Nevsun Is Hiding A Lot Of Potential
Aug.30.16 | About: Nevsun Resources (NSU)
Nevsun diversified not only its production mix but also its geographical risks.
The Bisha mine is profitable at current metals prices and it generates
enough cash to finance the exploration and development activities in
Eritrea as well as in Serbia.
The Timok Upper Zone mine should be in production by 2020, at a very
The Timok Lower Zone can turn out to be a giant copper-gold deposit
that will be in production for decades.
If zinc production start-up goes well and metals prices don't tank, it
is reasonable to expect that Nevsun's share price will cross the $5
level over the next 12 months.
Nevsun Resources (NYSEMKT:NSU) is a copper producer whose valuation
has long suffered for an increased political risk. Nevsun's
cornerstone asset, the copper-gold-zinc Bisha mine, is located in
Eritrea, a country in eastern Africa that is known for a higher level
of political risks. As a result, the market capitalisation of Nevsun
Resources tends to be lower compared to its peers, although the
company is able to remain profitable also at the current copper prices
that are close to multi-year lows.
But the times are changing and Nevsun Resources changes as well.
Earlier this year, the company acquired Reservoir Minerals and its
world-class copper-gold assets located in Serbia. The development of
the Timok mine will help Nevsun to diversify its operations
geographically. Moreover, the Eritrean Bisha mine entered another
phase of its existence and it is about to turn from a copper mine into
a copper-zinc mine. It is a great news for Nevsun Resources, as the
zinc market deficit is growing and zinc prices are on the verge of a
major bull market.
The Eritrean Operations
The Bisha mine is 60% owned by Nevsun Resources and 40% owned by the
Eritrean government through ENAMCO (Eritrean National Mining Company).
The successful collaboration with the Eritrean government helps to
mitigate the political risks. The Bisha project contains inferred and
indicated resourcesof 1.28 billion lb copper, 3.5 billion lb zinc and
1.3 million toz gold. The reserves include only the Bisha and Harena
open pits. The combined proven and probable reserves grade 1.1%
copper, 5.57% zinc, 0.68 g/t gold and 44 g/t silver. It equals to
copper equivalent grade of 5.1% or to gold equivalent grade of 5.6
g/t, at the current metals prices of $1,300/toz gold, $18.5/toz
silver, $2.1/lb copper and $1.05/lb zinc. The amount of metals
contained in the reserves equals to 0.51 billion lb copper, 2.58
billion lb zinc, 0.46 million toz gold and 29.71 million toz silver.
It is equal to 2.35 billon lb of copper equivalent or 3.79 million toz
of gold equivalent. In other words, the current Bisha mine reserves
are similar to a respectable high-grade gold deposit grading 5.6 g/t
gold and containing 3.79 million toz gold.
Received on Wed Sep 07 2016 - 20:15:03 EDT