By Nevsun Resources,
OVER the past week the Bisha process plant has had power supply issues with its third party power plant, causing a temporary halt in concentrate production.
Mining operations continue at full capacity and Bisha continues to truck and export stockpiled concentrates.
The Company has already achieved its annual production guidance and the plant interruption does not have a negative impact on the Company’s 2014 financial results as we will draw down and sell from stockpiled concentrate inventories.
Bisha’s diesel power plant is provided by Aggreko Power Systems. Recently, Aggreko replaced nine of the 27 generators as part of scheduled maintenance of the plant. The fix of the power interruption was initially thought to be a short-term issue however the power facility has been unable to reliably restart and Aggreko has mobilized to the Bisha site appropriate resources and technical personnel to assess and correct the problem in a timely manner.
Nevsun will provide an update on when the plant is expected back online.
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The news of the power supply issues at Bisha is a surprise and was not expected. While this is certainly negative news as it adds a layer of uncertainty, it doesn’t sound like the issue will have any effect on the company’s financials as the company continues to truck and export stockpiled ore. Still, the issue is worth keeping a close eye on and hopefully the issues will be resolved shortly.
Nevsun’s stock are just too cheap, yielding close to 4% with a forward P/E ratio of 9.11 and a book value of $3.32, which is just below its current share price. And with $380 million cash and $500 million working capital, the balance sheet is one of the strongest in the industry.
In addition, the company’s Bisha region remains under-explored and recent drilling has yielded spectacular results, with high-grade copper, gold and zinc intersections.
Nevsun’s stock is down 5% as a result of the news, and therefore, it is a solid buying opportunity as a result.