Sunridge Gold (CVE:SGC) (OTCQX:SGCNF) said a US$32 million budget has been set for 2015 at its joint venture Asmara project in Eritrea, with plans to begin mining operations in the fourth quarter of this year.
Goals have been set for Phase 1A of the mining operations, which is the open pit mining of near surface high grade copper and gold ore from the Debarwa deposit that will be crushed and shopped directly to a smelter.
The project, which has a three phase start-up plan beginning with high grade copper and gold, is pegged to produce an average annual rate of 65 million pounds of copper, 184 million pounds of zinc, 42,000 ounces of gold and 1 million ounces of silver over the first eight years.
Equipment for the first phase of production is to be financed by equipment vendors. Sunridge said it is in discussions with a number of other potential financing sources to fund the remaining capital costs.
The Asmara project is owned and operated by the Asmara Mining Share Company, which is held 60 percent by Sunridge and 40 percent by the Eritrean National Mining Corp (ENAMCO). Of the US$32 million budget allotted for this year, Sunridge must come up with two-thirds, with ENAMCO to fund the remainder.
The mining license for the property is expected to be issued in the second quarter of this year, after which financing is expected to be finalized. Sunridge is leaving the door open to a number of options, including debt from commercial and development banks, equipment financing, and funding from commodity offtake and royalty/streaming groups.
The Asmara joint venture is expected to hire some 250 new employees over the course of the year, with the majority to be taken on in October, after mobile equipment for the first phase has been ordered.
Once mining operations have commenced at Debarwa, extraction and shipping of the direct shipping ore is expected to start in the second quarter of 2016. Total cash costs for Phase 1A are anticipated to be in the range of 70 to 80 cents per pound of copper.
Sunridge said that proceeds from the first phase of operations will cover all capital costs for the expansion of the project into Phase 1B --- the gold heap-leach operation of near surface gold ore, which is expected to cost about $50 million. The start of construction for the next phase is slated for mid to late 2016.
Asmara is made up of six defined deposits, four of which were the subject of a feasibility study completed in May 2013, which defined an after-tax net present value of $428 million and an IRR of 27 percent. The model is based on processing the ore at a central location near the large Emba Derho deposit, with an estimated mine life of 17 years.
Sunridge's management proved it could navigate development of its project through a tough market, taking its original feasibility study released in 2012 back to the drawing board to rejig the asset as a staged project, where low volume but high grade mining in the first stage would help pay for the capex for the larger plant required for the bulk of the mine life.