Sunridge Gold to get US$10 million from Antofagasta

Vancouver junior Sunridge Gold (SGC-V) is getting a helping hand from copper giant Antofagasta Minerals (ANFGY-O, ANTO-L) to develop part of its Asmara project in Eritrea.

Antofagasta will spend US$10 million over a five-year period to earn a 60% interest in the exploration areas of the Asmara project and will also purchase Sunridge shares in a non-brokered private placement for proceeds of US$5 million.

The arrangement will make Antofagasta Sunridge’s largest shareholder with an 18% stake in the company.

The news sent Sunridge shares up 14.55% to 63¢ apiece — a one-year high — in midday trading in Toronto.

The exploration agreement covers the exploration areas (about 585 hectares within the Asmara project) but exclude the existing development areas and the defined deposits Sunridge has discovered so far including its Emba Derho copper-zinc-gold VMS deposit, the Adi Nefas zinc-gold-copper VMS deposit, the Debarwa copper-zinc-gold deposit and the Gupo gold deposit. Sunridge will retain a 100% interest in the four defined deposits.

The exploration areas include many high priority drill targets that Sunridge has defined over the last few years through geological mapping and sampling as well as various geophysical methods.

Targets of particular interest are Dario Paulus, Kodadu, Adi Rassi, Adi Musa and Adi Lamza. Sunridge believes that these areas have strong potential for new base metals and possibly gold discoveries.

“Antofagasta shares our belief that the Asmara project has the potential for the discovery of other large base metal deposits — larger even than the Emba Derho deposit,” Michael Hopley, Sunridge’s president and chief executive, said in a prepared statement. “This funding of the work on the exploration areas will allow us to drill many of the best targets in those areas. In addition, the corporate financing by Antofagasta will permit us to continue further exploration and development of the four existing deposits, particularly Emba Derho, towards final feasibility and eventual production.”

The Emba Derho copper-zinc-gold deposit has an indicated resource of 58 million tonnes grading 0.76% copper, 1.48% zinc, 10.34 grams silver per tonne and 0.26 gram gold. A preliminary economic assessment study released earlier this year outlined a 4-million-tonne-per-year mine that would annually produce about 55,000 tonnes zinc, 25,000 tonnes copper, 20,000 oz. gold and 600,000 oz. silver.

Once the private placement is closed, Sunridge’s cash position will shoot up from about $4.5 million to roughly $10 million. In addition to advancing deposits toward final feasibility studies, the funds will help Sunridge kick off exploration at its Besakoa project in Madagascar.

Under the agreement, Antofagasta must spend US$1.5 million in year one; US$2 million in year two; US$2 million in year three; US$2 million in year four and US$2.5 million in year five. Antofagasta has the right to accelerate the funding.

Sunridge will be the operator of the exploration program until Antofagasta has contributed US$7 million. At that point, Antofagasta will become the operator

Upon completion of US$10 million on exploration, Antofagasta will be entitled to acquire a 60% interest in the exploration areas and will have the right to complete a feasibility study on any project on the exploration areas to earn an additional 15% for a 75% interest.

Under its financing arrangement with Sunridge, Antofagasta will purchase about 14 million Sunridge shares at a price of 40¢ per share for gross proceeds of US$5 million.

As part of the financing and exploration agreement, Antofagasta also will be entitled to appoint a member of its choice to Sunridge’s board of directors and will have the right to participate in future financings to maintain their interest.