Nevsun Resources Ltd., (NSU-TSX/AMEX) (“Nevsun”) is pleased to announce that it has arrived at agreement with the Government of the State of Eritrea through the Eritrean National Mining Corporation (“ENAMCO”) regarding the State’s participation in the Bisha Project. This is a precursor to the finalization of discussions regarding a mining agreement for the Bisha Project.

As a very strong signal of support for the Bisha Project, the Government has agreed to purchase at fair value a 30% paid participating interest, to add to its 10% free participating interest provided by the country’s mining legislation, resulting in a total participation of 40% (30% contributing; 10% free carried). ENAMCO will pay the full fair value for its share of the project determined by an independent valuator at the time of Bisha’s first gold shipment.

In late 2006 the Government established ENAMCO for the purpose of holding ownership interests and to promote the development of the mining industry in Eritrea. Over the course of the past number of months Nevsun and ENAMCO have worked together to arrive at a fair and reasonable method for the determination of fair value, based on a reliable and independent process. The first step will see a provisional payment by ENAMCO within three months of this agreement. At the time of Bisha’s first gold shipment an independent professional valuation will be conducted using a discounted cash flow analysis based on the Bisha feasibility study financial model, updated for the market consensus for metal prices, actual capital costs incurred, and applying the then applicable discount rate.

This participation allows both parties to move forward together as partners in the Project and are beneficial to the Project, the Company and the Government of Eritrea in many ways:

• Positive Government support will help expedite all local requirements, reducing risk of disruption
• Early cash contribution by the Government provides the Company with some of its immediate capital funding requirements
• Reduced political risk with the Eritrean Government as a major shareholder
• Government provides proportionate share of capital to build the mine (33.3%) and shares the risk of capital spend (and over-run facilities) for loan financing

With the conclusion of this milestone the Ministry of Energy & Mines has assured Nevsun that the mining license and the underlying Mining Agreement for Bisha will be advanced very promptly. The Company looks forward to the Government’s continued support.

In addition to the project purchase price, the Government will fund its pro-rata 33.3% share of capital expenditure for the Project (33.3% = 30/90ths of contributing interests).

Naturally the future market will have a significant bearing on the final purchase price. The feasibility study demonstrates quite clearly that the Bisha Project is most sensitive to metal prices and is very much less sensitive to capital costs and operating costs. The project is financially robust as a result of low operating costs throughout the mine life.

The following provides a technical summary of the Bisha project and the capital and operating costs estimated in the feasibility study.

The Bisha 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.

The fully diluted proven and probable reserves mined by open pit methods for each ore type are presented below:

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.

In the first two years of production, gold and silver will be extracted together. Production of copper concentrate will begin with a minor amount in Year 2, significant quantities for Years 3 to 5, and smaller quantities in Years 6 to 10. Zinc concentrate production occurs only in Years 6 to 10.