Nevsun Accelerates Production, Sales and Net Income in Second Quarter 2014

Nevsun sold 51.5 million pounds of copper concentrate in the Q2 2014, an increase by 51% in Production and sales
Nevsun sold 51.5 million pounds of copper concentrate in the Q2 2014, an increase by 51% in Production and sales

By Nevsun,

NEVSUN Resources Ltd. (TSX:NSU / NYSE MKT:NSU) (Nevsun or the Company) is pleased to report its financial and operating results for the three and six months ended June 30, 2014. Unless otherwise noted, with the exception of earnings per share and realized price and cost per pound figures, all financial results are in millions of US dollars. 

Q2 2014   Q1 2014   YTD 2014
Revenues $ 169.2 $ 99.2 $ 268.4
Copper in concentrate produced, millions of pounds 47.4 39.7 87.1
Copper in concentrate produced, tonnes 21,500 18,000 39,500
Payable copper sold, millions of pounds (1) 51.5 34.0 85.5
Payable copper sold, tonnes 23,400 15,400 38,800
Copper price realized, per payable pound sold $ 3.21 $ 3.01 $ 3.14
C1 cash cost per payable pound sold (2) $ 1.05 $ 0.98 $ 1.01
Net income attributable to Nevsun shareholders $ 30.5 $ 15.4 $ 45.9
Earnings per share $ 0.15 $ 0.08 $ 0.23
June 30
2014
December 31,
2013
Cash and cash equivalents $ 359.2 $ 302.7
Working capital $ 497.8 $ 419.1
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(1) Q1 2014 included 4.5 million pounds (Q4 2013 – 30.6 million pounds) of pre-commercial production. Receipts from pre-commercial production sales were credited against mineral property, plant and equipment, net of costs of sale.
(2) C1 cash cost is a non-GAAP measure and includes mine site operating and general and administrative costs, freight, treatment and refining charges, less by-product credits. Royalties are excluded from the calculation of the C1 cash cost. Non-GAAP measures do not have a standardized meaning prescribed by International Financial Reporting Standards (IFRS) and may not be comparable to similar measures presented by other companies. Refer to Non-GAAP Performance Measures in the MD&A for a reconciliation of IFRS measures to C1 cash cost.

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Second Quarter 2014 Highlights

* Produced 47.4 million pounds of copper in the quarter
* Sold 51.5 million pounds of copper, a 51% increase over Q1 2014
* Achieved C1 cash costs of $1.05 per pound with strong earnings and cash flows
* Working capital approaching $500 million
* Announced successful drilling results from Bisha regional exploration
* Paid peer leading annualized dividend of $0.14 per share

As expected, Bisha accelerated both production and sales of copper concentrate during Q2 2014 with 87.1 million pounds of production year-to-date, including a record monthly production in June 2014 of 17.8 million pounds,” stated Cliff Davis, President and CEO of Nevsun.

This additional truck capacity allowed us to sell 51.5 million pounds during Q2 2014, a 51% increase versus the prior quarter.

Nevsun earned $54 million during Q2 2014 ($31 million attributable to Nevsun shareholders) or $0.15 per share.

We ended Q2 with an even stronger balance sheet with working capital approaching $0.5 billion,” stated Cliff Davis. “Our strong balance sheet allows us to comfortably maintain our quarterly dividend and continue to build up capital for future acquisitions or mergers.

On June 16, 2014, Bisha announced drilling results and the regional exploration program update. Cliff Davis commented, “We are excited to see some early success in our 2014 exploration program and have expanded the budget. We will be providing more updates throughout 2014 as we further evaluate the potential of the Bisha VMS belt.”

Operations Review

Key operating information – Bisha Mine
Mining – copper: Q2 2014 Q1 2014 YTD 2014
Ore mined, tonnes (1)(2) 697,000 487,000 1,184,000
Waste mined, tonnes 2,719,000 3,471,000 6,190,000
Strip ratio, (using tonnes) 3.9 7.1 5.2
Processing – copper:
Ore milled, tonnes 386,000 353,000 739,000
Copper feed grade, % 6.6 6.1 6.4
Recovery, % of copper 84.6 83.5 84.1
Copper concentrate grade, % 27.1 28.8 27.9
Copper in concentrate produced, millions of pounds 47.4 39.7 87.1
Copper in concentrate produced, tonnes 21,500 18,000 39,500
Payable copper sold, millions of pounds (3) 51.5 34.0 85.5
Payable copper sold, tonnes 23,400 15,400 38,800
Copper price realized, per payable pound sold $        3.21 $        3.01 $        3.14
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(1) Ore tonnes mined for the three month period ended March 31, 2014 included 91,000 tonnes of oxide ore including pyrite sand, 382,000 tonnes of supergene ore and 14,000 tonnes of primary ore.
(2) Ore tonnes mined for the three month period ended June 30, 2014 included 126,000 tonnes of oxide ore including pyrite sand, 531,000 tonnes of supergene ore and 40,000 tonnes of primary ore.
(3) Q1 2014 included 4.5 million pounds (Q4 2013 – 30.6 million pounds) of pre-commercial production. Receipts from pre-commercial production sales were credited against mineral property, plant and equipment, net of costs of sale.

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During Q2 2014, 697,000 tonnes of ore was mined, of which 531,000 tonnes was supergene ore and the remaining oxide, pyrite sand and primary ores which were stockpiled for later processing. The oxide and pyrite sand stockpiles are estimated to contain over 80,000 ounces of gold. Mobile equipment maintenance issues coupled with some in- pit dewatering activities had an adverse impact on waste mining with 2,719,000 tonnes mined in the quarter. However the lower than expected stripping during Q2 2014 is not expected to impact achieving copper production guidance in 2014.

Copper grades continued to exceed expectations at 6.6% in the quarter due to a combination of positive metal reconciliation and a variance to the original mine plan. As previously disclosed, the copper concentrator was designed for an average 4.5% copper feed. Accordingly, mill feeds in 2014 have been purposely reduced in order to match the 13.2 tonnes of copper produced per operating hour to avoid excessive copper losses to the tails management facility. We expect grades to decrease during the second half of 2014, approaching the original design of the flotation circuit by year-end. With lower copper feed grades, we can increase mill feed and maintain or potentially increase recoveries during the second half of 2014. We expect our C1 cash costs to increase during the second half of 2014 due to anticipated lower precious metals by-product credits and increased volumes of ore mined and milled.

Copper concentrate grades of 27% are lower than the planned 30% as the plant is carefully managed to ensure we meet the specifications of our contractual commitments with our various counterparties. Bisha will work to increase concentrate grades as much as possible in the second half to minimize shipping and smelting charges.