Nevsun: Design Work to Build Copper Processing Plant in Bisha Finalized

miningweekly.com,

Nevsun will start producing copper from the mine in 2013

South African contractor Senet is wrapping up detailed design work for the copper plant, and Nevsun CEO said he expects construction will begin later this year.

 Nevsun Resources will consider instituting a dividend policy, and is also looking to acquire more base-metals assets, as the company watches its cash reserves grow, CEO Cliff Davis said on Friday.

Nevsun achieved commercial production at its new Bisha mine in Eritrea in February this year. The company is producing more than 1 000 oz gold a day and reported first quarter cash costs of around $300/oz, including royalties. With gold at $1 500/oz and cash costs at less than half the industry average, Nevsun is enjoying profit margins of some $1 200/oz.

“Which means the mine is currently making over $1,2-million a day, or $750 000 after tax,” Davis told analysts on a conference call. (Note: This will leave Eritrea earning $450,000 a day)

The firm ended March with a cash position of over $100-million.

The company is looking at several uses for the growing cash pile, with growing its existing reserves at Bisha sitting at the top of the list, Davis said.

Nevsuin aims to double its reserves at Bisha this year, and already announced a 40% increase in March.

“It’s a pretty aggressive target but I think it’s achievable,” he said.

“We should be mining Bisha for many years beyond the 13-year defined mine life, as it currently stands.”

In addition to growing its current assets, the company is also looking at new opportunities, with an emphasis on base-metals assets, Davis said.

“And the third thing that we are going to be doing with respect to the use of cash is that the board will be looking at a possible dividend policy,” he said.

As far as acquisitions are concerned, the company will be “open minded” about the regions that it looks at.

“We are not necessarily going to become specialists in the horn of Africa or Africa,” he said,

Bisha, which is the first modern gold mine in Eritrea, was completed on schedule and actually ahead of budget. The first gold pour took place in January this year.

Although it has started off as a gold and silver producer, Nevsun will start producing copper from the mine in 2013, followed by zinc output a few years later.

“I think its fair to say that most people understand that we are a base-metals company,” Davis said.

“And hence that is where we are oriented” in looking for acquisitions,” he said.

“But at the same time we do have one heck of a lot of gold.”

South African contractor Senet is wrapping up detailed design work for the copper plant, and Davis said he expects construction will begin later this year.

Shares in Nevsun declined 2% on Friday, to C$5,25 apiece by 16:00 in Toronto.

(Source: https://www.miningweekly.com/article/nevsun-mulls-acquisitions-dividends-as-cash-piles-up-2011-05-13)

Original Title: Nevsun mulls acquisitions, dividends as cash piles up