Northland Capital sees good scope for Sunrise Resources shares to outperform

From the current low level there is good scope for Sunrise Resources (LON:SRES)  shares to outperform, according to Northland Capital.

“Having peaked at 6.7p last year, shares have fallen back to below 1p, a capitalisation that reflects little potential for the portfolio,” analyst Andrew McGeary said in a note to clients.

“From such a low base there is good scope for future outperformance.” 

McGeary says this outperformance could come from any one of the firm’s three projects – the Derryginagh barite project, the Long Lake gold project and diamond exploration.

This morning Sunrise announced the completion of its first drilling programme at the Derryginagh barite project in south-west Ireland. Assay results are expected later this month.

“Encouragingly (barite) mineralisation has been extended to 180 metres below surface, compared to the 60 metres extent of the old workings which is significant,” the analyst said.

“On visual inspection, thicknesses are said to be in line with shallower intersections and of high grade.” 

“Whilst news on potential for lateral extension is less positive, this remains inconclusive at this stage and the deposit also remains open along strike.”

McGeary reckons Derryginagh has the potential to underwrite the Sunrise business going forward as the company pursues other, potentially higher impact, prospects. 

At Derryginagh Sunrise is targeting the production of white barite for use as industrial filler in paint and plastics. An important first milestone at the project was the completion in May 2011 of a positive concept study, suggesting a profitable underground operation with output of at least 50,000 tonnes per year.

The recently completed drilling comprised six holes for a total of 892 metres and has been successful in extending the known barite vein system to approximately 180 metres vertically below surface. 

This represents a significant depth below the old workings where the drill intercepts, based on visual inspection, have thicknesses in line with shallower historical intersections and are visually estimated to be high-grade.

Geological logging of the drill core is being completed and results will be evaluated together with down-hole survey data to allow more detailed information to be released after assay results become available.

Sunrise expects to start feasibility studies for Derryginagh this year.

The group sees a substantial market for white barite in Europe which has traditionally been supplied from China, but the Chinese deposits are becoming exhausted and remaining reserves are being reserved for a growing domestic market.

It is planning a modest-sized underground mining operation feeding a low cost gravity separation plant producing high-value filler grade barite.

Barite is the mineral form of the chemical barium sulphate. It is an environmentally friendly, non-toxic natural product. It is chemically and physically unreactive, has a high specific gravity, and low oil adsorption. It also has good sound-deadening and radiation-shielding properties. 

Its properties make barite suitable for use as a weighting agent in oil industry drilling muds and as higher value industrial filler in, for example, paint plastics, brake linings and acoustic panels.