Nevsun sees bright future at Bisha

It’s a transformative year for Nevsun Resources (TSX: NSU; NYSE-MKT: NSU), as the company and its 40% joint-venture partner, Eritrean National Mining, remain on schedule and under budget to complete a zinc expansion project this May at their Bisha open-pit copper-zinc mine, 150 km west of Asmara in Eritrea.

The zinc circuit’s capital cost has been updated to US$80 million, or US$20 million under budget. It will be used to process primary zinc ore as mining at Bisha moves below the supergene horizon and into the zinc-rich part of the volcanogenic massive sulphide (VMS) deposit.

The new zinc and existing copper flotation plants could produce 225 million lb. zinc and 53 million lb. copper-in-concentrate every year through 2025 — not too different from the total copper tonnage produced at the mine in 2015.

But with copper prices hitting their lowest levels since May 2009 at US$4,318 per tonne in January 2016, the transition into Bisha’s open-ended zinc resources may be well-timed, the company said.

Nevsun reckons the market will see a zinc supply gap of 300,000 tonnes this year — created by global production cuts and mine closures, which shaved 10% off supply since 2014 — and growing in subsequent years.

The company sees other opportunities at Bisha. A recent scoping study by SRK Consulting suggests that some of the ore being mined in Bisha’s open pit may be more economic if extracted from underground workings.

However, the study draws its conclusions mostly from inferred resources and recommends Nevsun  drill the deposit further from underground to increase upgrade the resource.

Nevsun said in a press release that it will reach a decision to build the drive in the second half of 2017, and will continue exploration, metallurgical and geotechnical test work within the pit this year.

Bisha’s measured and indicated resources stand at 625 million lb. copper and 2.96 billion lb. zinc in 25.9 million tonnes of 5.5% zinc, and 2.1% copper and 1.1% copper in supergene and primary material.

Inferred resources add 74 million lb. copper and 204 million lb. zinc, in 3.2 million tonnes grading 5.9% zinc, and 1.3% copper and 1.1% copper in supergene and primary material.

Resource calculations use US$3.15 per lb. copper and US$1.10 per lb. zinc.

The scoping study suggests the mine life at Bisha could be extended with feed sourced from the open-ended Harena deposit, located 10 km south.

Over 20,000 metres of new drilling has bumped indicated resources 15% to 3.7 million tonnes at 0.9% copper and 3.1% zinc, along with a 69% increase in primary inferred resources, now at 10.9 million tonnes at 1.5% copper and 4% zinc.

“The underground scoping study demonstrated the potential to extend Bisha Main life by transitioning to underground mining in the future and the potential to provide more feed to the Bisha mill from a Harena underground mine. In 2016, we will further assess these opportunities through more investment,” Cliff Davis, CEO of Nevsun, said in a press release.

With no debt and US$430 million cash in its treasury, the Eritrea-focused miner appears well-positioned to grow in a VMS district where many targets are open-ended or underexplored.

This year the company plans to spend US$11 million to drill 34,000 metres at its Bisha Main and Harena deposits, along with greenfield exploration at its Mogaraib prospect.

Nevsun shares have traded within a 52-week range of $3.27 to $5.35, and closed at $4.43 per share at press time. The company has 199.8 million shares outstanding for an $897-million market capitalization.