Tuesday
Oct 07th
| Eritrea signs Bisha gold/base metals mining agreement with Nevsun |
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| Written by Rodrick Mukumbira | |
| Saturday, 15 December 2007 | |
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The Government of Eritrea hopes that its investment in the Bisha Mining project, and its agreement with Vancouver’s Nevsun Resources, will help launch a mining industry in the African nation. TSX and AMEX-quoted Nevsun Resources Ltd. stock rose as high as CAN$2.14 in Canada, up 8.08% and US$2.05 in the US, up 5 cents, on Wednesday after the company announced that its massive gold and base metal project in Eritrea was finally guaranteed.
Following months of delay, the government of Eritrea on Wednesday finally signed an agreement with the Vancouver-based company that should lead to the development of the Bisha project in the country's western region, which will become its first new mine since colonial times. Following a failed safari in Mali, where Nevsun owns the loss-making Tabakoto mine, which is currently on care-and-maintenance, the Bisha project in Eritrea is not only massive, but full of potential. It is believed to be among the world's largest undeveloped polymetallic deposits in Africa. Nevsun says it boasts 1.06 million ounces of gold, 10 million ounces of silver, 747 million pounds of copper and 1.09 billion pounds of zinc. 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 John Clarke, Nevsun's President and CEO. The project - expected to cost around US$250-million - will be developed by Bisha Mining Share Company (BMSC), owned 60% by Nevsun and 40% by the Eritrean National Mining Company (ENAMCO). The actual mining licence, which had long delayed the project, is now also guaranteed and is expected by January 2008. In November, ENAMCO borrowed US$60-million from credit firm China Import-Export Bank to buy a 30% participating interest in BMSC, to add up to its 10% free participating interest in line with the country's mining legislation. Approximately US$25-million of that will go to Nevsun as down payment, with the final price expected to be determined by independent evaluators when production commences. In addition to the project purchase price, the Eritrean government will have a proportionate share of capital, equivalent to 33.3% to build the mine and shares the risk of capital spend (and over-run facilities) for loan financing, according to the deal. Eritrea has also entered into guarantees to ensure a reduced political risk as a major shareholder in the mine, whose construction is expected to commence soon after the issuance of the mining licence, in a country currently facing threats of war from southern neighbour Ethiopia over a disputed border. Eritrea gained independence from Ethiopia in 1993 and currently both countries have more than 100,000 troops stationed close to the frontier, raising fears of a war. Eritrean Minister of Energy and Mines Tesfai Ghebreselassie said the project would benefit the impoverished Horn of Africa country, and "the success of the Bisha Mining Project has a special significance both for its economic benefits and trend-setting effects on the path of the industry we are very eager to develop in Eritrea". "I would like to reiterate our Government's commitment to do all within its means to assist Bisha Mining Share Company be a success story," Tesfai said. Construction is expected to take two years with actual mining expected to commence in 2010. The feasibility study completed in Q4 2006 deems the project to be profitable throughout its entire mine life because of the low operational costs. It is being modelled as a 10-year open pit operation capable of producing two million tons of ore per year. The mine, should finance be arranged successfully, will start as a high grade gold/silver operation on the near surface oxide section of the orebody. As the proposed open pit becomes deeper it would become a high grade copper operation with gold and silver credits in the supergene enriched ore zone and then by year 5 would start moving into the primary orebody at which point it would become a zinc mining operation with copper, gold and silver by products. During its first two years of operation, the $196-million project is expected to extract gold and silver together, specifically 471,000 ounces of gold and 424,000 ounces of gold annually. Production of copper concentrate is expected in significant quantities from years three to five, yielding from 176 million pounds of copper to 184 million pounds of copper annually. During the sixth through 10th years of mine life, the operation is anticipated to produce from 174 million to 236 million pounds of zinc annually. Operating costs are estimated at US$31.64 per ton, according to the feasibility study.
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| Last Updated ( Saturday, 15 December 2007 ) |
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