Vancouver — After a recent site inspection, management of
Nevsun has been exploring and developing Tabakoto since 1994, and brought the project to feasibility in late 2002. Construction began last year with a view to starting production this summer, building up to an annual rate of about 105,000 oz. gold early next year.
The company says construction was initially delayed by logistical problems involving the shipment of goods. All goods are now on-site, and construction of the plant facilities and infrastructure are reported to be progressing well. Power, fuel, a camp and administrative office are nearing completion and open-pit mining is under way.
The most significant delay involves the construction of a tailings facility. This critical-path delay, combined with previous delays, prompted the company to push-back the start of production until December of this year. Full production is expected to be achieved in the first quarter of 2006.
Nevsun initially estimated capital costs of US$40 million for Tabakoto, an estimate later raised to US$45 million, owing to higher steel and freight costs, and currency exchange rates.
Since then, time delays have added about US$3 million to capital costs, while increased costs for such items as mining equipment, materials, labour, shipping, and social programs have added another US$15 million. As a result, capital costs for Tabakoto are now estimated to total US$63 million.
On the other hand, the company notes that gold prices have increased significantly since the original feasibility study such that the benefits of higher prices now outweigh the additional capital costs.
Tabokoto has proven and probable reserves of 548,000 tonnes grading 3.98 grams gold per tonne, sufficient for about five years of production. The nearby Segala deposit and other satellite zones offer potential to expand and extend the life of the mine.
Nevsun is exploring and developing other mineral projects in Africa, notably the Bisha volcanogenic massive sulphide (VMS) deposit in Eritrea. A drilling program is under way at Bisha as part of the reserve estimate scheduled for completion late this year. The reserve estimate will then be incorporated into the feasibility study, scheduled for completion in the first quarter of 2006.
The Bisha project is held 90% by Nevsun, with the government of Eritrea holding the remaining 10%. The project is situated in the Gash-Barka district, about 150 km west of Asmara.
Nevsun posted a loss of US$2.7 million in the latest quarter ended June 30, compared with a loss of US$4.7 million a year earlier. The company is debt-free and has working capital of US$18 million, down from US$27 million in the second quarter of 2004.
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