VANCOUVER (miningweekly.com) – Canadian base metals producer Nevsun Resources has reported strong economics for its proposed Timok Upper Zone project, in Serbia.
The results of a preliminary economic assessment (PEA), completed by Vancouver-based SRK, has outlined a $630-million project that will produce 2.1-billion pounds of copper over a 15-year mine life.
Billed as one of the world’s best undeveloped copper projects, the mine will employ sub-level cave mining with 3.3-million tonnes of ore a year being processed through conventional plant producing copper concentrate.
Based on an assumed copper price of $3/lb, SRK has calculated an after-tax net present value, using an 8% discount rate, of $1.5-billion, with an impressive after-tax internal (IRR) rate of return of 50%. Investors often view an IRR of 35% and above as an extremely lucrative proposition, providing strong returns on the amount of money invested.
Nevsun believes the project is located in an established mining jurisdiction, supportive of new mining investment, with the strong project economics supporting a wide range of financing alternatives.
The report also outlined further upside potential from on-licence exploration and gold contained in pyrite concentrate.
Nevsun plans to proceed with further exploration campaigns in support of completing a prefeasibility study. The company expects to be able to start work on an exploration decline early in 2018, followed by a feasibility study in the first half of 2019.
“The PEA demonstrates the extremely compelling economics of the Timok Upper Zone project. Nevsun is in a unique position in the industry with a 100% ownership of a high-grade, high-return copper project in a well-established mining jurisdiction,” commented Nevsun CEO Peter Kukielski.
Nevsun advised that it is working with the Serbian government on permitting, with the objective to start production in 2021.
The PEA includes an added 36 639 m of infill drilling, an updated mineral resource estimate, a mining method based on numerous trade-off studies, more metallurgical testwork, process plant and infrastructure engineering and a new marketing study.
The Timok Upper Zone boasted 28.7-million tonnes in the measured and indicated categories, grading 3.7% copper, 2.4 g/t gold and 0.06% arsenic, for 1.05-million tonnes of copper and 2.2-million ounces of gold. The resource update added 350% of contained copper in the indicated category, up from 200 000 t to 900 000 t, and contained gold rose by 200% from 600 000 oz to 1.8-million ounces. The team has also upgraded the 2.2-million tonnes of previously indicated resource to the measured category, at a grade of 8.6% copper and 5.7 g/t gold.
The Timok Upper Zone project was the key asset acquired as part of the acquisition of Reservoir Minerals in June 23, 2016. It has now become the company’s main focus to bring the Timok project into production.
The Timok project is a joint venture with Freeport-McMoRan, and Nevsun being the operator. It will retain 100% ownership of the upper zone, while Freeport will gain up to a 54% interest in the lower zone.
Q3 RESULTS
Nevsun reported a surprise loss for the three months ended September.
The Vancouver-based miner reported a headline loss of $0.01 a share, compared to average market forecasts calling for nil per share.
The company reported a net loss of $500 000, or nil per share, compared with profit of $1.7-million, or $0.01 a share in the comparable period a year earlier.
Revenue jumped 210% to $71-million, which were attributable to the company’s first third-quarter zinc sales and significantly improved copper by-product sales.
Zinc revenues comprise sales of 43.4-million payable pounds of zinc, at an average realised price of $1.44/lb, and copper revenues were derived from 3.1-million payable pounds of copper, at an average realised price per pound of $2.99/lb.
Despite the earnings miss, Nevsun investors piled into the equity on Friday, presumably impressed by the strong economics for the Timok Upper Zone project despite it being early days and many hurdles remaining to be crossed.
On the TSX, Nevsun stock gained up to 16.41% in value to change hands at C$3.05 apiece.