Sunridge Gold Corp. (CVE:SGC) (OTCQX:SGCNF) said Thursday that it has signed a $9.25 million private placement financing with Chinese energy and mining company Shanghai Richstone Investment Group, with the proceeds to go toward the completion of the feasibility study at its Asmara project in Eritrea.
The exclusive, non-brokered subscription agreement will see the issue of 25 million Sunridge common shares, and 4.0 million non-transferable common share purchase warrants, at a price of 37 cents per share.
Each warrant will allow Richstone to buy one common share of the company at a price of 55 cents for one year.
The deal will see Richstone snag a 19.8 per cent equity interest in Sunridge, assuming the warrants are exercised in full.
The company said it will use the new funds to complete the feasibility study on its Asmara project, as well as for other expenses related to the project and general corporate purposes.
"We are very pleased to be working with an influential and experienced company like Richstone as a financial and strategic alliance partner," said president and CEO of Sunridge, Michael Hopley.
Beijing-based Richstone has oil and production in China, with additional interests in oil recovery technology, metal trading, and banking. Its total assets come in at more than US$400 million, with annual after-tax income of over $80 million.
"We believe [the private placement] will greatly assist Sunridge in the completion of a full feasibility study on the Asmara Project by early next year and then rapidly advance the large copper, zinc, gold, and silver deposits on the Asmara Project towards production," Hopley continued.
"The positive prefeasibility study on the project announced on May 2, 2012 showed strong economics with a 10% discounted Net Present Value of over $555million."
Indeed, in early May, the junior explorer said a prefeasibility study (NYSE:PFS) confirmed positive results at its Asmara North project, concluding that an integrated operation is the "optimum" economic situation.
The study, carried out by Snowden Mining Industry Consultants, showed that operating all four deposits of the Asmara project, known as Emba Derho, Adi Nefas, Gupo Gold and Debarwa, as an integrated operation with ore being processed at a single central mill is technically feasible.
The PFS showed that the asset could support mining for 15.25 years at a production rate of 25,900 tonnes of copper, 61,800 tonnes of zinc, 26,000 ounces of gold and 695,000 ounces of silver per year.
Under the plan, the Emba Derho, Debarwa and Gupo deposits would be mined by open-pit methods and the Adi Nefas deposit by underground mining methods.
Assuming a pre-tax, base-rate discount of 10 percent, the resulting project showed net present value of $555 million, with an internal rate of return of 27 percent.
Initial capital costs were projected at $489.3 million, including owner's costs and a contingency of $44.5 million. The expansion capital for phase two and three of the mine was estimated at an additional $69.4 million.
The company also released later last month a feasibility study for its 100 percent-owned Debarwa volcanogenic-massive-sulphide (VMS) copper-gold-zinc deposit at Asmara, which concluded that operating the deposit as a stand-alone mining operation is also economically viable.
The Debarwa feasability study showed a net present value of $71 million at a 10 percent discount rate, an internal rate of return of 41 percent, and payback in 1.1 years from start of production.
The recently started feasibility study on the Asmara North deposits, for which the proceeds of the financing announced today will go toward, will examine the integration of the Debarwa deposit with the Asmara North deposits into one operation.
Sunridge said last month that a Debarwa stand-alone operation provides it with earlier cash flow generation than if the deposit were integrated with the Asmara North deposits.
The ultimate decision will be made when the Asmara project feasibility study is completed in 2013.
The miner expects the private placement to close as soon as practicable, after the receipt of the required TSX Venture Exchange approval. It said the financing could close in more than one tranche.
Under the terms of the agreement, Richstone will be entited to nominate a representative to the company's board of directors, so long as it holds at least 5 per cent of Sunridge's issued and outstanding shares.
Richstone will also have the right to participate in any equity financing of the company in order to maintain its pro rata interest, as long as Richstone holds at least 10 per cent of Sunridge.