VANCOUVER (miningweekly.com) – A new prefeasibility study (PFS) on Canadian base metals producer Nevsun Resources’ Timok Upper Zone (UZ) copper/gold project, in Serbia, has confirmed the project as one of the best development-stage copper assets in the world, the company reports.
Vancouver-headquartered Nevsun reported last week that, based on an assumed copper price of $3.15/lb in 2020, when project construction is expected to start, the Timok UZ has an after-tax net present value (NPV), applying an 8% discount rate, of $1.82-billion, and an internal rate of return (IRR) of 80%.
The NPV, however, falls to $1.45-billion and an IRR of 55% when using the same price assumption in today’s market and including the $574-million pre-production capital cost. Capital expenditure (capex) excludes $114-million to be spent to reach a construction decision.
Nevsun guided that pending receipt of all required permitting, first production will take place in 2023, although the company would like to start production earlier in 2022.
On a comparative basis, the new PFS outlines a lower asset value for the project, as a result of a later start to production from 2021 envisioned in the October 2017 preliminary economic assessment (PEA) to 2023 in the latest PFS; a shorter mine life from 15 years to 10 years; higher copper refining and treatment charges and arsenic penalties; higher transport and selling costs; and higher mining, milling and general and administrative costs.
However, they are offset by somewhat lower total capex, higher life-of-mine copper and gold grades, and higher copper concentrate grades.
The mine is expected to produce 1.7-billion pounds of payable copper over a decade of operations, excluding from inferred resources, producing on average 1.89-million pounds of copper a year, at an average C1 cost of $0.92/lb of copper.
The company believes the strong front-end cash flow and quick payback period of less than one year supports a range of financing opportunities and alternatives.
Further, Nevsun advised that scoping-level work suggests the potential to decrease initial capital by up to $100-million through a staged ramp-up from 1.6-million tonnes to 3.2-million tonnes a year, while maintaining project economics.
The PFS was compiled and project managed by Hatch of Toronto, with input from SRK Vancouver, Knight Piesold in Vancouver, and Bluequest of Zug, Austria.
The PFS declared a maiden Timok UZ probable mineral reserve of 27-million tonnes at 3.3% copper and 2.1 g/t gold, based on a price of $3/lb copper and $1 300/oz gold. There remain 13.9-million tonnes of inferred resources at 1.6% copper and 0.9 g/t gold that require further drilling from underground to bring it into the higher-confidence reserve base.
Further work during the feasibility study, the results of which are expected to be released in mid-2019, will continue to refine the project and optimise costs for the construction and operation phases, Nevsun advised.
The company’s TSX-listed equity has responded positively to the Timok UZ PFS, gaining nearly 5% since Thursday and closing 3% higher on Monday at C$3.16 a share.