Is Sunridge the Next Nevsun?

Sunridge Gold

The mining industry is apparently focusing hard on Eritrea again and Sunridge Gold is now positioned to be the next company to push towards production.

Sunridge’s peer company, Nevsun Resources is currently building the first modern mine in Eritrea and is nearing completion of the Bisha gold-copper-zinc VMS project. The mine construction is on schedule and the first gold pour is now expected before the end of 2010. Nevsun’s market cap is now approximately $1.17 billion.

Also, further attention was brought to the region recently by the announced Citadel takeover by Equinox for $1.25 billion. The Valuation was primarily based on the Jabal Sayis Mine in Saudi Arabia, which compares very similar in terms of production numbers to that of Sunridge’s Emba Derho deposit. Although Jabel Sayis is further along in development, the price tag further demonstrates the potential upside in Sunridge’s value.

Sunridge compares favorably to both Nevsun’s valuation and the Citadel deal as Sunridge has larger resources and the current market valuation is still only $160 million. Sunridge has recently raised $26 million and now has over $30 million to take its projects through feasibility.

Sunridge has successfully been exploring for gold and base metals on the Asmara Project in Eritrea since 2003 and has now defined three VMS deposits. Debarwa, Emba Derho, and Adi Nefas Deposits which contain an impressive combined NI 43-101 compliant Indicated Resources of:

  • 1.28 billion pounds (580,000 tonnes) of copper,
  • 2.5 billion pounds (1,130,000 tonnes) of zinc,
  • 1.05 million ounces of gold, and
  • 31.8 million ounces of silver

The Asmara Project also hosts a fourth prospect known as Gupo which contains an Inferred Resource of 189,000 ounces of gold.

The Asmara Project is approximately 800 square kilometers and is located around the capital city of Asmara. The project is located on excellent infrastructure, with paved roads and grid power over the property and the Port of Massawa is 120km away and accessible by both road and rail.

The Debarwa Deposit is located approximated 25 km south of Asmara and is currently the focus of a Feasibility Study which is expected to be complete in Q3 of 2011. Sunridge has awarded the engineering contract for the feasibility study to Senet who is a logical choice as they are currently managing the building of Nevsun’s Bisha mine in Western Eritrea.

Debarwa is made up of an oxide gold “cap” consisting of an estimated 2.44 million tonnes at an average grade of 1.71 g/t gold. Below the oxide zone the deposit contains a copper enriched supergene zone consisting of an estimated 1.336 million tonnes at an average grade of 5.36% copper with gold and silver. Underlying the supergene zone is the primary mineralized zone which is open in depth with current estimates of 699,000 tonnes at an average grade of 2.53% copper, 3.23% zinc and 0.87 g/t gold.

Debarwa DSO Zone: A high grade copper zone (greater than 15% copper) has been identified within the supergene zone. The feasibility study will examine options to begin mining operations at Debarwa by selectively mining the DSO (Direct Shipping Option) to a smelter thereby producing cash flow early in the mine life during construction of a process plant facility.

The Northern Deposits consist of the large Emba Derho copper – gold – zinc VMS deposit and 2 satellite deposits – Adi Nefas and Gupo Gold. The Northern Deposits are located approximately 15 km north of Asmara and are all within 6 km of each other.

A positive scoping study was completed in June 2009 at the Emba Derho deposit which contains a NI 43-101 compliant Indicated Resource of 62.5 million tonnes, containing 996 million pounds of copper, 1,907 million pounds of zinc and 574,000 ounces of gold and 20 million ounces of silver.

The Scoping Study provided a base case analysis and yielded an NPV of US$323.8.9 million and an Internal Rate of Return of 27.7% when applying the two year moving average of metal prices prior to June 2009.

Sunridge management feels the Scoping study at Emba Derho is far from optimized and the will be demonstrated in prefeasibility studies, which are expected to begin before the end of 2010, will include Adi Nefas, and Gupo Gold.

Adi Nefas has an Indicated Resource of 2.73 million tonnes at 1.39% copper, 8.38% zinc, 2.85 g/t gold, and 99.3 g/t silver. The feasibility study will also include the gold oxide cap at Emba Derrho which contains 95,000 oz of gold at 0.84 g/t which was treated as waste in the scoping study.

The feasibility study will also examine a steeper pit slope and the use of a dense media separation (DMS) circuit to remove 20% of internal waste material that would otherwise would be sent through the plant as ore.

Exploration: Sunridge is about to begin a drill program at the Gupo Gold deposit and the Medrizien gold target. Gupo currently has an inferred resource containing 189,000 oz of gold averaging 2.99 g/t and the objective of the program is to expand and convert to an indicated category resource. The Medrizien target is within 1 km from Emba Derho and consists of a gold mineralized zone that has been mapped at surface up to 25 meters in width and several km along strike.

Sunridge management also expects to announce expansion drilling at Adi Nefas and Debarwa and is planning extensive drill programs on new high priority VMS targets in 2011.

Sunridge also has a VMS exploration project in Madagascar called Besakoa which has demonstrated strong geological similarities to the VMS deposits on the Asmara Project and the Bisha deposit. An initial exploration drill program is being planned for spring 2011.

I think it’s time to start calling Sunridge Gold the next possible Nevsun.