By Deborah Bacal,
Sunridge Gold Corp (CVE:SGC) (OTCQX:SGCNF) shares reached a new 52-week high on Friday, as the company rallied on the back of the rising gold price as well as news from earlier this month that will finally see the Eritrea National Mining Corp (ENAMCO) acquire a maximum 30% stake in the gold explorer’s Asmara project.
The news, released in early February, announced that ENAMCO formally agreed to acquire the maximum 30% stake following months of negotiations. The binding term sheet follows on from the initial agreement first announced in August 2012.
Under the terms, ENAMCO has exercised its right to acquire its maximum 30% participating interest in the project, in addition to its existing right to get a 10% interest that will be carried to production by the participating partners.
In return, ENAMCO will pay Sunridge US$18.33 million, bearing interest, payable in stages prior to production from the property. The Eritrean company will also pay Sunridge one third of all project development costs back-dated to July 2012, which is estimated at about US$4 million. ENAMCO will also contribute one third of ongoing expenses on the project, including for both exploration and development.
Both Sunridge and ENAMCO are now working toward completing a shareholders agreement, which is expected to take less than three months. The agreement will govern the management and funding of the project, which will be held 60% by Sunridge, with ENAMCO holding the remaining 40%.
The Asmara project, which has a three phase start-up plan outlined beginning with high grade copper and gold, is pegged to produce an average annual rate of 65 million pounds of copper, 184 million pounds of zinc, 42,000 ounces of gold and 1 million ounces of silver over the first eight years.
The junior gold company has been ramping up development of the proposed mine, with all work focused on bringing the project into production in 2015. It released a feasibility study last year on the four advanced deposits at the project (Emba Derho, Adi Nefas, Gupo Gold and Debarwa), which showed that mining of the deposits and processing of the ore near the large Emba Derho deposit is favourable, with a net present value of $692 million using a 10% discount rate, and an IRR of 34%.
Sunridge, in its announcement of the formal deal, took note that the valuation for ENAMCO’s interest is calculated based on a July 2012 date, and therefore is largely based on the results of Asmara’s pre-feasibility study published earlier that same year. This means that the full feasibility study completed last May, which showed “significantly higher value” was not taken into account.
The permitting process for the mining license at Asmara — which is expected to take 9 to 12 months — was kicked into high gear late last year, with the submission to the Ministry of Energy and Mines of the project’s Social and Environmental Impact Assessment report.
Investors have taken notice of the company’s aggressive development strategies. Shares rose to as high as 31 Canadian cents today on the TSX Venture Exchange, a new 52-week high.
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