3)
Looking at the specifics of Nevsun Resources' shareholders, we see that the company has solid analyst coverage. More than 70% of the company is owned by institutions with 14% owned by Blackrock and an additional 12% owned by Vanguard. This shows how major institutional investors believe that Nevsun Resources is an undervalued investment at the present time with significant growth potential.
As of June 30, 2017, Nevsun Resources had 302 million shares outstanding with 310 million fully diluted shares. That comes out to a market cap of $1 billion Canadian dollars, which has since dropped to roughly $600 million USD for the company. Out of this portfolio, the company also has absolutely no debt and $171 million of cash. This significant cash pile shows how the company has the finances to continue operating for years to come.
Nevsun Resources Upside - Nevsun Investor Presentation
Looking at the specific of Nevsun Resources compared to its peers, we can see how the company has 80% upside to reach its top peers. Even to reach the medium, the company has a respectable amount of upside ahead of it. This significant upside means that as the company's announces good for results, it has significant upside to catch up with its peers.
This shows how undervalued Nevsun Resources is as the present time compared to its peers. And on top of this, we can see Nevsun Resources' strong financials with no debt and a strong cash pile to continue operations for years to come, even as it spends money on expanding its Timok Project.
Overall Commodity Markets
Nevsun Resources' incredibly impressive track record, assets, and finances, will all be supported towards future profits, with the recovering commodity markets.
Zinc Production Peak - Nevsun Investor Presentation
Zinc, one of the most significant assets of the company's Bisha Mine, and is anticipated to see demand skyrocketing in the coming years for a variety of projects. However, supply is expected to keep up, even with secondary mine and new projects. The main reason for this is that uncommitted projects have faced increasing amounts of delays decreasing their anticipated supply by almost 50% in the coming years.
We all saw with the mid-2014 oil crash how quickly a slight surplus in production can causes prices to crash. Similarly, a slight deficit can cause prices to skyrocket, and we should be seeing that in the zinc markets in the coming years. That should support a rapid rise in profits which will provide significant income for Nevsun Resources.
This income could be paid out either through the company's dividend or through additional investment in the Timok Project.
Copper Market Supply and Demand - Mining.com
Similarly, copper demand is anticipated to continue growing over the long term, with new mines and highly profitable projects not making up for the demand. Starting in 2019, a deficit will begin to open up which should support a recovery in copper prices. This deficit will require 4-6 million tons of new copper capacity by 2025, capacity that does not exist from current projects.
This deficit will support a rapid rise in copper prices, providing significant income to Nevsun Resources from both its Bisha Mine and from its Timok Project when it comes online. This shows the long term potential that the commodity markets have.
Conclusion
Nevsun Resources has had a difficult time, not only over the past few years, but also since its last earnings announcement. Despite that, the company is still an amazing investment, and my top mining investment choice for the next five years. The company has a strong history of rewarding shareholders, an impressive asset portfolio, and strong financials.
More importantly, all of this comes in the midst of a recovering market. Some of the company's biggest assets, its zinc and copper assets, are expected to see a supply deficit in their markets soon. This supply deficit should support increased prices which should provide even more profits for Nevsun Resources. This combined with the Timok Project coming online should be enormous drivers in Nevsun Resources' earnings in the coming years.
Disclosure: I am/we are long RIO, FCX, NSU.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.