Investing In The New Resource Bull Market

An April 2016 PEA on Timok's Upper Zone outlines the project's exceptional economics, including an initial capex of $213 million; a post-tax NPV of $1 billion (at 8% discount rate and spot metal prices); a post-tax IRR of 86%; and a payback of less than one year.

For a project of this size, these economics are virtually unheard of. Additionally they don't take into account Timok's Lower Zone, which may have a potential production life of 15–20 years. We'll learn more about the Lower Zone over the coming year as Nevsun has initiated an aggressive drilling program. In a best case scenario, the Lower Zone could double or triple the overall value of Timok.

Developments at the Bisha mine in Eritrea have been overshadowed by the high-profile Timok deal. However, there have been several significant developments this year worth noting, including Bisha's zinc expansion coming in on time and underbudget and Q1/Q2 supergene copper ore production of 55.8 million pounds at a C1 cash cost of $1.04 per payable, which was above guidance of 40-50 million pounds and under the cost guidance of $1.20 to $1.40 per payable pound of copper.

Additionally, Newsun announced that it had increased its total land package of exploration licenses to 814 square kilometers in Eritrea's Bisha VMS District. This represents a 1,891% increase from the 41 square kilometers the company had before the deal. This acquisition solidifies my belief that Nevsun will find enough ore to keep the Bisha mine producing for another three decades. This may be a VMS district on the same scale as Manitoba's Flin Flon district, which has seen 25 producing mines in the past century. I'm thrilled to see what the company can discover elsewhere in the district over the coming years.

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