From Grandich's blog today:

Sunridge Gold announced a blockbuster deal with global copper producer Antofagasta Minerals S.A. that IMHO can change the landscape of the mining industry in Eritrea. The strategic alliance should enable Sunridge to aggressively explore the 585 square kilometer property that obviously Antofagasta believes has enormous potential. The agreement also allows Sunridge to continue developing the 4 known deposits that they already have in Eritrea.

More importantly though, a major global mining producer entering Eritrea for the first time is a major stamp of approval on both Sunridge and the country, and should help position Eritrea as the next mining hot spot in the world.

In working towards this deal, Antofagasta conducted extensive due diligence studies. This work included an in-depth study of the technical merits and geology, and also the geopolitical situation in Eritrea. Antofagasta management visited Eritrea and met with all levels of government. Their geologists did an extensive investigation into the geology by visiting the field and reviewing all technical data available on the project. They share Sunridge’s belief that the project could potentially host several large base metal and gold deposits, perhaps even larger than Sunridge’s Emba Derho deposit.

Sunridge will now have approximately $10 million in the treasury and further commitments from Antofagasta to fund an additional $10 million over the next 5 years.

Watch for news on this in the near future.

In my discussions with Sunridge management, they tell me that a news release outlining plans to drill on the Development Areas which they retain 100% should be forthcoming. This should include plans on the Debarwa deposit, which hosts extremely high copper grades and Sunridge geos feel can greatly be expanded.

Once the final agreement with Antofagasta is signed, exploration work should focus on 2 fronts:

1 – Drilling the new high priority targets on the Exploration Areas under the agreement, and

2 – Drilling on the Development Areas owned 100% by Sunridge.

Antofagasta

Antofagasta plc is listed on the London Stock Exchange and is a constituent of the FTSE-100 index. Its Chilean mining operations, which comprise Los Pelambres, El Tesoro and Michilla, are expected to produce approximately 447,000 tonnes of copper in concentrate and cathode and 7,200 tonnes of molybdenum in concentrate in 2009. It is currently carrying out a Brownfield expansion at Los Pelambres and developing the greenfield Esperanza project in Chile, which, when operational, are expected to increase total Group copper production to nearly 700,000 tonnes per year from 2011. Antofagasta also has exploration or feasibility programs in Chile, Pakistan, Zambia and Mexico. At 30 June 2009, Antofagasta plc had net cash of US$1.8 billion and it currently has a market capitalization of US$11.3 billion.

The Agreement

By funding US$10 million of exploration work over a 5-year period, Antofagasta can earn a 60% interest in a portion of the Sunridge’s Asmama project known as the Exploration Areas. They will have a right to complete a feasibility study on any project in the exploration areas to earn another 15%. Antofagasta will also purchase common shares of Sunridge in a non-brokered private placement for proceeds of US$5 million.

Antofagasta will become Sunridge’s largest shareholder owning an approximate 18% interest in Sunridge. Sunridge will retain 100% ownership of the 4 deposits discovered to date on the property.

Exploration Area

The deal will allow Sunridge to aggressively drill the numerous high priority drill targets located on the Asmara Project. This area appears to host some of the best potential in the world for VMS gold-base metals targets.

These high priority drill targets have been identified over the past several years through geological mapping and sampling as well as various geophysical methods. The targets typically have strong gravity anomalies, strong EM anomalies, strong soil geochemical anomalies, and to top it off they have gossanous rock poking out at surface. These are the same methods used by Sunridge in the discovery of their large Emba Derho copper-zinc-gold deposit, as well as Nevsun’s Bisha Project.

The new targets of particular interest are Dario Paulus, Kodadu, Adi Rassi, Adi Musa and Adi Lamza and we can watch for these names in the upcoming months as Sunridge begins an their drill program.

Development Areas

Sunridge has had great success with its’ drill programs over the last 5 years and has already defined 4 deposits on the Asmara Project, including the large Emba Derho deposit where a recent Preliminary Economic Assessment (Scoping) Study showed it to have a NPV of over US$200 million. Sunridge will retain 100% ownership of the deposits in the Development Areas. These four deposits contain “indicated 43-101” resources totaling:

• 1.28 billion pounds. of copper,
• 2.5 billion pounds of zinc,
• 955,000 ounces of gold, and
• 31.2 million ounces of silver

The four deposits defined by Sunridge in the Development Area to date are described below:

Emba Derho

• NI 43-101 “Indicated” resource – Approx 62.5 m/tonnes containing 990 m lbs Cu, 1.9 billion lbs Zn, 580,000 ozs Au & 20.8 m/ozs Ag.
• Positive Independent Preliminary Economic Assessment (Scoping) Study completed June 4, 2009 by Wardrop Engineering Inc shows:
  • Pre-tax NPV 0f US$203.9 million with 10% discount
  • Base case IRR of 21.6% with 4 year payback
  • Potential large open pit mine.
• Emba Derho deposit remains open to northwest, northeast, and to depth.

Debarwa

• Supergene copper zone with 1.3 m/tonnes of 5.36% copper, 1.54 g/t gold and 33.87 silver, containing 158 million pounds of copper in the Indicated category.
• Total Indicated NI43-101 resource – 4.47 million tonnes.
• The deep primary zone at Debarwa, which is open at depth, has an average grade of 2.53% copper with 3.23 % zinc in the Indicated category using a 1% copper cut-off and contains an additional 39 million pounds of copper and 49.8 million pounds of zinc.
• Open in several directions for expansion.

Adi Nefas

• High-grade VMS deposit.
• NI43-101 indicated resource of 2.7 million tones with 8.38% zinc, 2.85 g/t gold and 99.36 g/t silver, containing 504 million pounds of zinc, 250,000 ounces of gold and 9 million ounces of silver.
• Close proximity (6 km) to the large Emba Derho VMS deposit.

Gupo Gold

Drilling has outlined an inferred gold resource estimate of 1,965,000 tonnes at a grade of 2.99 grams per tonne gold totaling 189,000 ounces of gold.

Nevsun

The news of this agreement is also a tremendous boost for Nevsun Resources (Is in our model portfolio). Nevsun has been going it alone in building their Bisha Mine located in western Eritrea and the fact that a major mining company has entered the country after conducting a full due diligence give credence to what both Sunridge and Nevsun management have been saying about working in the country.

Nevsun also announced in July that they have secured the debt financing necessary to build the mine and production is expected 3rd or 4th quarter 2010. Several scenarios can be played out going forward – all good for Nevsun and Sunridge shareholders.

The Bottom Line

While both Sunridge and Nevsun have run up of late, they still appear to have lots of corporate development in front of them. In the case of Nevsun, I believe this news bolsters those of us who claim it’s a worthy takeover target. This can only help Sunridge if and when this proves correct.