"Lawrence Roulston's Resource Opportunities""Sunridge Gold is a major takeover target"
July 2013-2
Company Update
Sunridge Gold
(SGC-TSXV)
Sunridge, with a feasibility study completed
on its Asmara project in Eritrea,
is now working toward securing financing
for mine development and
obtaining the permits needed to develop
and operate the mine. They are
making good progress on both fronts.
Most of the studies have been completed
in support of the mining license
application. Formal submission is expected
imminently. The government is
anxious to see the project move forward
quickly, meaning that the mining
license application will be handled
expeditiously and is not expected to
delay project development.
The state-owned Eritrea National Mining
Corporation (ENAMCO) last July
agreed to acquire a 30% paid participating
interest in the project. Negotiations
are continuing with regard to setting
a purchase price, which will be on
commercial terms.
ENAMCO will then contribute 33 percent
of the capital expenditures as incurred.
The government also holds a
10 percent carried interest, which will
apply to the interest of both parties.
Financing efforts are being coordinated
by a financial group with considerable
success in arranging financing
for mining projects. In support of the
financing efforts, a leading independent
engineering firm is presently reviewing
the feasibility study on behalf
of potential lenders. There is a high
level of interest from lenders, recognizing
the very favorable economics of
this project and the success enjoyed by
Nevsun (NSU-TSX) in developing and
operating their Bisha mine in Eritrea.
The Asmara feasibility study contemplates
a three phase development plan.
The first phase will be to mine the
116,000 tonnes of high-grade ore
(15.6% copper, 3 g/t gold and 77 g/t
silver) which will be direct shipped to
a smelter. Mining that direct shipping
ore (DSO) will span about six months
and produce more than $100 million of
revenue, with only modest operating
expense. The capital expense incurred
in the DSO will be directly applicable
to the main project.
At the same time as mining the DSO,
mining of the gold oxide “caps” overlying
three of the base metal deposits
will begin, with the gold recovered by
heap leaching, producing five years of
cash flows, again with modest capital
expenditures and operating costs.
While mining the DSO and the gold
caps, the company would develop the
main ore bodies and construct the
processing facility. Production for the
first 1.25 years would come from an
enriched “supergene” zone, generating
high levels of cash flow early in the
mine life. Mining would be a combination
of open pit and underground, using
conventional flotation recovery.
The capital requirements, net of the
cash flow from the DSO ore and the
gold heap leach, would be about $350
million.
The Asmara projects is well located
for mine development, as it is less than
an hour drive from the main city in
Eritrea and only a couple of hours
from the port. The project has good
grades, it is easy to mine and it has
favorable metallurgy. The government
is highly supportive of mining, as
demonstrated by the success of the
Nevsun project.
North American investors may have
concerns about investing in Eritrea,
but that concern is misplaced. Nevsun
successfully developed and is profitably
operating its Bisha mine, which
involved participation of international
financial firms.
There are many mining companies that
would very much like to develop this
project. The biggest concern for shareholders
at this time is that Sunridge
will receive a takeover offer before
investors begin to recognize the value
of the large and highly attractive metal
deposits that they hold. Any offer
would be priced at a premium to the
market price at the time of the offer.
The share price will almost certainly
begin to track higher as investors gain
better insights into the nature of this
project and as investor sentiment improves
toward resources.
Price July 29, 2013: C$0.185
Shares Outstanding: 175 million
Shares Fully Diluted: 236 million
Market Cap: C$32.3 million
Contact: Investor Relations
604-688-1263
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