Nevsun Resources Ltd. (TSX:NSU)(NYSE MKT:NSU) (Nevsun or the Company) is pleased to report its financial and operating results for the three months ended September 30, 2017. Unless otherwise noted all financial results are in millions of US dollars.
Third quarter 2017 highlights
- Zinc recoveries continue to improve at Bisha, averaging 74.0% for the quarter and 82.0% for September
- Sold 43.4 million payable pounds of zinc in zinc concentrate at C1 cash costs(1) of $0.84 per payable pound sold
- Sold 4.0 million payable pounds of copper in copper concentrate at C1 cash costs(1) of $1.70 per payable pound sold
- Declared the third quarterly dividend of 2017 of $0.01 per share
- Ended period with cash and cash equivalents of $151 million
- Summary Timok Preliminary Economic Assessment (“PEA”) results were released on October 26, 2017
- Plan to deliver the Timok Pre-Feasibility Study (“PFS”) in Q1 2018
“We remain focused on ensuring our Bisha mine delivers maximum value and takes advantage of the current strong zinc price environment by both continuing to improve current metallurgical performance and increasing material movement capability in the mine,” commented Chief Executive Officer, Peter Kukielski.
Mr. Kukielski continued, “Zinc recoveries further benefitted from the primary ore metallurgy improvement program onsite. Additionally, several boundary material stockpile trial campaigns resulted in strong zinc recovery at the expense of copper recovery as portions of this material are not amenable to copper flotation.
The mobile fleet expansion at Bisha, announced in Q2 2017 and funded entirely through operating cash flow, is expected to be completed by the end of H1 2018.”
Bisha’s strip ratio increased in Q3 2017 as mining benches, walls and faces in the Bisha main pit were re-established to better prepare for a planned increase in mining rate and a more efficient mining schedule for 2018 onwards. This lower mining rate (compared with previous quarters) and mining pattern schedule is expected to continue and be finished by the end of Q4 2017.
The lower mining rate in Q3 2017 and resulting in-pit primary ore mill feed shortfalls led to trials and campaigns of a portion of the previously stockpiled boundary material with high zinc quantities but with minor activated copper quantities. This resulted in better than expected zinc recoveries and zinc production but disappointing, although not unexpected, lower copper production. The Company is encouraged by these recent results with particular focus now applied to investigating approximately 30 percent of the boundary ore stockpiles for future zinc-only processing. The Company is still uncertain if the metallurgical performance from these recent boundary material trials can be consistently achieved for the remaining material as these stockpiles are not homogenous with known variations in grades and mineralogy, and may have been subject to detrimental oxidation during surface stockpiling.
Most importantly, the skilled team of employees and external consultants at the Bisha Mine continue to make meaningful progress with the primary ore metallurgy rectification program. The program focusses on minor plant modifications, reagent trials, water treatment options, and oxidation and grind size analyses. The Company still expects to achieve 70% recovery of copper to copper concentrate and 77% recovery of zinc to zinc concentrate over the primary reserve life. The Company remains committed with critical expert resources to upgrading the quality of its copper and zinc concentrates to enhance marketability and to realise better commercial terms.
Financial Review
| Q3 2017 | Q2 2017 | Q1 2017 | Q4 2016 | |||||
| Revenue (millions) | $ | 71.0 | $ | 66.1 | $ | 71.6 | $ | 36.2 |
| Operating income (loss) (millions) | 12.2 | -65.1 | 11.7 | -4.9 | ||||
| Net income (loss) (millions) | 3.1 | -70.2 | 2.9 | -8.5 | ||||
| Working capital (millions) | 179.1 | 171.1 | 190.3 | 201.1 | ||||
| Zinc price realized, per payable pound sold | $ | 1.44 | $ | 1.16 | $ | 1.28 | $ | 1.17 |
| C1 cash cost per payable zinc pound sold (1) | 0.84 | 0.92 | 0.89 | 1.06 | ||||
| Copper price realized, per payable pound sold | $ | 2.99 | $ | 2.65 | $ | – | $ | – |
| C1 cash cost per payable copper pound sold (1) | 1.7 | 1.59 | – | – |
(1) C1 cash cost per payable pound sold is a non-GAAP measure – see page 19 of the Q3 2017 MD&A for a discussion of non-GAAP measure.
Operations Review
| YTD 2017 | Q3 2017 | Q2 2017 | Q3 2016 | |
| Mining | ||||
| Ore mined, tonnes (1) | 1,688,000 | 383,000 | 654,000 | 672,000 |
| Waste mined, tonnes | 10,979,000 | 4,126,000 | 3,739,000 | 2,446,000 |
| Strip ratio, (using tonnes) | 6.5 | 10.8 | 5.7 | 3.6 |
| Processing | ||||
| Ore Milled, tonnes | 1,713,000 | 524,000 | 590,000 | 510,000 |
| Zinc feed grade, % | 6.0 | 6.8 | 5.3 | 5.8 |
| Copper feed grade, % | 0.9 | 1.0 | 0.8 | 1.0 |
| Recovery, % of zinc (2) | 67.8 | 74 | 62.2 | 59.1 |
| Recovery, % of copper (3)(4) | 39.2 | 33.4 | 51.6 | – |
| Zinc concentrate grade, % (5) | 42.1 | 42 | 41.5 | 41.3 |
| Copper concentrate grade, % (4) | 17.6 | 17.8 | 17.4 | – |
| Zinc in concentrate produced, millions of pounds | 152.7 | 57.8 | 43 | 38.6 |
| Zinc in concentrate produced, tonnes | 69,300 | 26,300 | 19,500 | 17,500 |
| Copper in concentrate produced, millions of pounds (4) | 13.9 | 4 | 5.7 | – |
| Copper in concentrate produced, tonnes (4) | 6,300 | 1,800 | 2,600 | – |
| Payable zinc in concentrate sold, millions of pounds (6) | 130.6 | 43.4 | 34.3 | 21.2 |
| Payable zinc in concentrate sold, tonnes (6) | 59,200 | 19,800 | 15,400 | 9,600 |
| Payable copper in concentrate sold, millions of pounds | 10.8 | 3.1 | 7.7 | |
| Payable copper in concentrate sold, tonnes | 4,900 | 1,400 | 3,500 |
- Ore tonnes mined in the three and nine months ended September 30, 2017 included 381,000 and 1,618,000 tonnes of primary ore, respectively (three months ended September 30, 2016 – 643,000) and 2,000 and 70,000 tonnes of supergene ore, respectively (three months ended September 30, 2016 – 29,000).
- This represents the overall combined zinc recovery from the zinc flotation circuit (and when bulk concentrate is produced in the copper circuit).
- This represents the copper recovery from the copper flotation circuit only, and excludes copper recovered to bulk concentrate.
- Operating statistics related to recovery as a percentage of copper, copper concentrate grade, and copper in concentrate produced, were not meaningful during Q3 2016.
- This represents combined concentrate grade for both zinc and bulk concentrates.
- Sales of zinc in concentrate recorded during Q3 2016 consisted entirely of pre-commercial production. Receipts from the sales of pre-commercial production were credited against mineral property, plant and equipment, net of costs of sale.
