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Sunridge Gold (SGC-V) has outlined stronger economics in the feasibility study for its prized Asmara copper-zinc-gold project project in Eritrea, outshining last year’s prefeasibility study (PFS).
The latest study envisions mining Asmara’s four deposits— Emba Derho, Debarwa, Gupo Gold and Adi Nefas— as a single integrated operation with a central processing facility near Emba Derho.
At that facility, the company will process gold and silver from Emba Derho, Debarwa, Gupo via heap-leaching, as well as copper and zinc from Emba Derho, Debarwa and Adi Nefas by milling and flotation. All the deposits, except for Adi Nefas, will be mined using open-pit methods.
The study proposes a three-phase start-up, with first production slated for mid-2015, almost a year ahead of what was estimated in the PFS.
Commenting on the benefits of phasing into production, Sunridge’s CEO Michael Hopley said on a conference call: “It minimizes our capital exposure — the amount of money that we Sunridge would need to raise — and it starts cash flow a year earlier.”
This is largely why capital requirements at Asmara have dropped by US$135 million to US$354 million since the PFS, says Hopley, adding the Eritrean National Mining Corp. or ENAMCO — which is acquiring a 30% paid participating interest in the project — will be responsible for covering a third of all the capital and operating costs at Asmara.
The project has a 16.3-year mine life, including one year of construction. In the first phase, from years 1 to 5, Sunridge will mine 116,000 tonnes of high-grade direct shipping ore (DSO) grading 15.6% copper, 2.96 grams gold per tonne and 76.8 grams silver from Debarwa. The ore will be crushed at the facility near Emba Derho before being transported 120 km to the port facility at Massawa, after which it will be shipped to a smelter.
Scott Ansell, the junior’s vice-president of project development, says it should take roughly 30 weeks to mine, crush, and ship all of the DSO product to market.
Also in the first phase, the Vancouver-based firm will start heap-leaching gold and silver from the Debarwa, Emba Derho, and Grupo deposits.
“We have identified a location within the tailings facility that allows us to host a heap-leach facility for the first six years of the mine life,” says Ansell.
Sunridge anticipates churning through 1.4 million tonnes averaging 1.48 grams gold and 8.2 grams silver a year, with recoveries estimated at 67% gold and 38% silver.
During the second phase, set to start in the second year, Sunridge will mine 2.4 million tonnes of high-grade supergene copper ore from Debarwa and Emba Derho and process it at a central flotation plant near Emba Derho at a rate of 2 million tonnes per year for 1.25 years.
The average grades are estimated at 2.25% copper, 0.76 gram gold and 21.6 grams silver.
The copper concentrate, averaging 25% copper, 4.2 grams gold and 109 grams silver, will then be sent to the port of Massawa for shipping to smelters.
In phase three, slated for years 3.25 to 16.3, Asmara should enter full production. It is scheduled to mine and process via flotation roughly 51 million tonnes of primary copper and zinc ore from the Emba Derho, Debarwa and Adi Nefas deposits at a rate of 4 million tonnes a year for 13 years.
The average grades for phase three are pegged at 0.73% copper, 1.91% zinc, 0.36 gram gold and 12.6 grams silver.
Copper concentrate with gold and silver byproduct along with zinc concentrate that Sunridge produces will be shipped to smelters.
During the first eight years, annual metal production at the project, which shares the same name as the capital city of Asmara, should average 65 million lb. copper, 184 million lb. zinc, 42,000 oz. gold and 1 million oz. silver.
Average operating costs over the life of mine are US$29.42, slightly higher than the PFS.
Initial capital to build the first phase is pegged at US$46 million, while another US$357 million is estimated for the following two phases.
Compared to the PFS, Asmara’s pretax net preset value (NPV) has climbed from US$555 million to US$837 million, and its pretax internal rate of return (IRR) has gone from 27% to 34%, using a 10% discount.
At the same discount rate, the after-tax NPV is US$443, up from roughly US$350 million earlier, notes Hopley. The current after-tax IRR is 27%. Sunridge should be able to recoup its initial capital in 4.6 years after-taxes.
Asked how the company was able to boost economics, given the prefease also took a similar phased approach, Ansell said the improvements came largely from producing gold earlier in the mine life and introducing the DSO production, which wasn’t in the PFS because not enough metallurgical testwork was completed at that time.
“We brought the gold forward 13 years, which has a big impact on discounting. We included the DSO in the first year, which wasn’t in the prefease — it was part of the copper concentrate. And we've improved our mine plan. We’ve approximately improved our head grade for copper reporting by about 15%,” says Ansell, adding the company has also deferred some capital cost expenditures to later in the mine life.
With the feasibility checked off its to-do list, Sunridge is finishing up its environmental studies at Asmara, before applying for a mining license shortly. It expects to get the permit in late 2014, after which it will build the first phase of the mine.
Meanwhile, Sunridge plans to start detailed engineering work and explore avenues for financing.
Currently, it has a cash balance of US$3.5 million. On the feasibility news, Sunridge gained 3% to close May 16 at 18¢, near its 52-week low of 13.5¢ reached yesterday.