Michael Hopley CEO- Peter Grandich Q and A.
PG – Now that the financing is complete, what now?
MH –Activity has kicked into high gear with the Sunridge Team very busy on several fronts moving the Asmara Project rapidly towards production. The Feasibility Study completed in May demonstrated very strong economics for the project, with a pretax Net Present Value of$ 692 million and annual production averaging 65 million pounds of copper, 184 million pounds of zinc, 42,000 ounces of gold, and 1 million ounces of silver for the first 8 years of the mine life.
We are currently focused on completing an agreement with ENAMCO for the purchase of 30% of the Asmara Project, which will be a very important milestone ; We are very close to completing the Social and Environmental Impact Assessment Study and we will be officially applying for a mining license in December; we continue discussions with potential lenders and other sources of project financing and discussions continue with a number of interested parties that could lead to an acquisition of the Company or project.
PG – Can you provide an update on negotiations with ENAMCO?
MH –Completing the agreement is currently our top priority and I cannot stress how important this step is. In 2012 ENAMCO – which is the Eritrean state mining company – exercised their right under the mining proclamation to purchase the maximum 30% allowable under the law of the Asmara Project; this means, of course, that the project has the full support and backing of the government Since then we have been negotiating with ENAMCO for what that purchase price will be and we now are confident that we are close. We have been working towards a structure similar to that of the Nevsun-Enamco agreement on Bisha where it has been a win-win situation for both parties. Llike the Bisha Structure, there will be two components to an eventual agreement with ENAMCO; 1) the purchase price of the 30% which will be based on fair market value at the time they exercised their right to purchase, and 2) ENAMCO will be a participating partner in the project and will be responsible for one third of all development costs since exercising their right i.e.engineering studies, exploration work, capital costs etc.
We feel we are now close to concluding these negotiations and having the government as our partner as we enter the mine permitting stage.
PG – You mentioned that you will shortly be applying for a mining license for the Asmara Project. How long do you expect the permitting process to take?
MH - We have allocated 12 months for the permitting stage but we feel that it can be achieved in less time. Remember that having the mining licnse will add considerably to the value of the Asmara Project.
We recognized early during exploration that the Asmara project will be a very robust mine and therefore we have put a lot of effort into our social and environmental programs from early on and we are very confident that we have addresses all issues in the Social and Environmental Impact Assessment Study. Also, we may be able to get provisional approval on some of the earthwork so that construction can commence before the mining license is granted.
PG – I understand you are working on Project financing of the Asmara Project
We are also in discussions with smelters, metal traders, and other companies that can offer off-take agreements. It is clear from the Feasibly Study that the Asmara project will produce a significant amount of both copper and zinc concentrates which will be very high quality;meaing that these contain a high percentage of copper , zinc gold and silver but low in unwanted metals such as arsenic and mercury. Also, we are speaking to heavy equipment and mining equipment suppliers who are keen to debt finance their equipment for the project.
We are confident that between ENAMCO’s responsibility for ⅓ of the capital costs, bank debt facilities metal off-take, equipment financing and eventually an equity component we will be able to put together the necessary finances for the project.
PG - You have mentioned in 2 news releases that you are in discussions with interested parties that could lead to a potential acquisition of the Company. Can you comment on this?
MH – Since the Feasibly Study was completed in May which showed the Asmara Project to have very strong economics, there has been a surge of interest in the project and the company that could lead to the acquisition of the Company or the project. As I mentioned earlier, the project will produce large amounts of copper and zinc along with precious metals and being in an African country there is no surprise to see interest in Sunridge coming out of Asia. Due to the strong interest the Company since the BFS, we are in the process of appointing an adviser to assist us with any potential offers.
It is important to note that we are essentially going down two separate paths; 1) we are working to move the project into production ourselves just as Nevsun did, and 2) we are in discussions with a number of interested parties which could lead to the sale of the Company or the project. We were one of the very few companies to be able to raise money in these markets essentially due to the very strong economics of the project and the funds will enable us to continue to move forward. Although the mining sector has been brutal for the last few years, the Asmara Project is very robust and we believe that both paths are available to Sunridge.
Thank you Michael!