Nevsun Resources Ltd.

Nevsun Resources Ltd.

October 29, 2007 10:43 ET

Nevsun Resources Ltd.: Bisha Update-Agreement for State Participation Signed

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 29, 2007) - Nevsun Resources Ltd., (TSX:NSU)(AMEX:NSU) ("Nevsun") is pleased to announce that it has arrived at agreement with the Government of the State of Eritrea through the Eritrean National Mining Corporation ("ENAMCO") regarding the State's participation in the Bisha Project. This is a precursor to the finalization of discussions regarding a mining agreement for the Bisha Project.

As a very strong signal of support for the Bisha Project, the Government has agreed to purchase at fair value a 30% paid participating interest, to add to its 10% free participating interest provided by the country's mining legislation, resulting in a total participation of 40% (30% contributing; 10% free carried). ENAMCO will pay the full fair value for its share of the project determined by an independent valuator at the time of Bisha's first gold shipment.

In late 2006 the Government established ENAMCO for the purpose of holding ownership interests and to promote the development of the mining industry in Eritrea. Over the course of the past number of months Nevsun and ENAMCO have worked together to arrive at a fair and reasonable method for the determination of fair value, based on a reliable and independent process. The first step will see a provisional payment by ENAMCO within three months of this agreement. At the time of Bisha's first gold shipment an independent professional valuation will be conducted using a discounted cash flow analysis based on the Bisha feasibility study financial model, updated for the market consensus for metal prices, actual capital costs incurred, and applying the then applicable discount rate.

This participation allows both parties to move forward together as partners in the Project and are beneficial to the Project, the Company and the Government of Eritrea in many ways:

- Positive Government support will help expedite all local requirements, reducing risk of disruption

- Early cash contribution by the Government provides the Company with some of its immediate capital funding requirements

- Reduced political risk with the Eritrean Government as a major shareholder

- Government provides proportionate share of capital to build the mine (33.3%) and shares the risk of capital spend (and over-run facilities) for loan financing

With the conclusion of this milestone the Ministry of Energy & Mines has assured Nevsun that the mining license and the underlying Mining Agreement for Bisha will be advanced very promptly. The Company looks forward to the Government's continued support.

In addition to the project purchase price, the Government will fund its pro-rata 33.3% share of capital expenditure for the Project (33.3% equals 30/90ths of contributing interests).

Naturally the future market will have a significant bearing on the final purchase price. The feasibility study demonstrates quite clearly that the Bisha Project is most sensitive to metal prices and is very much less sensitive to capital costs and operating costs. The project is financially robust as a result of low operating costs throughout the mine life.

The following provides a technical summary of the Bisha project and the capital and operating costs estimated in the feasibility study.

The Bisha Deposit

The Bisha deposit is configured in three distinct layered zones - a 35m thick surface oxide zone having a high gold and silver content immediately overlying a 30m thick copper enriched supergene zone which itself overlies a primary sulphide zone containing both zinc and copper. Significant byproduct gold and silver are recoverable from both the supergene and primary ores.

To view the map accompanying this release please click on the following link:

Mineral Reserves

The fully diluted proven and probable reserves mined by open pit methods for each ore type are presented below:

Oxide Tonnes Au (g/t) Ag (g/t)
Proven 663,000 6.87 28.93
Probable 3,353,000 8.21 33.62
Combined 4,016,000 7.99 32.85

Supergene Tonnes Cu (%) Au (g/t) Ag (g/t)
Proven 808,000 5.10 0.81 44.74
Probable 5,542,000 4.30 0.83 34.71
Combined 6,350,000 4.40 0.83 35.98

Primary Tonnes Zn (%) Cu (%) Au (g/t) Ag (g/t)
Proven 353,000 11.38 1.10 0.82 65.56
Probable 9,360,000 7.05 1.15 0.76 53.57
Combined 9,713,000 7.21 1.14 0.76 54.00

TOTAL Combined 20,079,000


Processing of the three ore types will utilize a common crushing and SAG/ball grinding circuit, but will require three different extraction and processing circuits. After grinding, gold and silver will be extracted from the oxide ore by conventional cyanide leaching and recovered by the carbon in pulp process. Later in the project the supergene and primary ores will be processed by a conventional flotation process to recover copper and zinc as concentrates for direct sale to smelters. The tailing systems will be common for all three ore types.

The feasibility study envisages the mining and processing of each zone in succession starting with the surface oxide zone. Before the oxide ore is exhausted the copper flotation process equipment will be installed and commissioned so that a smooth transition can be made from oxide ore to the supergene ore treatment. Similarly, before the supergene ore is exhausted, the additional flotation equipment required to recover the zinc from the primary ore will be installed and commissioned to permit a smooth transition from supergene to primary ore.

In the first two years of production, gold and silver will be extracted together. Production of copper concentrate will begin with a minor amount in Year 2, significant quantities for Years 3 to 5, and smaller quantities in Years 6 to 10. Zinc concentrate production occurs only in Years 6 to 10.

Summary of Production Costs


Years 1 2 3 4 5 6 7 8 9 10
phase: Construction Oxide Supergene Primary
Gold Production
Thousands of
ounces 471 424 See note 2 below
Cost/oz ($)
(note 1) 150 150
Millions of
pounds 176 163 184 57 40 39 43 45
Cost/lb Cu ($)
(note 3) 0.25 0.27 0.26 See note 4 below
Zinc Production
Millions of
pounds 174 241 225 216 236
Cost/lb -
see note 4
below See note 4 below

Study Base Case Metal prices:

(Au $435/oz, Cu $1.44/lb prior to 2015 and $1.28 thereafter, Zn $0.57/lb, Ag $6.50/oz)

1. The operating cost per ounce for gold is after taking silver production as a credit.

2. The gold produced from the supergene and primary is taken as a byproduct credit to copper and zinc.

3. The operating cost per pound for copper from the supergene is after taking silver and gold as credits.

4. The operating cost per pound during the primary phase has not been presented in the table so as to avoid potential misinterpretation regarding allocations of credits. Depending upon metal prices at the time there may be greater emphasis on zinc or copper credits. If copper, gold & silver were regarded as byproducts in the zinc phase, the operating cost of zinc would be $0.06 per pound (base case).

Further detail of the Bisha project feasibility data can be obtained from the 43-101 compliant Technical Report for the Bisha Project feasibility study which was filed in November 2006 and is available on Sedar at, on EDGAR at, and on the Company's website The Company's MD&A disclosures (press release dated 13th August, 2007) also provide a synopsis of the feasibility costs and project valuations.

Bill Nielsen, P.Geo., VP Exploration, is the Qualified Person under instrument 43-101 who has read and approved this news release.

Sample preparation and analysis of materials used for the reserve statement were conducted at ALS Chemex of Vancouver, Canada.

Forward Looking Statements: The above contains forward-looking statements concerning anticipated developments on the Company's mineral property in Eritrea; participation by the Government of Eritrea; financial projections, and other events or conditions that may occur in the future. Forward-looking statements are frequently, but not always, identified by words such as "expects", "anticipates", "believes", "intends", "estimates", "potential", "possible" and similar expressions, or statements that events, conditions or results "will", "may", "could" or "should" occur or be achieved. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors. The Company's forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made and the Company assumes no obligation to update such forward-looking statements in the future. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.


Dr. John A. Clarke, President & Chief Executive Officer

Contact Information