http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=144982&sn=Detail&pid=102055
Missing oxide ore sees Nevsun cut 2012 gold output guidance in half
With less gold-rich oxide ore in its Bisha deposit than expected, Nevsun
forced to drop 2012 production guidance, but still sees mine as one of .the
best high grade open pit base metal ops in the world.
Author: Kip Keen
Posted: Tuesday , 07 Feb 2012
It was supposed to be another booming year for gold production for Nevsun
Resources (TSX: NSU) as it transitions into base metal production over the
next couple of years. But on Tuesday morning the Eritrea-focused miner
chopped 2012 gold production guidance in half to between 190,000 to 210,000
ounces from the oxide zone of its Bisha deposit in Eritrea.
Nevsun said in matching what it mined in 2011 to what it had modelled in
reserves a discrepancy began to emerge last year. Much of what it had
pegged as gold bearing ore turned out to be waste rock in the upper oxide
zone at Bisha, which, otherwise, is by and large a copper-zinc deposit.
The effect: A 35-percent-or-so reduction in oxide ore. Nevsun said there
are now 1.6 million tonnes of oxide ore _at_ 5.1 g/t gold instead of the
previously expected 2.5 million tonnes at about the same grade. The new
figure stems from research by Nevsun and independent consultants it hired
late last year to investigate the missing oxide ore.
Frazier Bourchier, Nevsun chief operating officer, said in a conference
call on Tuesday morning that the discrepancy in mined versus modelled
oxides came down to core recovery in drilling reserves and resources.
In the oxide zone it was poor. "Because it's highly altered and broken up,
the average core recovery of the drill in the oxide only was about 71
percent," Bourchier said.
That stands in contrast to the more competent rock in the supergene and
primary zones below the oxides where Bourchier said core recovery was 91
percent and 98 percent respectively.
The poor recovery is now biting back. To put together the Bisha feasibility
study, Bourchier said that core with less than 60 percent recovery was not
included in modelling resources. In turn that meant there were wider spaces
between data points.
"That ended up exacerbating the issue somewhat in terms of the grade
interpolation," Bourchier said, referring to the fact that gold content was
overestimated.
The heavy drop in gold ounces was clearly a disappointment for Nevsun.
Cliff Davis, Nevsun president and CEO, speaking from Eritrea during the
Tuesday conference call, put it baldly: "I don't think anybody is happy
with the missing oxide," Davis said, answering a question about the
reaction of Nevsun's 30-percent partner on Bisha, Eritrean state miner
ENAMCO, to the news.
But in delivering the unhappy message Davis held tightly to Nevsun
achievements at Bisha in 2011 - such as strong cash flow, low cash costs
and capital payback in its first year of operation - and what the
lower-oxide tonnage means in the grand scheme of the Bisha deposit. His
tone was more akin to a confident captain of a ship that has just taken a
bad but non-critical ding, than panicky officer of a vessel fast taking on
water.
"If we didn't have this oxide adjustment that we've been talking about our
year-end 2011 reserve would have been 26.2 million tonnes, including 2.5
million tonnes of oxide," Davis said. "So cutting through this, in other
words, the oxide mineralization adjustment that we've just discussed above
is equivalent to a reduction of 1.2 million tonnes or about four percent of
total reserves."
In that context Davis hailed Bisha as remaining "one of the highest-grade,
base-metal, open-pit deposits in the world" a couple times during the
conference call.
Next year Nevsun is to transition into mining copper-rich supergene ore,
and then a few more years down the road, it will be scooping out zinc-rich
primary ore.
While Nevsun is reviewing all its resources and reserves including the
supergene and primary zones - a restatement would be out sometime mid-year
- Davis said the discrepancy in the oxides is "unlikely to have occurred to
the same extent, if at all, within the more massive disseminated supergene
and primary zones of the ore body."
That comes back to core recovery, which was far better in the supergene and
primary zones and thus more likely to be accurate.
Still, however you cut it, a 35-percent drop in tonnage and half as much
gold production for a year will smart with investors. As of presstime
Nevsun's shareprice was down about 29 percent to C$4.53
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Received on Tue Feb 07 2012 - 22:45:06 EST
