The Eritrean National Mining Corp (Enamco) have agreed to pay...

The Eritrean National Mining Corp (Enamco) have agreed to pay US$253 million for a 30% interest in the Bisha gold mine owned by Nevsun Resources.

The government agreed in 2007 to exercise its right to purchase the stake, to go along with the existing 10% free-carried interest under Eritrean law.

According to an Amec technical report on the mine from March, the determination of net present value was to be based on the 2006 feasibility study financial model, including updates for current metal prices, actual pre-production capital expenditure and a discount rate appropriate for the mine as at first gold shipment.

Nevsun said two independent, international institutions were mutually appointed by the company and Enamco in January this year to conduct the valuation.

It should be noted that the purchase price is not indicative of the fair market value of Bisha but rather the outcome of a price determination process, defined in a 2007 shareholder agreement, based on parameters of the Bisha deposit as it was understood in 2007.

The government's payment will be made with the after tax cash flows generated by the Bisha mine.

I expect this is a similar process successfully completed by Chalice this year.

Gw