Nevsun’s coffers swell as it shifts Bisha to copper

VANCOUVER — In its first full quarter operating Bisha as a copper mine, owner Nevsun Resources (TSX: NSU; NYSE-MKT: NSU) encountered some commissioning challenges, like higher-than-expected grades and a trucking bottleneck that filled the concentrate pad to capacity and forced operations to a halt for 13 days, but it still kept production costs at the Eritrean operation among the lowest in the industry. 

The mine churned out 39.7 million lb. copper in the first quarter, at an average cash cost of US98¢ per lb. Nevsun realized an average price of US$3.01 when it sold each of those pounds of copper.

“Bisha had a great quarter,” said Nevsun president and CEO Cliff Davis. “We’re especially pleased to achieve a C1 cash cost per payable pound sold of 98¢, well within the first quartile of copper producers, while still ramping up production.”

With costs contained, Nevsun reported net earnings of US$15.4 million. Those earnings added to the miner’s growing financial stockpile: Nevsun is sitting on US$338 million in cash. Not surprisingly, Davis says the company continues to “actively evaluate potential merger and acquisition opportunities.”

Bisha sits 150 km west of the Eritrean capital city of Asmara. The 120 sq. km property covers a volcanogenic massive-sulphide deposit with distinct mineralization layers. Gold was the primary metal in the top layer, and from the start of commercial production in late 2011 until mid-2013, Bisha produced gold–silver doré.

By mid-2013, however, the mine had worked through the gold–silver layer and reached the second mineralization layer, where copper was the dominant mineral. To prepare for that transition Nevsun invested US$110 million into the Bisha processing plant, which began commissioning in July. The copper facility achieved commercial production in December.

Nevsun expects production to ramp up in the second quarter, as it irons out some of the wrinkles in its copper-production line. One hiccup was higher-than-expected copper grades: mill feed during the quarter averaged 6.1% copper compared to a planned 4.6% grade. Higher-grade material is best processed at a slightly lower throughput — even at a slower rate, the concentrate pad filled to maximum capacity because Nevsun could not get its hands on more concentrate trucks. As a result, Bisha was suspended for 13 days over the quarter to let trucks make space on the concentrate pad. 

Nevsun has located more truck and trailer sets. If all goes according to plan, Bisha could produce between 180,000 and 200,000 lb. copper this year. 

In February Nevsun updated the resource estimate at Bisha, boosting the contained copper count by 21%, despite mining depletion through the addition of two new satellite deposits. The Bisha and Harena deposits — which are being mined — and the new Northwest and Hambok deposits collectively contain 8.5 million indicated tonnes of supergene mineralization grading 3.41% copper, 0.6 gram gold per tonne and 25 grams silver per tonne, plus 32.3 million indicated tonnes of primary mineralization averaging 1.05% copper, 4.59% zinc, 0.6 gram gold and 36 grams silver. 

A small indicated oxide resource plus a total of 2.4 million tonnes of inferred oxide, supergene and primary resource add to the total count. 

The resources translate into a reserve that can support Bisha for another 11 years of operation. The company is also advancing a major exploration program across Bisha and on the neighbouring Mogoraib River licence. 

Nevsun owns 60% of the Bisha mine. The Eritrean government holds the other 40%. 

On news of its first-quarter results Nevsun’s share price fell 5¢ to $3.82. The company has a 52-week trading range of $2.77 to $4.74, and 199 million shares outstanding.