Nevsun Reports Strong Third Quarter 2012 Financial Results
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov 8, 2012) - Nevsun Resources Ltd. (NSU.TO)(NYSE MKT:NSU) today reported financial and operating results for the third quarter ended September 30, 2012.
This release should be read in conjunction with Nevsun Resources Ltd.''s ("Nevsun" or the "Company") 2012 third quarter Management Discussion and Analysis ("MD&A"), which can be found at www.nevsun.com/investors/financials. Unless otherwise noted, with the exception of earnings per share and cash cost per ounce figures, all results are in thousands of US dollars.
Third quarter 2012 highlights
Mined 316,000 tonnes of ore at 5.21 g/t gold
Produced 98,000 ounces of gold; 267,000 ounces in the nine months ended September 30, 2012
Net income attributable to Nevsun shareholders was $44.2 million, representing earnings of $0.22 per share
Cash costs of $307 per ounce of gold(1)
Outlook
Expects to exceed previously announced 2012 gold production target of 280,000 - 300,000 ounces
Oxide gold production expected to continue into Q2 2013
Copper plant expansion on budget and on schedule with commissioning expected for mid-2013
Mineral resource estimate for North West Zone deposit is expected to be released by mid-2013
Expects to release its exploration plans for Mogoraib region in Q1 2013
Financial review
The Bisha copper plant expansion continues on schedule and on budget. The copper plant expansion is entirely funded by Bisha operating cash flows. As a result, Nevsun has not had to access debt or equity markets to fund the expansion and Nevsun''s balance sheet remains clear of long-term debt obligations.
Revenues for the three months ended September 30, 2012 were $169,992, a decrease from the three months ended September 30, 2011 of $186,502, resulting from fewer gold ounces sold, with 96,700 ounces sold in the three months ended September 30, 2012 compared to 108,600 ounces sold in the same period in 2011 and from a lower realized gold price per ounce with $1,681 realized in Q3 2012, compared to $1,715 in Q3 2011. The lower Q3 2012 production resulted from the previously mentioned lower milled grade and from lower recoveries with 87% for Q3 2012 as compared with 89% for Q3 2011. The comparatively lower milled grades and recoveries were expected, based on the ore type for the section of the pit that was processed in Q3 2012. The Company had silver by-product sales of $7,442 and $1,125, respectively, for the three month periods ended September 30, 2012 and 2011.
Operating expenses for the three months ended September 30, 2012 of $29,196 (three months ended September 30, 2011 - $20,939) increased from the same period in the prior year mostly due to increases in fuel, mill consumables and labour costs and costs associated with an increased volume of waste removal. Royalties for the three month periods ended September 30, 2012, and 2011 were $8,154, and $9,276, respectively.
(1) Non-GAAP measure, refer to page 10 of the Q3 2012 MD&A
Net income attributable to Nevsun shareholders for the three months ended September 30, 2012 was $44,211, a decrease of $9,112 over the same period in the prior year due to lower revenues and higher costs, as explained above. Earnings per share attributable to Nevsun shareholders for the three months ended September 30, 2012 was $0.22, a decrease of $0.05 per share over the same period in 2011.
Gold cash costs per ounce sold for the three months ended September 30, 2012 were $307(2), which included $77 per ounce in silver by-product credits, while gold cash costs per ounce sold for the same period in 2011 were $267, which included $10 per ounce in silver by-product credits.
The Company''s cash and cash equivalents at September 30, 2012, were $378,925, up from $347,582 as at December 31, 2011. The Company generated $79,632 and $102,911, respectively, from its operating activities for the three month periods ended September 30, 2012 and 2011. There were $30,037 of income taxes paid in Q3 2012 and $nil paid in the comparative period.
During the three months ended September 30, 2012, the Company used $44,857 (three months ended September 30, 2011 - used $44,722) in its financing activities. During Q3 2012, the Company received $5,731, and $369 in related interest, as partial payment on the sale of 30% of the Bisha Mine to the State-owned Eritrean National Mining Corporation. No such proceeds were received in Q3 2011.
Operations review
Milled grade increased from 6.58 grams per tonne ("g/t") in Q1 2012 to 7.40 g/t in Q3 2012 as a result of pockets of high grade acid domain ore that were encountered in the pit. The ore in these extremely high grade pockets has poor competency making it difficult to anticipate with exploration core drilling while also requiring sophisticated stockpile blending to facilitate successful processing and recovery of the precious metals. Average metallurgical recoveries for the nine months ended September 30, 2012 of 86% are lower than the 89% experienced in the comparative prior period as a result of the changing nature of the ore and was expected.
The Company''s gold production for Q1, Q2, and Q3 2012 was 82,000, 87,000 and 98,000 ounces respectively. The total for the nine months ended September 30, 2012, of 267,000 was 4% lower than the 278,000 produced in the comparative prior period.
Ore mined was significantly higher in Q2 2012 at 500,000 tonnes, relative to Q1 and Q3 2012 at 349,000 and 316,000 tonnes respectively, as a result of stockpiling in Q2 to prepare for the rainy season that runs from mid-June to mid-September. Waste mined in Q3 2012 of 2,590,000 tonnes increased when compared to the 1,826,000 and 1,659,000 tonnes mined in Q1 and Q2, respectively.
The increase in the Q3 2012 waste tonnes mined and corresponding increase in strip ratio to 10.3 was in accordance with expectations. Copper phase pre-stripping was completed in Q2 2012 so costs related to copper phase waste tonnes are no longer deferred, adding to the strip ratio in Q3. In addition, strip ratio increased as a result of increased pit depth and the newly planned shallower pit walls due to updated geotechnical assessments, as noted in the August 31, 2012 Technical Report. Strip ratio levels similar to Q3 are expected to continue for the next 3 - 4 quarters, however a life of mine strip ratio of 6.6:1 is predicted in the August 31, 2012 Technical Report.
Reserves update
On September 7, 2012, the Company filed the Canadian National Instrument 43-101 Technical Report (the August 31, 2012 Technical Report) in support of previously announced increased mineral resources and mineral reserves estimates for Bisha. Expressed as contained metal, the copper reserves estimate increased 6% and the zinc reserves estimate increased 38% as of May 31, 2012, compared with the previous reserves estimate effective date January 1, 2011.
Exploration and development
Copper phase development:
The Company continued work on copper phase development activities during Q3 2012, expending $19,630 on the copper phase. Total capital for the copper phase expansion is expected to be approximately $125,000, including the copper plant, port facilities and concentrate shipping equipment. The Company is taking the same approach to eliminate price risk on construction that it was successfully able to accomplish during the build of the gold plant. As at September 30, 2012, $92,471 had been spent, ordered or arranged, thereby fixing nearly three quarters of the expected project costs. The copper flotation plant is targeted to be operational in mid-2013. SENET of South Africa is the engineering, procurement, and construction management contractor. Photos of the expansion can be found at www.nevsun.com/projects/photogallery/copperphase.
(2) Non-GAAP measure, refer to page 10 of the Q3 2012 MD&A
Harena:
In early July 2012, the State of Eritrea granted a mining license to Bisha Mining Share Company for the Harena deposit, located 9 km south of the Bisha plant. The Company started extracting Harena ore in October and processing it at the Bisha plant in November.
North West Zone:
The Company has planned a metallurgical and geotechnical drilling campaign for Q4 2012 with plans to prepare a resource estimate for the North West Zone by mid-2013.
Mogoraib:
On October 10, 2012 the Company closed the acquisition of the Mogoraib exploration license in Eritrea, which includes the Hambok copper and zinc deposit. Consideration for the acquisition was $5,000, plus an additional possible $7,500 upon commencement of commercial production from the licensed area.
While management does not believe Hambok is economic as a stand-alone deposit, the Company plans to undertake further exploration and, with the Bisha plant a short distance away, believes Hambok may become an extension for the Bisha base metal operations. The Company expects to announce its exploration plans for the region in Q1 2013.
If additional exploration is successful and base metals reserves are identified, then the Company may consider increasing the planned capacity of the zinc and copper plant when the Bisha plant transitions from copper to zinc in 2015 or 2016.
Conference call details
The Company will hold a conference call on Thursday, November 8, 2012 at 8:30AM Vancouver / 11:30AM Toronto, New York / 4:30 PM London, to discuss the quarterly results. Please call in at least five minutes prior to the conference call start time to ensure prompt access to the conference. Dial in details are as follows:
North America: 416-340-2219 / 1 866-226-1798 |
UK: 00800-9559-6849 (toll free) |
Other International: +1 416-340-2219 |
The conference call will be available for replay until November 15, 2012 by calling +1 905-694-9451 / 1 800-408-3053 and entering passcode 7510681.
Forward Looking Statements
The above contains forward-looking statements regarding future gold production, future gold recoveries, gold production grades, future gold cash production costs, future copper phase expansion, timing of copper production, and future Mogoraib exploration programs. Forward-looking statements are frequently, but not always, identified by words such as "expects", "anticipates", "believes", "intends", "estimated", "potential", "possible" and similar expressions, or statements that events, conditions or results "will", "may", "could" or "should" occur or be achieved. Information concerning the interpretation of drill results and mineral resource and reserve estimates also may be deemed to be forward-looking statements, as such information constitutes a prediction of what mineralization might be found to be present if and when a project is actually developed. 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, including, without limitation, the risks that (i) any of the assumptions in the historical resource estimates turn out to be incorrect, incomplete, or flawed in any respect; (ii) the methodologies and models used to prepare the resource and reserve estimates either underestimate or overestimate the resources or reserves due to hidden or unknown conditions, (iii) the mine operations are disrupted or suspended due to acts of god, internal conflicts in the country of Eritrea, or unforeseen government actions; (iv) the Company experiences the loss of key personnel; (v) the mine operations are adversely affected by other political or military, or terrorist activities; (vi) the Company becomes involved in any material disputes with any of its key business partners, lenders, suppliers or customers; (vii) the Company is subjected to any hostile takeover or other unsolicited attempts to acquire control of the Company; (viii) the Company is subject to any adverse ruling in any of the pending litigation to which it is a party; or (ix) the Company incurs unanticipated costs as a result of the transition from the oxide phase of the Bisha mining operations to the copper phase in 2013. Other risks are more fully described in the Company''s most recent Management Discussion and Analysis, which is incorporated herein by reference. 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, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
Please see the Company''s Annual Information Form, 2011 annual Management Discussion and Analysis, and 2012 third quarter Management Discussion and Analysis for a more complete discussion of the risk factors associated with our business.
About Nevsun Resources Ltd.
Nevsun Resources Ltd. is a Vancouver-based mining company with an operating mine in Eritrea. Nevsun''s 60%-owned Bisha Mine commenced gold production in February 2011 and is scheduled to transition to copper/gold production in 2013. Management expects the Bisha Mine will rank as one of the highest grade open pit base metal deposits in the world.
NEVSUN RESOURCES LTD.
Cliff T. Davis, President & Chief Executive Officer
Summarized financial and operating results | ||||||||||
Nine months ended September 30, | ||||||||||
Q3 2012 | Q2 2012 | Q1 2012 | 2012 | 2011(1) | ||||||
Revenues | $ | 169,992 | $ | 147,713 | $ | 149,390 | $ | 467,095 | $ | 376,902 |
Operating income | 125,482 | 109,671 | 110,628 | 345,781 | 288,529 | |||||
Net income attributable to Nevsun shareholders | 44,211 | 39,568 | 41,238 | 125,017 | 100,412 | |||||
Earnings per share attributable to Nevsun shareholders | 0.22 | 0.19 | 0.21 | 0.62 | 0.51 | |||||
Total assets | $ | 855,433 | $ | 813,352 | $ | 747,148 | $ | 855,433 | $ | 700,769 |
Gold production and sales statistics(2): | ||||||||||
Nine months ended September 30, | ||||||||||
Q3 2012 | Q2 2012 | Q1 2012 | 2012 | 2011 | ||||||
Tonnes milled | 465,000 | 465,000 | 430,000 | 1,360,000 | 1,351,000 | |||||
Milled gold grade (g/t)(5) | 7.40 | 6.93 | 6.58 | 6.98 | 7.30 | |||||
Recovery, % of gold | 87% | 85% | 86% | 86% | 89% | |||||
Gold in doré, ounces produced | 98,000 | 87,000 | 82,000 | 267,000 | 278,000 | |||||
Gold ounces sold | 96,700 | 87,500 | 83,100 | 267,300 | 270,100 | |||||
Gold price realized per ounce | $ | 1,681 | $ | 1,599 | $ | 1,712 | $ | 1,664 | $ | 1,605 |
Cash cost per ounce sold(3) | $ | 307 | $ | 253 | $ | 277 | $ | 280 | $ | 287 |
Mining statistics: | |||||
Nine months ended September 30, | |||||
Q3 2012 | Q2 2012 | Q1 2012 | 2012 | 2011 | |
Ore mined, tonnes | 316,000 | 500,000 | 349,000 | 1,165,000 | 1,230,000 |
Mined gold grade, g/t(5) | 5.21 | 6.04 | 4.71 | 5.42 | 7.70 |
Waste mined, tonnes(4) | 2,590,000 | 1,659,000 | 1,826,000 | 6,075,000 | 5,732,000 |
Strip ratio (using BCMs) (6) | 10.3 | 4.0 | 6.2 | 6.3 | 6.6 |
Copper phase prestrip, tonnes | - | 481,000 | 739,000 | 1,220,000 | - |
(1) The 2011 revenues, operating income, net income attributable to Nevsun shareholders and earnings per share attributable to Nevsun shareholders contain results from February 22, 2011 to March 31, 2011 and February 22, 2011 to September 30, 2011 only. | |||||
(2) The 2011 gold production and sales statistics include results from the pre-operating period, January 1 - February 21, 2011. For accounting purposes, sales from ounces produced prior to February 22, 2011 were considered pre-production and capitalized to property, plant and equipment. | |||||
(3) Cash operating cost per ounce sold includes royalties and is a non-GAAP measure; see pg 10 of the MD&A for more information. | |||||
(4) All waste tonnes mined reflect updated rock density estimates. | |||||
Condensed Consolidated Interim Statements of Comprehensive Income | ||||||||||
Unaudited | ||||||||||
(Expressed in thousands of United States dollars) | ||||||||||
| Nine months ended September 30, | |||||||||
2012 | 2011 | 2012 | 2011 | |||||||
Commercial operations commenced February 22, 2011: | ||||||||||
Revenues | $ | 169,992 | $ | 186,502 | $ | 467,095 | $ | 376,902 | ||
Cost of sales | ||||||||||
Operating expenses | (29,196) | (20,939) | (75,202) | (51,965) | ||||||
Royalties | (8,154) | (9,276) | (22,934) | (18,762) | ||||||
Depreciation and depletion | (7,160) | (9,343) | (23,178) | (17,646) | ||||||
Operating income (1) | 125,482 | 146,944 | 345,781 | 288,529 | ||||||
Administrative | (3,220) | (3,730) | (5,116) | (11,046) | ||||||
Finance income | 899 | 2,445 | 3,104 | 2,481 | ||||||
Finance costs | (153) | (595) | (459) | (1,987) | ||||||
Income before taxes | 123,008 | 145,064 | 343,310 | 277,977 | ||||||
Income taxes | (47,372) | (55,864) | (132,046) | (106,279) | ||||||
Net income | 75,636 | 89,200 | 211,264 | 171,698 | ||||||
Other comprehensive income: | ||||||||||
Unrealized loss on available-for-sale investment, net of tax | - | (40) | - | (166) | ||||||
Comprehensive income | $ | 75,636 | $ | 89,160 | $ | 211,264 | $ | 171,532 | ||
Income for the period attributable to: | ||||||||||
Nevsun shareholders | 44,211 | 53,323 | 125,017 | 100,412 | ||||||
Non-controlling interest | 31,425 | 35,877 | 86,247 | 71,286 | ||||||
$ | 75,636 | $ | 89,200 | $ | 211,264 | $ | 171,698 | |||
Comprehensive income for the period attributable to: | ||||||||||
Nevsun shareholders | 44,211 | 53,283 | 125,017 | 100,246 | ||||||
Non-controlling interest | 31,425 | 35,877 | 86,247 | 71,286 | ||||||
$ | 75,636 | $ | 89,160 | $ | 211,264 | $ | 171,532 | |||
Earnings per share attributable to Nevsun shareholders: | ||||||||||
Basic | $ | 0.22 | $ | 0.27 | $ | 0.62 | $ | 0.51 | ||
Diluted | $ | 0.22 | $ | 0.27 | $ | 0.61 | $ | 0.50 | ||
(1) Operating income for the comparative periods is from July 1 to September 30, 2011 and February 22 to September 30, 2011. | ||||||||||
Condensed Consolidated Interim Statements of Cash Flows | |||||||||
Unaudited | |||||||||
(Expressed in thousands of United States dollars) | |||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||
2012 | 2011 | 2012 | 2011 | ||||||
Cash provided by (used in): | |||||||||
Operating: | |||||||||
Income for the period | $ | 75,636 | $ | 89,200 | $ | 211,264 | $ | 171,698 | |
Items not involving the use of cash: | |||||||||
Accretion on reclamation liability | 153 | 153 | 459 | 356 | |||||
Depreciation and depletion | 7,165 | 9,343 | 23,182 | 17,646 | |||||
Income taxes | 47,372 | 55,864 | 132,046 | 106,279 | |||||
Share-based payments and stock appreciation rights | 1,219 | 2,493 | 751 | 7,730 | |||||
Interest income on due from non-controlling interest | (816) | (2,414) | (2,929) | (2,414) | |||||
Interest expense on advances from non-controlling interest | - | 406 | - | 1,495 | |||||
Changes in non-cash operating capital: | |||||||||
Accounts receivable and prepaids | (16,308) | (44,440) | (33,796) | (45,456) | |||||
Inventories | (4,002) | (5,367) | (10,963) | (13,402) | |||||
Accounts payable and accrued liabilities | (750) | (2,327) | (3,625) | (1,756) | |||||
Income taxes paid | (30,037) | - | (169,586) | - | |||||
Net cash provided by (used in) operating activities | 79,632 | 102,911 | 146,803 | 242,176 | |||||
Investing: | |||||||||
Proceeds on sale of pre-production gold sales | - | - | - | 48,613 | |||||
Expenditures on property, plant and equipment - gold phase | (2,415) | (8,559) | (9,210) | (35,096) | |||||
Expenditures on property, plant and equipment - copper phase | (19,630) | (8,711) | (46,294) | (12,608) | |||||
Expenditures on exploration and evaluation | (2,600) | (1,680) | (4,850) | (4,565) | |||||
Changes in non-cash working capital related to investing activities | (555) | - | (1,696) | - | |||||
Net cash provided by (used in) investing activities | (25,200) | (18,950) | (62,050) | (3,656) | |||||
Financing: | |||||||||
Dividends paid to Nevsun shareholders | (9,976) | (5,935) | (19,989) | (5,935) | |||||
Dividends paid to non-controlling interest | (38,000) | - | (64,000) | - | |||||
Receipt of purchase price settlement from non-controlling interest | 5,731 | - | 34,223 | - | |||||
Interest received on due from non-controlling interest | 369 | - | 1,773 | - | |||||
Principal and interest paid on loan from non-controlling interest | - | - | - | (4,103) | |||||
Repayment of advances from non-controlling interest | - | (41,000) | - | (58,000) | |||||
Issuance of common shares, net of issue costs | 160 | 2,213 | 855 | 6,035 | |||||
Repurchase and cancellation of common shares | (3,141) | - | (6,272) | - | |||||
Net cash used in financing activities | (44,857) | (44,722) | (53,410) | (62,003) | |||||
Increase in cash and cash equivalents | 9,575 | 39,239 | 31,343 | 176,517 | |||||
Cash and cash equivalents, beginning of period | 369,350 | 187,423 | 347,582 | 50,145 | |||||
Cash and cash equivalents, end of period | $ | 378,925 | $ | 226,662 | $ | 378,925 | $ | 226,662 | |
Non-cash investing and financing transactions: | |||||||||
Reclassification of share-based payments reserve to share capital upon exercise of options | 49 | 880 | 280 | 2,255 | |||||
Depreciation capitalized to property, plant and equipment | - | - | - | 397 | |||||
Share-based payments capitalized to property, plant and equipment | - | - | - | 276 | |||||
Closure and reclamation increase in property, plant and equipment | - | - | - | 1,074 | |||||
Interest capitalized to property, plant and equipment | - | - | - | 693 | |||||
Stock appreciation rights liability settled with common shares | - | 8,451 | - | 8,451 | |||||
Condensed Consolidated Interim Balance Sheets | |||||
Unaudited | |||||
(Expressed in thousands of United States dollars) | |||||
September 30, 2012 | December 31, 2011 | ||||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | $ | 378,925 | $ | 347,582 | |
Accounts receivable and prepaids | 54,285 | 20,490 | |||
Inventories | 43,839 | 32,099 | |||
Due from non-controlling interest | - | 11,137 | |||
477,049 | 411,308 | ||||
Non-current assets | |||||
Due from non-controlling interest | 62,382 | 84,312 | |||
Property, plant and equipment | 316,002 | 279,606 | |||
378,384 | 363,918 | ||||
Total assets | $ | 855,433 | $ | 775,226 | |
Liabilities and equity | |||||
Current liabilities | |||||
Accounts payable and accrued liabilities | $ | 18,618 | $ | 24,651 | |
Dividends payable | - | 10,013 | |||
Income taxes payable | 67,067 | 103,670 | |||
85,685 | 138,334 | ||||
Non-current liabilities | |||||
Deferred income taxes | 15,249 | 16,187 | |||
Provision for closure and reclamation | 13,692 | 13,233 | |||
28,941 | 29,420 | ||||
Total liabilities | 114,626 | 167,754 | |||
Equity | |||||
Share capital | 404,168 | 409,305 | |||
Share-based payments reserve | 12,920 | 11,736 | |||
Retained earnings | 191,424 | 76,383 | |||
Equity attributable to Nevsun shareholders | 608,512 | 497,424 | |||
Non-controlling interest | 132,295 | 110,048 | |||
Total equity | 740,807 | 607,472 | |||
Total liabilities and equity | $ | 855,433 | $ | 775,226 | |
