Nevsun Resources Ltd.
AMEX : NSU
TSX : NSU

Nevsun Resources Ltd.

October 12, 2006 17:29 ET

Nevsun Resources Ltd.: Bisha Feasibility Study Announcement

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 12, 2006) - Nevsun Resources Ltd. (TSX:NSU)(AMEX:NSU) (the "Company") is very pleased to announce the results of the feasibility study for its Bisha Project in Eritrea. AMEC Americas Limited, based in Vancouver Canada, has advanced the feasibility study sufficiently to allow the Company to provide the following details.

HIGHLIGHTS:



Metal Production (Life of Mine) - 1.06 million oz gold
(all payable) - 747 million lb copper
- 1,092 million lb zinc
- 10 million oz silver

Production Schedule - + 10 years open pit mine modeled
at 2 Mt/year of ore production
- years 1 and 2, average 447,000
oz Au per year
- years 3 to 5 average 173 million
lb Cu per year plus precious
metal credits
- years 6 to 10 average 218
million lb Zn plus 39 million lb
Cu per year plus precious metal
credits

Base Case Financial Analysis (after tax):
Rate of Return - 26% (Au $435/oz Cu $1.44/lb
prior to 2015 and $1.28
thereafter, Zn$0.57/lb, Ag
$6.50/oz)
NPV (0% discount) - $356 million
NPV (10% discount) - $135 million
Payback - 2.6 years (pre-production
capital payback)
Capital Cost Estimate - $196 million pre-production
Expansion Capital Estimate - $61 million + $31 million in two
phases, funded from operations
Operating Costs - $31.64/tonne ore milled through
life of mine


All metal prices used for the base case analysis were independently developed and provided to AMEC by a recognized independent minerals marketing consultant.

Recent Prices Case Financial Analysis (after tax):

Utilizing recent metal prices over life of mine (Au $600/oz, Cu $3.40/lb, Zn $1.50/lb, Ag $11/oz)



Rate of Return - 62%
NPV (0% discount) - $1,857 million
NPV (10% discount) - $853 million
Payback - 1.5 years (pre-production
capital payback)


Bisha is a high grade gold, silver and base metal-rich volcanogenic massive sulphide (VMS) deposit. The feasibility study indicates that the ore can be mined and processed using industry standard technology. The study indicates that the existing road infrastructure in Eritrea will be suitable for the project. Project infrastructure development will require construction of a power plant at the project site and construction of a concentrate storage and loadout facility at the port of Massawa, Eritrea.

As can be seen from the highlights above, the project has a strong financial return. The following is an abbreviated executive summary in advance of release of the full feasibility study. The final study is expected shortly and a 43-101 compliant Technical Report will be filed on SEDAR within 45 days.

Location and Access

Bisha is located in a sparsely populated area of western Eritrea, approximately 40 km from the nearest regional town of Akurdet and 150 km from the capital city of Asmara. The major port city of Massawa is approximately 340 km by road, which can be accessed in less than 8 hours.

To view the accompanying map, please click on the following link: http://www.ccnmatthews.com/docs/nsu1.jpg

The 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.

A full description of the Bisha mineral resource and metallurgy may be found in the Company's news releases dated January 10, 2006 and July 17, 2006, respectively. News releases can be found on the Company's web site (www.nevsun.com) as well as on Sedar at www.sedar.com and EDGAR at www.sec.gov/edgar/searchedgar.

To view the accompanying map, please click on the following link: http://www.ccnmatthews.com/docs/nsu2.jpg

Mineral Reserves

A full description of the Bisha mineral reserves may be found in the Company's news release dated October 5, 2006. The following is a summary of the fully diluted proven and probable reserve with grades for each metal in each ore type.



--------------------------------------------------------------------

Tonnes Au (g/t) Ag (g/t) Cu (%) Zn (%)
--------------------------------------------------------------------
Oxide 4,016,000 7.99 32.85 - -
--------------------------------------------------------------------
Supergene 6,350,000 0.83 35.98 4.40 -
--------------------------------------------------------------------
Primary 9,713,000 0.76 54.00 1.14 7.21
--------------------------------------------------------------------
Total 20,079,000
--------------------


Processing

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. No interruption to production is anticipated or required when transitioning from one ore type to another.

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.



Capital Costs

Pre-production Capital Costs (millions $):
Pre-strip mining and mining equipment $ 23
Oxide ore processing facilities $ 45
Site development, utilities, and
facilities $ 31
Tailings facilities $ 10
Freight, temp facilities, etc $ 22
Engineering procurement & construction
management $ 22
----
Subtotal $153
Owner's costs, staff, overheads, etc $ 13
Working capital $ 12
Contingency $ 18
----
TOTAL $196
----

Future Capital Costs for Supergene and
Primary Ores (millions $):
Copper flotation plant and port
facilities $ 61 Funded from cash flow
Zinc flotation plant and expanded
port facilities $ 31 Funded from cash flow
----
TOTAL $ 92
----


Operating Costs
Life of Mine Operating Costs :
Mining $135 M 21 % $ 6.75 /t
Process $365 M 58 % $ 18.17 /t
G&A (incl royalties) $135 M 21 % $ 6.72 /t
------ ----- ----------
Total $635 M 100 % $ 31.64 /t (including
fuel & power
of $236M;
$11.75 /t)
------ ----- ----------

Summary of Production, Costs and After Tax Cash Flow

Years 1 2 3 4 5 6 7 8 9 10
--------------------------------------------------------------------
Project
phase: Construction Oxide Supergene Primary
--------------------------------------------------------------------
Gold Production
Thousands of ounces 471 424 See note 2 below
Cost/oz ($) (note 1) 150 150
Copper Production
Millions of pounds 176 163 184 57 40 39 43 45
Cost/lb Cu ($)
(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

Years 1 2 3 4 5 6 7 8 9 10
--------------------------------------------------------------------
Base Case:
(Au $435/oz, Cu $1.44/lb prior to 2015 and
$1.28 thereafter, Zn $0.57/lb, Ag $6.50/oz)
After tax cash flow
(millions $) 94 98 94 96 87 30 29 24 32 48
Less capital
expenditure (196) (6)(50) (5) (28) (3)

Recent commodity prices:
(Au $600/oz, Cu $3.40/lb, Zn $1.50/lb, Ag $11/oz)
After tax cash flow
(millions $) 140 146 290 287 302 179 194 183 188 223
Less capital
expenditure (196) (6)(50) (5) (28) (3)

Notes:

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).


Environmental

The environmental and social impact assessment, which is being carried out by AMEC Americas Limited, includes socially responsible consultative studies and activities which are compliant with the April 2006 IFC Performance Standards on Social and Environmental Sustainability. Progress details may be viewed on the Company's web site: http://www.nevsun.com/socialresponsibility.html.

Government Support

The Government of Eritrea has been supportive to the Company in the advancement of this project. Once the feasibility study has been finalized, later this month, the Government and its independent engineer will complete its review. The Government has sought appropriate third party assistance for the preparation of a mining and stabilization agreement, including anticipated requirements of banks. The Company is in discussion with the Government regarding the terms of a mining and stabilization agreement. The award of a mining license for Bisha requires the completion of both the feasibility and the Environmental and Social Impact Assessment.

Finance and Timing

Endeavour Financial is advising the Company in the financing of the Bisha project. Following a site visit in March 2006 by representatives of several multilateral financial institutions, Endeavour engaged an independent technical consultant (ITC) to commence a third party due diligence on behalf of the interested financial institutions. The ITC reviewed the December 2005 Bisha Scoping Study, visited site in June 2006, and is now actively engaged in reviewing the feasibility study.

The Company anticipates completion of the mining agreement and the issue of a mining license in late Q4 2006 or early Q1 2007. This would permit targeting March 2007 for the completion of finance negotiations for the initial capital. Construction is expected to take slightly under two years, allowing commencement of production in Q4 2008 or Q1 2009.

Opportunities

As with most projects at the feasibility study stage, both risks and opportunities exist. Comments on the risks of the industry can be found below in our forward looking statement. Opportunities that could significantly enhance the project include:

(1) expansion of mining to an underground operation as the Bisha deposit is open at depth;

(2) metal prices - at current commodity prices, modeling of the known deposit, including inferred resources, demonstrates a potential additional 8 years mine life as a result of enlarging the pit and going to depth;

(3) development of additional deposits already identified through exploration (Harena and Northwest Zone);

(4) AMEC has identified additional indicated primary sulphide resources that have not been included in the estimate of reserves (which mostly lie within the waste envelop of the Bisha open pit). Approximately 4.7 million tonnes of 1.15% copper were identified after the start of the development of the mining study. The Company has disclosed the above under news release dated January 10, 2006,

(5) a near surface hanging wall copper zone has been discovered at the western margin of the open pit, as defined by drill intersections of 2.11% Cu over 19.6 m and 2.64% Cu over 12.0 m. This zone may have the potential to be added to the resource in the future. The Company has disclosed this in its news release dated April 25, 2006.

Supervision

Sean Waller, P. Eng. AMEC Project Manager, is a Qualified Person under National Instrument 43-101, and is the AMEC person responsible for the Bisha Feasibility Study.

Forward Looking Statements: The above contains forward looking statements that are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in our forward looking statements. Factors that could cause such differences include: changes in world commodity markets, equity markets, costs and supply of materials relevant to the mining industry, extent of resources actually contained in mineral deposits, actual recoveries achieved in processing ore, technological change, weather conditions, change in government and changes to regulations affecting the mining industry. Forward-looking statements in this release include statements regarding future mining plans, production, opportunities, financial plans and filing dates. Although we believe the expectations reflected in our forward looking statements are reasonable, results may vary, and we cannot guarantee future results, levels of activity, performance or achievements.

NEVSUN RESOURCES LTD.

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


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