Sunrise Resources poised for bright and busy summer of drilling

Sunrise Resources (LON:SRES) is set for a busy few months after it kick-started two key drill programmes this week.

On Monday Sunrise announced that it had begun a pivotal second phase of drilling at the Long Lake gold project in Canada. The diversified junior was put on the map by its recent success at the Long Lake, but this more than just a one project firm.

A second drill programme, announced this morning, could ultimately lead to the re-development of the Derryginagh barite mine in Ireland, with potentially rich cash-flows. 

Add the group’s Australian diamond exploration portfolio to the list and you can see that Sunrise offers investors a unique three-way play on mineral exploration.  

Indeed Sunrise, valued at just £10 million, offers far more opportunities than your average micro-cap.

Investors seemed to grasp this as the shares nudged towards 7 pence a share in a frenetic period at the end of last year, though there has been a major pullback since.

“We had a lot of interest in the shares on the back of Long Lake drilling, which was sustained by the results,” chairman Patrick Cheetam told Proactive Investors.

“The historic Long Lake mine produced substantial amounts of gold from very shallow workings, we’ve been targeting extensions to that mineralisation.

"In the 2010 drill programme we found extensions to the mineralisation on both sides of the deposit and confirmed the mineralised structure at depth. A lot of the next drilling phase will follow that up.”

However adverse weather put a dampener on the project in the new year, more accurately it was a wash-out.

Flooding caused by the thawing of a particularly snowy winter meant Sunrise couldn’t get access to the site as early as it wanted.

Cheetam explained: “We’ve had a bit of a delay getting back to work there and some investors, with short-term investment horizons, sold out in that period.”

“We were delayed not only by the weather but there were also difficulties getting drill contractors.

"After a period where a lot of juniors had managed to raise money, and put it to work, it was more difficult to find a contractor with suitable availability and sign them up.

“So it has taken longer than we had hoped to get something sorted on that front and because of that some investors have lost patience. But I’m confident that this side of things will pick up as we get to work with the drill. 

“Even so we’re still way above last year’s placing price at the back-end of last year.”

Sunrise got access to the project through an option deal with local prospector Gordon Saloin in May last year. 

The agreement gave it three years to acquire a 100 percent stake in the project.

Crucially Cheetham reckons the next drill programme will be the key milestone for Sunrise in the coming months.

“It is likely to be a make or break programme for Long Lake. The results will be very influential as far as our option to acquire the project is concerned.”

He also stressed that there is more to Long Lake than just gold. 

“We have also identified several other interesting targets. You see the area is not just about gold but it is also prospective for nickel and copper, the site is also along potential strike extensions of a number of copper and nickel mine, which also have a certain amount of platinum group metals as well.”

“The mine is located near one of the biggest nickel mining centres in the world.”

Aside from Long Lake the group’s other two projects couldn’t be more different.

In Ireland it has a barite mine re-development project which could produce a premium product for a niche industrial application, meanwhile in Australia it has an exciting opportunity to finish off a successful, albeit early stage, diamond exploration campaign started by De Beers.

Of the two the Derryginagh barite project, where an eight-hole drill programme began today, is the more advanced.

For the uninitiated, barite is an industrial mineral that has many uses, it is most commonly used as a weighting agent in drilling and as a filler in paint.  Importantly Sunrise believes that the Derryginagh barite is of a sufficient quality to be used as a ‘premium’ paint filler. 

“High quality white barite can be used as a filler in paint, in this niche application it has a much higher value than other application, about US$200 a tonne,” Cheetham added. “We’ve carried out sampling and tested the product. It meets the required specifications.” 

Importantly a high level, economic evaluation recently showed that Derryginagh could potentially support a mining operation.”

“That was very positive. So we are now moving into the drill phase so that we can start defining resources.”

The current drill programme, aimed at the defining a JORC mineral resource, is the next step for the potential mine development. 

Speaking about the drill programme Cheetam said: “We know roughly what we need to define to support an economic mining operation there.

“And defining that amount will be the main objective.”

Drilling is expected to about 6 weeks and the results should be available 6 weeks after the programme ends. In the meantime Sunrise is going to look at any potential planning issues shortly so it can get a clearer idea of a potential time-table should the mine development project prove viable.

Ultimately Derryginagh will be all about generating cash-flows that can in turn help fund the higher-impact projects. Operationally it could be a low risk project, and with sale prices above £200 a tonne, it could provide a funding engine-room for the business.

In February Sunrise, which originally spun out of Tertiary Mineral’s with a small diamond portfolio, announced a return to its roots as it was granted an initial 5 year exploration licence for the Cue Diamonds project – which was abandoned by De Beers when it pulled out of Australia in 2001. 

“De Beers found a number of Kimberlites across the ground, they probably weren’t quiet big enough for them at that time,” Cheetham said.

“An extensive exploration programme was still underway, looking for additional kimberlites in the area, when a decision was made back in South Africa that De Beers would cut back on exploration around the world.”

“For them it was a broader strategy decision, De Beers pulled out of Australia despite what it had found so far.”

“They left the project at a very interest stage in the exploration.”

“De Beers left will several drill targets untested, despite finding two kimberlites through what was a fairly limited drill programme.”

Cheetam predicts that drilling is likely to get underway towards the end of this year. 

In the meantime Sunrise needs to get clearance for the work programme. “We have to get what’s known as Native Title Clearance for the work programme, which means we have to complete anthropological studies over the area to make sure we’re not interfere with any aboriginal sites,” he added.

“As soon as that’s done and out of the way, we’ll move straight into drilling.” 

Given the group’s size and just how diversified its projects are, some investors may worry that Sunrise may be spreading itself too thinly. However Cheetham is confident that the group has sufficient funds to meet its immediate needs.

“We don’t anticipate a fund raising this year,” Cheetham said.

“We’ve got enough money to cover our work programmes going forward. The programmes that we have in planning are fully-funded, we’ve got about £1 million at the moment.”