Tabakoto to shut down (September 17, 2007)

Nevsun Resources (NSU-T, NSU-X) has announced it will mothball the Tabakoto gold mine in western Mali, citing low grades and poor operating performance.

Nevsun, which wrote down the carrying value of Tabakoto by US$80.9 million in its 2006 year-end financials, said that head grades at Tabakoto had not met reserve grades and the mining contractor had performed poorly. In addition, it was still trying to recover about US$7 million in fuel-tax rebates from the Malian government. A water shortage in May forced a suspension of operations until seasonal rains replenished the project’s reservoir and provided adequate flow in the Faleme River, where Tabakoto gets its water. There was also a 2-day strike at the operation.

In about 13 months Tabakoto produced 77,650 oz. gold, including 16,605 oz. in the second quarter of 2007. Total cash costs in the second quarter, including a 6% net smelter return payable to the Malian government, were US$778 per oz. Both grade and throughput have been below plan during the mine’s life so far.

In the second quarter, Tabakoto lost US$2.4 million and in the first quarter, US$858,000. At the corporate level, Nevsun lost US$4.7 million (US4 per share) on revenue of US$10.5 million in the second quarter, and US$3.6 million on revenue of US$12.4 million in the first quarter. Its second-quarter loss in 2006 was US$4.9 million, on revenue of US$5.9 million.

Nevsun has been trying to sell Tabakoto and the adjoining Segala property, or to deal a partial interest in the two projects. It said in a release that it would continue shopping the properties around, while paying out its obligations to the workforce and contractors.