From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Fri Dec 04 2009 - 15:40:18 EST
Nevsun Attracts Analyst Upgrades
By James West
MidasLetter - Friday, December 4, 2009
Nevsun Resources Inc. (TSX, AMEX: NSU), currently 40% through construction
on their Bisha Gold Project in Eritrea, Africa, has seen its future target
share price steadily increasing, according to the reports of analysts who
have visited the project.
Highly respected Canadian investment banks Haywood Securities based in
Vancouver, British Columbia, and Toronto-based GMP Securities raised their
target prices to CA$3.50 and CA$3.80 per share respectively, based on the
timely progress of plant construction, and the apparent ready availability
of capital to see the project completed. First gold ounces from production
are expected in late 2010.
According to GMP Securities analyst Mark Smith:
"The construction of the project is 40% complete with the remaining $153m of
capital to be spent over the next 12 months as the company draws down from
its debt facility. The 1.4Moz of gold reserves were calculated at $400/oz
and 2/g/t cut-off. There is resource (1.86Moz) : reserve conversion with the
possibility of increasing the gold production.
This orebody is financially robust given the high grade. The project is
expected to provide an 8 year optionality (16mt ore) as the pit shells were
modeled at Cu $1.05/lb, $0.50/lb Zn. The mill throughput rates can be
increased by 40% due to the softer nature of the sulphide ore. This
increases the NAV (@ 12%) to C$4.42/shr up from C$3.79/shr. If we include
the mining of the additional 16Mt of sulphide at $2.00/lb Cu pit shell the
NAV (@12%) further increases to C$5.02/shr.
We value Nevsun using a 1.0x P/NAV to our NAV of C$3.79/shr (at 12%), up
from C$3.51/shr, to derive a 12 month target of C$3.80, up from C$3.60. We
rate the stock a BUY. Our 24 month view NAV is C$4.66shr."
Haywood mining analyst Stefan Ioannou was only slightly less bullish in his
assessment:
"At the end of Q3/09, Nevsun had a cash balance of US$26.8 million. The
company recently closed a $32.8 million non-brokered private placement
consisting of 11.5 million common shares priced at $2.85 per share. Net
proceeds will be used for general working-capital purposes, including
exploration and development at Nevsun's 60% owned Bisha gold-copper-zinc
project in Eritrea. \
As of September 30, 2009, Bisha Mining Share Company (BMSC), which owns 100%
of the Bisha project and is in turn owned 60% by Nevsun (67% contributing)
and 40% by ENAMCO (the State mining Company; 33% contributing), had spent or
committed approximately US$123M on capital-cost-related items at the
project. Of this amount, approximately US$95M had actually been spent;
US$59M by Nevsun and US$36M by ENAMCO.
However, we note that our fully financed after-tax corporate NAV3% to 10%,
and hence implied target price, would increase by approximately $0.75 per
share, to $4.25 per share, with modeled production start-up in 'late' 2010.
We plan to closely monitor construction progress at Bisha over the coming
months and will adjust our modeled production start-up timeline accordingly.
With a feasibility study complete, a mining licence in hand, and project
financing essentially arranged, we believe that Bisha is 'ripe for the
picking' in a marketplace characterized by ongoing consolidation. Corporate
activity aside, Nevsun is well positioned to advance Bisha given the
Company's strong balance sheet and the project's robust economics.
With such well-heeled company as theses investment analysts, investors can
still participate in the substantial upside still remaining in the share
price. It doesn't take a rocket scientist to see that the numbers being
tossed around are extremely conservative in nature, and a much rosier
picture could emerge sooner rather than later.
----[This List to be used for Eritrea Related News Only]----