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Message: HRA Journal

Nevsun (NSU-T, Amex; $2.51 on T)
has had the nature of its waiting game
changed by UN sanction. On December 23rd
the UN Security Council voted to sanction the
Eritrean government because of border incursions
into neighboring Djibouti and supply
of arms to dissidents in Somalia. China
choose to abstain from the vote rather than
exercise its veto, which has to be viewed as
a signal that at best it sees no point fighting
this. The sanctions are an embargo against
war materials, enforceable by interdiction of
ships headed for the country, and travel restrictions
on government officials. They are
to be reviewed in three months.
NSU sold down on this announcement, and
we have to view this as at best a major increase
in the Bisha country-risk profile even
though the project should not be directly impacted
for the time being. However, if sanctions
are notched up it may become difficult
for its bankers to allow funding to continue,
especially given the government is one of the
borrowers. Hopefully the government will
see its way to clear to deal with world opinHRA
Journal 12 January 2010
ion, but for now we have to suggest that an
NSU position be brought to a 0 cost base
with profits taking or closing out a position if
needs be. We will continue to follow the
company on a profits taken basis until there
is some better sense of how the government
plans to respond to the sanctions.
http://www.nevsun.com/

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