Bisha Project Eritrea Update

March 5, 2007

 

BISHA PROJECT ERITREA Update

Nevsun Resources Ltd. (NSU-TSX and AMEX) (“Nevsun”) is pleased to provide an update on steps taken to date to progress the application for a mining license at its Bisha Project in Eritrea. As previously reported, January 17, 2007, the Government of Eritrea has been actively reviewing the Feasibility Study, the Social and Environmental Impact Assessment (SEIA), and the draft Environmental Management Plan for the Bisha project. These documents were prepared on behalf of the Company by AMEC Americas for the purpose of licensing the Bisha Project. The Government of Eritrea engaged an international mining consultancy to complete a due diligence review of these documents, and Nevsun requested Endeavour Financial to arrange a further independent review to be completed on behalf of prospective project financing partners.

Since January 2007 with the two due diligence reviews in progress, the Company has continued constructive discussion with the Government of Eritrea regarding the development of a mining agreement with a view to taking the Bisha Project into production. These discussions are still progressing. In early February H.E. Tesfai Ghebreselassie, the Minister of Energy and Mines of Eritrea, outlined the continuing strong government support for exploration and mine development in Eritrea, including the Bisha Project, in a presentation at the Indaba Conference in Cape Town.

In parallel with the mining agreement discussions, Nevsun is progressing with the selection review for an EPCM (engineering, procurement, construction and management) contractor for the Bisha Project. The Company has also sought competitive quotes for the procurement of the project’s major capital long lead items. The main critical long lead items include the crusher, SAG and ball mills, mill motors and mining fleet. The Company is planning to order the most critical long lead items shortly so as to enhance a timely completion for the overall project. Funding for this procurement and for starting the detailed engineering design component of an EPCM contract for the 2m tonne per year Bisha mining and milling operations was the focus of the private placement financing of October, 2006.

The technical and financial details of the Bisha Project were included in the press release of October 12, 2006 and a Technical Report was filed both on Sedar and on EDGAR in November 2006. News releases can be found on the Company’s web site (www.nevsun.com) as well as on Sedar at www.sedar.com and EDGAR at www.sec.gov/edgar/searchedgar.

A project summary is presented below.

Life of Mine Metal Production - Payable  - 1.06 million oz gold

                                                                        - 747 million lb copper

- 1,092 million lb zinc

- 10 million oz silver

Production Schedule     - + 10 years open pit mine modeled at 2 Mt/year of ore production

                                          - years 1 and 2, average 447,000 oz Au per year

                                          - years 3 to 5 average 173 million lb Cu per year plus precious metal credits 

                                         - years 6 to 10 average 218 million lb Zn plus 39 million lb Cu per year plus precious metal credits

Bisha is a high grade gold, silver and base metal-rich volcanogenic massive sulphide (VMS) deposit. The feasibility study indicates that the ore can be mined and processed using industry standard technology. The study indicates that the existing road infrastructure in Eritrea will be suitable for the project. Project infrastructure development will require construction of a power plant at the project site and construction of a concentrate storage and loadout facility at the port of Massawa, Eritrea.

The Deposit

The Bisha deposit is configured in three distinct layered zones – a 35m thick surface oxide zone having a high gold and silver content immediately overlying a 30m thick copper enriched supergene zone which itself overlies a primary sulphide zone containing both zinc and copper. Significant byproduct gold and silver are recoverable from both the supergene and primary ores.

Processing

Processing of the three ore types will utilize a common crushing and SAG/ball grinding circuit, but will require three different extraction and processing circuits. After grinding, gold and silver will be extracted from the oxide ore by conventional cyanide leaching and recovered by the carbon in pulp process. Later in the project the supergene and primary ores will be processed by a conventional flotation process to recover copper and zinc as concentrates for direct sale to smelters. The tailing systems will be common for all three ore types.

The feasibility study envisages the mining and processing of each zone in succession starting with the surface oxide zone.  Before the oxide ore is exhausted the copper flotation process equipment will be installed and commissioned so that a smooth transition can be made from oxide ore to the supergene ore treatment.  Similarly, before the supergene ore is exhausted, the additional flotation equipment required to recover the zinc from the primary ore will be installed and commissioned to permit a smooth transition from supergene to primary ore. No interruption to production is anticipated or required when transitioning from one ore type to another.

Opportunities

As with most projects at the feasibility study stage, both risks and opportunities exist. Comments on the risks of the industry can be found below in our forward looking statement. Opportunities that could significantly enhance the project include:

1)       Expansion of mining to an underground operation as the Bisha deposit is open at depth;

2)       Metal prices - at current commodity prices, modeling of the known deposit, including inferred resources, demonstrates a potential additional 8 years mine life as a result of enlarging the pit and going to depth;

3)       Development of additional deposits already identified through exploration (Harena and Northwest Zone);

4)       Additional indicated primary sulphide resources that have not been included in the estimate of reserves have been identified (which mostly lie within the waste envelop of the Bisha open pit). Approximately 4.7 million tonnes of 1.15% copper were identified after the start of the development of the mining study.  The Company has disclosed the above under news release dated January 10, 2006,

5)       A near surface hanging wall copper zone has been discovered at the western margin of the open pit, as defined by drill intersections of 2.11% Cu over 19.6 m and 2.64% Cu over 12.0 m. This zone may have the potential to be added to the resource in the future.

Forward Looking Statements:  The above contains forward looking statements that are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in our forward looking statements.  Factors that could cause such differences include:  changes in world commodity markets, equity markets, costs and supply of materials relevant to the mining industry, extent of resources actually contained in mineral deposits, actual recoveries achieved in processing ore, technological change, weather conditions, change in government and changes to regulations affecting the mining industry.  Forward-looking statements in this release include statements regarding future programs, review completion dates and opportunities. 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.