Nevsun Reports Huge Increase in Resources at Eritrea Mine

Nevsun Reports Huge Increase in Resources at Eritrea Mine

Radio Erena: 05 February 2015


On Tuesday, Nevsun Resources updated the mineral resource estimates for its Bisha and Harena deposits, both of which are located at its Bisha mine in Eritrea.

Though the company’s mineral reserve estimates for the deposits are still forthcoming, the resources at Harena saw substantial increases, while resources at Bisha grew as well.


2014 exploration drilling at Harena increased the open-pit indicated resources at the project by 1.4 million tonnes (113 million pounds of zinc and 32 million pounds of copper), while the inferred resources grew by a whopping 6.1 million tonnes (498 million pounds of zinc and 156 million pounds of copper).

In other words, indicated resources have roughly doubled at Harena, while inferred resources have seen an 18-fold jump. At Bisha, indicated and inferred resources grew by 0.9 and 0.6 million tonnes, respectively.

Furthermore, the company said Tuesday that its exploration work has been extremely cost effective so far. As both deposits still remain open, there will be more exploration work to come in 2015, along with the start of underground scoping assessments at both deposits.

“Since the restart of exploration here last year, the estimated cost of discovery at Harena has been approximately 2 cents per pound copper and 1 cent per pound zinc,” said Nevsun CEO Cliff Davis. “This tremendous cost efficiency speaks to how we approach our business practices. As exploration continues at Harena, excellent potential remains for additional resource expansion not only at Harena, but also at our three other deposits within the Bisha VMS District.”

Jurisdictional risk

To be sure, the African nation isn’t the most favorable country to be operating in — Eritrea has been cited by Human Rights Watch as having “dismal” human rights conditions, indefinite military services and “severe restrictions on freedoms of expression.”

Nevsun is required to partner with the Eritrean government for Bisha (it owns 60 percent, while the government owns the remaining 40), and the country’s practice of using conscripted labor has led to controversy over the construction of the Bisha mine in the past, the latest being a claim brought against the company in November.

For its part, Nevsun has undertaken its own Human Rights Impact Assessment and has stated that it “[does] not tolerate any violations of human rights.” Furthermore, the company has noted that “all personnel hired [at Bisha] must demonstrate that they have been demobilized from the Eritrean national service” in order to guard against the use of conscripted labor.

Analyst favorite

In any case, Nevsun remains an analyst favorite. For instance, while Eric Coffin of HRA Advisories has admitted that he’s “not crazy about Eritrea,” he still believes Bisha is “one of the best base metal [mines] in the world.”

Similarly, though he considers the project to have high political risk, Stefan Ioannou of Haywood Securities has said that the Bisha deposit is “undoubtedly a world-class giant” that could be the largest VMS deposit in the district. He sees plenty of potential in the satellite deposits around the mine as well.

It’s worth noting that Bisha is unique in another way — it began as a gold mine, but transitioned to being predominantly a copper operation in 2013 and will shift again to zinc-copper mining in 2016.

Furthermore, Ioannou has stated that Eritrea has world-class potential as a VMS mining district and that Nevsun offers “the best entrance point” via Bisha and its other exploration properties. ”Eritrea’s world-class potential has not gone unnoticed by the majors, as is evidenced by investments from Lundin Mining (TSX:LUN), Antofagasta (LSE:ANTO) and Newmont Mining (NYSE:NEM),” he said. “With commercial copper production underway, we believe that Bisha is ripe for the picking in a marketplace characterized by ongoing consolidation.”

Overall, Ioannou has a “buy” rating on Nevsun and a target price of $5. At close of day Tuesday, shares of the company were up about 1 percent, or 5 cents, trading at $4.58.