By Carrie White,
Vancouver-based Nevsun Resources (TSE:NSU)(AMEX:NSU) said Wednesday it posted strong first quarter results, and raised its gold production forecast for 2012 to 260,000 ounces.
Shares rose nearly five percent on the back of the news, trading at $3.39 early Wednesday morning.
The gold and base metal explorer/developer is currently focused on advancing its high grade gold, copper and zinc Bisha Project in Eritrea.
As a result of unusually high gold grades encountered last month, Nevsun said it is increasing its gold production guidance for the full year 2012 by approximately 25 percent to a range of 240,000 ounces to 260,000 ounces.
This is up significantly from a previous target of 190,000 to 210,000 ounces announced in early February, when the company said it has overestimated the size of its gold resources at its Bisha mine.
Nevsun noted that the high grades were found in a portion of the oxide zone that is the interface between the gold oxide and copper supergene zones, “commonly termed the acid domain“.
The company expects the high grades to persist until at least June 2012, but said it could not include grades in its mineral reserves because drill hole core recovery from the acid domain was sporadic and the core was difficult to assay.
Nevsun stressed that the “competency of the ore in this interface zone is poor and requires sophisticated stockpile blending to facilitate successful processing and recovery of the precious metals.”
In addition, the company said the combination of both a clay-like and sandy composition of the acid material leads to challenging daily ore control sampling, making it difficult to predict grades.
“The associated gold grade is highly variable and includes both very high and low grades,” said Nevsun in a recent release.
The company said it expects to release a revised mineral resource and reserve estimate for the entire Bisha and Harena deposits during early third quarter of 2012.
The Harena deposit lies 9.5 kilometres southwest of the Bisha main deposit
In other news, Nevsun released its first quarter results, posting a net income of $41.2 million, or 20 cents per share, up from $11.8 million, or six cents per share, a year ago.
Nevsun said that revenue more than doubled to $149.4 million, from $54.3 million in the year-ago quarter, as it benefited from higher gold sales and production, higher average realized prices and lower cash costs compared with a year earlier.
The company noted that average realized price for gold in the first quarter was $1,712 per ounce.
Tonnes milled during the first quarter totalled 430,000, down seven percent from 461,000 a year earlier, said Nevsun. Milling grade during the first quarter averaged 6.6 grams per tonne (g/t), up six percent from 6.2 g/t a year earlier. The company said it mined 358,000 tonnes in the first quarter, down 25 percent from 475,000 a year earlier.
The mining grade averaged 4.07 g/t, down 28 percent from 5.65 g/t a year earlier.
Nevsun said that gold cash costs per ounce for the quarter were $277 on 83,100 ounces sold, which included $85 per ounce in silver by-product credits. Gold cash costs per ounce for were $304 on 37,500 ounces sold a year earlier, during the five week operating period, which included $15 per ounce in silver by-product credits.
Looking ahead, Nevsun said that it has a 1,200 metre drilling program planned for its Harena deposit, during the second quarter of 2012.
The company drilled 5,716 metres at Bisha in the first quarter and expects that metallurgical and geotechnical data will be used for the revised reserve update due later in 2012. In the North West zone of the mine, Nevsun said that 1,850 metres were drilled in the first quarter, with a further 6,000 metres planned for 2012 and a resource estimate planned in late 2012.
The company said it continues work on copper phase development activities and plans for its copper flotation plant to be operational in mid-2013.
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NEVSUN REPORTS STRONG FIRST QUARTER 2012 FINANCIAL RESULTS, RAISES 2012 PRODUCTION OUTLOOK
By Nevsun,
Nevsun Resources Ltd. today reported strong financial and operating results for the first quarter ended March 31, 2012. Nevsun also increased its guidance for 2012 gold production by approximately 25% to a range of 240,000 ounces to 260,000 ounces.
FIRST QUARTER 2012 HIGHLIGHTS
- Revenue: $149.4 million
- Net income attributable to Nevsun shareholders: $41.2 million, $0.21 per share
- Ounces of gold produced: 82,000
- Cash costs: $277 per ounce of gold
- Average realized price: $1,712 per ounce
- Paid $0.05 dividend per share on January 16, 2012
OUTLOOK
Nevsun is increasing its production guidance for the full year 2012 as a result of unusually high gold grades encountered in April 2012. The high grades were in mining a portion of the oxide zone that is the interface between the gold oxide and copper supergene zones, commonly termed the acid domain. The high grades, which management now expects to persist until at least June 2012, could not be fully included in mineral reserves because drill hole core recovery from the acid domain was sporadic and the core was difficult to assay.
The new 2012 guidance compares favourably with a previous target of 190,000 – 210,000 ounces on February 7, 2012. Nevsun cautions that the competency of the ore in this interface zone is poor and requires sophisticated stockpile blending to facilitate successful processing and recovery of the precious metals. In addition, the combination of both a clay like and sandy composition of the acid material leads to challenging daily ore control sampling, making it difficult to predict grades. The associated gold grade is highly variable and includes both very high and low grades.
Nevsun expects to disclose a revised mineral resource and reserve estimate for the entire Bisha and Harena deposits during early third quarter 2012.
FINANCIAL REVIEW
The Company benefited from higher gold sales and production, higher average realized prices and lower cash costs in the first quarter of 2012 compared with a year earlier. The 2012 first quarter results reflect afull 13 weeks of operation. The comparable 2011 first quarter results reflect just five weeks of operation because the mine was only commissioned on February 22, 2011.
Tonnes milled during the first quarter of 2012 totalled 430,000, down 7% from 461,000 a year earlier. The milling grade during the first quarter of 2012 averaged 6.6 grams per tonne, up 6% from 6.2 grams per tonne a year earlier. Tonnes mined during the first quarter of 2012 totalled 358,000, down 25% from 475,000 a year earlier. The mining grade during the first quarter of 2012 averaged 4.07 grams per tonne, down 28% from 5.65 grams per tonne a year earlier.
Gold cash costs per ounce for Q1 2012 were $277 on 83,100 ounces sold, which included $85 per ounce in silver by-product credits, while gold cash costs per ounce for Q1 2011 were $304 on 37,500 ounces sold during the five week operating period from February 15 – March 31, 2011, which included $15 per ounce in silver by-product credits.
The Company’s cash and cash equivalents at March 31, 2012 were $279.4 million, down 20% from $347.6 million as at December 31, 2011. During Q1 2012 the Company used $39.2 million of cash in its operating activities, including paying $114.4 million during the quarter to settle its 2011 tax liability. During Q1 2011, the Company generated $27.0 million in cash from its operating activities. There were no income taxes paid in Q1 2011.
The Company used $16.7 million in investing activities in Q1 2012 and generated $30.0 million in the comparable prior period. In Q1 2011 the Company received $48.6 million in proceeds on pre-production gold sales; there were no such proceeds recorded in 2012 as the Company was in commercial production.
During Q1 2012 the Company used $12.3 millionin its financing activities, up from $3.5 millionin the same period in the prior year. During Q1 2012, the Company received $7.0 million as partial payment on the sale of 30% of the Bisha Mine to the State-owned Eritrean National Mining Corporation. No such proceeds were received in Q1 2011. In addition, in Q1 2012 the Company paid dividends of $10.0 million to Nevsun shareholders. No dividends were paid in Q1 2011.
EXPLORATION AND DEVELOPMENT
HARENA:
Harena lies 9.5 km southwest of the Bisha Main deposit on an exploration license contiguous to the Bisha Mining license. In December 2011 the Company applied for a license to mine the deposit and during the past quarter has provided supplemental materials for further clarification for the relevant authorities. Receipt of the Mining license is expected mid-2012. The Company has a 1,200 metre drilling program planned for Harena during the second quarter 2012.
BISHA:
In Q1 2012 the Company drilled 5,716 metres at Bisha. The purpose of the drill program is to generate metallurgical and geotechnical data to be used for the previously mentioned revised reserve update due later in 2012.
NORTH WEST ZONE:
The Company drilled 1,850 metres in Q1 2012 at the North West Zone. A further 6,000 metres of drilling is planned for 2012 and a resource estimate planned in late 2012.
COPPER PHASE DEVELOPMENT:
The Company continued work on copper phase development activities during Q1 2012, expending $11 million on terracing, other civils works and completing detailed design work. Total capital for the copper plant phase is expected to be approximately $100 million, of which $63 million has been spent, ordered or arranged. Ordering of major components is complete and the copper flotation plant is targeted to be operational in mid-2013. The Company is taking the same approach to eliminate price risk on construction that it was successfully able to accomplish during the build of the gold plant. The same firm, SENET of South Africa, is the engineering, procurement, and construction management contractor.
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