Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944

Entree Gold - September 2009

September 3, 2009




2009 price range:

$0.39 - 2.48

Entree Gold Profile

Entree Gold hopes to serve up a heaping helping of gold. The company explores and develops gold and copper prospects in China, Mongolia, and the US. Its primary exploration projects are the Lookout Hill and Manlai properties, both located in Mongolia's Gobi Desert. Entree Gold has an agreement with Ivanhoe Mines to help develop the Lookout Hill project. It is exploring copper projects in both the US and China. None of the company's projects are in production.


What we have to keep in mind is that in three year's time, if the $110M is left intact, Entree will have a cash flow coming out of Mongolia of $50M.

That is where the merchant banking concept will come in. If current management in three years' time is capable of making a contribution to mining in the Far East, and in America, in five year's time it will have $200M cash in hand -- a price of $3.50 is justified.

By 2015, with over $250M and a possible gold price of $1,200 per ounce, the value will increase to $5.00 per share.

Key Executives

Gregory G. Crowe


Michael Howard

8,400 tons

Hamish Malkin


Lindsay Richard Bottomer

Director/Vice President, Divisional

James L. Harris

Director/Chairman of the Board

Peter G. Meredith


Ownership Interest

Large block holder Type




Mutual Fund


Other Major


Key Current and Future Transactions

Shares outstanding





Average exercise price: $2.00
Cash: $20,000,000

Other Major


Exercise price: $3.00
Cash: $30,000,000

Current (Net) cash position

$60,000,000 + $50.0M = $110.M

Fully-diluted shares


Cash: $1.00 per share

Accordingly, EGI has a potential:


$1.00 per share

Current price:






Fully-diluted share price of $1.10



$115M market value

represents the total market value of EGI's mining interest, including the

8% of Oyu Tolgoi in Mongolia.

Oyu Tolgoi is reported to be the world's largest gold/copper mine.


Investment by Rio Tinto in Entree Gold Inc.

At June 30, 2008, Ivanhoe Mines owned approximately 14.7% of Entree's issued and outstanding shares.

At June 30, 2008, Rio Tinto owned approximately 15.9% of Entree's issued and outstanding shares.

Investment by Rio Tinto in Ivanhoe Mines Ltd.

In October 2006, Rio Tinto announced that it had agreed to invest up to $1.5 billion to acquire up to a 33.35% interest in Ivanhoe Mines. The proceeds from this investment were targeted to fund the joint development of the Oyu Tolgoi copper-gold project. An initial tranche of $303 million was granted to acquire 9.95% of Ivanhoe Mines' shares. It was further announced on September 12, 2007 that Rio Tinto will provide Ivanhoe Mines with a convertible credit facility of $350 million for interim financing for the Oyu Tolgoi copper-gold project in Mongolia. The credit facility is directed at maintaining the momentum of mine development activities at Oyu Tolgoi while Ivanhoe Mines and Rio Tinto continue to engage in finalizing an Investment Agreement between Ivanhoe Mines and the government of Mongolia. If converted, this investment could result in Rio Tinto's owning 46.65% of Ivanhoe Mines." Entree believes these investments represent, together with the investments in Entree made by both companies, a major vote of confidence by one of the world's pre-eminent mining companies in both the Oyu Tolgoi project and in the country of Mongolia.

Top 10 Institutional Holders



Caisse de Depot et Placement du Quebec


Front Street Capital, Inc.


Royce & Assoc. LLC


CPP Investment Board


RBC Asset Management


U.S. Global Investors Inc.


GAMCO Investors Inc.


Evergreen Investment Management Co. LLC


Norges Bank


Top 10 Other Holders



Rio Tinto PLC


Ivanhoe Mines Ltd.


Crowe, Gregory


Bailey, Mark


Harris, James L.


Bottomer, Lindsay Richard


Howard, Michael


Entree Gold:
A Premium Gold and Copper Exploration Company

The commodities market for gold and base metals has seen massive growth since 2002. As the world economy rebuilds in the coming months, China and India are expected to lead the way. Investors who are positioned to take advantage of this growth could see a substantial increase in the value of their investments.

As a well-managed and well-financed company, Entree Gold Inc. is ideally positioned to profit from the growing need for gold and base metals in Asia. The ongoing building and urbanization projects taking place in these countries need the minerals - gold, copper, molybdenum, and coal - currently being located by Entree Gold's skilled team of geologists.

Established Strategic Partnerships and Treasury

To advance the company's interests, Entree Gold's management team has selectively created partnerships with Ivanhoe and Rio Tinto, two well-respected mining companies. These arrangements have lead to a treasury of $50 million and no corporate debt.

Largest Gold and Copper Deposits on the Globe

Entree Gold holds an enviable portfolio of gold, copper, and coal exploration projects in Asia and North America, which include early-stage technical analysis and advanced exploration.

Most notably, near the Chinese border in Mongolia, Entree Gold holds the strategically placed Lookout Hill Property which comprises 179,590-hectares. Lookout Hill completely surrounds the Oyu Tolgoi project of Ivanhoe Mines. This site hosts the Hugo Dummett copper-gold deposit, the richest copper-gold porphyry deposit ever discovered. The Lookout Hill property contains two known deposits: the extension of Hugo North and the newly discovered Heruga Deposit. To the northeast of Hugo Dummett deposit, initial drill results show multi-meter thick coal-bearing seams.

Access to China – Promising Sites in the USA

In China, Entree's Gold newly formed company operates as a 100% legal entity. This gives Entree access to vast under-explored areas of China. In the south-western United States, Entree has assembled a portfolio of promising early-stage projects in mineral-rich sections of Arizona and New Mexico, including the recent discovery of porphyry-style mineralization near Lordsburg, NEW MEXICO.

     * Over $60 million cash in reserve and no corporate debt
     * Skilled management team focused on targeted development
     * 20% share in one of the world's richest gold and copper deposits (Hugo North)
     * 20% of one of the world's largest gold, copper, and molybdenum deposits        (Heruga)
     * 100% of promising new coal discovery (Nomkhon Bohr)



This is not the space to discuss in detail the Mongolian Oyu Tolgoi. However, the following features are noted:

  1. The decision was made by the Mongolian government to approve the contract of Ivanhoe and sign it two weeks from September 2, 2009.

  2. We simply state, based on public sources, that approximately 8% of the Ivanhoe Concession (Oyu Tolgoi) belongs to Entree Gold.

  3. The Ivanhoe Concession is valued at least at $4 billion and is estimated to produce 340,000 ounces of gold per annum, which at the current price of near $1,000 is equivalent to $340,000 per annum. Simultaneously, at least 6,200,000 pounds of copper will be delivered annually.

  4. The Ivanhoe agreement is based on the assumption that the above deliveries would last for at least 35 years. (Annual deliveries are, at least, $1.0B.)

  5. The Ivanhoe Concession is the largest gold and copper mine in the world. 



per share

Less 34% belongs to Mongolia









Discounted value for 35 years

$250M +


Higher prices




Entree has the best gold delivery results and as such it is a strong possibility that Entree's mining deliveries would be the first.


  1. If we assume that Ivanhoe on the stock market is valued at $4.15B, the 8% value of Ivanhoe is approximately $350M.

  2. Built on the valuation of $350M, a valuation which can eventually go much higher, the 115M shares would justify a price of $1.50 per share.

  3. If we add the other $110M cash, which we calculated from current and future sources, we would pick up an additional $1.00 per share, making Entree worth at least $2.50.

  4. Entree has further assets. It is probably one of the most imaginative corporate structures ever put together from Vancouver.

  5. With 94.5 million shares outstanding, the company structure, through options and warrants, the infusion of an additional $50M which, when added to the current $60M cash holdings, amounts to $110M, fulled diluted at $1.00 per share.

  6. Very few exploration companies, as Entree is today, have put together such a cash hold and kept itself open to at least five other mining projects and kept its hand in the giant Ivanhoe Concession in Mongolia.

  7. Furthermore, the company has a circle of directors and officers that could make a multi-billion dollar company envious. The board consists of Mr. Peter Meredith, Director of Ivanhoe, Michael Howard, QC, former head of the Conservative Party in the U.K., and a management team with excellent operating mining capabilities.

  8. With the ownership of 15%, both by Rio and Ivanhoe, the company is well positioned for future growth.

What we have to keep in mind is that in three year's time, if the $110M is left intact, Entree will have a cash flow coming out of Mongolia of $50M.

That is where the merchant banking concept will come in. If current management in three years' time is capable of making a contribution to mining in the Far East, and in America, in five year's time it will have $200M cash in hand -- a price of $3.50 is justified.

By 2015, with over $250M and a possible gold price of $1,200 per ounce, the value will increase to $5.00 per share.


Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.



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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail:

Copyright © 2011 Andrew Racz. All Rights Reserved.