Abstract

Bisha Mining Share Company (BMSC), Eritrea, is a subsidiary of Nevsun Resources of Canada. BMSC completed exploration work in the year 2005, which discovered Volcanogenic Massive Sulphide (VMS) deposit containing commercial quantities of gold, silver, copper and zinc at Bisha. An optimal open pit has been designed for the exploitation of the deposit using MineSight and Surpac software under the given geotechnical and economic parameters. The total tonnage from the optimised pit was 90 161 903t at a stripping ratio of 3.4. A Life of Mine (LOM) schedule carried out in Minesched predicted a mine life of 10 years and defined the transitional periods for the exploitation of gold, silver, copper and zinc deposits. The objective of this paper is to determine the economic viability of the project with its associated risk under the Mining and Mineral Laws of Eritrea. With a capital structure of 100% equity, a discounted cash flow analysis was conducted which resulted in a Net Present Value (NPV) of US$344 553 000 @10% discount rate and an Internal Rate of Return (IRR) of 29.9% which suggest the project to be economically viable. Sensitivity analysis conducted revealed that, the project will continue to be economically viable until the revenue decreases beyond 28.5%. Risk analysis using Monte Carlo simulation indicated a risk of failure of 18%. It is recommended that other financing sources such as long-term loans be exploited to further improve the economics and reduce the financial burden on the investors.

keywords: Mineral project evaluation; Risk analysis; Cash flow analysis; Sensitivity analysis; Monte carlosimulation