Nevsun opts for equity sale after project debt deemed 'unreliable'

TORONTO (miningweekly.com) – Canada's Nevsun Resources, which is building the Bisha mine, in Eritrea, has arranged a nonbrokered private placement to raise C$117-million, the company announced on Thursday.

The firm said it decided on the share sale to ensure that the project development continues on schedule, after existing finance facilities were deemed “unreliable and inconclusive”.

Nevsun arranged debt finance for the Bisha project last year with lenders in Europe and South Africa last year, but the facilities have not been drawn, because the European lenders needed to first secure the support of the German government.

While the South African lender, the country's Industrial Development Corporation, recently reconfirmed the availability of project debt, Nevsun said it has since become apparent that access to the debt in the time it would require it was “uncertain".

As a result, the company will sell 52-million shares, at C$2,25 apiece, in a private placement that is expected to close on or before February 19.

“The company is confident the funds from this private placement, together with its existing cash and the ongoing one-third contribution by the State of Eritrea to Bisha will be sufficient to see the Bisha project through to cash positive operations,” it reiterated on Thursday.

Nevsun said it has raised more than enough money to cover the forecast cost of the project, “to provide a reasonable cushion in the event of unforeseen events”.

The company also emphasised that the Eritrean National Mining Corporation has “reliably” provided its one-third contributing share of financing to Bisha.

“The company has taken a prudent business approach to secure funding needed to complete the Bisha project on schedule and has no practical alternative but to proceed without the debt providers,” the Vancouver-based firm commented.

“While the company would have preferred to stay with a leveraged project, the higher priority is to get the project built and producing cash.”

The Bisha project is approaching the 50% completion point, Nevsun confirmed.

The company reported last month that it had revised the capital cost estimate upwards to $260-million, from its original budget of $250-million.

Nevsun shares gained 3,3% on Thursday, to C$2,19 apiece by 16:10 in Toronto. The Bisha gold/silver/copper/zinc mine, in which Nevsun owns 60% and the government of Eritrea holds 40%, is scheduled to start production in the second half of this year.