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nevsun resources analysis 2014

Nevsun Resources Investment Idea Analysis 2014

Nevsun Resources (NYSE:NSU, TSE:NSU) is a small cap mining company headquartered in Canada, but operating in Africa. So what’s the story with NSU? Why is it a stock pick worthy of analysis? And is it good for a trade or investment?

Well, I’m glad you asked.

In the last year or so, NSU has made the transition from a gold miner to a copper miner. And by all accounts, things are going pretty well. For an in-depth update on the fundamental picture, try reading this Nevsun Resources Seeking Alpha Article.

The May 7 2014 NSU conference call is also worth reading.  For example, here’s a compelling excerpt:

“To give you a sense of how well we [NSU] have performed so far this year, I point out that during the first quarter of 2014 alone, our net income and cash flow from operations was greater than all of 2013.

So while there is some political risk for NSU’s operations, they are really starting to ramp up sales. Their dividend yields over 4%. And there are also some other highlights worth mentioning.

For example, the company’s market cap is about $780M, and they have over $400M in working capital (about $1.69/share in cash with no debt). And since the copper production transition is nearing completion, CapEx should could down a lot this year, which will provide a big boost to free cash flow. To get a better picture of NSU’s financial condition you can read NSU’s key stats on Morningstar.

Here’s one more consideration: NSU could benefit if the price of copper does indeed finally start moving higher. Take a look for yourself…

JJC nevsun resources comparison

The price in copper could be starting to trend higher. This would be another tailwind for JJC. (Click to enlarge)

Now let’s look at NSU more specifically. While the stock is still dealing with some overhead supply, it’s gaining momentum over the longer term and looks to be peaking above key resistance. And it’s been gaining steam above the 20 day moving average, while the 50 and 200 day moving averages are turning upwards, which might be a sign momentum is picking up.

nsu daily chart july 2014

NSU has been building a stable base. Will this trend strengthen? (Click to Enlarge).

If you take a closer look, the NSU hourly chart shows some large buyers coming in to support the trend.

nsu hourly chart july 2014

Will buyers keep showing up to support this trend? So far so good. (Click to Enlarge).

For the sake of disclosure, you should know I own a small position in NSU. I’m looking to add more shares on a pullback to the 20 day moving average. And if the operations remain on track I’ll double down on a pullback to 3.50. That’s not investment advice and you should do your own research. But I wanted to share how I’m thinking about this stock idea. Make sense?

Updated:  Since originally drafting this post, NSU has pulled back a little bit, but remains above the upward-sloping 20 day moving average. I am now watching to see how NSU consolidates before adding more to my position. If NSU bases out for a few days above the 20 day moving average and then starts to go higher I may add more. If it pulls back to the 20 day moving average more sharply, I’ll probably buy it once it starts bouncing. Again just sharing my thinking for educational purposes and it’s no endorsement that trading plan is appropriate for you.

And By The Way:  If you’re looking for more information on how to find and analyze your own stock ideas, you can download my free eBook using the form below. You’ll also get weekly tips and tools to help you make more confident stock market decisions. Check it out!