Junior explorer Sunridge Gold (CVE:SGC) (OTCQX:SGCNF) Wednesday said a prefeasibility study (PFS) confirmed "positive results" at its 100% owned Asmara North project in Eritrea, East Africa.
The company concluding that an integrated operation is the "optimum economic situation".
The study, carried out by Snowden Mining Industry Consultants, showed that operating all four deposits of the Asmara Project (Emba Derho, Adi Nefas, Gupo Gold and Debarwa) as an integrated operation with ore being processed at a single central mill is technically feasible and is an optimum situation economically.
The PFS showed that the asset could support mining for 15.25 years at a production rate of 25,900 tonnes of copper, 61,800 tonnes of zinc, 26,000 ounces of gold and 695,000 ounces of silver per year.
The PFS also recommended that the project be advanced to a feasibility study.
"We are very pleased with the results of the prefeasibility study - the outcomes have certainly exceeded our expectations and provide significant shareholder value,” said Sunridge Gold's president and CEO Michael Hopley.
"We are particularly pleased that the study has outlined an operating scenario in which all four deposits of the Asmara Project are developed in an integrated way with all ore being processed in a single centralized mill near the Emba Derho deposit.
"This is a major step forward for the project. We have started work on the recommended feasibility study."
Sunridge said the Emba Derho, Debarwa and Gupo deposits will be mined by open-pit methods and the Adi Nefas deposit by underground mining methods. An assessment of project economics, assuming a pre-tax, base-rate discount of 10 percent, showed the resulting project net present value is $555 million, while the internal rate of return is 27 percent.
Initial capital costs are projected at $489.3 million, including owner's costs and a contingency of $44.5 million.
The study showed the expansion capital for phase two and three of the mine to be an additional $69.4 million.
During the life of the mine, the PFS showed sustaining capital requirements of about $77.6 million and closure costs are estimated at $48.4 million, with a payback period of 3.5 years.
On site operating costs are estimated to be $25.78 per tonne average through the life of the mine.
The study used base case metal prices of US$3.28 per pound copper, US$0.99 per pound zinc, US$1,111 per ounce gold, and US$21.00 per ounce silver, and concluded that all ore from the different deposits be milled and processed in a single plant located at the Emba Derho deposit.
Processing of the three ore types (copper supergene, primary copper and zinc and gold oxide) will utilize a common crushing and ball milling circuit which includes high pressure grinding rolls (HPGR) and three different processing circuits.
The initial phase one plant will process supergene ore at a nominal two million tonnes per year rate by a conventional flotation
process to recover copper and by-product gold as a copper concentrate for sale to smelters.
This is followed by phase two processing of primary ores at a nominal four million tonnes per year rate producing copper, zinc, and by-product gold and silver as concentrates for direct sale to smelters.
The phase three plant reduces to a nominal two million tonnes per year rate to extract gold and silver from oxide ore using conventional cyanide leaching and recovery by the carbon in pulp process to produce gold and silver doré.
The tailing systems will be common for all three ore types.
According to the study, the first year of production produces copper concentrate with gold and silver credits, continuing until year 14. Production of zinc concentrate will begin in year one through year 14, while gold and silver extraction to a doré product will occur in the last half of year 14 and be complete in year 15.
The study used the recently completed estimate of measured and indicated resources for the Asmara Project, released in early April.
Total contained metal at the Asmara project, on a measured and indicated basis, stands at 1.27 billion pounds of copper, 2.6 billion pounds of zinc, and 930,000 ounces of gold and 28.36 million ounces of silver.
Total measured and indicated resources at Asmara amount to 76.09 million tonnes.
Sunridge said that social and environmental baseline studies and stakeholder engagement programs are well advanced on all four deposits that are included in the study.
The work will lead to the publications of Social and Environmental Impact Assessments (SEIA) in June 2012 (Debarwa) and June 2013 (Asmara North) projects.
When the mining license is granted, following completion of a feasibility study, Sunridge said the Government of Eritrea will have a 10 percent carried interest in the project and has the option to purchase up to a 30 percent working interest.
It is not known at this time if the government intends to exercise that option and the economics and financial analysis of the Study assumes a 100% interest by Sunridge.
The company said that opportunities to further enhance the economic value of the Asmara North project will be investigated during the feasibility study which is targeted for completion in the first quarter of 2013.
Sunridge is a mineral exploration and development company focused on the acquisition, exploration, discovery and development of base and precious metal projects on the Asmara Project in Eritrea and exploration properties in Madagascar.