Update From CanaccordNevsun Resources (NSU : TSX : $2.46) - Speculative Buy - Target: $4.10
Analyst: Steven Butler
Comment: Nevsun updates Bisha Resource
Nevsun reported results of its 2005 drill program at its Bisha property in Eritrea. Total measured and indicated resources have increased 15% for gold, 15% for silver, 20% for copper and 1% for zinc. Improvements have come as a result of improved tonnage and grade and the discovery of a new zone with greater than 0.5% copper but less than 2% zinc. Tonnage in the inferred category has increased over 100%, resulting in a 43% increase in copper and a 122% increase in zinc in that category. Nevsun will incorporate these results into the Bisha feasibility study expected out in
mid-2006.
These results are generally in line with our expectations, but we currently value the Supergene zone on an in-situ multiple basis. A DCF analysis of the deposit could add approximately 10-15% to our company valuation. We also expect the update to be received positively by the market as it demonstrates progress at the Bisha property.
We are currently reviewing our commodity price outlook and expect to revise our estimates in the coming week. We maintain our SPECULATIVE BUY rating on Nevsun's
shares.
Near term catalysts for Nevsun include the expected Q1/06 declaration of commercial production at Tabakoto in Mali and the expected release of the Bisha feasibility study in mid-2006. Our target price of C$4.10 represents 0.8 times our 5%/$525/oz peak gold NAVPS of approximately C$5.10.