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Nevsun Resources Ltd. Message Board

  • joeradder joeradder Feb 21, 2013 11:17 AM Flag

    Excellent Nevsun Article on Seeking Alpha

    Gold Stocks Are Dead. Long Live Gold Stocks!

    Nevsun Resources (NSU) is cheaper than sand, when you consider its future earnings against pretty much any peer it has. It has seen less than two years of revenue, and is therefore completely off of the radar for most people. It already pays a decent dividend of 2.53% annually. It is currently producing gold, but it has a very unique open pit reserve that will actually transition through several minerals. It will switch to majority copper production sometime in mid-2013. Production for 2012 was 300koz of gold, and is estimated at 80koz of gold for 2013, plus 60-80 million pounds of copper. It is expecting strong copper production for several years, as well as zinc, and will eventually add silver to the mine's output.

    Value-wise, it's a steal. It currently trades at a mere 5.5% premium to its net tangible book value, something that very few producing, cash flow generating assets can possibly claim in today's current climate - even many miners are trading at 1.5-2x net book and sometimes far higher than that. This company has seen share prices pop up as high as 10x book value before, so upside potential is very considerable. Think of this - Nevsun is trading at the same price-to-book as it was at the bottom of the gold market in the fall of 2008 - it is now producing, generating gobs of cash flow relative to its market cap, and pays a nice dividend for a miner.

    The transitional phase between gold and copper has pretty much been completed and is on schedule, but there could still be a small risk of delays in the last 20% of the project. Once that uncertainty is out of the way, expect the share price to resume building off of the double bottom low it established last year, when it popped from $2.70 a share all the way up to $4.98. It currently trades just below $4.00 per share. Keep in mind - Nevsun has $1.63 per share in net cash and almost no debt.

    I recommend purchasing Nevsun while it is still below $4.00/share, roughly at the value of its tangible assets, including a pile of cash. A continued sell-off in gold and copper, which looks very likely for the short term, should add some downside pressure to this stock that can present a great buying opportunity on weakness. It could carry all the way through to a swift new low below $2.78, but internals are already diverged well onto the upside, so if it does, it is the final low for the entire move. I recommend a moderate position around current levels, and cost dollar averaging into it if the price continues to track gold - A break above (although it is diverging up already, against gold, and has begun to more closely track the copper price) its recent high indicates the uptrend is still intact, and future appreciation can be expected.

    Sentiment: Strong Buy

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