Nevsun Announces Q3 Financial and Operating Results for 2013

Nevsun: Copper Production, Disciplined Growth.
Nevsun: Copper Production, Disciplined Growth.

By Nevsun,

Nevsun Resources Ltd.(TSX:NSU / NYSE Amex:NSU) is pleased to report its financial and operating results for the third quarter of 2013. Unless otherwise noted, with the exception of earnings per share, all results are in thousands of US dollars.

This release should be read in conjunction with Nevsun Resources Ltd.’s (Nevsun or the Company) condensed consolidated interim financial statements for the three and nine months ended September 30, 2013, and associated Management Discussion and Analysis (MD&A), which are available on the Company’s website, on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov).

Third quarter 2013 highlights

  • Bisha exceeded 13.5 million man hours without a lost time injury
  • Highly successful gold phase virtually completed with 13,300 ounces produced from decommissioning
  • Commenced full commissioning of copper plant
  • Achieved first copper production with 12 million pounds of copper produced
  • Completed first ocean shipments of copper concentrate
  • Generated revenues of $25.8 million on gold sales of 17,800 ounces
  • Maintained strong balance sheet with approximately $340 million in working capital
  • Expecting commercial production before year end

Recent developments

Full commissioning of the Bisha copper expansion project commenced in mid-July with the introduction of copper ore into the flotation circuit. The plant produced 12 million pounds of copper in concentrate during Q3 commissioning activity and two ocean shipments totalling 22,000 wet metric tonnes of concentrate were made in October. Bisha is now in the process of ramping up to commercial production, which is expected before the end of the year.

Cliff Davis, President and CEO of Nevsun commented, “The commencement of shipments of copper concentrate is a credit to our operating team at the Bisha Mine who have managed the transition from gold producer to copper producer whilst maintaining their exemplary safety record. We very much look forward to moving the operation back into commercial production and to a very profitable 2014.

With significant future cash flow and an already strong balance sheet, Nevsun is strategically positioned for growth. Nevsun will apply the same strict financial protocols to grow as it has through the successful development and operation of Bisha.”

Operations review

Key operating information – Bisha Mine:

  For the three months ended September 30, For the nine months ended September 30,
2013 2012 2013 2012
Mining:
Oxide ore mined, tonnes 232,000 316,000 1,132,000 1,165,000
Supergene ore mined, tonnes 327,000 327,000
Waste mined, tonnes(1) 2,802,000 2,590,000 6,374,000 6,075,000
Strip ratio (using BCMs) 8.5 10.3 5.9 6.3
Copper phase prestrip, tonnes 1,220,000
Processing – copper:
Tonnes milled 366,000 366,000
Copper feed grade, % 2.5 2.5
Recovery, % of copper 59.5 59.5
Copper in concentrate produced, millions of pounds 12.0 12.0
Processing – gold:
Tonnes milled 465,500 887,000 1,360,000
Gold grade (g/t) n/a 7.4 3.4 7.0
Recovery, % of gold n/a 87% 79% 86%
Gold in doré, ounces produced 13,300 98,000 90,500 267,000
Gold ounces sold 17,800 96,700 95,500 267,300
Gold price realized per ounce $   1,323 $   1,681 $   1,459 $   1,664

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(1) All waste tonnes mined reflect updated rock density estimates.

The Bisha Mine has exceeded 13.5 million man-hours without any lost time injury.

Total tonnes mined were up 60% Q3 2013 over Q2 2013 with ore mined up 30% to 559,000 tonnes. The ore mined included 232,000 tonnes of oxide and pyrite sand being mined to stockpile for future processing. Waste mined increased 70% Q3 2013 over Q2 2013 to 2,802,000 tonnes, for a strip ratio of 8.5 to 1 by volume.

The stronger performance reflects putting new equipment to use and improvements in maintenance. Overall, waste stripping remains behind plan for 2013, however, this is expected to have minimal impact on copper ore production through 2014.

The 366,000 tonnes milled was inclusive of pyrite sand processed through mid-July 2013. Overall in Q2 and Q3, 94,000 tonnes pyrite sand ore was processed, generating an estimated 7,000 tonnes of precious metal concentrate containing 8,000 ounces of gold and 789,000 ounces of silver.

The Company decreased its forecast for 2013 gold production to 95,000 ounces from the original target of 110,000 ounces for 2013 because it ceased the processing of pyrite sands and accelerated commissioning of the copper circuit. The Company made a business decision to bring forward full copper phase commissioning as the priority is to cash generation and value. Substantial oxide and transitional ore has been mined and remains available for future processing and monetization.

During copper commissioning, the strategy has been to make use of lower grade and sub-grade copper feeds and preserve reserve grade material. The early use of lower and sub-grade materials, along with issues with the operation of the conditioning tank and other elements of the flotation circuit (all expected to be resolved by mid-November), resulted in lower than expected recoveries during commissioning. The Company still expects copper recoveries to exceed 80% when the plant is in commercial production, on track for late 2013.

The Company began decommissioning the carbon-in-leach plant early in Q3 2013 and 13,300 gold ounces were poured for the quarter, almost entirely from this decommissioning process, bringing the total ounces poured for the nine months ended September 30, 2013, to 90,500.

Financial review

Summary of financial results:

In US $000s (except per share data) For the three months ended September 30, For the nine months ended September 30,
2013 2012 2013 2012
Revenues $   25,783 $ 169,992 $ 151,698 $ 467,095
Operating income 12,980 125,482 70,808 345,781
Net income 4,306 75,636 34,114 211,264
Net income attributable to Nevsun shareholders 1,170 44,211 17,069 125,017
Earnings per share attributable to Nevsun shareholders 0.01 0.22 0.09 0.62
Working capital 339,214 391,364 339,214 391,364
Total assets $ 878,413 $ 855,433 $ 878,413 $ 855,433

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Details of revenue breakdown for gold and silver, operating expenses, depreciation and depletion, and other expenses are discussed in the Company’s third quarter 2013 MD&A.

Working capital at September 30, 2013, including cash and cash equivalents, was $339,214. The Company’s cash and cash equivalents at September 30, 2013, of $290,211, was down from $396,404 as the Company spent approximately $100,000 on property plant and equipment and exploration, $16,750 on assistance to ENAMCO and a further $23,000 on financing activities, including $23,880 on dividends. These cash outflows were offset by cash provided by operations. Details of sources and uses of cash are presented in the third quarter financial statements and discussed in the MD&A.
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