Date: Friday, 27 April 2018
In Q1 2018, Nevsun's Eritrean Bisha mine copper and zinc recoveries experienced a huge increase.
The zinc and copper production was surprisingly high. If Nevsun manages to maintain the Q1 production levels, the 2018 production guidance will be beaten by a wide margin.
Nevsun's cash position has improved by $25 million.
The news release mentions a potential expansion of Bisha's mine life.
Nevsun Resources (NSU) released its Q1 2018 financial results. After several quarters of underperformance, Nevsun's only producing mine finally delivered a positive surprise. In Q1, Nevsun produced 71.6 million lb zinc and 8.9 million lb copper at its Eritrean Bisha mine. Especially, the high copper production is a very nice surprise, as the company has encountered some severe issues with copper recoveries over the last two years, since the processing of the primary ore began. But, in Q1 2018, copper recoveries jumped to 61.5%. Also, zinc recoveries experienced a notable growth to the 81.1% level.
As shown in the chart above, zinc recoveries, as well as copper recoveries, climbed to the highest levels since 2016. Zinc recoveries crossed 80% level for the first time since the processing of primary ore from Bisha deposit began. The same can be said also about copper recoveries and 60% level.
The significantly improved recoveries were reflected also by production volumes that reached new highs. Copper production increased by 147%, and zinc production increased by 24% quarter over quarter. Zinc production trend is positive, and despite some fluctuations, it is clearly growing. Copper production trend is less clear, as after reaching 5.7 million lb level in Q2 2017, copper production declined in Q3 as well as in Q4. The Q2 2018 copper production volume and recoveries should indicate whether Q1 2018 levels are sustainable.
Q1 operating results are really good. If Nevsun is able to maintain Q1 production volumes also for rest of 2018, it will beat the production guidance by a wide margin. According to 2018 production guidance, 210-240 million lb zinc and 20-30 million lb copper should be produced. If Q2, Q3, and Q4 are as successful as Q1, total 2018 zinc production should climb to 286.4 million lb and copper production should climb to 35.6 million lb. Both of the numbers are well above the upper level of the production guidance. Although management tries to be conservative, the news release indicates a potential revision of the guidance. This time, it should be to the upside:
The Company is currently installing upgrades on the plant that, once completed in Q2 2018, will allow for consistent application of the revised reagent scheme which is expected to significantly improve both copper recovery and copper concentrate grades going forward. As a result of the improved recoveries, Bisha is currently tracking toward the higher end of 2018 production guidance and toward the lower end of cost guidance. Based on this performance, the Company is confident that it will achieve 2018 guidance. Guidance will be reviewed if the modified processing approach results in a sustained improvement in recoveries over a more extended period.
But the news release contains another interesting hint that is a little drowned in the text. Nevsun's CEO stated:
The improvements also support the work we are doing on potentially extending the mine life beyond the current plan.