Nevsun dropped from NYSE gold miner index, shares fall

Mon Jun 17, 2013 1:34pm EDT
 
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By Peter N Henderson

TORONTO, June 17 (Reuters) - Canadian miner Nevsun Resources Ltd said on Monday it will be removed from the New York Stock Exchange's Arca Gold Miners Index as output at its Bisha mine in Eritrea switches to copper from gold, sending its shares more than 8 percent lower.

The Vancouver-based company also said its copper production in 2013 could drop by up to 50 percent, while gold output could rise by as much as 38 percent.

With its main revenue stream in transition to copper this year, Nevsun said its shares will be removed from the NYSE Arca index on June 21.

It said that as a result Van Eck Associates, which pegs its gold mining ETF to the Arca index, is required to sell its 7 percent stake the company.

Nevsun shares dropped more than 8 percent early on Monday, but later curbed losses and were down 6 percent at C$3.30 at midday on the Toronto Stock Exchange.

"We believe that most of today's selling pressure is related to an index change," said mining analyst Adam Low of Raymond James Ltd. "Cash flow under the copper production will still be very impressive. The fundamentals of the business haven't changed."

Nevsun's Bisha mine, which is 40 percent owned by the Eritrean government, began gold production in February 2011 and will move to being a primary copper producer this year. While many mines produce both copper and gold, it is unusual to have such a sharp transition.

The company said construction of its copper plant was completed on time and under budget, but it pushed back start-up to focus on processing additional gold from a pyrite sand deposit.

Nevsun now expects to produce 30 million to 50 million pounds of copper this year, down from a previous estimate of 60 million to 80 million, and 110,000 ounces of gold, up from a previous estimate of 80,000 to 90,000 ounces.

"Management had communicated as much in their first-quarter conference call," Low said. "They didn't give their numbers back then but everyone knew this kind of change was coming." (Reporting By Peter N Henderson; Editing by Jeffrey Hodgson; and Peter Galloway)