Sunridge Gold On Track to Start Production In 2015 On the Asmara Project, Eritrea

Development News
All eyes on Suridge's Asmara Project. Progress with regard to negotiations with ENAMCO as well as mining permitting process are two factors Investors and lenders want to see before pouring money into the project
Lenders won’t repeat the Bisha mistake this time around with the Asmara Project. After the successful Shareholder Agreement with ENAMCO and the start of mining permit process, lenders are scrambling to finance the lucrative project that is on track to start production in 2015.

By Sunridge Gold,

SUNRIDGE GOLD Corp. (the “Company” or “Sunridge”) (SGC: TSX.V/SGCNF: OTCQX) is pleased to report that the recent signing of the shareholder agreement with the Eritrean National Mining Corporation (“ENAMCO”) has accelerated activities on the Asmara copper-zinc-gold project (the “Asmara Project“) so that subject to permitting and funding the Asmara Project is on track to commence production in 2015.

The Asmara Project is to be held and operated by the Asmara Mining Share Company (“AMSCo“) and will be owned 60% by Sunridge 40% by ENAMCO. 

The mining plan in the Asmara Project feasibility study completed in 2013 outlined a 3 phase start up designed to reduce initial capital costs. In Phase 1A, the high-grade copper (direct shipping ore “DSO”) will be mined from the Debarwa deposit by open-pit methods, crushed and loaded into containers and transported 120 km to the port facility at Massawa for shipping and sale to a smelter.

This DSO zone contains 116,000 tonnes of high-grade material with an average grade of 15.6% copper, 2.96 g/t gold, and 76.8 g/t silver. In order to access the DSO zone, which is found about 30 meters from surface, the enriched gold oxide cap at surface will be mined and this material along with the similar gold cap from Emba Derho will make up Phase 1B which is the open-pit mining of the gold caps from both deposits with recovery of the gold by heap-leaching methods. Providing that the mining license is issued by the government to AMSCo as expected in late 2014 or early 2015, and funding is in place, then Phase 1 production is on track to start in the 4th quarter of 2015.

Capital and operating costs for Phase 1 are currently being reviewed in detail as management has identified opportunities to potentially lower these costs and further enhance the economics. Phase 1A capital costs are expected to be significantly reduced than those outlined in the feasibility study and the initial revenue from Phase 1A (DSO) will fund the construction of Phase 1B (gold heap-leaching) facilities.

Summary of Shareholder Agreement between Sunridge and ENAMCO:

Sunridge announced on June 27, 2014, that Sunridge and ENAMCO have executed a shareholders’ agreement (the “Shareholders’ Agreement”) for the AMSCo the operating entity which will own and operate the Asmara Project. The first US$2 million of the US$18.3 million purchase price for ENAMCO’s 30% interest in AMSCo has now been received by Sunridge and the remainder will follow the schedule outlined in the June 27, 2014 news release.

AMSCo will be owned 60% by Sunridge and 40% by ENAMCO (30% participating and 10% free carried interest) and will have a board of directors of five, comprising three from Sunridge and two from ENAMCO. All future project development or exploration costs will be shared two-thirds Sunridge and one-third ENAMCO. In addition, ENAMCO is funding the next approximately US$6 million to AMSCo for their portion of retroactive contributions to the project.

Current activities on the project are summarized as follows:

Mining License:

The permitting process to receive a mining license for operation of the Asmara Project was initiated last January with the submittal of the Social and Environmental Impact Assessment (SEIA) report and in April 2014 of the Social and Environmental Management Plans (SEMP) to the Ministry of Energy and Mines. Recently the Ministry appointed an independent engineering company to initiate due diligence work on the Asmara Project feasibility study and the SEIA. This work is expected to be completed by September 2014 and therefore the mining license is likely to be granted to AMSCo as expected in the 4th quarter of 2014 or the 1st quarter of 2015.

Selection of Engineering, Procurement and Construction Management (EPCM) Contractor:

Eligible candidates for an EPCM contractor for Phase 2 and 3 of the Asmara mine were identified in late 2013. The tendering process will proceed in September with the appointment by AMSCo of the selected contractor scheduled for December 2014 with basic design work beginning soon afterwards. EPCM functions for Phase 1 will be conducted by an owner’s team with support from a consultant engineering group.

Environmental Monitoring and Social Engagement:

To comply with both international and national environmental regulations AMSCo has an ongoing program of environmental monitoring that will continue to the initialization of production and beyond. In addition, there is an ongoing program of engagement of local communities that will be affected by the development of the Asmara Project.

Project Financing:

A project information memorandum was disseminated to a group of potential debt financing lenders in late 2013. These groups included commercial and development banks, export credit agencies and equipment suppliers, commodity off-take companies and royalty and streaming groups. At this stage several financing options are under consideration including conventional senior secured project related debt facilities and subordinated debt. Management of AMSCo will continue discussions with potential lending groups during the third quarter of 2014 with expectations of indicative term sheets to be delivered from the groups by the end of 2014 for consideration.

Discussions with other parties:

Since publication of the results of the feasibility study in May 2013, Sunridge has been approached by a number of companies interested in acquiring all or part of Sunridge’s interest in the Asmara Project. The Company continues discussions with a number of interested parties. There can be no assurance that any transaction will occur, or as to the timing, structure or terms of any transaction.

Summary of Asmara Project Feasibility Study:

The Asmara Project feasibility study (the “Study”) was completed in May 2013 and demonstrated that the mining of four of the six deposits that make up the Asmara Project (Emba Derho, Adi Nefas, Gupo Gold and Debarwa) and processing of the ore at a central location near the large Emba Derho deposit is economically robust with a pre-tax net present value (“NPV”) of $692 million (using a 10% discount rate) and with a pre-tax internal rate of return (“IRR”) of 34%. The post-tax NPV is $428 million with an IRR of 27%. The Study outlines a three-phase start-up mining operation which would initiate production in 2015 starting with high-grade copper and gold direct shipping ore production from the Debarwa deposit and heap-leaching of near surface gold, followed by supergene copper production, then zinc and copper at a full production rate of 4 million tonnes per year. At full production, the mine will produce an average annual production of 65 million lbs (29,000 t) copper, 184 million lbs. (83,000 t) zinc, 42,000 oz gold, and 1 million oz silver over the first 8 years. The life of mine is 17 years.

Michael Hopley, President and CEO of Sunridge Gold Corp. is the Company’s Qualified Person responsible for the contents of this press release and has reviewed the information in the release and confirmed that it is consistent with that provided by the independent Qualified Person responsible for the Study.