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Nevsun Resources slashes 2012 gold forecast from Bisha mine

Nevsun Resources (TSE:NSU) said Tuesday it expects gold production from its Bisha mine in Eritrea, East Africa in 2012 to be around half of what it initially anticipated due to over-estimations of the oxide gold resource.

The gold producer said it expects to produce between 190,000 to 210,000 ounces from its Bisha mine in Eritrea. This is about half of what the company was previously expecting, and falls short of the 379,000 ounces of gold produced a year ago.

Nevsun's outlook includes production from the Bisha Main oxide reserve, stockpiles and the Harena oxide. It does not include any production from "the much larger and more valuable" supergene and primary zones, the company said, which sit beneath the oxide zone cap and are scheduled to be brought into production in 2013.

Based on actual production data from 2011, the company reconciled its 2011 ore control model with the March 2011 resource model at Bisha, and concluded that the resource estimate used for mine planning over-estimated gold in portions of the Bisha Main oxide mineralization.

The new production forecast includes around 1.3 million tonnes at 5.1 grams per tonne gold of the remaining 1.6 million tonnes of Bisha Main oxide, compared with 2.5 million tonnes that was previously expected.

As per the March 2011 technical report, Nevsun said the change represents a reduction of approximately four percent in Bisha's total reserve tonnage.

The Bisha mine is one of the highest grade open pit base metal deposits in the world and has a mine life in excess of 12 years. It is a large precious and base metal-rich volcanogenic massive sulphide deposit situated 150 kilometres west of Asmara, Eritrea in East Africa.

Deposit mineralization comprises of gold and silver oxides, as well as copper and zinc massive sulphides.

Nevsun also announced Tuesday that it expects to release a revised reserve estimate for the entire Bisha and Harena deposits in late second-quarter or early third-quarter this year.

"The time delay from previous guidance is due to the rigorous review process that has commenced using new independent engineers, incorporating actual mine data and data from the extensive 2011 drilling program," the company said in a statement.

Nevsun CEO, Cliff Davis, commented: "Bisha had an excellent 2011 operating year, achieving its gold and cost per ounce production objectives.

"For 2012, Bisha has the team and contractors in place to successfully execute the copper phase expansion project so that copper production can start in mid 2013."

Indeed, the miner said it is on track to complete the copper phase expansion project at Bisha and will start copper commercial production next year.

While production for 2012 is lower than previously expected, Nevsun believes that the cash flow generated this year from the oxide deposit will be more than sufficient to fund the copper plant to completion.

Shares closed Monday at $6.34 each.