Nevsun advances Timok Upper Zone copper-gold project with release of robust PFS
Thursday, Mar 29, 2018
Nevsun Resources Ltd. has announced the results of a pre-feasibility study ("PFS") for the Timok Upper Zone copper-gold project in Serbia ("Timok Project" or "Project"), one of the world's best development stage copper projects.  All economic values within this release are in US dollars unless indicated otherwise.

Nevsun CEO Peter Kukielski commented, "The PFS confirms the extraordinary value of our wholly-owned Timok Upper Zone project. This is a high-grade, high return, fully executable copper project in a supportive jurisdiction. The PFS is an important advance over our October 2017 Preliminary Economic Assessment and further de-risks the Project by improving confidence in the engineering details, metallurgical understanding, timeline to production and capital assumptions.

As we drive toward a feasibility study in mid-2019, I am confident that we have the right team in place to bring the Timok Project into production. Between our management and the Board, we collectively have decades of development experience through the building of multiple projects and tens of billions of direct over sight of deployment of capital."

Timok Upper Zone Project PFS Highlights

  • Initial Probable Mineral Reserve of 27 million tonnes at 3.3% copper and 2.1 grams per tonne gold using a price of $3.00 per pound copper and $1300 per ounce gold
  • Pre-production capital cost of $574 million, excluding $114 million to be spent to reach a construction decision
  • After-tax NAV8% of $1.82 billion and IRR of 80% at $3.15 per pound copper valued at start of construction (July 2020)
  • After-tax NAV8% of $1.45 billion and IRR of 55% at $3.15 per pound copper, including pre-construction capital and valued at June 30, 2018
  • Initial production targeted for 2022
  • Ten-year mine life producing over 1.7 billion pounds of payable copper, excluding inferred resources
  • Life of Mine average annual payable production of 86 thousand tonnes per year at an average C1 cash cost of $0.92 per copper pound
  • Average annual payable copper production of 143 thousand tonnes at an average C1 cash cost of $0.54 per copper pound over the first three full years of production
  • Strong front-end cash flow and quick payback period of less than 1 year supports a wide range of financing opportunities and alternatives
  • Scoping level work suggests potential to decrease initial capital by up to $100 million through a staged ramp up from 1.6 to 3.2 million tonnes per annum while maintaining strong Project economics
  • Significant exploration potential exists through the future conversion of inferred resources and greenfield exploration
Nevsun CEO Peter Kukielski continued, "The Project lies in an established mining jurisdiction with a supportive and collaborative government. The Republic of Serbia recently granted an exploration decline permit for the Project, advancing our timeline to production. The decline permit is a testament to the strong working relationship that we have built with the government of Serbia. We are grateful for their continued support as we begin initial construction of the decline in Q2 2018, advancing the Timok Upper Zone Project for the benefit of both local stakeholders and our shareholders."

Serbia's Minister of Mining and Energy, Aleksandar Antic commented, "The Timok Project is very important to Serbia. I, and my Ministry, are committed to supporting Nevsun along the journey to production."

Mr. Kukielski added, "We are very excited about the potential upside from additional high-grade Upper Zone type deposits. Based on our recently disclosed exploration results, we are confident there are more discoveries to be made, which could eventually increase the production profile and extend mine life."

Ryan MacWilliam, Nevsun CFO, said, "The Timok Upper Zone remains a low capital intensity project which the Company is in a strong position to finance, considering our strong cash position, debt-free balance sheet, Bisha cash flow and the robust front-end cash flow from Timok. We have initiated discussions with several potential project finance providers, including traditional banks, development banks and precious metals streaming companies and potential strategic partners.  These discussions have confirmed that we have multiple viable options for financing the Project which will now be advanced in parallel with the feasibility study. As we move to feasibility, we will closely examine further de-risking the Project via a ramp-up scenario starting with initial production at 1.6 million tonnes per annum ramping up to 3.25 million tonnes per annum. Recent scoping level studies suggest that this approach has the potential to deliver a capital savings of up to $100 million while maintaining strong economics."

This PFS was compiled and project managed by Hatch (Toronto) with input from SRK (Vancouver), Knight Piesold (Vancouver), and Bluequest (Zug).

A NI43-101 Technical Report that summarizes the results of the PFS and incorporates an initial reserve statement for the Timok Upper Zone, will be filed within 45 days on SEDAR and on the Company's website.

Further work during the feasibility study ("FS"), expected to be released in mid-2019, will continue to refine the Project and optimize costs for the construction and operation phases of the Project.

Detailed PFS Summary and Economic Analysis Compared to October 2017 PEA
Table 1: Economic and Operational Summary
M = million

Detailed PFS Summary and Economic Analysis Compared to October 2017 PEA
Table 1: Economic and Operational Summary 
M = million

Metal Price Assumptions

Life of Mine ("LOM")

Life of Mine ("LOM")

Copper Price $ per pound



Gold Price $ per ounce



Capital Requirements

Initial Capital Requirement

$574 M
(excluding pre-
construction decision
capital of $114m)

$630 M
(including pre-construction
decision capital)

Life of Mine Sustaining Capital

$239 M

$342 M

Closure Costs

$48 M

$58 M

Operating Costs


$19.41 per tonne

$18.57 per tonne

Processing, Waste & Water Management

$11.10 per tonne

$10.06 per tonne


$1.91 per tonne

$2.37 per tonne

Total Site Costs

$32.42 per tonne

$31.00 per tonne

C1 Cash Cost

$0.92 per pound

$1.02 per pound

Production Summary

Initial Production



Total Mill Feed

27.1 M tonne

42.1 M tonne

Diluted Copper Feed Grade

3.26 %

2.6 %

Diluted Gold Grade

2.07 gram per tonne

1.7 gram per tonne

Diluted Arsenic Grade

0.17 %

0.13 %

Annual Mine Production

3.25 M tonne per annum

3.25 M tonne per annum

Life of Mine ("LOM")

10 yearsb

15 years

LOM Copper Recovery

93 %

92 %

LOM Gold Recovery

32 %

31 %

LOM Copper Concentrate Grade

26 %


LOM Gold Concentrate Grade

5.7 gram per tonne

4.8 gram per tonne

LOM Arsenic Concentrate Grade



Payable Copper

1,747 M pounds

2,105 M pounds

Payable Gold

516,000 ounces

569,000 ounces

Project Economics – After Tax

Valuation Date

July 2020

December 2017

After-Tax NPV (8% Discount Rate)

$1,816 Mc

$1,473 M

Internal Rate of Return



Payback (from start of processing)

0.9 years

1.4 Years

Cumulative Cash Flow

$2,740 M

$2,810 M


2022 is managements target for production.  See detailed explanation below for more details.


PEA included inferred resources.  Drilling from underground will be required to potentially convert any of this material to reserve.


After-tax NPV calculated at start of construction, using a flat copper price of $3.15 per pound and gold price of $1,300 per ounce.

Permitting and Timeline

Management is targeting a timeline to initial production in 2022.  This decision is based on a greater understanding of the Project schedule and a delay in commencement of Exploration Decline construction from Q4 2017 to Q2 2018. The Company recently received the final authorization (road use permit) to commence construction and will award the construction contract imminently. Exploration decline construction will take approximately two years to reach the top of the orebody, allowing underground mine development to begin in 2020. Mine development will run concurrently with construction of above ground infrastructure (including the plant).

After working through the procedures required to secure the exploration decline permit, the Company feels more confident in their understanding of the requirements and time that will be required to secure all future permits.   To achieve management's timeline above and start underground mine development and above ground infrastructure, the Company requires Mine Construction and Civil Works Construction Permits to be in place prior to a construction decision in Q3 2020. Should receipt of these permits be delayed, so too will the commencement of initial production.   A schedule with the maximum allowable time for each stage of permitting estimates first production in 2023.  Nevsun is working closely with the Republic of Serbia to receive these permits in a timely manner to achieve the 2022 target.

Milestone permits required prior to start of operations include:

  • Exploitation Field Permit (or, Mining License) expected in H2/2019
  • Construction permit expected in H2/2020
  • Mine Use Permit / Start of Operations in 2022

Valuation Date

The NPV valuation date used in the Timok Upper Zone PEA was December 31, 2017 and included future study costs and all expenses incurred prior to a construction decision. After careful consideration, Nevsun has decided to value the Project at the time a decision is made to begin construction.  At that point, Nevsun expects to have acquired all required permits and received Board and financing approval to commence construction of the mine, surface facilities and infrastructure to proceed to completion without constraint.  A start of construction date has been assumed of Q3 2020. This approach avoids NPV and IRR increasing as the Project moves closer to a construction decision. This is a consistent approach with our industry peers and will allow the PFS and FS economic evaluation of the Project to be compared on a like-for-like basis.  Table 2 shows the impact on NPV and IRR of this change. Pre-construction decision costs total $114 million. A breakdown of these costs by year is provided in Table 5. 

Table 2: Valuation Methodology Comparison


Valuation Inputs*


After-Tax NPV8% 

$1,473 M

$1,311 M

$1,816 M





*As of December 31, 2017, at $3.00 per pound copper

Resources and Reserves

An initial Probable Mineral Reserve of 27 million tonnes at 3.3% copper and 2.1 grams per tonne gold was declared along with these PFS results. There remain 13.9 million tonnes of inferred resources at 1.6% copper and 0.9 gram per tonne gold that require additional drilling from underground with the objective to bring into reserve. 

Ramp Up Scenario

The Company and its consultants examined, at a scoping study level, various throughput scenarios for the Timok Project during the PFS stage. During this scoping level assessment, a ramp-up scenario starting at an initial 1.6 million tonnes per annum and ramping up to 3.25 million tonnes per annum ("Ramp-Up Case") presented compelling economics and risk mitigation, especially through the deferral of initial capital expenditures of up to $100 million. While this news release and the associated technical report examine the Base Case flat 3.25 million tonne per annum scenario, it is likely that management and the Board may take the Ramp-Up case forward to feasibility. Management expects there are opportunities to optimize the economics from this case through additional study. This scenario lowers Project risk on many fronts; reduces the up-front capital while maintaining strong cash flows supporting Project financing, lowers the arsenic content of the ore in early years and provides lower execution risk given a staged ramp-up. 

Table 3: Total LOM Revenue, Costs and Cash Flows

Project Parameter


LOM Total (M)

Total Gross Revenue


Transportation, Refining & Penalties


Net Smelter Return ("NSR")




Site Operating Costs


Capital Costs (pre-production, sustaining & closure)


Project Cash Flow (Pre-Tax)


Note: totals may not match sum of individual items due to rounding

The corporate income tax rate in Serbia is 15%.  The Project is expected to benefit from a 10-year tax holiday provided in the current Corporate Income Tax Law in Serbia and applicable to major investments in the country. The Republic of Serbia receives a 5% net smelter return ("NSR") royalty and various payroll and other taxes to generate revenue.

The Project capital excludes three staged payments due to Freeport-McMoRan ("Freeport"): $45M anticipated to be paid on an Upper Zone build decision, $50M to be paid upon achievement of commercial production and up to $12.5 million to be paid out of Project cash flow.

Project economics are most sensitive to metal prices as demonstrated in the sensitivity analysis below.

Table 4: PFS After-Tax NPV and IRR Sensitivity to Copper Price



PFS Base Case



Cu Price per pound






After-Tax NPV8% (M)






IRR (%)






Payback (Years)






Initial and Sustaining Capital Estimate

Pre-construction capital expenditures are estimated at $574 million.  Capital spend prior to a construction decision is estimated at $114 million and includes underground development of the Exploration Decline ($43 million) as well as Owner's project development costs ($71 million), which includes land acquisition.

Expenditures after a construction decision are estimated at $574 million and consist of underground and surface infrastructure and facilities required prior to the start of operations.  Approximately 28% of the total initial capital is associated with underground development and underground infrastructure, which includes the ventilation raises, over 22 kilometers of initial underground development, the first primary crusher, material conveyor system and purchase of underground mining equipment.  Another 34% of the total initial capital is associated with the surface facilities and infrastructure, which include the construction of the processing plant, water management system, initial phase of the Tailings Storage Facility ("TSF") and other supporting and ancillary surface infrastructure typically required at a mine site.  The remaining 38% of the total initial capital is associated with Owner costs, as well as indirect costs and total Project contingency.

Sustaining capital is estimated at $287 million and includes $48 million in closure costs. This total includes $119 million for mine development and underground infrastructure spending that includes installation of a second lower underground crusher and conveyor as the mine deepens.  It also includes $89 million required to sustain the process plant, power supply facilities, TSF expansions and other site infrastructure sustaining costs and $31 million contingency.

Table 5: Initial Pre-Production Capital and Sustaining Capital Breakdown

Capital Cost Summary

Capital (M)

Capital (M)

Closure Cost

Capital (M)

Underground ("UG") Mine Development




Underground Mine Infrastructure




Site Development




Process Plant




Waste Management/TSF




Indirect Costs







Capitalized Operating Cost








Total Capex





Owner Costs prior to start of construction




Decline costs prior to start of construction




Total Pre-Construction Decision



Note: totals do not match sum of individual items due to rounding


Table 6: Pre-Production Capital and Sustaining Capital Schedule



Capital (M)












Pre-Construction Start Total










































LOM Total




Operating Cost Estimate

Onsite operating costs are expected to average $32.42 per tonne milled with offsite operating costs estimated to average $60.90 per tonne milled for the LOM.

Table 7: LOM Operating Costs

Operating Cost ("Opex")


$ per tonne





Processing Water & TSF






Subtotal Onsite Opex



TC, RC, Penalties & Transport

 & Transport






Subtotal Offsite Opex



All-in Opex



 Note: totals may not match sum of individual items due to rounding

Mining Design Details

The PFS is based on a Sub Level Cave ("SLC") mining method.  SLC is applicable through a wide range of geotechnical conditions and is typically used in massive, steeply-dipping orebodies with considerable strike length as at the Timok Project.   An added benefit is that the variable high grades near the top of the deposit are blended through the caving process.

The PFS mine design is based only on Measured and Indicated Mineral Resources.  Inferred Mineral Resources were not used to design the updated mine design and production profile. Total LOM mine development consists of 24 kilometers of lateral development, inclusive of declines, 3 kilometers of vertical development and 40 kilometers of operating development. 

Initial Timok Upper Zone Mineral Reserve Statement

The Initial Mineral Reserve estimate is based on the Mineral Resource Statement dated April 24, 2017 (see news release dated October 26, 2017 and associated Technical Report filed on SEDAR December 6, 2017).  The Mineral Resources are inclusive of Mineral Reserves.  Mineral Reserves are based on $3.00/lb copper and $1,300/oz gold. This differs from the copper price of $3.15 per pound used for the PFS economic analysis.

Metallurgical Test Work

Recent metallurgical test work conducted at XPS, Sudbury, Ontario, was aimed at confirming the bulk concentrate flotation results previously achieved by SGS-Lakefield.  XPS performed rougher and cleaner flotation tests, locked cycle tests, and supporting mineralogical evaluation.  The work generally confirmed the predicted performance of the bulk flotation procedure and demonstrated that the mass of concentrate can be reduced to increase copper grades together with a proportionate increase in arsenic levels in the concentrate.  Optimization of concentrate mass-pulls and arsenic levels will continue with direction from Nevsun marketing staff and advisors.

Additional test work is also continuing to examine the opportunity to produce two concentrates; production of a clean copper concentrate with a low level of arsenic and a complex copper concentrate with a relatively higher level of arsenic.

Processing Design Details

The copper mineralogy consists primarily of covellite and enargite. The mineralization also contains significant amounts of pyrite, accounting for approximately 45% of total tonnage.  The process plant design is based on key inputs from the metallurgical test work programs, the mine production plan, and industry best practices, including benchmarking of similar copper-gold concentrators. 

The process plant design was reviewed and updated by Hatch.  The most significant change was the removal of the pyrite circuit as production of the pyrite concentrate was found to be uneconomic.  The process plant has been designed to treat an average of 8,900 tonnes per day, equivalent to 3.25M tonnes per annum.

The processing flowsheet is considered conventional and consists of primary underground crushing; underground conveyors; overland conveying to the processing plant; coarse material storage bins; SAG and ball mill comminution circuit; copper flotation comprising of rougher flotation, regrind, and three stages of cleaning; copper concentrate thickening and filtration.  Other supporting systems to the process plant and site are included and generally consist of reagents storage and distribution; effluent treatment; water services which include fresh, fire, service, and process water systems; compressed air services; concentrate storage and handling; grinding media storage and addition; and plant controls.

Though the basis of this PFS is production of a single bulk concentrate, the robust flowsheet is flexible and allows the option to produce two copper concentrate products, instead of a single concentrate, with relatively minor reconfigurations of flotation equipment.  In the two concentrates scenario, a clean concentrate with less than 0.5% arsenic and a complex concentrate with greater than 0.5% arsenic would be produced.  Which concentrate is produced will be subject to the market conditions for complex concentrate at that time, but the flexibility is key to managing off-site realization costs.

Tailings Storage Facility Details

Knight Piésold Ltd. Vancouver ("KP") developed a long-term tailings storage strategy, including initial starter dam construction and future expansion stages for tailings deposition and water management based on the proposed mine development plan.

The PFS design of the Tailings Storage Facility ("TSF"), includes a single cell storage arrangement that was updated from the two-cell storage approach considered in the PEA. The single cell TSF approach provides for lower initial capital costs and generally simplified tailings delivery, reclaim and associated water management requirements.

Waste rock storage is included adjacent to the fully lined TSF basin.

PFS level cost estimates were developed for construction and closure of the TSF and water management structures using generated material quantities, unit costs and productivity data from similar facilities in comparable jurisdictions. 

Environmental, Permitting and Reclamation Details

The Project has contracted Dvoper Ltd, the Belgrade based subsidiary of a Croatian environmental permitting consulting firm, to support permitting and ERM, a global environmental consulting company, to perform environmental impact assessment work. ERM has subcontracted part of that work to Envico, a Belgrade based environmental and permitting consultant ("ERM/Envico"). ERM/Envico are also supporting environmental permitting.

The Project permitting process is on two separate and parallel tracks.  The first permitting track involved obtaining a permit for the development of the Exploration Decline and the associated surface based supporting infrastructure at the portal site. This permit has now been received and Exploration Decline construction will start in Q2 2018.  The other permitting effort focuses on those permits required to develop and operate the balance of the Project facilities, including the remainder of the underground mine development, the mineral processing facilities, TSF and other supporting infrastructure.

Land Acquisition

The Company is rapidly advancing land acquisition. As of March 28, 2018, the Company has acquired the necessary property rights to proceed with the exploration decline construction. Additionally, 53% of the required private land for the anticipated construction and operational footprint of the Project has been acquired.

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