looking for similar projects in eritrea

OCEAN EQUITIES Ltd.
Weekly Review 9/10/09

Chilean copper miner Antofagasta has closed an agreement with London listed, Eritrea-focused Sunridge Gold Corp. According to the agreement, Antofagasta will fund US$10m of exploration work over a 5 year period to earn a 60% interest in part of the Asmara Project in Eritrea.
Sunridge has also closed a private placement entailing the issue of 13,588,750 common shares to Antofagasta at C$0.40 for US$5m, representing ~18% of Sunridge. Antofagasta will be entitled to appoint one member to the Sunridge Board of Directors and will have certain rights to participate in future financings to maintain their share interest in the Company. Given Antofagasta’s expertise in mining, a board position at Sunridge bodes well for the latter.

Within the Asmara Project there are four deposits with NI-43-101 resources: three VMS deposits, the 50mt Emba Derho VMS copper-zinc-gold deposit, Debarwa and Adi Nefas; advanced high-grade gold, copper, zinc, and silver (VMS) deposits; and one gold deposit; Gupo. Sunridge’s exploration agreement with Antofagasta excludes the current development area that contains four defined deposits outlined above. Combined with its existing cash of approximately US$4.5m, Sunridge will now have a stronger cash position of approximately US$10m upon closing of the private placement, allowing Sunridge to conduct aggressive exploration and development programmes as well as advance deposits toward final feasibility studies on the existing resources on the Asmara Project and commencing exploration on the Besakoa project in Madagascar.

We recently travelled to Eritrea where we visited the Emba Derho and Debarwa projects. The level of prospectivity of the whole Asmara region is very high with multiple targets that have the potential to become ‘company-makers’. The Emba Derho project is the most advanced, with a Preliminary Economic Assessment completed in June 2009 that envisioned a mine that produced 55kt Zn, 25kt Cu, 20koz Au & 0.6moz Ag for over 10 years. The Debarwa project looks like it may become a shining star within Sunridge’s portfolio at the moment with a 4.5mt VMS resource that contains a 1.34mt supergene zone that grades at 5.36% Cu, 1.54g/t Au, & 33.87g/t Ag and potential extensions being drilled.

We are especially impressed that Sunridge has managed to agree a JV with Antofagasta that will ensure that it retains 100% ownership over its advanced projects. This speaks volumes about Antofagasta’s confidence of the geological potential of Sunridge’s other exploration areas, even excluding the known discoveries. It should be noted that Antofagasta is a big company (market capitalisation £11bn) with big operations (478kt Cu produced in 2008 from just 3 mines in Chile with a 50% interest in the giant Reko Diq project in Pakistan with Barrick), and it can be surmised that it will be looking for similar projects in Eritrea.