SeekingAlpha.com: Nevsun - Buy On Past And Present Performance, Hold For The Future

From: Berhane Habtemariam <Berhane.Habtemariam59_at_gmx.de_at_dehai.org>
Date: Thu, 29 Dec 2016 00:08:53 +0100

Nevsun - Buy On Past And Present Performance, Hold For The Future

 | About: Nevsun Resources (NSU) 
 

Summary

Debt free mining firm with significant exposure to zinc.

Cash heavy balance sheet will allow management to develop world class copper-gold deposit without typical stress associated with such long lived assets.

Shareholder focused management.

Invest on the Past and Present, Hold for the Future

Debt free mining firm with significant exposure to zinc and the cash necessary to develop a recently acquired world class copper-gold deposit.

It is not often that you find a mining company with a producing mine, a debt-free balance sheet, and positive cash flow. Even more infrequent, a miner that has an existing world class asset in a supply constrained commodity and a world class development property in a European nation. If all of this sounds appealing, then Nevsun Resources (TSX: NSU & NYSE: NSU) will be of some interest.

NSU is a Canadian headquartered copper-gold-zinc miner that currently operates the Bisha Mine in Eritrea, and has acquired the assets of Reservoir Minerals in June of this year. Based on a conservative analysis of the remaining life of the Bisha mine and the potential of the principal asset acquired from Reservoir minerals we believe that NSU is a long-term hold with a value north of $8.5 a share. NSU currently trades at $3.21 on the NYSE, suggesting a potential gain of 165%. The three key factors to understanding the value of this investment are: management's history of operational excellence[i], the current value of Bisha Mine, and the rich portfolio of prospective resources, most importantly the Timok project in Serbia.

Introduction

At the current time, NSU's only operating mine is the polymetallic copper-zinc-gold deposit in Eritrea, Africa. The mine was developed under budget, ahead of schedule and without debt. The mine, as currently developed, is expected to produce copper and zinc in significant quantities for a further eight years, along with by-product gold and silver.[ii] The Bisha mine, despite its comparably small footprint relative to other world class copper deposits, benefits from one of the lowest C1 cash costs per payable pound of copper sold[iii] in the industry. During the first half of 2016, NSU achieved a C1 cash cost of $1.04 per pound, this compares to an average cash cost of $1.28 per pound in Chile (the largest copper producing country in the world) during the first half of 2016, and average cost of $1.14 per pound in 3Q2016 by FCX (the largest publicly traded copper miner in the world).[iv]

 
Received on Wed Dec 28 2016 - 18:08:52 EST

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