Filed by Avantafile.com - Nevsun Resources Ltd.

EX-99.2 3 exhibit99-2.htm INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2018 Filed by Avantafile.com - Nevsun Resources Ltd. - Exhibit 99.2

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

UNAUDITED—PREPARED BY MANAGEMENT

Nevsun Resources Ltd.
Condensed Consolidated Interim Balance Sheets
Unaudited
(Expressed in thousands of United States dollars)

	Note		June 30, 2018		December 31, 2017

Assets

Current Assets
Cash and cash equivalents	2	$	125,083	$	124,598
Restricted cash	2		2,242		-
Accounts receivable			20,849		29,701
Prepaid expenses and other current assets			4,666		2,305
Inventories	3		88,963		72,261
			241,803		228,865

Non-current assets
Inventories	3		14,926		14,926
Mineral properties, plant and equipment	4		817,273		842,561
			832,199		857,487
Total assets		$	1,074,002	$	1,086,352

Liabilities and equity

Current liabilities
Accounts payable and accrued liabilities		$	71,263	$	62,943
Dividends payable	5		-		3,022
Provision for Lower Zone commitment			112		581
			71,375		66,546

Non-current liabilities
Deferred income taxes			37,582		32,722
Provision for mine closure and reclamation			32,531		33,943
			70,113		66,665
Total liabilities		$	141,488	$	133,211

Equity
Share capital	5	$	704,087	$	702,822
Share-based payments reserve	5		10,818		10,432
Retained earnings			76,671		90,540

Equity attributable to Nevsun shareholders			791,576		803,794

Non-controlling interest			140,938		149,347
Total equity		$	932,514	$	953,141
Total liabilities and equity		$	1,074,002	$	1,086,352

Contingencies (note 11 )

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

Nevsun Resources Ltd.
Condensed Consolidated Interim Statements of Comprehensive Income
Unaudited
(Expressed in thousands of United States dollars)

			Three months ended June 30,						Six months ended June 30,
	Note		2018			2017 (Restated – note 12)			2018			2017 (Restated – note 12)
Revenues	6	$	76,410		$	66,091		$	183,156		$	137,738
Cost of sales
Operating expenses			(52,139	)		(44,653	)		(107,321	)		(85,210	)
Royalties			(4,959	)		(3,619	)		(10,445	)		(9,922	)
Depreciation and depletion			(21,918	)		(12,980	)		(44,612	)		(25,919	)
Impairment reversal (charges)	4		4,992			(69,735	)		4,992			(69,735	)
Earnings (loss) from mine operations			2,386			(64,896	)		25,770			(53,048	)

Exploration expenses	7		(1,621	)		(15,179	)		(9,777	)		(28,322	)
Administrative expenses			(9,023	)		(5,975	)		(14,454	)		(10,669	)
Finance income			313			406			630			715
Finance costs			(519	)		(486	)		(1,038	)		(972	)
Income (loss) before taxes			(8,464	)		(86,130	)		1,131			(92,296	)

Income tax (expense) recovery			(796	)		1,932			(9,878	)		(1,033	)
Net loss and comprehensive loss		$	(9,260	)	$	(84,198	)	$	(8,747	)	$	(93,329	)

Net income (loss) and comprehensive income (loss) attributable to:
Nevsun shareholders		$	(9,367	)	$	(57,863	)	$	(13,869	)	$	(69,437	)
Non-controlling interest			107			(26,335	)		5,122			(23,892	)
		$	(9,260	)	$	(84,198	)	$	(8,747	)	$	(93,329	)

Loss per share attributable to Nevsun shareholders	5
Basic		$	(0.03	)	$	(0.19	)	$	(0.05	)	$	(0.23	)
Diluted			(0.03	)		(0.19	)		(0.05	)		(0.23	)

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

Nevsun Resources Ltd.
Condensed Consolidated Interim Statements of Cash Flows
Unaudited
(Expressed in thousands of United States dollars)

			Three months ended June 30,						Six months ended June 30,
	Note		2018			2017 (Restated – note 12)			2018			2017 (Restated – note 12)
Operating activities
Net loss		$	(9,260	)	$	(84,198	)	$	(8,747	)	$	(93,329	)
Items not involving the use (receipt) of cash
Depreciation and depletion			21,732			12,987			44,832			25,933
Impairment charges (reversal)	4		(4,992	)		69,735			(4,992	)		69,735
Income tax expense (recovery)			796			(1,932	)		9,878			1,033
Share-based compensation			389			833			603			1,040
Provision for inventory obsolescence			-			352			-			352
Other			171			121			345			286
			8,836			(2,102	)		41,919			5,050
Changes in non-cash operating working capital
Accounts receivable and prepaids			(1,260	)		(2,821	)		10,015			(10,264	)
Inventories			(5,541	)		(3,795	)		(15,271	)		3,052
Accounts payable and accrued liabilities			10,262			15,987			11,855			9,880

Cash generated from operating activities			12,297			7,269			45,518			7,718
Income taxes paid			(8,000	)		-			(8,000	)		(18,794	)

Net cash provided by (used in) operating activities			4,297			7,269			40,518			(11,076	)
Investing activities
Expenditures on mineral properties, plant and equipment			(12,457	)		(4,778	)		(18,433	)		(7,083	)
Change in non-cash working capital related to investing activities			(888	)		4,079			(3,384	)		2,355
Restricted cash held in trust for construction contract	2		(2,242	)		-			(2,242	)		-

Net cash used in investing activities			(15,587	)		(699	)		(24,059	)		(4,728	)
Financing activities
Dividends paid to Nevsun shareholders	5		-			(2,763	)		(2,724	)		(13,325	)
Distribution to non-controlling interest			(14,000	)		(4,000	)		(14,000	)		(4,000	)
Amounts repaid by non-controlling interest, including interest			-			5,000			-			5,000
Issuance of common shares, net of issue costs			750			-			750			245

Net cash used in financing activities			(13,250	)		(1,763	)		(15,974	)		(12,080	)
Increase (decrease) in cash and cash equivalents			(24,540	)		4,807			485			(27,884	)
Cash and cash equivalents, beginning of period			149,623			166,565			124,598			199,256
Cash and cash equivalents, end of period		$	125,083		$	171,372		$	125,083		$	171,372

Supplementary cash flow information (note 2 )

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

Nevsun Resources Ltd.
Condensed Consolidated Interim Statements of Changes in Equity
Unaudited
(Expressed in thousands of United States dollars, except number of shares)

	Number of shares		Share capital		Share-based payments reserve			Retained earnings (Restated – Note 12)			Equity attributable to Nevsun shareholders			Non-controlling interest (Restated – Note 12)			Total equity
December 31, 2016	301,322,891	$	700,133	$	12,775		$	183,465		$	896,373		$	166,086		$	1,062,459

Exercise of stock options	81,333		245		-			-			245			-			245
Transfer to share capital on exercise of stock options	-		107		(107	)		-			-			-			-
Stock options reclassified to cash-settled units	-		-		(1,718	)		1,718			-			-			-
Share-based payments	-		-		1,153			-			1,153			-			1,153
Shares issued as part of dividend reinvestment program	569,978		1,793		-			-			1,793			-			1,793
Loss for the period	-		-		-			(69,437	)		(69,437	)		(23,892	)		(93,329	)
Dividends declared	-		-		-			(6,039	)		(6,039	)		-			(6,039	)
Distribution to non-controlling interest	-		-		-			-			-			(4,000	)		(4,000	)
Spending on Lower Zone commitment	-		-		-			-			-			3,443			3,443
June 30, 2017 (Restated – note 12)	301,974,202	$	702,278	$	12,103		$	109,707		$	824,088		$	141,637		$	965,725
December 31, 2017	302,212,480	$	702,822	$	10,432		$	90,540		$	803,794		$	149,347		$	953,141

Exercise of options	251,335		750		-			-			750			-			750
Transfer to share capital on exercise of stock options	-		217		(217	)		-			-			-			-
Share-based payments	-		-		603			-			603			-			603
Shares issued as part of dividend reinvestment program	109,190		298		-			-			298			-			298
Income (loss) for the period	-		-		-			(13,869	)		(13,869	)		5,122			(8,747	)
Distribution to non-controlling interest	-		-		-			-			-			(14,000	)		(14,000	)
Spending on Lower Zone commitment	-		-		-			-			-			469			469
June 30, 2018	302,573,005	$	704,087	$	10,818		$	76,671		$	791,576		$	140,938		$	932,514

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

Nevsun Resources Ltd.
Notes to Condensed Consolidated Interim Financial Statements
Unaudited
(Expressed in thousands of United States dollars, unless otherwise stated)
Three and six months ended June 30, 2018 and 2017

1.	Reporting entity and basis of presentation

Reporting entity

Nevsun Resources Ltd. (“Nevsun” or “the Company”) is a mid-tier base metals company. The Company is incorporated and domiciled in Canada. These condensed consolidated interim financial statements (“interim financial statements”) of the Company as at and for the three and six months ended June 30, 2018 include the accounts of the Company and its subsidiaries.

The Company’s two principal assets are its ownership interest in the Timok project, a copper-gold development project in Serbia (“Timok Project”), and its 60% owned Bisha Mine in Eritrea (owned via an Eritrean-registered corporation, Bisha Mining Share Company (“BMSC”)). The Company owns a 100% interest in the Upper Zone of the Timok Project and currently owns a 60.4% interest in the Lower Zone of the Timok Project with Freeport-McMoRan Inc. (“Freeport”) owning the remaining interest in the Lower Zone, which represents a non-controlling interest. Nevsun’s 40% partner in the Bisha Mine is the State-owned Eritrean National Mining Corporation (“ENAMCO”), which also represents a non-controlling interest.

Statement of compliance

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performance since the last annual consolidated financial statements as at and for the year ended December 31, 2017.

These interim financial statements were authorized for issue by the Audit Committee of the Company’s Board of Directors on July 25, 2018.

Significant accounting policies

These interim financial statements follow the same accounting policies and methods of application as the Company’s most recent annual financial statements, except as outlined below. Accordingly, they should be read in conjunction with the Company’s most recent annual financial statements.

IFRS 9 – Financial Instruments

Effective January 1, 2018, the Company has adopted IFRS 9 – Financial Instruments. IFRS 9 provides three different measurement categories for non-derivative financial assets – subsequently measured at amortized cost, fair value through profit or loss or fair value through other comprehensive income – while all non-derivative financial liabilities are classified as subsequently measured at amortized cost. The category into which a financial asset is placed and the resultant accounting treatment is largely dependent on the nature of the business of the entity holding the financial asset. All financial instruments are initially recognized at fair value.

The implementation of the new standard has not had a material impact on the measurement of the Company’s reported financial results; however additional disclosures have been provided.

1.	Reporting entity and basis of presentation

Significant accounting policies

IFRS 9 – Financial Instruments (continued)

Under IFRS 9, the Company’s accounting policy for financial instruments is as follows:

Financial assets

The Company initially recognizes financial assets on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability.

The Company classifies all of its financial assets, except trade receivables, as subsequently measured at amortized cost. Trade receivables are derivatives and are measured at fair value through profit or loss (“FVTPL”; see note 1(c)(ii)). All financial assets that do not meet the criteria to be recognized as subsequently measured at amortized cost or subsequently measured at fair value through other comprehensive income are classified as FVTPL.

Financial liabilities

The Company measures all of its financial liabilities as subsequently measured at amortized cost. Financial liabilities are recognized initially at fair value, net of transaction costs incurred and are subsequently measured at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit and loss over the period to maturity using the effective interest method.

ii.

IFRS 15 – Revenue from Contracts with Customers

Effective January 1, 2018, the Company has adopted IFRS 15 – Revenue from Contracts with Customers. The new standard requires a methodology of recognizing revenue in line with the transfer of control of promised goods or services, and allocating revenue to separately identifiable goods or services identified within a contract, based on their relative stand-alone selling price. In order to facilitate this identification and allocation process, the new standard employs a five-step model with prescriptive steps and decision-making criteria.

The implementation of the new standard has not had a material impact on the Company’s reported financial results, however additional disclosures have been provided (see note 6).

1.	Reporting entity and basis of presentation

Significant accounting policies

ii.

IFRS 15 – Revenue from Contracts with Customers (continued)

Under IFRS 15, the Company’s accounting policy is as follows:

Revenue is recognized by the Company when the following conditions have both been met: the Company has the present right to payment for the transferred asset, and the customer has obtained control of the asset. Because sales are completed in the form of executed sales contracts whereby final prices are determined by quoted market prices on a date subsequent to the date of sale, revenue is recorded on a provisional basis based on current market prices on the date control is transferred to the customer. Each period end, prior to final settlement, adjustments are made to the provisional sale price based on movements in quoted forward market prices up to the date of final price determination. This variable pricing adjustment mechanism constitutes a derivative financial instrument and is accounted for at fair value through profit or loss in accordance with IFRS 9 – Financial Instruments, with changes in fair value recorded as an adjustment to revenue. Any variances in the measurements of final metal concentrate weight and/or metal content are also recognized as adjustments to revenue.

Revenue is presented net of treatment and refining charges and penalties. The Company includes proceeds from the sale of by-products in revenue.

iii.

Voluntary change in accounting policy – Exploration and evaluation expenditures

Effective December 31, 2017, the Company implemented a voluntary change in accounting policy with respect to exploration and evaluation expenditures. As such, certain prior period amounts within these interim financial statements have been restated in accordance with the new policy. Refer to note 12 for additional disclosure regarding the effects of change.

Use of judgements and estimates

In preparing these interim financial statements, management has made judgements and estimates that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expense. Actual amounts incurred by the Company may differ from these values.

The significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2017.

Changes in accounting standards

IFRS 16 – Leases

On January 1, 2019, the Company will adopt IFRS 16 – Leases, replacing IAS 17 – Leases. The new standard aims to bring most leases into which a lessee has entered on-balance sheet and provides new guidelines under which a lessee must evaluate and measure a contract that contains a lease. The new standard is likely to result in increases to both the asset and liability positions of lessees, as well as affect the reported depreciation expense and finance costs of these entities in the statement of profit or loss. The Company is currently evaluating the financial impact the new standard will have on its financial results.

2.	Supplemental cash information

		June 30, 2018		December 31, 2017
Cash	$	89,532	$	59,504
Cash equivalents		35,551		65,094
Restricted cash		2,242		-
Total cash	$	127,325	$	124,598

The Company maintains virtually all cash and cash equivalents in USD currency. Cash equivalents consist of short-term deposits that are accessible with 30 days’ notice.

The Company’s restricted cash supports a bank guarantee, expiring October 2018, in connection with a construction contract at the Timok Project.

Supplementary information for the statements of cash flows is as follows:

		Three months ended June 30,						Six months ended June 30,
		2018			2017			2018			2017
Non-cash investing and financing transactions
Shares issued as part of DRIP	$	-		$	256		$	298		$	1,793
Closure and reclamation increase (decrease) in mineral properties, plant and equipment		(2,450	)		2,095			(2,450	)		(805	)
Depreciation added to (relieved from) inventory		(2	)		(1,807	)		1,189			1,943
Depreciation included in inventory impairment charge		-			6,347			-			6,347

3.	Inventories

		June 30, 2018			December 31, 2017
Materials and supplies	$	62,616		$	52,230
Work-in-progress		23,420			20,592
Finished goods – concentrates		17,853			14,365
Total inventories	$	103,889		$	87,187
Less: non-current portion of ore in stockpiles		(14,926	)		(14,926	)
Inventory recorded as a current asset	$	88,963		$	72,261

The non-current portion of ore in stockpiles as at June 31, 2018 and December 31, 2017 consisted of primary ore (zinc-only) of $13,087 and supergene ore of $1,839. Depreciation of $7,559 is included in work-in-progress and finished goods inventories at June 30, 2018 (December 31, 2017 – $6,370).

All inventories are located at the Bisha Mine.

4.	Mineral properties, plant and equipment

The Company’s properties are located in Serbia, Eritrea and Macedonia. The principal property in Serbia is the Brestovac – Metovnica exploration license which hosts the Timok Project. The Company also holds as part of the Timok Project three additional exploration licenses. The Company holds eight additional exploration licenses in the Bor region of Serbia that form the Tilva Joint Venture with Rio Tinto Mining and Exploration Ltd. (“Rio Tinto”). All exploration expenditures on these eight exploration licenses are funded by Rio Tinto. The Company also holds eleven additional 100%-owned exploration licenses in Serbia.

The properties in Eritrea consist of two mining licenses, Bisha and Harena, and two exploration licenses, Tabakin and New Mogoraib. All properties are subject to a mining agreement with the Government of Eritrea. The Bisha mining license was granted in 2008 for an initial period of 20 years and the Harena mining license was granted in 2012 for 10 years. Both licenses can be extended if required. The Tabakin exploration license was granted in 2016 for 10 years before land relinquishment requirements begin. The New Mogoraib license, also granted in 2016, is valid for three years with no relinquishments, followed by two one-year renewals with a 25% annual area reduction after year three.

Properties in Macedonia include one exploration permit and seven pending exploration permits.

Costs classified as mineral properties represent historic acquisition costs and exploration, evaluation and development costs at Bisha and Harena, incurred subsequent to the declaration of the initial reserves on those exploration licenses.

At June 30, 2017, the Company recorded a write down of $10,918 related to equipment and related capital inventory for which there was no longer any useful life. As the result of an extension of the Bisha Mine life announced in June 2018, certain of this equipment and related capital inventory will be refurbished and placed back into use. As a result, $4,992 of the impairment charge was reversed at June 30, 2018.

As at June 30, 2018, the Company had commitments to purchase and unsettled obligations for property, plant and equipment of $1,059 (December 31, 2017 – $1,782).

4.	Mineral properties, plant and equipment (continued)

Six months ended June 30, 2018		Exploration and evaluation		Construction- in-progress			Mineral properties		Plant and equipment			Total
Cost
December 31, 2017	$	548,900	$	8,310		$	36,440	$	512,874		$	1,106,524
Additions		10,307		1,626			32		6,668			18,663
Disposals		-		-			-		(661	)		(661	)
Change in reclamation obligation		-		-			-		(2,450	)		(2,450	)
Reversal of impairment		-		-			-		13,179			13,179
Transfers		-		(9,334	)		-		9,334			-
June 30, 2018	$	559,207	$	602		$	36,472	$	538,944		$	1,135,225
Accumulated depreciation
December 31, 2017	$	-	$	-		$	20,142	$	243,821		$	263,963
Charge for the period		-		-			2,443		44,020			46,463
Disposals		-		-			-		(661	)		(661	)
Reversal of impairment		-		-			-		8,187			8,187
June 30, 2018		-		-			22,585		295,367			317,952
Net book value June 30, 2018	$	559,207	$	602		$	13,887	$	243,577		$	817,273

Six months ended June 30, 2017 (Restated – note 12)		Exploration and evaluation		Construction- in-progress			Mineral properties		Plant and equipment			Total
Cost
December 31, 2016	$	547,331	$	308		$	33,865	$	535,970		$	1,117,474
Additions		438		3,180			887		1,948			6,453
Transfers to inventory		-		-			-		(1,085	)		(1,085	)
Change in reclamation obligation		-		-			-		(805	)		(805	)
Impairment charge		-		-			-		(29,621	)		(29,621	)
June 30, 2017	$	547,769	$	3,488		$	34,752	$	506,407		$	1,092,416
Accumulated depreciation
December 31, 2016	$	-	$	-		$	17,079	$	205,425		$	222,504
Charge for the period		-		-			1,260		22,274			23,534
Impairment charge		-		-			-		(18,703	)		(18,703	)
June 30, 2017		-		-			18,339		208,996			227,335
Net book value June 30, 2017	$	547,769	$	3,488		$	16,413	$	297,411		$	865,081

5.	Share capital and reserves

Stock options

The three months ended June 30, 2018 included $389 (three months ended June 30, 2017 – $835) in share-based payment costs related to stock options, all of which are presented in administrative expenses.

The six months ended June 30, 2018 included $603 (six months ended June 30, 2017 – $1,153) in share-based payment costs related to stock options, all of which are presented in administrative expenses.

	Number of options	Weighted average exercise price (CAD)
Outstanding, December 31, 2017	9,364,433	$	3.47
Granted	520,000		2.92
Exercised	(251,335)		3.89
Forfeited or expired	(2,478,198)		3.76
Outstanding, June 30, 2018	7,154,900	$	3.32

The weighted average share price of the Company on the dates options were exercised during the six months ended June 30, 2018, was CAD $4.43. The weighted average price of options exercisable at the end of the period was CAD $3.77.

Earnings (loss) per share

The calculation of earnings per share is based on the following data:

		Three months ended June 30,						Six months ended June 30,
		2018			2017 (Restated – note 12)			2018			2017 (Restated – note 12)
Net loss attributable to Nevsun shareholders	$	(9,367	)	$	(57,863	)	$	(13,869	)	$	(69,437	)
Effect of dilutive securities		-			-			-			-
Diluted net loss attributable to Nevsun shareholders	$	(9,367	)	$	(57,863	)	$	(13,869	)	$	(69,437	)
Weighted average number of common shares outstanding for the purpose of basic loss per share (000s)		302,377			301,959			302,339			301,959
Dilutive options and stock appreciation rights		-			-			-			-
Weighted average number of common shares outstanding for the purpose of diluted loss per share (000s)		302,377			301,959			302,339			301,959
Loss per share
Basic	$	(0.03	)	$	(0.19	)	$	(0.05	)	$	(0.23	)
Diluted		(0.03	)		(0.19	)		(0.05	)		(0.23	)

5.	Share capital and reserves (continued)

Dividends

The Company announced in January 2018 that it would be suspending declarations of dividends, and as such no dividends were declared by the Company during the six months ended June 30, 2018. During the six months ended June 30, 2017, the Company declared two dividends of $0.01 per share for total declarations of $6,039.

6.	Revenue

		Three months ended June 30,						Six months ended June 30,
		2018			2017			2018			2017
Zinc concentrate sales	$	74,834		$	43,802		$	158,152		$	110,082
Zinc concentrate mark-to-market adjustments		(12,219	)		(4,096	)		(14,871	)		(2,524	)
Zinc concentrate by-product sales		113			210			1,707			7,324
Zinc concentrate treatment charges		(1,234	)		(1,599	)		(2,395	)		(7,582	)
Total revenue from zinc concentrate contracts		61,494			38,317			142,593			107,300
Copper concentrate sales		13,470			19,737			37,509			19,737
Copper concentrate mark-to-market adjustments		(171	)		686			(706	)		686
Copper concentrate by-product sales		3,439			5,864			8,762			5,864
Copper concentrate treatment and refining charges		(1,822	)		(3,303	)		(5,002	)		(3,303	)
Total revenue from copper concentrate contracts		14,916			22,984			40,563			22,984
Other		-			4,790			-			7,454
	$	76,410		$	66,091		$	183,156		$	137,738

Mark-to-market adjustments on sales of zinc and copper concentrates consist of provisional and final pricing adjustments, as well as physical quantity adjustments, made prior to the finalization of the sales contract. Other revenue in 2017 consists of stockpiled gold and silver bearing ore shipped directly to buyers.

The Company’s sales contracts are provisionally priced with provisional pricing periods lasting typically one to four months with provisional pricing adjustments recorded to revenue as market prices vary. The Company’s products are transferred to its customers as at a point in time. As at June 30, 2018, a 10% change to the underlying metals prices would result in a change in revenue and accounts receivable of $9,533, based on the total quantities of metals in sales contracts for which the provisional pricing periods were not yet closed.

7.	Exploration Expense

For the three and six months ended June 30, 2018 and 2017, the Company incurred the following exploration expenses:

		Three months ended June 30,				Six months ended June 30,
		2018		2017 (Restated – note 12)		2018		2017 (Restated – note 12)
BMSC	$	1,239	$	2,852	$	3,231	$	5,562
Timok – Upper Zone		-		6,399		4,620		13,724
Timok – Lower Zone		244		5,781		1,184		8,695
Other properties		138		147		742		341
	$	1,621	$	15,179	$	9,777	$	28,322

8.	Financial instruments

Zinc and copper concentrates sales receivables of $72 and amounts refundable of $10,866 (December 31, 2017 – receivables of $16,556) are carried at fair value as the receivables are derivatives due to the provisional pricing of these sales contracts. The receivables are measured using quoted forward market prices that correspond to the settlement date of the provisional pricing period for the estimated metals contained within the zinc and copper concentrates or direct shipment sales. There were no changes to the method of fair value measurement during the period.

Except for the Company’s zinc and copper concentrate trade receivables, the fair values of the Company’s financial assets and financial liabilities approximate their carrying amounts in the condensed consolidated interim balance sheet.

9.	Segment information

Results of operating segments are reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance.

The Company conducts its business in two principal operating segments: the development project in Europe (Timok Project, plus other assets) and the mining operations in Africa (BMSC). For segmented reporting purposes, the Company’s reportable operating segments are comprised of Europe, Africa, and all other business activities and operating segments that are not reportable (North America).

9.	Segment information (continued)

The principal products of the Company’s mining operations in Africa are zinc and copper concentrates, containing by-products of gold and silver. Cash and cash equivalents of $116,960 are located outside of Africa at June 30, 2018 (December 31, 2017 – $116,099). Information related to the reportable operating segments is as follows:

Total Assets		June 30, 2018		December 31, 2017
Europe	$	530,204	$	501,700
Africa		459,974		472,411
North America		83,824		112,241
Total	$	1,074,002	$	1,086,352
Total liabilities		June 30, 2018		December 31, 2017
Europe	$	3,283	$	6,244
Africa		127,151		117,394
North America		11,054		9,573
Total	$	141,488	$	133,211

		Revenues				Cost of sales				Net income (loss) attributable to Nevsun shareholders
		Three months ended June 30,
		2018		2017		2018		2017 (Restated – note 12)		2018			2017 (Restated – note 12)
Europe	$	-	$	-	$	-	$	-	$	(1,570	)	$	(12,237	)
Africa		76,410		66,091		79,016		61,252		162			(39,500	)
North America		-		-		-		-		(7,959	)		(6,126	)
Total	$	76,410	$	66,091	$	79,016	$	61,252	$	(9,367	)	$	(57,863	)

		Revenues				Cost of sales				Net income (loss) attributable to Nevsun shareholders
		Six months ended June 30,
		2018		2017		2018		2017 (Restated – note 12)		2018			2017 (Restated – note 12)
Europe	$	-	$	-	$	-	$	-	$	(7,156	)	$	(22,975	)
Africa		183,156		137,738		162,378		121,051		7,684			(35,836	)
North America		-		-		-		-		(14,397	)		(10,626	)
Total	$	183,156	$	137,738	$	162,378	$	121,051	$	(13,869	)	$	(69,437	)

10.

Interest in subsidiary

The following table presents the financial position of the Company’s 60% owned subsidiary, Bisha Mining Share Company (“BMSC”), as at June 30, 2018 and December 31, 2017. The information is presented on a 100% basis. As at June 30, 2018, BMSC holds cash and cash equivalents of $35,673 (December 31, 2017 – $22,128).

		June 30, 2018			December 31, 2017
Current assets	$	143,150		$	123,174
Non-current assets		314,074			349,237
Current liabilities		(54,608	)		(50,731	)
Non-current liabilities		(69,796	)		(66,663	)
Net assets	$	332,823		$	355,017
Net assets attributable to non-controlling interest	$	133,130		$	142,008

The following table presents the financial results of BMSC for the three and six months ended June 30, 2018 and 2017, respectively:

		Three months ended June 30,					Six months ended June 30,
		2018		2017 (Restated – note 12)			2018		2017 (Restated – note 12)
Revenues	$	76,410	$	66,091		$	183,156	$	137,738
Net income and comprehensive income		269		(65,834	)		12,806		(59,727	)
Net income and comprehensive income attributable to non-controlling interest		107		(26,335	)		5,122		(23,892	)

The following table presents the summary cash flow information of BMSC for the three and six months ended June 30, 2018 and 2017, respectively:

		Three months ended June 30,						Six months ended June 30,
		2018			2017 (Restated – note 12)			2018			2017 (Restated – note 12)
Net cash provided by operating activities	$	9,911		$	24,815		$	59,453		$	21,612
Net cash used in investing activities		(4,184	)		(3,861	)		(10,908	)		(5,301	)
Net cash used in financing activities		(35,000	)		(10,000	)		(35,000	)		(10,000	)
Increase (decrease) in cash and cash equivalents	$	(29,273	)	$	10,954		$	13,545		$	6,311

10.

Interest in subsidiary (continued)

The following table presents the financial position of the Company’s subsidiary, Rakita Exploration doo (“Rakita”), which holds the Timok Project, as at June 30, 2018 and December 31, 2017. The information is presented on a 100% basis.

		June 30, 2018			December 31, 2017
Current assets	$	12,447		$	2,954
Non-current assets		522,282			510,341
Current liabilities		(3,079	)		(6,487	)
Non-current liabilities		(76,516	)		(51,555	)
Net assets		455,134			455,253
Net assets attributable to non-controlling interest	$	7,808		$	7,339

The following table presents the financial results of Rakita for the three and six months ended June 30, 2018 and 2017, respectively:

		Three months ended June 30,						Six months ended June 30,
		2018			2017 (Restated – note 12)			2018			2017 (Restated – note 12)
Net loss and comprehensive loss	$	(156	)	$	(12,067	)	$	(5,588	)	$	(22,567	)
Net loss and comprehensive loss attributable to non-controlling interest		(65	)		(2,289	)		(469	)		(3,443	)

The following table presents the summary cash flow information of Rakita for the three and six months ended
June 30, 2018 and 2017, respectively.

		Three months ended June 30,						Six months ended June 30,
		2018			2017 (Restated – note 12)			2018			2017 (Restated – note 12)
Net cash used in operating activities	$	(301	)	$	(11,750	)	$	(7,950	)	$	(22,412	)
Net cash used in investing activities		(10,041	)		661			(11,941	)		(1,970	)
Net cash provided by financing activities		15,532			9,200			24,961			20,400
Decrease in cash and cash equivalents	$	5,190		$	(1,889	)	$	5,070		$	(3,982	)

11.

Commitments and contingencies

Legal claims

The Company is involved in various claims, litigation and other matters in the ordinary course and conduct of business. Some of these pending matters will take a number of years to resolve. While it is not possible to determine the ultimate outcome of such actions at this time, and inherent uncertainties exist in predicting such outcomes, it is the Company’s belief that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on its consolidated financial position or results of operations. As a result, no contingent liabilities have been recorded in these interim financial statements.

Contractual dispute with Canaccord

Canaccord Genuity Corp. (“Canaccord”) was an advisor to Reservoir Minerals Inc. (“Reservoir”) in connection with the Company’s transaction (the “Transaction”) to acquire Reservoir and all of its assets, including the Timok Project.

In early April 2016, Canaccord and Reservoir entered into an advisory agreement regarding a potential acquisition of control of Reservoir (the “April Advisory Agreement”). In September 2016, Canaccord filed a Notice of Claim in the British Columbia Supreme Court regarding the fees under the April Advisory Agreement.

The claim was heard in the British Columbia Supreme Court (“the Court”) on January 25 and 26, 2018. On April 27, 2018, the Court released its judgment concluding that the Transaction Fee under the April Advisory Agreement should total CAD$9,942. The decision was subsequently appealed by Canaccord and cross-appealed by Reservoir in May 2018. At June 30, 2018, the Company has accrued an additional CAD$3,896 ($2,959) in administrative expenses, representing the Transaction Fee of CAD$9,942 per the Court’s judgement less fees previously paid to Canaccord of CAD$6,047.

Environmental bond

As at June 30, 2018, the Company has arranged an annually renewable environmental bond for the Bisha Mine for $65,000 (December 31, 2017 – $45,000) at a cost of 1% per annum.

12.

Change in accounting policy

During 2017, the Company conducted a review of its accounting policy with respect to exploration and evaluation expenditures. As a result of this review, management voluntarily changed the accounting policy effective December 31, 2017, and all such expenditures are now expensed until proven and probable mineral reserves have been declared, and the Company believes that further work will add economic value to those reserves. This change was conducted in order to enhance the relevance and reliability of the information available to the users of the Company’s financial statements. The change in accounting policy was made in accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, and was recognized on a full retrospective basis. Further information on this change is provided in the annual consolidated financial statements for the year ended December 31, 2017.

As at June 30, 2017, the following adjustments were recorded to the consolidated balance sheet:

As at June 30, 2017		As previously reported			Adjustment			Restated
Exploration and evaluation	$	627,243		$	(79,474	)	$	547,769
Mineral properties, net book value		35,862			(19,449	)		16,413
Plant and equipment, net book value		296,813			598			297,411
Net decrease in assets					(98,325	)
Deferred income taxes	$	(54,457	)	$	23,875		$	(30,582	)
Net decrease in liabilities					(74,450	)
Non-controlling interest	$	(157,218	)	$	15,581		$	(141,637	)
Net decrease in equity				$	(58,869	)

For the three months ended June 30, 2017, the following adjustments were recorded to the consolidated statement of comprehensive income:

For the three months ended June 30, 2017		As previously reported			Adjustment			Restated
Depreciation and depletion	$	(13,147	)	$	167		$	(12,980	)
Exploration expenses		-			(15,179	)		(15,179	)
Income tax recovery		911			1,021			1,932
Decrease in net income				$	(13,991	)
Net loss and comprehensive loss attributable to:
Nevsun shareholders	$	(44,538	)	$	(13,325	)	$	(57,863	)
Non-controlling interest		(25,669	)		(666	)		(26,335	)
Weighted average shares outstanding (thousands)
Basic		301,959			-			301,959
Diluted		301,959			-			301,959
Loss per share attributable to Nevsun shareholders
Basic	$	(0.15	)	$	(0.04	)	$	(0.19	)
Diluted		(0.15	)		(0.04	)		(0.19	)

12.

Change in accounting policy (continued)

For the six months ended June 30, 2017, the following adjustments were recorded to the consolidated statement of comprehensive income:

For the six months ended June 30, 2017		As previously reported			Adjustment			Restated
Depreciation and depletion	$	(26,252	)	$	333		$	(25,919	)
Exploration expenses		-			(28,322	)		(28,322	)
Income taxes		(3,020	)		1,987			(1,033	)
Decrease in net income				$	(26,002	)
Net loss and comprehensive income loss attributable to:
Nevsun shareholders	$	(44,732	)	$	(24,705	)	$	(69,437	)
Non-controlling interest		(22,595	)		(1,297	)		(23,892	)
Weighted average shares outstanding (thousands)
Basic		301,876			-			301,876
Diluted		301,876			-			301,876
Loss per share attributable to Nevsun shareholders
Basic	$	(0.15	)	$	(0.08	)	$	(0.23	)
Diluted		(0.15	)		(0.08	)		(0.23	)

For the three months ended June 30, 2017, the following adjustments were recorded to the consolidated statement of cash flows:

For the three months ended June 30, 2017		As previously reported			Adjustment			Restated
Net cash provided by operating activities	$	22,448		$	(15,179	)	$	7,269
Net cash used in investing activities		(15,878	)		15,179			(699	)
Net change in cash and cash equivalents				$	-

For the six months ended June 30, 2017, the following adjustments were recorded to the consolidated statement of cash flows:

For the six months ended June 30, 2017		As previously reported			Adjustment			Restated
Net cash provided by (used in) operating activities	$	17,246		$	(28,322	)	$	(11,076	)
Net cash used in investing activities		(33,050	)		28,322			(4,728	)
Net change in cash and cash equivalents				$	-