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Nevsun signs gold mining agreement with Eritrea

Written by Administrator

Saturday, 15 December 2007

ASMARA (Reuters) - Canadian mining company Nevsun Resources Ltd (NSU.TO: Quote) has signed an agreement with Eritrea to begin tapping high-grade gold and base metals in the Red Sea state.

In a statement on its Web site, Nevsun said that its Eritrean venture, Bisha Share Mining Company, expected a mining license "soon."

"The mining agreement contains all of the normal provisions governing the future development and operations for the Bisha Project, including all substantive requirements of international financial institutions," said the statement released late on Wednesday.

Nevsun expects its Bisha gold and base metals project to produce around 1 million ounces of gold, 747 million pounds of copper, and 1.1 billion pounds of zinc over its 10-year life.

In October, Nevsun signed an agreement with the government of Eritrea over ownership of Bisha.

Under the agreement, Eritrea will take an additional 30 percent stake in the project, to add to the 10 percent interest provided under the country's mining legislation.

The price will be determined by an independent valuator when Bisha ships its first gold, which analysts expect in 2010 or later.

Gold explorers have flocked to Eritrea in recent years, although some investors have remained suspicious after the nation unexpectedly ordered a halt to foreign mining work in September 2004. The ban was lifted the following year.

Bisha is expected to be the first new mining project in the country to reach production.

(Reporting by Jack Kimball; Editing by Paul Bolding)

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