VANCOUVER, Aug. 9, 2017 /PRNewswire/ - Nevsun Resources
Ltd. (TSX:NSU) (NYSE MKT: NSU) (Nevsun or the Company) today
announced its financial results for Q2 2017 and key strategic and
capital allocation updates to its core assets, the high-grade Timok
Upper Zone copper-gold project in Serbia and the cash producing
Bisha mine in Eritrea. Nevsun's recently appointed President
and CEO, Peter Kukielski, has
completed a comprehensive strategic review which included several
trips to Serbia and Eritrea.
Peter Kukielski commented,
"Nevsun's mission, and the reason I joined the Company, is to build
a strong, multi-mine mid-tier mining company, delivering shared
prosperity to all stakeholders. With great people, strong
assets and a clean balance sheet the Company is well positioned to
deliver that vision. In getting to know the business I have
been pleased to meet the teams we have on the ground and to witness
the strong support we enjoy from our local governments and other
stakeholders."
Mr. Kukielski continued, "To ensure we properly evaluate
optimization opportunities and increase the level of front end
engineering at Timok, we will now complete the Preliminary
Feasibility Study ("PFS") in Q1 2018. We will provide the market
with an interim update via an updated Preliminary Economic
Assessment ("PEA") in October 2017.
The additional time spent on the PFS will reduce the time needed
for a Feasibility Study, and we therefore continue to maintain our
target for production in 2021. We are also required to make tough
capital allocation decisions across the business. We have decided
to only fund the capital for a four year open pit at Bisha.
With additional capital, deeper material remains economic and we
are working with the State of
Eritrea to assess reserve increase options. Overall, the
Company is in a stronger position to fund Timok with cash flow from
Bisha and cash of $171 million on the
balance sheet."
Highlights
- Peter Kukielski appointed
President and CEO on May 12,
2017
- Decided to publish an updated Timok PEA in October 2017
- Revised Timok PFS timeline to Q1 2018
- Timok remains on-track for 2021 production with decline
construction commencing in Q4 2017
- Decided to invest $24 million in
capital in a four year open pit at Bisha (all funded from operating
cash flow)
- Ended period with cash and cash equivalents of $171 million
- Sold 34.3 million payable pounds of zinc in zinc concentrate at
C1 cash costs(1) of $0.92
per payable pound sold
- Sold 7.7 million payable pounds of copper in copper concentrate
at C1 cash costs(1) of $1.59 per payable pound sold
- Recorded a $70 million non-cash,
pre-tax write-down of long term stockpiles and mobile
equipment
Timok Project Review
|
|
|
|
|
|
Q2 2017
|
Q1 2017
|
Q4 2016
|
Q3 2016
|
Spending – Upper
Zone
|
$
|
6,314
|
$
|
7,668
|
$
|
5,924
|
$
|
2,785
|
Spending – Lower
Zone
|
|
5,781
|
|
2,914
|
|
2,022
|
|
1,013
|
The Company has spent $14 million
to date in 2017 on Upper Zone activities, and expects that the PFS
will be achieved within the $40
million budget despite the extended timeline. Key milestones
achieved to date in 2017 include the completion of all planned
infill drilling (30,000 metres) and the advancement of key
technical mining, metallurgical and environmental studies. The
Company is on track to commence decline development in Q4 2017,
with permitting well advanced, and the contract tendering process
on schedule.
The Company has recently commenced a 10,000 metre drilling
program to search for additional nearby, high grade Upper Zone type
deposits, with two rigs actively drilling at June 30.
The Company has spent $9 million
to date in 2017 (cumulative $12
million from June 2016) on the
Lower Zone drilling program. The Company has drilled 29,000 metres
to date, and is targeting another 16,000 metres of Lower Zone
drilling in 2017, with eleven rigs actively drilling at
June 30.
Financial Review
|
|
|
|
|
|
|
|
|
|
|
Q2 2017
|
|
Q1 2017
|
|
Q4 2016
|
|
Q3 2016
|
Revenue
(millions)
|
$
|
66.1
|
$
|
71.6
|
$
|
36.2
|
$
|
22.9
|
Operating income
(loss) (millions)
|
|
(65.1)
|
|
11.7
|
|
(4.9)
|
|
17.5
|
Net income (loss)
(millions)
|
|
(70.2)
|
|
2.9
|
|
(8.5)
|
|
6.0
|
Working capital
(millions)
|
|
171.1
|
|
190.3
|
|
201.1
|
|
206.9
|
|
|
|
|
|
|
|
|
|
Copper price
realized, per payable pound sold
|
$
|
2.65
|
$
|
-
|
$
|
-
|
$
|
2.10
|
C1 cash cost per
payable copper pound sold(1)
|
|
1.59
|
|
-
|
|
-
|
|
0.72
|
|
|
|
|
|
|
|
|
|
Zinc price realized,
per payable pound sold
|
|
1.16
|
|
1.28
|
|
1.17
|
|
-
|
C1 cash cost per
payable zinc pound sold(1)
|
|
0.92
|
|
0.89
|
|
1.06
|
|
-
|
(1) C1 cash cost per
pound is a non-GAAP measure – see the MD&A for discussion of
non-GAAP measures and cash costs.
|
Q2 operating results were pre-released. See the news
release from July 13, 2017 for
operating details and commentary.
Changes to 2017 Outlook and Guidance
- Deliver an updated Timok PEA in October
2017
- Deliver Timok PFS in Q1 2018 (previously September 2017)
- Produce 190 to 210 million pounds of zinc (previously 200 to
230)
- Zinc cash cost $0.70 to $0.90 per
payable pound sold (no change)
- Produce 20 to 30 million pounds of copper (previously 10 to
20)
- Copper cash cost $1.55 to $1.75
per payable pound sold (previously $0.90 to
$1.10)
- Monetize 15,000 gold equivalent ounces from stockpiles
(previously 10,000)
- Capital investment of $104
million (previously $88
million)
Revised production guidance reflects the fact that Bisha no
longer produces bulk zinc concentrate and copper concentrate has
been produced every month since February
2017 with improved recoveries. Cash cost changes
reflect mix in copper vs zinc (hence different allocation of costs)
as well as higher than anticipated mining costs.
Revised 2017 capital spending guidance is as follows:
- Timok Upper Zone decreased to $40
from $45 million;
- Timok Lower Zone decreased to $14
from $17 million due to slower than
planned drilling;
- Timok Upper Zone greenfield exploration commenced with
additional $4 million budget as
announced April 20, 2017;
- Bisha sustaining capital increased to $41 million from $17
million primarily to acquire new heavy mining equipment;
and
- Bisha regional exploration spending remained unchanged at
$9 million for 2017.
Bisha Reserve Estimate
Bisha and Harena proven and probable primary ore reserves as of
December 31, 2016 declined to 9.6
million tonnes at 6.16 percent zinc, 1.05 percent copper, 0.69 g/t
gold and 44.9 g/t silver. See Appendix of this release for complete
table and assumptions. At a processing rate of 2.4 million tonnes
per annum, the Bisha operation now has a reserve mine life to
mid-2021, down from approximately 8 years at the last reserve
estimate. The decrease is due to the decision to mine a
smaller pit at Bisha. A larger capital investment to mine a larger
pit was considered, however, the Company determined that on a
risk-adjusted basis this alternative was not the most prudent
allocation of capital at this time
The new technical report assumes 70% recovery of copper to
copper concentrate and 77% recovery of zinc to zinc concentrate,
down from the previous reserve estimate of 85% and 80%
respectively. These levels are the best current estimate of
long-term recoveries for processing Bisha primary ore. We
expect to achieve the new recoveries in 2018 and have retained a
leading metallurgical expert full time to drive continued
improvement at Bisha.
The Company has allocated an additional $24 million of sustaining capital in 2017,
primarily for the acquisition of new heavy mining equipment.
This additional capital provides a robust return on investment
while de-risking mining and processing of the above reserve.
For more details, please refer to the NI 43-101 technical report
supporting this reserve and the resources reported in February 2017 filed on SEDAR, EDGAR and the
Company's website.
Bisha and Harena Underground Studies
Bisha has approximately 28 million tonnes of measured and
indicated mineral resources and 31 million tonnes of inferred
mineral resources within 20 kilometres of the existing mill.
While results of both the Harena and Bisha underground scoping
studies were marginal, converting regional resources into reserves
remains a long term objective.
For more detail on the underground scoping work, please refer to
Section 24 of the NI 43-101 technical report supporting this
reserve and the resources reported in February 2017 filed on SEDAR, EDGAR and the
Company's website.
Q2 2017 Results Conference Call and Webcast Details
The Company will hold a conference call and webcast on
Thursday, August 10, 2017, at
8AM Vancouver / 11AM
Toronto, New York / 4PM
London, to discuss the Q2 2017
results.
Conference Call:
Please call in at least five minutes prior to the conference
call start time to ensure prompt access to the conference. Dial in
details are as follows:
North America: 1 888-390-0546 /
+1 416-764-8688 / +1 778-383-7413
UK: 0800 652 2435 (toll free)
Other International: +1 416-764-8688 / +1 778-383-7413
The conference call will be available for replay by phone until
Thursday, August 17, 2017, by calling
1 888-390-0541 / +1 416-764-8677 and entering passcode 458226
#.
Webcast:
A live audio webcast of the conference call will be available on
the Company's website www.nevsun.com or by clicking
https://event.on24.com/wcc/r/1462194/D71E5CD15383FD33589C096AF55F0D0E
About Nevsun Resources Ltd.
Nevsun Resources Ltd. is the 100% owner of the high-grade
copper-gold Timok Upper Zone and 60% owner of the Timok Lower Zone
in Serbia. Nevsun generates cashflow from its 60% owned copper-zinc
Bisha Mine in Eritrea. Nevsun is
well positioned with a strong debt-free balance sheet to grow
shareholder value through advancing Timok to production.
Qualified Persons Statement
The information in this report that relates to mineral reserves
was prepared by Anoush Ebrahimi P.
Eng. of SRK Consulting (Canada) Inc.
Peter Manojlovic, P.Geo., and
Frazer Bourchier, P.Eng., are Nevsun's designated Qualified Persons
and have reviewed and approved the contents of this press
release.
A Quality Assurance/Quality Control program was part of the
sampling program for the Bisha work. Certified reference material
(standards), duplicates and blank samples are systematically
inserted into the flow of drill samples and results analyzed on a
batch by batch basis. This program includes a chain of custody
whereby diamond drill core samples are initially crushed and
sub-sampled at the Bisha Mine sample preparation facility and
pulverized and analyzed by Genalysis in Perth, Australia. Multi-element analysis is
completed using ICP-AES methods; gold is analyzed by fire assay
with AAS finish. Reverse circulation drill samples are processed at
the Bisha Mine on-site laboratory, which is a member of the SGS
group. Multi-element analysis is completed using ICP-OES methods
with gold also analyzed by fire assay.
Cautionary Notes to Investors - Resource and Reserve
Estimates
In accordance with applicable Canadian securities regulatory
requirements, all mineral resource estimates of the Company
disclosed or incorporated by reference in this news release have
been prepared in accordance with Canadian National Instrument
43-101 - Standards of Disclosure for Mineral Projects ("NI
43-101"), classified in accordance with Canadian Institute of
Mining Metallurgy and Petroleum's "CIM Standards on Mineral
Resources and Reserves Definitions and Guidelines" (the "CIM
Guidelines"). The definitions of mineral reserves and mineral
resources are set out in our disclosure of our mineral reserve and
mineral resource estimates in our Annual Information Form.
The Company uses the terms "mineral resources", "measured
mineral resources", "indicated mineral resources" and "inferred
mineral resources". While those terms are recognized by Canadian
securities regulatory authorities, they are not recognized by the
United States Securities and Exchange Commission (the "SEC") and
the SEC does not permit U.S. companies to disclose resources in
their filings with the SEC.
Pursuant to the CIM Guidelines, mineral resources have a higher
degree of uncertainty than mineral reserves as to their existence
as well as their economic and legal feasibility. Inferred mineral
resources, when compared with measured or indicated mineral
resources, have the least certainty as to their existence, and it
cannot be assumed that all or any part of an inferred mineral
resource will be upgraded to an indicated or measured mineral
resource as a result of continued exploration. Pursuant to NI
43-101, inferred mineral resources may not form the basis of any
economic analysis, including any feasibility study. Accordingly,
readers are cautioned not to assume that all or any part of a
mineral resource exists, will ever be converted into a mineral
reserve, or is or will ever be economically or legally mineable or
recovered.
Forward Looking Statements
The above contains forward-looking statements or
forward-looking information within the meaning of the United States
Private Securities Litigation Reform Act of 1995, and applicable
Canadian securities laws. Forward-looking statements are
frequently, but not always, identified by words such as "expects",
"anticipates", "believes", "hopes", "intends", "estimated",
"potential", "possible" and similar expressions, or statements that
events, conditions or results "will", "may", "could" or "should"
occur or be achieved. Forward-looking statements are
statements concerning the Company's current beliefs, plans and
expectations about the future, including but not limited to
statements and information made concerning: statements relating to
the business, prospects and future activities of, and developments
related to the Company, anticipated dividends, goals, strategies,
future growth, planned future acquisitions and explorations
activities, the adequacy of financial resources planned production,
capital investment, production costs, deliverables and other events
or conditions that may occur in the future, and are inherently
uncertain. The actual achievements of the Company or other future
events or conditions may differ materially from those reflected in
the forward-looking statements due to a variety of risks,
uncertainties and other factors, including, without limitation, the
risks that: (i) any of the assumptions in the historical resource
estimates turn out to be incorrect, incomplete, or flawed in any
respect; (ii) the methodologies and models used to prepare the
resource and reserve estimates either underestimate or overestimate
the resources or reserves due to hidden or unknown conditions,
(iii) exploration activities, or the mine operations are disrupted
or suspended due to acts of god, internal conflicts in the country
of Eritrea or Serbia, unforeseen
government actions or other events; (iv) the Company experiences
the loss of key personnel; (v) the Company's operations or
exploration activities are adversely affected by other political or
military, or terrorist activities; (vi) the Company becomes
involved in any material disputes with any of its key business
partners, suppliers or customers; (vii) the Company is subjected to
any hostile takeover or other unsolicited attempts to acquire
control of the Company; (viii) the Company is subject to any
adverse ruling in any of the pending litigation to which it is a
party; (ix) the timing and success of improving the quality of the
copper circuit product by resolving the metallurgical challenges
from the variable ore materials being processed to produce
concentrate from the copper circuit; * the effect on resource or
reserve estimates due to the possible inability to resolve the
metallurgical challenges on the variable ore materials being
processed on a timely basis or at all; and other risks are more
fully described in the Company's Annual Information Form for the
fiscal year ended December 31, 2016,
which are incorporated herein by reference. The Company's
forward-looking statements are based on the beliefs, expectations
and opinions of management on the date the statements are made and
the Company assumes no obligation to update such forward-looking
statements in the future, except as required by law. For the
reasons set forth above, investors should not place undue reliance
on the Company's forward-looking statements.
Further information concerning risks and uncertainties
associated with these forward-looking statements and our business
can be found in our Annual Information Form for the year ended
December 31, 2016, which is available
on the Company's website (www.nevsun.com), filed
under our profile on SEDAR (www.sedar.com) and on
EDGAR (www.sec.gov) under cover of Form 40-F.
Mineral Reserve statement for Bisha
Main and Harena deposits, Eritrea, effective 31 December
2016
Category
|
Quantity
(000's
t)
|
Grade
|
Contained
Metal
|
(%
Zn)
|
(%
Cu)
|
(g/t
Au)
|
(g/t
Ag)
|
'000 lbs
Zn
|
'000 lbs
Cu
|
'000 Ozs
Au
|
'000 Ozs
Ag
|
Proven
|
Supergene
|
12
|
|
2.57
|
0.71
|
17
|
|
675
|
|
7
|
Primary
|
1,047
|
7.43
|
1.05
|
0.76
|
46
|
171,583
|
24,248
|
26
|
1,535
|
Total
Proven
|
1,059
|
|
|
|
|
171,583
|
24,923
|
26
|
1,541
|
Probable
|
Supergene
|
|
|
|
|
|
|
|
|
|
Primary
|
8,532
|
6.00
|
1.05
|
0.68
|
45
|
1,128,788
|
196,688
|
186
|
12,293
|
Total
Probable
|
8,532
|
|
|
|
|
1,128,788
|
196,688
|
186
|
12,293
|
Total Reserve
(P&P)
|
Supergene
|
12
|
|
2.57
|
0.71
|
17
|
|
675
|
|
7
|
Primary
|
9,579
|
6.16
|
1.05
|
0.69
|
45
|
1,300,371
|
220,936
|
212
|
13,827
|
Total
|
9,591
|
|
|
|
|
1,300,371
|
221,611
|
212
|
13,834
|
Notes to be read
in conjunction with the Mineral Reserve tables:
|
(1)
|
NSR cut-off ($US/t):
Supergene ore $39.12 and Primary ore, $37.22 at Bisha Main, and
$39.78 at Harena. Mineral Reserves are defined within a mine plan,
with phase designs guided by Lerch-Grossman (LG) Pit Shells,
generated using commodity prices for copper, zinc, gold and silver
of $2.70/lb, $1.00/lb, $1,200/oz, $18.00/oz respectively. The
reference mining cost was $2.27/t, plus $0.015/t/5 m bench for ore
and waste below reference elevations of 540 m amsl for Bisha Main.
The total ore-based cost (process, G&A, stockpile and rehandle)
is $39.12/t for supergene and $37.22/t primary ores. Harena
ore-based costs include an additional $2.56/t overland ore haulage
cost. Overall pit slopes varied from 38˚ to 44˚ for Bisha Main and
from 29˚ to 36˚ for Harena.
|
(2)
|
Economic values for
multi-metal, multi zones were modelled using Net Smelter Return
values. Each block NSR value was calculated using diluted grades,
commodity prices, recoveries and appropriate smelter terms and
downstream costs. Metallurgical recoveries, supported by
metallurgical testwork, were applied as follows:
|
|
a.
|
Bisha Main Supergene
zone: Two concentrates are produced from primary ore, copper and
zinc concentrates. For copper concentre recoveries of 70%, 15% and
27% were applied for copper, gold and silver respectively. For zinc
concentrate a 77% recovery has been applied to zinc.
|
|
b.
|
Copper concentrate
grade is 20%.
|
|
c.
|
Zinc concentrate
grade is 50%
|
|
d.
|
Harena primary zone:
recoveries to copper concentrate of 85%, 36% and 29% were applied
for copper, gold and silver respectively. A zinc recovery to zinc
concentrate of 85% was applied.
|
(3)
|
Mineral Reserves are
reported within Bisha Main and Harena ultimate pit designs, using
NSR block grade, where the marginal cut- off is the total ore based
cost stated above. Tonnages are rounded to the nearest 1,000
tonnes. Grades for contained metals are rounded to two decimal
places.
|
(4)
|
Rounding as required
by reporting guidelines may result in apparent summation
differences between tonnes, grade and contained metal
content.
|
(5)
|
Tonnage and grade
measurements are in metrics units. Contained gold and silver ounces
are reported as troy ounces, contained copper and zinc pounds as
imperial pounds.
|
(6)
|
The life of mine
strip ratios (by weight) for Bisha Main and Harena are 7.1:1
and 7.2:1 respectively.
|
(7)
|
0.5 m "skin" of
dilution is applied at ore/waste contacts.
|
(8)
|
2% mining losses
adjustments are made.
|
(9)
|
The end of December
2016 topography was used for this calculation.
|
NEVSUN RESOURCES LTD.
"Peter G.J. Kukielski"
Peter G.J. Kukielski
President & Chief Executive Officer
SOURCE Nevsun Resources Ltd.