VANCOUVER, July 26, 2018 /CNW/ - Nevsun Resources Ltd.
(TSX:NSU) (NYSE AMERICAN:NSU) ("Nevsun" or "the Company") is
pleased to report its financial results for the three and six
months ended June 30, 2018. Unless
otherwise noted all financial results are in millions of US
dollars.
Q2 2018 Highlights
- Broke ground on the Timok Upper Zone exploration decline.
- Announced initial Timok Lower Zone inferred mineral resource of
1.7 billion tonnes grading 0.86% copper and 0.18 grams per tonne
gold (0.96% copper equivalent) for 31.5 billion pounds of copper
and 9.6 million ounces of gold.
- Announced Bisha open pit extension through 2022.
- Achieved copper recoveries of 69.4% with implementation of the
revised reagent scheme in June.
- On track to meet full year 2018 guidance with quarterly
production of 51.3 million pounds of zinc and 8.6 million pounds of
copper.
- C1 cash costs(2) also within guidance at
$0.71 per payable pound of zinc sold
on a by-product basis.
- Revenue adversely impacted by lower zinc prices in June,
resulting in downward provisional pricing adjustments.
- Unrestricted cash balance of $125.1
million at the end of the quarter, of which $110.8 million is attributable to Nevsun
shareholders.
"We improved metallurgical performance at Bisha in the second
quarter with the implementation of the new reagent scheme.
Production volumes were down principally due to the processing of
lower grade material, however we expect to revert to processing
higher grade material through the balance of 2018. Most
importantly, we were able to convert a portion of our extensive
resources to reserves in a capital efficient, economically
attractive mine life extension, which is expected to extend Bisha
cashflows, reducing Timok funding requirements," said Peter Kukielski, Chief Executive Officer.
Mr. Kukielski continued: "At Timok, the initial resource
declaration for the Lower Zone confirmed the project as one of the
largest copper porphyry discoveries in recent years and highlighted
why we are so optimistic about the deposit's long-term prospects.
At the Upper Zone, the ground-breaking ceremony for the exploration
decline demonstrated strong support from the Serbian government and
other important local stakeholders. In the third quarter, we will
complete the trade off study on the ramp up scenario for the Timok
Upper Zone. We also continue to engage with potential strategic
partners who could both invest in Nevsun and potentially bring
complementary technical or other capabilities required for
successful execution of the project."
"Taken together, the solid progress and improvements this
quarter at both of our key assets have increased the fundamental
value of the Company, and set the stage for further value
enhancement in the months ahead."
Timok Project Update
In Q2 2018, the Company announced an initial NI 43-101 compliant
inferred resource for the Timok Lower Zone with 1.7 billion tonnes
grading 0.86% copper and 0.18 grams per tonne gold (0.96% copper
equivalent) for 31.5 billion pounds of copper and 9.6 million
ounces of gold. The mineral resource model includes the data
from the recently completed $20
million drill program and demonstrates the impressive copper
grade, continuity and thickness of mineralization in the Lower
Zone. A core relogging program is in progress to better define the
geological constraints on this resource to be used in future
economic studies. The Company expects to file a NI 43-101 Technical
Report incorporating the initial resource statement for the Timok
Lower Zone in Q3 2018.
Progress also continued at the Timok Upper Zone where a contract
for construction of the exploration decline was awarded in the
quarter and site preparation activities commenced in May 2018 in advance of construction of the portal
and development of the exploration decline. Drilling also continued
as part of a condemnation drill program aimed to ensure that no
significant mineralization is present near proposed infrastructure.
The Company has acquired 100% of the land required for development
of the exploration decline and 64% of the required private land for
construction of the Upper Zone project as at June 30, 2018.
A ramp-up scenario is being examined starting with initial
production at 1.6 million tonnes per annum ramping up to 3.25
million tonnes per annum over a two-year period. An update on this
study will be provided in the third quarter. Discussions with
potential off takers and potential finance providers continue to be
advanced in parallel with the feasibility study ("FS").
The 2018 regional drilling program commenced in June and is
focused on searching for additional high grade Upper Zone-style
mineralization. Exploration drilling resumed in the Eastern Target
2 area 500 metres east of the Upper Zone with three holes currently
in progress. Strong Upper Zone style alteration with associated
pyrite, enargite and minor covellite mineralization typical of the
outer edge of the Upper Zone is being encountered. Recent
work has highlighted another area immediately to the west of the
Upper Zone with similar high potential.
Bisha Mine Update
The Bisha Mine maintained total quarterly material movement
above five million tonnes for the third consecutive quarter. This
sustained improvement in mine performance reflects the deployment
of new heavy mining equipment ("HME"), and the implementation of a
plan for in-pit waste dumping with favourable impacts on haulage
distance. The mine is expected to continue to benefit from the
in-pit waste dumping until the end of 2018. These benefits were
offset by variances to the mine plan which resulted in tighter ore
supply in the pit. Lower grade ore encountered outside of the
reserve model on the western side of the open pit maintained the
supply of primary ore to the process plant, but resulted in lower
zinc feed grade in Q2 2018.
The decrease in ore milled in Q2 2018 resulted from reduced
operating time for maintenance activities. This, together with
reduced feed grades, resulted in zinc in concentrate produced
decreasing in Q2 2018 from Q1 2018. The implementation of an
alternate reagent scheme in mid-June continued to benefit
copper-zinc selectivity and resulted in improved copper concentrate
grade and copper recovery from Q1 2018.
2018 Outlook Update
Through the first half of 2018, the Company achieved three 2018
objectives for the Timok Project, with the completion of the
pre-feasibility study, the commencement of the exploration decline
and the declaration of an inferred resource on the Lower Zone.
Through the second half of 2018, the Company will complete the
initial study work on the Timok ramp up scenario and advance the
FS, with expected completion in mid-2019. Land acquisition and
permitting activities will continue to advance in parallel with a
significant majority of the private land required for the Timok
Project expected to be purchased in 2018.
The Company's previously published 2018 outlook production is
210 to 240 million pounds of zinc and 20 to 30 million pounds of
copper. Zinc production in the first half of the year was 122.9
million pounds. The Company expects to revert to processing
higher-grade material in the second half of 2018 and remains
confident that it will achieve its 2018 zinc production guidance.
Copper production in the first half of the year was 17.5 million
pounds and it continues tracking toward the higher end of
guidance.
C1 cash costs per payable pound of zinc sold on a by-product
basis are expected to be $0.60 to
$0.80 in 2018. C1 cash costs on a
by-product basis were $0.65 in the
first half of the year and the Company expects it to remain within
the expected range in 2018.
Q2 2018 Financial Review
|
|
|
|
|
|
Q2 2018
|
Q1 2018
|
Q4 2017
|
Q2 2017
(Restated)(1)
|
Revenue
(millions)
|
$
|
76.4
|
$
|
106.7
|
$
|
80.6
|
$
|
66.1
|
Impairment reversals
(charges) (millions)
|
|
5.0
|
|
-
|
|
18.0
|
|
(69.7)
|
Earnings from mine
operations (millions)(1)
|
|
2.4
|
|
23.4
|
|
15.0
|
|
(64.9)
|
Exploration expenses
(millions)(1)
|
|
(1.6)
|
|
(8.2)
|
|
(10.2)
|
|
(15.2)
|
Net income (loss)
(millions)(1)
|
|
(9.3)
|
|
0.5
|
|
2.2
|
|
(84.2)
|
Net loss attributable
to Nevsun shareholders (millions)(1)
|
|
(9.4)
|
|
(4.5)
|
|
(3.8)
|
|
(57.9)
|
Basic loss per share
attributable to Nevsun shareholders(1)
|
$
|
(0.03)
|
$
|
(0.01)
|
$
|
(0.01)
|
$
|
(0.19)
|
|
|
|
|
|
|
|
|
|
Unrestricted cash
(millions)
|
$
|
125.1
|
$
|
149.6
|
$
|
124.6
|
$
|
171.4
|
Working capital
(millions)
|
|
170.4
|
|
187.6
|
|
162.3
|
|
172.1
|
|
|
|
|
|
|
|
|
|
Zinc price realized,
per payable pound sold(3)
|
$
|
1.14
|
$
|
1.51
|
$
|
1.54
|
$
|
1.16
|
C1 cash cost per
payable zinc pound sold, by-product basis(2)
|
|
0.71
|
|
0.58
|
|
1.13
|
|
0.68
|
C1 cash cost per
payable zinc pound sold, co-product basis(2)
|
|
0.84
|
|
0.79
|
|
1.23
|
|
0.92
|
|
|
|
|
|
|
|
|
|
Copper price
realized, per payable pound sold
|
$
|
3.09
|
$
|
3.01
|
$
|
3.26
|
$
|
$2.65
|
C1 cash cost per
payable copper pound sold, co-product
basis(2)
|
|
1.39
|
|
1.56
|
|
2.01
|
|
1.59
|
(1)
|
Effective December
31, 2017, the Company voluntarily elected to change its accounting
policy with respect to exploration and evaluation expenditures, and
as such, certain financial measures have been restated. Please
refer to the Company's 2017 annual consolidated financial
statements for the full accounting policy, and to the Company's Q2
2018 interim financial statements for disclosure surrounding the
effect of the change as at and for the three and six months ended
June 30, 2017.
|
(2)
|
C1 cash cost per
pound is a non-GAAP measure. See page 23 of the Company's Q2 2018
MD&A for discussion of non-GAAP measures and page 6 of the
Company's Q2 2018 MD&A, Cash Costs, for explanation of per-unit
costs.
|
(3)
|
Zinc price realized
per payable pound sold includes provisional pricing adjustments for
shipments not yet settled, including shipments in previous
quarters. In Q2 2018, zinc price realized per payable pound sold of
$1.14 is inclusive of downward provisional pricing and other
adjustments of $0.23 per payable pound sold – see page 26 of the
Company's Q2 2018 MD&A for a reconciliation of realized metal
prices.
|
Q2 2018 Operating Review
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|
|
|
|
|
|
|
Q2 2018
|
Q1 2018
|
Q4 2017
|
Q2 2017
|
Mining
|
|
|
|
|
|
|
Ore mined,
tonnes(1)
|
|
582,000
|
640,000
|
362,000
|
654,000
|
|
Waste mined,
tonnes
|
|
4,900,000
|
4,525,000
|
4,981,000
|
3,739,000
|
|
Strip ratio, using
tonnes
|
|
8.4
|
7.1
|
13.8
|
5.7
|
Processing
|
|
|
|
|
|
|
Ore milled,
tonnes
|
|
491,000
|
563,000
|
520,000
|
590,000
|
|
Zinc feed grade,
%
|
|
6.1
|
7.1
|
6.9
|
5.3
|
|
Copper feed grade,
%
|
|
1.1
|
1.2
|
1.2
|
0.8
|
|
Recovery, % of
zinc
|
|
77.6
|
81.1
|
72.6
|
62.2
|
|
Recovery, % of
copper(2)
|
|
69.4
|
61.5
|
27.4
|
51.6
|
|
Zinc concentrate
grade, %
|
|
47.8
|
47.8
|
45.6
|
41.5
|
|
Copper concentrate
grade, %(2)
|
|
21.5
|
20.9
|
18.7
|
17.4
|
|
Zinc in concentrate
produced, millions of pounds
|
|
51.3
|
71.6
|
57.7
|
43.0
|
|
Zinc in concentrate
produced, tonnes
|
|
23,300
|
32,500
|
26,100
|
19,500
|
|
Copper in concentrate
produced, millions of pounds
|
|
8.6
|
8.9
|
3.6
|
5.7
|
|
Copper in concentrate
produced, tonnes
|
|
3,900
|
4,100
|
1,600
|
2,600
|
|
Payable zinc in
concentrate sold, millions of pounds
|
|
53.8
|
53.4
|
44.6
|
34.3
|
|
Payable zinc in
concentrate sold, tonnes
|
|
24,400
|
24,200
|
20,200
|
15,400
|
|
Payable copper in
concentrate sold, millions of pounds
|
|
4.3
|
7.8
|
3.6
|
7.7
|
|
Payable copper in
concentrate sold, tonnes
|
|
2,000
|
3,500
|
1,600
|
3,500
|
(1)
|
Ore tonnes mined for
the three and six months ended June 30, 2018 consisted of 582,000
and 1,222,000 tonnes of primary ore (Q2 2017 – 643,000 and
1,237,000 tonnes of primary ore and 11,000 and 68,000 tonnes of
supergene ore).
|
(2)
|
This represents the
copper recovery to copper concentrate from the copper flotation
circuit only, and excludes copper recovered to zinc
concentrates.
|
The Company's Interim Financial Statements and Management's
Discussion and Analysis ("MD&A") are available on the
Company website at www.nevsun.com, on SEDAR
at www.sedar.com and on EDGAR at www.sec.gov.
Q2 2018 Results Conference Call and Webcast Details
The Company will hold a conference call and webcast on
Friday, July 27, 2018, at
8AM Vancouver / 11AM
Toronto, New York / 4PM
London, to discuss the financial
and operating results.
Conference Call:
Please call in at least five minutes prior to the conference
call start time to ensure prompt access to the conference. Dial in
details are as follows:
North America: 1 888-390-0546 /
+1 416-764-8688 / +1 778-383-7413
UK: 0800 652 2435 (toll free)
Other International: +1 416-764-8688 / +1 778-383-7413
The conference call will be available for replay by phone until
Friday, August 3, 2018, by calling 1
888-390-0541 / +1 416-764-8677 and entering passcode 439304 #.
Webcast:
A live audio webcast of the conference call will be available on
the Company's website www.nevsun.com or by clicking here.
Qualified Persons Statement
Mr. Peter Manojlovic, PGeo, and
Vice President Exploration of Nevsun Resources Ltd. is a Qualified
Person under the terms of NI 43-101 and has reviewed the
exploration and mineral resource and reserve statements of this
press release and approved its dissemination.
Cautionary Notes to Investors – Resource Estimates
In accordance with applicable Canadian securities regulatory
requirements, all mineral resource estimates of the Company
disclosed or incorporated by reference in this news release have
been prepared in accordance with Canadian National Instrument
43-101 - Standards of Disclosure for Mineral Projects, classified
in accordance with Canadian Institute of Mining Metallurgy and
Petroleum's "CIM Standards on Mineral Resources and Reserves
Definitions and Guidelines" (the "CIM Guidelines").
The Company uses the terms "mineral resources", and "inferred
mineral resources". While those terms are recognized by Canadian
securities regulatory authorities, they are not recognized by the
United States Securities and Exchange Commission (the "SEC") and
the SEC does not permit U.S. companies to disclose resources in
their filings with the SEC.
Pursuant to the CIM Guidelines, mineral resources have a higher
degree of uncertainty than mineral reserves as to their existence
as well as their economic and legal feasibility. Inferred mineral
resources, when compared with measured or indicated mineral
resources, have the least certainty as to their existence, however,
it is reasonable to expect that the majority of inferred mineral
resources could be upgraded to indicated mineral resources with
continued exploration. Pursuant to NI 43-101, inferred mineral
resources may not form the basis of any economic analysis,
including any feasibility study. Accordingly, readers are cautioned
not to assume that all or any part of a mineral resource exists,
will ever be converted into a mineral reserve, or is or will ever
be economically or legally mineable or recovered.
About Nevsun Resources Ltd.
Nevsun Resources Ltd. is the 100% owner of the high-grade
copper-gold Timok Upper Zone and 60.4% owner of the Timok Lower
Zone in Serbia. The Timok Lower Zone is a joint venture with
Freeport-McMoRan Exploration Corporation ("Freeport") which
currently owns 39.6% and upon completion of any feasibility study
(on the Upper or Lower Zone), Nevsun Resources Ltd. will own 46%
and Freeport will own 54%. Nevsun
generates cash flow from its 60% owned copper-zinc Bisha Mine in
Eritrea. Nevsun is well positioned with a strong debt-free
balance sheet to grow shareholder value through advancing Timok to
production.
Forward Looking Statements
The above contains forward-looking statements or
forward-looking information within the meaning of the United States
Private Securities Litigation Reform Act of 1995, and applicable
Canadian securities laws. All statements, other than statements of
historical facts, are forward looking statements including
statements with respect to the Company's Bisha Mine in Eritrea and its intentions for its Timok Upper
Zone Project in Serbia (the "Timok Project"). The Company also
cautions the reader that the PEA previously released in
September 2017 and the PFS released
in March 2018 on the Timok Project
that support the technical feasibility or economic viability of the
Timok Project, including the marketability of the concentrate,
mining method, costs, processing, metal recoveries and any other
technical aspects related to the Timok Project, are preliminary in
nature and there is no certainty that the PEA or the PFS will be
realized.
Forward-looking statements are frequently, but not always,
identified by words such as "expects", "anticipates", "believes",
"hopes", "intends", "estimated", "potential", "possible" and
similar expressions, or statements that events, conditions or
results "will", "may", "could" or "should" occur or be achieved.
Forward-looking statements are statements concerning the Company's
current beliefs, plans, objectives and expectations about the
future, including but not limited to statements and information
made concerning: statements relating to the business, prospects and
future activities of, and development plans related to the Company,
exploration activities, the adequacy of financial resources,
anticipated production, processing and recoveries of zinc and
copper, mineral reserve and resource estimates, mining efficiencies
and access to mineral reserves, goals, strategies, future growth,
planned future acquisitions, anticipated C1 cash costs to produce
zinc or copper, resolution of metallurgical challenges from
variable ore materials to produce concentrate and the ability to
increase processing and recovery rates of zinc and copper,
achievement of and timing for achievement of any key milestones
including, planned mineral movement at the Bisha Mine and other
events or conditions that may occur in the future regarding the
Company or its projects.
The actual achievements of the Company or other future events
or conditions may differ materially from those reflected in the
forward-looking statements due to a variety of risks, uncertainties
and other factors. These risks, uncertainties and factors include
general business, legal, economic, competitive, political,
regulatory and social uncertainties; actual results of exploration
activities and economic evaluations; fluctuations in currency
exchange rates; changes in project parameters; changes in costs,
including labour, infrastructure, operating and production costs;
future prices of copper, gold, zinc, silver and other minerals;
resource estimates and variations of mineral grade or recovery
rates; metallurgical challenges on the variable ore materials being
processed and if the significant improvements in recovery rates of
zinc and copper will be maintained or that recoveries to initial
design levels will be achieved; the ability to extend mine life
beyond the current mine plans; operating or technical difficulties
in connection with exploration; land acquisition; mining method,
production profile and mine plan; other development or mining
activities, including the failure of plant, equipment or processes
to operate as anticipated; performance on ore production and waste
movement and improvement in mining capability; delays in
exploration, development and construction activities including
commencement of the decline construction as planned; changes in
government legislation and regulation; the ability to maintain and
renew existing licenses and permits and the ability to obtain other
required licences and permits in a timely manner or at all; the
ability to obtain financing on acceptable terms and in a timely
manner or at all; contests over title to properties; employee
relations and shortages of skilled personnel and contractors; the
speculative nature of, and the risks involved in, the exploration,
development and mining business including, without limitation,
other risks that are more fully described in the Company's Annual
Information Form for the fiscal year ended December 31, 2017 (the "AIF") and the Company's
management discussion and analysis for the fiscal year ended
December 31, 2017 (the "MD&A"),
which are incorporated herein by reference.
The Company's forward-looking statements are based on the
beliefs, expectations and opinions of management on the date the
statements are made and the Company assumes no obligation to update
such forward-looking statements in the future, except as required
by law. For the reasons set forth above, investors should not
place undue reliance on the Company's forward-looking
statements.
Further information concerning risks and uncertainties
associated with these forward-looking statements and our business
can be found in our AIF and MD&A, which is available on the
Company's website (www.nevsun.com), filed under our profile on
SEDAR (www.sedar.com) and on EDGAR (www.sec.gov) under cover of
Form 40-F.
NEVSUN RESOURCES LTD.,
"Peter G.J. Kukielski"
Peter G.J. Kukielski
President & Chief Executive Officer
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SOURCE Nevsun Resources Ltd.