Nevsun Resources and Reservoir Minerals announced an agreement on April 24 to combine their companies. The agreement assumes completion of Reservoir’s right to first offer to obtain Freeport-McMoRan’s 55% interest of the Upper Zone and 28% of Freeport’s 55% interest in the Lower Zone of the Cukaru Peki copper-gold deposit on the Timok project in Serbia. Reservoir owns the remaining 45% interests in both zones.

The Nevsun/Reservoir agreement supersedes an agreement announced in early March whereby, subject to Reservoir’s right to first offer, Lundin Mining would have acquired 100% of Freeport’s interest in the Upper Zone and 28% of its interest in the Lower Zone (E&MJ, April 2016, p. 5).

Drill core sample from the Timok property, showing 2.63% CuEq (2.25% Cu and 0.64 g/t Au) in andesite. (Photo: Reservoir Minerals)

The Nevsun/Reservoir announcement came five days after Reservoir reported robust results from a preliminary economic assessment (PEA) of development of the Upper Zone of the Cukaru Peki deposit. The PEA base case considers the economic merit of a Phase 1 starter mine, with access via a twin decline to higher-grade direct shipping ore (DSO) that would require only crushing and grinding. Mining of the DSO would be followed by mining of the main Upper Zone mineralization down to the 800-m level.

Grades in the DSO material would average 13% copper and 10.6 g/mt gold. Phase 2 Main mine material would come in at 4.6% copper and 2.9 g/mt gold.

DSO mining would begin in 2019, followed by a start of mining in the Main mine in 2022, ramping up eventually to a 2-million-mt/y maximum production rate. DSO would be mined at a rate of 600,000 mt/y for 3.5 years, resulting in total production of 248,000 mt of copper and 649,000 oz of gold in ore. Phase 2 Main mine processing at a rate of 2 million mt/y would yield additional production of 507,000 mt of copper and 184,000 oz of gold in concentrate.

Preproduction capital for the Phase 1 DSO starter mine is estimated at $213 million.

The Nevsun/Reservoir agreement places a total value of about $365 million on Reservoir. Upon completion of the agreement, current Nevsun shareholders will own approximately 67% of the combined company, and current Reservoir shareholders will own the remaining 33%. The combined company will have a 100% interest in the Upper Zone and a 60.4% interest in the Lower Zone of the Timok project under two joint-venture agreements with Freeport and will become the operator of the project. Freeport may increase its ownership in the Lower Zone to 54% under the terms of the original Timok joint-venture agreement.

Nevsun is 60% owner and operator of the high-grade Bisha copper-zinc mine in Eritrea. It recently reported new assay results from its Bisha regional exploration, as reported in the Exploration section of this issue of E&MJ.


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