Sunridge Gold (SGC.V) has announced the results of the independent feasibility study on the Asmara Project in Eritrea.
The feasibility study has outlined a three-stage development of the project, whereby only $46M is needed for the start of the production of the direct shippable copper ore and the gold leach stage. Another $357M is needed for the second and third phases.
The average annual production for the first 8 years will be approximately 42,000oz of gold, 1Moz of silver, 65Mlbs of Cu and in excess of 180Mlbs of zinc. As we like the combination of precious metals and zinc, Sunridge Gold might be attractive to both precious metals and base metals investors.
Even at the low-case scenario using a $0.80/lbs and $2.75/lbs zinc and copper price, and a price of $1250/oz for gold and $21/oz for silver, the post-tax NPV10% comes in at $131M, which is approximately C$0.75/share.
If we apply a copper price of 3/lbs, zinc $1/lbs and a gold and silver price of $1400/oz ad $25/oz respectively, the after-tax NPV10% increases to $364M, which is in excess of C$2/share, based on the current share count.
Sunridge had approximately C$3.7M in working capital at the end of February of this year, so they don’t have to go back to the markets in the first few months.
We think a stock-for-stock merger between Nevsun Resources (NSU.TO, NYSEMKT:NSU) and Sunridge Gold might be advantageous for shareholder of both companies, but the big question is if Nevsun wants more exposure to Eritrea.
> Click here for the press release
Disclosure: The author has no position in Sunridge Gold yet, but owns a long position in Nevsun Resources. Please see our disclaimer for current positions.
