By Nevsun Resources,
Nevsun Resources Ltd. (TSX:NSU) (NYSE MKT:NSU) is pleased to report its financial and operating results for the year ended December 31, 2015. Unless otherwise noted, with the exception of earnings per share and realized price per ounce and per pound figures, all financial results are in millions of US dollars.
Full year 2015 highlights
- Earnings per share of $0.11
- Maintained strong working capital of $462 million, including $434 million in cash
- Produced 135.9 million pounds of copper
- Continued low C1 cash costs(1) of $1.31 per payable pound sold
- Monetized stockpiled precious metals concentrate and pyrite sands gold ore
- Advanced zinc expansion project on time and under budget
- Discovered new regional VMS deposit at Asheli
- Expanded mineral resources at Bisha and Harena
- Paid annualized dividend of $0.16 per share
Cliff Davis, Nevsun CEO, commented, “We are pleased to report another year of earnings and cash flow generation, despite the current commodities price environment, which funded our zinc plant expansion and our peer leading dividend. Nevsun’s balance sheet remains strong with $434 million in cash and no debt. Our cash represents US$2.17 per share which represents 67% of the most recent total share price of US$3.25.”
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Nevsun CEO Cliff Davis on Q4 2015 Results – Earnings Call Transcript
Good morning, ladies and gentlemen. And welcome to the Nevsun Resources 2015 Annual Production and Earnings Results Conference Call. I now would like to turn the conference over to Mr. Davis, President and CEO. Please go ahead, sir.
Cliff Davis
Good morning from Vancouver. With me today is our Chief Operating Officer, Frazer Bourchier; and our Chief Financial Officer, Tom Whelan.
Before I begin, a few cautionary comments. The following prepared statements and discussion contains forward-looking statements regarding production forecasts, past and future financial results, as well as the potential arising from exploration programs and potential M&A activity. Forward-looking statements are by their nature uncertain, and frequently but not always are identified by words, such as expects, anticipates, believes and similar expressions, or statements that, events, conditions or results, will or could, should, occur or be achieved. Actual results or future events or conditions may differ materially from what is projected due to a variety of risks, uncertainties and other factors. We encourage all listeners to thoroughly read yesterday’s news release, as well as the annual financial statements and the entire MD&A. All of the financial numbers referred to today are in United States dollars.
Now, I’m going to provide you my views of what we have accomplished over the past year and where we are headed, all in the context of our long-term strategies that we have consistently communicated. We’ll then open up the call to a question-and-answer period.
Nevsun had a great 2015, despite challenging market conditions. We continued to deliver value to our shareholders. We remain profitable, despite significant downturn in the industry. And we continue to deliver on our objectives.
Nevsun remains strong 2015 was no exception in delivering results. Last year, we demonstrated once again on our ability to deliver financial results, in a depressed copper environment. Despite the weak copper price and a few unplanned plant stoppages during the year, we managed our operations well and produced significant cash from operations.
Bisha mined over 3 million tonnes of ore, 38% more than 2014 at almost 4% copper from the Bisha open pit. We milled 1.9 million tonnes of ore, 8% more than 2014 to produce a 136 million pounds of copper. Bisha came in slightly below our production guidance for 2015, but from a financial perspective, our focus on cost containment allowed us to continue with low C1 cash cost of a $1.31 per pound and we were able to generate a $120 million of net cash from operations from the mine. We had income before taxes of about $80 million. So, we continued to generate significant operating cash flow. We continued to pay our shareholders a peer leading quarterly dividend. We continued to invest in growth through exploration.
The balance sheet continues to be very strong with about $460 million in working capital, including over $430 million in cash. You’ve heard me say this before, we produce copper but what we really produce is cash. We have used the cash generator this year on dividends to shareholders and growth in the form of exploration and growth on the zinc expansion project.
Our dividend is at US$0.16 a share, which is a yield of about 5%. Nevsun remains one of the highest yielding and most profitable companies in our peer group. We have now paid back to our shareholders over $130 million. A big part of our success is through the support and cooperation of the State of Eritrea. Through our 18 years in Eritrea, we have had a stable regulatory and legal environment and full support of our partner, the Eritrean National Mining Corporation as well as strong support from the Ministry of Energy and Mines and several other ministries and their staff. We’d like to thank the State of Eritrea for their ongoing partnership in Bisha.
Looking forward and planning for the future, our strategy is concise, straight forward and has been well communicated to the market for the past few years. First, we have a great asset in the Bisha Mine. We plan to maximize the value of the Bisha resources. Second, we plan to grow the Eritrean assets through exploration. Third, we plan to diversify our asset base through merger or acquisition. And fourth, we plan to sustain our annual dividend. I’ll now address each of these strategies.
Maximizing value from Bisha:
In mid 2015, we engaged the independent engineers to assist in reviewing mine optimization plans for Bisha. This includes investigating when Bisha might transform from an open pit mine to an underground mine. That process is ongoing. However, as a management team, we are confident enough in the likelihood of going underground that during Q3 we put a halt to Phase 8 and 9 waste stripping. To give you a sense of magnitude, and it’s more fully explained in our MD&A, the volume of waste material is approximately 90 million tonnes and that’s $3 per tonne mining cost. This translates to reduced waste stripping cost of about $270 million. Of course this is not an absolute saving but rather, if we go underground would be offset by the cost of declined development and underground mining.
Zinc is also a big part of our future. We have already started individual equipment commissioning within the new zinc plant. And Bisha expects to be producing the zinc concentrate in Q2, which will be followed by the ramp up to commercial production over a few months. The zinc plant is an addition to the existing copper plant. We don’t stop producing copper but rather we’ll produce less copper and add zinc to our revenue stream. Depending on metals prices, we expect the total Bisha revenue will be approximately 50% copper and 50% zinc with continued gold and silver credits from the concentrate. As described in our MD&A, the zinc plant expansion is progressing very well. We are ahead of schedule and well below budget. Also, we have not committed any of our zinc offtake, which means we have the opportunity to maximize value during future sales negotiations, as we take advantage of what we believe will be a sellers’ market for zinc.
Exploration:
We’re also very bullish on our exploration success. Over the course of last year, our drilling success resulted in substantial increase to our resources. Over the first five years of operations, our reserves have increased by about 50% and our resources have increased by about a 115%.
For 2016, we plan to continue spending on exploration. During the past year, the Bisha team defined additional mineralization at the Harena deposits which is a short distance from the main Bisha deposits. Harena now extends about 1 kilometer along strikes and also remains open at depth. A new resource estimate was published a week ago with ongoing investigation work on a potential underground mine. The exploration team is now targeting additional drilling at Bisha as well as more drilling at the new Asheli discovery and other targets on the Mogoraib License.
Diversification, business development:
We continue to be very active in M&A, we are currently looking at a few opportunities but will only move forward if we can generate a good return to our shareholders. Our preference in commodity is copper. And generally, we would prefer an asset already in production in a jurisdiction that the markets will better understand. While we are very happy with Eritrea as a jurisdiction, clearly the market is not as happy and we must act in the best interest of the company and our shareholders.
I’d like to sum up with a few key messages.
First, we had a very good year with positive financial results, particularly in this commodity price environment. We are financially very healthy. Second, our exploration program has been very successful, which should translate into further mine extension and value. Third, our zinc expansion is ahead of schedule, under budget, and we should be producing zinc concentrate in Q2 this year. Fourth, our M&A strategy is based on capital discipline with total shareholder return as the fundamental driving principle.
>> The full transcript of the conference call can be found HERE.
