Canada’s Nevsun Resources has now achieved its first major milestone with its initial gold pour at its new Bisha gold, silver and base metals mine in the poor East African state of Eritrea – a country which has been attracting a great deal of mining and exploration interest of late.
Nevsun’s Bisha Project is a large precious and base metal-rich volcanogenic massive sulphide (VMS) deposit located 150km west of Asmara, Eritrea, East Africa. Deposit mineralisation consists of gold and silver oxides, in addition to copper and zinc massive sulphides. The first pour at Bisha was part of the plant commissioning process and rendered two dore bars totaling 26 kilograms (approx. 920 ounces).
Nevsun’s President Cliff Davis noted, “… we are on time, under budget, and will considerably further the country’s development with the realisation of Eritrea’s first modern day mine. In the face of difficult capital markets during 2008/2009 and other obstacles overcome in 2010, we are proud of this significant accomplishment. We look forward to substantially growing Bisha in the coming months, in terms of reserves and throughput.”
Nevsun is focused on the rapid completion of the project, which began construction in September 2008. The mine is currently ramping up to full production which should be achieved in the current quarter. It will be a low-cost gold producer for the first two years, and then also a high-grade copper concentrate and zinc producer for the remaining mine life. Bisha’s Feasibility Study estimated an initial 10-year mine life with metal prices very conservatively based on $435/oz gold, $1.44/lb copper for the first 5 years ($1.28/lb thereafter), $0.57/lb zinc and $6.50/oz silver. Metal prices are now very considerably higher than this! Nevsun says that its studies show that it should be able to produce gold at an operating cost of less than $250/oz, with copper operating costs ranging from $0.54-$0.67/lb, and zinc operating costs at $0.50/lb (including all royalties and credits).
The Bisha Mine is expected to produce 1.06 million ounces of gold, 9.4 million ounces of silver, 734 million pounds of copper, and over one billion pounds of zinc over the 10-year mine life on which the feasibility study was based, but there is great potential to expand this further as exploration in its licence areas continues.
In November, Nevsun said that a resource expansion drill programme will test the extent of mineralisation in the hanging wall copper zone, which is immediately west and adjacent to the Bisha Main deposit. The programme will also include infill drilling at Harena, which lies 9km SW of the Bisha Main deposit. If favourable results are achieved, the company reckons that both areas could add significant tonnages to the its reserves, extending mine life and cash flow.
Nevsun plans at least 8,000m of diamond drilling, which is now under way and will be completed in Q1. After which, results will be assessed and, if favourable, resource/reserve estimation will be initiated on Harena while drilling continues on the hanging wall zone.
The company notes that past drilling at Bisha identified appreciable amounts of relatively low-grade copper mineralisation located up to several hundred metres into the hanging wall. Assays included 12.0m of 2.64% Cu, 19.6m of 2.11% Cu, 56.5m of 0.81% Cu and 31.5m of 0.76% Cu. Company geologists have interpreted that this zone may extend for hundreds of meters in a north south direction. Although this mineralisation is lower grade than the Bisha Main, it is potentially economic, which could add incremental value to the project.
The Harena deposit saw considerable drilling in 2005/06 that revealed a third potential VMS near surface deposit on the Bisha licenses, followed up by infill drilling in 2009. Harena is expected to provide a likely source of supplemental feed for Bisha’s processing plant, which could provide valuable cash flow and also prolong mine life.
Overall, Bisha’s mining and exploration licences cover a contiguous area of 110 km2. The Bisha Main and North West zone are both located within the 16.5 km2 mining license. Nevsun, through its Eritrean subsidiary, Bisha Mining Share Company (BMSC), holds the licences.
The State of Eritrea has a free carried 10% interest plus an additional 30% paid participating interest for a total 40% interest in Bisha. The amount to be paid to Nevsun by the State will be determined by an independent valuator and shall be based on the net present value of 30% of the project, as evaluated upon the first shipment of gold from the mine. The payments to Nevsun for the purchased interest shall be, over time, out of Bisha cash distributions.