Sunridge Gold Corp. (CVE:SGC) (OTCQX:SGCNF) said Thursday that it has signed a $9.25 million private placement financing with Chinese energy and mining company Shanghai Richstone Investment Group, with the proceeds to go toward the completion of the feasibility study at its Asmara project in Eritrea.
The exclusive, non-brokered subscription agreement will see the issue
of 25 million Sunridge common shares, and 4.0 million non-transferable
common share purchase warrants, at a price of 37 cents per share.
Each warrant will allow Richstone to buy one common share of the company at a price of 55 cents for one year.
The deal will see Richstone snag a 19.8 per cent equity interest in Sunridge, assuming the warrants are exercised in full.
The company said it will use the new funds to complete the
feasibility study on its Asmara project, as well as for other expenses
related to the project and general corporate purposes.
"We are very pleased to be working with an influential and
experienced company like Richstone as a financial and strategic alliance
partner," said president and CEO of Sunridge, Michael Hopley.
Beijing-based Richstone has oil and production in China, with
additional interests in oil recovery technology, metal trading, and
banking. Its total assets come in at more than US$400 million, with
annual after-tax income of over $80 million.
"We believe [the private placement] will greatly assist Sunridge in
the completion of a full feasibility study on the Asmara Project by
early next year and then rapidly advance the large copper, zinc, gold,
and silver deposits on the Asmara Project towards production," Hopley
"The positive prefeasibility study on the project announced on May 2,
2012 showed strong economics with a 10% discounted Net Present Value of
Indeed, in early May, the junior explorer said a prefeasibility study
(PFS) confirmed positive results at its Asmara North project,
concluding that an integrated operation is the "optimum" economic
The study, carried out by Snowden Mining Industry Consultants, showed
that operating all four deposits of the Asmara project, known as Emba
Derho, Adi Nefas, Gupo Gold and Debarwa, as an integrated operation with
ore being processed at a single central mill is technically feasible.
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.
Under the plan, the Emba Derho, Debarwa and Gupo deposits would be
mined by open-pit methods and the Adi Nefas deposit by underground
Assuming a pre-tax, base-rate discount of 10 percent, the resulting
project showed net present value of $555 million, with an internal rate
of return of 27 percent.
Initial capital costs were projected at $489.3 million, including
owner's costs and a contingency of $44.5 million. The expansion capital
for phase two and three of the mine was estimated at an additional $69.4
The company also released later last month a feasibility study for
its 100 percent-owned Debarwa volcanogenic-massive-sulphide (VMS)
copper-gold-zinc deposit at Asmara, which concluded that operating the
deposit as a stand-alone mining operation is also economically viable.
The Debarwa feasability study showed a net present value of $71
million at a 10 percent discount rate, an internal rate of return of 41
percent, and payback in 1.1 years from start of production.
The recently started feasibility study on the Asmara North deposits,
for which the proceeds of the financing announced today will go toward,
will examine the integration of the Debarwa deposit with the Asmara
North deposits into one operation.
Sunridge said last month that a Debarwa stand-alone operation
provides it with earlier cash flow generation than if the deposit were
integrated with the Asmara North deposits.
The ultimate decision will be made when the Asmara project feasibility study is completed in 2013.
The miner expects the private placement to close as soon as
practicable, after the receipt of the required TSX Venture Exchange
approval. It said the financing could close in more than one tranche.
Under the terms of the agreement, Richstone will be entited to
nominate a representative to the company's board of directors, so long
as it holds at least 5 per cent of Sunridge's issued and outstanding
Richstone will also have the right to participate in any equity
financing of the company in order to maintain its pro rata interest, as
long as Richstone holds at least 10 per cent of Sunridge.