
By Peter Arendas,
Nevsun Resources (NYSEMKT:NSU) is a copper producer whose valuation has long suffered for an increased political risk. Nevsun’s cornerstone asset, the copper-gold-zinc Bisha mine, is located in Eritrea, a country in eastern Africa that is known for a higher level of political risks. As a result, the market capitalisation of Nevsun Resources tends to be lower compared to its peers, although the company is able to remain profitable also at the current copper prices that are close to multi-year lows.
But the times are changing and Nevsun Resources changes as well. Earlier this year, the company acquired Reservoir Minerals and its world-class copper-gold assets located in Serbia. The development of the Timok mine will help Nevsun to diversify its operations geographically.
Moreover, the Eritrean Bisha mine entered another phase of its existence and it is about to turn from a copper mine into a copper-zinc mine. It is a great news for Nevsun Resources, as the zinc market deficit is growing and zinc prices are on the verge of a major bull market.
The Eritrean Operations
The Bisha mine is 60% owned by Nevsun Resources and 40% owned by the Eritrean government through ENAMCO (Eritrean National Mining Company). The successful collaboration with the Eritrean government helps to mitigate the political risks.
The Bisha project contains inferred and indicated resources of 1.28 billion lb copper, 3.5 billion lb zinc and 1.3 million toz gold. The reserves include only the Bisha and Harena open pits. The combined proven and probable reserves grade 1.1% copper, 5.57% zinc, 0.68 g/t gold and 44 g/t silver. It equals to copper equivalent grade of 5.1% or to gold equivalent grade of 5.6 g/t, at the current metals prices of $1,300/toz gold, $18.5/toz silver, $2.1/lb copper and $1.05/lb zinc.
The amount of metals contained in the reserves equals to 0.51 billion lb copper, 2.58 billion lb zinc, 0.46 million toz gold and 29.71 million toz silver. It is equal to 2.35 billon lb of copper equivalent or 3.79 million toz of gold equivalent. In other words, the current Bisha mine reserves are similar to a respectable high-grade gold deposit grading 5.6 g/t gold and containing 3.79 million toz gold.
The Bisha mine is in a transition phase as the original copper-rich supergene ore has been almost exhausted and Nevsun starts to mine the primary ore. As a result, the amount of copper production will decrease while the amount of zinc production will increase rapidly. Also, the gold and silver production should increase slightly. The expected production mix is shown by the chart below.
However, it is important to note that Nevsun used metals prices of $2.9/lb copper, $0.92/lb zinc, $1,175/toz gold and $20/toz silver to calculate the copper equivalent production. At current metals prices, the copper equivalent production, presented by the chart below, should be by 25-35 million lb higher.

There are several exploration targets close to Bisha, moreover Bisha deposit itself is still open down-dip. And on July 26, Nevsun announced that the Bisha exploration licence area increased almost twenty-fold, to 814 km2.
Nevsun believes that the Bisha VMS district can turn out to be comparable to Noranda or Flin Flon VMS districts that contained 25 and 18 VMS deposits, respectively.
There is a good possibility that Nevsun will be able not only to keep on replenishing the extracted reserves but also to grow them and also to expand its Eritrean operations. (continue reading the remainder of the subscribed article from the source HERE.)