China Eximbank provides RMB 250 million loan for SRBM acquisition of 60% equity stake in Asmara Mining Share Company (AMSC)

On September 11, 2015, Sunridge Gold Corporation announced that Asmara Mining Share Company (AMSC) — a joint venture between Sunridge Gold Corporation (Sunridge) [60% ownership stake] and the Eritrean National Mining Corporation (ENAMCO) [40% equity stake] — had signed a Mining Agreement with the Eritrean Ministry of Energy and Mines (MEM) and as a result three mining licenses would subsequently be issued to AMSC for the Asmara Polymetallic (Copper-Gold) Mine Project. The licenses covered the four advanced sub-projects (Emba Derho, Adi Nefas, Gupo Gold and Debarwa) that make up the Asmara Polymetallic (Copper-Zinc-Gold) Mine Project (also known simply as the ‘Asmara Project’). An additional 83.12 square kilometers of exploration licenses were to be retained by AMSC, which include the Adi Rassi copper-gold deposit and the Kodadu gold deposit. The September 11, 2015 Mining Agreement covered every aspect of the planned mining operations on the Asmara Polymetallic (Copper-Gold) Mine Project, including the timing of the start of development and commercial production, design capacity and production amounts, reporting requirements, royalty calculations, the use of expatriate employees, contractors and sub-contractors, financing and fiscal arrangements, safety issues, community relations, as well as reclamation and closure issues. It granted AMSC exclusive rights to the mineral title and exclusive rights to conduct mining operations within the license areas over a 20 year term. The Emba Derho, Debarwa and the Adi Nefas Mining Licenses were to cover a total area of 19.3 square km, and planned mining operations of the Mining Licenses were based on a feasibility study that was undertaken on May 16, 2013 and amended in March 2014. The September 11, 2015 Mining Agreement also approved the initiation of all of AMSC’s proposed reclamation and closure plans contained in the Asmara Project Social and Environmental Impact Assessment (SEIA) report, which was completed in January 2014. Then, on November 6, 2015, Sichuan Road & Bridge Mining Investment Development Corp. Ltd. (SRBM or 四川路桥矿业投资开发有限公司) announced its intention to purchase a 60% equity stake in AMSC from Sunridge for $65 million in cash. SRBM also agreed in principle to assume the obligation to pay Sunridge the remaining principal of the deferred payment of $13.33 million owed to Sunridge by ENAMCO. The acquisition, which was facilitated by an RMB 250 million loan from China Eximbank to SRBM, was successfully completed in April 2016. Then, in 2022, China Eximbank signed a $260 million loan agreement [identification number: 2060011022020215403] with AMSC for the Phase 1A of Asmara Polymetallic (Copper-ZInc-Gold) Mine Project. The loan carries a 10-year maturity, a 3.5 year grace period, and an unknown interest rate. SRBM provided a corporate guarantee for 60% of the face value of the loan and ENAMCO provided a corporate guarantee for 40% of the face value of the loan. Under Phase 1A, high-grade copper from the Debarwa deposit will be mined via open-pit methods, crushed and loaded into containers, and transported 120 km to the port facility at Massawa for shipping and sale to a smelter in China (a process known as direct shipping ore or “DSO”). Phase 1A officially commenced in June 2022. China’s ambassador to Eritrea, Cai Ge, cut the ribbon to officially mark the start of the project. The Asmara Polymetallic (Copper-Gold) Mine Project (total cost: $500 million) hosts four known deposits at Emba Derho, Adi Nefas, Gupo, and Debarwa. The mine is expected to have a life of 17 years, producing an estimated 381,000 metric tons of copper, 850,000 tons of zinc, 436,000 ounces of gold, and 11 million ounces of silver. The feasibility study for the project demonstrated that mining the four advanced deposits that make up the Asmara Project (Emba Derho, Adi Nefas, Gupo Gold and Debarwa) and processing of the ore at a central location near the large Emba Derho deposit is economically robust with a pre-tax net present value (“NPV”) of $692 million (using a 10% discount rate) and with a pre-tax internal rate of return (“IRR”) of 34%. The post-tax NPV is $428 million with an IRR of 27%. The feasibility study outlined a three-phase start-up mining operation which would begin with Phase 1A of high-grade copper DSO production from the Debarwa deposit, followed by Phase 1B heap-leaching of near surface gold, Phase 2 supergene copper production, then zinc and copper at a full production rate of 4 million tonnes per year. At full production, the mine is expected produce an average annual production of 65 million lbs (29,000 tons) copper, 184 million lbs (83,000 tons) zinc, 42,000 oz gold, and 1 million oz silver over the first 8 years. The life of the mine is 17 years.

Additional details

1. The K&L Gates’ transaction advisory team on the April 2016 acquisition was led by Beijing partner Frank Voon, who was supported by Hong Kong partners Michael Chan and Sacha Cheong, and associate Iris Bi. K&L Gates advised Sunridge on Hong Kong law and provided transaction support from a Chinese-law perspective. 2. AMSC is the project company (special purpose vehicle) that is responsible for the financing, design, and implementation of the Asmara Polymetallic (Copper-Zinc-Gold) Mine Project. 3. Evidence of corporate guarantee issuance can be found at https://finance.sina.com.cn/jjxw/2023-02-09/doc-imyezuta6308260.shtml. 4. ENAMCO is a state-owned Eritrean mining company.

Number of official sources

5

Number of total sources

17