From: Biniam Haile \(SWE\) (eritrea.lave@comhem.se)
Date: Sun Sep 20 2009 - 18:25:23 EDT
Agoracom: Small Cap Investment
Sunridge Gold - A Giant Helps It Take Several Steps Up The Corporate
Ladder.
Posted by Peter Grandich at 6:09 AM on Tuesday, September 8th, 2009
Intro
Sunridge Gold announced a blockbuster deal with global copper producer
Antofagasta Minerals S.A. that IMHO can change the landscape of the
mining industry in Eritrea. The strategic alliance should enable
Sunridge to aggressively explore the 585 square kilometer property that
obviously Antofagasta believes has enormous potential. The agreement
also allows Sunridge to continue developing the 4 known deposits that
they already have in Eritrea.
More importantly though, a major global mining producer entering Eritrea
for the first time is a major stamp of approval on both Sunridge and the
country, and should help position Eritrea as the next mining hot spot in
the world.
In working towards this deal, Antofagasta conducted extensive due
diligence studies. This work included an in-depth study of the technical
merits and geology, and also the geopolitical situation in Eritrea.
Antofagasta management visited Eritrea and met with all levels of
government. Their geologists did an extensive investigation into the
geology by visiting the field and reviewing all technical data available
on the project. They share Sunridge's belief that the project could
potentially host several large base metal and gold deposits, perhaps
even larger than Sunridge's Emba Derho deposit.
Sunridge will now have approximately $10 million in the treasury and
further commitments from Antofagasta to fund an additional $10 million
over the next 5 years.
Watch for news on this in the near future.
In my discussions with Sunridge management, they tell me that a news
release outlining plans to drill on the Development Areas which they
retain 100% should be forthcoming. This should include plans on the
Debarwa deposit, which hosts extremely high copper grades and Sunridge
geos feel can greatly be expanded.
Once the final agreement with Antofagasta is signed, exploration work
should focus on 2 fronts:
1 - Drilling the new high priority targets on the Exploration Areas
under the agreement, and
2 - Drilling on the Development Areas owned 100% by Sunridge.
Antofagasta
Antofagasta plc is listed on the London Stock Exchange and is a
constituent of the FTSE-100 index. Its Chilean mining operations, which
comprise Los Pelambres, El Tesoro and Michilla, are expected to produce
approximately 447,000 tonnes of copper in concentrate and cathode and
7,200 tonnes of molybdenum in concentrate in 2009. It is currently
carrying out a Brownfield expansion at Los Pelambres and developing the
greenfield Esperanza project in Chile, which, when operational, are
expected to increase total Group copper production to nearly 700,000
tonnes per year from 2011. Antofagasta also has exploration or
feasibility programs in Chile, Pakistan, Zambia and Mexico. At 30 June
2009, Antofagasta plc had net cash of US$1.8 billion and it currently
has a market capitalization of US$11.3 billion.
The Agreement
By funding US$10 million of exploration work over a 5-year period,
Antofagasta can earn a 60% interest in a portion of the Sunridge's
Asmama project known as the Exploration Areas. They will have a right to
complete a feasibility study on any project in the exploration areas to
earn another 15%. Antofagasta will also purchase common shares of
Sunridge in a non-brokered private placement for proceeds of US$5
million.
Antofagasta will become Sunridge's largest shareholder owning an
approximate 18% interest in Sunridge. Sunridge will retain 100%
ownership of the 4 deposits discovered to date on the property.
Exploration Area
The deal will allow Sunridge to aggressively drill the numerous high
priority drill targets located on the Asmara Project. This area appears
to host some of the best potential in the world for VMS gold-base metals
targets.
These high priority drill targets have been identified over the past
several years through geological mapping and sampling as well as various
geophysical methods. The targets typically have strong gravity
anomalies, strong EM anomalies, strong soil geochemical anomalies, and
to top it off they have gossanous rock poking out at surface. These are
the same methods used by Sunridge in the discovery of their large Emba
Derho copper-zinc-gold deposit, as well as Nevsun's Bisha Project.
The new targets of particular interest are Dario Paulus, Kodadu, Adi
Rassi, Adi Musa and Adi Lamza and we can watch for these names in the
upcoming months as Sunridge begins an their drill program.
Development Areas
Sunridge has had great success with its' drill programs over the last 5
years and has already defined 4 deposits on the Asmara Project,
including the large Emba Derho deposit where a recent Preliminary
Economic Assessment (Scoping) Study showed it to have a NPV of over
US$200 million. Sunridge will retain 100% ownership of the deposits in
the Development Areas. These four deposits contain "indicated 43-101"
resources totaling:
.1.28 billion pounds. of copper,
.2.5 billion pounds of zinc,
.955,000 ounces of gold, and
.31.2 million ounces of silver
The four deposits defined by Sunridge in the Development Area to date
are described below:
Emba Derho
.NI 43-101 "Indicated" resource - Approx 62.5 m/tonnes containing 990 m
lbs Cu, 1.9 billion lbs Zn, 580,000 ozs Au & 20.8 m/ozs Ag.
.Positive Independent Preliminary Economic Assessment (Scoping) Study
completed June 4, 2009 by Wardrop Engineering Inc shows:
.Pre-tax NPV 0f US$203.9 million with 10% discount
.Base case IRR of 21.6% with 4 year payback
.Potential large open pit mine.
.Emba Derho deposit remains open to northwest, northeast, and to depth.
Debarwa
.Supergene copper zone with 1.3 m/tonnes of 5.36% copper, 1.54 g/t gold
and 33.87 silver, containing 158 million pounds of copper in the
Indicated category.
.Total Indicated NI43-101 resource - 4.47 million tonnes.
.The deep primary zone at Debarwa, which is open at depth, has an
average grade of 2.53% copper with 3.23 % zinc in the Indicated category
using a 1% copper cut-off and contains an additional 39 million pounds
of copper and 49.8 million pounds of zinc.
.Open in several directions for expansion.
Adi Nefas
.High-grade VMS deposit.
.NI43-101 indicated resource of 2.7 million tones with 8.38% zinc, 2.85
g/t gold and 99.36 g/t silver, containing 504 million pounds of zinc,
250,000 ounces of gold and 9 million ounces of silver.
.Close proximity (6 km) to the large Emba Derho VMS deposit.
Gupo Gold
Drilling has outlined an inferred gold resource estimate of 1,965,000
tonnes at a grade of 2.99 grams per tonne gold totaling 189,000 ounces
of gold.
Nevsun
The news of this agreement is also a tremendous boost for Nevsun
Resources (Is in our model portfolio). Nevsun has been going it alone in
building their Bisha Mine located in western Eritrea and the fact that a
major mining company has entered the country after conducting a full due
diligence give credence to what both Sunridge and Nevsun management have
been saying about working in the country.
Nevsun also announced in July that they have secured the debt financing
necessary to build the mine and production is expected 3rd or 4th
quarter 2010. Several scenarios can be played out going forward - all
good for Nevsun and Sunridge shareholders.
The Bottom Line
While both Sunridge and Nevsun have run up of late, they still appear to
have lots of corporate development in front of them. In the case of
Nevsun, I believe this news bolsters those of us who claim it's a worthy
takeover target. This can only help Sunridge if and when this proves
correct.
Tags: Nevsun Resources
http://grandich.agoracom.com/2009/09/sunridge-gold-a-giant-helps-it-take
-several-steps-up-the-corporate-ladder/
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