Beacon on sgc..new target

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Beacon on sgc..new target

posted on Nov 12, 2014 10:41AM

Beacon Securities Ltd.|

66 Wellington Street West Suite 40

50, Toronto, Ontario, M5

1H1

|416.

643.3830

|www.beaconsecur

ities.ca

nridge Gold

rporation

(

SGC

)

Poi

ed To Become

ritrea’s

Next Miner

October

, 2014

Michael Curran, CFA

(416)

507

3950

mcurran@beaconsecurities.ca

We are initiating coverage of

Sunridge

Gold Corp.

with a

BUY

rating and a 12

month target price of $

0.55

/sh

. In

summary, our recommendation is based on the following:



Robust

Mining P

roject

SGC

’s main asset is

the

Asmara

VMS

project in Eritrea, located in northeastern Africa.

SGC holds a 60% in

terest with the Eritrean Government

holding the remaining 40% (10% free

carried).

The

feasibility study

s completed on the

copper

zinc

gold

silver

project, and permits to begin

mine

construction are

expected

in Q1/15.



Multi

Staged Development

initial

ope

rations will involve

open pit

mining of direct shipping ore (DSO) containing

high grade copper, gold, and silver.

Next, n

ear

surface

oxides will be processed at site using heap

leaching

methods to recover gold and silver.

Finally, additional

processing cir

cuits will be added, and throughput rates

increased, to recover zinc and

copper from primary

sulphide ores.



Experienced Management Team

SGC’s team includes

several people involved in taking the Bisha mine from

exploration to production in Eritrea.



Reratin

g Opportunity With Permits/Financing

: we expect

renewed market interest in SGC shares as additional

milestones are achieved towards moving the Asmara

project into construction

in the coming few quarters

Valuation/Rating:

shares currently trade at

our

NAV of the company’s assets, which compares to the peer

group of companies averaging

0.5

0.6x

. Employing

our

target P/NAV

and forward

looking P/CF

multiple

s (

0.6

and

6.0x respectively)

, generates our 12

month target price of

/sh, and we are in

itiating coverage of

SGC

with a

BUY

rating.

Initiating Coverage

Previous Close

$0.14

12-month Target Price

$0.55

Potential Return

307.4%

Dividend Yield

0.0%

52 Week Price Range

$0.13-$0.31

(US$MM, except per unit)

FY13

FY14e

FY15e

FY16e

Revenue

$0.0

$79.5

Net Income

-$12.4

-$6.5

-$7.5

$16.8

Shares O/S (wgt avg)

168

205

270

280

EPS (operating)

-$0.07

-$0.03

-$0.02

$0.07

CFPS

-$0.07

-$0.03

-$0.02

$0.16

P/E

neg.

2.1x

P/CF

neg.

0.8x

NAV

$0.63

P/NAV

0.2x

Shares Outstanding

210.0

million

Mgt/Insiders

<1%

(C$MM)

Market Cap

$28.4

LT Debt (corporate)

$0.0

Working Capital

$3.0

Enterprise Value

$25.4

Fiscal Year End

August 31

Copper

Zinc

Gold

Silver

(MMlbs)

(MMoz)

2P Reserves

M+I Resources

1,266

2,553

0.9

28.4

(US$/sh)

Q1/13

Q2/13

Q3/13

Q4/13

EPS (operating)

-$0.02

CFPS

-$0.02

Q1/14

Q2/14

Q3/14

Q4/14e

EPS (operating)

-$0.01

CFPS

-$0.01

BUY $0.55

Sunridge Gold has been exploring for VMS base and precious metal

deposits in Eritrea since 2003, outlining several deposits on its Asmara

property. The project has been advanced sufficiently for the

Government of Eritrea to exercise its option to purchase 30% of the

project.

All prices in C$ unless otherwise indicated

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