Massawa

By: Berhane Woldu

If there is ever a region that epitomizes the economic future of Eritrea, it’s the Northern Red Sea Region. A frenzied sprawl of 1 million people it’s the second largest region in Eritrea.

It’s also a place where you will find six ethnic groups live together in harmony. At one recent colloquium conducted by the Governor of the region it was explained the various economic developments and the exploitation of natural resources such as agriculture, fisheries, tourism and mining.

All this speaks to Eritrea’s new growth path, one that is defined by Eritrean’s and Eritrean demand, rather than outsiders. The epicenter of the new growth is the country’s vast coastal expanse and the vast plains that are conducive for agricultural investment. While economist inside and outside Eritrea are bearish on Gold export from Bisha, Gash- Barcka region, it will be extremely bullish on the prospects of the Northern Red Sea Region which enjoys higher growth rates, favorable government policy, and the possibility of a huge consumption binge. Northern Red Sea Region also happens to be where the free zone ports of different size, 220 coral reefs and over 1000 fish species and virgin natural resources; oil, natural gas, iron ore, and lime stone are located. Mineral resources embedded on various areas of the region such as copper, gold, gypsum, granite, marble and ceramics. But while foreign firms are salivating over the potential gains to be had from all this, it’s the Eritreans themselves, rather than outsiders, who will tap them.

State-owned industries are an important factor in the nation’s economy. The basis for public intervention in the economy is the system of state holdings regulated by the ministry bearing that name, established in 1991; it representing a necessary tool by means of which the state can exercise control over, and act directly in, the country’s development, causing it to reach those results dictated by state economic policy. The state’s political authorities thus assign the economic policy objectives deemed necessary, and the agencies autonomously see to their desired outcomes. These agencies are: Ministry of Fisheries, Massawa Port Authority, Ministry of Education and many more who jointly work with the regional administration to implement the set goals and achieve the desired outcome in the domains of agriculture, fisheries, tourism, trade and industry, social services and infrastructural developments.

Development policies have now been put in place. The construction of Massawa airport, the Free Economic Zone, the expanding and reconstructing of ports, construction of oil jetty and the construction of cement fabric that is expected to produce 10,000K per day are some of the developments that have been achieved in the region.

Last year the government announced new Massawa infrastructure projects totaling 1 billion nakfa, even more than the 2009 figure. But unlike in the 2002 to 2008,Eritrea has the financial resources, experience, expertise and confidence it gained to build the country from zero economy to where it is today on its own.

What’s more, the fact that the region is rich in natural resources and borders politically troublesome areas like Ethiopia, Sudan and Yemen means that the regional government is more likely to want to exert greater control in commercial affairs.

The central government has given the coast more investment in the domains of agriculture, fisheries, tourism, trade and industry. The development of theNorthern Red Sea region is a study in state-led capitalism. Over the next 5 years, there’s going to be a huge shift in the nature of private investment in Eritrea; much more of the money is going to come from Eritrea rather than foreigners. In the wake of the 2009 world financial turmoil and still mired in fiscal retrenchment and tighter credit conditions, capital is becoming scarce and more expensive; hence, mobilization of internal capital as an alternative source of capital is essential to Eritrea. Eritrea’s current emphasis on balancing its economy towards domestic demand also means less of a golden handshake for foreign companies.

The sectors such as telecommunication, agriculture, and electricity are off limits to foreigners. Now, with the focus on agriculture, over 90,000 hectares have been utilized and a number of agricultural infrastructure programs have been implemented which increase domestic consumption. Local firms will have leg up in the growing region where no multinationals have yet to venture. Foreign firms’ relative lack of business experience in a region where culture, equality, mutual interest, ideology, trust, and relationship with the local bureaucracy play an even larger role is a major disadvantage. Even if all things were equal, basic geography will always favor costal area development. Transport costs are much higher for foreign firms than they are for domestic firms, and the proximity and cultural similarity of countries like Yemen and Arabia favor regional partnership rather than ventures run by Western multinationals.

In a highly stressed global economy, it’s wise to look internally and focus on Northern Red Sea Region long-term competitive advantages.

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5. Nevsun Increases Mineable Reserves at Bisha by Fourty Percent

The net impact of higher throughputs and lower cut-off grade has resulted in an extended mine life of 13 years, while increasing previously reported robust cash flow.

Highlights

• 40% increase in reserves, using $1,015/oz gold, $15.85/oz silver, $2.40/lb copper, $0.92/lb zinc
• 20% increase in ore throughput starting in 2013
• Bisha 13 year undiscounted cash flow now totals $2,162,000,000 (1)
• Upgrade does not include pit expansion at depth, hanging wall copper zone or the Harena satellite deposit

¹Bisha Project undiscounted cash flow was estimated using what Nevsun has classified below as a medium metals price scenario, at $1,200/oz gold, $24/oz silver, $3.30/lb copper and $1.00/lb zinc, all on an after-tax, after expansion capex basis.

Mineral Resources, Effective Date: 01 January, 2011

Mineral resources for the project which are based on the same resource model as the model used in the 2006 feasibility study, were re-estimated within an optimized pit shell using a base-case gold price of $1,170/oz, silver price of $18.20/oz, copper price of $2.76/lb, and zinc price of $1.05/lb, and variable NSR cut-offs, based on oxidation state, and include:

Measured: 2,124 kt grading 2.72 g/t Au, 40.01 g/t Ag, 2.26% Cu, 2.07% Zn

Indicated: 27,726 kt grading 1.62 g/t Au, 38.79 g/t Ag, 1.53% Cu, 3.22% Zn

Inferred: 10,570 kt grading 0.67 g/t Au, 47.78 g/t Ag, 0.91% Cu, 5.67% Zn

Mineral resources that are not mineral reserves do not have demonstrated economic viability.

For more information visit: kincommunications

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5. Nevsun Resources Ltd.: Bisha Commissioning and Resource Expansion on Track

Nevsun Resources Ltd. (TSX: NSU/NYSE Amex: NSU) is pleased to report the gold assays from the thirty-four infill diamond drill holes at the Harena deposit within its Bisha exploration license in Eritrea.

Nevsun plans to use the infill drilling results to complete a resource estimate, mine plan and mining license application to process the material at its Bisha processing plant.

Harena lies 9.5 km southwest of the Bisha Main deposit on an exploration license contiguous to the Bisha Mining license.

Highlights

• High grade, near surface oxide gold cap
• Copper and zinc primary sulphide underneath
• Potential additional feed for Bisha both in CIL and flotation phases

Select High Grade Results Include:

• Hole #H-078 – 18m at 11.78g/t Au, from 51.0 metres to 69.0 metres
• Hole #H-062 – 31.9m at 4.09g/t Au, from 5.6 metres to 37.5 metres
• Hole #H-063 – 51m at 3.34g/t Au, from 19.5 metres to 70.5 metres
• Hole #H-059 – 60m at 2.73g/t Au, from 13.5 metres to 70.3 metres
• Hole #H-081 – 18m at 3.89g/t Au, from 45.0 metres to 63.0 metres
• Hole #H-075 – 24m at 3.19g/t Au, from 46.5 metres to 70.5 metres

The drilling took place in the fall of 2010. Drill hole locations were selected to infill drill the gossanous oxide cap on 25m x 25m and 12.5m x 25m fences which is the same spacing used to define measured and indicatedresource categories at the Bisha Main deposit. The results were positive, and have provided increased confidence to the widths and grades of the gold bearing oxide cap at Harena. A resource estimate on the deposit has been initiated with results expected in late April. If the results are positive a reserve estimate and mine study will be done to support a mining license application.

Detailed results of gold in the oxide are in the attached schedule together with a map of hole locations. The results of assays on the sulphides are still in progress and will be disclosed at a later date.

Nevsun views the Harena deposit as a potential source of supplemental feed for the processing plant at Bisha. Supplemental feed can provide valuable cash flow as an extension to mine life without having to absorb any start-up capital costs.

Darin Wasylik, Senior Geologist for Nevsun, a qualified person under National Instrument 43-101, supervised and directed all work associated with the drilling program.

Sample preparation and analysis were conducted at ALS Chemex of Romania and Vancouver, Canada.

Forward Looking Statements: The above contains statements regarding positive drill results, indications that the Bisha concession may host multiple deposits, the Harena deposit as a potential source of supplemental feed and valuable cash flow, the close relationship between the interpreted graphitic horizon and the Harena massive sulphide, and additional prospects at the Harena area. Although we believe the expectations reflected in our forward looking statements are reasonable, results may vary, and we cannot guarantee future results, levels of activity, performance or achievements. . Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those described in the Management Discussion and Analysis of the Company. The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made and the Company assumes no obligation to update such forward-looking statements in the future. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

NEVSUN RESOURCES LTD.

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February 22, 2011

• Bisha Declares Commercial Production
• Commercial production achieved on schedule and under budget
• Producing over 1,000 ounces per day
• Produced 40,000 ounces of gold to date
• Recoveries higher than expected

VANCOUVER,BC – Nevsun Resources Ltd. (TSX:NSU / NYSE Amex:NSU) is very pleased to announce that the Bisha Mine in Eritrea has reached commercial production. Commercial production marks the completion of project development, commissioning and operational ramp-up of the mine and processing plant. The operation is currently producing gold at a rate in excess of 1,000 ounces per day.

The commissioning of the plant commenced in late October, with first gold pour in late December and a progressive ramp up thereafter. Plant throughput averaged approximately 5,250 tonnes per day over the last 30 days, with a peak of 6,560 tonnes per day, well above schedule.

Recoveries are also higher than planned, averaging 89% over the last 30 days. During the commissioning phase, Bisha has produced approximately 40,000 ounces of gold.

Nevsun’s President Cliff Davis states “We are very pleased to bring this spectacular deposit into production and under budget. Our success can be attributed to our staff, contractors and the unwavering support of the Government of Eritrea.

The State has understood from the beginning that responsible development of the mining industry has the potential to be a significant economic catalyst to the State of Eritrea over the next several years.”

Commercial production was defined as >90% of planned throughput and >90% of planned recoveries for a period of >30 days.

As announced in the Company’s news release dated January 27, 2011, the Company’s independent engineer is currently working on a re-statement of reserves for the Bisha deposit and anticipates this will be available before the end of this quarter.

Forward Looking Statements: The above contains forward-looking statements concerning development and operating progress. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible” and similar expressions, or statements that events, conditions or results “will,” “may,” “could” or “should” occur or be achieved. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those described in the Management Discussion and Analysis of the Company. The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made and the Company assumes no obligation to update such forward-looking statements in the future. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

NEVSUN RESOURCES LTD.

“Cliff T. Davis”

Cliff T. Davis

President & Chief Executive Officer

A detailed stock quote on TSX: NSU can be found here.

For Investor Relations Contact:

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Nevsun CEO Cliff Davis

The following article is written by Peter Caufield in the February issue of Resource World.

Vancouver-based Nevsun Resources Ltd. [NSU-TSX] recently poured its first gold at the Bisha Gold Mine in Eritrea, northeast Africa. The first pour was part of the plant commissioning process and rendered two doré bars totaling 26 kilograms (approximately 920 ounces).

In an announcement, Nevsun President and CEO Cliff Davis said, “Nevsun’s first gold pour is a tremendous achievement that has been accomplished by a team of outstanding professionals on the ground in Eritrea and with the continued support of the Eritrean government.

It gives me great pleasure to say we are on time, under budget, and will considerably further the country’s development with the realization of Eritrea’s first modern-day mine. In the face of difficult capital markets in 2008 and 2009 and other obstacles overcome in 2010, we are proud of this significant accomplishment. We look forward to substantially growing Bisha in the coming months, in terms of reserves and throughput. This success should be a good indicator of our strategic capability in the future.”

Nevsun is a single-country, single-project, gold and base metal developer focused on the Bisha Project. Bisha is a fullyfinanced and permitted high-grade gold, copper and zinc deposit. Nevsun expects the mine to be fully commissioned and in full production by the end of Q1 2011.

The first mine to come into production in Eritrea in many years, Bisha is projected to produce 1.06 million ounces of gold, 9.4 million ounces of silver, 734 million pounds of copper and 1,075 million pounds of zinc. Davis says the milestone event shows that the persistence of Nevsun and its supporters in the Eritrean government is paying off.

“When we started, the financial community was doubtful about the project,” Davis said. “So we put together the financing ourselves, with the Eritrean government putting in cash. Their financial contribution distinguishes Bisha from other mining projects.”

THE BISHA PROJECT

The Bisha Project is a large volcanogenic massive sulphide (VMS) deposit located 150 km west of Asmara, the capital of Eritrea. Bisha’s mining and exploration licenses cover a contiguous area of 110 square km. The Bisha Main and North West zones are both located within the 16.5 square km mining license.

The Bisha Main Zone is a 1.2 km-long section characterized by precious metalrich (gold and silver) oxides and base metal-rich (copper and zinc) massive sulphides. The deposit is configured in three distinct layers. The Oxide Zone (0-35m) is a near-surface gold-silver rich bearing oxide. It has reserves of 4.02 million tons of 7.99 grams gold/tonne and 33 grams silver/ tonne. This zone will be mined in the first two years of production.

The Supergene Zone (35m-65m) is a copper-enriched massive sulphide horizon that also contains gold and silver. It has reserves of 6.35 million tons of 4.4% copper. The Supergene Zone will be mined in the next three years of production. The third zone (65m-+450m.) is an underlying primary massive sulphide containing significant copper and high-grade zinc zones with appreciable gold and silver. It has reserves of 9.71 million tonnes of 7.21% zinc and 1.14% copper.

The third zone will be mined from year six to the end of the mine’s life. Bisha’s feasibility study estimates a 10-year mine life with metal prices based on US $435/oz gold, US $1.44/lb copper for the first five years (US $1.28/lb thereafter), US $0.57/lb zinc and US $6.50/oz silver. The mine is expected to produce gold at an operating cost of less than US $250/ oz, with copper operating costs ranging from $0.54-$0.67/lb, and zinc operating costs at $0.50/lb (including all royalties and credits).

The construction budget for the project was $260 million but the actual cost was 5% lower than that figure. “We had a good mine construction contractor, a Southern African company called SENET,” Davis said. “Plus the mine was built during a time of low construction costs.” At the peak of construction, in July 2010, about 1,700 people were working on the project.

RECENT EXPLORATION AT BISHA

Recent exploration by Nevsun focused on the Harena deposit, which is one of the other two VMS deposits that have been identified, and lies 9.5 km southwest of the Bisha Main deposit. Harena is contained within Nevsun’s exploration licence, contiguous to the mining licence. In late 2009, 17 infill diamond drill holes were completed to confirm the previously identified discovery. Harena was originally chosen as a potential exploration target based on an alteration anomaly defined from Landsat imagery. A subsequent airborne electromagnetic survey defined a moderate conductor over a limited strike length on what was interpreted as the same stratigraphic horizon as the Bisha Main deposit.

Diamond drilling, in 2005, intersected various widths of oxide and sulphide mineralization over a strike length of 400 metres, which confirmed the presence of a satellite VMS deposit. As a result of the company’s efforts to advance the Bisha Main Zone through feasibility and development, the Harena area was left until late 2009 for further exploration. The company sees the Harena deposit as a likely source of supplemental feed for the processing plant at Bisha, and it will probably provide valuable cash flow as an extension to the life of mine, without requiring startup capital expenses.

Davis says the company intends to have re-stated reserves by end of Q1 2011. “We expect to extend the mine life and to increase reserves substantially,” he said. “The plan is to significantly grow our asset.”

BISHA MINING SHARE COMPANY (BMSC)

The Bisha Project was and is being operated by Bisha Mining Share Company (BMSC), a joint-venture company owned by Eritrea’s National Mining Corp. (ENAMCO) and Canada’s Nevsun Resources Ltd. The Bisha mining licence was granted to BMSC in January 2008. ENAMCO is paying one-third of the cost of the project (in cash) and Nevsun is contributing the other two-thirds (by an issue of equity). ENAMCO owns 40% of the project and Nevsun owns 60%. In addition, Nevsun will receive payments from the Eritrean government related to the latter’s purchase of its share of the project.

BMSC decided, in early 2010, to fund the project by equity instead of debt financing. The company says the move has increased the estimated cash flow by eliminating finance costs and debt repayment. BMSC expects the project will have positive cash flow by Q1 2011. BMSC has entered into metal sales contracts for its future gold and copper production. The prices for all metals will be fixed at spot rates at the time of delivery. Gold will be refined in Switzerland and Canada by two major international companies; the copper concentrate will be shipped to major smelters in Europe and India. Davis called the Bisha Mining Share Company “a model for future mining companies in Eritrea.”

HOW ERITREA BENEFITS

Eritrea benefits in a number of significant ways from the Bisha Project. The country’s largely untrained work force receives employment and training, and the government receives royalties (5% for precious metals, 3.5% for base metals) and income taxes (maximum rate of 38%). Davis says that when the project is running at full capacity, it will employ a total of about 700 workers, the majority of whom will be Eritrean. Between 60 and 70 will be expatriates.

Davis says the Eritrean government has been very supportive of the Bisha Project. “Unlike some other jurisdictions in Africa, there is no government corruption in Eritrea,” he said. “The Bisha Project has received continuous support from the Eritrean government. They see mining as a significant, positive boost for their economy, which has historically been mainly agricultural.”

He says the Bisha Project represents the start of the Eritrean mining industry. “Before we began development, all the details had to be sorted out on how a mining company would work with the Eritrean government,” Davis said. “This was the first mining license to be granted and first environmental impact assessment to be carried out in Eritrea.”

Davis, who has worked with governments in Ghana and Mali, which are well-established mining jurisdictions, says it likely took an extra year and a half to two years to bring the project in Eritrea into development. “We had to sort out the license and a mining agreement with the state, as well as work through a difficult time in capital markets,” he said.

The genesis of the Bisha Project was a letter Nevsun received from a prospector from eastern Canada in 1997. “He told us that Eritrea was the place to be,” Davis said. “He said there were lots of excellent opportunities there that were being overlooked by the rest of the world.” In 1998, Nevsun sent its senior geologist to Eritrea to investigate and in 1999 Nevsun acquired several exploration licenses. In late 2002, the company discovered Bisha.

To bring the project to fruition, Davis said he has made at least 30 trips from Nevsun’s head office in Vancouver to Eritrea, with each trip lasting from a few days to a few weeks. He met regularly with officials from the Eritrean government’s Ministry of Energy and Mines, Ministry of Finance and ENAMCO.

ERITREA BACKGROUNDER

Eritrea became an independent state in 1993, following a 30-year war for liberation that ended in 1991. Since independence, the government of Eritrea has been rehabilitating the economy and improving the Eritreans’ standard of living. The annual growth rate of the economy returned to 7% until it was curtailed by the border dispute with neighboring Ethiopia in May 1998. In the northeast Africa, Eritrea is bounded by Sudan to the west and north, and Ethiopia and Djibouti to the south, with the Red Sea on its east coast. Eritrea covers a land surface area of about 125,000 square km and has a population of about 4 million people.

The country is home to nine ethnic groups, all with a strong sense of national unity. Tigrinya and Tigre are the most widely spoken indigenous languages. English is commonly used in the business community, while Arabic and Italian are also frequently encountered. The topography of Eritrea is exceptionally varied: a long coastal plain; an escarpment, which rises steeply to the central highlands; the low-lying western and southwestern parts of the country; and rugged mountain chains that run from the central plateau to the extreme north of the country.

Eritrea’s infrastructure is centred on a well-developed communications network that links the capital city, Asmara, to other regions of the country, including the two main sea ports of Massawa and Assab, and to neighboring countries. Asmara and Massawa have international airports, which also serve internal flights.

War destroyed much of the infrastructure and its reconstruction has been a high priority of the government. Part of the railway has been rebuilt and it is now functional from Asmara to the port of Massawa. Telecommunications facilities have also been renovated and developed and mobile phones are now widely used in and around the major towns.

ERITREA’S MINERAL POTENTIAL

Eritrea is not well explored and it is widely expected that there are many economic mineral deposits still to be discovered. The country possesses a geological setting that is favourable for both precious and base metal mineralization. Industrial minerals are also found in various locales as well as construction materials, including marble and granite. Recent exploration has shown that gold occurrences are widespread in many parts of the F E B R U A R Y 2 0 11 www.resourceworld.com 63 country. Exploration activity in the last decade has shown the presence of potentially economic gold deposits in the western lowlands and in the northern part of the country.

The average head grades in most of the historic vein gold mines active up to the late 1950s were reported to be as high as 25-45 grams/tonne, with reasonably good recoveries. Eritrea’s gold mineralization is usually hosted in quartz veins and stockworks (a network of veins), and in particular in shear zones associated with felsic volcanic rocks, dioritic intrusions and in schists (a type of metamorphosed rock) that are frequently sub-parallel to the strike of the pronounced cleavage of the host rocks. A major belt of massive sulphide deposits with gold and base-metal mineralization passes through Asmara. It includes, as well as the historically known Debarwa, the newly discovered Adi Nefas, Emba Derho and many other localities. They lie within a roughly 50 km-wide belt over a strike length of 250 km, extending for over 50 km north of Asmara to the Ethiopian border to the south.

With regard to industrial minerals, evaporite sequences outcrop, containing potash, sylvite and gypsum, have been found at Colluli, south of Bada in the Danakil Depression. Substantial deposits of the latter are also found in the Desset area, north-west of Massawa. Large deposits of common salt occur at several places along the Red Sea coast. Considerable quantities of high-quality silica are found at Merbet, already exploited for glass manufacture. In addition, deposits of silica sand with feldspar occur in various wadis.

EXPLORATION AND MINING

Exploration started in liberated Eritrea in 1996. The level of participation by foreign companies has increased significantly following the discovery of the high-grade VMS deposit at Bisha. There are 16 mining and exploration companies operating in Eritrea from Australia, Bermuda, Canada, China, Libya, the United Arab Emirates and the UK.

The companies collectively operate 34 projects. They include some advanced exploration sites (where mineral resources have been established, and, in some cases, where scoping level and feasibility studies are completed) to early-stage prospecting projects (where reconnaissance mapping is being carried out). The total area, covered by exploration and mining activities is approximately 14,000 square km. Exploration during the past 10 years has identified 3 million ounces of gold, 41 million ounces of silver, 1,600 million pounds of copper and 4,200 million pounds of zinc.

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Click on picture

The Northern Miner - 31 January 2011 – Nevsun Resources (nsu-t, nsu-x) has poured its first gold on time and under budget at Bisha, Eritrea’s first modern-day mine, the company reported on Jan. 4.

Ramp up to full commercial production will take place over the course of the first quarter.

The maiden gold pour was part of the plant commissioning process and yielded two doré bars or about 920 oz. gold.

“In the face of difficult capital markets during 2008/2009 and other obstacles overcome in 2010, we are proud of this significant accomplishment,” Cliff Davis, the company’s president, said in a statement.

Nevsun discovered the large precious and base-metal volcanogenic massive sulphide (VMS) deposit in January 2003.

The Main zone is a 1.2-km-long section characterized by precious metal oxides and base metal-rich (copper and zinc) massive sulphides, and the deposit is configured in three distinct layers.

The Oxide zone is a near-surface gold-silver rich bearing oxide with a reserve of 4.02 million tonnes grading 7.99 grams gold per tonne and 33 grams silver per tonne. This zone reaches from surface down to a depth of 35 metres.

The Supergene zone (35 metres to 65 metres) is a copper-enriched massive sulphide horizon that also contains gold and silver. This zone has a reserve of 6.35 million tonnes of 4.4% copper.

The Primary zone (65 metres to 450 metres) is an underlying primary massive sulphide containing copper and high-grade zinc zones with appreciable gold and silver.

The reserve in this zone has been estimated at 9.71 million tonnes of 7.21% zinc plus 1.14% copper. Nevsun anticipates Bisha will produce 1.06 million oz. gold, 734 million lbs. copper, 1 billion lbs. zinc and 9.4 million oz. silver over the course of its 10-year-plus mine life as an open pit.

The mine will be a low-cost gold producer in the first two years of its lifetime and a low-cost, highgrade copper concentrate and zinc producer in the remaining years.

Gold will be produced at an operating cost of less than US$250 per oz., with copper operating costs ranging from US54¢-US67¢ per lb., and zinc operating costs at US50¢ per lb.

Eritrea won independence from Ethiopia in 1993.

At presstime in Toronto, Nevsun was trading at $7.34 per share. Over the last year, it has traded in a range of $1.98-$7.54. The company has 195.92 million shares outstanding.

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Watch the full clip here: BNN: NEVSUN RESOURCES CEO CLIFF DAVIS

[wikichart align="center" ticker="AMEX:NSU" showannotations="true" livequote="true" startdate="30-07-2010" enddate="30-01-2011" width="250" height="160"]

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Nevsun’s President Cliff Davis states, “We are very pleased with the commissioning program to date. As the plant moves into steady state operations, we continue to increase feed grade to the mills as gold recovery is at or above schedule. Thanks to the hard work of the Bisha team, their contractors and the continued support from the State of Eritrea , we are on track to be a mid-tier gold producer by the end of this quarter.”

Bisha Resource and Reserve Expansion Program

The 2011 Resource and Reserve Expansion Program for Bisha is expected to increase mine life and enable throughout expansion. The program includes drilling incremental resources and increasing the classification of existing resources.

“In addition to achieving commercial gold production this quarter, our second major objective for the year is to expand Bisha’s reserves and resources,” states Davis. “Through infill drilling and updated resource models, we expect significant increases to our copper, gold, and zinc reserves, in addition to expanding the total resource base through in-pit, step-out and satellite deposit drilling.”

The program aims to expand resources and reserves in four ways:

• Resource and reserve restatement with recent metals pricing – end Q1 2011
• Drilling satellite deposit Harena – drill results in February 2011; resource statement in end Q1 2011
• Drilling Hangingwall Copper adjacent to Bisha pit – drill results in Q2; resource statement by end of Q4 2011
• Infill drilling deep primary sulphide material under Bisha Main pit – drilling in Q2; resource statement by end of Q4 2011

The first new resource and reserve statement for Bisha is expected late this quarter, incorporating more recent metals pricing and other updated mine plans than the previous 2006 estimates. Later in 2011, subject to drill results, the Company expects a second increase to Bisha’s resource and reserves by including results from the Hangingwall Copper and its infill deep drilling at Bisha Main.

The Harena drilling program concluded just before the holidays in December 2010, after 2,449m of diamond drilling. Assays are due in February, with the objective of generating an incremental resource statement and applying for a mining license later this year so the oxide gold material can be co-processed with Bisha Main’s ore.

The program to drill the Hangingwall Copper has commenced with two drills mobilizing to site. The program is budgeted for up to 12,000m over three months. After this program, the drills will move to Bisha Main, where deep drilling will commence. The program is budgeted for 14,000m of drilling, to infill drill the Bisha Main pit resources to 450m, with the objective of increasing the classification and quantity of resources.

Forward-Looking Statements: The above contains forward-looking statements concerning development progress, planned exploration and development drilling and potential resource re-statements. Forward-looking statements are frequently, but not always, identified by words such as “expects”, “anticipates”, “believes”, “intends”, “estimates”, “potential”, “possible” and similar expressions, or statements that events, conditions or results “will”, “may”, “could” or “should” occur or be achieved. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those described in the Management Discussion and Analysis of the Company. The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made and the Company assumes no obligation to update such forward-looking statements in the future. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

NEVSUN RESOURCES LTD.

Cliff T. Davis, President & Chief Executive Office

A detailed stock quote on TSX: NSU can be found here.

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2. Bisha Update & Plant Commissioning Targets
3. Nevsun Reports Drill Results from Harena Satellite Deposit in Eritrea
4. Nevsun Increases Mineable Reserves at Bisha by Fourty Percent
5. Nevsun Resources Drilling Results at the Harena VMS Deposit, Eritrea

Shabait – Asmara, 26 January 2011 – Bisha Mining Company today handed its first product of gold to President Isaias Afwerki. Present at the handing ceremony at the State Palace were the Minister of Energy and Mines, and Board members of the Company.

Bisha Mining Company would soon begin selling its products in the world gold market, according to reports. Bisha Mining Company is a share company operating jointly by the Eritrean National Mining Company and NEVSUN.

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Chalice Gold Mines

Minesite, By Alastair Ford - “We’ve done a lot in the last year or so”, says Doug Jones, managing director of Australian-listed Chalice Gold Mines, which is one of the trailblazers in the new mining district of Eritrea. The company is working up the Zara gold project in the centre of the country, a few hundred kilometres north of the famous Bisha mine, which has just been brought into production by Nevsun. And Chalice has been developing Zara at a fair old lick, as Doug is keen to point out.

“In August of 2009 we’d just completed the merger with Sub-Sahara. Then we cleaned it up to get a 100 per cent interest in the project, subject to the government’s option to purchase 30 per cent. Then we got the drilling done, produced a maiden reserve, got all the water drilling and environmental studies done, and then completed a feasibility study in July. We got through a TSX listing and did a couple of capital raisings.”

At times it’s been hard to keep up, such has been the whirlwind of activity produced by the company. But then the Chalice boys are like that. On their frequent visits to London they barely have time to touch the ground and raise a beer glass to their lips before they’re off to their next meeting with existing, or potential investors.

In any case, those same investors must be well satisfied at the moment with progress on Zara. The results of the feasibility study were released in August and showed that at the Koka deposit, the company has a project capable of producing 100,000 ounces per year over a seven year mine life, based on the current resource of 840,000 ounces. The study used a US$900 gold price, and assumed cash costs of US$338 per ounce from a basic open pit. So far so good, and perhaps not surprising that the company’s shares have doubled in the last 12 months or so to the current A$0.70 from a 52-week low of A$032 hit early in 2010. But now’s the time to be moving established gold ounces towards production, especially with costs likely to be so low, and given the complexities and uncertainties in the Australian tax system, it’s perhaps not surprising that local Aussie investors have in recent months favoured African developers over their local home-grown types.

That’s a big turnaround, but it hasn’t done Chalice any harm. Indeed it’s allowed the company to build up enough momentum to get the shares listed on the Toronto exchange too, a development which was ongoing in the final quarter of last year, and which was finally completed in the latter part of November, just in time for the big Mines & Money conference in London, at which Chalice’s had a particularly high profile.

The interest stems not only from the track record of success that’s now building up, but also from the possibilities on the ground at Koka, and at Zara, that still remain. There’s never been much doubt in Doug’s mind, nor indeed that of Chalice’s chairman Tim Goyder, that resources at Koka will go over the million ounce mark in due course. Doug talks of “big exploration upside” without hesitation, and adds that in addition to its existing ground Chalice will pick up further acreage before too long.

It will be helped along the way by a government that is enthusiastic, to say the least, about the potential of Zara and Koka. The government now looks likely to exercise its option to buy into Koka, although at what price remains to be seen. Negotiations are likely to be tough, but Doug is quite clear. “The government want to see this go forward”, he says. “The biggest question is how much they’re going to pay, and when they’re going to pay it”. But both sides have already agreed that if a deal can’t be thrashed out then the matter will be settled by independent arbitration. Whatever happens, with the government on board, the political risk will be much reduced, in what is still seen as a volatile area.

After that it’ll be a question of completing the permitting process, and raising the necessary funding to get Koka into production. Initial costs have been put at around US$122 million, and all options are still on the table. Some nice drilling results from the ongoing programme at Zara would certainly help build up a bit of a tail wind as far as that fundraising is concerned. But first, the negotiators will have to come to an agreement as to the precise terms on which the government will be allowed to participate. It should be an interesting year.

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Nevsun’s Bisha Project is a large precious and base metal-rich volcanogenic massive sulphide (VMS) deposit located 150km west of Asmara, Eritrea, East Africa. Deposit mineralisation consists of gold and silver oxides, in addition to copper and zinc massive sulphides. The first pour at Bisha was part of the plant commissioning process and rendered two dore bars totaling 26 kilograms (approx. 920 ounces).

Nevsun’s President Cliff Davis noted, “… we are on time, under budget, and will considerably further the country’s development with the realisation of Eritrea’s first modern day mine. In the face of difficult capital markets during 2008/2009 and other obstacles overcome in 2010, we are proud of this significant accomplishment. We look forward to substantially growing Bisha in the coming months, in terms of reserves and throughput.”

Nevsun is focused on the rapid completion of the project, which began construction in September 2008. The mine is currently ramping up to full production which should be achieved in the current quarter. It will be a low-cost gold producer for the first two years, and then also a high-grade copper concentrate and zinc producer for the remaining mine life. Bisha’s Feasibility Study estimated an initial 10-year mine life with metal prices very conservatively based on $435/oz gold, $1.44/lb copper for the first 5 years ($1.28/lb thereafter), $0.57/lb zinc and $6.50/oz silver. Metal prices are now very considerably higher than this! Nevsun says that its studies show that it should be able to produce gold at an operating cost of less than $250/oz, with copper operating costs ranging from $0.54-$0.67/lb, and zinc operating costs at $0.50/lb (including all royalties and credits).

The Bisha Mine is expected to produce 1.06 million ounces of gold, 9.4 million ounces of silver, 734 million pounds of copper, and over one billion pounds of zinc over the 10-year mine life on which the feasibility study was based, but there is great potential to expand this further as exploration in its licence areas continues.

In November, Nevsun said that a resource expansion drill programme will test the extent of mineralisation in the hanging wall copper zone, which is immediately west and adjacent to the Bisha Main deposit. The programme will also include infill drilling at Harena, which lies 9km SW of the Bisha Main deposit. If favourable results are achieved, the company reckons that both areas could add significant tonnages to the its reserves, extending mine life and cash flow.

Nevsun plans at least 8,000m of diamond drilling, which is now under way and will be completed in Q1. After which, results will be assessed and, if favourable, resource/reserve estimation will be initiated on Harena while drilling continues on the hanging wall zone.

The company notes that past drilling at Bisha identified appreciable amounts of relatively low-grade copper mineralisation located up to several hundred metres into the hanging wall. Assays included 12.0m of 2.64% Cu, 19.6m of 2.11% Cu, 56.5m of 0.81% Cu and 31.5m of 0.76% Cu. Company geologists have interpreted that this zone may extend for hundreds of meters in a north south direction. Although this mineralisation is lower grade than the Bisha Main, it is potentially economic, which could add incremental value to the project.

The Harena deposit saw considerable drilling in 2005/06 that revealed a third potential VMS near surface deposit on the Bisha licenses, followed up by infill drilling in 2009. Harena is expected to provide a likely source of supplemental feed for Bisha’s processing plant, which could provide valuable cash flow and also prolong mine life.

Overall, Bisha’s mining and exploration licences cover a contiguous area of 110 km2. The Bisha Main and North West zone are both located within the 16.5 km2 mining license. Nevsun, through its Eritrean subsidiary, Bisha Mining Share Company (BMSC), holds the licences.

The State of Eritrea has a free carried 10% interest plus an additional 30% paid participating interest for a total 40% interest in Bisha. The amount to be paid to Nevsun by the State will be determined by an independent valuator and shall be based on the net present value of 30% of the project, as evaluated upon the first shipment of gold from the mine. The payments to Nevsun for the purchased interest shall be, over time, out of Bisha cash distributions.

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1. Nevsun Pours First Gold at Bisha – The Northern Miner
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4. Nevsun Reports Drill Results from Harena Satellite Deposit in Eritrea
5. Nevsun Increases Mineable Reserves at Bisha by Fourty Percent