Canaccord Morning Coffee
Nevsun Resources* (NSU : TSX : $5.87), Net Change: 0.69, % Change: 13.32%, Volume: 821,106
Cha Ching...Nevsun Resources was hot on Wednesday, soaring after announcing an inaugural semi-annual dividend of US
.03/share (annualized US
.06/share), which implies a 1.1% yield based on Tuesday’s close price. With $103 million in cash at year end and an estimated $290 million in annual after-tax free cash flow from the Bisha Mine (based on Canaccord Genuity’s estimates, 100% basis), this may not come as a total surprise, although the market may not have expected an announcement so soon considering the company just reported its first quarter as a producer. Better yet, there is good potential for this dividend to be increased over time. Many stocks in the sector have performed well following the announcement of material dividends, and Nevsun was certainly no expectation. Shares made double digit gains after dipping below $5.00 last week. While the Eritrean risk may have kept some investors on the sidelines, it seems the yield should provide an incentive partly compensating for country risk. Key upcoming catalyst remains the finalization of the purchase price for ENAMCO's incremental 30% stake in Bisha (expected by the end of June 2011)