Nevsun Resources (TSX and AMEX: NSU) [Shares: 128M issued, 139M fully diluted as at Sep 2009]
Date / Location of update	Comments
7th October 2009, Interim Update (Stock Price: C$2.76)	We have decided to exit NSU and will use Wednesday's closing price of C$2.76 for record purposes. This will go into the records as a loss of 23% based on our entry price back in 2004, although the current price is a long way above our more recent buy suggestions. NSU could do extremely well over the next 12 months as its Bisha project is brought into production, but at the current price the large upside potential is, we think, offset by large risk. There is execution risk (potential delays in bringing the project on line and the risk that the mine will not perform according to its design parameters) and country risk (Eritrea).
16th September 2009, Interim Update (Stock Price: US$2.25)	In the 7th September Weekly Update we suggested taking some money off the table, but stated that none of the TSI gold/silver stock selections looked like 'sells' at that time. We said that any decision to sell would therefore have to be based on personal money management considerations. Due to additional gains over the past week, some TSI gold/silver stocks now look like they could soon reach levels where they will be clear-cut candidates for selling. Specifically: 1. New Gold (NGD) has substantial resistance at US$4.50-US$5.00. Also, at current metal prices we think that NGD would be fully valued in the mid-US$4 area. We would therefore be inclined to make a partial exit from this stock at around US$4.50. 2. We think Northgate Minerals (NXG) is worth around US$5/share at current metal prices, so it is still a long way from being fully valued. However, we suggest making a partial exit in the vicinity of resistance defined by last year's top (US$3.50) if this resistance is challenged within the next few weeks. 3. Minefinders Corp. (MFN) closed at US$10.65 on Wednesday and has substantial resistance in the US$12-$13 range. At current metal prices it would also, in our opinion, be fully valued in the aforementioned price range. We would therefore make a full or partial exit from MFN at around US$12. 4. Nevsun Resources (NSU) closed at US$2.25 on Wednesday and would be a good candidate for selling above US$2.50.
15th July 2009, Interim Update (Stock price: US$1.63)	There was a big up-move in NSU over the past two days in response to news that its Bisha poly-metallic project in Eritrea is now fully financed through to production. Bisha has exceptional economics and there is no longer any financing risk, but political and execution risks remain high. By "execution risk" we mean the risk that there will be delays and cost overruns during the construction phase and/or that the completed mine will not perform in accordance with its design parameters. Risk is always relatively high and the potential for positive surprises relatively low during a project's construction stage (Stage 4 in our Mine Development Risk Profile). This week's surge has pushed NSU to a new high for the year and broken it above the downward-sloping trend-line drawn on the following chart. It would not make sense to add to existing positions or take new positions in the stock in reaction to this surge, especially considering that there doesn't appear to be much scope for additional good news in the short-term. However, due to the removal of the financing risk a pullback to the US$1.20s or lower would be 'buyable' in anticipation of a move up to at least US$2.50 within the coming 12 months.
3rd November 2008, Weekly Update (Stock Price: C$0.65)	NSU reported last Thursday that the Industrial Development Corporation of South Africa (IDC) has approved an $89-million (U.S.) commitment to the development of Nevsun Resources Ltd.'s Bisha project. The same press release went on to state: "...the project is advancing on plan using the cash strength of the sponsors [NSU and the Government of Eritrea]. Based on the current finance plan, the sponsors have sufficient cash and lines of credit to fully finance the project. Nevsun does not expect to issue any additional equity." This is very good news, especially the part about not having to issue any additional equity. The nature of the Bisha project is such that it could be developed into a very profitable mining operation even at low metal prices (Au $600, Cu $1.50, Zn $0.50). Unfortunately, it is located in a relatively high-risk country. Given the problems experienced by the company when developing an earlier project, there are also legitimate concerns about the ability of NSU's management to properly execute its business plan. Due to the risks, NSU would not be at the top of our shopping list at this time (not while relatively low-risk companies are so cheap). However, it does not appear to have much financing risk and we like the fact that the Bisha project doesn't need higher metal prices in order to be economically robust. Consequently, if we were holding NSU (we are) then we would continue to hold it.
20th October 2008, Weekly Update (Stock price: C$0.50)	ATW.V (ATW Ventures), CGR (Claude Resources) and NSU (Nevsun Resources) are special situations in that they warrant a relatively high risk rating (4 or 5) even though they aren't early-stage explorers. ATW has about $10M of cash and is expected to advance its Burnakura project into production within the next few months, but we will leave the risk rating at '4' until there is a clearer indication from the company as to the project's completion schedule and economics. CGR has about 50K ounces/year of current production at its Seabee project, but has never been able to turn a profit from this production. Due to Seabee's marginal nature we have always considered that the bulk of CGR's upside potential lay with its early-stage Madsen project. NSU has moved into the development phase and has plenty of cash, but has high political and execution risk.
19th May 2008, Weekly Update (Stock Price: US$1.54)	NSU looks more attractive right now than it has looked in a long time. The stock is within 10% of its 52-week low and intermediate-term support (see chart below), but the results of the updated feasibility study on the poly-metallic Bisha project revealed a manageable increase in capital cost and showed that the project would be economically robust even if metal prices were to drop well below their current levels. Furthermore, NSU should be able to take Bisha through to production without doing any more equity financings. At current metal prices NSU's 60% stake in the Bisha project is worth US$540M, which is equivalent to about US$3.50 per fully diluted share. There is significant country risk (Eritrea), but this risk is mitigated by the fact that the Eritrean Government will be NSU's partner (the Government will own the remaining 40%). There is now less chance of NSU being taken over by a larger mining company in the near future because Lundin Mining, the most likely acquirer, is dealing with many other issues. However, we think NSU is a speculative buy in the US$1.50s in anticipation of a narrowing of the large gap between its market capitalisation and the net present value of the Bisha project.
9th January 2008, Interim Update (Stock price: US$2.34)	NSU received the mining license for its Bisha project earlier this week. The project has extremely good economics, but is being assigned a low valuation due to the perceived country risk (Eritrea). It is well known that Lundin Mining is interested in acquiring the Bisha project, and the most likely time-period for Lundin (or some other large or mid-size mining company) to make a bid for NSU is the period between the issuing of the mining license and the finalisation of financing arrangements for Bisha. That period is the coming two months. We plan to exit NSU during the first half of this year. If the anticipated takeover bid occurs then we should be able to do so at 50% or more above the current price.
31st October 2007, Interim Update (Stock price: US$2.28)	In last week's Interim Update we speculated that NSU's recent equity financing presaged some good news regarding the issuing of a mining licence for the company's Bisha project in Eritrea. This proved to be a good guess in that NSU announced on Monday that it had come to terms with the Eritrean Government with regard to the Government's stake in the project, which, in turn, paves the way for the required licence to be issued. The agreement that has just been reached between NSU and the Eritrean Government will result in the Government owning 40% of the project. This is consistent with what we've been assuming would happen -- our valuations of NSU have been based on the assumption that the company would end up with 60% of Bisha -- and therefore doesn't affect our analysis. In this situation, government involvement of such magnitude is a plus because it reduces political risk (the Eritrean Government now has a powerful incentive to make sure that Bisha gets developed as quickly and as inexpensively as possible). Having said that, political risk remains high due to the on-going conflict between Eritrea and neighbouring Ethiopia. We think NSU's 60% stake in the Bisha project is worth around US$3.50 per NSU share using the current fully-diluted share count. NSU's fair value is probably a good deal higher than that because the 'mothballed' Tabakoto gold mine in Mali is still worth something and because Bisha has a lot of growth potential, but a sizeable risk discount is appropriate. Therefore, if the market were to offer us something in the US$3.50/share area then we would take it. The stock is a speculative buy under US$2.00/share.
24th October 2007, Interim Update (Stock price: US$1.77)	NSU announced last week that it was doing a non-brokered private placement financing of 10 million shares at C$1.50 per share. According to the company: the proceeds from the offering will be used for working capital and to finance the early stages of construction of the Bisha project, after conclusion of a mining agreement and receipt of a mining licence from the government of Eritrea. No one knows exactly when the aforementioned mining licence will be issued, but it will probably be in the near future and when it happens there should be a significant 'pop' in NSU's stock price. The question, then, is: why not hold off on doing an equity financing until AFTER the stock has rallied in response to news regarding receipt of the mining licence? Our guess -- and it's nothing more than a guess -- is that one or more 'favoured' investors are being handed the opportunity to take a sizeable position in the stock ahead of the good news. If this is indeed the case it explains why NSU recovered quickly following the knee-jerk negative response to the financing announcement.
10th September 2007, Weekly Update (Stock price: US$1.54)	NSU announced last week that its Tabakoto gold mine in Mali was being shut down and put on "care and maintenance", a reasonable thing to do given that the mine was losing money on every ounce of gold it produced. Tabakoto had previously been written down to zero in NSU's financial statements. Tabakoto still has significant value because: a) the in-ground resource, despite not living up to the estimates contained in the project's feasibility study, has value as a type of call option on gold, and b) the mine's plant, equipment and on-site structures are worth something. Ideally, the Tabakoto project will be sold to another gold mining company operating in the region -- our Resolute Mining springs to mind -- thus allowing NSU to focus on the Bisha poly-metallic project in Eritrea. The only reason to own NSU at this time is because the Bisha project is worth a lot more than NSU's current market cap. To be specific, as noted in the 16th October 2006 Weekly Update we think NSU's stake in the Bisha project is worth at least US$500M, or more than US$4 per share. It is this upside potential that keeps us interested in the stock despite its poor performance. In the current environment we prefer exploration-stage resource stocks that are focused on gold (as opposed to the poly-metallic focus of NSU) and that are relatively low-risk (exploration-stage resource stocks are inherently risky, but some are less risky than others). CKG.V, GGN.TO, GOZ.V and KGN.V meet these criteria whereas NSU does not. However, the likelihood that Bisha's tremendous value will be unlocked, one way or another, justifies maintaining a small position in NSU.
22nd August 2007, Interim Update (Stock price: US$1.69)	Nevsun Resources (TSX and AMEX: NSU) has its hands on one of the best undeveloped mid-size metal deposits in the world (the Bisha project in Eritrea) and has a low market capitalisation relative to the size/quality of this deposit, but we do not consider it to be a "core" holding due to its sub-par management and Eritrea's high political risk.
4th June 2007, Weekly Update (Stock Price: US$2.39)	Our last mention of NSU was at the end of February when the stock was trading at US$2.04. At that time we concluded that some 'nibbling' might be appropriate given the stock's under-valuation and its close proximity to intermediate-term support. It has since moved a bit higher, despite more bad news related to the company's Tabakoto gold mine in Mali. Since being put into production this mine has performed far worse than predicted in the feasibility analysis. In fact, even with the gold price in the US$650-$700 range NSU loses money on every ounce of gold it produces at Tabakoto. The market was therefore able to shake-off last week's news that the mine would have to be closed for a while due to a water shortage. In any case, NSU's speculative appeal has always revolved around the poly-metallic Bisha project in Eritrea. The location (Eritrea) is non-ideal to say the least, but the project's size and grade make it a world-class asset. Sweden's Lundin Mining apparently offered to pay $5/share for NSU in negotiations with NSU's management last year, an offer that NSU's management rejected. Based on what has subsequently transpired, the rejection of Lundin's offer was clearly a monumental blunder. However, that a company of Lundin's stature was prepared to make such an offer in the first place highlights the potential value of the Bisha project. The upside potential offered by Bisha continues to interest us, but we don't want to hold NSU through Bisha's construction phase if NSU's current management remains in charge. It is therefore likely that we will exit the stock within the next few months, preferably in response to corporate activity (a takeover). Technically, there is substantial resistance at US$2.50 (see chart below) and a close above this resistance would indicate that an intermediate-term bottom was put in place earlier this year. We don't think NSU is well suited to investors who are looking for stocks to add to a long-term 'core' position in the gold sector. However, it has some short-term speculative merit and could be purchased as a trade following a pullback to around US$2.25 or following a daily close in the US$2.55-2.65 range.
28th February 2007, Interim Update (Stock Price: US$2.04)	Unlike RIC, NSU certainly has mineral assets with the potential to excite the stock market. Furthermore, these assets are currently trading for a lot less than they appear to be worth. There are always reasons for extreme under-valuation, and in NSU's case one of the reasons is perceived political risk (Eritrea). However, we've come to the conclusion that the main factor weighing on the stock is the market's perception of the company's management. Years ago when NSU was doing nothing other than drill holes in the ground the management seemed capable enough, but they began to look much less capable and lost a lot of credibility once the company changed from being purely an explorer to being a mine builder/operator. Unfortunately, management's bad experiences (huge delays and cost overruns) with the development of the Tabakoto gold mine in Mali haven't dissuaded it from trying to take the much larger poly-metallic Bisha project in Eritrea through to production. Clearly, the management team doesn't understand its own limitations. Despite the management problem we are going to retain the stock for now because we think NSU's assets are too good to languish near current valuations for much longer. In our opinion, either the market will re-rate the stock or another mining company will make a hostile takeover bid (hostile to management, that is, but not to shareholders). In fact, with the stock approaching intermediate-term support (see chart below) some 'nibbling' might be appropriate at this time. We wouldn't be surprised to see NSU trade as low at US$1.75 in parallel with more corrective activity in the gold sector over the next few weeks, but that's probably the worst case barring a political blow-up in Eritrea.
3rd January 2007, Interim Update (Stock price: C$2.39/US$2.08)	NSU's weakness over the past few months is probably due, in part, to signs that the company's management is 'hell bent' on building a mine at the Bisha project in Eritrea rather than selling the project to a larger mining company. Considering the cost overruns and delays incurred during the development of a mining operation at the company's Tabakoto project, the market is concerned -- rightly so, in our opinion -- about the ability of NSU's management to do a good job with the development of a much bigger mine at Bisha. On-going concerns about political and geopolitical risk have probably also played a part in NSU's decline. However, we think the main driving force behind NSU's relentless slide is market related rather than company specific because other junior metal producers have similar chart patterns but do not face the same issues. For example, Northern Orion (AMEX: NTO) does not face the aforementioned management/political risks and yet its chart looks quite similar to that of NSU. In other words, we think NSU's stock price has, for the most part, been reacting to the general deterioration in sentiment towards small base-metal producers. The other issues have simply exacerbated the weakness. We wouldn't be aggressive buyers of anything at the moment, but to get the most 'bang for your buck' during a long-term bull market you must be prepared to do some buying when valuable assets become depressed due to the periodic ebbing of investor sentiment. NSU is presently very oversold and its assets are very valuable, so this is a time for risk-tolerant speculators to be doing some buying. The company's long-term fundamentals are just as bullish today as they were a few months ago; all that's changed is sentiment.
4th December 2006, Weekly Update (Stock price: US$2.41/C$2.76)	NSU has dropped back to intermediate-term support (see chart below) and is a good candidate for new buying near the current price. Significant political risk must be taken into account due to the location of the company's most valuable asset (the Bisha project in Eritrea), but the stock's low valuation means that a large risk-related discount has already been applied. We consider NSU to be a gold stock, but it has been trading more like a junior copper stock over the past couple of months and hasn't participated at all in the gold sector's rally. Bisha is more of a base metal project than a gold project, but the plan is for almost 100% of Bisha's production to be gold during its first two years of operation. Also, the company owns the Tabakoto gold mine in Mali, a mine that has been designed to produce gold at the rate of 100K ounces/year. Some NSU warrants trade on the TSX, but in our opinion the warrants are currently very expensive relative to the stock. For example, the C$3.00 Oct-2008 warrants (TSX: NSU.WT.A) closed at C$1.00 on Friday, but by our calculations the fair value for these warrants would be around C$0.75 with the stock at its current level.
18th October 2006, Interim Update (Stock Price: C$3.05/US$2.68)	Prior to the start of trading on Wednesday NSU announced that it was raising C$25M by issuing 8.4M new shares at C$3.00/share. The previous day's sell-off was obviously in anticipation of this new equity issue. When a company issues new shares at a discount to the current market price the market price will almost always drop to near the price of the new issue. However, once the new issue is 'bedded down' the preceding price trend will usually resume. In NSU's case, the new equity issue will probably hinder the stock's progress over the next few weeks but shouldn't have longer-term implications.
16th October 2006, Weekly Update (Stock price: C$3.34/US$2.93)	NSU's Eritrea-based Bisha project is, in effect, a base metal deposit with a gold top. The plan is for the high-level gold zone to be mined during the first 2 years of operation and for the cash flow generated by the gold production to be used to fund the construction of lower-level copper and zinc mines. The results of the Bisha Feasibility Study (FS) were announced after the close of trading on Thursday. There were no surprises, but the results were good and in response the stock was quite strong on Friday. Very briefly, at metal prices near current levels the FS indicates that: a) The project will have a 62% rate of return and a net present value of US$853M (at a 10% discount rate) b) Total production over the 10-year life of the mine will be 1.06M ounces of gold, 747M pounds of copper and 1092M pounds of zinc The Eritrean Govt has the option of taking a stake of up to 40% in the project (the Govt gets 10% for free while the other 30% would have to be purchased), so to be conservative we'll assume that NSU is going to end up with 60%. Based on the above NPV figure NSU's ownership stake in the Bisha project is therefore worth around US$512M at current metal prices (0.6*$853M). This looks reasonable because profitable base-metal mining operations are often valued by the stock market at around 2-times annual sales and a value of $853M for the entire project would be equivalent to about 1.8-times annual sales revenue. Using current metal prices in our valuation analysis might be considered overly aggressive, but we think this aggressiveness is offset by the fact that we aren't including anything in our valuation for the many growth opportunities that exist at Bisha. Using a value of $512M for NSU's Bisha stake and adding $200M for the company's 100K oz/yr gold mine in Mali gives us a total valuation of US$712M, or US$6.50/share, for NSU. Therefore, with the stock having closed at US$2.93 on Friday there appears to be plenty of scope for future gains. Note, though, that due to the substantial political risk associated with Eritrea we probably won't wait for the stock to reach full valuation before exiting. At this stage our intention is to take profits if the stock trades up to the US$5.00-$5.50 range. This is not a price range that we think will be reached over the next few weeks, but if metal prices remain firm it could be achieved during the first quarter of next year. NSU is a likely takeover target, but the possibility of a takeover is not the main reason we continue to hold the stock. A takeover bid could come at any time, or it might never come.
9th October 2006, Weekly Update (Stock price: C$3.07/US$2.70)	In a press release last week NSU announced: "The Company expects to provide a summary of the results of the Bisha Project feasibility study during the week of October 10, 2006." At Friday's closing price of US$2.70 NSU had a market capitalisation of US$300M. Now, at current metal prices NSU's 100K oz/year Tabakoto mine in Mali should be worth at least US$200M, meaning that the market is currently valuing NSU's 60% share of the Bisha project at only US$100M. In our opinion, the results of the Feasibility Study (FS) will suggest that NSU's stake in the Bisha project is worth many times the amount currently being factored into NSU's market capitalisation, even after making a sizable allowance for the political risk associated with Eritrea. If you don't already have a position in NSU you should therefore consider taking a position prior to the announcement of the FS results.
13th September 2006, Interim Update (Stock Price: C$3.21)	The Feasibility Study on NSU's poly-metallic Bisha project in Eritrea is due to be completed within the next few weeks. The study should reveal very robust economics and highlight the value inherent in NSU. We will be surprised if NSU is not taken-over within the coming 6 months.
16th August 2006, Interim Update (Stock price: C$3.18/US$2.83)	Ivernia sold-off this week in response to bad news, as did Taseko Mines (AMEX: TGB) last week. However, even when companies don't report anything bad in their quarterly reports their stocks are tending to drop in the wake of the reports. The stock market, at this time, is tending to latch-onto the negatives in company reports and ignore the positives. This is a market that is both unforgiving and difficult to impress. The stock market wasn't impressed with the quarterly report released by NSU prior to the start of trading on Monday (the stock fell 6% on the day), but as far as we can tell there wasn't anything negative in the report. The company confirmed that commissioning of its 100K oz/yr Tabakoto gold mine was complete and that the mine would be cash-flow-positive in September. This asset, in our opinion, is worth around US$200M at the current gold price, leaving about US$140M of NSU's current $340M market cap for its 60% stake in the Bisha project. However, according to the Management Discussion and Analysis (MD&A) that accompanied NSU's latest financial results the Bisha project has an undiscounted net present value of US$2.6B at metal prices that are slightly lower than today's prices; and that's without taking into account the additions to in-ground resources stemming from last year's drilling program. The Bisha feasibility study, which is scheduled to be complete by the end of next month, should serve to highlight the huge gap between the project's value and its market price. This may not arouse the stock market's interest, but it will almost certainly arouse the interest of other mining companies (potential bidders for NSU).
26th July 2006, Interim Update (Stock Price: C$3.38/US$2.96)	NSU's high-grade poly-metallic Bisha project in Eritrea makes the company a likely takeover target. The project is being assigned a relatively low valuation by the stock market due to political risk concerns, but some large and mid-tier mining companies have recently demonstrated a willingness to venture into deepest darkest Africa in search of high-quality metal deposits. Potential buyers of NSU include Phelps Dodge, the Lundin Group, Randgold Resources and Golden Star Resources. NSU is suitable for new buying below US$3.00 (it closed at 2.96 on Wednesday).
17th July 2006, Weekly Update (Stock price: C$3.19)	In the 1st May Weekly Update, with the stock trading at C$4.27, we suggested it was time to take partial profits on NSU "for risk management purposes". The stock subsequently traded as low as C$2.65 and ended Friday's session at C$3.19. Much of the risk was 'wrung out' of the NSU stock price by the May-June correction and we now consider NSU to be a strong buy. In particular, at its current price NSU's stock market capitalisation is a bit more than US$300M, but the company's 100K oz/year Tabakoto gold mine in Mali is probably worth US$200M-US$250M and at current metal prices NSU's 60% stake in the poly-metallic Bisha project in Eritrea is probably worth at least US$800M. There's a lot of political risk associated with the Bisha project, but a buyer of the shares near the current stock price is being well compensated for accepting this risk.
1st May 2006, Weekly Update (Stock price: C$4.27)	Based on the scoping study completed during the final quarter of last year, at current metal prices Nevsun's (TSX and AMEX: NSU) 60% stake in the poly-metallic Bisha project in Eritrea would be worth at least US$800M (around US$7 per NSU share). It's 100% stake in the 100K ounce/year Tabakoto mine in Mali is probably worth US$200M-$250M (around US$2 per NSU share), giving us a very rough total value for NSU of around US$9/share (C$10/share). This is a long way above Friday's closing price of C$4.27, probably because the market is applying a large political-risk discount to the Bisha project. However, even if we discount Bisha's value by 50% we still come up with a fair valuation of US$5.50/share (C$6.20) for NSU. From a technical perspective (see chart below), the stock is approaching resistance at C$4.50. If it gets through C$4.50 then the next target would be C$6.00. Below the current price there is very strong support in the C$3.00-3.50 range and we expect that this support will hold during the next pullback. We want to maintain some exposure to NSU because the intermediate-term upside potential still appears to be significantly greater than the downside risk. In particular, the longer we go without another 'scary incident' in Eritrea the lower the market's Eritrea discount and the higher the market's valuation of Bisha is likely to become (the risk won't actually become less, but investors will become complacent). However, with the stock approaching resistance and with metal prices in blow-off mode it would be reasonable, for risk management purposes, to take SOME money off the table now. We have therefore decided to leave NSU in the Stocks List and to exit the NSU warrants (TSX: NSU.WTA) that were added last November. The profit on the warrants was 446%.
3rd April 2006, Weekly Update (Stock price: C$3.28)	Nevsun Resources (AMEX and TSX: NSU) was suggested at US$2.48 on 27th March and closed at US$2.81 on 31st March. We suggest taking profits in the US$3.20-$3.40 range.
27th March 2006, Weekly Update (Stock price: C$2.88)	If there's a bit more strength in the gold sector over the coming 1-2 weeks then NSU will likely break upward out of its consolidation pattern and move sharply higher.
27th February 2006, Weekly Update (Stock price: C$2.76)	An article posted at http://www.resourceinvestor.com/pebble.asp?relid=17338 on 23rd February provides a good overview of the investment case for Nevsun Resources (TSX and AMEX: NSU). The article mentions that Canaccord recently valued NSU at US$4.23 per share. This, we think, is a reasonable 12-month target for the stock. We would consider NSU a buy at less than US$2.40/share and a strong buy near US$2.00/share. As mentioned in our 22nd February commentary, the Tabakoto gold project in Mali is probably worth at least US$1.80 per NSU share so if you can buy NSU in the low-$2.00 area you will be paying almost nothing for the large upside potential provided by the Bisha project in Eritrea. In the stock market it is sometimes possible to get something for nothing. -------------------------------- Looking at the gold/silver stocks remaining in the TSI Stocks List, the most likely recipients of future takeover bids are Cumberland Resources (TSX and AMEX: CLG), Metallica Resources (AMEX: MRB), and Nevsun Resources (TSX and AMEX: NSU), with the most likely bidders being Kinross Gold or Newmont Mining for Cumberland, Falconbridge/Inco for Metallica, and an African miner such as Randgold Resources or Golden Star Resources for Nevsun. However, we wouldn't be buying any of these stocks now based on the off chance that they might receive takeover bids in the near future. NSU is presently at a level at which new buying would probably make sense for those with a tolerance for political risk; MRB recently traded at the top of the US$2.30-$2.50 buy range suggested in the 15th February Interim Update, but has since moved back above US$3; and CLG would have to drop back to the low-US$2 area before it would once again become a low-risk buy.
22nd February 2006, Interim Update (Stock price: C$2.74)	Nevsun Resources (TSX and AMEX: NSU) announced on Tuesday that its 100K oz/yr Tabakoto mine in Mali had finally entered the commissioning phase and that commercial production should be achieved by the end of April. This represents a further delay, but it removes the uncertainty that had been caused by a lack of news over the past two months. If we value Tabakoto at US$2,000 per ounce of production -- a conservative number assuming a gold price of more than $500/oz -- then this project is worth around US$200M (US$1.80 per NSU share based on a total share count of 110M), which would mean that NSU's Bisha project in Eritrea was being valued by the stock market at around US$66M. However, at current metal prices Bisha has a net present value of more than US$1B, so an enormous discount is obviously being applied due to the political risk perceived to be associated with Eritrea. In our opinion there's a significant chance that something WILL go horribly wrong on the political front in Eritrea at some point over the next few years, so we would not be interested in NSU at this time if the Bisha project was all it had. The problem with political risk is that it tends to strike 'out of the blue', that is, everything seems fine one day and then the next day all hell breaks loose. In fact, the long period of stability that often precedes a major upheaval causes a lot of money to be lost because the stability convinces many investors that the risk is inconsequential. The reason we have an interest in NSU at this time is that the bulk of its current market capitalisation is underpinned by its Tabakoto project; in other words, very little value is being assigned to Bisha. However, if time goes by and nothing really bad happens in Eritrea then the risk premium applied to Bisha will fall. The risk level itself probably won't fall, but investors will begin to feel more comfortable and this comfort will be reflected in a much higher valuation being applied to the Bisha project. Our current plan is to exit NSU once the market has assigned a substantial value (at least US$200M) to Bisha.   By the way, there was some extraordinary trading activity in NSU earlier this week with the AMEX-traded shares ending Tuesday's session at a 20% premium to the TSX-traded shares. We've never before seen anything like this sort of discrepancy in price between two liquid markets that were open at the same time. The premium immediately disappeared at the start of trading on Wednesday.
4th January 2006, Interim Update (Stock price: C$2.15)	Nevsun Resources (TSX and AMEX: NSU) has above-average upside potential and above-average risk. The main risk is political as a result of its Bisha project being located in Eritrea. The stock is presently attempting to overcome resistance in the low-C$2.00 area (it closed at C$2.15 on Wednesday) and needs a solid close above C$2.26 to break its lengthy downtrend. A breakout would open the door to a move up to C$3.50-C$4.00 over the ensuing few months. Our current plan is to exit NSU if such a move eventuates.
28th December 2005, Interim Update (Stock price: C$1.99)	If there's a "January Effect" rally this year then a stock that stands a good chance of participating is Nevsun Resources (TSX and AMEX: NSU). There's considerable political risk associated with NSU's Bisha project in Eritrea, but at its current stock price the company's market cap is fully supported by its Tabakoto gold mine in Mali. It would be reasonable for investors to accumulate NSU now, but traders might want to wait for the stock to break its downtrend before establishing a position.
7th December 2005, Interim Update (Stock price: C$1.99)	On Tuesday, Nevsun Resources (TSX and AMEX: NSU) announced the results of a scoping study on the Bisha polymetallic project in Eritrea. The scoping study, which was done by AMEC Engineering, contained the following estimates:   - Project net present value (NPV) and internal rate of return (IRR) at current commodity prices: US$1.3B and 71%, resp.   - Project NPV and IRR using ultra-conservative assumptions for commodity prices ($400/oz for gold, $1.05/pound for copper, $0.50/pound for zinc): US$346M and 35%, resp. The scoping study has helped highlight just how under-valued NSU is at this time because the company's current market cap is only US$190M and for this market cap investors are getting the 100K oz/year Tabakoto gold mine in Mali in addition to the Bisha project. Clearly, there is a massive political risk discount being applied to NSU due to Bisha being located in the tiny East-African country of Eritrea. In our opinion, the Tabakoto project is worth at least US$150M-$200M; therefore, despite the fact that Bisha is potentially worth more than US$1B at current commodity prices it seems that it is being assigned almost no value by the stock market. We think NSU could end up being the recipient of a takeover bid from a mid-tier African gold producer such as Randgold Resources, IAMGold, or Golden Star Resources. If there is going to be a takeover attempt it will, however, hopefully not occur until after the NSU stock price has moved much higher.
28th November 2005, Weekly Update (Stock price: C$1.69)	Two stocks that have not really participated in the gold sector's recent rally are Nevsun Resources (TSX and AMEX: NSU) and Golden Star Resources (AMEX: GSS). We think these stocks are suitable for accumulation near current prices (US$2.44 for GSS and US$1.47 for NSU). GSS and NSU have languished due to a loss of credibility by their respective managements. Management remains a concern in both cases, but a bull market can make dumb managers look smart. Just look at how well Harmony Gold (NYSE: HMY) has done over the past 6 months despite the poor track record and lack of credibility of its senior management. When a company with valuable assets performs poorly enough on the stock market over an extended period to make it very cheap relative to its peers, the stock will likely either make a catch-up move or become a take-over target.
9th November 2005, Interim Update (Stock price: C$1.63)	At current prices one of the most under-valued stocks in the gold stock universe is Nevsun Resources (TSX and AMEX: NSU). NSU's Tabakoto mine in Mali is scheduled to go into production next month and to be producing at the design rate of 100K ounces/year by the end of Q1 2006. This project alone would be worth at least as much as NSU's current market cap of US$150M, so at the current stock price investors are effectively getting the spectacular Bisha project in Eritrea for free. Something else to consider is that some large investors were prepared to purchase C$40M of NSU shares at C$2.25 per share just three weeks ago (the stock closed at C$1.63 on Wednesday). We don't think NSU is a great stock to buy for a short-term trade even though it has the potential to provide shareholders with good short-term returns from current levels. Rather, this looks like an excellent opportunity for longer-term investors to take a position or to add to an existing position.
10th October 2005, Weekly Update (Stock price: C$2.07)	A couple of months ago the management of Nevsun Resources (TSX and AMEX: NSU) warned the market that the company wouldn't have sufficient funds to complete the development of its 100K oz/yr gold mine in Mali and the Feasibility Study at its Bisha project in Eritrea. At that time it said that Nevsun was "re-reviewing its appetite for debt finance on either the Project or corporately". The company has, however, once again gone down the equity-financing path and arranged to issue 13.35M new shares at C$2.25/share to raise C$30M. This has the disadvantage of diluting the interests of existing shareholders and the advantage of keeping the company debt-free. Naturally, the stock sold off in response to the news. We think last week's reaction to the financing news has created another buying opportunity because even with the additional shares the company's market cap is low relative to the value of its assets.
2nd September 2005, Market Alert #149 (Stock price: C$1.95)	At this time we'd also like to highlight First Majestic Resource (TSXV: FR), Nevsun Resources (TSX and AMEX: NSU) and DRDGOLD (NASDAQ: DROOY) as being suitable for new buying near yesterday's closing prices.
27th July 2005, Interim Update (Stock price: C$2.07)	Regardless of our overall market views, we endeavour to highlight our favourite stocks whenever they reach levels at which new buying might be a good idea. One stock that has just reached such a level is Nevsun Resources (TSX and AMEX: NSU). The below chart shows that NSU has been sliding lower since early March and is now back to near the panic lows reached during the second half of last year. Last year's lows, by the way, were the effect of the huge uncertainty created in the minds of investors when Eritrea's Government forced Nevsun to stop work at the Bisha poly-metallic deposit. Near-term uncertainty was subsequently removed and the company resumed exploration work at the spectacular Bisha project early this year, but there remains a high degree of political risk associated with this project. Importantly, though, Nevsun is also developing the Tabakoto mine in Mali. Assuming that development of this 105K-oz/year gold mine is completed over the next 3-5 months in accordance with current plans, then NSU's current market capitalisation of around US$150M will be fully justified by the Tabakoto project alone. In addition, having just recently completed a financing NSU has US$30-40M or working capital and will therefore not need to raise any more money over the coming 12 months. In other words, the market appears to be assigning almost no value to the huge upside potential of the Bisha project. Further to the above, NSU is a speculative stock that we think has a very attractive risk/reward ratio near yesterday's closing price of C$2.07 (US$1.66).
25th April 2005, Weekly Update (Stock price: C$2.54)	Early last week Nevsun Resources (TSX and AMEX: NSU) announced more good drilling results from its Bisha project in Eritrea, including a spectacular result of 8.4% zinc over 128m from a hole drilled at the Bisha Main deposit. These results were ignored by the stock market, perhaps because Eritrea has proven to have such a large amount of political risk that great exploration results might never be translated into a profitable mining operation. As we've said before, we think the political risk in Eritrea is unacceptably high and for this reason we do not expect to be long-term holders of NSU. However, there's a 'right price' for almost everything and at C$2.50 or lower we think NSU's risk/reward is attractive. This is because the company is building a 100K oz/year mine at its Tabakoto project in Mali that is scheduled to be put into production during the third quarter of this year and the Mali project, alone, is probably worth at least C$1.50-C$2.00 per share. In other words, buyers of NSU at C$2.50/share would not be paying very much for the enormous potential offered by the Bisha project. Furthermore, having effectively thrown a spanner into the works last year by ordering NSU and other mining companies to stop work for about four months we think it's very unlikely that the Eritrean Government will do anything disruptive this year.
4th April 2005, Weekly Update (Stock price: C$2.90)	Nevsun Resources (TSX: NSU) would, we think, be a buy at around C$2.50 and a sell at around C$4.00...
7th March 2005, Stock Selection Update #33 (Stock price: C$3.34)	We just added three new stocks to the TSI List, but at the same time we are looking for opportunities to exit some stocks that are currently in the List. The reasons for exiting will vary, but boil down to the long-term risk/reward not being as attractive as it is elsewhere.   Two stocks that fit into the above-mentioned category are Patricia Mining (TSX: PAT) and Nevsun Resource (TSX: NSU); PAT because its long-term upside potential is lower than many other stocks that we follow and NSU because the political risk associated with Eritrea has proven to be unacceptably high. We aren't tempted to exit either of these stocks near current levels, but would be sellers of PAT at around C$0.80 and sellers of NSU at around C$4.00.
31st January 2005, Weekly Update (Stock price: C$2.71)	This stock would be a very interesting speculation if it dropped to around C$2.50 because at that price the market would be assigning a value of only US$30M-US$60M to the company's world-class Bisha deposit in Eritrea. As previously discussed, any mineral deposit in Eritrea deserves to be heavily discounted due to the associated political risk; however, at C$2.50/share we think the discount would be excessive and the risk/reward ratio would be very attractive.
17th January 2005, Weekly Update (Stock price: C$3.14)	On Friday Nevsun Resources (TSX and AMEX: NSU) announced that it had been given permission by the Government of Eritrea to resume work at its Bisha project. Bisha, which contains a very high-grade poly-metallic deposit and is probably one of the world's best new mineral discoveries, was the main reason we added NSU to the TSI Stocks List in the first place. NSU's stock market capitalisation was cut in half several months ago when the original stop-work letter was received from the Eritrean Government and has rebounded strongly over the past two weeks in anticipation of some favourable news and then, on Friday, in response to the news.  With confirmation now in hand that it is able to proceed with exploration/development of Bisha it is our opinion that NSU, at Friday's closing price of C$3.14, offers better value than it did in the low-$2 area without such confirmation. However, the reasons given by the Government for halting work in the first place make no sense at all and suggest that the political risk associated with the project is even higher than most investors had previously assessed (there was already a substantial risk premium attached to the project prior to the events of the past 4 months). In particular, Eritrea's Information Minister Ali Abdu Ahmed, in a telephone interview with Reuters on Friday, said that mineral exploration companies had been ordered to suspend work because Eritrea had wanted to discuss issues relating to agreements governing the companies' activities. Clearly, though, any such discussions could have occurred in parallel with a continuation of work. A result of the above-mentioned discussions is that the Government now has the right to increase its ownership of the Bisha project and other mining projects in the country to a maximum of 40% (the maximum had previously been set at 30%). It seems, therefore, that the central reason for the original stop-work order was to strengthen the Government's position in its attempts to 'negotiate' an additional 10% ownership. So, what to do? Our view is that NSU is definitely a 'hold' at its current price, but we don't think it is a good candidate for new buying. Also, we'd be inclined to sell if the stock price recovered to around C$4.00 at some point over the coming few months and would consider it a speculative buy if it pulled back to around C$2.50.
20th October 2004, Interim Update (Stock price: C$2.04)	Nevsun Resources (TSX: NSU) reported the initial independent resource estimate for its Bisha project on Monday. This initial estimate leaves little doubt that Bisha will be developed into a very profitable mining operation assuming development can proceed at all. What makes the Bisha deposit special is its high grade. For example, the initial estimate of "indicated" resources included 1.04M ounces of gold at 6.51g/t + 585M pounds of copper at 3.47% + 1.68B pounds of zinc at 9.4%. The value of this resource estimate will be moot, though, until the Eritrean Government provides clarity on the reasons behind its "stop work" instruction. In the absence of this clarity we continue to believe that NSU is neither a buy nor a sell in the C$2.00-C$3.00 range.
27th September 2004, Weekly Update (Stock Price: C$2.43)	There continues to be a lot of speculation about the reason for the Government of Eritrea's decision to tell Nevsun Resources (TSX: NSU) and other companies exploring for minerals in Eritrea to stop work. For example, it has been mentioned that the Government has taken this action as part of a strategy to 'negotiate' a better deal with the companies. Also, there has been speculation that the Government might have done what it has done without providing any justification because Eritrea is going to be used as a staging ground for United Nations' military action against neighbouring Sudan (the military action would be undertaken to stop the mass slaughter of civilians which is now occurring in Sudan). A detailed discussion of this possibility can be found HERE The need for secrecy associated with a UN military excursion into Sudan would, in our opinion, be the only explanation that would excuse the recent actions of the Eritrean Government and allow for a full recovery in the NSU stock price once the military exercise had been completed. Our view continues to be that NSU should neither be bought nor sold near current prices until the reasons behind the Government's decision are known.
13th September 2004, Weekly Update (Stock price: C$2.37)	In the 6th September Weekly Update we made the following comment with regard to the "stop work" directive issued by the Government of Eritrea to Nevsun Resources (TSX: NSU) and two other companies exploring for minerals in that country: "The first thing that occurred to us when we read the above press release was that the Eritrean Government wanted to 'agree' a higher equity stake in the projects owned by Nevsun, Sunridge and Sanu (the government is currently entitled to a 10% stake in Nevsun's Bisha project) and that the letter instructing the companies to stop work was sent in order to improve the government's negotiating position. On further reflection, though, a more likely possibility is that work has been halted due to security concerns." If the information in Doug Casey's article at www.321gold.com (http://www.321gold.com/editorials/casey/casey091004.html) is accurate, and we are not certain that it is, then our first reaction was the correct one. In any case, as mentioned in last week's e-mail alert we would not be buyers OR sellers of NSU until more details are known about the fate of the Bisha project. With the stock price in the low-C$2.00 area the company's market value is underpinned by its cash and its development-stage project in Mali. However, there are a lot of under-valued exploration/development-stage gold stocks in the world right now, but the one thing that differentiates NSU from the pack is its Bisha project in Eritrea.
8th September 2004, Stock Selection Update #25 (Stock price: C$2.15)	In the Weekly Update we said we'd send out an e-mail alert when we got some more information regarding the reasons behind a "halt work" letter sent by the Government of Eritrea to Nevsun Resources (TSX: NSU) and two other companies exploring for minerals in the small East African country. We were hoping that this information would be available before trading commenced on Tuesday.   However, as stated in a joint press release issued on Tuesday afternoon:   "The companies have been in contact with the Department of Mines and have held meetings with the Minister of Energy and Mines. The companies hope that they will have further clarification with respect to this directive within the next few days. The respective country managers and representatives are doing everything they can in Eritrea with all levels of government to obtain an understanding of the issues at hand."   In other words, no additional information has been forthcoming.   Trading in the shares did resume on the Toronto Exchange, though, and in the absence of any clarification the market did what it often does: it immediately discounted the worst case (the worst case being that NSU's Bisha project will have to be written off in full). We say this because NSU's cash combined with its Tabakoto project in Mali would probably justify a price of at least C$2.00/share (NSU closed at C$2.15 on Tuesday).   Due to the market's apparent discounting of a worst-case outcome NSU looks like an interesting speculation near Tuesday's closing price, but in the absence of more information about the fate of the Bisha project we wouldn't be buyers or sellers of the stock. The reason is that there are a lot of under-valued development-stage mining companies in the world, but the only reason we are interested in this particular one is the Bisha project (Bisha appears to be one of the best mineral discoveries of the past decade, but due to political risk considerations -- which the current situation has exemplified -- NSU has tended to sell at a much lower price than the company's exploration results, taken in isolation, would suggest was reasonable). Therefore, in the unlikely event that the Bisha project had to be abandoned or was going to be halted indefinitely we'd take a loss and move on.   The bottom line is that we need more information before we can make any decision on what to do with this stock.
6th September 2004, Weekly Update (Stock price: C$3.98)	Nevsun Resources (TSX: NSU) issued the following statement after the close of trading on Friday: "Nevsun Resources Ltd., Sanu Resources Ltd. and Sunridge Gold Corp. have today each received a letter dated Sept. 2, 2004, from the Minister of Energy and Mines for Eritrea instructing the companies to halt all mineral prospecting and exploration work and related activities in Eritrea until further notice. No reason was given for this instruction in the letter. The companies have sought further clarification and will provide further information as it becomes available." The first thing that occurred to us when we read the above press release was that the Eritrean Government wanted to 'agree' a higher equity stake in the projects owned by Nevsun, Sunridge and Sanu (the government is currently entitled to a 10% stake in Nevsun's Bisha project) and that the letter instructing the companies to stop work was sent in order to improve the government's negotiating position. On further reflection, though, a more likely possibility is that work has been halted due to security concerns. Hopefully, more information will be available before markets open for trading on Tuesday (Canadian and US markets are closed on Monday due to the Labor Day holiday in each country). When we know more we'll send out an e-mail alert. In the absence of any more information the only action we would take is to cancel any outstanding buy orders for NSU. This is because we won't be able to assess the likely effects on company value and stock price until we know the reason(s) behind the "halt work" letter.
23rd August 2004, Weekly Update (Stock price: C$3.92)	Nevsun Resources (TSX: NSU) has been consolidating in similar fashion to CLG, but is yet to break upward. A daily close of C$4.20 or higher would project a move up to around C$5.00. The initial resource estimate for Nevsun's world class Bisha project is scheduled to be reported during September and this could generate some speculative enthusiasm for the stock.
2nd August 2004, Weekly Update (Stock price: C$3.50)	NSU has recently drifted lower due to the general lack of interest in exploration/development-stage metal stocks and offers excellent value at Friday's closing price of C$3.50.
5th July 2004, Weekly Update (Stock price: C$3.85)	Provided you were cashed-up when it happened, the best thing about this year's sharp correction in the gold sector was that many of the top-quality stocks came down just as much as, or in some cases even more than, the lesser-quality stocks. MVG (discussed above) is one example of a top-quality stock getting absolutely hammered, and Nevsun Resources (TSX: NSU) is another. At its May-2004 low NSU was down by an incredible 67% from its November-2003 peak and at Friday's closing price it is still down by 58% from its peak. NSU was a recent addition to the TSI Stocks List and we continue to think it is a good candidate for accumulation below C$4.00. Technically, the stock appears to be consolidating just below its 50-day MA
4th June 2004, Stock Selection Update #20	Nevsun (TSX: NSU) is an example of a company with great prospects and lots of cash. It is presently not a member of the TSI Stocks List, but we've recently mentioned it as a buy in the C$3.50-C$4.00 range. NSU owns the development-stage Tabakoto and Segala projects in Mali and the exploration-stage Bisha project in Eritrea (a small African country that was part of Ethiopia until it gained its independence in 1993).   Nevsun announced last week that Tabakoto will be brought into production at the rate of 105K ounces/year over the coming 12 months, but the market was disappointed that the latest estimates for mine construction cost and operating cost/ounce were much higher than those contained in 2002 feasibility study. The economics of the Tabakoto project will probably turn out to be a lot better than the ultra-conservative estimates included in last week's announcement, but in any case the main reason to own NSU is the Bisha Project.   The exploration results announced for Bisha over the past year have been spectacular and enough drilling has already been done to know that NSU has its hands around a world class polymetallic deposit. The only question is just how big the deposit will turn out to be because a lot of exploration potential remains. The initial resource estimate should be available within the next 1-2 months.   At its current share price NSU has an enterprise value of around US$150M, which is extremely low given the size and quality of the Bisha resource. Also, the Bisha project makes NSU a likely takeover candidate, perhaps by one of the mid-tier gold miners such as Randgold or Golden Star, but there is certainly no takeover premium in the current stock price.