Entree Gold Inc.

Entree Gold Inc.

June 20, 2005 10:30 ET

Rio Tinto to Acquire Initial 9.9% of Entree

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - June 20, 2005) - Entree Gold Inc. (TSX VENTURE:ETG) ("Entree" or the "Company") announces that it has entered into an agreement with a subsidiary of Rio Tinto plc (NYSE:RTP)(LSE:RIO.L) (collectively, "Rio Tinto") under which Rio Tinto will acquire an initial 9.9% equity position in Entree, with the right to increase that position to 19.8% of Entree's issued common shares.

Greg Crowe, Entree's President and CEO commented, "We are delighted to have Rio Tinto as a strategic partner. This placement not only provides Entree with funding it will need to pursue its wholly-owned projects in Mongolia, it also establishes a new relationship with one of the world's mining giants. We look forward to the mutually beneficial exploration and development of our Mongolian projects."

Tim Moody, Exploration Director - Rio Tinto Mining & Exploration, commented, "Rio Tinto is very pleased with its investment in Entree and with the prospectivity of the Entree property portfolio".


In total, Entree will sell to Rio Tinto's wholly owned subsidiary, Kennecott Canada Exploration Inc. ("Kennecott"), up to 6,306,921 units, at a price of CDN$2.20 each. Each unit consists of one common share and two share purchase warrants (an "A Warrant" and a "B Warrant"). Two A Warrants may be exercised to purchase one additional Entree common share at a price of $2.75 for two years, and two B Warrants may be exercised to purchase one additional Entree common share at a price of $3.00 for two years.

The financing is expected to close in two tranches, the first of which will be the placement to Kennecott of 5,665,730 units, for gross proceeds of CDN$12,464,606. The second tranche will consist of placements to Ivanhoe Mines Ltd. (NYSE:IVN)(TSX:IVN) ("Ivanhoe"), should it elect to exercise its right, under its Equity Participation and Earn-In Agreement with Entree, to maintain its existing percentage ownership of Entree common shares, and to Kennecott to allow it to maintain its 9.9% ownership of Entree's common shares, after any such purchase by Ivanhoe. Based on Entree's current understanding of Ivanhoe's securities holdings in Entree, this could result in the issuance by Entree, in the second tranche, of up to 1,235,489 units to Ivanhoe and up to an additional 641,191 units to Kenecott, for additional gross proceeds to Entree of up to CDN$4,128,696.


Entree's agreement includes provisions pursuant to which Rio Tinto will be entitled to maintain its proportional equity interest in future financings by Entree and will vote its shares in support of certain matters at meetings of Entree shareholders.

In addition, Entree has agreed to give Rio Tinto a right of first refusal on its 100% owned Ulziit Uul property, in southern Mongolia. Ulziit Uul is located approximately 120 km from Entree's Lookout Hill property and is adjacent to Ivanhoe's Kharmagtai property. Entree is currently exploring the property to establish copper/gold drill targets and expects to commence drilling in August.

The proceeds of the private placement will be used to fund drilling and other exploration work on Entree's Mongolian projects and to provide working capital. A finder's fee will be paid by Entree on units purchased by Kennecott. The private placement is subject to securities regulatory approval.


Entree Gold Inc. (www.entreegold.com) is an exploration stage junior resource company engaged in the exploration of gold and copper prospects. The Company is a large landholder in Mongolia's south Gobi Desert, near the Chinese border. Entree maintains 100% royalty-free interest in the 179,590 hectare Lookout Hill (Shivee Tolgoi) property which completely surrounds Ivanhoe's 8,500 hectare Turquoise Hill (Oyu Tolgoi) holdings. Ivanhoe has an earn-in agreement with Entree whereby Ivanhoe can earn up to an 80% interest in a project area covering approximately 22% (approximately 40,000 hectares) of Entree's Lookout Hill property by spending US$35 million on the project and financing Entree's subsequent share of project expenditures. The Company is a Tier 1 listed company that trades on the TSX Venture Exchange under the symbol "ETG".

This news release contains forward-looking statements. Forward-looking statements are statements which relate to future events. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Readers are referred to the sections entitled "Risk Factors" in the Company's periodic filings with the British Columbia Securities Commission, which can be viewed at www.SEDAR.com, and with the United States Securities and Exchange Commission, which can be viewed at www.SEC.gov.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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