After weathering the storm of developing world politics, Nevsun Resources appears to be back on track at one of the world’s most promising new deposits. The company announced earlier this month that they are re-commencing a 20,000-meter drill program at the Bisha property in the northeastern African nation of Eritrea.

Politics of the Absurd

Some readers (and certainly Nevsun investors) will remember the bizarre chain of events that stopped work at Bisha early last September. Namely, just after the company had completed a 195-hole, 30,000-meter in-fill drill program delineating solid-looking VMS mineralization-with grades up to 28.23g/t Au over 19.5 meters, and 4.04% copper over 34.5 meters-they suddenly received an order from the Eritrean Minister of Energy and Mines telling them to cease all mining and exploration activities.

No official reason was given for the about-face in policy, though Casey Research was able to get a high-ranking government official to confirm off the record that it was because the size of the deposit had become apparent to the government, leading it to angle for a bigger piece of the pie. With their biggest asset in doubt, Nevsun’s stock shed nearly half its value, plummeting from above C$4.00 to near C$2.00. The company spent the next four months waiting for word from the Eritrean government about what was going on, a task that only got more difficult when an independent resource estimate drafted from their Bisha numbers showed they were sitting on nearly 23 million Indicated ounces of gold, copper, and zinc, with another 6 million ounces Inferred.

Given these impressive numbers, Nevsun officials were understandably apprehensive when, in early January of this year, they received a letter from the Eritrean government, asking for a meeting. It turned out to be good news: the Energy and Mines Minister invited the company back to work, saying cryptically that “applicable laws had been thoroughly reviewed in order to ensure mutual benefit to the State of Eritrea and its exploration and development partners.” The only concrete change that came out of the review was the government’s decision to raise its maximum-available equity interest in Bisha and other projects from 20% to 30%.

Drills are Turning

After the meeting, Nevsun wasted no time getting its drill rigs back on Bisha: they are already turning on a program focusing on a small amount of further in-fill drilling at the Bisha Main zone, as well as investigating additional targets in the Northwest and Harena areas. Metallurgical work is also planned ahead of a feasibility study to be ready for Q1 2006. Exploratory geophysics will also be run on other parts of the property.

The preliminary numbers on Bisha make it a target well worth paying attention to, though the market is still nervous about the reliability of the Eritrean government as a business partner: Nevsun’s stock made a slight upward move on January 14 when the Eritrean government’s decision was announced, reaching $2.59, but then came off steadily to $2.02 by February 7. Since then it has made another move upward, as high as $2.42 on Feb. 14, but this rise too has stalled, with the price dropping back to $2.30, as of this writing.

The top Eritrean plays seem to be worth further evaluation for inclusion in your portfolio, but there also seems to be no rush to buy at this point. Based on the market action since the resumption of activities, there does seem to be some interest in the properties but there are also clearly some once-burned investors looking for an exit. Selling by that group, in conjunction with overall weakness in the gold markets, may keep the lid on things for a bit longer.