By Alastair Ford

East Africa is increasingly coming into focus in London as a mining province.

It’s not the only new area in Africa emerging as a force in the mining industry - Burkina Faso and Mali have gained much traction in recent years - but development in East Africa generally is at an earlier stage, and the opportunities are accordingly much greater.

Michael Hopley of Sunridge Resources describes his own company’s entry into the region in the following terms: “We followed the classic path of a successful junior company – going where others feared to tread and then attracting the attention of a major”.

Sunridge has been on the ground in Eritrea for some years now, and can fairly claim a place amongst the ranks of first movers in the country. Neighbours now include Nevsun and Chalice Gold Mines, and if the gold price remains high, and the geological thinking stays the same, it’s a fair bet there’ll be a few more entrants into the country over time.

At the beginning of the autumn Antofagasta signed up with Sunridge on a joint venture that will involve the Chilean copper major spending US$10 million on exploration over the next five years. At the same time Antofagasta also invested US$5 million directly into Sunridge, making it the company’s largest shareholder. The deal lit a fire under those with a watching brief on East Africa, and some London commentators went on to describe the company as the best positioned in the region, following the deal.

The thinking is straightforward. At Emba Derho, Sunridge has a superb-looking flagship project. At the last count Emba Derho boasted 990 million pounds of copper, 1,900 million pounds of zinc, 485,000 ounces of gold, and 19.5 million ounces of silver. That’s just the sort of project to stretch the mettle of a junior miner, without overwhelming it.

It’s not quite big enough to tempt a major in, though. Antofagasta did have a look at it, gave it the thumbs up on its own terms, and decided that the best thing about it was that it was it was a good indicator of the wider prospectivity of the area. So the joint venture deal excludes Emba Derho, and three other projects on which Sunridge has worked up a resource.

For its part, as it goes to work on the 58,000 hectares that comprise Sunridge’s Asmara property, Antofagasta will be embarking on a process that will eventually allow it to earn up to 60 per cent of the project. If it then takes a project through to feasibility it will earn an additional 15 per cent.

So, although the deal positions Sunridge nicely, leaving it with C$9 million in the bank as of December and free to work up its four advanced projects, it also allows Antofagasta to build a sizeable land position in an emerging mining province on the simple basis that it pays for its own data.

That’s what you might call a win-win situation, and it’s no wonder that where markets were able to express an opinion on the deal – in the trading of Sunridge shares – the general feeling was one of approval. Sunridge shares had been on the rise all year, but following the deal they jumped up a punchy 50 per cent, from around C$0.50 to around C$0.75. They’ve since given back some ground, though, and are currently trading at around C$0.63.

That’s all well and good, but still leaves Sunridge with plenty of work to do on the properties that have stayed exclusively under its control. Over the summer consultants at Wardrop gave Emba Derho a detailed once over and concluded in a published scoping study that for US$330 million Sunridge could construct a four million tonnes per year operation at Emba Derho, mining from an open pit for 10.4 years, and based on the current resource numbers.

The potential for a longer mine life was explicitly mentioned, based on a very real possibility that either an underground option could be developed, or that open cut mining could be extended. Exactly where Sunridge goes for that US$330 million isn’t yet clear, but it’s worth noting that the company has seven confidentiality agreements in place, and that the counterparties include groups of Koreans, Saudis, Egyptians, and Chinese.

Meanwhile, at the smaller Debarwa project, which Michael Hopley says may in fact be the first into production, Sunridge has just hit 15.67 metres at 10.21% copper and 2.01 grammes per tonne gold. That bodes well for strong early cash flow from a smaller scale mine, probably working initially on a direct shipping model. Something there could be up and running within a couple of years, reckons Michael.

Meanwhile, as Nevsun moves to within an ace of putting its million ounce Bisha gold project into production, the focus on Eritrea is only likely to grow. So far, from a political perspective, it’s been a good place to operate as a mining company. There is every sign that it will continue to be so. And if that’s the case, the interest of London-based investors is likely to increase still further. Source: (Minesite)

Related posts:

1. Sunridge Gold Appoints New Director and Provides Update on Antofagasta Asmara Project Joint-Venture Exploration Program
2. Sunridge Gold Inks Strategic Partnership With Antofagasta
3. Sunridge Gold Begins New Drill Programme in Eritrea
4. Sunridge Gold Announces US$10,000,000 Exploration Funding and Alliance With Antofagasta Minerals S.A. for Eritrea Project
5. Assessment of Emba Derho Deposit in Eritrea positive says Sunridge Gold Corp.