, Turquoise Hill and Rio Tinto, since February 2013. The discussions to date have focussed on issues arising from Entrée’s exclusion from the Oyu Tolgoi Investment Agreement, including the fact that the Government of Mongolia does not have a full 34% interest in the Entrée/Oyu Tolgoi JV Property; the fact that the mining licences integral to future underground operations are held by more than one corporate entity; and the fact that Entrée does not benefit from the stability that it would otherwise have if it were a party to the Oyu Tolgoi Investment Agreement. In order to receive the benefits of the Oyu Tolgoi Investment Agreement, the Government of Mongolia may require Entrée to agree to certain concessions, including with respect to the economic benefit of Entrée’s interest in the Entrée/Oyu Tolgoi JV Property, or the royalty rates applicable to Entrée’s share of the Entrée/Oyu Tolgoi JV Property mineralization. No agreements have been finalized. If the parties fail to reach mutually acceptable agreements in a timely manner, there is a risk that the Government of Mongolia may resort to measures which, whether legitimate or not, could have an adverse effect on the business, assets and financial condition of Entrée as well as the Company’s share price. Such measures could include suspending, revoking, cancelling or withdrawing the Shivee Tolgoi and Javhlant mining licences; attempting to invalidate, confiscate, expropriate or rescind the Entrée/Oyu Tolgoi JV or Entrée’s interest in the Entrée/Oyu Tolgoi JV Property; and filing legal proceedings against Entrée. Entrée is subject to legal and political risk in Mongolia. Entrée’s interest in the Entrée/Oyu Tolgoi JV Project is not covered by the Oyu Tolgoi Investment Agreement. Government policy may change to discourage foreign investment, nationalization of the mining industry may occur and other government limitations, restrictions or requirements may be implemented. There can be no assurance that Entrée’s assets will not be subject to nationalization, requisition, expropriation or confiscation, whether legitimate or not, by any authority or body. In addition, there can be no assurance that neighbouring countries’ political and economic policies in relation to Mongolia will not have adverse economic effects on the development 65 of Entrée’s assets, including with respect to ability to access power, transport and sell products and access construction labour, supplies and materials. The political, social and economic environment in Mongolia presents a number of serious risks, including: uncertain legal enforcement; invalidation, confiscation, expropriation or rescission of governmental orders, permits, licences, agreements and property rights; the effects of local political, labour and economic developments, instability and unrest; corruption, requests for improper payments or other corrupt practices; and significant or abrupt changes in the applicable regulatory or legal climate. There is no assurance that provisions under Mongolian law for compensation and reimbursement of losses to investors under such circumstances would be effective to restore the full value of Entrée’s original investment or to compensate for the loss of the current value of its assets. Entrée may be affected in varying degrees by, among other things, government regulations with respect to restrictions on foreign ownership, state ownership of Strategic Deposits, royalties, production, price controls, export controls, income and other taxes, expropriation of property, employment, land use, water use, environmental legislation, mine safety and annual fees to maintain mining licences in good standing. The regulatory environment is in a state of continuing change, and new laws, regulations and requirements may be retroactive in their effect and implementation. There can be no assurance that Mongolian laws protecting foreign investments will not be amended or abolished or that existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks described above. The legal framework in Mongolia is, in many instances, based on recent political reforms or newly enacted legislation, which may not be consistent with long-standing local conventions and customs. There may be ambiguities, inconsistencies and anomalies in the agreements, licences and title documents through which Entrée holds its assets, or the underlying legislation upon which those assets are based, which are atypical of more developed legal systems and which may affect the interpretation and enforcement of Entrée’s rights and obligations. Mongolian institutions and bureaucracies responsible for administering laws may lack a proper understanding of the laws or the experience necessary to apply them in a modern business context. Many laws have been enacted, but in many instances they are neither understood nor enforced and may be applied in an inconsistent, arbitrary and unfair manner, while legal remedies may be uncertain, delayed or unavailable. In addition, Entrée’s licences, permits and assets are often affected in varying degrees, by political instability and governmental regulations and bureaucratic processes, any one or more of which could preclude Entrée from carrying out business activities fairly in Mongolia. Legal redress for such actions, if available, is uncertain and can often involve significant delays. Entrée is not presently a party to the Oyu Tolgoi Investment Agreement, and there can be no assurance that Entrée will be entitled to all of the benefits of the Oyu Tolgoi Investment Agreement. Entrée is not presently a party to the Oyu Tolgoi Investment Agreement. Although OTLLC agreed under the terms of the Earn-In Agreement to use its best efforts to cause Entrée to be brought within the ambit of, made subject to and be entitled to the benefits of the Oyu Tolgoi Investment Agreement or a separate stability agreement on substantially similar terms to the Oyu Tolgoi Investment Agreement, unless and until Entrée finalizes agreements with the Government of Mongolia and other Oyu Tolgoi stakeholders, there can be no assurance that Entrée will be entitled to all of the benefits of the Oyu Tolgoi Investment Agreement, including stability with respect to taxes payable. If Entrée is not entitled to all of the benefits of the Oyu Tolgoi Investment Agreement, it could be subject to the surtax royalty which came into effect in Mongolia on January 1, 2011. The rates of the surtax royalty vary from 1% to 5% for minerals other than copper. For copper, the surtax royalty rates range between 22% and 30% for ore, between 11% and 15% for concentrates, and between 1% and 5% for final products. No surtax royalty is charged on any minerals below a certain threshold market price, which varies depending on the type of minerals. This is in addition to the standard royalty rates of 2.5% for coal sold in Mongolia and commonly occurring minerals sold in Mongolia, and 5% for all other minerals. Even if Entrée does finalize agreements with the Government of Mongolia and other Oyu Tolgoi stakeholders, there can be no assurance that the present or future Parliament will refrain from enacting legislation that undermines such agreements or the Oyu Tolgoi Investment Agreement or that the present or a future government 66 will refrain from adopting government policies or seeking to renegotiate the terms of such agreements or the Oyu Tolgoi Investment Agreement (which was threatened in both 2011 and 2012) in ways that are adverse to Entrée’s interests or that impair OTLLC’s ability to develop and operate the Oyu Tolgoi project on the basis currently contemplated, which may have a material adverse impact on Entrée and the Company’s share price. Recent and future amendments to Mongolian laws could adversely affect Entrée’s interests. The Government of Mongolia has put in place a framework and environment for foreign direct investment. However, there are political constituencies within Mongolia that have espoused ideas that would not be regarded by the international mining community as conducive to foreign investment if they were to become law or official government policy. This was evidenced by revisions to the Minerals Law in 2006 as well as by the 2012 passage of legislation to control foreign direct investment in strategic sectors of the Mongolian economy, including mining. In October 2011, Prime Minister Batbold stated in his 2012 budget speech that the Government of Mongolia is revisiting all treaties for the avoidance of double taxation, including the 2002 convention between Canada and Mongolia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital (the “Canadian Double Tax Treaty”). On November 1, 2013, an Investment Law came into effect in Mongolia. The law was aimed at reviving foreign investment by easing restrictions on investors (including foreign and domestic) in key sectors such as mining and by providing greater certainty on the taxes they must pay and certain guarantees in relation to their investments in Mongolia. The full impact of the Investment Law is still not yet known. On January 16, 2014, the Mongolian Parliament adopted a new State Minerals Policy. The main focus of the policy is to establish a stable investment environment; improve the quality of mineral exploration, mining and processing; encourage the use of environmentally friendly and modern technology; and strengthen the competitiveness of the Mongolian mining sector on the international market. The State Minerals Policy is also intended to serve as the basis for amendments to the existing Minerals Law and other laws relating to the mining sector. On July 1, 2014, the Mongolian Parliament passed the 2014 Amendments to the Minerals Law. In addition, the Mongolian Parliament also passed a separate law which repeals the 2010 statute which imposed a moratorium on the granting of new exploration licences and the transfer of existing licences. The 2014 Amendments extend the maximum period for an exploration licence from 9 years to 12 years (although it ended the three year pre-mining period sometimes given to licence holders upon the expiration of their exploration rights), extend the requirement for holders of mining licences to ensure that 90% of their workforce is comprised of Mongolian nationals to the mining licence holder’s subcontractors as well, make clearer the roles and responsibilities of government ministries and departments with respect to mineral matters, modify the definition of Strategic Deposit to reflect its impact on the national economy and not regional economy, and provide for some instances where a tender may not be required to obtain minerals licences where state funding has been used if related to compensation for declaring a special needs area, among other changes. On February 18, 2015, the Mongolian Parliament adopted the 2015 Amendment, which permits a licence holder to negotiate with the Government of Mongolia with respect to an exchange of the Government’s 34% (50% in cases where exploration has been funded by the State budget) equity interest in a licence holder with a Strategic Deposit for an additional royalty payable to the Government. The amount of the royalty payment would vary depending on the particulars of the Strategic Deposit but cannot exceed 5%. The rate of this royalty payment shall be approved by the Government of Mongolia. The full impact of the 2015 Amendment is not yet known. On November 10, 2016, the Mongolian Parliament adopted the 2016 Amendment, which introduces the term “derivative deposit” and applicable regulations for mining/exploitation of derivative deposits. Mining/exploitation of a derivative deposit by a licence holder or any other contracted third party (with the licence holder) is subject to licence. Further, the 2016 Amendment sets the royalty payment for mining/exploitation of a derivative deposit at 67 2.5% of the sales value, with an additional royalty of between 0% and 5% for gold if it is sold other than to the Central Bank of Mongolia. The Ministry of Mining is currently working on a draft mining law, aimed at regulating the mining sector in greater detail in Mongolia. If adopted, the draft mining law could adversely affect Entree’s interests. It is not possible to determine when, if ever, this draft law will be adopted and in what form. The Ministry of Finance and certain Members of Parliament have released draft laws and draft amendments to the tax legislation of Mongolia which include provisions related to the taxation of foreign legal entities operating in Mongolia and minerals companies in general. If certain provisions of these amendments were adopted by Parliament as currently drafted, they could adversely affect Entree's interests. It is not possible to determine when, if ever, these amendments would be adopted and in what form. On December 9, 2017, the Parliament of Mongolia amended the General Tax Law, the Corporate Income Tax Law, the Personal Income Tax Law, the Minerals Law, the Land Law and the Legal Entities Registration (collectively, the “2017 Amendments”) to introduce the concept of an “ultimate holder” of a legal entity for tax purposes. Any change of an ultimate holder of a legal entity that maintains a minerals licence is deemed to be a sale of the minerals licence and is subject to a 30% corporate income tax on the total income earned. The legal entity holding the minerals licence bears the tax obligation, not the person who earns the income from the transaction. In general, taxable income will be assessed based on the value of the minerals licence, pro-rated to the number or percentage of shares transferred from the ultimate holder. On December 25, 2017, the Ministry of Finance passed Decree No. 380 setting out the methodology to determine the value of minerals licences. The full impact of the 2017 Amendments is not yet known. If the Government of Mongolia revises, amends or cancels the Canadian Double Tax Treaty; if the Investment Law, State Minerals Policy, 2014 Amendments, 2015 Amendment, 2016 Amendment, 2017 Amendments or new mining law are implemented or interpreted in a manner that is not favourable to foreign investment or Entrée’s interests; or if new tax laws or amendments to tax laws are adopted that are not favourable to foreign investment or Entrée’s interests, it could have an adverse effect on Entrée’s operations in Mongolia and future cash flow, earnings, results of operations and financial condition as well as the Company’s share price. Entrée may experience difficulties with its joint venture partners; Rio Tinto controls the development of the Oyu Tolgoi project, including the Entrée/Oyu Tolgoi JV Property. While the Entrée/Oyu Tolgoi JV is operating under the terms of the Entrée/Oyu Tolgoi JVA, the Entrée/Oyu Tolgoi JVA has not been formally executed by the parties. There can be no assurance that OTLLC or its shareholders will not attempt to renegotiate some or all of the material terms governing the joint venture relationship in a manner which could have an adverse effect on Entrée’s future cash flow, earnings, results of operations and financial condition as well as the Company’s share price. OTLLC has earned either a 70% or 80% interest in mineralization extracted from the Entrée/Oyu Tolgoi JV Property, depending on the depth at which minerals are extracted, and has effective control of the Entrée/Oyu Tolgoi JV. Rio Tinto, which beneficially owns approximately 17.43% of the Company’s issued and outstanding shares, exerts a significant degree of control over the business and affairs of Turquoise Hill and OTLLC. Pursuant to the various agreements among Turquoise Hill, OTLLC and Rio Tinto, Rio Tinto is responsible for the management of the building and operation of the Oyu Tolgoi project (which includes the Heruga and Hugo North Extension deposits on the Entrée/Oyu Tolgoi JV Property); is responsible for all exploration operations on behalf of OTLLC, including exploration on the Entrée/Oyu Tolgoi JV Property; and prepares all programs and budgets for approval by the OTLLC board. The interests of Rio Tinto, Turquoise Hill and OTLLC and the interests of the Company’s other shareholders are not necessarily aligned and there can be no assurance that Rio Tinto, Turquoise Hill or OTLLC will exercise their rights or act in a manner that is consistent with the best interests of the Company’s other shareholders. 68 Entrée is and will be subject to the risks normally associated with the conduct of joint ventures, which include disagreements as to how to develop, operate and finance a project, inequality of bargaining power, incompatible strategic and economic objectives and possible litigation between the participants regarding joint venture matters. These matters may have an adverse effect on Entrée’s ability to realize the full economic benefits of its interest in the property that is the subject of a joint venture, which could affect its results of operations and financial condition as well as the Company’s share price. Entrée may be subject to risks inherent in legal proceedings. In the course of its business, Entrée may from time to time become involved in various claims, arbitration and other legal proceedings, with and without merit. The nature and results of any such proceedings cannot be predicted with certainty. Any potential future claims and proceedings are likely to be of a material nature. In addition, such claims, arbitration and other legal proceedings can be lengthy and involve the incurrence of substantial costs and resources by Entrée, and the outcome, and Entrée’s ability to enforce any ruling(s) obtained pursuant to such proceedings, are subject to inherent risk and uncertainty. The initiation, pursuit and outcome of any particular claim, arbitration or legal proceeding could have a material adverse effect on Entrée’s financial position and results of operations, and on Entrée’s business, assets and prospects. In addition, if Entrée is unable to resolve any existing or future potential disputes and proceedings favourably, or obtain enforcement of any favourable ruling, if any, that may be obtained pursuant to such proceedings, it is likely to have a material adverse impact on Entrée’s business, financial condition and results of operations and Entrée’s assets and prospects as well as the Company’s share price. On February 27, 2013, Entrée received notice from MRAM regarding the Entrée/Oyu Tolgoi JV’s mining licences. On February 27, 2013, notice was delivered to Entrée by MRAM advising that any transfer, sale or lease of the Shivee Tolgoi and Javhlant mining licences is temporarily restricted. While Entrée was subsequently advised that the temporary transfer restriction on the joint venture mining licences will be lifted, it has not received official notification of the lifting of the restriction. Any future action by the Government of Mongolia to suspend, revoke, withdraw or cancel the Shivee Tolgoi and Javhlant mining licences, whether legitimate or not, would have an adverse effect on the business, assets and financial condition of Entrée as well as the Company’s share price. The Earn-In Agreement requires OTLLC to enter into the Entrée/Oyu Tolgoi JVA, which bestows upon OTLLC certain powers and duties as manager of the Entrée/Oyu Tolgoi JV, including the duty to cure title defects, the duty to prosecute and defend all litigation or administrative proceedings arising out of operations, and the duty to do all acts reasonably necessary to maintain the Entrée/Oyu Tolgoi JV Property assets, including the mining licences. Pursuant to the Assignment Agreement dated March 1, 2005 between the Company, Turquoise Hill and OTLLC, the Company is also entitled to look to Turquoise Hill for the performance of OTLLC’s obligations under the Earn-In Agreement, which is governed by British Columbia law. In addition, the Shivee Tolgoi and Javhlant mining licences are included in the contract area of the Oyu Tolgoi Investment Agreement. The Oyu Tolgoi Investment Agreement restricts the grounds upon which the Mongolian State administrative authority in charge of geology and mining may revoke a mining licence covered by the Oyu Tolgoi Investment Agreement. The Oyu Tolgoi Investment Agreement also includes a dispute resolution clause that requires the parties to resolve disputes through international commercial arbitration procedures. Entrée is not a party to the Oyu Tolgoi Investment Agreement and does not have any direct rights under the Oyu Tolgoi Investment Agreement. In the event that the Government of Mongolia suspends, revokes, withdraws or cancels the Shivee Tolgoi and Javhlant mining licences, there can be no assurance that OTLLC, Turquoise Hill or Rio Tinto will invoke the international arbitration procedures, or that Entrée will be able to enforce the terms of the Earn-In Agreement or the Entrée/Oyu Tolgoi JVA to cause OTLLC or Turquoise Hill to do all acts reasonably necessary to maintain the Entrée/Oyu Tolgoi JV Property assets, including by invoking the international arbitration procedures under the Oyu Tolgoi Investment Agreement. There may also be limitations on OTLLC, Turquoise Hill and Rio Tinto’s ability to enforce the terms of the Oyu Tolgoi Investment Agreement against the Government of Mongolia, which is a sovereign entity, regardless of the outcome of an arbitration proceeding. Without an effective means of enforcing the terms of the 69 Entrée/Oyu Tolgoi JVA, the Earn-In Agreement or the Oyu Tolgoi Investment Agreement, Entrée could be deprived of substantial rights and benefits with little or no recourse for fair and reasonable compensation. This would have an adverse effect on the business, assets and financial condition of Entrée as well as the Company’s share price. Entrée may be unable to enforce its legal rights in certain circumstances. In the event of a dispute arising at or in respect of Entrée’s foreign operations, Entrée may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada or other jurisdictions. Entrée may also be hindered or prevented from enforcing its rights with respect to a governmental entity or instrumentality because of the doctrine of sovereign immunity. Any adverse or arbitrary decision of a court, arbitrator or other governmental or regulatory body, or Entrée’s inability to enforce its contractual rights, may have a material adverse impact on Entrée’s business, assets, prospects, financial condition and results of operation as well as the Company’s share price. Entrée’s rights to use and access certain land area could be adversely affected by the application of Mongolia’s Resolution 81, Resolution 140 or Resolution 175. In June 2010, the Government of Mongolia passed Resolution 140, the purpose of which is to authorize the designation of certain land areas for “state special needs” within certain defined areas, some of which include or are in proximity to the Oyu Tolgoi project. These state special needs areas are to be used for Khanbogd village development and for infrastructure and plant facilities necessary to implement the development and operation of the Oyu Tolgoi project. A portion of the Shivee Tolgoi licence is included in the land area that is subject to Resolution 140. In June 2011, the Government of Mongolia passed Resolution 175, the purpose of which is to authorize the designation of certain land areas for “state special needs” within certain defined areas in proximity to the Oyu Tolgoi project. These state special needs areas are to be used for infrastructure facilities necessary to implement the development and construction of the Oyu Tolgoi project. Portions of the Shivee Tolgoi and Javhlant licences are included in the land area that is subject to Resolution 175. It is expected but not yet formally confirmed by the Government that to the extent that a consensual access agreement exists or is entered into between OTLLC and an affected licence holder, the application of Resolution 175 to the land area covered by the access agreement will be unnecessary. OTLLC has existing access and surface rights to the Entrée/Oyu Tolgoi JV Property pursuant to the Earn-In Agreement. If Entrée is unable to reach a consensual arrangement with OTLLC with respect to the Shivee West Property, Entrée’s right to use and access a corridor of land included in the state special needs areas for a proposed power line may be adversely affected by the application of Resolution 175. While the Mongolian Government would be responsible for compensating Entrée in accordance with the mandate of Resolution 175, the amount of such compensation is not presently quantifiable. While the Oyu Tolgoi Investment Agreement contains provisions restricting the circumstances under which the Shivee Tolgoi and Javhlant licences may be expropriated, which may make the application of Resolution 140 and Resolution 175 to the Entrée/Oyu Tolgoi JV Property unnecessary, there can be no assurances that the Resolutions will not be applied in a manner that has an adverse impact on Entrée. In March 2014, the Government of Mongolia passed Resolution 81, the purpose of which is to approve the direction of the railway line heading from Ukhaa Khudag deposit located in the territory of Tsogttsetsii soum, Umnugobi aimag, to the port of Gashuunshukhait and to appoint the Minister of Roads and Transportation to develop a detailed engineering layout of the base structure of the railway. On June 18, 2014, Entrée was advised by MRAM that the base structure overlaps with a portion of the Javhlant licence. By Order No. 123 dated June 18, 2014, the Minister of Mining approved the composition of a working group to resolve matters related to the holders of licences through which the railway passes. The Minister of Mining has not yet responded to a request 70 from Entrée to meet to discuss the proposed railway, and no further correspondence from MRAM or the Minister of Mining has been received. It is not yet clear whether the State has the legal right to take a portion of the Javhlant licence, with or without compensation, in order to implement a national railway project, and if it does, whether it will attempt to exercise that right. While the Oyu Tolgoi Investment Agreement contains provisions restricting the circumstances under which the Javhlant licence may be expropriated, there can be no assurances that Resolution 81 will not be applied in a manner that has an adverse impact on Entrée. Changes in, or more aggressive enforcement of, laws and regulations could adversely impact Entrée’s business. Mining operations and exploration activities are subject to extensive laws and regulations. These relate to production, development, exploration, exports, imports, taxes and royalties, labour standards, occupational health, waste disposal, protection and remediation of the environment, mine decommissioning and reclamation, mine safety, toxic substances, transportation safety and emergency response and other matters. Compliance with these laws and regulations increases the costs of exploring, drilling, developing, constructing, operating and closing mines and other facilities. It is possible that the costs, delays and other effects associated with these laws and regulations may impact the decision of Entrée or one of its partners as to whether to continue to operate in a particular jurisdiction or whether to proceed with exploration or development of properties. Since legal requirements change frequently, are subject to interpretation and may be enforced to varying degrees in practice, Entrée is unable to predict the ultimate cost of compliance with these requirements or their effect on operations. Changes in governments, regulations and policies and practices could have an adverse impact on Entrée’s future cash flows, earnings, results of operations and financial condition, which may have a material, adverse impact on Entrée and the Company’s share price. Risks Associated With The Development of the Oyu Tolgoi Project The Entrée/Oyu Tolgoi JV Property forms part of the Oyu Tolgoi project. As a result, certain risk factors associated with the development of the Oyu Tolgoi project are also applicable to Entrée and may adversely affect Entrée, including the following. There can be no assurance that OTLLC will be capable of raising the additional funding that it needs to continue the development of the Oyu Tolgoi project, including Hugo North Extension Lift 2 and Heruga. Further development of the Oyu Tolgoi project depends upon OTLLC’s ability to obtain and service the funding requirements of the project. Volatility in capital markets and commodity prices and other macroeconomic factors may adversely affect OTLLC’s ability to secure project financing. In addition, OTLLC operates in a region of the world that is prone to economic and political upheaval and instability, which may make it more difficult to obtain sufficient debt financing from project lenders for future phases of the Oyu Tolgoi project. The actual cost of developing the Oyu Tolgoi project may differ materially from estimates and involve unexpected problems or delays. OTLLC’s estimates regarding the cost of development and operation of the Oyu Tolgoi project are estimates only. The estimates and the assumptions upon which they are based are subject to a variety of risks and uncertainties and other factors that could cause actual expenditures to differ materially from those estimated. If these estimates prove incorrect, the total capital expenditures required to complete development of the Oyu Tolgoi project underground mine, including Entrée’s share of Entrée/Oyu Tolgoi JV capital expenditures being debt financed by OTLLC, may increase, which may have a material adverse impact on Entrée, its results of operations, financial conditions, and the Company’s share price. 71 There are a number of uncertainties inherent in the development and construction of any new or existing mine, including the Oyu Tolgoi project underground mine. These uncertainties include: the timing and cost, which can be considerable, of the construction of mining and processing facilities; the availability and cost of skilled labour, the impact of fluctuations in commodity prices, process water, power and transportation, including costs of transport for the supply chain for the Oyu Tolgoi project, which requires routing approaches which have not been fully tested; the annual usage costs to the local province for sand, aggregate and water; the availability and cost of appropriate smelting and refining arrangements; and the need to obtain necessary environmental and other government permits, such permits being on reasonable terms, and the timing of those permits. The cost, timing and complexities of mine construction and development are increased by the remote location of the Oyu Tolgoi project. It is common in new mining operations and in the development or expansion of existing facilities to experience unexpected problems and delays during development, construction and mine start-up, which may cause delays in commencement or expansion of mineral production. Any delays could impact disclosed project economics. Accordingly, there is no assurance that the future development, construction or expansion activities will be successfully completed within cost estimates, on schedule or at all and, if completed, there is no assurance that such activities will result in profitable mining operations. The Oyu Tolgoi Investment Agreement and Mine Plan include a number of future covenants that may be outside of the control of the investors to perform. The Oyu Tolgoi Investment Agreement and Mine Plan commit Turquoise Hill and Rio Tinto to perform many obligations in respect of the development and operation of the Oyu Tolgoi project. While performance of many of these obligations is within the effective control of Turquoise Hill and Rio Tinto, the scope of certain obligations may be open to interpretation. Further, the performance of other obligations may require co-operation from third parties or may be dependent upon circumstances that are not necessarily within the control of Turquoise Hill and Rio Tinto. Non-fulfillment of any obligation may result in a default or breach under the Oyu Tolgoi Investment Agreement and the Mine Plan. Such a default could result in a termination of the Oyu Tolgoi Investment Agreement and the Mine Plan, which may have a material adverse impact on Entrée and the Company’s share price. The Oyu Tolgoi Investment Agreement commits OTLLC to utilize only Mongolian power sources. Such sources of power may not be available or may be available upon commercial terms that are less advantageous than those available from other potential power suppliers. Despite Turquoise Hill and Rio Tinto’s best efforts, such an obligation is not necessarily within their control and non-fulfillment of such requirement may result in a default under the Oyu Tolgoi Investment Agreement. Risks Associated With the Amended Funding Agreement In certain circumstances the Company may be required to return a portion of the Deposit to Sandstorm. The 2013 Agreement provided for a partial refund of the Deposit and a pro rata reduction in the number of metal credits deliverable to Sandstorm in the event of a partial expropriation of Entrée’s economic interest, contractually or otherwise, in the Entrée/Oyu Tolgoi JV Property. The Amended Funding Agreement provides that the Company will not be required to make any further refund of the Deposit if Entrée’s economic interest is reduced by up to and including 17%. If there is a reduction of greater than 17% up to and including 34%, the Amended Funding Agreement provides the Company with greater flexibility and optionality in terms of how the Company will refund a corresponding portion of the Deposit, including not requiring Entrée to refund cash. To the extent there is an expropriation of greater than 34%, which is not reversed during the abeyance period provided for in the Amended Funding Agreement with Sandstorm, the Company will be required to return a portion of the Deposit in cash (the amount of the repayment not to exceed the amount of the Unearned Balance). 72 Certain events outside of Entrée’s control may be an event of default under the Amended Funding Agreement. If an event of default occurs under the Amended Funding Agreement, the Company may be required to immediately pay to Sandstorm a default fee, which it may not have sufficient funds to cover. Some potential events of default may be outside of Entrée’s control, including a full expropriation of Entrée’s economic interest, contractually or otherwise, in the Entrée/Oyu Tolgoi JV Property which is not reversed during the abeyance period provided for in the Amended Funding Agreement. If an event of default occurs and the Company is required to pay a default fee to Sandstorm, it may have a material adverse impact on Entrée’s business, financial condition, assets and prospects, and on the Company’s share price. Short term fluctuations in mineral prices may expose the Company to trading losses. Under the Amended Funding Agreement, the Company agrees to use future cash flows from its mineral property interests to purchase and deliver metal credits to Sandstorm. The Amended Funding Agreement does not require the Company to deliver actual metal production, therefore the Company will have to use revenue it receives from the sale of its share of metal production to purchase the requisite amount of metal credits for delivery to Sandstorm. To the extent metal prices on the day on which the Company’s production is sold are different from metal prices on the day on which the Company purchases metal credits for delivery to Sandstorm, the Company may suffer a gain or loss on the difference. Risks Associated With Mining Resource and reserve estimates, including estimates for the Hugo North Extension and Heruga deposits, are estimates only, and are subject to change based on a variety of factors. The estimates of reserves and resources, including the anticipated tonnages and grades that will be achieved or the indicated level of recovery that will be realized, are estimates only and no assurances can be given as to their accuracy. Such estimates are, in large part, based on interpretations of geological data obtained from drill holes and other sampling techniques, and large scale continuity and character of the deposits will only be determined once significant additional drilling and sampling has been completed and analyzed. Actual mineralization or formations may be different from those predicted. It may also take many years from the initial phase of drilling before production is possible, and during that time the economic feasibility of exploiting a deposit may change. Reserve and resource estimates are materially dependent on prevailing market prices and the cost of recovering and processing minerals at the mine site. Market fluctuations in the price of metals or increases in the costs to recover metals may render the mining of ore reserves uneconomical and materially adversely affect operations. Moreover, various short-term operating factors may cause a mining operation to be unprofitable in any particular accounting period. Prolonged declines in the market price of metals may render reserves containing relatively lower grades of mineralization uneconomic to exploit and could reduce materially reserves and resources. Should such reductions occur, the discontinuation of development or production might be required. The estimates of mineral reserves and resources attributable to a specific property are based on accepted engineering and evaluation principles. The estimated amount of contained metals in probable mineral reserves does not necessarily represent an estimate of a fair market value of the evaluated property. There are numerous uncertainties inherent in estimating quantities of mineral reserves and resources. The estimates in the Company’s disclosure documents are based on various assumptions relating to commodity prices and exchange rates during the expected life of production, mineralization, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Any significant change in the assumptions underlying the estimates, including changes that result from variances between projected and actual 73 results, could result in material downward revision to current estimates, which may have a material adverse impact on Entrée and the Company’s share price. Mineral prices are subject to dramatic and unpredictable fluctuations. Entrée expects to derive revenues, if any, from the extraction and sale of base and precious metals such as copper, gold, silver and molybdenum. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond Entrée’s control, including international economic and political trends, expectations of inflation, global and regional demand, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities, increased production due to improved extraction and production methods and economic events, including the performance of Asia’s economies. Ongoing worldwide economic uncertainty could lead to prolonged recessions in many markets which may, in turn, result in reduced demand for commodities, including base and precious metals. The effect of these factors on the price of base and precious metals, and, therefore, the economic viability of any of Entrée’s property interests, cannot accurately be predicted. Should prevailing metal prices remain depressed, there may be a curtailment or suspension of mining, development and exploration activities. Entrée would have to assess the economic impact of any sustained lower metal prices on recoverability and, therefore, the cut-off grade and level of reserves and resources. These factors could have an adverse impact on Entrée’s future cash flows, earnings, results of operations, stated reserves and financial condition, which may have an adverse impact on Entrée and the Company’s share price. Entrée has interests in properties that are not in commercial production. There is no assurance that the existence of mineral reserves will be established in commercially exploitable quantities. Mineral reserves have been established on Lift 1 of the Hugo North Extension deposit in Mongolia. Mineral resources have been outlined on Hugo North Extension Lift 2 and the Heruga deposit. Unless and until mineral reserves are established in economically exploitable quantities on a deposit, and it is brought into commercial production, Entrée cannot earn any revenues from operations on that deposit. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. There is no assurance that commercial quantities of ore will be discovered or that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. The discovery of mineral deposits is dependent upon a number of factors, not the least of which is the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metallurgical recoveries, metal prices and government regulations, including regulations relating to taxation, royalties, allowable production, importing and exporting of minerals, and environmental protection. Most of the above factors are beyond the control of Entrée. The probability of an individual prospect ever having mineral reserves that meet the requirements of the definition is extremely remote. There can be no assurance that Entrée or its partners will be able to obtain or maintain any required permits. Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labour standards, water rights, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that Entrée or any of its partners, including OTLLC, will be able to obtain or maintain any of the permits required for the continued exploration of mineral properties in which Entrée has an interest or 74 for the construction and operation of a mine on those properties at economically viable costs. If required permits cannot be obtained or maintained, Entrée or its partners may be delayed or prohibited from proceeding with planned exploration or development of the mineral properties in which Entrée has an interest and Entrée’s business could fail. Entrée’s property interests are subject to substantial environmental and other regulatory requirements and such regulations are becoming more stringent. Non-compliance with such regulations could materially adversely affect Entrée. Entrée’s property interests are subject to environmental regulations in the various jurisdictions in which they are located. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Environmental legislation is evolving in a manner which will likely require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect Entrée’s operations. Environmental hazards may exist on the properties in which Entrée holds interests which are presently unknown to Entrée and which have been caused by previous or existing third-party owners or operators of the properties. Government approvals and permits are also often required in connection with various aspects of operations on the properties in which Entrée has an interest. To the extent that such approvals are required and not obtained, Entrée or its partners may be delayed or prevented from proceeding with planned exploration or development of the mineral properties, which may have a material, adverse impact on Entrée and its share price. In Mongolia, Entrée is required to deposit 50% of its proposed reclamation budget with the local Soum Governor’s office (a soum is the local Mongolian equivalent of a township or district) which will be refunded only on acceptable completion of land rehabilitation after mining operations have concluded. Even if Entrée relinquishes its licences, Entrée will still remain responsible for any required reclamation. There can be no assurance that title to licences and concessions is free from defects. While Entrée has investigated title to the exploration and mining licences and concessions held by it and its partners, title may be challenged by third parties or the licences that permit Entrée or its partners to explore, develop or mine properties may expire if Entrée or its partners fail to timely renew them and pay the required fees. Entrée cannot guarantee that its rights will not be revoked or altered to its detriment as a result of actions by the Mongolian Ministry of Mining, MRAM, Mongolia’s Resolution 81, 140 and/or 175 or otherwise. The ownership and validity of exploration and mining licences and concessions are often uncertain and may be contested. In Mongolia, should a third party challenge to the boundaries or registration of ownership arise, the Government of Mongolia may declare the property in question a special reserve for up to three years to allow resolution of disputes or to clarify the accuracy of its mining licence register. Entrée is not aware of any third party challenges to the location or area of any of the licences or concessions in any of the jurisdictions in which it operates. There is, however, no guarantee that title to the licences and concessions will not be challenged or impugned in the future. If Entrée or its partners fail to pay the appropriate annual fees or timely apply for renewal, then these licences or concessions may expire or be forfeit. 75 Mineral exploration and development is subject to extraordinary operating risks. Entrée does not currently insure against these risks. Mineral exploration and development involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Entrée’s operations will be subject to all of the hazards and risks inherent in the exploration and development of resources, including liability for pollution or hazards against which Entrée cannot insure or against which Entrée may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. Entrée does not currently maintain any insurance coverage against all of these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material, adverse impact on Entrée. The mining industry is highly competitive and there is no assurance that Entrée will continue to be successful in acquiring property interests or in the recruitment or retention of qualified employees. If Entrée cannot continue to acquire property interests or recruit qualified personnel, its financial condition could be adversely affected. There is aggressive competition within the mining industry for the identification and acquisition of property interests considered to have commercial potential, as well as the necessary labour and supplies required to develop such properties. Entrée competes with other companies, many of which have greater financial resources, operational experience and technical capabilities than Entrée, for the acquisition of property interests as well as for the recruitment and retention of qualified employees and other personnel. Entrée may not be able to maintain or acquire attractive property interests on terms it considers acceptable, or at all. Consequently, its financial condition could be materially adversely affected. Risks Related To Entrée Entrée can provide investors with no assurances that it will generate any operating revenues or ever achieve profitable operations. Although Entrée has been in the business of exploring mineral resource properties since 1995, Entrée has never had any revenues from its operations. In addition, its operating history has been restricted to the acquisition and exploration of its mineral properties. Entrée anticipates that it will continue to incur operating costs without realising any revenues until such time as the Entrée/Oyu Tolgoi JV Property or one of the properties in which Entrée has a royalty interest is brought into production. Entrée expects to continue to incur losses into the foreseeable future. Entrée recognises that if it is unable to generate revenues from mining operations and any dispositions of its interests in properties, Entrée will not be able to earn profits or continue operations. Entrée can provide investors with no assurance that it will generate any operating revenues or ever achieve profitable operations. Entrée may be forced to raise funds for operating expenses from outside sources. Entrée has not generated any revenue from operations since its incorporation. Entrée anticipates that it will continue to incur operating expenses without revenues unless and until it is able to generate cash flows from the Entrée/Oyu Tolgoi JV or one of its royalty interests. As at December 31, 2017, Entrée had working capital of approximately $7.2 million. Entrée’s average monthly operating expenses in 2017 were approximately $258,000, including general and administrative expenses and investor relations expenses. Entrée has a carried interest in the Entrée/Oyu Tolgoi JV Property. As a result, Entrée believes that it will not have to raise any additional funds to meet its currently budgeted operating requirements for the next 12 months. If these funds are not sufficient, or if Entrée does not begin generating revenues from operations sufficient to pay its operating expenses when Entrée has expended them, Entrée will be forced to raise necessary funds from outside sources. While Entrée may be able to raise funds through strategic alliances, joint ventures, product streaming or other arrangements, it has traditionally raised its operating capital from sales of equity, but there can be no assurance that Entrée will continue to be able to do so. 76 Recent global financial conditions may adversely impact operations and the value and price of the Company’s Common Shares. Recent global financial and market conditions have been subject to increased volatility. This increased volatility may impact the ability of Entrée to obtain equity or debt financing in the future and, if obtained, on terms favourable to Entrée. If these increased levels of volatility and market turmoil continue, Entrée’s operations could be adversely impacted and the value and the price of the Company’s Common Shares could be adversely affected. As a result of their existing shareholdings and agreements with Entrée, Sandstorm, Rio Tinto, Turquoise Hill and OTLLC potentially have the ability to influence Entrée’s business and affairs. Sandstorm’s beneficial shareholdings in the Company, totalling approximately 13.72% of the Company’s outstanding Common Shares, and Rio Tinto’s beneficial shareholdings in the Company, totalling approximately 17.43% of the Company’s outstanding Common Shares, potentially give Sandstorm and Rio Tinto the voting power to influence the policies, business and affairs of Entrée and the outcome of any significant corporate transaction or other matter, including a merger, business combination or a sale of all, or substantially all, of Entrée’s assets. In addition, Rio Tinto (on behalf of OTLLC) has operational control over the Entrée/Oyu Tolgoi JV Property. OTLLC and Sandstorm also have certain rights in the event of a proposed disposition by Entrée of its interest in the Entrée/Oyu Tolgoi JV and OTLLC has a right of first refusal with respect to any proposed disposition by Entrée of an interest in the Shivee West Property, which is not currently subject to the Entrée/Oyu Tolgoi JV. The share position in the Company of each of Sandstorm, Rio Tinto and Turquoise Hill may have the effect of delaying, deterring or preventing a transaction involving a change of control of the Company in favour of a third party that otherwise could result in a premium in the market price of the Company’s Common Shares in the future. In the case of Sandstorm, the risk is mitigated to some extent by the requirement in the Amended Funding Agreement for Sandstorm to vote its shares as the Board specifies with respect to any potential acquisition of the Company, provided the potential acquirer agrees to execute and deliver to Sandstorm a deed of adherence to the Amended Funding Agreement. The Company’s Articles and indemnity agreements between the Company and its officers and directors indemnify its officers and directors against costs, charges and expenses incurred by them in the performance of their duties. The Company’s Articles contain provisions requiring the Company to indemnify Entrée’s officers and directors against all judgements, penalties or fines awarded or imposed in, or an amount paid in settlement of, a legal proceeding or investigative action in which such party, by reason of being a director or officer of Entrée, is or may be joined. The Company also has indemnity agreements in place with its officers and directors. Such limitations on liability may reduce the likelihood of derivative litigation against the Company’s officers and directors and may discourage or deter the Company’s shareholders from suing its officers and directors based upon breaches of their duties to Entrée, though such an action, if successful, might otherwise benefit Entrée and the Company’s shareholders. Investors' interests in the Company will be diluted and investors may suffer dilution in their net book value per Common Share if the Company issues stock options or bonus shares or if the Company issues additional Common Shares to finance its operations. Entrée has never generated revenue from operations, and it is currently without a source of revenue. The Company may be required to issue additional Common Shares to finance Entrée’s operations or to acquire additional property interests. The Company may also in the future grant to Stephen Scott, the Company’s President and Chief Executive Officer, up to 400,000 Common Shares of the Company, issuable at the discretion of the Board, based on the achievement of certain performance criteria. The Company may also in the future grant to some or all of Entrée’s directors, 77 officers, consultants, and employees additional options to purchase Common Shares as non-cash incentives to those persons. Such options may be granted at prices equal to market prices, or at prices as allowable under the policies of the TSX and the Company’s Stock Option Plan, when the public market is depressed. The issuance of any options could, and the issuance of any additional Common Shares will, cause the Company’s existing shareholders to experience dilution of their ownership interests. If the Company issues additional Common Shares, investors’ interests in the Company will be diluted and investors may suffer dilution in their net book value per Common Share depending on the price at which such securities are sold. As at December 31, 2017 Entrée had outstanding options exercisable into 9,175,000 Common Shares (March 8, 2018 – 7,685,000 Common Shares) which, if exercised as at March 8, 2018 would represent approximately 5.3% (March 8, 2018 – 4.4%) of its issued and outstanding Common Shares. If all of these options are exercised and the underlying Common Shares are issued, such issuance will cause a reduction in the proportionate ownership and voting power of all other shareholders. The dilution may result in a decline in the market price of the Company’s Common Shares. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends. The Company has no earnings or dividend record. The Company has not paid dividends on its Common Shares since incorporation and does not anticipate doing so in the foreseeable future. The Company’s current intention is to apply any future net earnings to increase its working capital. Prospective investors seeking or needing dividend income or liquidity should, therefore, not purchase the Company’s Common Shares. The Company currently has no revenue and a history of losses, so there can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to the holders of Common Shares. Certain associations may give rise to conflicts of interest. Some of the directors and officers of the Company are also directors, officers or employees of other companies that are similarly engaged in the business of acquiring, exploring and developing natural resource properties. In addition, certain individuals also serve as directors or officers of Mason and are subject to the Administrative Services Agreement. Such associations may give rise to conflicts of interest from time to time. Entrée’s directors and officers are required by law to act honestly and in good faith with a view to its best interests and to disclose any interest which they may have in any of its projects or opportunities. In general, if a conflict of interest arises at a meeting of a board of directors, any director in a conflict will disclose his or her interest and abstain from voting on such matter or, if he or she does vote, his or her vote does not count. There can be no assurance that Entrée will be able to attract and retain key management personnel. Entrée’s ability to continue its exploration and development activities and to develop a competitive edge in the marketplace depends, in large part, on its ability to attract and maintain qualified key management personnel. Competition for such personnel is intense, and there can be no assurance that Entrée will be able to attract and retain such personnel. Its development now, and in the future, will depend on the efforts of key management figures. The loss of any of these key people could have a material adverse effect on Entrée’s business. Entrée currently only maintains key-man life insurance on its President & Chief Executive Officer. Fluctuations in currency exchange rates may impact Entrée’s financial position and results. Fluctuations in Canadian and United States currency exchange rates may significantly impact Entrée’s financial position and results. 78 Future negative effects due to changes in tax regulations cannot be excluded. Entrée runs its business in different countries and strives to run its business in as tax efficient a manner as possible. The tax systems in certain of these countries are complicated and subject to change. For this reason, the possibility of future negative effects on the results of the Company due to changes in tax regulations cannot be excluded. Repatriation of earnings to Canada from other countries may be subject to withholding taxes. Entrée has no control over withholding tax rates. The Company is subject to anti-corruption legislation. The Company is subject to the U.S. Foreign Corrupt Practices Act and other similar legislation, such as Canada’s Corruption of Foreign Officials Act (collectively, “Anti-Corruption Legislation”), which prohibits Entrée or any officer, director, employee or agent of Entrée or any shareholder of the Company on its behalf from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. Anti-Corruption Legislation also requires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequate system of internal accounting controls. Entrée’s international activities create the risk of unauthorized payments or offers of payments by its employees, consultants or agents, even though they may not always be subject to its control. Entrée prohibits these practices by its employees and agents. However, Entrée’s existing safeguards and any future improvements may prove to be less than effective, and its employees, consultants and agents may engage in conduct for which it might be held responsible. Any failure by Entrée to adopt appropriate compliance procedures and ensure that its employees and agents comply with Anti-Corruption Legislation and applicable laws and regulations in foreign jurisdictions could result in substantial penalties or restrictions on Entrée’s ability to conduct business in certain foreign jurisdictions, which may have a material adverse impact on Entrée and the price of the Company’s Common Shares. The Company believes that it was a passive foreign investment company during 2017, which may have a material effect on U.S. holders. The Company believes it was a “passive foreign investment company” (“PFIC”) during the year ended December 31, 2017 and may be a PFIC for subsequent tax years, which may have a material effect on United States shareholders (“US Holders”). United States income tax legislation contains rules governing PFICs, which can have significant tax effects on US Holders of foreign corporations. A US Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to United States federal income taxation under one of two alternative tax regimes at the election of each such US Holder. The United States federal income tax consequences to a US Holder of the acquisition, ownership, and disposition of Common Shares will depend on whether such US Holder makes an election to treat the Company as a “qualified electing fund” or “QEF” under Section 1295 of the Code (“QEF Election”) or a mark-to-market election under Section 1296 of the Code (“Mark-to- Market Election”). Additional adverse rules would apply to US Holders for any year the Company is a PFIC and Entrée owns or disposes of shares in another corporation which is a PFIC. However, US Holders should be aware that there can be no assurance that the Company will satisfy the record keeping requirements that apply to a QEF, or that the Company will supply US Holders with information that such US Holders require to report under the QEF election rules, in the event that the Company is a PFIC and a US Holder wishes to make a QEF election. Thus, US Holders may not be able to make a QEF Election with respect to their Common Shares. It may be difficult to enforce judgements or bring actions outside the United States against the Company and certain of its directors. The Company is a Canadian corporation and certain of its directors are neither citizens nor residents of the United States. A substantial part of the assets of several of these persons are located outside the United States. As a result, it may be difficult or impossible for an investor to enforce in courts outside the United States judgements 79 obtained in United States courts based upon the civil liability provisions of United States federal securities laws against these persons and the Company; or to bring in courts outside the United States an original action to enforce liabilities based upon United States federal securities laws against these persons and the Company. Entrée may be subject to increased costs and compliance risks as a result of being a public company. Legal, accounting and other expenses associated with public company reporting requirements have increased significantly over time. The Company anticipates that general and administrative costs associated with regulatory compliance will continue to increase with ongoing compliance requirements under the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as any new rules implemented by the SEC, Canadian Securities Administrators, the NYSE American and the TSX in the future. These rules and regulations have significantly increased the Company’s legal and financial compliance costs and made some activities more time-consuming and costly. There can be no assurance that the Company will continue to effectively meet all of the requirements of these rules and regulations, including Sarbanes-Oxley Section 404, National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings of the Canadian Securities Administrators (“NI 52-109”), and the continued listing standards of the NYSE American and the TSX. Any failure to effectively implement internal controls, or to resolve difficulties encountered in their implementation, could harm the Company’s operating results, cause the Company to fail to meet reporting obligations or result in management being required to give a qualified assessment of the Company’s internal controls over financial reporting or the Company’s independent auditors providing an adverse opinion regarding management’s assessment. Any such result could cause investors to lose confidence in the Company’s reported financial information, which could have a material adverse effect on the trading price of the Company’s Common Shares. Any failure to comply with the continued listing standards of the NYSE American or the TSX, including by maintaining a minimum listing price, could result in, among other things, the initiation of delisting proceedings. Ongoing compliance requirements have also made it more difficult and more expensive for the Company to obtain director and officer liability insurance, and the Company may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage in the future. As a result, it may be more difficult for the Company to attract and retain qualified individuals to serve on its Board or as executive officers. If the Company fails to maintain the adequacy of its internal control over financial reporting, the Company’s ability to provide accurate financial statements and comply with the requirements of Sarbanes-Oxley and NI 52-109 could be impaired, which could cause the price of the Company’s Common Shares to decrease. Internal controls cannot provide absolute assurance with respect to the reliability of financial reporting and financial statement preparation. Internal controls over financial reporting are procedures designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and transactions are properly recorded and reported. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and financial statement preparation. Entrée’s operations depend on information technology (“IT”) systems. These IT systems could be subject to network disruptions caused by a variety of sources, including computer viruses, security breaches and cyberattacks, as well as disruptions resulting from incidents such as cable cuts, damage to physical plants, natural disasters, terrorism, fire, power loss, vandalism and theft. Entrée’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact Entrée’s reputation and results of operations. Although to date Entrée has not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that Entrée will not incur such losses in the future. Entrée’s risk and exposure to these matters cannot be fully mitigated because of, among other 80 things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority. As cyber threats continue to evolve, Entrée may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities. DIVIDENDS The Company has not declared any dividends on its Common Shares since its inception on July 19, 1995. There is no restriction in the Company’s Articles that will limit its ability to pay dividends on its Common Shares. However, the Company does not anticipate declaring and paying dividends to its shareholders in the near future. CAPITAL STRUCTURE The Company is authorized to issue an unlimited number of Common Shares without par value, of which 173,573,572 were issued and outstanding at December 31, 2017 and 174,221,796 were issued and outstanding at March 8, 2018. Each Common Share is entitled to one vote. All Common Shares of the Company rank equally as to dividends, voting power and participation in assets. No Common Shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights and no provision for exchange, exercise, redemption and retraction, purchase for cancellation, surrender or sinking or purchase funds. Provisions as to modification, amendments or variation of such rights or such provisions are contained in the BCBCA and the Company’s Articles. MARKET FOR SECURITIES The Company’s shares were traded on the TSX Venture Exchange until April 24, 2006. On April 24, 2006 the Company began trading on the TSX. The Company’s symbol is “ETG” and its CUSIP number is 29384J 10 3. The Company’s Common Shares are also traded on the NYSE American under the symbol “EGI”. Trading History The following tables sets forth, for each month of the most recently completed financial year, the price range and volumes traded or quoted on the TSX (as reported by TSX Infosuite) and the NYSE American (as reported by NYSE Data & Analytics): TSX Trading Data 2017 High Cdn$ 0.80 0.94 0.84 0.73 0.66 0.60 0.66 0.65 0.60 0.59 0.79 0.78 Low Cdn$ 0.40 0.63 0.58 0.56 0.49 0.46 0.45 0.52 0.50 0.50 0.55 0.55 Close Cdn$ 0.69 0.75 0.65 0.64 0.59 0.49 0.66 0.58 0.55 0.56 0.60 0.77 Volume 5,035,899 1,696,918 1,559,057 1,660,604 1,700,900 1,365,498 1,714,628 963,920 1,269,594 1,513,285 2,726,561 2,067,292 January February March April May June July August September October November December 81 NYSE American Trading Data 2017 High $ 0.61 0.72 0.63 0.54 0.48 0.44 0.55 0.52 0.50 0.46 0.61 0.63 Low $ 0.30 0.49 0.42 0.41 0.22 0.35 0.36 0.41 0.40 0.40 0.40 0.43 Close $ 0.52 0.56 0.49 0.46 0.44 0.38 0.52 0.45 0.45 0.43 0.47 0.60 Volume 4,718,059 3,707,920 2,060,417 1,217,737 1,574,844 1,163,308 2,527,117 2,294,078 3,300,253 2,385,472 4,178,828 2,610,598 January February March April May June July August September October November December The closing price of the Company’s Common Shares as reported by the TSX on December 29, 2017 (the last trading day of the year) was C$0.77. The Company’s Common Shares are issued in registered form. Computershare Investor Services Inc. is the registrar and transfer agent for the Company’s Common Shares. On December 31, 2017, the shareholders' list for the Company’s Common Shares showed 1,204 registered shareholders and 173,573,572 Common Shares outstanding. As part of the Arrangement, optionholders of the Company received Mason incentive stock options (“Mason Options”) which were proportionate to, and reflective of the terms of, their existing incentive stock options of the Company. In exchange for each existing incentive stock option, the holder was issued one fully vested replacement option to purchase a Common Share of the Company (a “Replacement Option”) and 0.45 of a fully vested Mason Option. On May 23, 2017, Mason awarded a total of 3,708,000 Mason Options to the Company’s optionholders in accordance with its Stock Option Plan, which was approved by the Company’s shareholders at the Annual and Special Meeting of Securityholders held to approve the Arrangement. The Mason Options were awarded with exercise prices ranging from C$0.07 per share to C$0.27 per share and expiry dates ranging from September 2017 to November 2021. On May 23, 2017, the Company’s optionholders also received an aggregate 8,240,000 Replacement Options with exercise prices ranging from C$0.18 per share to C$0.61 per share and expiry dates ranging from September 2017 to November 2021. The exercise prices assigned to the Replacement Options and the Mason Options reflect the allocation of the original exercise price of the existing options between the Replacement Options and the Mason Options issued, based on the relative market value of Mason and the Company following completion of the Arrangement. Subsequent to completion of the Arrangement, the Company awarded 65,000 stock options to a consultant of the Company at an exercise price of C$0.62, a total of 1,835,000 stock options to directors, officers, employees and consultants of the Company at an exercise price of C$0.52, and 100,000 stock options to a director of the Company at an exercise price of C$0.63. The following table outlines the details of each award of Replacement Options and other incentive stock options of the Company made since January 1, 2017: Number of Options Exercise Price C$ Award Date Expiry Date 82 100,000 65,000 75,000 50,000 65,000 100,000 230,000 5,000 1,925,000 50,000 150,000 100,000 715,000 935,000 100,000 500,000 770,000 100,000 2,205,000 65,000 1,835,000 100,000 Total: 10,240,000 $0.47 $0.26 $0.18 $0.28 $0.36 $0.61 $0.47 $0.47 $0.47 $0.28 $0.28 $0.36 $0.26 $0.18 $0.32 $0.28 $0.28 $0.33 $0.36 $0.62 $0.52 $0.63 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 May 23, 2017 October 16, 2017 February 5, 2018 September 7, 2017 September 7, 2017 September 7, 2017 September 7, 2017 September 7, 2017 September 21, 2017 September 21, 2017 October 6, 2017 March 15, 2018(1) April 9, 2018 June 27, 2018 November 13, 2018 December 19, 2018(2) December 22, 2019(3) July 12, 2020 November 15, 2020 December 3, 2020(4) March 31, 2021 November 21, 2021(5) May 22, 2022 October 15, 2022 February 4, 2023 (1) (2) (3) (4) (5) Of these, 55,000 expired on August 21, 2017 following termination of employment of the optionholder. Of these, 30,000 expired on August 21, 2017 following termination of employment of the optionholder. Of these, 75,000 expired on August 21, 2017 following termination of employment of the optionholder. Of these, 50,000 expired on August 21, 2017 following termination of employment of the optionholder. Of these, 65,000 expired on August 21, 2017 following termination of employment of the optionholder. On January 11, 2017, the Company issued 8,654,979 common share purchase warrants in connection with the Private Placement. As part of the Arrangement, warrantholders of the Company received Mason Warrants which were proportionate to, and reflective of the terms of, their existing warrants of the Company. In exchange for each existing warrant, the holder was issued one Replacement Warrant and 0.45 of a Mason Warrant. On May 23, 2017, warrantholders of the Company received an aggregate 4,169,119 Mason Warrants each with an exercise price of C$0.23, and an aggregate 9,264,735 Replacement Warrants each with an exercise price of C$0.55. The exercise prices assigned to the Replacement Warrants and the Mason Warrants reflect the allocation of the original exercise price of the existing warrants between the Replacement Warrants and the Mason Warrants issued, based on the relative market value of Mason and the Company following completion of the Arrangement. See “Description of the Business – Non-Brokered Private Placement” above. Number of Replacement Warrants Exercise Price C$ 8,654,979 609,756 0.55 0.55 83 Expiry Date January 10, 2022 January 12, 2022 The Company has no outstanding securities not listed on a marketplace other than incentive stock options and Replacement Warrants. ESCROWED SECURITIES There were no escrowed securities at December 31, 2017. DIRECTORS AND OFFICERS The Company’s Board consisted of six directors as at December 31, 2017. On February 5, 2018, Lord Howard retired as Non-Executive Chairman and a director of the Company and Mark Bailey was appointed Non-Executive Chairman. Also on February 5, 2018, Michael Price was appointed to the Board to fill the vacancy created by Lord Howard’s retirement. The term of office for each director expires at the next annual general meeting following his or her election or appointment. The following is a brief account of the education and business experience of each director and executive officer, indicating each person’s principal occupation during the last five years. Mark Bailey, Non-Executive Chairman and Director Mr. Bailey has been a director of the Company since June 28, 2002. On February 5, 2018, Mr. Bailey was appointed Non-Executive Chairman of the Company. Mr. Bailey is a mining executive and registered professional geologist with 40 years of industry experience. Between 1995 and 2012, he was the President and Chief Executive Officer of Minefinders Corporation Ltd. (“Minefinders”), a precious metals mining company that operated the multi-million ounce Dolores gold and silver mine in Mexico before being acquired by Pan American Silver Corp. Before joining Minefinders, Mr. Bailey held senior positions with Equinox Resources Inc. and Exxon Minerals. Since 1984, Mr. Bailey has worked as a consulting geologist with Mark H. Bailey & Associates LLC. Mr. Bailey is currently a director of Mason, Fiore Gold Ltd. and Core Gold Inc. James Harris, Director Mr. Harris has been a director of the Company since January 29, 2003, served as the Company’s Non-Executive Chairman between March 15, 2006 and June 27, 2013 and served as the Company’s Non-Executive Deputy Chairman between June 27, 2013 and February 28, 2015. Mr. Harris was formerly a corporate, securities and business lawyer with over 30 years’ experience in Canada and internationally. He has extensive experience with the acquisition and disposition of assets, corporate structuring and restructuring, regulatory requirements and corporate filings, and corporate governance. Mr. Harris was also a Founding Member of the Legal Advisory Committee of the former Vancouver Stock Exchange. Mr. Harris has completed the Directors’ Education Program of the Institute of Corporate Directors and is an Institute accredited Director. Mr. Harris has also completed a graduate course in business at the London School of Economics. Mr. Harris is currently a director of Mason. 84 Alan Edwards, Director Mr. Edwards has been a director of the Company since March 8, 2011. Mr. Edwards has more than 35 years of diverse mining industry experience. He is a graduate of the University of Arizona, where he obtained a Bachelor of Science Degree in Mining Engineering and an MBA (Finance). Mr. Edwards is currently the President of AE Resources Corp., an Arizona based company. Mr. Edwards is a director of Americas Silver Corporation, Orvana Minerals Corp. and is the Chairman of the Board of Mason and Rise Gold Corp. He served as the non-executive Chairman of the Board of AQM Copper Inc. from October 2011 to January 2017 and AuRico Gold Inc. (Alamos Gold Inc. following its combination with AuRico Gold in July 2015) from July 2013 to November 2015. Mr. Edwards served as the Chief Executive Officer of Oracle Mining Corporation, a Vancouver based company, from 2012 to 2013. He also previously served as President and Chief Executive Officer of Copper One Inc. and Frontera Copper Corporation, and as Executive Vice President and Chief Operating Officer of Apex Silver Mines Corporation, where he directed the engineering, construction and development of the San Cristobal project in Bolivia. Mr. Edwards has also worked for Kinross Gold Corporation, P.T. Freeport Indonesia, Cyprus Amax Minerals Company and Phelps Dodge Mining Company, where he started his career. Anna Stylianides, Director Ms. Stylianides has been a director of the Company since July 13, 2015. Ms. Stylianides has over 20 years of experience in global capital markets and has spent much of her career in investment banking, private equity, and corporate management and restructuring. She began her career in corporate law by joining the firm of Webber Wentzel Attorneys in 1990 after graduating from the University of the Witwatersrand in Johannesburg, South Africa. In 1992, she joined Investec Merchant Bank Limited where she specialized in risk management and gained extensive experience in the areas of corporate finance, structured finance, mergers and acquisitions, structuring, specialized finance and other banking and financial services transactions. She was also involved in designing and structuring of financial products for financial institutions and corporations. Ms. Styliandes was most recently the Executive Chairman of Eco Oro Minerals Corp. (“Eco Oro”), a precious metals exploration and mining development company with a portfolio of projects in northeastern Colombia, and is currently a director of Eco Oro, Sabina Gold & Silver Corp., Capfin Partners, LLC, Altius Minerals Corporation and the Fraser Institute. Michael Price, Director Dr. Price has been a director of the Company since February 5, 2018. Dr. Price has over 35 years of experience in mining and mining finance. He is currently a Non-Executive Director of Eldorado Gold Corp. and Asanko Gold Inc., and is the London Representative of Resource Capital Funds. During his career, Dr. Price has served as Managing Director, Joint Global Head of Mining and Metals, Barclays Capital, Managing Director, Global Head of Mining and Metals, Societe Generale and Head of Resource Banking and Metals Trading, NM Rothschild and Sons. Dr. Price has B.Sc. and Ph.D. qualifications in Mining Engineering from University College Cardiff. Stephen Scott, President, Chief Executive Officer and Director Mr. Scott was appointed to the position of Interim Chief Executive Officer on November 16, 2015. He was appointed to the positions of President, Chief Executive Officer and director on April 1, 2016. 85 Mr. Scott has thirty years of global experience in all mining industry sectors. Before joining Entrée, he was the President of Minenet Advisors, a capital markets and management advisory consultancy providing a broad range of advice and services to clients relating to planning and execution of capital markets transactions, strategic planning, generation and acquisition of projects, and business restructuring. Between 2000 and 2014, Mr. Scott held various global executive positions with Rio Tinto including General Manager Commercial, Rio Tinto Copper and President and Director of Rio Tinto Indonesia. He is an experienced public company director having served as an independent director on the boards of a number of TSX and AIM listed public mining companies. Mr. Scott holds a Bachelor of Business and Graduate Certificate in Corporate Secretarial Practises from Curtin University in Western Australia. Mr. Scott is also currently the President, Chief Executive Officer and a director of Mason. The Rt. Honourable Lord Howard of Lympne, Former Non-Executive Chairman and Director The Rt. Honourable Lord Howard of Lympne was a director of the Company from May 16, 2007 to February 5, 2018, served as the Company’s Non-Executive Deputy Chairman between May 16, 2007 and June 27, 2013 and was appointed Non-Executive Chairman on June 27, 2013. Lord Howard retired as Non-Executive Chairman of the Company on February 5, 2018. Lord Howard is the former leader of the Conservative Party in Britain, a distinguished lawyer, and served as a Member of Parliament in Britain for 27 years. He filled many government posts, including Home Secretary, Secretary of State for Employment and Secretary of State for the Environment, as well as Shadow Foreign Secretary and Shadow Chancellor. After his retirement from the House of Commons at the 2010 General Election, Lord Howard was created a Life Peer. He was created a Companion of Honour in the Queen’s Birthday Honours List, 2011. Lord Howard was awarded the Altan Gadas (Order of the Polar Star) in January 2013, the highest honour that can be bestowed on a non-citizen of Mongolia. Lord Howard is also senior non-executive director of Watchstone Group plc and Chairman of Soma Oil & Gas Holdings Limited. Duane Lo, Chief Financial Officer Mr. Lo was appointed to the position of Interim Chief Financial Officer on April 1, 2016 and was appointed to the position of Chief Financial Officer on November 1, 2016. Mr. Lo has almost 20 years of experience in accounting and financial management, the majority of which has been spent in the financing, management and administration of mining operations and development projects in Brazil, Africa and other jurisdictions. Mr. Lo is currently also the Chief Financial Officer of Mason. He was previously the Executive Vice President and Chief Financial Officer of Luna Gold Corp. and Corporate Controller for First Quantum Minerals Ltd. Mr. Lo was also employed at Deloitte in the assurance and advisory practice. He holds a Chartered Professional Accountant, Chartered Accountant (CPA, CA) designation from the Institute of Chartered Accountants of British Columbia. Mr. Lo is currently a director of Fengro Industries Corp. Susan McLeod, Vice President, Legal Affairs and Corporate Secretary Ms. McLeod joined the Company as Vice President, Legal Affairs on September 22, 2010 and was appointed Corporate Secretary on November 22, 2010. Ms. McLeod is currently also the Chief Legal Officer and Corporate Secretary of Mason. Prior to joining Entrée, Ms. McLeod was in private practise in Vancouver, Canada since 1997, most recently with Fasken Martineau DuMoulin LLP (from 2008 to 2010) and P. MacNeill Law Corporation (from 2003 to 2008). She has worked as outside counsel to public companies engaged in international mineral exploration and mining. She has advised clients with respect to corporate finance activities, mergers and acquisitions, corporate governance and continuous disclosure matters, and mining-related commercial agreements. Ms. McLeod holds a B.Sc. and an LLB from the University of British Columbia, and is a member of the Law Society of British Columbia. 86 Robert Cinits, Vice President, Corporate Development Mr. Cinits has been the Company’s Vice President, Corporate Development since January 1, 2014. Prior to that, he was the Company’s Vice President, Technical Services from June 27, 2013 to December 31, 2013, and the Company’s Director of Technical Services from July, 2011 to June 26, 2013. Mr. Cinits has extensive experience in project management and development and geological consulting. He is currently also the Chief Operating Officer of Mason. Prior to joining the Company, Mr. Cinits was the Chief Operating Officer for MinCore Inc., a private, Toronto-based exploration company with projects in Sinaloa, Mexico, from 2007 to 2011. From 2003 through 2006, Mr. Cinits worked for AMEC as the Manager of Geology and Mining for the Lima Peru office. He was involved in numerous feasibility and prefeasibility studies, as well as PEAs, resource estimates and mine and project audits/reviews throughout South America and other locations worldwide. Mr. Cinits has also worked for several consulting groups and junior mining companies since 1985. Mr. Cinits holds a Bachelor of Science degree in Geology from the University of Toronto and is a member of Engineers and Geoscientists, British Columbia and the Society of Economic Geologists. The table below sets out the municipality of residence and securities held by directors and executive officers as at December 31, 2017. Name and municipality of residence No. of Common Shares beneficially owned, directly or indirectly, or controlled(1). Mark Bailey(2) Arizona U.S.A. James Harris(3) British Columbia Canada Rt. Honourable Lord Howard of Lympne London, UK(4) Alan Edwards(5) Arizona U.S.A Anna Stylianides(6) British Columbia Canada Stephen Scott(7) British Columbia Canada 576,136 653,062 431,239 429,951 73,171 332,561 No. of securities held on a fully- diluted basis 576,136 Common Shares: Replacement Warrants: 50,000 Stock options: 830,000 1,456,136 Total: 653,062 Common Shares: Replacement Warrants: 67,500 Stock options: 930,000 1,650,562 Total: 431,239 Common Shares: Replacement Warrants: 101,219 1,030,000 Stock options: 1,562,458 Total: 429,951 Common Shares: Replacement Warrants: 60,975 Stock options: 830,000 1,320,926 Total: 73,171 Common Shares: Replacement Warrants: 36,585 525,000 Stock options: 634,756 Total: 332,561 Common Shares: Replacement Warrants: 48,780 1,225,000 Stock options: 1,606,341 Total: Name and municipality of residence No. of Common Shares beneficially owned, directly or indirectly, or controlled(1). No. of securities held on a fully- diluted basis 87 Duane Lo(8) British Columbia Canada Robert Cinits(9) British Columbia Canada Susan McLeod(10) British Columbia Canada 626,300 48,780 271,500 Common Shares: 626,300 Replacement Warrants: 122,000 Stock options: 550,000 1,298,300 Total: Common Shares: 48,780 Replacement Warrants: 24,390 1,260,000 Stock Options: 1,333,170 Total: Common Shares: 271,500 Replacement Warrants: 61,000 1,285,000 Stock options: 1,617,500 Total: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Meaning an officer of the issuer, or a director or senior officer that has direct or indirect beneficial ownership of, control or direction over, or a combination of direct or indirect beneficial ownership of and control or direction over securities of the issuer carrying more than 10% of the voting rights attached to all the issuer’s outstanding securities. Member of the Compensation Committee (chair), Audit Committee and Technical Committee. As at March 8, 2018, Mr. Bailey held 611,627 Common Shares, 50,000 Replacement Warrants and 600,000 stock options. Member of the Corporate Governance and Nominating Committee (chair), Audit Committee and Compensation Committee. As at March 8, 2018, Mr. Harris held 908,062 Common Shares, 67,500 Replacement Warrants and 675,000 stock options. Lord Howard retired as a director and Non-Executive Chairman of the Board on February 5, 2018. On February 5, 2018, Michael Price was appointed to the Board to fill the vacancy created by Lord Howard’s retirement. As at March 8, 2018, Mr. Price held 100,000 stock options. Member of the Technical Committee (chair), Compensation Committee and Corporate Governance and Nominating Committee. As at March 8, 2018, Mr. Edwards held 457,783 Common Shares, 60,975 Replacement Warrants and 600,000 stock options. Member of the Audit Committee (chair) and Corporate Governance and Nominating Committee. Member of the Technical Committee. As at March 8, 2018, Mr. Lo held 726,300 Common Shares, 122,000 Replacement Warrants and 550,000 stock options. As at March 8, 2018, Mr. Cinits held 131,805 Common Shares, 24,390 Replacement Warrants and 935,000 stock options. As at March 8, 2018, Ms. McLeod held 412,655 Common Shares, 61,000 Replacement Warrants and 910,000 stock options. To the best of the Company’s knowledge as at December 31, 2017, directors and executive officers, as a group, beneficially owned, or controlled or directed, directly or indirectly, 3,442,700 Common Shares (not including Common Shares issuable upon exercise of Replacement Warrants or stock options) representing 1.98% of the then outstanding Common Shares (March 8, 2018: 3,653,964 Common Shares representing 2.10%). Cease Trade Orders, Bankruptcies, Penalties or Sanctions Alan Edwards, a director of the Company, was Chairman of the Board of Oracle Mining Corp. (“Oracle”) until his resignation effective February 15, 2015. On December 23, 2015, Oracle announced that the Superior Court of Arizona had granted the application of Oracle’s lender to appoint a receiver and manager over the assets, undertaking and property of Oracle Ridge Mining LLC. 88 Standing Committees of the Board of Directors The standing committees of the Board are the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee and the Technical Committee. Audit Committee The Audit Committee is comprised of three directors, each of whom, in the judgement of the Board, meets the independence requirements of applicable securities legislation and policies for audit committee members. The members of the Audit Committee are Anna Stylianides (chair), Mark Bailey and James Harris. All members of the Audit Committee are financially literate. Relevant education and experience for members of the Audit Committee is listed under their profiles above. The mandate of the Audit Committee is to oversee the Company’s financial reporting obligations, systems and disclosure, including monitoring the integrity of the Company’s financial statements, monitoring the independence and performance of the Company’s external auditors and acting as a liaison between the Board and the Company’s auditors. The activities of the Audit Committee typically include reviewing interim financial statements and annual financial statements, management’s discussion and analysis and news releases with respect to the Company’s financial performance before they are publicly disclosed, ensuring that internal controls over accounting and financial systems are maintained and that accurate financial information is disseminated to shareholders. Other responsibilities include reviewing the results of internal and external audits and any change in accounting procedures or policies, and evaluating the performance of the Company's auditors. The Audit Committee communicates directly with the Company’s external auditors in order to discuss audit and related matters whenever appropriate. The full text of the Audit Committee Charter is attached to this AIF as an Appendix. Audit Fees The following table shows the aggregate fees billed to the Company by its external auditor in each of the last two years. Audit Fees(1) Audit Related Fees(2) Tax Fees(3) All other fees Total: 2017 $34,485 $24,173 $Nil $Nil $58,658 2016 $37,820 $Nil $Nil $Nil $37,820 (1) Audits of the Company’s consolidated financial statements, meetings with the Audit Committee and management with respect to annual filings, consulting and accounting standards and transactions, issuance of consent in connection with Canadian and United States securities filings. (2) Audit-related fees paid for assurance and related services by the auditors that were reasonably related to the performance of the audit or the review of the Company’s quarterly financial statements that are not included in Audit Fees. (3) Tax compliance, taxation advice and tax planning for international operations. Compensation Committee The Compensation Committee is comprised of three directors, each of whom, in the judgement of the Board, meets the independence requirements of applicable securities legislation and policies for compensation 89 committee members. The members of the Compensation Committee are: Mark Bailey (chair), Alan Edwards and James Harris. The primary objective of the Compensation Committee is to discharge the Board’s responsibilities relating to compensation and benefits of the executive officers and directors of the Company to ensure that such compensation realistically reflects the responsibilities and risks of such positions. In addition, the Compensation Committee makes recommendations for grants made under the Company’s Stock Option Plan, determines the recipients of, and the nature and size of share compensation awards granted from time to time, and determines any bonuses to be awarded from time to time. Corporate Governance and Nominating Committee The Corporate Governance and Nominating Committee is comprised of three directors, each of whom, in the judgement of the Board, meets the independence requirements of applicable securities legislation and policies for nominating committee members. The Corporate Governance and Nominating Committee: (1) assists the Board, on an annual basis, by identifying individuals qualified to become Board members, and recommends to the Board the director nominees for the next annual meeting of shareholders; (2) assists the Board in the event of any vacancy on the Board by identifying individuals qualified to become Board members, and recommends to the Board qualified individuals to fill any such vacancy; and (3) recommends to the Board, on an annual basis, director nominees for each Board committee. The members of the Corporate Governance and Nominating Committee are: James L. Harris (chair), Alan Edwards and Anna Stylianides. Technical Committee The members of the Technical Committee consist of Alan Edwards (chair), Mark Bailey and Stephen Scott. In the judgement of the Board, Mr. Edwards and Mr. Bailey are independent directors. Mr. Scott is not independent, by virtue of the fact that he is the President and Chief Executive Officer of the Company. The mandate of the Technical Committee is to exercise all the powers of the Board (except those powers specifically reserved by law to the Board itself) during intervals between meetings of the Board pertaining to the Company’s mining properties, programs, budgets, and other related activities and the administration thereof. Potential Conflicts of Interest To the best of the Company’s knowledge, and other than as disclosed in this AIF, there are no known existing or potential conflicts of interest between the Company and any director or officer of the Company. The Company’s directors and officers may serve as directors or officers of other companies, including Mason, with whom the Company has an Administrative Services Agreement, or have significant shareholders in other resource companies. Such associations may give rise to conflicts of interest from time to time. Directors are required by law to act honestly and in good faith with a view to Entrée’s best interests and to disclose any interest which they may have in any of Entrée’s projects or opportunities. In general, if a conflict of interest arises at a meeting of the Board, any director in a conflict will disclose his or her interest and abstain from voting on such matter or, if he or she does vote, his or her vote does not count. In determining whether or not Entrée will participate in any project or opportunity, the directors will primarily consider the degree of risk to which Entrée may be exposed and its financial position at that time. PROMOTERS Not applicable. LEGAL PROCEEDINGS AND REGULATORY ACTIONS Not applicable. 90 INTEREST IN MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS Agreement to Amend with Sandstorm Gold Ltd. On February 23, 2016, the Company and Sandstorm entered into an Agreement to Amend, which provides for a 17% reduction in the metal credits that the Company is required to sell and deliver to Sandstorm under the 2013 Agreement. In return, the Company refunded 17% of the Deposit by paying $5.5 million in cash and issuing $1.3 million of common shares (thereby reducing the Deposit to $33.2 million). At closing, the parties entered into the Amended Funding Agreement. See “Description of the Business – Agreements with Sandstorm – Amended and Restated Equity Participation and Funding Agreement” above. The transaction closed on March 1, 2016. Pursuant to the Agreement to Amend, the Company issued 5,128,604 common shares to Sandstorm at a price of C$0.3496 per common share. The price was calculated using the VWAP of the Company’s common shares on the TSX for the 15 trading days preceding February 23, 2016, the effective date of the Agreement to Amend. The Agreement to Amend is a related party transaction as that term is defined in Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) by virtue of the fact that Sandstorm beneficially owns Common Shares of the Company carrying more than 10% of the voting rights attached to all of the Company’s outstanding Common Shares. The Company relied on exemptions from the formal valuation and minority approval requirements set out in MI 61-101 based on a determination that neither the fair market value of the partial refund or the amendments (including, without limitation, the reduction in deliverable metal credits), exceeds 25% of the Company’s market capitalization. The Agreement to Amend was approved by the Board, which is entirely comprised of independent directors, with one director dissenting. Non-Brokered Private Placement On January 11, 2017, the Company closed the first of two tranches of the Private Placement. The Company issued 17,309,971 Units at a price of C$0.41 per Unit for gross proceeds of C$7,097,088.11. A second tranche of 1,219,513 Units closed on January 13, 2017. See “Description of the Business – Non-Brokered Private Placement” above. Each Unit consisted of one common share of the Company and one-half of one transferable common share purchase warrant. Each whole warrant entitled the holder to acquire one additional common share of the Company for a period of five years at a price of C$0.65. As part of the Arrangement, warrantholders of the Company received Mason Warrants which were proportionate to, and reflective of the terms of, their existing warrants of the Company. In exchange for each existing warrant, the holder was issued one Replacement Warrant and 0.45 of a Mason Warrant. On May 23, 2017, warrantholders of the Company received an aggregate 4,169,119 Mason Warrants each with an exercise price of C$0.23, and an aggregate 9,264,735 Replacement Warrants each with an exercise price of C$0.55. The exercise prices assigned to the Replacement Warrants and the Mason Warrants reflect the allocation of the original exercise price of the existing warrants between the Replacement Warrants and the Mason Warrants issued, based on the relative market value of Mason and the Company following completion of the Arrangement. Directors and executive officers of the Company and their associates acquired an aggregate 1,144,902 Units under the Private Placement on the same terms and conditions as the other subscribers. In addition, Sandstorm acquired 914,634 Units. As at March 8, 2018, Sandstorm holds 23,900,380 Common Shares, or 13.72% of the Company’s issued and outstanding Common Shares. The following directors, executive officers and persons or companies that beneficially own, or control or direct, directly or indirectly, more than 10% of the Common Shares of the Company acquired Units under the Private Placement on the same terms and conditions as the other subscribers: Name of person or company Nature of relationship to Company # of Units purchased % of Units purchased Sandstorm Gold Ltd. 10% shareholder 914,634 Stephen Scott Director & executive officer 73,171 4.94 0.39 Walentyna Szczepinska-Karcz Associate of director & executive officer 24,390 0.13 Michael Howard Former Director 202,439 James Harris Director 13,500 Maureen Leyland Associate of director 13,500 JLHLC Holdings Inc. Associate of director 108,000 Alan Edwards Director Mark Bailey Director Anna Stylianides Director 121,951 100,000 73,171 Duane Lo Executive officer 244,000 Robert Cinits Executive officer Susan McLeod Executive officer John Quelch Associate of executive officer 48,780 37,000 85,000 1.09 0.07 0.07 0.58 0.66 0.54 0.39 1.32 0.26 0.20 0.46 91 % of Common Shares of Company held by person or company as at March 8, 2018 13.72 0.18 0.01 0.25 0.28 0.02 0.22 0.26 0.35 0.04 0.42 0.08 0.16 0.08 The Company relied on exemptions from the formal valuation and minority approval requirements set out in MI 61-101 based on a determination that neither the fair market value of the Units subscribed for by the foregoing persons and companies, nor the consideration paid by such persons and companies, would exceed 25% of the Company’s market capitalization. On January 3, 2017, the Company’s Audit Committee reviewed the related party component of the Private Placement and unanimously deemed it to be appropriate. On January 4, 2017, the Board unanimously authorized and approved the Private Placement. 92 TRANSFER AGENTS AND REGISTRARS Computershare Investor Services Inc. at its offices in Vancouver and Toronto is both the transfer agent and registrar for the Company. Their address is 3rd Floor, 510 Burrard Street, Vancouver, British Columbia, V6C 3G9, Telephone: (604) 689-9853, Facsimile: (604) 689-8144. MATERIAL CONTRACTS 1. 2. 3. Arrangement Agreement dated February 28, 2017 between Entrée Gold Inc. and Mason Resources Corp. See “Description of the Business – Plan of Arrangement” above. Amended and Restated Equity Participation and Funding Agreement dated February 14, 2013 and amended March 1, 2016 between Entrée Gold Inc. and Sandstorm Gold Ltd. See “Description of the Business – Agreements with Sandstorm – Amended and Restated Equity Participation and Funding Agreement” above. Joint Venture Agreement effective June 30, 2008 between Entrée Gold Inc. and Ivanhoe Mines Mongolia Inc. XXK (now OTLLC). Pursuant to Earn-In Agreement, a joint venture was formed on June 30, 2008 and the parties were required to enter into the Entrée/Oyu Tolgoi JVA in the form attached to the Earn-In Agreement as Appendix A. The Entrée/Oyu Tolgoi JVA contains provisions governing the parties’ activities on the Entrée/Oyu Tolgoi JV Property, including exploration, acquisition of additional real property and other interests, evaluation of, and if justified, engaging in development and other operations, engaging in marketing products, and completing and satisfying all environmental compliance and other continuing obligations affecting the Entrée/Oyu Tolgoi JV Property. 4. Equity Participation and Earn-in Agreement dated October 15, 2004, between Entrée Gold Inc. and Ivanhoe Mines Ltd. (now Turquoise Hill), as amended on November 9, 2004 and subsequently assigned to Ivanhoe Mines Mongolia Inc. XXK (OTLLC) on March 1, 2005. Under the Earn-In Agreement, OTLLC earned a 70% interest in mineralization above a depth of 560 metres on the Entrée/Oyu Tolgoi JV Property, and an 80% interest in mineralization below that depth, by spending an aggregate $35 million on exploration. OTLLC completed its earn-in on June 30, 2008, at which time a joint venture was formed under the terms of the Entrée/Oyu Tolgoi JVA. The Entrée/Oyu Tolgoi JVA was intended to replace the Earn-In Agreement, with the Earn-In Agreement terminating, except for certain provisions that expressly survive the termination. Those parts include provisions related to the Entrée/Oyu Tolgoi JVA, title, tenure and related matters and arbitration. INTEREST OF EXPERTS Entrée’s auditor is Davidson & Company LLP, Chartered Professional Accountants, in Vancouver, British Columbia. The Corporation’s audited consolidated financial statements as at and for the years ended December 31, 2017, 2016 and 2015 have been filed under National Instrument 51-102 – Continuous Disclosure Obligations in reliance on the report of Davidson & Company, independent registered chartered professional accountants, given on their authority as experts in auditing and accounting. Davidson & Company LLP have confirmed they are independent of the Company in accordance with the rules of professional conduct of the Chartered Professional Accountants of British Columbia. 93 Amec Foster Wheeler Americas Limited prepared the 2018 Technical Report, which forms the basis of the scientific and technical disclosure regarding the Entrée/Oyu Tolgoi JV Project, a copy of which is available on SEDAR at www.sedar.com. To the knowledge of the Company, Amec Foster Wheeler Americas Limited and its designated professionals as a group have a registered or beneficial interest, direct or indirect, in less than one percent of the outstanding Common Shares. Robert Cinits, P. Geo, the Company’s Vice President, Corporate Development, approved the technical information in this AIF and the Company’s news releases and other disclosure documents. Mr. Cinits has a registered or beneficial interest, direct or indirect, in 131,805 Common Shares, 24,390 Replacement Warrants and incentive stock options to purchase 935,000 Common Shares of the Company. ADDITIONAL INFORMATION Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation is contained in the management information circular for the Annual General and Special Meeting of the Company’s securityholders held on May 1, 2017. Additional financial information is contained in the Company’s comparative financial statements and MD&A as at and for the years ended December 31, 2017, 2016 and 2015. Copies of the information circular, financial statements and MD&A are available on SEDAR, and may also be obtained upon request from the Company at Suite 1650, 1066 West Hastings Street, Vancouver, British Columbia V6E 3X1. Additional information relating to Entrée Resources Ltd. may be found on SEDAR at www.sedar.com. 1 APPENDIX TO ANNUAL INFORMATION FORM DATED MARCH 10, 2017 ENTRÉE RESOURCES LTD. AUDIT COMMITTEE CHARTER As Adopted by the Board of Directors on December 4, 2014 I. Purpose of Audit Committee of Entrée Resources Ltd. (the “Company”) The purpose of the Audit Committee (the “Committee”) is to: 1. Assist the Board of Directors of the Company (the “Board”) responsibilities relating to: in fulfilling its oversight (a) (b) (c) the quality and integrity of the Company’s financial statements, financial reporting process and systems of internal controls and disclosure controls regarding risk management, finance, accounting, and legal and regulatory compliance; the appointment, independence, qualifications, and compensation of the Company’s independent accountants and review of the audit efforts of the Company’s independent accountants; and the development and implementation of policies and processes regarding corporate governance matters. Provide an open avenue of communication between the independent accountants, the Company’s financial and senior management and the Board. Prepare any reports required to be prepared by the Committee pursuant to the rules of any stock exchange on which the Company’s shares are listed and pursuant to the rules of any securities commission or other regulatory authority having jurisdiction, whether for inclusion in the Company’s annual proxy statement or otherwise. 2. 3. The Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section VII below of this Charter. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits, or to determine that the Company’s financial statements are complete and accurate or are in accordance with generally accepted accounting principles, accounting standards, or applicable laws and regulations. This is the responsibility of management of the Company and the Company’s independent accountants, as well as any advisors employed by the Committee. Because the primary function of the Committee is oversight, the Committee shall be entitled to rely on the expertise, skills and knowledge of management and the Company’s independent accountants and the integrity and accuracy of information provided to the Committee by such persons in carrying out its oversight responsibilities. Nothing in this Charter is intended to change the responsibilities of management and the independent accountants. 2 II. Composition The Committee shall be composed of at least three directors, each of whom the Board determines has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, is otherwise “unrelated” and satisfies the definition of “independent” as set forth by Rule 10A-3 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), Section 803A of the NYSE MKT Company Guide and any other applicable securities laws, rules or requirements of any stock exchange upon which the Company’s securities are listed as in effect from time to time. Exchange Act Rule 10A-3 requires that each member of the Audit Committee must serve on the Board and satisfy independence requirements. For the purposes of satisfying the independence requirement, Audit Committee members may not, other than in their capacity as members of the Committee, the Board, or any other committee of the Board (i) accept, directly or indirectly, any consulting, advisory, or other compensatory fee1 from the Company, or of the Company’s subsidiaries; or (ii) be an affiliate of the Company or any of the Company’s subsidiaries. Because the Company is currently a foreign private issuer, the Company may seek to take advantage of the following exemptions from the Rule 10A-3 independence requirements: 1. 2. A non-executive employee of the Company may be exempt from the prohibition of accepting consulting, advisory or other compensatory fees if that employee is elected or named to the Board or Audit Committee pursuant to the Company’s governing laws or constating documents, an employee collective bargaining or similar agreement or other home country legal or listing requirement; and An Audit Committee member may be exempt from the prohibition of being an affiliate of the Company if: (a) (b) (c) The member is an affiliate of the Company or a representative of such an affiliate; The member has only observer status on, and is not a voting member or the chair of the Audit Committee; and The member nor the affiliate for which such member is a representative is an executive officer of the Company. These exemptions are only available to the Company so long as it remains a foreign private issuer as defined by Exchange Act Rule 3b-4(c). If the Company ceases to fall within the definition of a foreign private issuer, the Company must immediately take steps to cure any independence non-compliance within the Audit Committee.2 1 Compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided, however, that such compensation is not contingent upon continued service to the Company.) This exception, however, may be overridden by the NYSE MKT and the Audit Committee should, during its routine evaluation of the effectiveness of this Charter, determine whether this exception still applies. 2 If the Company elects to take advantage of either these exemptions, the Audit Committee should periodically review its status as a foreign private issuer as defined by Exchange Act Rule 3b-4(c). If the Company ceases to qualify as a foreign private issuer, and the Company’s securities are listed on the NYSE MKT, the Company may need to adjust its “independence” criteria to reflect the requirements set forth in Rule 803A of the NYSE MKT Company Guide Rule. 3 All members of the Committee must be financially literate, meaning that such member has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements. One or more members of the Committee shall be, in the judgment of the Board an “audit committee financial expert” as such term is defined by applicable rules and regulations. If any executive officer of the Company becomes aware of any material non-compliance with the requirements of Exchange Act Rule 10A-3, the Company must provide notification to the exchange on which its securities are listed. If any member of the Committee ceases to be “independent”, as defined by the applicable securities laws and exchange requirements, including Exchange Act Rule 10A-3, for reasons outside that member’s reasonable control, that person, with prompt notice to the exchange on which the Company’s securities are listed, may remain an audit committee member until the earlier of the next annual meeting of the shareholders or one year from the occurrence of the event that caused the member to no longer be independent. III. Authority The Committee shall have the authority to (i) retain (at the Company’s expense) its own legal counsel, accountants and other consultants that the Committee believes, in its sole discretion, are needed to carry out its duties and responsibilities; (ii) conduct investigations that it believes, in its sole discretion, are necessary to carry out its responsibilities; and (iii) take whatever actions that it deems appropriate to foster an internal culture that is committed to maintaining quality financial reporting, sound business risk practices and ethical behaviour within the Company. In addition, the Committee shall have the authority to request any officer, director, employee or consultant of the Company, the Company’s outside legal counsel and the independent accountants to meet with the Committee and any of its advisors and to respond to their inquiries. The Committee shall have full access to the books, records and facilities of the Company in carrying out its responsibilities. Finally, the Board shall adopt resolutions which provide for appropriate funding, as determined by the Committee, for (i) services provided by the independent accountants in rendering or issuing an audit report, (ii) services provided by any adviser employed by the Committee which it believes, in its sole discretion, are needed to carry out its duties and responsibilities, or (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties and responsibilities. The Committee shall be responsible for establishing procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and (ii) the confidential, anonymous submissions by employees of the Company regarding questionable accounting or auditing matters. The Committee shall review the reports of the Chief Executive Officer and Chief Financial Officer (in connection with their required certifications for the Company’s filings with the United States Securities and Exchange Commission) regarding any significant deficiencies or material weaknesses in the design of operation of internal controls and any fraud that involves management or other employees of the Company who have a significant role in managing or implementing the Company’s internal controls. During this review, the Committee should evaluate whether the internal control structure, as created and as implemented, provides reasonable assurances that transactions are recorded as necessary to permit the Company’s external auditors to reconcile the Company’s financial statements in accordance with applicable securities laws. The Committee, in its capacity as a committee of the Board, is directly responsible for the appointment, compensation, retention and oversight of the work of the independent accountants engaged (including resolution of disagreements between the Company’s management and the independent accountants regarding financial reporting) for the purpose of preparing and issuing an audit report or performing other audit, review or attest services for the Company. 4 The independent accountants shall submit to the Audit Committee annually a formal written statement delineating all relationships between the independent accountants and the Company and its subsidiaries, addressing the non-audit services provided to the Company or its subsidiaries and the matters set forth in or required by the rules and regulations of all relevant regulatory authorities. The independent accountants shall submit to the Audit Committee annually a formal written statement of the fees billed for each of the following categories of services rendered by the independent accountants: (i) the audit of the Company’s annual financial statements for the most recent fiscal year and any reviews of the financial statements; (ii) information technology consulting services for the most recent fiscal year, in the aggregate and by each service (and separately identifying fees for such services relating to financial information systems design and implementation); and (iii) all other services rendered by the independent accountants for the most recent fiscal years, in the aggregate and by each service. IV. Appointing Members The members of the Committee shall be appointed or re-appointed by the Board on an annual basis. Each member of the Committee shall continue to be a member thereof until such member’s successor is appointed, unless such member shall resign or be removed by the Board or such member shall cease to be a director of the Company. Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board and shall be filled by the Board if the membership of the Committee is less than three directors as a result of the vacancy or the Committee no longer has a member who is an “audit committee financial expert” as a result of the vacancy. V. Chairperson The Board, or in the event of its failure to do so, the members of the Committee, must appoint a Chairperson from the members of the Committee. If the Chairperson of the Committee is not present at any meeting of the Committee, an acting Chairperson for the meeting shall be chosen by majority vote of the Committee from among the members present. In the case of a deadlock on any matter or vote, the Chairperson shall refer the matter to the Board. All requests for information from the Company or the independent accountants shall be made through the Chairperson. VI. Meetings The time and place of meetings of the Committee and the procedure at such meetings shall be determined from time to time by the members thereof provided that: 1. 2. 3. A quorum for meetings shall be two members, present in person or by telephone or other telecommunication device that permit all persons participating in the meeting to speak and hear each other; The Committee shall meet at least quarterly (or more frequently as circumstances dictate); and Notice of the time and place of every meeting shall be given in writing or facsimile communication to each member of the Committee and the external auditors of the Company at least 48 hours prior to the time of such meeting. While the Committee is expected to communicate regularly with management, the Committee shall exercise a high degree of independence in establishing its meeting agenda and in carrying out its responsibilities. The Committee shall submit the minutes of all meetings of the Committee to, or discuss the matters discussed at each Committee meeting with, the Board. 5 VII. Specific Duties In meeting its responsibilities, the Committee is expected to: 1. 2. 3. 4. 5. 6. 7. 8. 9. Select the independent accountants, considering independence and effectiveness, approve all audit and non-audit services in advance of the provision of such services and the fees and other compensation to be paid to the independent accountants, and oversee the services rendered by the independent accountants (including the resolution of disagreements between management and the independent accountants regarding preparation of financial statements) for the purpose of preparing or issuing an audit report or related work, and the independent accountants shall report directly to the Committee; To pre-approve any non-audit services to be provided to the Company by the external auditor and the fees for those services; Review the performance of the independent accountants, including the lead partner of the independent accountants, and, in its sole discretion, approve any proposed discharge of the independent accountants when circumstances warrant, and appoint any new independent accountants; Periodically review and discuss with the independent accountants all significant relationships the independent accountants have with the Company to determine the independence of the independent accountants, including a review of service fees for audit and non-audit services; Review and approve the issuer’s hiring policies from time to time regarding partners, employees and former partners and employees of the present and former external auditor of the issuer; Inquire of management and the independent accountants and evaluate the effectiveness of the Company’s process for assessing significant risks or exposures and the steps management has taken to monitor, control and minimize such risks to the Company. Obtain annually, in writing, the letters of the independent accountants as to the adequacy of such controls; Consider, in consultation with the independent accountants, the audit scope and plan of the independent accountants; Review with the completeness of coverage, and the effective use of audit resources; independent accountants the coordination of audit effort to assure Consider and review with the independent accountants, out of the presence of management: (a) (b) (c) the adequacy of the Company’s internal controls and disclosure controls including the adequacy of computerized information systems and security; the truthfulness and accuracy of the Company’s financial statements; and any related significant findings and recommendations of the independent accountants together with management’s responses thereto; 10. Following completion of the annual audit, review with management and the independent accountants: (a) the Company’s annual financial statements and related footnotes; 6 (b) (c) (d) the independent accountants’ audit of the financial statements and the report thereon; any significant changes required in the independent accountants’ audit plan; and other matters related to the conduct of the audit which are to be communicated to the committee under generally accepted auditing standards; Following completion of the annual audit, review separately with each of management and the independent accountants any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information; Establish regular and separate systems of reporting to the Committee by each of management and the independent accountants regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments; In consultation with the independent accountants, review any significant disagreement among management and the independent accountants in connection with the preparation of the financial statements, including management’s responses; 11. 12. 13. 14. Consider and review with management: (a) (b) significant findings during the year and management’s responses thereto; and any changes required in the planned scope of their audit plan; Review, prior to publication, all filings with regulatory authorities and any other publicly disclosed information containing the Company’s financial statements, including Management’s Discussion & Analysis, any certification, report, opinion or review rendered by the independent accountants, any press releases announcing earnings (especially the use of “pro forma” or “adjusted” in compliance with generally accepted accounting principles) and all financial information and earnings guidance intended to be provided to analysts and the public or to rating agencies, and consider whether the information contained in these documents is consistent with the information contained in the financial statements; information not prepared Facilitate the preparation and inclusion of any report from the Committee or other disclosures as required by applicable laws and regulations in the Company’s annual proxy statement or other filings of all regulatory authorities having jurisdiction; Review with management the adequacy of the insurance and fidelity bond coverages, reported contingent liabilities, and management’s assessment of contingency planning. Review management’s plans regarding any changes in accounting practices or policies and the financial impact of such changes, any major areas in management’s judgment that have a significant effect upon the financial statements of the Company, and any litigation or claim, including tax assessments, that could have a material effect upon the financial position or operating results of the Company; Review with management and the independent accountants each annual, quarterly and other periodic report prior to its filing with the relevant regulators or prior to the release of earnings; Review policies and procedures with respect to officers’ expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by the independent accountants; 15. 16. 17. 18. 19. 7 20. 21. 22. 23. 24. 25. 26. Review, with the Company’s counsel, any legal, tax or regulatory matter that may have a material impact on the Company’s financial statements, operations, related Company compliance policies, and programs and reports received from regulators; Evaluate and review with management the Company’s guidelines and policies governing the process of risk assessment and risk management; Meet with the independent accountants and management in separate executive sessions to discuss any matters that the Committee or these groups believe should be discussed privately with the Committee; Report Committee actions to the Board with such recommendations as the Committee may deem appropriate; Maintain, review and update the procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters, as set forth in Annex A attached to this Charter; Review, assess and update this Charter on an annual basis and recommend any proposed changes to the Board for approval, in accordance with the requirements of the all applicable laws; and Perform such other functions consistent with this Charter, the Company’s Articles and governing law, as the Committee deems necessary or appropriate. 8 ANNEX A PROCEDURES FOR THE SUBMISSION OF COMPLAINTS AND CONCERNS REGARDING ACCOUNTING, INTERNAL ACCOUNTING CONTROLS OR AUDITING MATTERS 1. 2. 3. 4. 5. Entrée Resources Ltd. (the “Company”) has designated its Audit Committee of its Board of Directors (the “Committee”) to be responsible for administering these procedures for the receipt, retention, and treatment of complaints received by the Company or the Committee directly regarding accounting, internal accounting controls, or auditing matters. Any employee or consultant of the Company may on a confidential and anonymous basis submit concerns regarding questionable accounting controls or auditing matters to the Committee by setting forth such concerns in a letter addressed directly to the Committee with a legend on the envelope such as “Confidential” or “To be opened by Committee only”. If an employee or consultant would like to discuss the matter directly with a member of the Committee, the employee or consultant should include a return telephone number in his or her submission to the Committee at which he or she can be contacted. All submissions by letter to the Committee can be sent to: Entrée Resources Ltd. c/o Audit Committee Attn: Chairperson Suite 1650 - 1066 West Hastings Street Vancouver, BC CANADA V6E 3X1 Email Address: whistleblower@entreeresourcesltd.com Any complaints received by the Company that are submitted as set forth herein will be forwarded directly to the Committee and will be treated as confidential if so indicated. At each meeting of the Committee, or any special meetings called by the Chairperson of the Committee, the members of the Committee will review and consider any complaints or concerns submitted by employees as set forth herein and take any action it deems necessary in order to respond thereto. All complaints and concerns submitted as set forth herein will be retained by the Committee for a period of seven (7) years. Exhibit 99.2 CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States dollars) December 31, 2017 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Directors of Entrée Resources Ltd. (formerly Entrée Gold Inc.) Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Entrée Resources Ltd. (formerly Entrée Gold Inc.) (the “Company”), as of December 31, 2017 and 2016, and the related consolidated statements of comprehensive loss, changes in stockholders’ equity (deficiency), and cash flows for the years ended December 31, 2017, 2016, and 2015, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Entrée Resources Ltd. (formerly Entrée Gold Inc.) as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years ended December 31, 2017, 2016, and 2015 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Vancouver, Canada March 8, 2018 We have served as the Company’s auditor since 1997. “DAVIDSON & COMPANY LLP” Chartered Professional Accountants Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Consolidated Statements of Comprehensive Loss For the years ended December 31, 2017, 2016 and 2015 (expressed in thousands of U.S. dollars) Expenses Exploration General and administrative Restructuring costs Depreciation Other Operating loss Foreign exchange (gain) loss Interest income Interest expense Loss from equity investee Operating loss before income taxes Income tax (recovery) expense Net loss from continuing operations Net loss from discontinued operations Net loss Foreign currency translation adjustment Net loss and comprehensive loss Net loss per common share Basic and fully diluted – continuing operations Basic and fully diluted – discontinued operations Weighted average shares outstanding Note 2017 2016 2015 12 $ 332 $ 2,334 211 20 192 3,089 (380) (116) 287 215 3,095 (72) 3,023 176 3,199 2,481 5,680 (0.02) (0.00) $ $ $ $ 7 5 13 2 $ $ $ $ 489 2,489 - 16 - 2,994 343 (102) 279 237 3,751 (553) 3,198 1,465 4,663 (717) 3,946 (0.02) (0.01) $ $ $ $ $ 1,637 4,690 - 21 - 6,348 (2,919) - 412 119 3,960 160 4,120 3,711 7,831 4,928 12,759 (0.03) (0.02) Basic and fully diluted (000’s) 172,259 151,925 147,037 Total shares issued and outstanding (000’s) 9 173,574 153,045 147,331 The accompanying notes are an integral part of these consolidated financial statements. 3 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Consolidated Balance Sheets As at December 31, 2017 and 2016 (expressed in thousands of U.S. dollars) Assets Current assets Cash and cash equivalents Receivables Prepaid expenses Assets held for spin-off Equipment Mineral property interests Long-term investment Reclamation deposits and other Assets held for spin-off Total assets Liabilities Current liabilities Accounts payable and accrued liabilities Liabilities held for spin-off Loan payable to Oyu Tolgoi LLC Deferred revenue Liabilities held for spin-off Total liabilities Stockholders’ (deficiency) equity Common stock, no par value, unlimited number authorized, 173,573,572 (December 31, 2016 – 153,045,408) issued and outstanding Additional paid-in capital Accumulated other comprehensive income (loss) Subscriptions received in advance Accumulated deficit Total stockholders’ (deficiency) equity Note 2017 2016 $ 7,068 $ 13,262 17 2 4 6 5 2 2 7 8 2 9 263 119 - 7,450 112 532 151 12 - 37 54 348 13,701 43 496 146 9 38,885 $ $ 8,257 $ 53,280 247 $ 225 - 247 7,841 24,658 - 32,746 230 455 7,334 22,987 3,015 33,791 139,689 178,740 22,175 5,230 - (191,583) (24,489) 20,863 (7,061) 559 (173,612) 19,489 Total liabilities and stockholders’ (deficiency) equity $ 8,257 $ 53,280 Nature and continuance of operations (Note 1) Plan of arrangement and discontinued operations (Note 2) Commitments and contingencies (Note 16) Subsequent events (Note 19) The accompanying notes are an integral part of these consolidated financial statements. 4 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Consolidated Statement of Stockholders’ (Deficiency) Equity For the years ended December 31, 2017, 2016 and 2015 (expressed in thousands of U.S. dollars) Attributable to equity holders of the Company Shares (000’s) Share capital Additional paid-in capital Other comprehensive (loss) income Subscriptions received in advance Deficit Total Note Balance at December 31, 2016 153,045 $ 178,740 $ 20,863 $ (7,061) $ 559 $ (173,612) $ 19,489 Net loss for the year Foreign currency translation Stock-based compensation Transfer of net assets to Mason Issuance of share capital – inducement bonus shares Issuance of share capital – private placement Issuance of share capital – stock options Balance at December 31, 2017 Balance at December 31, 2015 Net loss for the year Subscriptions received in advance Foreign currency translation Stock-based compensation Issuance of share capital – stock options Issuance of share capital - Sandstorm - - - - - - - (44,214) 100 37 - - 632 - - 18,529 1,899 4,478 648 1,129 (449) - (2,481) - 14,772 - - - 173,573 $ 139,689 $ 22,175 $ 5,230 $ 147,331 $ 177,206 $ 20,517 $ (7,778) $ - - - - - - - - 585 5,129 197 1,337 - - - 489 (143) - - - 717 - - - - - - - - (559) - - - - 559 - - - - (3,199) (3,199) - - (2,481) 632 (14,772) (44,214) - - - 37 5,048 199 $ (191,583) $ (24,489) $ (168,949) $ 20,996 (4,663) (4,663) - - - - - 559 717 489 54 1,337 10 2 10 9 10 9 10 10 8 Balance at December 31, 2016 153,045 $ 178,740 $ 20,863 $ (7,061) $ 559 $ (173,612) $ 19,489 Balance at December 31, 2014 146,984 $ 177,138 $ 20,346 $ (2,850) $ Net loss for the year Foreign currency translation Stock-based compensation Issuance of share capital – stock options - - - - - - 347 68 - - 197 (26) - (4,928) - - 10 10 Balance at December 31, 2015 147,331 $ 177,206 $ 20,517 $ (7,778) $ - - - - - - $ (161,118) $ 33,516 (7,831) (7,831) - - - (4,928) 197 42 $ (168,949) $ 20,996 The accompanying notes are an integral part of these consolidated financial statements. 5 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Consolidated Statements of Cash Flows For the years ended December 31, 2017, 2016 and 2015 (expressed in thousands of U.S. dollars) Cash flows used in operating activities Net loss from continuing operations $ (3,023) $ (3,198) $ (4,120) Note 2017 2016 2015 Items not affecting cash: Depreciation Stock-based compensation Loss from equity investee Interest expense Income tax (recovery) expense Unrealized foreign exchange (gains) losses Other Change in non-cash operating working capital: (Increase) decrease in receivables and prepaid expenses (Increase) decrease in other assets Decrease in accounts payable and accruals Deposit on metal credit obligation Discontinued operations Cash flows (used in) from investing activities Cash paid in connection with the Arrangement Purchase of equipment Proceeds from sale of equipment and other Mineral property interests Cash flows from financing activities Proceeds from issuance of capital stock – private placement Proceeds from issuance of capital stock – stock options Subscriptions received in advance Decrease in cash and cash equivalents Cash and cash equivalents - beginning of year Effect of exchange rate changes on cash 5 7 13 8 2 2 9 10 9 20 678 215 287 (72) (1,260) 11 (3,144) (351) (3) (102) - 604 16 489 237 279 (553) 324 3 (2,403) 113 7 (949) (5,500) (1,474) (2,996) (10,206) (8,843) (100) - - (8,943) 5,038 199 - 5,237 (6,702) 13,262 508 - (6) 40 - 34 - 53 559 612 (9,560) 22,657 165 21 197 119 279 160 (2,988) 12 (6,320) 455 (2) (265) - (3,689) (9,821) - (16) - (500) (516) - 41 - 41 (10,296) 33,388 (435) Cash and cash equivalents - end of year $ 7,068 $ 13,262 $ 22,657 Supplemental cash flow information (Note 15) The accompanying notes are an integral part of these consolidated financial statements. 6 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) 1 Nature and continuance of operations Entrée Resources Ltd. (formerly Entrée Gold Inc.) was incorporated under the laws of the Province of British Columbia on July 19, 1995 and continued under the laws of the Yukon Territory on January 22, 2003. On May 27, 2005, the Company changed its governing jurisdiction from the Yukon Territory to British Columbia by continuing into British Columbia under the Business Corporations Act (British Columbia) (the "BCBCA"). On May 9, 2017, the Company changed its name from Entrée Gold Inc. to Entrée Resources Ltd. The principal business activity of Entrée Resources Ltd., together with its subsidiaries (collectively referred to as the "Company" or "Entrée"), is the exploration of mineral property interests. To date, the Company has not generated significant revenues from its operations and is considered to be in the exploration stage. All amounts are expressed in United States dollars, except for certain amounts denoted in Canadian dollars ("C$"). These consolidated financial statements have been prepared on the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company currently earns no operating revenues. Continued operations of the Company are dependent upon the Company’s ability to secure additional equity capital or receive other financial support, and in the longer term to generate profits from business operations. Management believes that the Company has sufficient working capital to maintain its operations for the next 12 months. 2 Plan of arrangement and discontinued operations On May 9, 2017, the Company completed a plan of arrangement (the "Arrangement") under Section 288 of the BCBCA pursuant to which Entrée transferred its wholly owned subsidiaries that directly or indirectly hold the Ann Mason Project in Nevada and the Lordsburg property in New Mexico including $8,843,232 in cash and cash equivalents to Mason Resources Corp. ("Mason Resources") in exchange for 77,804,786 common shares of Mason Resources (the "Mason Common Shares"). Mason Resources commenced trading on the Toronto Stock Exchange on May 12, 2017 under the symbol "MNR". As part of the Arrangement, Entrée then distributed its 77,805,786 Mason Common Shares to Entrée shareholders by way of a share exchange, pursuant to which each existing share of Entrée was exchanged for one "new" share of Entrée and 0.45 of a Mason Common Share. Optionholders and warrantholders of Entrée received replacement options and warrants of Entrée and options and warrants of Mason Resources which were proportionate to, and reflective of the terms of, their existing options and warrants of Entrée. The assets and liabilities that were transferred to Mason Resources were classified as discontinued operations and classified on the balance sheet as assets / liabilities held for spin-off ("Spin-off"). The discontinued operations include three entities transferred to Mason Resources pursuant to the Arrangement: Mason U.S. Holdings Inc. (formerly Entrée U.S. Holdings Inc.); Mason Resources (US) Inc. (formerly Entrée Gold (US) Inc.); and M.I.M. (U.S.A.) Inc. (collectively the “US Subsidiaries”). The Spin-off distribution was accounted for at the carrying amount, without gain or loss, and resulted in a reduction of stockholders’ (deficiency) equity of $44.2 million. 7 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) The closing of the Arrangement resulted in the following Spin-off assets and liabilities being distributed to Mason Resources on May 9, 2017: May 9, 2017 December 31, 2016 Current assets Cash Receivables and prepaids Long-term assets Equipment Mineral property interest Reclamation deposits and other Current liabilities Accounts payable and accrued liabilities Long-term liabilities Deferred income taxes Net assets $ 8,843 137 8,980 25 37,699 481 38,205 (34) (2,937) 44,214 $ $ 129 219 348 25 38,379 481 38,885 (230) (3,015) $ 35,988 The net loss from the US Subsidiaries has been reclassified to net loss from discontinued operations as follows: Expenses Exploration General and administrative Depreciation Foreign exchange gain Net loss from discontinued operations $ 3 Significant accounting policies Principles of consolidation 2017 2016 2015 $ 239 $ 1,366 $ 3,502 19 4 (86) 176 84 15 - 188 22 (1) $ 1,465 $ 3,711 These consolidated financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") in the United States of America and include the accounts of the Company and all of its subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. 8 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) Use of estimates The preparation of consolidated financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuations, asset impairment, stock-based compensation and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between estimates and the actual results, future results of operations will be affected. Cash and cash equivalents Cash and cash equivalents includes cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $7.1 million in cash and cash equivalents at December 31, 2017 (December 31, 2016 - $13.3 million). Long-term investments Long-term investments in companies in which the Company has voting interests of 20% to 50% or where the Company has the ability to exercise significant influence, are accounted for using the equity method. Under this method, the Company’s share of the investees’ earnings and losses is included in operations and its investments therein are adjusted by a like amount. Dividends received are credited to the long-term investment accounts. Equipment Equipment, consisting of office equipment, computer equipment, field equipment, and buildings, is recorded at cost less accumulated depreciation. Depreciation is recorded on a declining balance basis at rates ranging from 20% to 30% per annum. Mineral property interests Costs of exploration and costs of carrying and retaining unproven properties are expensed as incurred. The Company considers mineral rights to be tangible assets and accordingly, the Company capitalizes certain costs related to the acquisition of mineral rights. Asset retirement obligation The Company records the fair value of the liability for closure and removal costs associated with the legal obligations upon retirement or removal of any tangible long-lived assets where the initial recognition of any liability will be capitalized as part of the asset cost and depreciated over its estimated useful life. To date, the Company has not incurred any significant asset retirement obligations. Impairment of long-lived assets Long-lived assets are continually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the discounted carrying amount of the assets exceeds the fair value of the assets. 9 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) Stock-based compensation The Company applies the fair value method of accounting for all stock option awards, whereby the Company recognizes a compensation expense for all stock options awarded to directors, officers, employees, and consultants based on the fair value of the options on the date of grant, which is determined using the Black Scholes option pricing model. The options are expensed over the vesting period of the options. Financial instruments The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions which are accounted for at the transferor’s carrying amount or exchange amount. Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive (loss) income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in the statement of comprehensive loss. The Company classifies its financial instruments as follows: Cash and cash equivalents is classified as held for trading, and is measured at fair value using Level 1 inputs. Receivables are classified as loans and receivables, and have a fair value approximating their carrying value, due to their short-term nature. The Company’s other financial instruments, accounts payable and accrued liabilities, and loans payable are classified as other financial liabilities, and are measured at amortized cost. Income taxes The Company follows the asset and liability method of accounting for income taxes whereby deferred income taxes are recognized for the deferred income tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective income tax bases (temporary differences). Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is included in income in the period in which the change occurs. The amount of deferred income tax assets recognized is limited to the amount that is more likely than not to be realized. Foreign currency translation The functional currency of Entrée Resources Ltd. is the Canadian dollar. Accordingly, monetary assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date while non-monetary assets and liabilities denominated in a foreign currency are translated at historical rates. Revenue and expense items denominated in a foreign currency are translated at exchange rates prevailing when such items are recognized in the statement of comprehensive loss. Exchange gains or losses arising on translation of foreign currency items are included in the statement of comprehensive loss. The functional currency of Entrée Resources Ltd.’s significant subsidiaries is the United States dollar. Upon translation into Canadian dollars for consolidation, monetary assets and liabilities are translated at the exchange rate in effect at the balance sheet date while non-monetary assets and liabilities are translated at historical rates. Revenue and expense items are translated at exchange rates prevailing when such items are recognized in the statement of comprehensive loss. Exchange gains or losses arising on translation of foreign currency items are included in the statement of comprehensive loss. 10 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) The Company follows the current rate method of translation with respect to its presentation of these consolidated financial statements in the reporting currency, which is the United States dollar. Accordingly, assets and liabilities are translated into United States dollars at the period-end exchange rates while revenue and expenses are translated at the prevailing exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ (deficiency) equity as accumulated other comprehensive (loss) income. Net loss per share Basic net loss per share is computed by dividing the net loss for the period attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share takes into consideration shares of common stock outstanding (computed under basic loss per share) and potentially dilutive shares of common stock. Diluted net loss per share is not presented separately from basic net loss per share as the conversion of outstanding stock options and warrants into common shares would be anti-dilutive. At December 31, 2017, the total number of potentially dilutive shares of common stock excluded from basic net loss per share was 9,175,000 (December 31, 2016 – 12,010,000; December 31, 2015 – 13,208,000). Comparative figures Certain comparative figures have been reclassified to conform to the current year’s presentation. Recent accounting pronouncements In August 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessment of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is substantial doubt about the entity’s ability to continue as a going concern. The requirement was effective for annual periods ending after December 15, 2016 and did not have a material impact on the Company’s consolidated financial statements. Accounting Standards Update 2016-09 – Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. This accounting pronouncement, which goes into effect for periods ending after December 16, 2016, addresses the simplification of several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. Accounting Standards Update 2015-17 – Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This accounting pronouncement requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Currently deferred tax liabilities and assets must be presented as current and noncurrent. The policy was effective for periods ending after December 16, 2016. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. Accounting Standards Update 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This accounting pronouncement, which goes into effect for periods beginning after December 15, 2017, is far reaching and covers several presentation areas dealing with measurement, impairment, assumptions used in estimating fair value and several other areas. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements. Accounting Standards Update 2016-02-Leases (Topic 842). This accounting pronouncement allows lessees to make an accounting policy election to not recognize a lease asset and liability for leases with a term of 12 months or less and do not have a purchase option that is expected to be exercised. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements. 11 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) 4 Equipment Cost Accumulated depreciation Office equipment $ 55 $ 8 $ Computer equipment Field equipment Buildings 149 39 45 130 33 5 2017 Net book value 47 19 6 40 Cost Accumulated depreciation 2016 Net book value $ 40 $ 34 $ 6 170 36 41 144 30 36 26 6 5 $ 288 $ 176 $ 112 $ 287 $ 244 $ 43 5 Long-term investments Entrée/Oyu Tolgoi JV Property, Mongolia The Company has a carried 20% participating joint venture interest in a land package that includes two of the Oyu Tolgoi deposits in the South Gobi region of Mongolia (the "Entrée/Oyu Tolgoi JV Property"). The Entrée/Oyu Tolgoi JV Property is comprised of the eastern portion of the Shivee Tolgoi mining licence, which hosts the Hugo North Extension copper-gold deposit, and all of the Javhlant mining licence, which hosts the majority of the Heruga copper-gold-molybdenum deposit. The Shivee Tolgoi and Javhlant mining licences were granted by the Mineral Resources Authority of Mongolia in October 2009. Title to the two licences is held by the Company. The Company is entitled to 20% or 30% of the mineralization extracted from the Entrée/Oyu Tolgoi JV Property, depending on the depth of mineralization. In October 2004, the Company entered into an arm’s-length Equity Participation and Earn-In Agreement (the "Earn-In Agreement") with Turquoise Hill Resources Ltd. ("Turquoise Hill"). Under the Earn-In Agreement, Turquoise Hill agreed to purchase equity securities of the Company, and was granted the right to earn an interest in what is now the Entrée/Oyu Tolgoi JV Property. Most of Turquoise Hill’s rights and obligations under the Earn-In Agreement were subsequently assigned by Turquoise Hill to what was then its wholly-owned subsidiary, Oyu Tolgoi LLC ("OTLLC"). The Government of Mongolia subsequently acquired a 34% interest in OTLLC from Turquoise Hill. On June 30, 2008, OTLLC gave notice that it had completed its earn-in obligations by expending a total of $35 million on exploration of the Entrée/Oyu Tolgoi JV Property. OTLLC earned an 80% interest in all minerals extracted below a sub- surface depth of 560 metres from the Entrée/Oyu Tolgoi JV Property and a 70% interest in all minerals extracted from surface to a depth of 560 metres from the Entrée/Oyu Tolgoi JV Property. In accordance with the Earn-In Agreement, the Company and OTLLC formed a joint venture (the "Entrée/Oyu Tolgoi JV") on terms annexed to the Earn-In Agreement (the "JVA"). The portion of the Shivee Tolgoi mining licence outside of the Entrée/Oyu Tolgoi JV Property, Shivee West, is 100% owned by the Company, but is subject to a right of first refusal by OTLLC. In October 2015, the Company entered into a License Fees Agreement with OTLLC, pursuant to which the parties agreed to negotiate in good faith to amend the JVA to include Shivee West in the definition of Entrée/Oyu Tolgoi JV Property. The parties also agreed that the annual licence fees for Shivee West would be for the account of each joint venture participant in proportion to their respective interests, with OTLLC contributing the Company’s 20% share charging interest at prime plus 2% (Note 7). The conversion of the original Shivee Tolgoi and Javhlant exploration licences into mining licences was a condition precedent to the Investment Agreement (the "Oyu Tolgoi Investment Agreement") between Turquoise Hill, OTLLC, the Government of Mongolia and Rio Tinto International Holdings Limited. The licences are part of the contract area covered by the Oyu Tolgoi Investment Agreement, although the Company is not a party to the Oyu Tolgoi Investment Agreement. The Shivee Tolgoi and Javhlant mining licences were each issued for a 30 year term and have rights of renewal for two further 20 year terms. 12 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) As of December 31, 2017, the Entrée/Oyu Tolgoi JV had expended approximately $30.1 million (2016 - $29.0 million) to advance the Entrée/Oyu Tolgoi JV Property. Under the terms of the Entrée/Oyu Tolgoi JV, OTLLC contributed on behalf of the Company its required participation amount charging interest at prime plus 2% (Note 7). Investment – Entrée/Oyu Tolgoi JV Property The Company accounts for its interest in the Entrée/Oyu Tolgoi JV as a 20% equity investment. Historically, all Company expenditures related to its interest in the Entrée/Oyu Tolgoi JV have been expensed as incurred through the statement of comprehensive loss or recognized as part of the Company’s share of the loss of the joint venture. The Company’s share of the loss of the joint venture was $0.2 million for the year ended December 31, 2017 (2016 - $0.2 million; 2015 - $0.1 million) plus accrued interest expense of $0.3 million for the year ended December 31, 2017 (2016 - $0.3 million; 2015 - $0.4 million). The Entrée/Oyu Tolgoi JV investment carrying value at December 31, 2017 was $0.2 million (December 31, 2016 - $0.1 million) and was recorded in long-term investment. This amount is related to prepaid licence fees which are amortized over the licence period. 6 Mineral property interests December 31, 2017 Transferred to Mason Resources pursuant to the Arrangement (Note 2) December 31, 2016 Ann Mason Project (a) $ - $ (37,988) $ 37,988 Lordsburg property (a) Cañariaco Project Royalty (b) Other (c) - 532 - 532 (391) - - 391 496 - $ (38,379) $ 38,875 $ Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristics of many mineral property interests. The Company has investigated title to its mineral property interests and, except as otherwise disclosed below, to the best of its knowledge, title to the mineral property interests remains in good standing. a) Ann Mason Project and Lordsburg Property On May 9, 2017, the Company completed the Arrangement under Section 288 of the BCBCA pursuant to which Entrée transferred its wholly owned subsidiaries that directly or indirectly hold the Ann Mason Project in Nevada and the Lordsburg property in New Mexico (Note 2). The comparative period balances have been classified as assets held for Spin-off on the Consolidated Balance Sheets. b) Cañariaco Project Royalty, Peru The Company entered into an agreement with Candente Copper Corp. (TSX:DNT) ("Candente") to acquire a 0.5% net smelter returns royalty on Candente's 100% owned Cañariaco project in Peru for a purchase price of $500,000. The Cañariaco project includes the Cañariaco Norte copper-gold-silver porphyry deposit, as well as the adjacent Cañariaco Sur and Quebrada Verde copper porphyry prospects, located within the western Cordillera of the Peruvian Andes in the Department of Lambayeque, Northern Peru. 13 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) c) Other Properties The Company also has interests in other properties in Mongolia (Shivee West) and Australia (Blue Rose). During fiscal 2014, the Company recorded an impairment of $552,095 against these properties. 7 Loan payable to Oyu Tolgoi LLC Under the terms of the Entrée/Oyu Tolgoi JV (Note 5), OTLLC will contribute funds to approved joint venture programs and budgets on the Company’s behalf. Interest on each loan advance shall accrue at an annual rate equal to OTLLC’s actual cost of capital or the prime rate of the Royal Bank of Canada, plus two percent (2%) per annum, whichever is less, as at the date of the advance. The loan will be repayable by the Company monthly from ninety percent (90%) of the Company’s share of available cash flow from the Entrée/Oyu Tolgoi JV. In the absence of available cash flow, the loan will not be repayable. The loan is not expected to be repaid within one year. 8 Deferred revenue In February 2013, the Company entered into an equity participation and funding agreement (the "2013 Agreement") with Sandstorm Gold Ltd. ("Sandstorm") whereby Sandstorm provided an upfront deposit (the "Deposit") of $40 million. The Company will use future payments that it receives from its mineral property interests to purchase and deliver metal credits to Sandstorm, in amounts that are indexed to the Company’s share of gold, silver and copper production from the current Entrée/Oyu Tolgoi JV Property. Upon the delivery of metal credits, Sandstorm will also make the cash payment outlined below. In addition, the 2013 Agreement provided for a partial refund of the Deposit and a pro rata reduction in the number of metal credits deliverable to Sandstorm in the event of a partial expropriation of Entrée’s economic interest, contractually or otherwise, in the current Entrée/Oyu Tolgoi JV Property. On February 23, 2016, the Company and Sandstorm entered into an Agreement to Amend, whereby the Company refunded 17% of the Deposit ($6.8 million) (the "Refund") in cash and shares thereby reducing the Deposit to $33.2 million for a 17% reduction in the metal credits that the Company is required to deliver to Sandstorm. At closing on March 1, 2016, the parties entered into an Amended and Restated Equity Participation and Funding Agreement (the "Amended Sandstorm Agreement"). Under the terms of the Amended Sandstorm Agreement, the Company will purchase and deliver gold, silver and copper credits equivalent to: (cid:120) 28.1% of Entrée’s share of gold and silver, and 2.1% of Entrée’s share of copper, produced from the Shivee Tolgoi mining licence (excluding Shivee West); and (cid:120) 21.3% of Entrée’s share of gold and silver, and 2.1% of Entrée’s share of copper, produced from the Javhlant mining licence. Upon the delivery of metal credits, Sandstorm will make a cash payment to the Company equal to the lesser of the prevailing market price and $220 per ounce of gold, $5 per ounce of silver and $0.50 per pound of copper (subject to inflation adjustments). After 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 current Entrée/Oyu Tolgoi JV Property the cash payment will be increased to the lesser of the prevailing market price and $500 per ounce of gold, $10 per ounce of silver and $1.10 per pound of copper (subject to inflation adjustments). To the extent that the prevailing market price is greater than the amount of the cash payment, the difference between the two will be credited against the Deposit (the net amount of the Deposit being the "Unearned Balance"). This arrangement does not require the delivery of actual metal, and the Company may use revenue from any of its assets to purchase the requisite amount of metal credits. Under the Amended Sandstorm Agreement, Sandstorm has a right of first refusal, subject to certain exceptions, on future production-based funding agreements. The Amended Sandstorm Agreement also contains other customary terms and conditions, including representations, warranties, covenants and events of default. The initial term of the Amended Sandstorm Agreement is 50 years, subject to successive 10-year extensions at the discretion of Sandstorm. 14 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) In addition, the Amended Sandstorm Agreement provides that the Company will not be required to make any further refund of the Deposit if Entrée’s economic interest is reduced by up to and including 17%. If there is a reduction of greater than 17% up to and including 34%, the Amended Sandstorm Agreement provides the Company with the ability to refund a corresponding portion of the Deposit in cash or common shares of the Company or any combination of the two at the Company’s election, in which case there would be a further corresponding reduction in deliverable metal credits. If the Company elects to refund Sandstorm with common shares of the Company, the value of each common share shall be equal to the volume weighted average price for the five (5) trading days immediately preceding the 90th day after the reduction in Entrée’s economic interest. In no case will Sandstorm become a "control person" under the Amended Sandstorm Agreement. In the event an issuance of shares would cause Sandstorm to become a "control person", the maximum number of shares will be issued, and with respect to the value of the remaining shares, 50% will not be refunded (and there will not be a corresponding reduction in deliverable metal credits) and the remaining 50% will be refunded by the issuance of shares in tranches over time, such that the number of shares that Sandstorm holds does not reach or exceed 20%. All shares will be priced in the context of the market at the time they are issued. In the event of a full expropriation, the remainder of the Unearned Balance after the foregoing refunds must be returned in cash. For accounting purposes, the Deposit is accounted for as deferred revenue on the balance sheet and the original Deposit was recorded at the historical amount of C$40.0 million. As a result of the Amended Sandstorm Agreement, the deferred revenue amount was adjusted to reflect the $6.8 million Refund which was recorded at the foreign exchange amount at the date of the Refund resulting in a net balance of C$30.9 million. This amount is subject to foreign currency fluctuations upon conversion to U.S. dollars at each reporting period. The $6.8 million Refund was paid with $5.5 million in cash and the issuance of $1.3 million of common shares of the Company. On March 1, 2016, the Company issued 5,128,604 common shares to Sandstorm at a price of C$0.3496 per common share pursuant to the Agreement to Amend. 9 Share capital The Company’s authorized share capital consists of unlimited common shares without par value. At December 31, 2017, the Company had 173,573,572 (December 31, 2016 – 153,045,408) shares issued and outstanding. a) Plan of arrangement On May 9, 2017, the Company completed the spin-out of its Ann Mason Project and Lordsburg property into Mason Resources through the Arrangement under Section 288 of the BCBCA. As part of the Arrangement, Entrée shareholders received Mason Common Shares by way of a share exchange, pursuant to which each existing share of Entrée was exchanged for one "new" share of Entrée and 0.45 of a Mason Common Share. Optionholders and warrantholders of Entrée received replacement options and warrants of Entrée and options and warrants of Mason Resources which were proportionate to, and reflective of the terms of, their existing options and warrants of Entrée. b) Private placement In January 2017, the Company closed a non-brokered private placement in two tranches issuing a total of 18,529,484 units at a price of C$0.41 per unit for aggregate gross proceeds of C$7.6 million. Each unit consisted of one common share of the Company and one-half of one transferable common share purchase warrant (a "Warrant"). Each whole Warrant entitled the holder to acquire one additional common share of the Company at a price of C$0.65 per share (pre-Arrangement price) for a period of 5 years. No commissions or finders' fees were paid in connection with the private placement. Pursuant to the Arrangement, on May 23, 2017 each Warrant was exchanged for one replacement Entrée Warrant and 0.45 of a Mason Resources transferable common share purchase warrant with the same attributes as the original Warrants. The exercise price of the replacement Entrée Warrants was adjusted based on the market value of the two companies after completion of the Arrangement resulting in a ratio between Entrée and Mason Resources of 85% and 15%, respectively. 15 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) c) Share purchase warrants At December 31, 2017, the following share purchase warrants were outstanding: Number of share purchase warrants (000’s) Pre-Arrangement exercise price per share C$ Post-Arrangement adjusted exercise price per share C$ 8,655 610 0.65 0.65 0.55 0.55 Expiry date January 10, 2022 January 12, 2022 At issuance, the fair value per share purchase warrant was determined to be C$0.21. Pursuant to the Arrangement, the replacement Entrée Warrants were revalued at May 9, 2017 and the fair value per share purchase warrant was determined to be C$0.37. The following weighted average assumptions using the Black Scholes option pricing model were used: Share price Risk-free interest rate Dividend rate Expected life Annualized volatility 10 Stock-based compensation Pre-Arrangement Post-Arrangement C$0.43 1.01% 0.00% 5 years 70% C$0.55 1.01% 0.00% 5 years 72% The Company provides stock-based compensation to its directors, officers, employees, and consultants through grants of stock options. Pursuant to the Arrangement, on May 23, 2017 each outstanding option was exchanged for one replacement Entrée option with the same expiry date and 0.45 of a Mason Resources option. The exercise prices of the replacement Entrée options were adjusted based on the market value of the two companies after completion of the Arrangement. a) Stock options The Company has adopted a stock option plan (the "Plan") to grant options to directors, officers, employees and consultants. Under the Plan, the Company may grant options to acquire up to 10% of the issued and outstanding shares of the Company. Options granted can have a term of up to ten years and an exercise price typically not less than the Company's closing stock price on the Toronto Stock Exchange on the last trading day before the date of grant. Vesting is determined at the discretion of the Board of Directors. Under the Plan, an option holder may elect to terminate an option, in whole or in part and, in lieu of receiving shares to which the terminated option relates (the "Designated Shares"), receive the number of shares, disregarding fractions, which, when multiplied by the weighted average trading price of the shares on the TSX during the five trading days immediately preceding the day of termination (the "Fair Value" per share) of the Designated Shares, has a total dollar value equal to the number of Designated Shares multiplied by the difference between the Fair Value and the exercise price per share of the Designated Shares. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted. For employees, the compensation expense is amortized on a straight-line basis over the requisite service period which approximates the vesting period. Compensation expense for stock options granted to non-employees is recognized over the contract services period or, if none exists, from the date of grant until the options vest. Compensation associated with 16 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) unvested options granted to non-employees is re-measured on each balance sheet date using the Black-Scholes option pricing model. The Company uses historical data to estimate option exercise, forfeiture and employee termination within the valuation model. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. Since the Company has not paid and does not anticipate paying dividends on its common stock, the expected dividend yield is assumed to be zero. Companies are required to utilize an estimated forfeiture rate when calculating the expense for the reporting period. Based on the best estimate, management applied the estimated forfeiture rate of Nil in determining the expense recorded in the accompanying Statements of Comprehensive Loss. Stock option transactions are summarized as follows: Number of shares (000’s) Weighted average exercise price C$ Outstanding – January 1, 2015 Granted Exercised Cancelled Forfeited/expired Outstanding – December 31, 2015 Granted Exercised Cancelled Forfeited/expired Outstanding – December 31, 2016 * Granted Exercised Cancelled Forfeited/expired Outstanding – December 31, 2017 13,779 1,670 (347) (163) (1,731) 13,208 2,520 (585) (665) (2,468) 12,010 1,900 (1,899) (1,646) (1,190) 9,175 0.85 0.34 0.22 0.25 2.43 0.60 0.42 0.25 0.28 1.17 0.48 0.52 0.32 0.75 1.20 0.38 *The weighted average exercise price is before the exercise price adjustment applied pursuant to the Arrangement (Note 2). The exercise prices were adjusted such that the aggregate "in the money" amounts for the outstanding options remained the same before and after the Arrangement. 17 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) At December 31, 2017, the following stock options were outstanding: Number of shares (000`s) Vested (000`s) 2,855 860 1,320 2,240 1,900 9,175 2,855 860 1,320 2,240 1,884 9,159 Aggregate intrinsic value C$ (000’s) Pre- Arrangement exercise price per share C$ Post- Arrangement adjusted exercise price per share C$ * Expiry date 1,048 0.30 – 0.56 0.26 – 0.47 Mar – Dec 2018 507 633 921 469 3,578 0.21 0.33 – 0.38 0.39 – 0.42 0.18 Dec 2019 0.28 – 0.32 July – Dec 2020 0.33 – 0.36 Mar – Nov 2021 n/a 0.52 – 0.62 May – Oct 2022 * The post-Arrangement adjusted exercise price per share is after the adjustment applied pursuant to the Arrangement (Note 2). Weighted average exercise price for exercisable options Weighted average share price for options exercised Weighted average years to expiry for exercisable options b) Stock-based compensation December 31, 2017 C$0.38 C$0.32 2.6 For the year ended December 31, 2017, the total stock-based compensation charges relating to 1,900,000 options granted to officers, employees, directors and consultants was $0.6 million (2016 - $0.5 million; 2015 - $0.2 million). The following weighted average assumptions were used for the Black-Scholes valuation of stock options granted: Risk-free interest rate Expected life of options (years) Annualized volatility Dividend rate Fair value per option c) Bonus shares 2017 1.62% 4.6 72% 0.00% C$0.24 2016 0.62% 4.6 73% 0.00% C$0.18 2015 0.77% 4.6 75% 0.00% C$0.15 On May 5, 2017, the Company issued 100,000 common shares for no cash proceeds pursuant to a grant of employment inducement bonus shares. 18 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) 11 Segmented information The Company operates in one business segment being the exploration of mineral property interests. The Company’s assets are geographically segmented as follows: United States (Note 2) Canada Other 12 Exploration costs Mongolia Other 13 Income taxes $ $ 2017 2016 - $ 39,233 7,226 1,031 13,263 784 8,257 $ 53,280 2017 2016 181 $ 151 332 $ 372 $ 117 489 $ $ $ Loss for the year before income taxes $ (3,095) $ (3,751) $ 2017 2016 Statutory rate Expected income tax recovery Permanent differences and other Difference in foreign tax rates Effect of change in future tax rates Effect of dissolution of subsidiaries Change in valuation allowance 26.00% (805) 309 (637) (48) - 1,109 26.00% (975) (1,296) 960 (47) - 805 Total income tax (recovery) expense $ (72) $ (533) $ 19 2015 1,488 149 1,637 2015 (3,960) 26.00% (1,030) (1,010) 247 3,397 6,339 (7,783) 160 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) Current income tax recovery Deferred income tax expense (recovery) Total income taxes $ $ Deferred income tax assets: Non-capital loss carryforward Resource expenditures Equipment Share issue and legal costs Other Valuation allowance Net deferred income tax assets Deferred income tax liabilities: Foreign exchange on loan Net deferred income tax liabilities Net deferred income tax 2017 (72) $ - (72) $ 2016 - $ (533) (533) $ 2017 $ 9,117 $ 2,713 174 28 1,004 13,036 (13,009) 27 $ 2015 - 160 160 2016 8,779 2,582 158 3 797 12,319 (12,169) 150 (27) $ (27) $ (150) (150) - $ - $ $ $ $ The Company has available for deduction against future taxable income non-capital losses of approximately $31.1 million (2016: $30.0 million) in Canada, $0.7 million (2016: $0.6 million) in China, $6.2 million (2016: $5.7 million) in Mongolia, $nil (2016: $0.1 million) in Australia and $1.0 million (2016: $0.7 million) in Peru. These losses, if not utilized, will expire through 2037. Subject to certain restrictions, the Company also has foreign resource expenditures available to reduce taxable income in future years. Deferred tax benefits which may arise as a result of these losses, resource expenditures, equipment, share issue and legal costs have not been recognized in these consolidated financial statements. 20 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) 14 Financial instruments a) Financial instruments The Company's financial instruments generally consist of cash and cash equivalents, receivables, deposits, accounts payable and accrued liabilities, and loans payable. It is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values. The Company is exposed to currency risk by incurring certain expenditures in currencies other than the Canadian dollar. In addition, as certain of the Company’s consolidated subsidiaries’ functional currency is the United States dollar, the Company is exposed to foreign currency translation risk. The Company does not use derivative instruments to reduce this currency risk. b) Fair value classification of financial instruments Fair value measurement is based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value which are: Level 1 — Quoted prices that are available in active markets for identical assets or liabilities. Level 2 — Quoted prices in active markets for similar assets or liabilities that are observable. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. At December 31, 2017, the Company had Level 1 financial instruments, consisting of cash and cash equivalents, with a fair value of $7.1 million (2016 - $13.3 million). 15 Supplemental cash flow information Other than those described in Note 2, there were no significant non-cash transactions during the years ended December 31, 2017, 2016 and 2015. 16 Commitments and contingencies As at December 31, 2017, the Company had the following commitments: Lease commitments $ 573 Total Less than 1 year 115 $ 1 - 3 years 3-5 years $ 235 $ 224 More than 5 years - $ Under the terms of the Amended Sandstorm Agreement, the Company may be subject to a contingent liability if certain events occur (Note 8). 21 Entrée Resources Ltd. (Formerly Entrée Gold Inc.) Notes to Consolidated Financial Statements For the years ended December 31, 2017, 2016 and 2015 (tabular amounts expressed in thousands of U.S. dollars, except per share amounts and where indicated) 17 Administrative Services Agreement On May 9, 2017, Mason Resources entered into an Administrative Services Agreement ("ASA") with Entrée whereby Entrée provides office space, furnishings and equipment, communications facilities and personnel necessary for Mason Resources to fulfill its basic day-to-day head office and executive responsibilities on a pro-rata cost-recovery basis. The total amount charged to Mason Resources for the year ended December 31, 2017 was $0.6 million. As of December 31, 2017, included in the receivables balance on the consolidated balance sheet is $0.2 million due from Mason Resources relating to the ASA. Also included in costs recoverable by Entrée under the ASA is a one-time restructure charge of $0.2 million to Mason Resources that is related to the Arrangement (Note 2). This amount includes legal, filing and audit related costs directly attributable to the Arrangement. 18 Related party transactions Other than those described in Note 17, the Company did not enter into any transactions with related parties during the years ended December 31, 2017, 2016 and 2015. 19 Subsequent events Effective February 5, 2018, Mr. Mark Bailey was appointed to the role of Non-Executive Chairman of the Board of Directors and succeeded The Rt. Honourable Lord Howard of Lympe who retired from his position as a director and Board Chair. In addition, Dr. Michael Price joined the Company’s Board of Directors as an independent director. Subsequent to December 31, 2017, 1,590,000 stock options with an exercise price of C$0.47 were exercised or terminated (Note 10). An aggregate of 648,224 common shares were issued, and the Company received gross proceeds of C$150,400 from the option exercises. 100,000 stock options with an exercise price of C$0.63 were granted to Dr. Michael Price. 22 Exhibit 99.3 Management’s Discussion and Analysis Year Ended December 31, 2017 (Expressed in United States dollars, except per share amounts and where otherwise noted) March 8th, 2018 This Management’s Discussion and Analysis ("MD&A") should be read in conjunction with the consolidated financial statements for the year ended December 31, 2017 and related notes thereto which have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). References to "Entrée" and the "Company" are to Entrée Resources Ltd. and/or one or more of its wholly-owned subsidiaries. For further information on the Company, reference should be made to its continuous disclosure (including its most recently filed annual information form ("AIF")), which is available on SEDAR at www.sedar.com. Information is also available on the Company’s website at www.EntreeResourcesLtd.com. Information on risks associated with investing in the Company’s securities is contained in the Company’s most recently filed AIF. Technical and scientific information under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") concerning the Company’s material property, including information about mineral resources and reserves, is contained in the Company’s most recently filed AIF and in its technical report titled "Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report" with an effective date of January 15, 2018 prepared by Amec Foster Wheeler Americas Limited. 2017 HIGHLIGHTS Entrée/Oyu Tolgoi JV Property (cid:120) In September 2017, Entrée management visited the Oyu Tolgoi project and toured some of the main surface infrastructure, including the concentrator and tailings facilities, as well as underground where they observed some of the development work completed as at the date of the visit. This visit also included a review of plans with Oyu Tolgoi LLC ("OTLLC") for the immediate and medium-term future. (cid:120) As reported by Turquoise Hill Resources Ltd. ("Turquoise Hill"): o The main focus of underground development programs at the Oyu Tolgoi project during 2017 was underground lateral development, sinking of Shafts 2 and 5, support infrastructure and the convey- to-surface system. o By the end of 2017, five development crews had been deployed, and the commissioning of a new 3,500 tonne per day development crusher was completed in the third quarter of 2017. o Shaft 5 is expected to be complete in the first quarter of 2018. When completed, Shaft 5 will be dedicated to ventilation thereby increasing the capacity for underground activities. o The sinking of Shaft 2 has been completed, including reaching final depth, shaft bottom mass excavation and concrete floor installation, marking an early milestone in the development progress of Lift 1. The fit out of Shaft 2 will take place throughout 2018. Shaft 2 will be used for access, production and ventilation. o Turquoise Hill continues to plan for first draw bell on the Oyu Tolgoi mining licence in mid-2020 and sustainable first production from the Oyu Tolgoi mining licence in 2021. (cid:120) On January 15, 2018, the Company reported the results of an updated Technical Report titled "Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report" (the "2018 Technical Report") that was completed by Amec Foster Wheeler Americas Limited on its interest in the Entrée/Oyu Tolgoi joint venture property in Mongolia (the "Entrée/Oyu Tolgoi JV Property"). The 2018 Technical Report discusses two development scenarios, an updated reserve case (the "2018 Reserve Case") and a Life-of-Mine ("LOM") Preliminary Economic Assessment ("2018 PEA"). Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) o The 2018 Reserve Case is based only on mineral reserves attributable to the Entrée/Oyu Tolgoi joint venture (the "Entrée/Oyu Tolgoi JV") from Lift 1 of the Hugo North Extension (also referred to as "HNE") underground block cave. o The 2018 PEA is an alternative development scenario completed at a conceptual level that assesses the inclusion of mineral resources from Hugo North Extension Lift 2 and Heruga into an overall mine plan with mineral resources from 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. o Life-of-mine ("LOM") financial highlights attributable to Entrée from the 2018 Reserve Case and the 2018 PEA include: 2018 Reserve Case HNE Lift 1 2018 PEA (1)(2) HNE Lift 1 + Lift 2 HNE Lift 1+2+Heruga LOM cash flow (cid:120) (cid:120) Before-tax After-tax Net present value 5% (cid:120) 8% (cid:120) Mine life (3) Metal recovered (4) (cid:120) (cid:120) (cid:120) Copper Gold Silver Notes: $ M $ M Years Mlb Koz Koz $382 $291 $157 $111 14 1,115 514 3,651 $2,132 $1,595 $505 $277 33 5,679 2,637 20,442 $2,078 $1,522 $512 $278 77* 10,497 9,367 45,378 1. 2. 3. 4. Long term metal prices used in the net present value ("NPV") economic analyses are: copper $3.00/lb, gold $1,300/oz and silver $19.00/oz. 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. *The 2018 PEA covers a period from 2021 to 2097 (77 years), but there is an 11 year period (2054-2064) with no mining from the Entrée/Oyu Tolgoi JV Property when other mineralization from the Oyu Tolgoi mining licence is being mined and processed. Entrée has a 20% attributable interest in the recovered metal. o The 2018 PEA demonstrates that Entrée’s interest is multi-generational, with potential to deliver over $2.1 billion dollars in undiscounted pre-tax cash flows just from Hugo North Extension Lifts 1 and 2 over the first 33 years of production. Post-tax, this equates to a net present value at 8% of $277 million. The 2018 PEA also brings resources from Heruga into the mine plan, but these are not scheduled to be mined until much later in the life of the Oyu Tolgoi project. Although the Heruga deposit provides considerable flexibility for future mine planning and development options, additional technical work is needed to establish the mineral resources and costs with greater certainty and to enable investors to better understand the true value of the Heruga deposit. Corporate (cid:120) In January 2017, the Company closed a non-brokered private placement of 18,529,484 units of the Company at a price of C$0.41 per unit for gross proceeds of approximately C$7.6 million. Each unit consisted of one common share and one-half of one transferable common share purchase warrant that entitled the holder to purchase one additional common share of the Company for a period of five years following the date of issuance. (cid:120) On May 9, 2017, the Company completed its strategic reorganization of Entrée’s business (the "Arrangement"). Entrée’s U.S. based assets, the Ann Mason Project and Lordsburg property, were transferred to a newly incorporated company, Mason Resources Corp. ("Mason Resources") (TSX:MNR and OTCQB:MSSNF) and Entrée shareholders exchanged their old Entrée shares for shares of two separate and focused, well-capitalized, debt-free TSX-listed companies, each with a high quality advanced project. The reorganization provides new and existing shareholders with optionality as to investment strategy and risk profile. (cid:120) On May 9, 2017, the Company changed its name from Entrée Gold Inc. to Entrée Resources Ltd. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) (cid:120) On May 9, 2017, the Company entered into an Administrative Services Agreement with Mason Resources, pursuant to which Entrée provides office space, furnishings and equipment, communications facilities and personnel necessary for Mason Resources to fulfill its basic day-to-day head office and executive responsibilities on a pro-rata cost-recovery basis. (cid:120) Q4 2017 net loss from continuing operations was $1.1 million as compared to Q4 2016 ($0.5 million). For the full 2017 year, net loss from continuing operations was $3.0 million, which is a reduction of 6% compared to 2016 ($3.2 million). (cid:120) As at December 31, 2017, cash on hand was $7.1 million and there was a working capital balance of $7.2 million. OVERVIEW OF BUSINESS Entrée is a mineral resource company with interests in development and exploration properties in Mongolia, Peru and Australia. The Company’s principal asset is its interest in the Entrée/Oyu Tolgoi JV Property – a carried 20% or 30% interest (depending on the depth of mineralization) in two of the Oyu Tolgoi project deposits, as well as a large underexplored, highly prospective land package located in the South Gobi region of Mongolia. Entrée’s joint venture partner, OTLLC, holds the remaining 80%/70% interest. The Oyu Tolgoi project, upon completion of the underground mine development, will become one of the world’s largest new copper-gold mines. The project includes two separate land holdings: the Oyu Tolgoi mining licence, which is held by OTLLC (66% Turquoise Hill and 34% the Government of Mongolia), and the Entrée/Oyu Tolgoi JV Property, which is a partnership between Entrée and OTLLC. The Entrée/Oyu Tolgoi JV Property comprises the eastern portion of the Shivee Tolgoi mining licence, and all of the Javhlant mining licence. The Shivee Tolgoi and Javhlant mining licences are held by Entrée. The terms of the Entrée/Oyu Tolgoi JV state that Entrée has a right to receive 20% of all mineralization extracted from deeper than 560 metres below surface and 30% of all mineralization extracted from above 560 metres depth. The Entrée/Oyu Tolgoi JV Property includes the Hugo North Extension copper-gold deposit and the majority of the Heruga copper-gold-molybdenum deposit. The resources at Hugo North Extension include a Probable reserve, which is part of the first lift ("Lift 1") of the Oyu Tolgoi underground block cave mining operation. Lift 1 is currently in development by project operator Rio Tinto International Holdings Ltd. ("Rio Tinto"), with first development production from the Entrée/Oyu Tolgoi JV Property expected in 2021. When completed, Oyu Tolgoi is expected to become the world’s third largest copper mine. In addition to the Hugo North Extension copper-gold deposit, the Entrée/Oyu Tolgoi JV Property includes approximately 94% of the resource tonnes outlined at the Heruga copper-gold-molybdenum deposit, and a large exploration land package, which together form a significant component of the overall Oyu Tolgoi project. The first two phases of the Oyu Tolgoi project are fully financed, with the Oyut open pit mine on the Oyu Tolgoi mining licence (Phase 1) currently in production and construction of Lift 1 of the Hugo North/Hugo North Extension underground block cave (Phase 2) currently in progress. The Company also has the following assets: (cid:120) Blue Rose JV – a 56.53% interest in the Blue Rose joint venture ("Blue Rose JV") on minerals other than iron ore on exploration licence EL 6006 in the Olary Region of South Australia. The Blue Rose JV partners also have certain rights and royalties with respect to iron ore outlined or extracted from the area covered by EL 6006. (cid:120) Cañariaco Project Royalty – a 0.5% net smelter returns royalty on Candente Copper Corp.’s Cañariaco copper porphyry project in Peru ("Cañariaco Royalty"). The Company’s corporate headquarters are located in Vancouver, British Columbia, Canada. Field operations are conducted out of local offices in Mongolia. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:885)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Trading of the Company’s common shares commenced on the NYSE American effective July 18, 2005, under the trading symbol "EGI". On April 24, 2006, the Company’s common shares began trading on the Toronto Stock Exchange ("TSX") and discontinued trading on the TSX Venture Exchange. The trading symbol remained "ETG". OUTLOOK AND STRATEGY Entrée/Oyu Tolgoi JV Property With the completion and filing of the 2018 Technical Report, the Company is now focused on: (cid:120) Assessing opportunities to crystallize value ahead of production from the Entrée/Oyu Tolgoi JV Property. (cid:120) (cid:120) Streamlining Entrée’s joint venture interest. Educating the market about the risk profile associated with Entrée’s interest in the Entrée/Oyu Tolgoi JV Property. (cid:120) Working with Entrée’s joint venture partners to advance any exploration opportunities on the Entrée/Oyu Tolgoi JV Property that may exist, including several near surface targets that have been identified. Corporate With the completion of the restructuring in May 2017 and the filing of the 2018 Technical Report in January 2018, the Company’s focus will be to maximize investor awareness on the results of the 2018 Technical Report and what this report means to the Company and all stakeholders, both current and potential. Corporate costs, which include Mongolian site management, marketing and compliance costs, are estimated between $1.2 million and $1.5 million for the 2018 year. ENTRÉE/OYU TOLGOI JV PROPERTY AND SHIVEE WEST PROPERTY – MONGOLIA 2018 Technical Report Highlights On January 15, 2018, the Company announced the results of the 2018 Technical Report completed on its interest in the Entrée/Oyu Tolgoi JV Property. The 2018 Technical Report discusses two development scenarios, the 2018 Reserve Case and the 2018 PEA. The 2018 Reserve Case is based only on mineral reserves attributable to the Entrée/Oyu Tolgoi JV from Lift 1 of the Hugo North Extension underground block cave. The 2018 PEA is an alternative development scenario completed at a conceptual level that assesses the inclusion of Hugo North Extension Lift 2 and Heruga 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 Hugo North Extension Lift 2 and Heruga once production commences at Hugo North Extension Lift 1. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:886)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) LOM highlights of the production and financial results from the 2018 Reserve Case and the 2018 PEA are summarized as follows: Entrée/Oyu Tolgoi JV Property Units 2018 Reserve Case 2018 PEA Probable Reserve Feed Indicated Resource Feed Inferred Resource Feed Copper Recovered Gold Recovered Silver Recovered Entrée Attributable Financial Results LOM Cash Flow, pre-tax NPV5%, after-tax NPV8%, after-tax NPV10%, after-tax Notes: Mlb koz koz $M $M $M $M 35 Mt @ 1.59% Cu, 0.55 g/t Au, 3.72 g/t Ag (1.93% CuEq) ---- ---- 1,115 514 3,651 382 157 111 89 ---- 113 Mt @ 1.42% Cu, 0.50 g/t Au, 3.63 g/t Ag (1.73% CuEq) 708 Mt @ 0.53% Cu, 0.44 g/t Au, 1.79 g/t Ag (0.82 % CuEq) 10,497 9,367 45,378 2,078 512 278 192 1. 2. 3. 4. 5. Long term metal prices used in the NPV economic analyses are: copper $3.00/lb, gold $1,300.00/oz and 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 footnotes to the Mineral Resources Table below. 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) the Company is only reporting the production and cash flows attributable to the Entrée/Oyu Tolgoi JV Property, not production and cash flows for other mineral deposits located on the Oyu Tolgoi mining licence 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’s 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. 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. Key items per the 2018 Reserve Case outputs are as follows: (cid:120) (cid:120) (cid:3) 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). (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:887)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) (cid:120) Maximum production rate of approximately 24,000 tonnes per day ("tpd"), which is blended with production from OTLLC’s Oyut open pit deposit and Hugo North deposit to reach an average mill throughput of approximately 110,000 tpd. (cid:120) (cid:120) (cid:120) (cid:120) Total direct development and sustaining capital expenditures of approximately $262 million ($52 million attributable 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. Key items per the 2018 PEA outputs are as follows: (cid:120) 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. (cid:120) Development schedule assumes for Entrée/Oyu Tolgoi JV Property: (cid:16) (cid:16) (cid:16) 2021 start of Lift 1 development production and in 2026 initial Lift 1 block cave production 2028 Lift 2 development production and in 2035 initial Lift 2 block cave production 2065 Heruga development production and in 2069 initial block cave production (cid:120) (cid:120) (cid:120) (cid:120) Total direct development and sustaining capital expenditures of approximately $8,637 million ($1,727 million attributable 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. 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, 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. The 2018 Technical Report has been filed on SEDAR and is available for review under the Company’s profile on SEDAR (www.sedar.com) or on www.EntreeResourcesLtd.com. Summary and Location of Project The Entrée/Oyu Tolgoi JV Project (shown on Figure 1) comprises the Entrée/Oyu Tolgoi Property and the Shivee West Property (see "Shivee West Property Summary" below). The Entrée/Oyu Tolgoi JV Project completely surrounds OTLLC’s Oyu Tolgoi mining licence and forms a significant portion of the overall Oyu Tolgoi project area. Figure 1 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. The Entrée/Oyu Tolgoi JV Project is located within the Aimag (province) of Ömnögovi in the South Gobi region of Mongolia, about 570 kilometres ("km") south of the capital city of Ulaanbaatar and 80 km north of the border with China. The Entrée/Oyu Tolgoi JV Property comprises the eastern portion of the Shivee Tolgoi mining licence and all of the Javhlant mining licence, and hosts: (cid:120) The Hugo North Extension copper-gold porphyry deposit (Lift 1 and Lift 2): (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:888)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) (cid:16) (cid:16) Lift 1 is the upper portion of the Hugo North Extension copper-gold porphyry deposit and forms the basis of the 2018 Reserve Case. It is the northern portion of the Hugo North Lift 1 underground block cave mine plan that is currently in development on the Oyu Tolgoi mining licence. Starting in approximately 2021, the development will cross north onto the Entrée/Oyu Tolgoi JV Property. Hugo North Extension Lift 1 Probable reserves include 35 million tonnes ("Mt") grading 1.59% copper, 0.55 grams per tonne ("g/t") gold, and 3.72 g/t silver. Lift 1 mineral resources are also included in the alternative development scenario, as part of the mine plan for the 2018 PEA. Lift 2 is immediately below Lift 1 and is the next potential phase of underground mining, once Lift 1 mining is complete. Lift 2 is currently included as part of the alternative, 2018 PEA mine plan. Hugo North Extension Lift 2 resources included in the 2018 PEA mine plan are: 78 Mt (Indicated), grading 1.34% copper, 0.48 g/t gold, and 3.59 g/t silver; plus 88.4 Mt (Inferred), grading 1.34% copper, 0.48 g/t gold, and 3.59 g/t silver. (cid:120) The Heruga copper-gold-molybdenum porphyry deposit is at the south end of the Oyu Tolgoi trend of porphyry deposits. Approximately 94% of the Heruga deposit occurs on the Entrée/Oyu Tolgoi JV Property. The 2018 PEA includes Heruga as the final deposit to be mined, as two separate block caves, one to the south with a slightly deeper block cave to the north. The portion of the Heruga mineral resources that occur on the Entrée/Oyu Tolgoi JV Property and are part of the alternative, 2018 PEA mine plan include 620 Mt (Inferred) grading 0.42% copper, 0.43 g/t gold, and 1.53 g/t silver. (cid:120) A large prospective land package. Entrée has a 20% or 30% (depending on the depth of mineralization) participating interest in the Entrée/Oyu Tolgoi JV with OTLLC holding the remaining 80% (or 70%) 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 South deposits on the Oyu Tolgoi mining licence. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:889)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Figure 1 – Entrée/Oyu Tolgoi JV Project Notes: 1. 2. 3. *The Shivee West Property 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. Entrée has a 20% participating interest in the Hugo North Extension and Heruga resources and reserves. Figure 2 shows a north-south oriented, west-looking cross section through the 12.4 km-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. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:890)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Figure 2 – Cross Section Through the Oyu Tolgoi Trend of Porphyry Deposits The 2018 Technical Report forms the basis for the scientific and technical information in this MD&A regarding the Entrée/Oyu Tolgoi JV Project. Portions of the information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the Company’s AIF and to the full text of the 2018 Technical Report, which are available on the Company’s website (www.EntreeResourcesLtd.com)or on SEDAR (www.sedar.com). 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 joint venture agreement ("Entrée/Oyu Tolgoi JVA), 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 JVA and generally accepted accounting principles. Under the terms of the Entrée/Oyu Tolgoi JVA, 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. The capital and operating costs in the 2018 Reserve Case are based on estimates prepared for OTFS16. The capital and operating costs in the 2018 PEA are based on data provided by OTLLC. A summary of the Entrée/Oyu Tolgoi JV capital expenditures, including direct development and sustaining capital, and amortization charges for capital costs incurred by OTLLC on the Oyu Tolgoi mining licence for both the 2018 Reserve Case and the 2018 PEA is as follows: (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:891)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Description Entrée/Oyu Tolgoi JV Property Direct Development & Sustaining Capital(1)(2)(3) Amortization Charges for Capital Costs Incurred by OTLLC(4)(5) Notes: Unit $M $M 2018 Reserve Case 2018 PEA Entrée/Oyu Tolgoi JV Entrée 20% Attributable Entrée/Oyu Tolgoi JV Entrée 20% Attributable 261.7 395.7 52.3 79.1 8,637.3 1,727.4 1,846.7 369.3 1. 2. 3. 4. 5. Capital costs are inclusive of indirect costs, Mongolian custom duties and VAT and contingency. For the purposes of the 2018 Technical Report, it has been assumed that all underground infrastructure for Heruga will be constructed on the Entrée/Oyu Tolgoi JV Property. HNE means Hugo North Extension. The amortization charges for capital items incurred by OTLLC are for both surface and underground capital items required for both the 2018 Reserve Case and the 2018 PEA. The 2018 PEA assumes that the same capital items, with additional modifications would be used to produce from Hugo North Extension Lift 2. Under the 2018 PEA, the total amount of the amortization charges for these capital items is allocated over a larger resource base, therefore, the total amortization charges to the Entrée/Oyu Tolgoi JV for the specific capital items is lower than the 2018 Reserve Case. OTLLC capital costs are inclusive of indirect costs, Mongolian custom duties and VAT and contingency. The average LOM operating costs for the Entrée/Oyu Tolgoi JV Property 2018 Reserve Case and the 2018 PEA (including amortization charges for capital costs incurred by OTLLC on the Oyu Tolgoi mining licence) are shown as follows: Description Unit 2018 Reserve Case 2018 PEA Mining Processing Infrastructure and Other Operating Amortized Mining, Process and Tailings Costs Total Refining & Transportation Costs Total Operating Expenditure Administration Charge (2% during development; 2.5% during production) Total Notes: $/t processed $/t processed $/t processed $/t processed $/t processed $/t processed $/t processed $/t processed 6.19 8.41 2.04 10.47 8.66 35.76 1.32 37.08 5.67 9.37 2.04 1.681,2 3.75 22.51 0.84 23.35 1. 2. 3. Mining amortized cost are significantly reduced for the 2018 PEA because the Lift 1 costs are being divided by the total resource tonnage for presentation purposes; nonetheless, within the financial model Lift 1 costs are amortized against Lift 1 tonnage and captured during Lift 1 mining. Process amortized costs are significantly lower for the 2018 PEA because the concentrate expansion costs are amortized against the resource tonnage within the financial model including Lift 1, Lift 2, and Heruga. Figures have been rounded as required by reporting guidelines, and may result in apparent summation differences. Cash costs are those costs relating to the direct operating costs of the mine site, including mining, concentration, tailings, operational support costs, infrastructure, smelting and refining and administration fees. Total cash costs after credits (C1 costs) are the cash costs less the revenue from the gold and silver by-products. The all-in sustaining cost (AISC) is calculated according to World Gold Council guidance. It is the C1 costs plus mineral royalty and capital costs. AISC costs exclude income tax and financing charges. The breakdown of the mine cash costs for the Entrée/Oyu Tolgoi JV Property 2018 Reserve Case and the 2018 PEA are shown as follows: (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:882)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Unit LOM Average 2018 Reserve Case LOM Average 2018 PEA Description Mine Site Cash Cost TC/RC, Royalties & Transport $/lb Payable Copper $/lb Payable Copper Total Cash Costs Before Credits $/lb Payable Copper Gold Credits Silver Credits $/lb Payable Copper $/lb Payable Copper Total Cash Costs After Credits (C1) $/lb Payable Copper Total All-in Sustaining Costs After Credits (AISC) $/lb Payable Copper 0.95 0.29 1.25 0.62 0.06 0.56 1.03 1.66 0.32 1.97 1.22 0.08 0.68 1.83 Notes: 1. Figures have been rounded as required by reporting guidelines, and may result in apparent summation differences. The cash flows in the 2018 Reserve Case and 2018 PEA are based on data provided by OTLLC, including mining schedules and annual capital and operating cost estimates, as well as Entrée’s interpretation of the commercial terms applicable to the Entrée/Oyu Tolgoi JV, and certain assumptions regarding taxes and royalties. The cash flows have not been reviewed or endorsed by OTLLC. There can be no assurance that OTLLC or its shareholders will not interpret certain terms or conditions, or attempt to renegotiate some or all of the material terms governing the joint venture relationship, in a manner which could have an adverse effect on Entrée’s future cash flow and financial condition. The cash flows also assume that Entrée will ultimately have the benefit of the standard royalty rate of 5% of sales value, payable by OTLLC under the Oyu Tolgoi Investment Agreement. Unless and until Entrée finalizes agreements with the Government of Mongolia or other Oyu Tolgoi stakeholders, there can be no assurance that Entrée will be entitled to all the benefits of the Oyu Tolgoi Investment Agreement, including with respect to taxes and royalties. If Entrée is not entitled to all the benefits of the Oyu Tolgoi Investment Agreement, it could have an adverse effect on Entrée’s future cash flow and financial condition. For example, Entrée could be subject to a surtax royalty, which came into effect in Mongolia on January 1, 2011. To become entitled to the benefits of the Oyu Tolgoi Investment Agreement, Entrée may be required to negotiate and enter into a mutually acceptable agreement with the Government of Mongolia or other Oyu Tolgoi stakeholders, with respect to Entrée’s direct or indirect participating interest in the Entrée/Oyu Tolgoi JV or the application of a special royalty (not to exceed 5%) to Entrée’s share of the Entrée/Oyu Tolgoi JV Property mineralization or otherwise. Mineral Resources and Mineral Reserves – Entrée/Oyu Tolgoi JV Property The Entrée/Oyu Tolgoi JV Property mineral resource estimate for the Hugo North Extension deposit has an effective date of January 15, 2018. The mineral resource model and the mineral resource estimate have not changed since March 28, 2014, the effective date of the previous mineral resource estimate reported by Entrée. The Entrée/Oyu Tolgoi JV mineral resource estimate for the Heruga deposit has an effective date of January 15, 2018. The mineral resource model and the mineral resource estimate have not changed since March 30, 2010, the effective date of the previous mineral resource estimate reported by Entrée. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:883)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) The mineral resource estimate for the Entrée/Oyu Tolgoi JV Property is as follows: Entrée/Oyu Tolgoi JV Property– Mineral Resources Classification Tonnage (Mt) Cu (%) Au Ag Mo CuEq (g/t) (g/t) (ppm) (%) Hugo North Extension (>0.37% CuEq Cut-Off) Contained Metal Cu Au Ag Mo (Mlb) (Koz) (Koz) (Mlb) Indicated Inferred 122 174 1.68 1.00 0.57 0.35 4.21 2.73 ___ ___ 2.03 1.21 4,515 3,828 2,200 2,000 16,500 15,200 ___ ___ Heruga (>0.37% CuEq Cut-Off) Inferred 1,700 0.39 0.37 1.39 113.2 0.64 14,604 20,410 75,932 424 Notes: 1. 2. 3. 4. 5. 6. 7. Mineral resources have an effective date of January 15, 2018. Mr Peter Oshust, P. Geo, an Amec Foster Wheeler employee, is the Qualified Person responsible for the mineral resource estimate. Mineral resources are reported inclusive of the mineral resources converted to mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resources are constrained within three-dimensional shapes and above a CuEq grade. The CuEq formula was developed in 2016, and is CuEq16 = Cu + ((Au*AuRev) + (Ag*AgRev) + (Mo*MoRev)) ÷ CuRev; where CuRev = (3.01*22.0462); AuRev = (1250/31.103477*RecAu); AgRev = (20.37/31.103477*RecAg); MoRev = (11.90*0.00220462*RecMo); RecAu = Au recovery/Cu recovery; RecAg = Ag recovery/Cu recovery; RecMo = Mo recovery/Cu recovery. Differential metallurgical recoveries were taken into account when calculating the copper equivalency formula. The metallurgical recovery relationships are complex and relate both to grade and Cu:S ratios. The assumed metal prices are $3.01/lb for copper, $1,250.00/oz for gold, $20.37/oz for silver, and $11.90/lb for molybdenum. Molybdenum grades are only considered high enough to support potential construction of a molybdenum recovery circuit at Heruga, and hence the recoveries of molybdenum are zeroed out for Hugo North Extension. A NSR of $15.34/t would be required to cover costs of $8.00/t for mining, $5.53/t for processing, and $1.81/t for G&A. This translates to a CuEq break-even underground cut-off grade of approximately 0.37% CuEq for Hugo North Extension mineralization. Considerations for reasonable prospects for eventual economic extraction for Hugo North included an underground resource-constraining shape that was prepared on vertical sections using economic criteria that would pay for primary and secondary development, block-cave mining, ventilation, tramming, hoisting, processing, and general and administrative ("G&A") costs. A primary and secondary development cost of $8.00/t and a mining, process, and G&A cost of $12.45/t were used to delineate the constraining shape cut-off. Inferred resources at Heruga have been constrained using a CuEq cut-off of 0.37%. Mineral resources are stated as in situ with no consideration for planned or unplanned external mining dilution. The contained copper, gold, and silver estimates in the mineral resource table have not been adjusted for metallurgical recoveries. Mineral resources are reported on a 100% basis. OTLLC has a participating interest of 80%, and Entrée has a participating interest of 20%. Notwithstanding the foregoing, in respect of products extracted from the Entrée/Oyu Tolgoi JV Property pursuant to mining carried out at depths from surface to 560 metres below surface, the participating interest of OTLLC is 70% and the participating interest of Entrée is 30%. Figures have been rounded as required by reporting guidelines, and may result in apparent summation differences. Entrée/Oyu Tolgoi Mineral Reserves Entrée/Oyu Tolgoi JV Property mineral reserves are contained within the Hugo North Extension Lift 1 block cave mining plan. The mine design work on Hugo North Lift 1, including the Hugo North Extension, was prepared by OTLLC. The mineral reserve estimate is based on what is deemed minable when considering factors such as the footprint cut-off grade, the draw column shut-off grade, maximum height of draw, consideration of planned dilution and internal waste rock. The mineral reserve estimate only considers mineral resources in the Indicated category and engineering that has been carried out to a feasibility level or better to state the underground mineral reserve. There is no Measured mineral resource currently estimated within the Hugo North Extension deposit. Copper and gold grades for the Inferred mineral resources within the block cave shell were set to zero and such material was assumed to be dilution. The block cave shell was defined by a $17.00/t NSR. Future mine planning studies may examine lower shut-offs. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:884)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) The mineral reserve estimate for the Entrée/Oyu Tolgoi JV Property is as follows: Entrée/Oyu Tolgoi JV Property – Mineral Reserve Hugo North Extension Lift 1 Classification Probable Notes: Tonnage NSR (Mt) 35 ($/t) 100.57 Cu (%) 1.59 Au (g/t) 0.55 Ag (g/t) 3.72 Recovered Metal Cu (Mlb) Au (Koz) Ag (Koz) 1,121 519 3,591 1. 2. 3. 4. 5. 6. Mineral reserves have an effective date of January 15, 2018. Mr Ian Loomis, P. E., an Amec Foster Wheeler employee, is the Qualified Person responsible for the mineral reserve estimate. For the underground block cave, all mineral resources within the shell has been converted to mineral reserves. This includes low-grade Indicated mineral resources and Inferred mineral resource assigned zero grade that is treated as dilution. A footprint cut-off NSR of $46.00/t and column height shut-off NSR of $17/t were used to define the footprint and column heights. An average dilution entry point of 60% of the column height was used. The NSR was calculated with assumptions for smelter refining and treatment charges, deductions and payment terms, concentrate transport, metallurgical recoveries, and royalties using base data template 31. Metallurgical assumptions in the NSR include recoveries of 90.6% for Cu, 82.3% for Au, and 87.3% for Ag. Mineral reserves are reported on a 100% basis. OTLLC has a participating interest of 80%, and Entrée has a participating interest of 20%. Notwithstanding the foregoing, in respect of products extracted from the Entrée/Oyu Tolgoi JV Property pursuant to mining carried out at depths from surface to 560 metres below surface, the participating interest of OTLLC is 70% and the participating interest of Entrée is 30%. Figures have been rounded as required by reporting guidelines, and may result in apparent summation differences. Exploration Potential Rio Tinto undertakes all exploration work on the Entrée/Oyu Tolgoi JV Property on behalf of joint venture manager OTLLC, through various agreements among OTLLC, Rio Tinto and Turquoise Hill. Exploration during 2016 on the Entrée/Oyu Tolgoi JV Property has outlined several near-surface porphyry prospects, the most significant being at Castle Rock and Southeast IP (refer to Figure 1). At the Castle Rock Prospect, a polymetallic (Mo-As-Sb-Te index) soil anomaly covers an area of about 1.5 km by 2.0 km and occurs coincident with a strong, near-surface induced polarization ("IP") anomaly. At the Southeast IP prospect an extensive area of 60 to 511 part per million ("ppm") copper soil anomalies, covering about 3 km by 3 km has been outlined, coincident with a strong IP anomaly. Further exploration, including drilling is budgeted for both these prospects in 2018. The areas to the north of Hugo North Extension and to the south of Heruga have been under-explored and remain strong targets for future exploration. A complete description and the Company’s related history of the Entrée/Oyu Tolgoi JV is available in the Company’s AIF dated March 8, 2018, available for review on SEDAR at www.sedar.com. For additional information regarding the assumptions, qualifications and procedures associated with the scientific and technical information regarding the Entrée/Oyu Tolgoi JV Property, reference should be made to the full text of the 2018 Technical Report which is available for review on SEDAR. As at December 31, 2017 Rio Tinto beneficially owned 30,366,129 common shares (including 13,799,333 common shares held by Turquoise Hill), or 17.5% of the outstanding shares of the Company. Shivee West Property Summary The Shivee West Property comprises the northwest portion of the Entrée/Oyu Tolgoi JV Project, and adjoins the Entrée/Oyu Tolgoi JV Property and OTLLC’s Oyu Tolgoi mining licence. To date, no economic zones of precious or base metals mineralization have been outlined on the Shivee West Property. However, zones of gold and copper mineralization have previously been identified at Zone III/Argo Zone and Khoyor Mod. There has been no drilling on the ground since 2011, and no exploration work has been completed since 2012. In 2015, in light of the ongoing requirement to pay approximately $350,000 annually in licence fees for the Shivee West Property and a determination that no further exploration work would likely be undertaken in the near future, Entrée began to examine options to reduce expenditures in Mongolia. These options included further reducing the area of the mining licence, looking for a purchaser or partner for the Shivee West Property, and rolling the ground into the Entrée/Oyu Tolgoi JV. Management determined that it was in the best interests of Entrée to roll the Shivee West Property into the Entrée/Oyu Tolgoi JV, and Entrée entered into a License Fees Agreement with OTLLC on October 1, 2015. The License Fees Agreement provides the parties will use their best efforts to amend the Entrée/Oyu Tolgoi JVA to include the Shivee West Property in the definition of Entrée/Oyu Tolgoi JV Property. Entrée determined that rolling the Shivee West Property into the Entrée/Oyu Tolgoi JV would provide the joint venture partners with continued (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:885)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) security of tenure; Entrée shareholders would continue to benefit from any exploration or development that the Entrée/Oyu Tolgoi JV management committee approves on the Shivee West Property; and Entrée would no longer have to pay licence fees, as the parties agreed that the licence fees would be for the account of each joint venture participant in proportion to their respective interests, with OTLLC contributing Entrée’s 20% share charging interest at prime plus 2%. To date, no amended Entrée/Oyu Tolgoi JVA has been entered into and Entrée retains a 100% interest in the Shivee West Property. 2017 Review(cid:3) Exploration and development of the Entrée/Oyu Tolgoi JV Property is under the control of Rio Tinto on behalf of manager OTLLC. As reported by Turquoise Hill: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) The main focus of underground development programs at the Oyu Tolgoi project during 2017 was underground lateral development, sinking of Shafts 2 and 5, support infrastructure and the convey-to-surface system. By the end of 2017, five development crews had been deployed, and the commissioning of a new 3,500 tonne per day development crusher was completed in the third quarter of 2017. Shaft 5 is expected to be complete in the first quarter of 2018. When completed, Shaft 5 will be dedicated to ventilation thereby increasing the capacity for underground activities. The sinking of Shaft 2 has been completed, including reaching final depth, shaft bottom mass excavation and concrete floor installation, marking an early milestone in the development progress of Lift 1. The fit out of Shaft 2 will take place throughout 2018. Shaft 2 will be used for access, production and ventilation. Turquoise Hill continues to plan for first draw bell on the Oyu Tolgoi mining licence in mid-2020 and sustainable first production from the Oyu Tolgoi mining licence in 2021. For the three months ended December 31, 2017, Entrée expenses related to Mongolian operations were $0.2 million compared to $0.1 million for the same period of 2016. For the full year ended December 31, 2017, expenses related to Mongolia operations were $0.4 million compared to $0.4 million for the 2016 year. In 2017, these costs represented consulting costs related to technical report preparation and in-country administration. In 2016, the expenses were comparable and related to similar expenditure items and also included camp closure costs. BLUE ROSE JV – AUSTRALIA Summary The Blue Rose silver-iron-gold-copper property is located in the Olary Region of South Australia, 300 kilometres northeast of Adelaide and 130 kilometres west-southwest of Broken Hill. Entrée (operator) has a 56.53% interest in a joint venture to explore for minerals (other than iron ore) on the property, with Giralia Resources Pty Ltd., now a subsidiary of Atlas Iron Limited, retaining a 43.47% interest (Blue Rose JV). The property consists of one exploration licence, EL6006, totalling 257 square kilometres, expiring on July 18, 2019. The Braemar Iron Formation is the host rock to magnetite mineralization on both EL6006 and Magnetite Mines Limited’s Razorback Iron project, located immediately west of EL6006. Aeromagnetic anomalies coincident with the outcropping and sub-cropping magnetite units extend from Razorback into EL6006. The mineralization within the Braemar Iron Formation forms a simple dipping tabular body with only minor faulting, folding and intrusives. Grades, thickness, dip, and outcropping geometry remain very consistent over kilometres of strike. While the bedded magnetite has the highest iron content, the tillitic unit is diluted by the inclusion of lithic fragments, such as iron-poor granite and metasedimentary dropstones. On April 18, 2017, the Blue Rose JV partners entered into a Deed of Consent, Sale and Variation (the "Deed") with Lodestone Equities Limited and Fe Mines Limited (formerly Braemar Iron Pty Ltd) ("FML"). FML has certain rights in respect of the exploration for, and development of, iron ore on EL6006 pursuant to a prior agreement. In accordance with the Deed, the Blue Rose JV partners transferred title to EL6006 and assigned their native title agreements to FML, and agreed to vary a payment required to be made to the Blue Rose JV partners under the prior (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:886)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) agreement. FML paid to the Blue Rose JV partners an aggregate A$100,000 at completion, and granted to them (a) the right to receive an additional payment(s) upon completion of an initial or subsequent iron ore resource estimate on EL6006, to a maximum of A$2 million in aggregate; and (b) a royalty equal to 0.65% of the free on board value of iron ore product extracted and recovered from EL6006. Under the Deed, an additional A$285,000 must also be paid to the Blue Rose JV partners upon the commencement of Commercial Production (as such term is defined in the Deed). The Blue Rose JV partners retain their existing rights to explore for, develop and mine all minerals other than iron ore on EL6006. On May 23, 2017, the Blue Rose JV partners entered into an agreement with Hamelin Gully Pty Ltd, for the sale of data and information relating to ground surrendered by the Blue Rose JV partners and subsequently acquired by Hamelin Gully. The purchase price for the data and information was A$150,000. The transaction closed on July 11, 2017. 2017 Review Expenditures in 2017 were minimal and related to administrative costs in Australia. CAÑARIACO PROJECT ROYALTY – PERU Summary In July 2015, the Company entered into an agreement with Candente Copper Corp. (TSX:DNT) ("Candente") to acquire a 0.5% NSR royalty on Candente's 100% owned Cañariaco project in Peru for a purchase price of $500,000. The Cañariaco project includes the Cañariaco Norte copper-gold-silver porphyry deposit, as well as the adjacent Cañariaco Sur and Quebrada Verde copper porphyry prospects, located within the western Cordillera of the Peruvian Andes in the Department of Lambayeque, Northern Peru. There was no activity or expenditures related to this royalty in 2017. SUMMARY OF CONSOLIDATED FINANCIAL OPERATING RESULTS Plan of arrangement and discontinued operations On May 9, 2017, the Company completed a plan of arrangement under Section 288 of the Business Corporations Act (British Columbia) pursuant to which Entrée transferred its wholly owned subsidiaries that directly or indirectly hold the Ann Mason Project in Nevada and the Lordsburg property in New Mexico including $8,843,232 in cash and cash equivalents to a newly incorporated company, Mason Resources in exchange for 77,804,786 common shares of Mason Resources ("Mason Common Shares"). Mason Resources commenced trading on the TSX on May 12, 2017 under the symbol "MNR" and on the OTCQB Venture Market on November 9, 2017 under the symbol "MSSNF". As part of the Arrangement, Entrée then distributed 77,805,786 Mason Common Shares to Entrée shareholders by way of a share exchange, pursuant to which each existing share of Entrée was exchanged for one "new" share of Entrée and 0.45 of a Mason Common Share. Optionholders and warrantholders of Entrée received replacement options and warrants of Entrée and options and warrants of Mason Resources which were proportionate to, and reflective of the terms of, their existing options and warrants of Entrée. The assets and liabilities that were transferred to Mason Resources were classified as discontinued operations and classified on the balance sheet as assets / liabilities held for spin-off ("Spin-off"). The discontinued operations include three entities transferred to Mason Resources pursuant to the Arrangement: Mason U.S. Holdings Inc. (formerly Entrée U.S. Holdings Inc.); Mason Resources (US) Inc. (formerly Entrée Gold (US) Inc.); and M.I.M. (U.S.A.) Inc. (collectively the "US Subsidiaries"). The Spin-off distribution was accounted for at the carrying amount, without gain or loss, and resulted in a reduction of stockholders’ (deficiency) equity of $44.2 million. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:887)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) The closing of the Arrangement resulted in the following Spin-off assets and liabilities being distributed to Mason Resources on May 9, 2017: Current assets Cash Receivables and prepaids Long-term assets Equipment Mineral property interest Reclamation deposits and other Current liabilities Accounts payable and accrued liabilities Long-term liabilities Deferred income taxes Net assets May 9, 2017 December 31, 2016 $ 8,843 $ 129 137 8,980 25 37,699 481 38,205 (34) 219 348 25 38,379 481 38,885 (230) (2,937) (3,015) $ 44,214 $ 35,988 (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:888)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Operating Results The Company’s operating results for the three years ended December 31 were: 2017 2016 2015 Expenses Exploration General and administration Restructuring costs Depreciation Other Operating loss Foreign exchange (gain) loss Interest expense, net Loss from equity investee Operating loss before income taxes Income tax (recovery) expense Net loss from continuing operations Net loss from discontinued operations Net loss Foreign currency translation adjustment Net loss and comprehensive loss Net loss per common share Basic/diluted– continuing operations Basic/diluted - discontinued operations Total assets Total non-current liabilities $ 332 $ 489 $ 2,334 211 20 192 3,089 (380) 171 215 3,095 (72) 3,023 176 $ $ $ $ $ $ 3,199 $ 2,481 5,680 $ (0.02) $ (0.00) $ 8,257 $ 32,499 $ 2,489 - 16 - 2,994 343 177 237 3,751 (553) 3,198 1,465 4,663 (717) 3,946 (0.02) (0.01) 53,280 33,336 $ $ $ $ $ $ 1,637 4,690 - 21 - 6,348 (2,919) 412 119 3,960 160 4,120 3,711 7,831 4,928 12,759 (0.03) (0.02) 61,662 39,316 During the year ended December 31, 2017, the Company’s net loss from continuing operations was $3.0 million compared to $3.2 million and $4.1 million for the comparative periods of 2016 and 2015, respectively. Exploration costs in 2017 included expenditures of $0.1 million for administration costs for Mongolia, and $0.2 million in holding costs on all other properties. In the comparative 2016 period, the Company incurred exploration expenditures of $0.4 million for Mongolia administration and $0.2 million in holding costs for all other properties. In the comparative period of 2015, exploration costs were higher due to costs for Mongolia camp closures and employee severances. Overall, general and administration expenditures in 2017 was comparable to the same period in 2016 and 50% lower than the comparative 2015 period due to the reduction in corporate personnel and overhead costs in 2015. Other expenses include expenditures of $0.2 million for an updated technical report for the Entrée/Oyo Tolgoi JV Property. The resulting foreign exchange gain of $0.4 million in 2017 was primarily the result of movements between the C$ and US$ as the Company holds its cash in both currencies. Interest expense (net) was primarily related to the loan payable to OTLLC pursuant to the Entrée/Oyu Tolgoi JVA and is subject to a variable interest rate. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:889)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) The loss from equity investee was related to the Entrée/Oyu Tolgoi JV Property and was consistent with the same period in 2016 and 81% higher than the comparative 2015 period due to a reclassification in 2015. Net loss from discontinued operations was due to the Arrangement that was completed during Q2 2017 and the amount was related to exploration costs of the assets that were spun-out to Mason Resources. The total assets as at December 31, 2017 are substantially lower than the comparative periods due to the completion of the restructuring and resulting roll out of the assets into Mason Resources. The non-current liabilities as at December 31, 2017 is comparable to the balance at December 31, 2016 but is lower than at December 31, 2015 due to a reduction of the deferred revenue balance to Sandstorm Gold Ltd. ("Sandstorm") during 2016. Quarterly Financial Data – 2 year historic trend Exploration $ 95 $ 74 $ 94 $ 69 $ 70 $ 50 $ 142 $ 227 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 General and administrative Depreciation Operating loss Foreign exchange (gain) loss Interest expense, net Loss from equity investee Income tax recovery Net loss from continuing operations Net loss from discontinued operations Net loss Basic/diluted loss per share – continuing operations Basic/diluted loss per share – discontinued operations 628 905 937 524 911 6 1,012 26 49 57 - 293 7 374 4 726 (349) (100) 49 55 - 38 55 (72) 3 977 43 35 48 - 4 1,011 (54) 48 68 (553) 4 578 (39) 45 62 - 476 4 622 4 43 60 - 552 4 783 432 41 47 - $ 1,144 $ 129 $ 647 $ 1,103 $ 520 $ 646 $ 729 $ 1,303 - - 23 153 $ 448 $ 363 $ 325 $ 329 $ 1,144 $ 129 $ 670 $ 1,256 $ 968 $ 1,009 $ 1,054 $ 1,632 $ (0.01) $ (0.00) $ (0.00) $ (0.01) $ (0.00) $ (0.00) $ (0.00) $ (0.01) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00) Exploration costs have been consistent since Q3 2016 after the Company placed all non-material properties on care and maintenance. General and administrative costs have trended lower since Q1 2016 due to reduction of overhead expenditures with the exception of the period from Q4 2016 to Q2 2017 which incurred one-time costs associated with the strategic reorganization initiatives. In Q4 2017, general and administrative costs include stock-based compensation of $0.4 million and expenditures relating to an updated technical report for the Entrée/Oyu Tolgoi JV Property of $0.2 million. Interest expense is primarily due to accrued interest on the OTLLC loan payable, partially offset by interest income earned on invested cash. Interest expense remains consistent quarter on quarter. The loss from equity investee was related to the Entrée/Oyu Tolgoi JV Property and remains consistent quarter on quarter. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:890)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) LIQUIDITY AND CAPITAL RESOURCES 2017 2016 2015 Cash used in operating activities - Before changes in non-cash working capital items $ (3,144) $ (2,403) $ (6,320) - After changes in non-cash working capital items (2,996) (10,206) (9,821) Cash flows from financing activities Cash flows (used in) from investing activities Net cash outflows 5,237 (8,943) (6,702) 612 34 41 (516) (9,560) (10,296) Effect of exchange rate changes on cash 508 165 (435) Cash balance $ 7,068 $ 13,262 $ 22,657 Cash flows after changes in non-cash working capital items was 71% and 69% lower than the comparative years of 2016 and 2015, respectively, due to the $5.5 million cash refund to Sandstorm in 2016 and reductions in overhead expenditures since 2015. Cash flows from financing activities included $5.2 million received from the non-brokered private placement which closed in January 2017 and stock option proceeds. Cash flows used in investing activities included the transfer of $8.8 million to Mason Resources on May 1, 2017 as a capital contribution in connection with the Arrangement. The Company is an exploration stage company and has not generated positive cash flow from its operations. As a result, the Company has been dependent on equity and production-based financings for additional funding. Working capital on hand at December 31, 2017 was approximately $7.2 million with a cash balance of approximately $7.1 million. Management believes it has adequate financial resources to satisfy its obligations over the next 12 month period and up to the time when the Company expects the Entrée/Oyu Tolgoi JV Property will commence production. The Company does not currently anticipate the need for additional funding during this time. Loan Payable to Oyu Tolgoi LLC Under the terms of the Entrée/Oyu Tolgoi JVA, OTLLC will contribute funds to approved joint venture programs and budgets on the Company’s behalf. Interest on each loan advance shall accrue at an annual rate equal to OTLLC’s actual cost of capital or the prime rate of the Royal Bank of Canada, plus two percent (2%) per annum, whichever is less, as at the date of the advance. The loan will be repayable by the Company monthly from ninety percent (90%) of the Company’s share of available cash flow from the Entrée/Oyu Tolgoi JV. In the absence of available cash flow, the loan will not be repayable. The loan is not expected to be repaid within one year. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:883)(cid:891)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Contractual Obligations As at December 31, 2017, the Company had the following contractual obligations outstanding: Lease commitments $ 573 $ 115 $ 235 $ 224 $ - Total Less than 1 year 1 - 3 years 3-5 years More than 5 years STOCKHOLDERS’ DEFICIENCY The Company’s authorized share capital consists of unlimited common shares without par value. On May 9, 2017, the Company completed the spin-out of its Ann Mason Project and Lordsburg property (the "US Projects") into Mason Resources through the Arrangement. As part of the Arrangement, Entrée shareholders received Mason Common Shares by way of a share exchange, pursuant to which each existing share of Entrée was exchanged for one "new" share of Entrée and 0.45 of a Mason Common Share. Optionholders and warrantholders of Entrée received replacement options and warrants of Entrée and options and warrants of Mason Resources which were proportionate to, and reflective of the terms of, their existing options and warrants of Entrée. As a result of the completed Arrangement, stockholders’ (deficiency) equity was reduced by $44.2 million. At December 31, 2017, the Company had 173,573,572 shares issued and outstanding and at March 8, 2018, the Company had 174,103,280 shares issued and outstanding. On January 11 and 13, 2017, the Company closed a non-brokered private placement in two tranches issuing a total of 18,529,484 units at a price of C$0.41 per unit for aggregate gross proceeds of C$7.6 million. Each unit consisted of one common share of the Company and one-half of one transferable common share purchase warrant. Each whole warrant entitled the holder to acquire one additional common share of the Company at a price of C$0.65 per share for a period of 5 years. No commissions or finders' fees were payable in connection with the private placement. As part of the Arrangement, warrantholders of the Company received Mason Resources common share purchase warrants ("Mason Warrants") which were proportionate to, and reflective of the terms of, their existing warrants of the Company. In exchange for each existing warrant, the holder was issued one replacement common share purchase warrant of the Company (a "Replacement Warrant") and 0.45 of a Mason Warrant. On May 23, 2017, warrantholders of the Company received an aggregate 4,169,119 Mason Warrants each with an exercise price of C$0.23, and 9,264,735 Replacement Warrants each with an exercise price of C$0.55. The exercise prices assigned to the Replacement Warrants and the Mason Warrants reflect the allocation of the original exercise price of the existing warrants between the Replacement Warrants and the Mason Warrants issued, based on the relative market value of Mason and the Company following completion of the Arrangement.(cid:3) Share Purchase Warrants At December 31, 2017 and at the date of this MD&A, the following share purchase warrants were outstanding: Number of share purchase warrants (000’s) Pre-Arrangement exercise price per share C$ Post-Arrangement adjusted exercise price per share C$ Expiry date 8,655 610 0.65 0.65 0.55 0.55 January 10, 2022 January 12, 2022 Stock Option Plan The Company has adopted a stock option plan (the "Plan") to grant options to directors, officers, employees and consultants. Under the Plan, the Company may grant options to acquire up to 10% of the issued and outstanding shares of the Company. Options granted can have a term of up to ten years and an exercise price typically not less than the Company's closing stock price on the TSX on the last trading day before the date of grant. Vesting is determined at the discretion of Entrée’s Board of Directors (the "Board"). (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:882)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Under the Plan, an option holder may elect to terminate an option, in whole or in part and, in lieu of receiving shares to which the terminated option relates (the "Designated Shares"), receive the number of shares, disregarding fractions, which, when multiplied by the weighted average trading price of the shares on the TSX during the five trading days immediately preceding the day of termination (the "Fair Value" per share) of the Designated Shares, has a total dollar value equal to the number of Designated Shares multiplied by the difference between the Fair Value and the exercise price per share of the Designated Shares. As part of the Arrangement, optionholders of the Company received Mason incentive stock options ("Mason Options") which were proportionate to, and reflective of the terms of, their existing incentive stock options of the Company. In exchange for each existing incentive stock option, the holder was issued one fully vested replacement option to purchase a Common Share of the Company (a "Replacement Option") and 0.45 of a fully vested Mason Option. On May 23, 2017, Mason awarded a total of 3,708,000 Mason Options to the Company’s optionholders in accordance with its Stock Option Plan, which was approved by the Company’s shareholders at the Annual and Special Meeting of Securityholders held to approve the Arrangement. The Mason Options were awarded with exercise prices ranging from C$0.07 per share to C$0.27 per share and expiry dates ranging from September 2017 to November 2021. On May 23, 2017, the Company’s optionholders also received an aggregate 8,240,000 Replacement Options with exercise prices ranging from C$0.18 per share to C$0.61 per share and expiry dates ranging from September 2017 to November 2021. The exercise prices assigned to the Replacement Options and the Mason Options reflect the allocation of the original exercise price of the existing options between the Replacement Options and the Mason Options issued, based on the relative market value of Mason and the Company following completion of the Arrangement. As at December 31, 2017, the Company had 9,175,000 stock options outstanding, of which 9,158,750 had vested and were exercisable. Subsequent to December 31, 2017, 1,590,000 stock options with an exercise price of C$0.47 were exercised or terminated. An aggregate of 648,224 common shares were issued, and the Company received gross proceeds of C$150,400 from the option exercises. 100,000 stock options with an exercise price of C$0.63 were granted to a director. The following is a summary of stock options outstanding as at the date of this report: Number of shares (000`s) Vested (000`s) Aggregate intrinsic value C$ (000’s) Pre-Arrangement exercise price per share C$ Post- Arrangement adjusted exercise price per share C$ Expiry date 1,265 860 1,320 2,240 1,900 100 7,685 1,265 860 1,320 2,240 1,884 50 7,619 280 310 329 406 37 - 1,362 0.30 – 0.56 0.26 – 0.47 Mar – Dec 2018 0.21 0.33 – 0.38 0.39 – 0.42 n/a n/a 0.18 Dec 2019 0.28 – 0.32 July – Dec 2020 0.33 – 0.36 Mar – Nov 2021 0.52– 0.62 May – Oct 2022 0.63 Feb 2023 PLAN OF ARRANGEMENT On May 9, 2017, the Company completed the spin-out of its US Projects into Mason Resources through the Arrangement. The Mason Common Shares commenced trading on the TSX on May 12, 2017 under the symbol "MNR" and on the OTCQB Venture Market on November 9, 2017 under the symbol "MSSNF". The Arrangement was designed to deliver greater value to shareholders by unlocking the value of the Ann Mason Project in Nevada while minimizing dilution to Entrée’s flagship asset in Mongolia. Upon completion of the spin-out of Mason Resources, the Company focused on an updated Technical Report including a Preliminary Economic Assessment that assesses the inclusion of mineral resources from the Entrée/Oyu Tolgoi JV’s Hugo North Extension Lift 2 and Heruga into an overall mine plan with mineral resources from Hugo North Extension Lift 1. The results of the 2018 Technical Report were released on January 15, 2018. In addition, the Company continues to assess other high quality, value accretive royalty and development opportunities, and to identify opportunities to streamline Entrée’s joint venture interest or crystalize value ahead of production from the Entrée/Oyu Tolgoi JV Property. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:883)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) AMENDED SANDSTORM AGREEMENT On February 14, 2013, the Company entered into an Equity Participation and Funding Agreement with Sandstorm (the "2013 Agreement"). Pursuant to the 2013 Agreement, Sandstorm provided an upfront refundable deposit (the "Deposit") of $40 million to the Company. The Company will use future payments that it receives from its mineral property interests to purchase and deliver metal credits to Sandstorm, in amounts that are indexed to the Company’s share of gold, silver and copper production from the currently defined Entrée/Oyu Tolgoi JV Property. Upon the delivery of metal credits, Sandstorm will also make the cash payment outlined below. In addition, the 2013 Agreement provided for a partial refund of the Deposit and a pro rata reduction in the number of metal credits deliverable to Sandstorm in the event of a partial expropriation of Entrée’s economic interest, contractually or otherwise, in the Entrée/Oyu Tolgoi JV Property. On February 23, 2016, the Company and Sandstorm entered into an Agreement to Amend the 2013 Agreement, whereby the Company refunded 17% of the Deposit ($6.8 million) (the "Refund") in cash and shares thereby reducing the Deposit to $33.2 million for a 17% reduction in the metal credits that the Company is required to deliver to Sandstorm. At closing on March 1, 2016, the parties entered into an Amended and Restated Equity Participation and Funding Agreement (the "Amended Sandstorm Agreement"). Under the terms of the Amended Sandstorm Agreement, the Company will purchase and deliver gold, silver and copper credits equivalent to: (cid:120) (cid:120) 28.1% of Entrée’s share of gold and silver, and 2.1% of Entrée’s share of copper, produced from the Shivee Tolgoi mining licence (excluding the Shivee West Property); and 21.3% of Entrée’s share of gold and silver, and 2.1% of Entrée’s share of copper, produced from the Javhlant mining licence. Upon the delivery of metal credits, Sandstorm will make a cash payment to the Company equal to the lesser of the prevailing market price and $220 per ounce of gold, $5 per ounce of silver and $0.50 per pound of copper (subject to inflation adjustments). After 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 Entrée/Oyu Tolgoi JV Property (as currently defined) the cash payment will be increased to the lesser of the prevailing market price and $500 per ounce of gold, $10 per ounce of silver and $1.10 per pound of copper (subject to inflation adjustments). To the extent that the prevailing market price is greater than the amount of the cash payment, the difference between the two will be credited against the Deposit (the net amount of the Deposit being the "Unearned Balance"). This arrangement does not require the delivery of actual metal, and the Company may use revenue from any of its assets to purchase the requisite amount of metal credits. Under the Amended Sandstorm Agreement, Sandstorm has a right of first refusal, subject to certain exceptions, on future production-based funding agreements. The Amended Sandstorm Agreement also contains other customary terms and conditions, including representations, warranties, covenants and events of default. The initial term of the Amended Sandstorm Agreement is 50 years, subject to successive 10-year extensions at the discretion of Sandstorm. In addition, the Amended Sandstorm Agreement provides that the Company will not be required to make any further refund of the Deposit if Entrée’s economic interest is reduced by up to and including 17%. If there is a reduction of greater than 17% up to and including 34%, the Amended Sandstorm Agreement provides the Company with the ability to refund a corresponding portion of the Deposit in cash or common shares of the Company or any combination of the two at the Company’s election, in which case there would be a further corresponding reduction in deliverable metal credits. If the Company elects to refund Sandstorm with common shares of the Company, the value of each common share shall be equal to the volume weighted average price ("VWAP") for the five (5) trading days immediately preceding the 90th day after the reduction in Entrée’s economic interest. In no case will Sandstorm become a "control person" under the Amended Sandstorm Agreement. In the event an issuance of shares would cause Sandstorm to become a "control person", the maximum number of shares will be issued, and with respect to the value of the remaining shares, 50% will not be refunded (and there will not be a corresponding reduction in deliverable metal credits) and the remaining 50% will be refunded by the issuance of shares in tranches over time, such that the number of shares that Sandstorm holds does not reach or exceed 20%. All shares will be priced in the context of the market at the time they are issued. In the event of a full expropriation, the remainder of the Unearned Balance after the foregoing refunds must be returned in cash. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:884)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) The Amended Sandstorm Agreement does not impact Sandstorm's requirement to vote its shares as Entrée's Board specifies with respect to any potential acquisition of the Company, provided the potential acquirer agrees to execute and deliver to Sandstorm a deed of adherence to the Amended Sandstorm Agreement. For accounting purposes, the Deposit is accounted for as deferred revenue on the balance sheet and the original Deposit was recorded at the historical amount of C$40.0 million. As a result of the Amended Sandstorm Agreement, the deferred revenue amount was adjusted to reflect the $6.8 million Refund which was recorded at the foreign exchange amount at the date of the Refund resulting in a net balance of C$30.9 million. This amount is subject to foreign currency fluctuations upon conversion to US dollars at each reporting period. The $6.8 million Refund was paid with $5.5 million in cash and the issuance of $1.3 million of common shares of the Company. On March 1, 2016, the Company issued 5,128,604 common shares to Sandstorm at a price of C$0.3496 per common share pursuant to the Agreement to Amend. The price was calculated using the VWAP of Entrée's shares on the TSX for the 15 trading days preceding February 23, 2016, the effective date of the Agreement to Amend. As at December 31, 2017 Sandstorm owned 23,900,380 common shares, or 13.8% of the outstanding shares of the Company. OTHER DISCLOSURES Off-Balance Sheet Arrangements Entrée has no off-balance sheet arrangements except for the contractual obligation noted above. Financial Instruments The following table provides the fair value of each classification of financial instrument: Financial assets Cash and cash equivalents Receivables Reclamation deposits and other Total financial assets Financial liabilities Accounts payable and accrued liabilities Loans payable Total financial liabilities 2017 7,068 263 12 7,343 247 7,841 8,088 $ $ $ $ $ $ $ $ 2016 13,262 37 9 13,308 225 7,334 7,559 Fair value measurement is based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value which are: Level 1 — Quoted prices that are available in active markets for identical assets or liabilities. Level 2 — Quoted prices in active markets for similar assets that are observable. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. At December 31, 2017, the Company had Level 1 financial instruments, consisting of cash and cash equivalents, with a fair value of $7.1 million. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:885)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) INTERNATIONAL FINANCIAL REPORTING STANDARDS The Company is a "domestic" issuer under Canadian securities law and a "foreign private issuer" under United States Securities and Exchange Commission ("SEC") regulations. The Company files its financial statements with both Canadian and US securities regulators in accordance with US GAAP, as permitted under current regulations. In 2008, the Accounting Standards Board in Canada and the Canadian Securities Administrators ("CSA") confirmed that domestic issuers were required to transition to International Financial Reporting Standards ("IFRS") for fiscal years beginning on or after January 1, 2011. On September 27, 2008, the CSA Staff issued Staff Notice 52-321 "Early Adoption of International Financial Reporting Standards, Use of US GAAP and References to IFRS-IASB" which confirmed that domestic issuers that are also SEC registrants are able to continue to use US GAAP. Consequently, the Company was not required to convert to IFRS effective January 1, 2011 and has elected to continue using US GAAP. NON-US GAAP PERFORMANCE MEASUREMENT "Cash Costs" and all-in sustaining cost ("AISC") are non-US GAAP Performance Measurements. These performance measurements are included because these statistics are widely accepted as the standard of reporting cash costs of production in North America. These performance measurements do not have a meaning within US GAAP and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance measurements should not be considered in isolation as a substitute for measures of performance in accordance with US GAAP. CRITICAL ACCOUNTING ESTIMATES, RISKS AND UNCERTAINTIES The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Measurement of the Company’s assets and liabilities is subject to risks and uncertainties, including those related to reserve and resource estimates; title to mineral properties; future commodity prices; costs of future production; future costs of restoration provisions; changes in government legislation and regulations; future income tax amounts; the availability of financing; and various operational factors. Entrée is a mineral exploration company and is exposed to a number of risks and uncertainties; some of these risks and uncertainties have been discussed elsewhere in this MD&A. For a more extensive discussion of risks and uncertainties to which Entrée is exposed, the reader should refer to the section titled "Risk Factors" contained in the Company’s AIF available on SEDAR at www.sedar.com. Legal and Political Risk The Minerals Law of Mongolia defines a mineral deposit of strategic importance (a "Strategic Deposit") as a mineral resource that may have the potential to impact national security, or the economic and social development of the country, or that is generating or has the potential to generate more than 5% of Mongolia’s gross domestic product in any given year. The Minerals Law of Mongolia provides that the State may be an equity participant with any private legal entity, up to a 34% equity interest, in the exploitation of any Strategic Deposit where the quantity and grade of the deposit have been defined by exploration that has not been funded from the State budget. Under Resolution No 57 dated July 16, 2009 of the State Great Khural, the Oyu Tolgoi series of deposits were declared to be Strategic Deposits. On October 6, 2009, Turquoise Hill, its wholly-owned subsidiary OTLLC, and Rio Tinto signed an investment agreement (the "Oyu Tolgoi Investment Agreement") with the Mongolian Government, which regulates the relationship among the parties and stabilizes the long term tax, legal, fiscal, regulatory and operating environment to support the development of the Oyu Tolgoi project. The Oyu Tolgoi Investment Agreement specifies that the Government of Mongolia will own 34% of the shares of OTLLC (and by extension, 34% of OTLLC’s interest in the Entrée/Oyu Tolgoi JV Property) through its subsidiary Erdenes Oyu Tolgoi LLC. A shareholders’ agreement was concurrently executed to establish the Government’s 34% ownership interest in OTLLC and to govern the relationship among the parties. The Ministry of Mining has advised Entrée that it considers the deposits on the Entrée/Oyu Tolgoi JV Property to be part of the series of Oyu Tolgoi deposits. Entrée has been in discussions with stakeholders of the Oyu Tolgoi project, (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:886)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) including the Government of Mongolia, OTLLC, Erdenes Oyu Tolgoi LLC, Turquoise Hill and Rio Tinto, since February 2013. The discussions to date have focussed on issues arising from Entrée’s exclusion from the Oyu Tolgoi Investment Agreement, including the fact that the Government of Mongolia does not have a full 34% interest in the Entrée/Oyu Tolgoi JV Property; the fact that the mining licences integral to future underground operations are held by more than one corporate entity; and the fact that Entrée does not benefit from the stability that it would otherwise have if it were a party to the Oyu Tolgoi Investment Agreement. In order to receive the benefits of the Oyu Tolgoi Investment Agreement, the Government of Mongolia may require Entrée to agree to certain concessions, including with respect to the economic benefit of Entrée’s interest in the Entrée/Oyu Tolgoi JV Property, or the royalty rates applicable to Entrée’s share of the Entrée/Oyu Tolgoi JV Property mineralization. No agreements have been finalized. If the parties fail to reach mutually acceptable agreements in a timely manner, there is a risk that the Government of Mongolia may resort to measures which, whether legitimate or not, could have an adverse effect on the business, assets and financial condition of Entrée as well as the Company’s share price. Such measures could include suspending, revoking, cancelling or withdrawing the Shivee Tolgoi and Javhlant mining licences; attempting to invalidate, confiscate, expropriate or rescind the Entrée/Oyu Tolgoi JV or Entrée’s interest in the Entrée/Oyu Tolgoi JV Property; and filing legal proceedings against Entrée. Entrée is not presently a party to the Oyu Tolgoi Investment Agreement. Although OTLLC agreed under the terms of the October 2004 Equity Participation and Earn-In Agreement between Turquoise Hill and Entrée, as amended and subsequently assigned to OTLLC (the "Earn-In Agreement") to use its best efforts to cause Entrée to be brought within the ambit of, made subject to and be entitled to the benefits of the Oyu Tolgoi Investment Agreement or a separate stability agreement on substantially similar terms to the Oyu Tolgoi Investment Agreement, unless and until Entrée finalizes agreements with the Government of Mongolia and other Oyu Tolgoi stakeholders, there can be no assurance that Entrée will be entitled to all of the benefits of the Oyu Tolgoi Investment Agreement, including stability with respect to taxes payable. If Entrée is not entitled to all of the benefits of the Oyu Tolgoi Investment Agreement, it could be subject to the surtax royalty which came into effect in Mongolia on January 1, 2011. The rates of the surtax royalty vary from 1% to 5% for minerals other than copper. For copper, the surtax royalty rates range between 22% and 30% for ore, between 11% and 15% for concentrates, and between 1% and 5% for final products. No surtax royalty is charged on any minerals below a certain threshold market price, which varies depending on the type of minerals. This is in addition to the standard royalty rates of 2.5% for coal sold in Mongolia and commonly occurring minerals sold in Mongolia, and 5% for all other minerals. Even if Entrée does finalize agreements with the Government of Mongolia and other Oyu Tolgoi stakeholders, there can be no assurance that the present or future Parliament will refrain from enacting legislation that undermines such agreements or the Oyu Tolgoi Investment Agreement or that the present or a future government will refrain from adopting government policies or seeking to renegotiate the terms of such agreements or the Oyu Tolgoi Investment Agreement (which was threatened in both 2011 and 2012) in ways that are adverse to Entrée’s interests or that impair OTLLC’s ability to develop and operate the Oyu Tolgoi project on the basis currently contemplated, which may have a material adverse impact on Entrée and the Company’s share price. The Government of Mongolia has put in place a framework and environment for foreign direct investment. However, there are political constituencies within Mongolia that have espoused ideas that would not be regarded by the international mining community as conducive to foreign investment if they were to become law or official government policy. This was evidenced by revisions to the Minerals Law in 2006 as well as by the 2012 passage of legislation to control foreign direct investment in strategic sectors of the Mongolian economy, including mining. In October 2011, Prime Minister Batbold stated in his 2012 budget speech that the Government of Mongolia is revisiting all treaties for the avoidance of double taxation, including the 2002 convention between Canada and Mongolia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital (the "Canadian Double Tax Treaty"). On November 1, 2013, an Investment Law came into effect in Mongolia. The law is aimed at reviving foreign investment by easing restrictions on investors (including foreign and domestic) in key sectors such as mining and by providing greater certainty on the taxes they must pay and certain guarantees in relation to their investments in Mongolia. The full impact of the Investment Law is still not yet known. On January 16, 2014, the Mongolian Parliament adopted a new State Minerals Policy. The main focus of the policy is to establish a stable investment environment; improve the quality of mineral exploration, mining and processing; encourage the use of environmentally friendly and modern technology; and strengthen the competitiveness of the Mongolian mining sector on the international market. The State Minerals Policy is also intended to serve as the basis for amendments to the existing Minerals Law and other laws relating to the mining sector. On July 1, 2014, the Mongolian Parliament passed amendments to the Minerals Law (the "2014 Amendments"). In addition, the Mongolian (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:887)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Parliament also passed a separate law which repealed the 2010 statute which imposed a moratorium on the granting of new exploration licences and the transfer of existing licences. The 2014 Amendments extend the maximum period for an exploration licence from 9 years to 12 years (although it ended the three year pre-mining period sometimes given to licence holders upon the expiration of their exploration rights), extend the requirement for holders of mining licences to ensure that 90% of their workforce is comprised of Mongolian nationals to the mining licence holder’s subcontractors as well, make clearer the roles and responsibilities of government ministries and departments with respect to mineral matters, modify the definition of Strategic Deposit to reflect its impact on the national economy and not regional economy, and provide for some instances where a tender may not be required to obtain minerals licences where state funding has been used if related to compensation for declaring a special needs area, among other changes. On February 18, 2015, the Mongolian Parliament adopted a further amendment to the Minerals Law (the "2015 Amendment"), which permits a licence holder to negotiate with the Government of Mongolia with respect to an exchange of the Government’s 34% (50% in cases where exploration has been funded by the State budget) equity interest in a licence holder with a Strategic Deposit for an additional royalty payable to the Government. The amount of the royalty payment would vary depending on the particulars of the Strategic Deposit but cannot exceed five percent. The rate of this royalty payment shall be approved by the Government of Mongolia. The full impact of the 2015 Amendment is not yet known. The Ministry of Mining is currently working on a draft mining law, aimed at regulating the mining sector in greater detail in Mongolia. If adopted, the draft mining law could adversely affect Entree’s interests. It is not possible to determine when, if ever, this draft law will be adopted and in what form. The Ministry of Finance and certain Members of Parliament have released draft laws and draft amendments to the tax legislation of Mongolia which include provisions related to the taxation of foreign legal entities operating in Mongolia and minerals companies in general. If certain provisions of these amendments were adopted by Parliament as currently drafted, they could adversely affect Entree's interests. It is not possible to determine when, if ever, these amendments would be adopted and in what form. On December 9, 2017, the Parliament of Mongolia amended the General Tax Law, the Corporate Income Tax Law, the Personal Income Tax Law, the Minerals Law, the Land Law and the Legal Entities Registration, to introduce the concept of an "ultimate holder" of a legal entity for tax purposes (the "2017 Amendments"). Any change of an ultimate holder of a legal entity that maintains a minerals licence is deemed to be a sale of the minerals licence and is subject to a 30% corporate income tax on the total income earned. The legal entity holding the minerals licence bears the tax obligation, not the person who earns the income from the transaction. In general, taxable income will be assessed based on the value of the minerals licence, pro-rated to the number or percentage of shares transferred from the ultimate holder. On December 25, 2017, the Ministry of Finance passed Decree No. 380 setting out the methodology to determine the value of minerals licences. The full impact of the amendments is not yet known. If the Government of Mongolia revises, amends or cancels the Canadian Double Tax Treaty; if the Investment Law, State Minerals Policy, 2014 Amendments, 2015 Amendment, 2017 Amendments or new mining law are implemented or interpreted in a manner that is not favourable to foreign investment or Entrée’s interests; or if new tax laws or amendments to tax laws are adopted that are not favourable to foreign investment or Entrée’s interests, it could have an adverse effect on Entrée’s operations in Mongolia and future cash flow, earnings, results of operations and financial condition as well as the Company’s share price. While the Entrée/Oyu Tolgoi JV is operating under the terms of the Entrée/Oyu Tolgoi JVA, the Entrée/Oyu Tolgoi JVA has not been formally executed by the parties. There can be no assurance that OTLLC or its shareholders will not attempt to renegotiate some or all of the material terms governing the joint venture relationship in a manner which could have an adverse effect on Entrée’s future cash flow, earnings, results of operations and financial condition. OTLLC has earned either a 70% or 80% interest in mineralization extracted from the Entrée/Oyu Tolgoi JV Property, depending on the depth at which minerals are extracted, and has effective control of the Entrée/Oyu Tolgoi JV. Rio Tinto, which beneficially owns 17.5% of the Company’s issued and outstanding shares, exerts a significant degree of control over the business and affairs of Turquoise Hill and OTLLC. Pursuant to various agreements among Turquoise Hill, OTLLC and Rio Tinto, Rio Tinto is responsible for the management of the building and operation of the Oyu Tolgoi project (which includes the Heruga and Hugo North Extension deposits on the Entrée/Oyu Tolgoi JV Property); is responsible for all exploration operations on behalf of OTLLC, including exploration on the Entrée/Oyu Tolgoi JV Property; and prepares all programs and budgets for approval by the OTLLC board. The interest of Rio Tinto, Turquoise Hill and OTLLC and the interests of the Company’s other shareholders are not necessarily aligned and there can be no assurance that Rio Tinto, Turquoise Hill or OTLLC will exercise its rights or act in a manner that is consistent with the best interests of the Company’s other shareholders. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:888)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Entrée is and will be subject to the risks normally associated with the conduct of joint ventures, which include disagreements as to how to develop, operate and finance a project, inequality of bargaining power, incompatible strategic and economic objectives and possible litigation between the participants regarding joint venture matters. These matters may have an adverse effect on Entrée’s ability to realize the full economic benefits of its interest in the property that is the subject of a joint venture, which could affect its results of operations and financial condition as well as the Company’s share price. In the course of its business, Entrée may from time to time become involved in various claims, arbitration and other legal proceedings, with and without merit. The nature and results of any such proceedings cannot be predicted with certainty. Any potential future claims and proceedings are likely to be of a material nature. In addition, such claims, arbitration and other legal proceedings can be lengthy and involve the incurrence of substantial costs and resources by Entrée, and the outcome, and Entrée’s ability to enforce any ruling(s) obtained pursuant to such proceedings, are subject to inherent risk and uncertainty. The initiation, pursuit and/or outcome of any particular claim, arbitration or legal proceeding could have a material adverse effect on Entrée’s financial position and results of operations, and on Entrée’s business, assets and prospects. In addition, if Entrée is unable to resolve any existing or future potential disputes and proceedings favourably, or obtain enforcement of any favourable ruling, if any, that may be obtained pursuant to such proceedings, it is likely to have a material adverse impact on Entrée’s business, financial condition and results of operations and Entrée’s assets and prospects as well as the Company’s share price. On February 27, 2013, the Mineral Resources Authority of Mongolia ("MRAM") delivered notice to Entrée advising that any transfer, sale or lease of the Shivee Tolgoi and Javhlant mining licences is temporarily restricted. While Entrée was subsequently advised that the temporary transfer restriction on the joint venture mining licences would be lifted, it did not receive official notification of the lifting of the restriction. Any future action by the Government of Mongolia to suspend, revoke, withdraw or cancel the Shivee Tolgoi and Javhlant mining licences, whether legitimate or not, would have an adverse effect on the business, assets and financial condition of Entrée as well as the Company’s share price. The Earn-In Agreement requires OTLLC to enter into the Entrée/Oyu Tolgoi JVA, which bestows upon it certain powers and duties as manager of the Entrée/Oyu Tolgoi JV, including the duty to cure title defects, the duty to prosecute and defend all litigation or administrative proceedings arising out of operations, and the duty to do all acts reasonably necessary to maintain the Entrée/Oyu Tolgoi JV Property assets, including the mining licences. Pursuant to the Assignment Agreement dated March 1, 2005 between the Company, Turquoise Hill and OTLLC, the Company is also entitled to look to Turquoise Hill for the performance of OTLLC’s obligations under the Earn-In Agreement, which is governed by British Columbia law. In addition, the Shivee Tolgoi and Javhlant mining licences are included in the contract area of the Oyu Tolgoi Investment Agreement. The Oyu Tolgoi Investment Agreement restricts the grounds upon which the Mongolian State administrative authority in charge of geology and mining may revoke a mining licence covered by the Oyu Tolgoi Investment Agreement. The Oyu Tolgoi Investment Agreement also includes a dispute resolution clause that requires the parties to resolve disputes through international commercial arbitration procedures. Entrée is not a party to the Oyu Tolgoi Investment Agreement and does not have any direct rights under the Oyu Tolgoi Investment Agreement. In the event that the Government of Mongolia suspends, revokes, withdraws or cancels the Shivee Tolgoi and Javhlant mining licences, there can be no assurance that OTLLC, Turquoise Hill or Rio Tinto will invoke the international arbitration procedures, or that Entrée will be able to enforce the terms of the Entrée/Oyu Tolgoi JVA or Earn-In Agreement to cause OTLLC or Turquoise Hill to do all acts reasonably necessary to maintain the Entrée/Oyu Tolgoi JV Property assets, including by invoking the international arbitration procedures under the Oyu Tolgoi Investment Agreement. There may also be limitations on OTLLC, Turquoise Hill and Rio Tinto’s ability to enforce the terms of the Oyu Tolgoi Investment Agreement against the Government of Mongolia, which is a sovereign entity, regardless of the outcome of an arbitration proceeding. Without an effective means of enforcing the terms of the Entrée/Oyu Tolgoi JVA, the Earn-In Agreement or the Oyu Tolgoi Investment Agreement, Entrée could be deprived of substantial rights and benefits with little or no recourse for fair and reasonable compensation, which could have an adverse effect on the business, assets and financial condition of Entrée as well as the Company’s share price. In the event of a dispute arising at or in respect of Entrée’s foreign operations, Entrée may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada or other jurisdictions. Entrée may also be hindered or prevented from enforcing its rights with respect to a governmental entity or instrumentality because of the doctrine of sovereign immunity. Any adverse or arbitrary decision of a court, arbitrator or other governmental or regulatory body, or Entrée’s inability to enforce its contractual rights, may have a material adverse impact on Entrée’s business, assets, prospects, financial condition and results of operation as well as the Company’s share price. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:889)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) In June 2010, the Government of Mongolia passed Resolution 140, the purpose of which is to authorize the designation of certain land areas for "state special needs" within certain defined areas, some of which include or are in proximity to the Oyu Tolgoi project. These state special needs areas are to be used for Khanbogd village development and for infrastructure and plant facilities necessary in order to implement the development and operation of the Oyu Tolgoi project. A portion of the Shivee Tolgoi licence is included in the land area that is subject to Resolution 140. In June 2011, the Government of Mongolia passed Resolution 175, the purpose of which is to authorize the designation of certain land areas for "state special needs" within certain defined areas in proximity to the Oyu Tolgoi project. These state special needs areas are to be used for infrastructure facilities necessary in order to implement the development and construction of the Oyu Tolgoi project. Portions of the Shivee Tolgoi and Javhlant licences are included in the land area that is subject to Resolution 175. It is expected but not yet formally confirmed by the Government that to the extent that a consensual access agreement exists or is entered into between OTLLC and an affected licence holder, the application of Resolution 175 to the land area covered by the access agreement will be unnecessary. OTLLC has existing access and surface rights to the Entrée/Oyu Tolgoi JV Property pursuant to the Earn-In Agreement. If Entrée is unable to reach a consensual arrangement with OTLLC with respect to the Shivee West Property, or the Shivee West Property is not ultimately included in the Entrée/Oyu Tolgoi JV Property pursuant to the License Fees Agreement, Entrée’s right to use and access a corridor of land included in the state special needs areas for a proposed power line may be adversely affected by the application of Resolution 175. While the Mongolian Government would be responsible for compensating Entrée in accordance with the mandate of Resolution 175, the amount of such compensation is not presently quantifiable. While the Oyu Tolgoi Investment Agreement contains provisions restricting the circumstances under which the Shivee Tolgoi and Javhlant licences may be expropriated which may make the application of Resolution 140 and Resolution 175 to the Entrée/Oyu Tolgoi JV Property unnecessary, there can be no assurances that the Resolutions will not be applied in a manner that has an adverse impact on Entrée. In March 2014, the Government of Mongolia passed Resolution 81, the purpose of which is to approve the direction of the railway line heading from Ukhaa Khudag deposit located in the territory of Tsogttsetsii soum, Umnugobi aimag, to the port of Gashuunshukhait and to appoint the Minister of Roads and Transportation to develop a detailed engineering layout of the base structure of the railway. On September 18, 2014, Entrée was advised by MRAM that the base structure overlaps with a portion of the Javhlant licence. By Order No. 123 dated September 18, 2014, the Minister of Mining approved the composition of a working group to resolve matters related to the holders of licences through which the railway passes. The Minister of Mining has not yet responded to a request from Entrée to meet to discuss the proposed railway, and no further correspondence from MRAM or the Minister of Mining has been received. It is not yet clear whether the State has the legal right to take a portion of the Javhlant licence, with or without compensation, in order to implement a national railway project, and if it does, whether it will attempt to exercise that right. While the Oyu Tolgoi Investment Agreement contains provisions restricting the circumstances under which the Javhlant licence may be expropriated, there can be no assurances that Resolution 81 will not be applied in a manner that has an adverse impact on Entrée. Risks Associated with the Development of the Oyu Tolgoi Project Further development of the Oyu Tolgoi project depends upon OTLLC’s ability to obtain and service the funding requirements of the project. Volatility in capital markets and commodity prices and other macroeconomic factors may adversely affect OTLLC’s ability to secure project financing. In addition, OTLLC operates in a region of the world that is prone to economic and political upheaval and instability, which may make it more difficult to obtain sufficient debt financing from project lenders for future phases of the Oyu Tolgoi project. OTLLC’s estimates regarding the cost of development and operation of the Oyu Tolgoi project are estimates only. The estimates and the assumptions upon which they are based are subject to a variety of risks and uncertainties and other factors that could cause actual expenditures to differ materially from those estimated. If these estimates prove incorrect, the total capital expenditures required to complete development of the Oyu Tolgoi project underground mine, including Entrée’s share of Entrée/Oyu Tolgoi JV capital expenditures being debt financed by OTLLC,(cid:3)may increase, which may have a material adverse impact on Entrée, its results of operations, financial conditions, and the Company’s share price. There are a number of uncertainties inherent in the development and construction of any new or existing mine, including the Oyu Tolgoi project. These uncertainties include: the timing and cost, which can be considerable, of the construction of mining and processing facilities; the availability and cost of skilled labour, the impact of fluctuations in commodity prices, process water, power and transportation, including costs of transport for the supply chain for the Oyu Tolgoi (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:890)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) project, which requires routing approaches which have not been fully tested; the annual usage costs to the local province for sand, aggregate and water; the availability and cost of appropriate smelting and refining arrangements; and the need to obtain necessary environmental and other government permits, such permits being on reasonable terms, and the timing of those permits. The cost, timing and complexities of mine construction and development are increased by the remote location of the Oyu Tolgoi project. The Oyu Tolgoi Investment Agreement commits Turquoise Hill and Rio Tinto to perform many obligations in respect of the development and operation of the Oyu Tolgoi project. While performance of many of these obligations is within the effective control of Turquoise Hill and Rio Tinto, the scope of certain obligations may be open to interpretation. Further, the performance of other obligations may require co-operation from third parties or may be dependent upon circumstances that are not necessarily within the control of Turquoise Hill and Rio Tinto. Non-fulfillment of any obligation may result in a default or breach under the Oyu Tolgoi Investment Agreement. Such a default could result in a termination of the Oyu Tolgoi Investment Agreement, which may have a material adverse impact on Entrée and the Company’s share price. The Oyu Tolgoi Investment Agreement commits OTLLC to utilize only Mongolian power sources. Such sources of power may not be available or may be available upon commercial terms that are less advantageous than those available from other potential power suppliers. Despite Turquoise Hill and Rio Tinto’s best efforts, such an obligation is not necessarily within their control and non-fulfillment of such requirement may result in a default under the Oyu Tolgoi Investment Agreement. It is common in mining operations and in the development, construction or expansion of existing facilities to experience unexpected problems and delays during such activities, which may cause delays in the commencement or expansion of mineral production. Such delays could have unforeseen impacts on disclosed project economics. Accordingly, there is no assurance that the current or future development, construction or expansion activities will be successfully completed within cost estimates, on schedule or at all and, if completed, there is no assurance that such activities will result in profitable mining operations. Risks Associated with the Amended Sandstorm Agreement The 2013 Agreement provided for a partial refund of the Deposit and a pro rata reduction in the number of metal credits deliverable to Sandstorm in the event of a partial expropriation of Entrée’s economic interest, contractually or otherwise, in the Entrée/Oyu Tolgoi JV Property. The Amended Sandstorm Agreement provides that the Company will not be required to make any further refund of the Deposit if Entrée’s economic interest is reduced by up to and including 17%. If there is a reduction of greater than 17% up to and including 34%, the Amended Sandstorm Agreement provides the Company with greater flexibility and optionality in terms of how the Company will refund a corresponding portion of the Deposit. To the extent there is an expropriation of greater than 34%, which is not reversed during the abeyance period provided for in the Amended Sandstorm Agreement, the Company will be required to return a portion of the Deposit in cash (the amount of the repayment not to exceed the amount of the Unearned Balance). If an event of default occurs under the Amended Sandstorm Agreement, the Company may be required to immediately pay to Sandstorm a default fee, which it may not have sufficient funds to cover. Some potential events of default may be outside of Entrée’s control, including a full expropriation of Entrée’s economic interest, contractually or otherwise, in the Entrée/Oyu Tolgoi JV Property which is not reversed during the abeyance period provided for in the Amended Sandstorm Agreement. If an event of default occurs and the Company is required to pay a default fee to Sandstorm, it may have a material adverse impact on Entrée’s business, financial condition, assets and prospects, and on the Company’s share price. Under the Amended Sandstorm Agreement, the Company agreed to use future cash flows from its mineral property interests to purchase and deliver metal credits to Sandstorm. The Amended Sandstorm Agreement does not require the Company to deliver actual metal production, therefore the Company will have to use revenue it receives from the sale of its share of metal production to purchase the requisite amount of metal credits for delivery to Sandstorm. To the extent metal prices on the day on which the Company’s production is sold are different from metal prices on the day on which the Company purchases metal credits for delivery to Sandstorm, the Company may suffer a gain or loss on the difference. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:884)(cid:891)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) Risks Associated with Mining or Related to Entrée The estimates of reserves and resources, including the anticipated tonnages and grades that will be achieved or the indicated level of recovery that will be realized, are estimates only and no assurances can be given as to their accuracy. Such estimates are, in large part, based on interpretations of geological data obtained from drill holes and other sampling techniques. Actual mineralization or formations may be different from those predicted. Reserve and resource estimates are materially dependent on prevailing market prices and the cost of recovering and processing minerals at the mine site. Market fluctuations in the price of metals or increases in the costs to recover metals may render the mining of ore reserves uneconomical and materially adversely affect operations. Sandstorm’s beneficial shareholdings in the Company, totalling 13.8% of the Company’s outstanding shares, and Rio Tinto’s beneficial shareholdings in the Company, totalling 17.5% of the Company’s outstanding shares, potentially give Sandstorm and Rio Tinto the voting power to influence the policies, business and affairs of Entrée and the outcome of any significant corporate transaction or other matter, including a merger, business combination or a sale of all, or substantially all, of Entrée’s assets. In addition, Rio Tinto (on behalf of OTLLC) has operational control over the Entrée/Oyu Tolgoi JV Property. OTLLC and Sandstorm also have certain rights in the event of a proposed disposition by Entrée of its interest in the Entrée/Oyu Tolgoi JV and OTLLC has a right of first refusal with respect to any proposed disposition by Entrée of an interest in the Shivee West Property, which is not currently subject to the Entrée/Oyu Tolgoi JV. The share position in the Company of each of Sandstorm, Rio Tinto and Turquoise Hill may have the effect of delaying, deterring or preventing a transaction involving a change of control of the Company in favour of a third party that otherwise could result in a premium in the market price of the Company’s shares in the future. In the case of Sandstorm, the risk is mitigated to some extent by the requirement in the Amended Sandstorm Agreement for Sandstorm to vote its shares as the Board specifies with respect to any potential acquisition of the Company, provided the potential acquirer agrees to execute and deliver to Sandstorm a deed of adherence to the Amended Sandstorm Agreement. Entrée must comply with licence and permitting requirements. In Mongolia, the Shivee Tolgoi and Javhlant exploration licences were converted to mining licences on October 27, 2009. These licences now have a term of 30 years, with two potential extensions of 20 years each. The total estimated annual fees to maintain the licences in good standing, which are primarily the responsibility of OTLLC, is approximately $944,000. In Mongolia, Entrée and its partners must comply with environmental regulations that govern air and water quality and land disturbance and provide mine reclamation and closure costs. Entrée runs its business in different jurisdictions and strives to run its business in as tax efficient a manner as possible. The tax systems in certain of these jurisdictions are complicated and subject to change. For this reason, the possibility of future negative effects on the results of the Company due to changes in tax regulations cannot be excluded. Repatriation of earnings to Canada from other jurisdictions may be subject to withholding taxes. Entrée has no control over withholding tax rates. Certain of Entrée’s officers and directors may be or become associated with other natural resource companies that acquire interests in mineral properties. In addition, certain individuals also serve as directors or officers of Mason Resources and are subject to the Administrative Services Agreement between the Company and Mason Resources. Such associations may give rise to conflicts of interest from time to time. Entrée’s directors are required by law to act honestly and in good faith with a view to its best interests and to disclose any interest which they may have in any of its projects or opportunities. In general, if a conflict of interest arises at a meeting of a board of directors, any director in a conflict will disclose his or her interest and abstain from voting on such matter or, if he or she does vote, his or her vote does not count. DISCLOSURE CONTROLS AND PROCEDURES Management is responsible for establishing and maintaining disclosure controls and procedures, which provide reasonable assurance that material information relating to the Company and its subsidiaries is accumulated and communicated to management to allow timely decisions regarding required disclosure. Management has evaluated the effectiveness of its disclosure controls and procedures as of December 31, 2017 and believes its disclosure controls and procedures are effective. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:885)(cid:882)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only a reasonable and not absolute assurance that the objectives of the control system are met. Further, the design of a control system reflects the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any systems of controls is also based in part on certain assumptions about the likelihood of certain events, and there can be no assurance that any design can achieve its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for designing internal control over financial reporting, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Management evaluated the Company’s internal control over financial reporting at December 31, 2017 and concluded that it is effective and that no material weakness relating to design or operations exists. No change in the Company’s internal control over financial reporting occurred during the period beginning on October 1, 2017 and ended on December 31, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. FORWARD LOOKING STATEMENTS This MD&A contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking statements include, but are not limited to, statements with respect to corporate strategies and plans; requirements for additional capital; uses of funds; the value and potential value of assets and the ability of the Company to maximize returns to shareholders; potential types of mining operations; construction and continued development of the Oyu Tolgoi underground mine; the expected timing of first development production from Lift 1 of the Entrée/Oyu Tolgoi JV Property; anticipated future production and mine life; the future prices of copper, gold, molybdenum and silver; the estimation of mineral reserves and resources; the realization of mineral reserve and resource estimates; projected mining and process recovery rates; anticipated future production, capital and operating costs, cash flows and mine life; capital, financing and project development risk; mining dilution; closure costs and requirements; discussions with the Government of Mongolia, Rio Tinto, OTLLC and Turquoise Hill on a range of issues including Entrée’s interest in the Entrée/Oyu Tolgoi JV Property, the Shivee Tolgoi and Javhlant mining licences and certain material agreements; potential actions by the Government of Mongolia with respect to the Shivee Tolgoi and Javhlant mining licences and Entrée’s interest in the Entrée/Oyu Tolgoi JV Property; the potential for Entrée to be included in or otherwise receive the benefits of the Oyu Tolgoi Investment Agreement or another similar agreement; the potential for the Government of Mongolia to seek to directly or indirectly invest in Entrée’s interest in the Hugo North Extension and Heruga deposits; the potential application of the Government of Mongolia’s Resolution 81, Resolution 140 and Resolution 175 to the Shivee Tolgoi and Javhlant licences; potential size of a mineralized zone; potential expansion of mineralization; potential discovery of new mineralized zones; potential metallurgical recoveries and grades; plans for future exploration and/or development programs and budgets; permitting time lines; anticipated business activities; proposed acquisitions and dispositions of assets; and future financial performance. In certain cases, forward-looking statements and information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budgeted", "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", "will be taken", "occur" or "be achieved". While the Company 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 Entrée’s future performance and are based on numerous assumptions regarding present and future business strategies, local and global economic conditions, legal proceedings (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:885)(cid:883)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) and negotiations and the environment in which Entrée will operate in the future, including the price of copper, gold and silver, and the status of Entrée’s relationship and interaction with the Government of Mongolia, OTLLC, Rio Tinto and Turquoise Hill. With respect to the construction and continued development of the Oyu Tolgoi underground mine, important risks, uncertainties and factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements and information include, amongst others, the timing and cost of the construction and expansion of mining and processing facilities; the timing and availability of a long term power source for the Oyu Tolgoi underground mine; the ability of OTLLC to draw down on the supplemental debt under the Oyu Tolgoi project finance facility and the availability of additional financing on terms reasonably acceptable to OTLLC, Turquoise Hill and Rio Tinto to further develop Oyu Tolgoi; delays, and the costs which would result from delays, in the development of the underground mine; projected copper, gold and silver prices and demand; and production estimates and the anticipated yearly production of copper, gold and silver at the Oyu Tolgoi underground mine. The 2018 PEA is based on a conceptual mine plan that includes Inferred resources. Numerous assumptions were made in the preparation of the 2018 PEA, including with respect to mineability, capital and operating costs, production schedules, the timing of construction and expansion of mining and processing facilities, and recoveries, that may change materially once production commences at Hugo North Extension Lift 1 and additional development and capital decisions are required. Any changes to the assumptions underlying the 2018 PEA could cause actual results to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements and information relating to the 2018 PEA. Other uncertainties and factors which could cause actual results to differ materially from future results expressed or implied by forward-looking statements and information include, amongst others, unanticipated costs, expenses or liabilities; discrepancies between actual and estimated production, mineral reserves and resources and metallurgical recoveries; the size, grade and continuity of deposits not being interpreted correctly from exploration results; fluctuations in commodity prices and demand; changing foreign exchange rates; actions by Rio Tinto, Turquoise Hill or OTLLC and by government authorities including the Government of Mongolia; the availability of funding on reasonable terms; the impact of changes in interpretation to or changes in enforcement of laws, regulations and government practices, including laws, regulations and government practices with respect to mining, foreign investment, royalties and taxation; the terms and timing of obtaining necessary environmental and other government approvals, consents and permits; the availability and cost of necessary items such as water, skilled labour, transportation and appropriate smelting and refining arrangements; unanticipated reclamation expenses; geotechnical or hydrogeological considerations during mining being different from what was assumed; changes to assumptions as to the availability of electrical power, and the power rates used in operating cost estimates and financial analyses; changes to assumptions as to salvage values; ability to maintain the social licence to operate; 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, performance or achievements of Entrée to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements and information. Such factors include, among others, risks related to international operations, including legal and political risk in Mongolia; risks associated with changes in the attitudes of governments to foreign investment; risks associated with the conduct of joint ventures; discrepancies between actual and anticipated production, mineral reserves and resources and metallurgical recoveries; global financial conditions; changes in project parameters as plans continue to be refined; 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; 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 completion of development or construction activities; environmental risks; title disputes; limitations on insurance coverage; as well as those factors discussed in the section entitled "Critical Accounting Estimates, Risks and Uncertainties" in this MD&A and in the section entitled "Risk Factors" in the AIF. 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. Except as required under applicable securities legislation, the Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:885)(cid:884)(cid:3) Q4 2017 MD&A (table amounts expressed in thousands of US Dollars, except per share amounts and where otherwise noted) TECHNICAL INFORMATION Robert Cinits, P.Geo., Entrée’s Vice-President, Corporate Development and a Qualified Person ("QP") as defined by NI 43-101, has approved the technical disclosure in this MD&A. Cautionary Note to United States Investors - Canadian Disclosure Standards in Mineral Resources and Mineral Reserves The terms "mineral reserve", "Proven mineral reserve" and "Probable mineral reserve" are Canadian mining terms as defined in accordance with NI 43-101 under the guidelines set out in the CIM Definition Standards - For Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014, as may be amended from time to time by the CIM. The definitions of Proven and Probable reserves used in NI 43-101 differ from the definitions in the SEC Industry Guide 7. Under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility study is required to report reserves, the three year history average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. In addition, the terms "mineral resource", "Measured mineral resource", "Indicated mineral resource" and "Inferred mineral resource" are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and normally are not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that all or any part of mineral deposits in these categories will ever be converted into reserves. "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred mineral resources may not form the basis of feasibility or prefeasibility studies, except in rare cases. Accordingly, information contained in this MD&A containing descriptions of our mineral deposits may not be comparable to similar information made public by US companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder. (cid:3) (cid:19)(cid:131)(cid:137)(cid:135)(cid:3)(cid:885)(cid:885)(cid:3) Exhibit 99.4 CERTIFICATION I, Stephen Scott, certify that: 1 I have reviewed this annual report on Form 40-F of Entrée Resources Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; 4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-5(f) for the issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal 5. control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. Date: March 9, 2018 By: /S/Stephen Scott Stephen Scott Chief Executive Officer (Principal Executive Officer) Exhibit 99.5 CERTIFICATION I, Duane Lo, certify that: 1 I have reviewed this annual report on Form 40-F of Entrée Resources Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; 4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-5(f) for the issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal 5. control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. Date: March 9, 2018 By: /S/Duane Lo Duane Lo Chief Financial Officer (Principal Financial and Accounting Officer) Exhibit 99.6 CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of Entrée Resources Ltd. (the “Company”) on Form 40-F for the period ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen Scott, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company. March 9, 2018 /S/Stephen Scott Stephen Scott Chief Executive Officer (Principal Executive Officer) A signed original of this written statement required by Section 906 has been provided to Entrée Resources Ltd. and will be retained by Entrée Resources Ltd. and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 99.7 In connection with the annual report of Entrée Resources Ltd. (the “Company”) on Form 40-F for the period ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Duane Lo, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company. March 9, 2018 /S/Duane Lo Duane Lo Chief Financial Officer (Principal Financial and Accounting Officer) A signed original of this written statement required by Section 906 has been provided to Entrée Resources Ltd. and will be retained by Entrée Resources Ltd. and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 99.8 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the inclusion in Entrée Resources Ltd.’s (formerly Entrée Gold Inc.) Annual Report on Form 40-F for the year ended December 31, 2017 of our report dated March 8, 2018, relating to the consolidated financial statements, which appear in the Annual Report. Vancouver, Canada March 8, 2018 “DAVIDSON & COMPANY LLP” Chartered Professional Accountants Exhibit 99.9 CONSENT OF EXPERT FILED BY EDGAR March 9, 2018 United States Securities and Exchange Commission Re: Entrée Resources Ltd. – Form 40-F We refer to the report entitled “Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report” (the “Report”) with an effective date of 15 January 2018 as referenced in the Annual Report on Form 40-F dated March 9, 2018 for the year ended December 31, 2017 (the “Form 40-F”) of Entrée Resources Ltd. (the “Company”), which is to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. This letter is being filed as our consent to the use of our name and the Report, and summaries thereof (the “Summary Material”) in the Form 40-F, the Company’s Management Discussion and Analysis for the year ended December 31, 2017 and in the Company’s Annual Information Form for the year ended December 31, 2017 and any amendments thereto. We hereby consent to the incorporation by reference in the Company’s Registration Statements on Form S-8 (Nos. 333-127062 and 333-182891) of the Summary Material concerning the Report and the reference to our name as set forth above in the Form 40-F. Yours truly, AMEC FOSTER WHEELER AMERICAS LIMITED /S/Kris Homer Name: Kris Homer Title: Operations Director Exhibit 99.10 CONSENT OF EXPERT FILED BY EDGAR March 9, 2018 United States Securities and Exchange Commission Re: Entrée Resources Ltd. – Form 40-F I refer to the report entitled “Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report” (the “Report”) with an effective date of 15 January 2018 as referenced in the Annual Report on Form 40-F dated March 9, 2018 for the year ended December 31, 2017 (the “Form 40-F”) of Entrée Resources Ltd. (the “Company”), which is to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. This letter is being filed as my consent to the use of my name and the Report, and summaries thereof (the “Summary Material”), in the Form 40-F, the Company’s Management Discussion and Analysis for the year ended December 31, 2017 and in the Company’s Annual Information Form for the year ended December 31, 2017 and any amendments thereto. I hereby consent to the incorporation by reference in the Company's Registration Statements on Form S-8 (Nos. 333-127062 and 333-182891) of the Summary Material concerning the Report and the reference to my name as set forth above in the Form 40-F. Yours truly, /S/Ian Loomis Dr. Ian Loomis, P.E. Exhibit 99.11 CONSENT OF EXPERT FILED BY EDGAR March 9, 2018 United States Securities and Exchange Commission Re: Entrée Resources Ltd. – Form 40-F I refer to the report entitled “Entrée/Oyu Tolgoi Joint Venture Project, Mongolia, NI 43-101 Technical Report” (the “Report”) with an effective date of 15 January 2018 as referenced in the Annual Report on Form 40-F dated March 9, 2018 for the year ended December 31, 2017 (the “Form 40-F”) of Entrée Resources Ltd. (the “Company”), which is to be filed with the United States Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. This letter is being filed as my consent to the use of my name and the Report, and summaries thereof (the “Summary Material”), in the Form 40-F, the Company’s Management Discussion and Analysis for the year ended December 31, 2017 and in the Company’s Annual Information Form for the year ended December 31, 2017 and any amendments thereto. I hereby consent to the incorporation by reference in the Company's Registration Statements on Form S-8 (Nos. 333-127062 and 333-182891) of the Summary Material concerning the Report and the reference to my name as set forth above in the Form 40-F. Yours truly, /S/Peter Oshust Peter Oshust, P.Geo. Exhibit 99.12 CONSENT OF EXPERT FILED BY EDGAR March 9, 2018 United States Securities and Exchange Commission Re: Entrée Resources Ltd. – Form 40-F I refer to scientific and technical information developed by Entrée Resources Ltd. (the “Company”), which I approved, or the preparation of which I supervised, in my capacity as a “qualified person” as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects, that is referenced in the Annual Report on Form 40-F dated March 9, 2018 for the year ended December 31, 2017 (the “Form 40-F”) (the “Technical Information”). This letter is being filed as my consent to the use of my name and the Technical Information, and summaries thereof (the “Summary Material”), in the Form 40-F, the Company’s Management Discussion and Analysis for the year ended December 31, 2017 and in the Company’s Annual Information Form for the year ended December 31, 2017 and any amendments thereto. I hereby consent to the incorporation by reference in the Company's Registration Statements on Form S-8 (Nos. 333-127062 and 333-182891) of the Summary Material concerning the Technical Information and the reference to my name as set forth above in the Form 40-F. Yours truly, /S/Robert Cinits Robert Cinits, P.Geo. Entrée Resources Ltd. Vice President, Corporate Development 

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