JOHANNESBURG (miningweekly.com) – Canada-based Nevsun Resources has finalised $235-million debt for its Bisha project in Eritrea, completing the funding arrangements to develop the gold/silver/copper/zinc mine.

The debt package is a mix of senior and subordinated loans from a lending group consisting of seven lenders from Europe and South Africa, the company late last week.

It had also arranged a cost over-run facility of $30-million that would be in addition to a contingency allowance of $32-million.

Thus far, Nevsun and the government of Eritrea have funded some $120-million of the $355-million Bisha project, which will be that country's first modern-day major mine.

The company reported that the project was more than one-third completed, with production scheduled to start in the third quarter of next year. It will produce an average of 431 000 oz/y of gold and 702 000 oz/y of silver in the first two years of production.

Copper and zinc output will begin in years three and six respectively.

The project was expected to generate enough cash in the first two-and-a-half years to repay all debt facilities, as well as fund the copper phase mine expansion, Nevsun said in a statement.

The projected operating cash costs for gold production were estimated to be less than $230/oz, including royalties.

Nevsun said that utilisation of the debt facilities was expected in the “next few weeks”, after certain conditions were met, including the registration of security, final letters from governments and final insurance arrangements.

The company is also required to establish a gold price protection programme, in the event that the price of gold falls below $700/oz. The programme is a purchase of gold puts of 200 000 oz for the first two years of production to ensure that the project benefits from not only the floor price of $700/oz, but also 100% of all gold prices higher than $700/oz.

Nevsun was ordered by the Eritrean government to halt exploration at Bisha in 2004 and then allowed to resume operations in the country in early 2005, after agreeing to allow the government to buy a 30% interest in the project, on top of the free 10% interest it receives, according to the country's law.