Greg Davis, Corporate Development, Sunridge Gold- 2015 Subscriber Investment Summit Presentation

Big news out this morning from Subscriber Investment Summit presenter Sunridge Gold (SGC:TSXV).

Sunridge has agreed to sell its 60% interest in the Asmara Mining Share Company (AMSC), holder of the Asmara project in Eritrea, to China's Sichuan Road & Bridge Mining Investment Development Corp. Ltd. (SRBM), for an upfront purchase price of US$65 million cash.

The other 40% of Asmara is held by Enamco, Eritrea's state-owned mining company.

The stock is trading up 9 cents (52.94%) in early trading this morning on the news. At 26 cents, the current market cap is $54.6 million, still well below the $65-million ($86-million Cdn) offer.

Mr. Hopley, president and CEO of Sunridge, commented, "The $65-million (U.S.) purchase price for our 60-per-cent interest in AMSC to be paid by SRBM, or $85-million at the current exchange rates, equates to a significant premium to the present market value of Sunridge, and under the continuing challenging market conditions for junior resource companies, we believe that this is an attractive cash offer."

CEO Chat regular Eric Coffin of Hard Rock Advisory, a long-time follower of Sunridge in his excellent newsletter, chimed in with his thoughts on the takeover this morning.

He described it as a "good deal for SGC shareholders" and said the plan is to "distribute all cash as a return of capital and fold it up."

He expects the final payout will be about 40 cents a share by the time taxes and closing costs are included. "Not what management wanted in a perfect world but when someone offers more than twice the current share price you have to take it to shareholders."

"The arbs will be having fun with SGC I'm sure @Ryan. Everyone will have their own thoughts about odds that it closes and what the transaction cost and payout will be. I think it should be close to 40 so the current price is pretty cheap if you think it closes and are willing to sit on it," Coffin commented.

The risk here is that the deal fails to close.

The conditions to closing include:

  • Sunridge shareholders approving the transaction at a meeting to be called and held in January, 2016;
  • Receipt of the remaining final regulatory approvals within China, including but not limited to final SASAC approval, and approval of the National Development and Reform Commission, the Ministry of Commerce, and the State Administration of Foreign Exchange;
  • Receipt of regulatory approvals in Canada, including the TSX Venture Exchange, and receipt from the Ministry of Energy and Mines of the government of Eritrea of notice of its approval of the transaction.

The Asmara project consists of four advanced-stage deposits of copper, zinc and gold that were included in a 2013 feasibility study, as well as two pipeline projects. Sunridge had received its mining licenses and Phase 1 production was targeted for 2016.

Read: Sunridge Agrees To Sell Its 60% Interest In Asmara Mining Share Company

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