It certainly hasn’t been a pleasant few months for shareholders of Nevsun Resources (NYSEMKT:NSU). Since my last article in February, shares have only continues to plummet, falling from $2.72 to under $2.40 per share. Between a 75% dividend cut and copper production issues at its Bisha mine, some shareholders have had enough.
Nevsun Resources Ltd. (TSX:NSU)(NYSE MKT:NSU) is pleased to report its financial and operating results for the three months ended March 31, 2017.
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.
First quarter 2017 highlights
Sold 66.5 million pounds of contained zinc in concentrate at C1 cash costs of $0.89 per payable pound sold
Produced 3.3 million pounds of copper in concentrate and 51.9 million pounds of zinc in concentrate
Zinc recovery improved to 71.0% during Q1 2017 from 63.6% during Q4 2016
Announced a significant increase in resources at the Bisha Mine
Completed the geophysics survey at Bisha, generating promising new targets
Completed the planned infill drilling program for the Timok Upper Zone
Approved a new exploration program targeting additional high-grade mineralization at Timok
Ended period with working capital of $190 million, including $167 million of cash and cash equivalents
Declared quarterly dividend of $0.01 per share
“Timok remains the Company’s number one priority to add shareholder value. We continue to achieve our key milestones including completion of infill drilling and progressing technical studies in support of the Timok project pre-feasibility study. We are on-track to commence decline development during 2017 and remain on-track to deliver the pre-feasibility study,” stated Chief Executive Officer, Cliff Davis.
“We are making continued improvements at Bisha which is translating into improvements to our operating income quarter over quarter,” stated Cliff Davis,
“With copper sales expected during Q2 2017 and less bulk concentrate, we expect even further improvements for the remainder of 2017. We are also pleased with higher than planned quarterly zinc and copper production, which means the Company is on track to meet annual production guidance. We continue to make incremental progress on all key performance indicators.”
Operating income (loss) (millions)
Net income (loss) (millions)
Working capital (millions)
Copper price realized, per payable pound sold
Zinc price realized, per payable pound sold
C1 cash cost per payable copper pound sold (1)
C1 cash cost per payable zinc pound sold (1)
(1) C1 cash cost per payable pound sold is a non-GAAP measure – see page 14 of the Q1 2017 MD&A for a discussion of non-GAAP measure.
(COMMENTARY BY DARP| SEEKING ALPHA) – Overall sounds good. They finally are producing copper and apparently the copper is profitable to produce and it enhances zinc recovery too. Key points below:
During this past quarter, the Bisha Mine has achieved incremental improvements in production of its two desired types of concentrate. Due to a variety of changes being implemented at the Bisha Mine, the Company has been able to reduce the activation of zinc sphalerite ore in the copper circuit, which resulted in the production of meaningful quantities of copper concentrate during February and March 2017.
The improved separation is also leading to increased amounts of zinc concentrate being produced in the zinc circuit with less production of bulk concentrate. The Company continues to devote significant resources including the use of external specialists with the objective of increasing the recoveries of copper and zinc in their respective circuits towards design levels, and to upgrade the quality of the copper and zinc concentrates produced to improve marketability.
The Company sold 52.9 million pounds of payable zinc during Q1 2017 (35.2 million pounds during Q4 2016) versus 34.9 million pounds of payable copper during Q1 2016. The Company had unusually high finished good inventory at December 31, 2016 due to the timing of shipments, all of which was sold during Q1 2017.
Cash costs per payable zinc pound sold for the three months ended March 31, 2017 were $0.89 (Q4 2016 – $1.06). After adding back the one-time recovery of withholding taxes (as noted above), and excluding selling costs related to sales of DSO, the C1 cash cost per payable zinc pound sold consists of $0.91 of operating expenses and selling costs and $0.11 of treatment and refining charges, offset by $0.13 of by-product credits.
Mine operating and selling costs are within annual guidance. The C1 cash cost per payable zinc pound sold reflects the co-product costing method. During Q1 2017, both zinc and copper concentrates were produced and cash costs were allocated to the respective concentrates based on expected revenue using budgeted metals prices.
The realized costs allocated to copper concentrate will be disclosed on a per payable pound sold basis upon the first sale of copper concentrate generated from primary ore, currently expected for Q2 2017.
During the three months ended March 31, 2016, the C1 cash cost per payable copper pound sold was $1.12, comprised of $1.11 of operating expenses and selling costs and $0.31 of treatment and refining charges, less $0.30 of by-product credits.
During the primary phase, it is expected that on a gross basis operating expenses will be slightly higher than those incurred during the supergene phase, largely as a result of higher reagent use expected during the primary phase to separate the copper and zinc elements in their respective flotation circuits.
At the end of the period, there were four distinct types of stockpiled material – 2,430,000 tonnes of primary ore inclusive of boundary ore material, 90,000 tonnes of supergene ore, 120,000 tonnes of oxide ore, and 400,000 tonnes of pyrite sand material.
The 2,430,000 tonnes of primary ore include an estimated 2,300,000 tonnes of boundary ore material. The boundary ore material had been intended to be either processed in a blended manner with in-pit fresh primary ore through both the existing copper flotation plant followed by the new zinc flotation plant, and/or processed via an alternative method based on future planned boundary material processing studies commencing later this year.
The Company has decided to segregate and stockpile all boundary primary material for future processing pending these technical investigations unless ore feed blends dictate the need for some boundary addition to the process plant.
The Company continues to find discreet but smaller zones of supergene ore. The Company has accumulated sufficient stockpiled supergene ore (90,000 tonnes) and intends to undertake a specific campaign to process this ore through the plant during 2017.
The stockpiled oxide ore consists of 20,000 tonnes of material containing high grades of gold and silver which is expected to be monetized by the end of the first half of 2017. The remaining 100,000 tonnes of oxide ore is expected to be processed at the end of the mine life through a re-commissioning of the existing carbon-in-leach plant.
The pyrite sand material consists of approximately 10,000 tonnes of higher grade material, and 390,000 tonnes of lower grade material. Further study is required to determine the most economic method of monetizing the lower grade stockpiled pyrite sand.