Nevsun closing in on Eritrean mining licence

The Eritrean government and Vancouver-based Nevsun Resources (NSU-T, NSU-X) have hammered out a deal over how much of the Bisha project the government will have.

The government will pay fair value for a 30% participating interest moving its total interest to 40%. The stake will be held by the state mining body, ENAMCO, which was created in 2006 to gain ownership interest in project and to help develop the mining industry in the country.

The government already has a 10% free participating interest provided by the country’s mining legislation

With an agreement reached Nevsun says it has been assured that the process to get a full mining licence for Bisha will move quickly.

An independent valuator will assess how much ENAMCOs stake is worth at the time of the first gold shipment using a discounted cash flow analysis based on the Bisha feasibility study financial model, updated for the market consensus for metal prices, actual capital costs incurred, and applying the then applicable discount rate.

ENAMCO also has to make a provisional payment within the next three months.

In Toronto on Oct. 29, Nevsun shares gained roughly 17% or 30 to $2.10 on 3.2 million shares traded.

In its press release Nevsun was touting the fact that the partnership will not only reduce its political risk discount, but will also bring more capital to the project and greater risk diversification, as the government must contribute to 33.3% of capital costs.

Bisha is made up of three distinct zones: a 35 metre oxide zone overlying a 30 metre supergene zone, overlying a primary sulphide zone. Significant byproduct gold and silver are recoverable from both the supergene and primary ores.

The oxide zone has a proven and probable reserve of 4 million tonnes grading 7.99 grams gold and 32.85 grams silver.

The Supergene zone has a reserve of 6.4 million tonnes grading 4.4% copper, grams 0.83 grams gold and 35.98 grams silver. While the primary zone has a reserve of 9.7 million tonnes grading 7.21% zinc, 1.14% copper, 0.76 grams gold and 54 grams silver.

Nevsun plans to process the three ore-types with a common crushing and SAG/ball grinding circuit. It will, however, require three different extraction and processing circuits, it says.