Exhibit 99.3

**MANAGEMENT’S DISCUSSION & ANALYSIS – ANNUAL FISCAL 2011**

This MD&A was prepared by management and  reviewed and approved by the Board of Directors on March 20, 2012.  The following discussion of performance,  financial condition and future prospects should be read in conjunction with the  audited annual consolidated financial statements of Nevsun Resources Ltd. (the  Company or Nevsun) and notes thereto for the year ended December 31, 2011.  The information provided herein supplements  but does not form part of the financial statements.  This discussion covers the year and the  subsequent period up to the date of issue of this MD&A.  Unless otherwise noted, all dollar amounts  are stated in thousands of United States dollars.  Additional information relating to the Company,  including the Company’s Annual Information Form, which will be filed prior to  March 31, 2012, is available at www.sedar.com.

| **Contents** |
|--------------|

| Business of the Company.                                                       | 2  |
|--------------------------------------------------------------------------------|----|
| 2011 annual  highlights.                                                       | 2  |
| Fourth quarter  highlights.                                                    | 2  |
| Outlook.                                                                       | 2  |
| Highlights of the  Bisha Mine.                                                 | 4  |
| Key financial and  operating information.                                      | 4  |
| Selected annual  financial information.                                        | 6  |
| Review of 2011  annual financial results.                                      | 6  |
| Selected quarterly  financial information.                                     | 7  |
| Valuation and  settlement of sale of Bisha interest to Eritrea Government | 8  |
| Liquidity and  capital resources.                                              | 9  |
| Commitments and  contractual obligations.                                      | 10 |
| Contingencies.                                                                 | 10 |
| Outstanding share  data.                                                       | 10 |
| Non-GAAP measure.                                                              | 10 |
| Use of financial  instruments.                                                 | 11 |
| Critical  accounting estimates.                                                | 11 |
| Disclosure  controls and procedures.                                           | 13 |
| Changes in  internal control over financial reporting.                         | 13 |
| Management’s  report on internal control over financial reporting.       | 14 |
| Adoption of new  accounting standards.                                         | 14 |
| Related party  transactions.                                                   | 15 |
| Risk factors.                                                                  | 15 |
| NYSE Amex  corporate governance.                                               | 22 |
| Cautionary Note  Regarding Preparation of Reserves and Resources.              | 23 |

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2

| **Business of the Company** |
|-----------------------------|

The principal business of Nevsun  Resources Ltd. (Nevsun or the Company) is the operation of the Bisha Mine in Eritrea, located in northeast Africa. The  Company is involved in all aspects of Bisha operations, including  exploration, development, extraction, processing and reclamation.   

The Company’s significant development projects include  the construction of the Bisha Mine copper flotation circuit, the licensing of  the Harena deposit, which lies 9.5 km from Bisha, and exploration of the  Northwest Zone, which is also a satellite deposit to Bisha.

Nevsun is listed for trading on  both the TSX and NYSE Amex LLC stock exchanges under the symbol NSU.

| **2011 annual highlights** |
|----------------------------|

- Gold production of 379,000  ounces. Revenues of $548 million 
- Average realized price per ounce  sold of $1,620 
- Cash cost of $295 per ounce,  inclusive of royalties
- Cash increased to $347 million 
- Strong drill results on the  Bisha hanging wall copper zone and zinc/copper sub-pit mineralization
- Valuation completed for the sale of Bisha interest to the  Eritrean government
- Capital investment recovered in first year of operations
- Declared inaugural dividend of $0.03 per share and a second  semi-annual dividend of $0.05 per share

| **Fourth quarter highlights** |
|-------------------------------|

- Gold production of 101,000 ounces. Revenues of $171 million 
- Average realized price per ounce sold of $1,685 
- Cash cost of $314 per ounce, including royalties

| **Outlook** |
|-------------|

Operations

  The Bisha Mine is in its second year of a two year gold  oxide phase. The Company expects to produce between 190,000 – 210,000 gold  ounces in 2012 from the Bisha Mine and the Harena deposit, for which the  Company has submitted an application for a mining license. Ore from the  Harena deposit, which sits approximately 9.5 km from the Bisha Mine, will be  processed at the Bisha plant. Oxide gold production is expected to conclude  in Q1 2013 and the carbon-in-leach (CIL) plant will be mothballed such that  it can be restarted should more oxide deposits be discovered in the Bisha  vicinity.

While cash costs will increase in 2012 due to decreased  gold production and due to the increased trucking distances involved with  transporting Harena ore, cash costs per ounce are expected to remain less than  industry average.

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3

Exploration and development 

A resource and reserve restatement is planned for late  second quarter or early third quarter 2012. The restatement is expected to  include the results of the 2011 Bisha infill drill and deep drill programs.  The restatement is also expected to include the Hanging wall copper zone and  the Harena deposits, neither of which have been included in previous resource  and reserve statements. In 2012, the Company has planned an 8,000 meter  drill program on the Northwest Zone, a satellite deposit that sits within the  Bisha mining license. Nevsun expects to issue a resource statement on  Northwest Zone late in the year.  

The  Company is continuing with its $100 million copper plant expansion. Copper  production is scheduled for mid-2013.

The remaining Bisha Mine production profile is  as follows.  The Supergene and Primary  production statistics provided below are based on the technical  report titled “Nevsun Resources Limited, Bisha Polymetallic Operation, Eritrea,  Africa NI 43-101 Technical Report” prepared by independent engineers effective  January 1, 2011 and updated March 29, 2011 (the “2011 Technical Report”), and  are subject to the assumptions, qualifications and procedures set out in the  2011 Technical Report.  For a complete  description of such assumptions, qualifications and procedures, reference  should be made to the full text of the 2011 Technical Report which is available  for review on SEDAR under the profile for the Company located at www.sedar.com.

|   |                                                                    | SUPERGENE         | PRIMARY                   |
|--------|-------------------------------------------------------------------------|-------------------|---------------------------|
|   | 2012                                                                    | 2013              | 2014                      | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
|   | CIL                                                                     | COPPER FLOTATION  | COPPER AND ZINC FLOTATION |
| Copper | Remaining gold production to fund    copper plant  expansion  | 538,000,000 lbs   | 283,000,000 lbs           |
| Zinc   |                                                                    | 1,373,000,000 lbs |
| Gold   | 90,000 oz                                                               | 127,000 oz        |
| Silver | 3,370,000 oz                                                            | 6,914,000 oz      |

The chart below contains  forward looking information and is based on management estimates of 100% of  the projected Bisha Project after tax and after project capital year on year  cash flows. The following estimates and assumptions were used to prepare the  cash flows estimate:

-   2012 and 2013 gold production is based on management estimates  of contained metals and mill recoveries; 
- 2013 copper production includes management estimates of the  timing of commissioning and ramp up to commercial copper production; 
- 2014 – 2023 production incorporates the March 2011 reserve  update figures, adjusted by management for differences in timing of  production;
- Cash inflows are based upon metals production at the following  prices: $1600 gold, $3 copper, $1 zinc, and $24 silver;
- Cash production costs are based on actual 2011 cash production  costs, adjusted by management for estimated changes in scope of activities,  inflation factors and other items;
- Copper capital expansion costs are based on engineering reports  prepare by the Company’s contractor 
- capital expansion costs are based on the 2011 Technical  Report; 
- 2012 sustaining capital costs are based on management  estimates; and 
- 2013 –  2023 sustaining capital costs are based on the 2011 Technical Report.

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4

The chart above constitutes forward looking financial cash flow  information and may not be appropriate for other purposes. The chart is  based on assumptions that were reasonable at the time of preparation but are  limited in applicability to the circumstances that existed at that time.

| **Highlights of the Bisha Mine** |
|----------------------------------|

| The Bisha Mine is a gold, copper and zinc deposit that is  projected to have a strong economic return over a remaining twelve year mine  life.  Nevsun is a 60% shareholder in the Bisha project.  The remaining 40%  interest is held by the Eritrean National Mining Corporation (ENAMCO) and is  referred to as the non-controlling interest herein.  Management expects to  extend the mine life. The top layer of the deposit is gold oxide material  lying at surface that allowed an early payback of gold phase capital and will  allow for funding of the copper expansion.  At the end of 2011, one year of  the two year gold oxide phase had been mined and the copper plant expansion  is underway.  The Mine has the full support of the Eritrean Government, whose  senior representatives assist Nevsun in expediting development and  operations. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Key financial and operating  information** |
|----------------------------------------------|

Financial results (10 month  operating period):

| In US $000s (except per  share data) |   | Q4 2011 |   |   | Q3 2011 |   |   | Q2 2011 |   |   | Q1 2011 |   |   | 2011    |   |
|--------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| Revenues                             | $      | 170,868 |   | $      | 186,502 |   | $      | 136,085 |   | $      | 54,315  |   | $      | 547,770 |   |
| Operating income                     |   | 129,254 |   |   | 146,944 |   |   | 101,947 |   |   | 39,638  |   |   | 417,783 |   |
| Net after-tax income                 |   | 78,336  |   |   | 89,200  |   |   | 60,605  |   |   | 21,893  |   |   | 250,034 |   |
| Owners’ earnings per  share    |   | 0.23    |   |   | 0.27    |   |   | 0.18    |   |   | 0.06    |   |   | 0.74    |   |
| Total assets                         | $      | 775,226 |   | $      | 700,769 |   | $      | 480,830 |   | $      | 392,717 |   | $      | 775,226 |   |

The Bisha Mine achieved commercial production in late  February 2011. Q4 was the Company’s third full quarter of production. The  operating income contains results only from February 22, 2011 to December 31,  2011.

During Q2 2011 the Company declared its first  semi-annual dividend of $0.03 per share and paid it in July.   On November 21, 2011 the Company announced  an increased semi-annual dividend of $0.05 per share for shareholders of record  on December 31, 2011 and paid it on January 15, 2012.

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5

Gold production and sales  statistics(1):

|                                |   | Q4 2011 |   |   | Q3 2011 |   |   | Q2 2011 |   |   | Q1 2011 |   |   | 2011      |   |
|-------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|
| Tonnes milled                       |   | 455,000 |   |   | 446,000 |   |   | 444,000 |   |   | 461,000 |   |   | 1,806,000 |   |
| Gold grade (g/t)                    |   | 8.33    |   |   | 8.45    |   |   | 7.27    |   |   | 6.22    |   |   | 7.55      |   |
| Recovery, % of gold                 |   | 88%     |   |   | 89%     |   |   | 89%     |   |   | 88%     |   |   | 88%       |   |
| Gold in doré, ounces  produced |   | 101,000 |   |   | 110,000 |   |   | 93,000  |   |   | 75,000  |   |   | 379,000   |   |
| Gold ounces sold                    |   | 99,800  |   |   | 108,600 |   |   | 88,700  |   |   | 72,800  |   |   | 369,900   |   |
| Gold price realized per  ounce      | $      | 1,685   |   | $      | 1,715   |   | $      | 1,510   |   | $      | 1,405   |   | $      | 1,620     |   |
| Cash cost per ounce sold(2)         | $      | 314     |   | $      | 267     |   | $      | 305     |   | $      | 304     |   | $      | 295       |   |

(1) Q1 gold  production and sales statistics include results from the pre-operating  period, January 1 – February 21, 2011. For accounting purposes, sales from  ounces produced prior to February 22, 2011 are considered pre-production and  capitalized to property, plant and equipment.

(2) Cash  operating cost per ounce sold includes royalties and is a non-GAAP measure;  see pg 10 for more information.

Oxide gold reconciliation 

On February 7, 2012, the Company  announced that, based on actual production data from 2011, it reconciled its  2011 Bisha ore control model with the most recent Bisha resource model and  concluded that the resource estimate used for mine planning over-estimated  gold in portions of the Bisha Main oxide mineralization. Company staff and a  newly appointed independent engineering firm conducted a thorough  investigation of the oxide part of the deposit. 

The new production forecast includes  approximately 1.3 million tonnes at 5.1 grams per tonne gold of the remaining  1.6 million tonnes of Bisha Main oxide. This compares with 2.5 million tonnes  that was previously expected. Accordingly, the ounces to be produced in 2012  are about half of what Nevsun was previously expecting. In context, per the 2011  Technical Report, the change represents a reduction of approximately 4% in  Bisha’s total reserve tonnage, after taking into account that Bisha also has a  proven and probable supergene and primary reserve of 23.7 million tonnes,  including 3.9% copper in 7.4 million tonnes of supergene and 5.4% zinc in 16.3  million tonnes of primary. 

Nevsun now expects to disclose a revised reserve  estimate for the entire Bisha and Harena deposits during the later part of  second quarter of 2012 or early third quarter 2012. The time delay from  previous guidance is due to the rigorous review process that has commenced  using new independent engineers, incorporating actual mine data and data from  the extensive 2011 drilling program.

Exploration and development

In an effort to further expand resources, reserves and  mine life, the Company executed a number of drill programs in 2011 and  continued with drilling. A revised resource and reserve re-statement is  planned for mid-2012. 

Harena: 

Harena lies 9.5 km southwest of the Bisha Main deposit  on an exploration license contiguous to the Bisha Mining license. In  December 2011 the Company applied for a license to mine the deposit. The  Company has a 1,200 metre drilling program planned for Harena in 2012.

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6

Bisha: 

Hanging Wall Copper Zone: The Company announced the  results of the hanging wall copper zone drill program in separate press  releases dated August 31, 2011 and October 27, 2011. The results included 30  metres of 8.55% copper and 37.5 meters of 8.26% copper in the hanging wall  copper zone immediately west of the Bisha Main deposit in two separate drill  holes. A 3,900 metre geotechnical and metallurgical drill program is planned  for the hanging wall copper zone for 2012.  

Sub Pit Mineralization: The Company also announced the  results of a 16,000 meter diamond drill program on the Bisha Main deposit. The  objective of the program was to infill drill the portion of the Bisha Main deposit  below the currently designed pit, classified as an inferred resource, in  order to improve confidence levels of the geology and mineralization with the  goal of upgrading the resources to the indicated category. The results include  a drill hole containing 88 meters of 11.8% zinc and 0.8% copper. The results were positive and have confirmed the grade and  continuity of the Bisha primary zone below the current pit shell design.

Copper phase  development:

The Company continued work on copper phase development  activities during Q4 2011, expending $10 million on terracing, other civils  works and completing detailed design work. Total capital for the copper  plant phase is expected to be approximately $100 million. Ordering of major  components is complete and the copper flotation plant is targeted to be  operational in mid-2013. The Company is taking the same approach to  eliminate price risk on construction as it was successfully able to  accomplish during the build of the gold plant. The same firm, SENET of South  Africa, is the engineering, procurement, and construction management  contractor.

| **Selected annual financial  information** |
|--------------------------------------------|

The following annual financial  information for the years ended December 31, 2011, 2010 and 2009 were  prepared in accordance with International Financial Reporting Standards.

Fiscal Years Ended (audited)

|                                  |   | December  31,   2011 |   |   | December  31,   2010 |   |   | December  31,   2009 |   |
|---------------------------------------|--------|----------------------|--------|--------|----------------------|--------|--------|----------------------|--------|
| Revenues                              | $      | 547,770              |   | $      | -                    |   | $      | -                    |   |
| Net income (loss) for the year        |   | 250,034              |   |   | (17,050              | )      |   | (4,467               | )      |
| Net income (loss) per share - basic   | $      | 0.74                 |   | $      | (0.07                | )      | $      | (0.03                | )      |
| Net income (loss) per share - diluted |   | 0.73                 |   |   | (0.07                | )      |   | (0.03                | )      |
|                                  |   |                 |   |   |                 |   |   |                 |   |
| Total assets                          | $      | 775,226              |   | $      | 356,180              |   | $      | 189,947              |   |
| Total long term financial liabilities | $      | 29,420               |   | $      | 110,777              |   | $      | 57,215               |   |
| Dividends                             | $      | 15,948               |   | $      | -                    |   | $      | -                    |   |

| **Review of 2011 annual financial  results** |   |
|----------------------------------------------|--------|

The following variances  result when comparing operations for year ended December 31, 2011 with the  same period of the prior year (in US $000s, except for realized price per  ounce information). Since the Bisha Mine commenced operations in 2011, there  are no comparative results for revenues, operating expenses, royalties and  depreciation and depletion for the year ended December 31, 2010:

|   | 1. | Revenues:  The Company recorded revenues of $547,770 on sales of 369,900 gold ounces in  2011. The Company benefitted from high gold prices throughout 2011,  achieving a realized price of $1,620 per ounce sold. Revenues were higher  than expected due to a higher than expected realized price per ounce and due to  slightly better than expected gold grades. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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7

|   | 2. | Operating expenses: The Company recorded operating expenses of $76,812.  Operating expenses were in line with expectations. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Royalties:  Royalty expenses of $27,283 were recorded on gold and silver sales for the year.  Royalty expenses were higher than expected due to the higher than expected  realized price per ounce achieved during the year. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | Depreciation  and depletion: Expenses of $25,892 were recorded in 2011. |
|--------|----|-------------------------------------------------------------------------|

|   | 5. | Administrative:  Administrative costs for the year ended December 31, 2011 were $14,471, up $2,238  from 2010. The increase is primarily a result of an increase in non-cash  share-based payments expense by $1,823. Increases in consulting, investor  relations, audit and office costs were offset by lower foreign exchange losses  compared to 2010. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6. | Finance  income: Finance income increased by $1,147 in 2011. In the year ended  December 31, 2011 the Company earned interest of $3,625 on the due from  non-controlling interest balance. There was no comparative balance in the  year ended December 31, 2010. In the year ended December 31, 2011 the  Company disposed of an available-for-sale investment for a gain of $1,166  compared to a gain of $716 in 2010. In the year ended December 31, 2010 the  Company earned royalties of $926 and realized a gain of $2,000 on the sale of  the royalty interest. There was no royalty income in 2011. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7. | Finance  costs: Finance costs for the period ended December 31, 2011 include interest  on advances from non-controlling interest of $1,681 and $509 accretion of  reclamation liability. During 2010, as the Bisha Mine was under development,  interest on advances from non-controlling interest was capitalized. There  was no accretion recorded in 2010. The $8,583 in finance costs in 2010  related principally to the write-off of deferred financing fees. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 8. | For the year  ended December 31, 2011 income attributable to non-controlling interest  increased by $106,703 when compared to the prior year from a loss of $3,734  to income of $102,969. The loss in 2010 resulted from attributing to the  non-controlling interest its share of the write-off of deferred finance fees  and foreign exchange losses whereas the income in 2011 results from  attributing to the non-controlling interest its share of income from the  operation of the Bisha Mine. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Selected quarterly financial information** |
|----------------------------------------------|

Selected consolidated  financial information from continuing operations for the most recent eight  quarters (unaudited) are presented below. Revenue and income (loss) for the  period include both owners’ and non-controlling interest.

| In US $000s (except per  share data)      |   | **2011  4th** | ** ** | ** ** | **2011  3rd** | ** ** | ** ** | **2011  2nd** | ** ** | ** ** | ** ** | **2011  1st** |   |
|-------------------------------------------|--------|---------------|------------|------------|---------------|------------|------------|---------------|------------|------------|------------|---------------|--------|
| Revenues                                  | $      | 170,868       |       | $          | 186,502       |       | $          | 136,085       |       | $          |       | 54,315        |   |
| Net income for the  period                |   | 78,336        |       |       | 89,200        |       |       | 60,605        |       |       |       | 21,893        |   |
| Owners’ earnings per  share basic   |   | 0.23          |       |       | 0.27          |       |       | 0.18          |       |       |       | 0.06          |   |
| Owners’ earnings per  share diluted |   | 0.23          |       |       | 0.27          |       |       | 0.17          |       |       |       | 0.06          |   |

| In US $000s (except per share  data) |   | **2010  4th** | ** ** | ** ** | **2010  3rd** | ** ** | ** ** | **2010  2nd** | ** ** | ** ** | ** ** | **2010  1st** | ** ** |
|--------------------------------------|--------|---------------|------------|------------|---------------|------------|------------|---------------|------------|------------|------------|---------------|------------|
| Revenues                             | $      | -             |       | $          | -             |       | $          | -             |       | $          |       | -             |       |
| Loss for the period                  |   | (1,814        | )          |       | (1,300        | )          |       | (2,434        | )          |       |       | (11,502       | )          |
| Owners’ loss per share  basic  |   | (0.01         | )          |       | (0.01         | )          |       | (0.01         | )          |       |       | (0.04         | )          |
| Owners’ loss per share diluted |   | (0.01         | )          |       | (0.01         | )          |       | (0.01         | )          |       |       | (0.04         | )          |

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8

The following variances result when comparing operations for the three-month period ended December 31, 2011 with the same period of the prior year (in US $000s) except for revenues and operating expenses where the comparison is to Q3 2011.  Since the Bisha Mine commenced operations in 2011, there are no comparative results for revenues, operating expenses, royalties and depreciation and depletion for Q4 2010:  

|   | 1. | Revenues:  The Company recorded revenues of $170,868 in Q4 2011. Revenues decreased from Q3 2011 as a result of lower gold ounces sold and lower realized gold price per ounce. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Operating expenses:  The Company’s Q4 2011 operating expenses of $24,848 are comparable to Q3 2011 operating expenses of $20,939. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Royalties:  The Company incurs a 5% precious metals royalty on gold and silver doré sales.  In Q4 2011 royalty expenses of $8,521 were recorded on gold and silver sales.  As of the date of this MD&A the Company had paid $29,713 in royalties to the State of Eritrea, which includes royalties from the pre-operating period. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | Depreciation and depletion:  In Q4 2011 depreciation and depletion of $8,247 was recorded. |
|--------|----|--------------------------------------------------------------------------------------------|

|   | 5. | Administrative:  Administrative costs in Q4 2011 were $3,425, down from $3,990 in Q4 2010.  The decrease is primarily a result of a decrease in share-based payments in Q4 2011. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 6. | Finance income:  Finance income in Q4 2011 was $2,432, up from $2,175 in Q4 2010.  In Q4 2011 the Company earned interest of $1,266 on the due from non-controlling interest balance.  There was no comparative balance in Q4 2010.  In Q4 2011 the Company sold an available-for-sale investment for a gain of $1,166.  In Q4 2010 the Company earned royalties of $157.  There were no royalties earned in Q4 2011 as the royalty was bought out in Q4 2010 for $2,000. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 7. | Finance costs:  Finance costs in Q4 2011 were $347, which included $166 interest expense and $153 accretion of reclamation liability.  There were no finance costs in Q4 2010. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 8. | Income attributable to non-controlling interest for the quarter was $31,683, an increase of $31,751 from a loss of $68 in Q4 2010.  The non-controlling interest has a 40% share in the Bisha Mine and the increase is due to the Bisha Mine going into commercial production in 2011 and the attribution to the non-controlling interest of its share of income from operation of the Bisha Mine. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Valuation and settlement of sale of Bisha interest to Eritrea Government** |
|------------------------------------------------------------------------------|

In October 2007, the Company entered into an agreement with ENAMCO whereby the State increased its interest in Bisha by 30%, to add to its 10% free carried interest provided by Eritrean mining legislation, resulting in a total participation of 40%. At the time, ENAMCO made a provisional payment of $25,000 and agreed to fund its share of the capital requirements for the development of Bisha.  ENAMCO advanced $74,995 over the course of construction of the Bisha Mine to fund its share of the development. In addition ENAMCO provided a loan of $20,000 to Nevsun to assist the Company in financing its share of development costs. 

Purchase price settlement: 

During August 2011, the Company finalized its arrangements with ENAMCO for the purchase of the 30% participating interest in the Bisha Mine.  After the parties mutually engaged independent expert valuation advice, the parties agreed to a purchase price of $253,500, resulting in a gain to the Company of $242,506.  The gain has been recorded directly to retained earnings as it represents a change in Nevsun’s interest in a subsidiary that did not result in a change in control. 

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9

The resulting amount receivable from  ENAMCO bears interest at 12 month US dollar LIBOR plus 4% and the receivable  and interest shall be collected from cash flow from the Bisha Mine that would  otherwise be distributed to ENAMCO in accordance with its share ownership. The  estimated amount to be collected in the next twelve months is recorded as a  current asset.  Interest of $1,266 has  been recorded in Q4 as finance income.

 Income tax related to the gain on  disposition to ENAMCO is $92,848.  Nevsun  arranged for ENAMCO to take responsibility for the settlement of taxes and,  accordingly, has adopted a net-of-tax presentation on the balance sheet.  

In  October 2011, the Company collected $27,088 of the purchase price receivable  net-of-taxes.  A further $7,000 was  collected in January 2012. 

| **Liquidity and  capital resources** |
|--------------------------------------|

The Company’s cash at December 31,  2011 was $347 million (December 31, 2010 – $50 million). The Company is  confident this cash, along with ongoing cash flows, will be sufficient to meet  its operating and development cash requirements.

During the year ended December 31,  2011 the Company generated $366 million in cash flows from operating  activities (year ended December 31, 2010 – used $6 million). Since the Bisha  Mine commenced operations in 2011, there are no mining operating cash flows  for the comparative periods.

 During Q4 2011 the Company generated $124 million in  cash flows from operating activities (Q4 2010 – $1 million).

The Company used $12 million in investing activities in  the year ended December 31, 2011 (year ended December 31, 2010 – used $130  million). In 2011 the Company received $49 million from sales of gold during  the pre-production period. In 2011 the Company invested $6 million in  exploration work, $34 million in gold phase property, plant and equipment and  $24 million in copper phase property, plant and equipment. In 2010 the  Company invested $1 million in exploration work, and $107 million in gold  phase property, plant and equipment, and $1 million in copper phase property,  plant and equipment, as well as $18 million to buy out a 1.5% net smelter  royalty on the Bisha Mine.  

The Company used $8 million in investing activities in  Q4 2011 (Q4 2010 – used $29 million). The Company spent $10 million on  property, plant and equipment in Q4 2011 compared to $34 million in Q4 2010.  The decrease in cash use resulted from the Bisha Mine being in commercial  production in Q4 2011 whereas it was in development through all of Q4 2010.

The Company used $57 million in its financing activities  in the year ended December 31, 2011 and generated $157 million in the prior  year. For the year ended December 31, 2011, in addition to the repayment of  $75 million in advances from non-controlling interest and $6 million in  interest on those advances, the Company also repaid $3 million in principal  on the loan from non-controlling interest and $1 million in interest related  to that loan. The Company received $7 million (year ended December 31, 2010  - $7 million) in cash flows from the issuance of common shares related to the  exercise of stock options. Additionally, the Company received $27 million in  2011 from the non-controlling interest as partial payment on the sale of 30%  of the Bisha Mine. In the year ended December 31, 2010, in addition to $7  million received from the issuance of common shares related to the exercise  of stock options, the Company raised $111 million in a private placement used  to fund the development of the Bisha Mine. In the year ended December 31,  2010, $40 million was advanced from the non-controlling interest.

During Q4 2011 the Company received $5 million (Q4 2010  – received $3 million) from financing activities. In Q4 2011 the Company  received $27 million from the non-controlling interest as partial payment on  the sale of 30% of the Bisha Mine. In Q4 2011 $17 million (Q4 2010 – $nil)  of advances from non-controlling interest were repaid as well as $6 million  in interest on those advances and proceeds of $1 million (Q4 2010 –  $3million) were received on the issuance of common shares related to  stock option exercises.

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10

| **Commitments and contractual obligations** |
|---------------------------------------------|

As of December 31, 2011 the Company had  the following contractual obligations:

|                                              |   | Total  |   |   | Less than1 year |   |   | 2-3 years |   |   | 4-5 years |   |   | Over 5 years |   |
|---------------------------------------------------|--------|--------|--------|--------|-----------------|--------|--------|-----------|--------|--------|-----------|--------|--------|--------------|--------|
| Purchase commitments and contractual  obligations | $      | 14,891 |   | $      | 14,891          |   | $      | -         |   | $      | -         |   | $      | -            |   |
| Minimum operating lease payments                  |   | 10,370 |   |   | 5,185           |   |   | 5,185     |   |   | -         |   |   | -            |   |
| Total contractual obligations                     | $      | 25,261 |   | $      | 20,076          |   | $      | 5,185     |   | $      | -         |   | $      | -            |   |

The Company also has an environmental  bond to cover remediation liabilities for Bisha in the amount of $2,000,000  at a cost of 1% per annum. 

The Company has not entered into any  specialized financial agreements to minimize its commodity risk, investment  risk or currency risk. There are no off-balance sheet arrangements.

| **Contingencies** |
|-------------------|

A putative class action complaint was filed  against the Company in March 2012 in the United States District Court for the  Southern District of New York, alleging liability under the U.S. federal  securities laws on the basis that certain statements made by the defendants  were materially false and/or misleading, for failure to disclose certain  matters regarding the gold reserves and operations at the Bisha mine. The  complaint seeks unspecified damages, including interest, reasonable costs,  including attorneys’ fees, and such equitable relief as the court may deem proper.  It is not possible at this time to estimate the ultimate outcome of such  action.   The Company believes the  allegations are without merit and will vigorously defend itself.

| **Outstanding share data** |
|----------------------------|

As of March 20, 2012 the Company  had 200,470,415 shares and 8,537,500 options issued and outstanding.  

On March 19, 2012, the Company announced a common share  repurchase program in accordance with the rules of the Toronto Stock  Exchange. The program allows for the purchase of up to 4,009,408 common  shares of the Company, representing approximately 2% of the 200,470,415  common shares issued and outstanding as at March 15, 2012. The purchases may  commence no earlier than March 26, 2012 and may continue until September 26,  2012.

| **Non-GAAP measure** |
|----------------------|

Cash cost per ounce sold is a non-GAAP (Generally  Accepted Accounting Principles) financial measure and includes all costs  absorbed into inventory, as well as royalties and by-product credits, but  excludes depreciation and depletion and share-based payments. It is intended  to provide additional information and does not have any standardized meaning  prescribed by International Financial Reporting Standards (IFRS) and should  not be considered in isolation or as a substitute for measures of performance  prepared in accordance with IFRS. The measure is not necessarily indicative  of operating profit or cash flow from operations as determined under IFRS.  Other companies may calculate cash cost per ounce differently.  

We have defined cash cost per ounce sold below and  reconciled it with the GAAP measures we report.

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11

*Cash cost per ounce  sold:*

|                                                                                                  |   | Q4 2011 |   |   | Q3 2011 |   |   | Q2 2011 |   |   | Q1 2011 |   |   | 2011    |   |
|-------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| Cost of sales (USD 000s)                                                                              | $      | 41,614  |   | $      | 39,558  |   | $      | 34,138  |   | $      | 14,677  |   | $      | 129,987 |   |
| Less silver by-product  sales                                                                         |   | (1,868  | )      |   | (1,125  | )      |   | (1,053  | )      |   | (571    | )      |   | (4,617  | )      |
| Less non-cash items:                                                                                  |   |    |   |   |    |   |   |    |   |   |    |   |   |    |   |
|      Depreciation and  depletion                                             |   | (8,247  | )      |   | (9,343  | )      |   | (5,707  | )      |   | (2,595  | )      |   | (25,892 | )      |
|      Share-based payments                                                    |   | (163    | )      |   | (62     | )      |   | (360    | )      |   | (127    | )      |   | (712    | )      |
| Cash operating costs                                                                                  | $      | 31,336  |   | $      | 29,028  |   | $      | 27,018  |   | $      | 11,384  |   | $      | 98,766  |   |
| Gold ounces sold during  operating period     (February 22, 2011 to December 31, 2011) |   | 99,800  |   |   | 108,600 |   |   | 88,700  |   |   | 37,400  |   |   | 334,500 |   |
| Cash cost per ounce sold                                                                              | $      | 314     |   | $      | 267     |   | $      | 305     |   | $      | 304     |   | $      | 295     |   |

| **Use of financial instruments** |
|----------------------------------|

The principal financial instrument  currently affecting the Company’s financial condition and results of  operations is cash and cash equivalents. To minimize risk, the Company’s  funds are kept in highly liquid instruments managed by independent financial  managers with ultimate oversight by the Company. A high percentage of the  funds are maintained in accounts outside of Africa.   

Loans and receivables, particularly trade receivables,  are with internationally recognized, credit worthy precious metals refiners.  Available-for-sale financial assets are measured at fair value with  unrealized gains and losses recognized in other comprehensive income, except  for other-than-temporary declines that are recorded in income. Foreign  currency exposure is minimized by retaining all but a small portion of cash  in United States dollar denominated instruments. The United States dollar is  the predominant currency within the industry. The Company also contracts for  goods and services mainly in United States currency or currencies pegged to  the United States dollar.

| **Critical accounting estimates** |
|-----------------------------------|

Critical accounting estimates used  in the preparation of the financial statements include the Company’s determination  of the commencement of commercial production, assessment of the Company’s  functional currency, estimate of the provision for  reclamation and closure, review of indicators of impairment, the  determination of impairment charges for long-lived assets and the available-for-sale  investment, determination of mineral reserves, valuation of share-based  payments and deferred income tax asset valuation reserves, classification of  current and non-current portions of due from non-controlling interest and  income taxes payable, which are based on mine cash flows, among others. These  estimates involve considerable judgment and are, or could be, affected by  significant factors that are out of the Company’s control. Actual results  could differ from those estimates.

Prior to reaching operating levels  intended by management, costs incurred are capitalized as part of the costs  of related mining properties and proceeds from mineral sales are offset  against costs capitalized. Depletion of capitalized costs for mining  properties begins when operating levels intended by management have been  reached. Management considers several factors in determining when a mining  property has reached the operating levels intended by management. The results  of operations of the Company during the periods presented in these audited  consolidated financial statements have been impacted by management’s  determination that its Bisha Mine reached the operating levels intended by  management on February 22, 2011.

The functional currency for each of the  Company’s subsidiaries is the currency of the primary economic environment in  which the entity operates. The Company has determined the functional currency  of each entity is the US dollar. Assessment of functional currency involves  certain judgments to determine the primary economic environment and the  Company reconsiders the functional currency of its entities if there is a  change in events and conditions which determined the primary economic  environment.

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12

The Company’s recoverability  evaluation of its property, plant and equipment is based on market conditions  for minerals, underlying mineral resources associated with the assets and future  costs that may be required for ultimate realization through mining operations  or by sale. The Company is in an industry that is exposed to a number of  risks and uncertainties, described below under Risk Factors. Bearing these  risks in mind, the Company has assumed historical world commodity prices will  be achievable, as will costs used in studies for construction and mining  operations. The Company has relied on mineral resource and reserve reports  by independent engineers on the Bisha Property in Eritrea. All of these  assumptions are potentially subject to change, out of the Company’s control  and such changes are not readily determinable. Accordingly, there is always  the potential for a material adjustment to the value assigned to property,  plant and equipment.

Management has determined that  exploration drilling, evaluation, development and related costs incurred  which have been capitalized are economically recoverable. Management uses  several criteria in its assessments of economic recoverability and  probability of future economic benefit including geologic and metallurgic  information, history of conversion of mineral deposits to proven and probable  reserves, scoping and feasibility studies, accessible facilities, existing  permits and life of mine plans.

The Company considers both external and  internal sources of information in assessing whether there are any  indications that property, plant and equipment are impaired. External sources  of information the Company considers include changes in the market, economic  and legal environment in which the Company operates that are not within its  control and affect the recoverable amount of property, plant and equipment.  Internal sources of information the Company considers include the manner in  which property, plant and equipment are being used or are expected to be used  and indications of economic performance of the assets.

In determining the recoverable amounts  of the Company’s property, plant and equipment, the Company’s management  makes estimates of the discounted future after-tax cash flows expected to be  derived from the Company’s mining properties using an appropriate discount  rate. Reductions in metal price forecasts, increases in estimated future  costs of production, increases in estimated future non-expansionary capital  expenditures, reductions in the amount of recoverable reserves, resources,  and exploration potential, and/or adverse current economics can result in a  write-down of the carrying amounts of the Company’s property, plant and  equipment.

The Company has an obligation to reclaim its property after  the minerals have been mined from the site. As a result, the Company has  recorded a liability for the best estimate of the reclamation and closure  costs it expects to incur. The Company has estimated applicable inflation  and discount rates as well as expected reclamation and closure time frames.  To the extent that the estimated reclamation costs change, such changes will  impact future accretion recorded and depreciation.

The factors affecting share-based payments include  estimates of when stock options might be exercised and the stock price  volatility. The timing for exercise of options is out of the Company’s  control and will depend, among other things, upon a variety of factors  including the market value of Company shares and financial objectives of the  holders of the options. The Company has used historical data to determine  volatility in accordance with Black-Scholes modeling, however future  volatility is inherently uncertain and the model has its limitations. While  these estimates can have a material impact on the share-based payments  expense and hence, results of operations, there is no impact on the Company’s  financial condition or liquidity.

In determining the classification of current and  non-current portion of due from non-controlling interest, the Company makes  estimates of the future after-tax cash flows expected to be derived from the  Company’s mining properties. Reductions in metal price  forecasts, increases in estimated future costs of production, increases in  estimated future expansionary and non-expansionary capital expenditures could  result in a change in the classification of the current and non-current  portions of the due from non-controlling interest.

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13

In assessing the probability of  realizing income tax assets recognized, management makes estimates related to  expectations of future taxable income, applicable tax opportunities, expected  timing of reversals of existing temporary differences and the likelihood that  tax positions taken will be sustained upon examination by applicable tax  authorities. In making its assessments, management gives additional weight to  positive and negative evidence that can be objectively verified. Estimates of  future taxable income are based on forecasted cash flows from operations and  the application of existing tax laws in each jurisdiction. Forecasted cash  flows from operations are based on life of mine projections internally  developed and reviewed by management. Weight is attached to tax planning  opportunities that are within the Company’s control, and are feasible and  implementable without significant obstacles. The likelihood that tax  positions taken will be sustained upon examination by applicable tax  authorities is assessed based on individual facts and circumstances of the  relevant tax position evaluated in light of all available evidence. Where  applicable tax laws and regulations are either unclear or subject to ongoing  varying interpretations, it is reasonably possible that changes in these  estimates can occur that materially affect the amounts of income tax assets  recognized. At the end of each reporting period, the Company reassesses  unrecognized income tax assets.

| **Disclosure controls and  procedures** |
|-----------------------------------------|

The Company’s Chief Executive Officer and Chief  Financial Officer are responsible for establishing and maintaining the  Company’s disclosure controls and procedures, as defined in CSA National  Instrument 52-109 and in Rules 13(a) – 15(e) under the Securities and  Exchange Act of 1934, as amended (the Exchange Act), to provide reasonable  assurance that all relevant information is gathered and reported to them on a  timely basis so that the appropriate decisions can be made regarding public  disclosures.  

The Chief Executive Officer and Chief Financial Officer,  after participating with the Company’s management in evaluating the  effectiveness of the Company’s disclosure controls and procedures have  concluded that, as at December 31, 2011, the Company’s disclosure controls  and procedures were effective.

| **Changes in internal control over financial  reporting** |
|-----------------------------------------------------------|

With the  participation of our Chief Executive Officer and our Chief Financial Officer,  management evaluated whether there has been any change in our internal  control over financial reporting during the fiscal year ended December 31,  2011. 

During the year ended December 31, 2011, a new  accounting and financial reporting system was implemented at Bisha Mining  Share Company (BMSC), in which the Company has a 60% interest. In connection  with this system implementation, the Company updated its internal controls  over financial reporting, as necessary, to accommodate modifications to its  business and financial reporting procedures. As at December 31, 2011, BMSC’s  assets constituted approximately 55% of the Company’s total assets.

The Company starting selling dore and recording proceeds  on its sales in 2011. $49 million in proceeds on sales were recorded in the  pre-operating period and $548 million in revenues were recorded during the  operating period. The Company established internal controls over financial  reporting to record, process and report on this new business process.

Other than the system implementation at BMSC and the processing  of revenues, no other changes in internal controls over financial reporting  occurred during the quarter ended December 31, 2011 that have materially  affected or are reasonably likely to materially affect the Company’s internal  control over financial reporting.  

Due to its inherent limitations, internal control over  financial reporting may not prevent or detect material misstatements. Also,  projections of any evaluation of effectiveness to future periods are subject  to the risk that controls may become inadequate because of changes in  conditions, or that the degree of compliance with the policies or procedures  may deteriorate.

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14

| **Management’s report on internal  control over financial reporting** |
|-----------------------------------------------------------------------------|

Our management is responsible for  establishing and maintaining adequate internal control over financial  reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the  Exchange Act.  

Our internal control over financial  reporting includes those policies and procedures that: (1) pertain to the  maintenance of records that, in reasonable detail, accurately and fairly  reflect the transactions and dispositions of our assets; (2) provide  reasonable assurance that transactions are recorded as necessary to permit  preparation of financial statements in accordance with generally accepted  accounting principles, and that our receipts and expenditures are being made  only in accordance with authorizations of our management and directors; and  (3) provide reasonable assurance regarding prevention or timely detection of  unauthorized acquisition, use or disposition of our assets that could have a  material effect on the financial statements.

With the participation of our Chief  Executive Officer and our Chief Financial Officer, management conducted an  evaluation of the effectiveness of our internal control over financial  reporting, as of December 31, 2011, based on the framework set forth in Internal Control-Integrated Framework issued by the  Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based  on its evaluation under this framework, management concluded that our  internal control over financial reporting was effective as of that date.

 KPMG LLP (KPMG), an independent registered public accounting firm, which audited and reported on our consolidated financial statements, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2011.  The attestation report is included with the consolidated financial statements.

| **Adoption of new accounting standards** |
|------------------------------------------|

During the year  ended December 31, 2011, the Company adopted the following accounting  policies:

(a) Revenue  recognition

Revenue from the sale of goods is recognized when  persuasive evidence, usually in the form of an executed sales agreement, or  an arrangement exists, indicating there has been a transfer of risks and  rewards to the customer, no further work or processing is required by the  Company, the quantity and quality of the goods has been determined with  reasonable accuracy, the price is fixed or determinable, and collectability  is reasonably assured. For gold sales this is generally on receipt of a  shipment by a refiner.

(b) Inventories

Inventories are valued at the lower of cost and net  realizable value, on a weighted average cost basis. Average costs are  calculated by reference to the cost levels experienced in the current month  together with those in opening inventory. Cost for raw materials and  supplies is purchase price, and for partly processed and finished goods is  the cost of production. For this purpose the costs of production include:

|   | (i) | fuel, power, labour costs, materials and contractor  expenses which are directly attributable to the extraction and processing of  ore; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | the depreciation of mining properties and property, plant  and equipment used in the extraction and processing of ore; and |
|--------|------|----------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | production overheads. |
|--------|-------|-----------------------|

Work-in-progress inventory includes ore stockpiles and  other partly processed material. Stockpiles represent ore that has been  extracted and is available for further processing. Quantities are assessed  primarily through surveys and assays.

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15

(c) Stripping costs  in the production phase

Where production stripping activity does not result in  inventory produced but does provide improved access to the ore body, the  costs are deferred when the stripping activity meets the following: (1) it is  probable the Company will be the future beneficiary of the stripping  activity; (2) the Company can identify the component of the ore body for  which access has been improved; and (3) the costs relating to the stripping  activity associated with that component can be measured reliably. Deferred  stripping costs are capitalized to property, plant and equipment and are  depreciated on a units of production basis.

(d) Stock  appreciation rights

Stock appreciation rights (SARs) allow the holder to  receive cash or common shares of the Company in the amount of the underlying  value of the associated stock option. When the holder has the option of  settling in cash or shares, the SAR is recorded at the fair value of the debt  component of the SAR while assigning nil value to the equity component.  Changes to the fair value of the liability are recognized in income.   

Where the holder elects to take common shares instead of  cash, the value of the related liability is transferred directly to retained  earnings; where the holder elects to settle SARs in cash instead of common  shares, the value of the related liability is extinguished when the cash is  paid.

| **Related party transactions** |
|--------------------------------|

Except for those transactions with the non-controlling  interest disclosed in this MD&A and in the 2011 annual consolidated  financial statements, there were no material transactions with related  parties during the three and twelve-month periods ended December 31, 2011.

| **Risk factors** |
|------------------|

The operations of the Company are  highly speculative due to the high-risk nature of its business in the mining  industry. The risks below are not the only ones facing the Company.  Additional risks not currently known to the Company, or that the Company  currently deems immaterial, may also impair the Company’s operations. If any  of the following risks actually occur, the Company’s business, financial  condition and operating results could be adversely affected.

**Commodity price risk** The profitability of the Company’s operations will be dependent  upon the market price of mineral and materials commodities. The Company does  not enter into any commodity hedging and accordingly is fully exposed to  price risk. The price of gold and other metals can and has experienced  volatile and significant price movements over short periods of time, and is  affected by numerous factors beyond the control of the Company, including  international economic and political trends, expectations of inflation or  deflation, currency exchange fluctuations (specifically, the U.S. dollar  relative to other currencies), interest rates, global or regional consumption  patterns, speculative activities and increased production due to improved  mining and production methods. The supply of and demand for metals are  affected by various factors, including political events, economic conditions  and production costs, and governmental policies.

Mineral reserve calculations and  life-of-mine plans using significantly lower metal prices could result in  material write-downs of the Company’s investment in mining properties and  increased amortization, reclamation and closure charges. In addition to  adversely affecting the Company’s mineral reserve estimates and its financial  condition, declining commodity prices can impact operations by requiring a  reassessment of the feasibility of a particular project. Such a reassessment  may be the result of a management decision or may be required under financing  arrangements related to a particular project. Even if the project is  ultimately determined to be economically viable, the need to conduct such a  reassessment may cause substantial delays or may interrupt operations until  the reassessment can be completed.  

The Bisha Mine’s power generation plant  and mobile equipment fleet are diesel fueled. As fuel costs are a  significant component of the Company’s operating costs, changes in the price  of diesel could have a significant effect on its operating costs.

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16

**Share price risk** The market price of a publicly traded stock, particularly a  junior resource issuer like the Company, is affected by many variables not  directly related to the success of the Company, including the market for all  junior resource sector shares, the breadth of the public market for the  stock, and the attractiveness of alternative investment. The effect of these  and other factors on the market price of the common shares of the Company on  the exchanges on which the common shares are listed suggests that the share  price will be volatile. In the previous eight quarters, between January 1,  2010 and December 31, 2011 the Company’s shares traded in a range between Cdn  $2.02 and Cdn $7.33.

**Exploration, development and operating  risks** Mining operations generally involve a high  degree of risk. The Company’s operating mine in Eritrea is subject to all  the hazards and risks normally associated with mineral production, including  damage to or destruction of plant and equipment, unexpected geologic  formations, pit collapse, injury or life endangerment, environmental damage,  fire, equipment failure or structural failures, such as retaining walls or  tailings dams, potentially resulting in environmental pollution and  consequent liability. The payment of such liabilities may have a material,  adverse effect on the Company’s financial position.   

The exploration for and development of  mineral deposits involves significant risks, which even a combination of  careful evaluation, experience and knowledge may not eliminate. While the  discovery of an ore body may result in substantial rewards, few properties  that are explored are ultimately developed into producing mines. There is no  certainty that expenditures made by the Company towards the search and  evaluation of mineral deposits will result in discoveries or future  development.  

Major expenses may be required to  locate and establish additional mineral reserves. It is impossible to ensure  that the exploration or development programs planned by Nevsun will result in  additional profitable commercial mining operation. Whether a mineral deposit  will be commercially viable depends on a number of factors, some of which  are: the particular attributes of the deposit, such as size, grade and  proximity to infrastructure; metal prices that are highly cyclical; and government  regulations, including regulations relating to prices, taxes, royalties, land  tenure, land use, importing and exporting of minerals and environmental  protection. The exact effect of these factors cannot be accurately predicted,  but the combination of these factors may result in Nevsun not receiving an  adequate return on invested capital.  

The marketability of natural resources  that may be acquired or discovered by the Company will be affected by  numerous factors beyond its control. These factors include market  fluctuations, the proximity and capacity of natural resource markets and  processing equipment, and government regulations, including regulations  relating to prices, taxes, royalties, land tenure, land use, importing and  exporting of minerals and environmental protection. The exact effect of  these factors cannot be accurately predicted, but the combination of these  factors may result in the Company not receiving an adequate return on  invested capital.

**Putative class action and litigation risk** In March 2012, a putative class action complaint was filed against  the Company and certain of its officers in the United States District Court for  the Southern District of New York.  The  case is captioned Craig F. Piazza v. Nevsun Resources Ltd., Clifford T.  Davis, Peter J. Hardie, and Scott Trebilcock (S.D.N.Y. Case No.  12-cv-1845).  The complaint alleges that  the defendants are liable under the U.S. federal securities laws because  certain statements made by the defendants were materially false and/or  misleading, for failure to disclose certain matters regarding the gold reserves  and operations at the Bisha mine.  The  complaint seeks unspecified damages, including interest, reasonable costs,  including attorneys’ fees, and such equitable relief as the court may deem  proper, but does not state an amount of alleged damages.  The Company believes the allegations in the  complaint are without merit and intends to defend against them vigorously. There  is a risk this lawsuit could result in substantial costs to the Company, divert  management’s attention and resources from the Company’s  operations and negatively affect the Company’s public image and  reputation.  There is no assurance that  similar claims will not be made under Canadian securities laws.

 

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17

**Foreign operation and political risk** The Company conducts operations through foreign subsidiaries with  financial assets in Barbados and mining operations in Eritrea, and  substantially all of its assets are held in such entities. While the Company  believes that the political climate of these countries and strong government  support in Eritrea provide a favourable environment for its operations, there  is no guarantee against any future political or economic instability in these  countries or neighbouring countries which might adversely affect the  Company.

 Political unrest in Egypt, Libya,  Syria, Yemen, Saudi Arabia, Somalia and other countries in the region has had  an impact on investor confidence with companies operating in northern Africa,  including Eritrea, even though no direct effect is evident or anticipated in  the operations at Bisha or communications with the Eritrean government. In  addition, intervention by the international community through organizations  such as the United Nations could affect the political risk of operating in  Eritrea. In December 2009 the United Nations Security Council (UNSC) imposed  sanctions on Eritrea related to an arms embargo, which in itself has had no  direct impact to the Bisha Project, except to cause some uncertainty as to  how UN member states may continue to deal with the country. In December 2011  the UNSC provided additional sanctions guidance to member states. Effects of  the sanctions may include limitations on the transfer of cash or other assets  between the parent corporation and such entities, or among such entities,  which could restrict the Company’s ability to fund its operations efficiently  and to repatriate cash.

Other risks the Company faces in  operating in foreign jurisdictions include terrorism, hostage taking,  military repression, extreme fluctuations in currency exchange rates, high  rates of inflation, labour unrest, the risks of war or civil unrest, expropriation  and nationalization, renegotiation or nullification of existing concessions,  licences, permits and contracts, illegal mining, changes in taxation policies,  restrictions on foreign exchange and repatriation, and changing political  conditions, currency controls and governmental regulations that favour or  require the awarding of contracts to local contractors or require foreign  contractors to employ citizens of, or purchase supplies from, a particular  jurisdiction.  

All or any of these factors,  limitations, or the perception thereof could impede the Company’s  activities, result in the impairment or loss of part or all of the Company’s  interest in the properties, or otherwise have an adverse impact on the  Company’s valuation and stock price.

**Infrastructure risk** Mining, processing and development activities depend, to some  degree, on adequate infrastructure. Reliable roads, bridges, power sources  and water supply are important determinants that affect capital and operating  costs. Unusual or infrequent weather phenomena, sabotage, government or  other interference in the maintenance or provision of such infrastructure  could adversely affect the Company’s operations, financial condition and  results of operations.   

The Company will be dependent upon  adequate port facilities to be developed for the shipping of copper and zinc  concentrates to its future customers. The planned port facilities are  to be developed by the State of Eritrea and, accordingly, risks associated  with availability of adequate port facilities are beyond the control of the  Company. There are no assurances that adequate port facilities will be  developed in time.

**Key executive risk** The Company is to a large degree dependent on the services of key  executives and senior personnel. Due to the relatively small size of the  Company, the loss of these persons or the Company’s inability to attract and  retain executives and personnel with the qualifications necessary to operate  the business successfully may adversely affect its business and future  operations.

**Expatriate and third-party nationals  skills risk** The Company’s Eritrean operations are  the first modern commercial mining operation in that jurisdiction. As a  result, the Company is reliant on attracting and retaining expatriate and  third-party nationals with mining experience to staff key operations and  administration management positions. The Company’s inability to attract and  retain personnel with the skills and experience to manage the operation and  train and develop staff, due to the intense international competition for  such individuals, may adversely affect its business and future operations.

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**Labour risk** The Company is dependent on its workforce to extract and process  minerals, and is therefore sensitive to a labour disruption of the Company's  mining activities. The Company endeavours to maintain good relations with its  workforce in order to minimize the possibility of strikes, lock-outs and  other stoppages at its work sites. Relations between the Company and its  employees may be impacted by changes in labour relations which may be  introduced by, among other things, employee groups, unions, and the relevant  governmental authorities in whose jurisdictions the Company carries on  business.

**Reserve and resource estimate risk** The figures for reserves and resources presented in this document  and contained in the Company’s continuous disclosure documents filed on SEDAR  (www.sedar.com) and EDGAR (www.sec.gov)  are estimates, and no assurance can be given that the anticipated tonnages  and grades will be achieved or, in the case of reserves, that the indicated  level of metallurgical recovery will be realized. Actual reserves may not  conform to geological, metallurgical or other expectations, and the volume  and grade of ore recovered may be below the estimated levels. Market  fluctuations in the price of mineral commodities or increases in the costs to  recover minerals may render the mining of ore reserves uneconomical and  require the Company to take a write-down of the asset or to discontinue  development or production. Moreover, short-term operating factors relating  to the reserves, such as the need for orderly development of the ore body or  the processing of new or different ore grades, may cause a mining operation  to be unprofitable in any particular accounting period.   

There are numerous uncertainties inherent  in estimating quantities of mineral reserves and resources, including many  factors that are beyond the Company’s control. The estimates are based on  various assumptions relating to metal prices and exchange rates during the  expected life of production, mineralization of the area to be mined, the  projected cost of mining, and the results of additional planned development  work. Actual future production rates and amounts, revenues, taxes, operating  expenses, environmental and regulatory compliance expenditures, development  expenditures and recovery rates may vary substantially from those assumed in  the estimates. Any significant change in these assumptions, including  changes that result from variances between projected and actual results,  could result in material downward or upward revision of current estimates.

**Production risk **As is typically the case with the mining industry, no assurances  can be given that future mineral production estimates will be achieved.  Estimates of future production for the Company’s mining operations are  derived from the Company’s mining plans. These estimates and plans are  subject to change. The Company cannot give any assurance that it will  achieve its production estimates. The Company’s failure to achieve its  production estimates could have a material and adverse effect on  the  Company’s future cash flows, results of operations, production cost,  financial condition and prospects. The plans are developed based on, among  other things, mining experience, reserve estimates, assumptions regarding  ground conditions, hydrologic conditions and physical characteristics of ores  (such as hardness and presence or absence of certain metallurgical  characteristics) and estimated rates and costs of production. Actual  production may vary from estimates for a variety of reasons, including risks  and hazards of the types discussed above, and as set out below, including:

- mining dilution;
- accidents;
- equipment failures;
- natural phenomena such as inclement weather  conditions, floods, droughts, rock slides and earthquakes;
- encountering unusual or unexpected geological  conditions;
- changes in power costs and potential power  shortages;
- shortages of principal supplies needed for  operations;
- strikes and other actions by labour; and
- regulatory restrictions imposed by government  agencies. 

Such occurrences could, in addition to  stopping or delaying mineral production, result in damage to mineral  properties, injury or death to persons, damage to the Company’s property or  the property of others, monetary losses and legal liabilities. These factors  may also cause a mineral deposit that has been mined profitably in the past  to become unprofitable. Estimates of production from properties not yet in  production or from operations that 

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are to be expanded are based on similar  factors (including, in some instances, feasibility studies prepared by the  Company’s personnel and outside consultants) but it is possible that actual  operating costs and economic returns will differ significantly from those  currently estimated. It is not unusual in new mining operations or mine  expansion to experience unexpected problems during the startup phase. Delays  often can occur in the commencement of production.

**Need for additional reserves risk **Given that mines have limited lives based on proven and probable  mineral reserves, the Company must continually replace and expand its  reserves at its mines. The life-of-mine estimates included in the Company’s  continuous disclosure documents filed on SEDAR are subject to adjustment. The  Company’s ability to maintain or increase its annual production of gold and  other commodities will be dependent in significant part on its ability to  bring new mines into production and to expand reserves at existing  mines. The Bisha Mine has an estimated 12 year mine life remaining.

**Permitting risk **The Company’s operations are subject to receiving and maintaining  permits from appropriate governmental authorities. The  Company has not yet received the permits to develop and produce minerals from  the Harena deposit. The Company’s 2012 forecast production assumes that such  permits will be obtained and the Harena deposit will contribute to 2012  production. There is no assurance that delays will  not occur in connection with obtaining all necessary renewals of permits for  the existing operations, additional permits for any possible future changes  to operations, or additional permits associated with new legislation. Prior  to any development on any of its properties, the Company must receive permits  from appropriate governmental authorities. There can be no assurance that the  Company will obtain or continue to hold all permits necessary to  develop or continue operating at any particular property. Any  failure to obtain or maintain requisite permits could have a material adverse  effect on the Company and its future production.

**Construction and start-up of new  mines and mine expansion** The success of  construction projects, plant expansions and the start-up of new mines by the  Company is subject to a number of factors including the availability and  performance of engineering and construction contractors, mining contractors,  suppliers and consultants, the receipt of required governmental approvals and  permits in connection with the construction of mining facilities and the  conduct of mining operations, including environmental permits, price  escalation on all components of construction and start-up, the underlying  characteristics, quality and unpredictability of the exact nature of  mineralogy of a deposit and the consequent accurate understanding of dore or  concentrate production, the successful completion and operation of ore passes  and conveyors to move ore and other operational elements. Any delay in the  performance of any one or more of the contractors, suppliers, consultants or other  persons on which the Company is dependent in connection with its construction  activities, a delay in or failure to receive the required governmental  approvals and permits in a timely manner or on reasonable terms, or a delay  in or failure in connection with the completion and successful operation of  the operational elements in connection with new mines could delay or prevent  the construction and start-up of new mines as planned. There can be no  assurance that current or future construction and start-up plans implemented  by the Company will be successful.

**Environmental risk** The Company’s operations are subject to environmental regulations  promulgated by the government of Eritrea. Environmental legislation provides  for restrictions and prohibitions on spills, releases or emissions of various  substances produced in association with certain mining industry operations,  such as seepage from tailings disposal areas that could result in  environmental pollution. A breach of such legislation may result in the  imposition of fines and penalties. Environmental legislation is evolving in  general in a manner that means standards and enforcement, fines and penalties  for non-compliance are becoming more stringent. Environmental assessments  for projects carry a heightened degree of responsibility for companies,  directors, officers and employees. The cost of compliance with changes in  government regulations has the potential to reduce the profitability of  operations. The Company intends to fully comply with all environmental  regulations in the countries in which the Company has operations and comply  with prudent international standards. 

The Company adopted the IFC Social and  Environmental Performance Standards of April 2006 and developed its  management plans accordingly. The plans have been subject to review by the  host country, as well as part of an extensive due diligence by international  bankers who at one time were considered for funding. The social and  environmental plans have been implemented and have subsequently been audited  by an independent third party. Staff training and engagement with local  authorities, as well as significant employment from both local and other  in-country sources are key elements of the Company’s social and environmental  management. Department 

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heads for both Human Resources and Environment are  experienced professionals with a solid understanding of local requirements as  well as IFC Performance Standards. The Company continues to place  significant emphasis on all social and environmental impacts of its  operations.

Environmental hazards may also exist on  the properties on which the Company holds interests that are unknown to the  Company at present and that have been caused previous to the Company  receiving title to the properties.  

Failure to comply with applicable laws,  regulations and permitting requirements may result in enforcement actions,  including orders issued by regulatory or judicial authorities causing  operations to cease or be curtailed, and may include corrective measures  requiring capital expenditures, installation of additional equipment, or remedial  actions. Parties engaged in mining operations, including the Company, may be  required to compensate those suffering loss or damage by reason of the mining  activities and may have civil or criminal fines or penalties imposed for  violations of applicable laws or regulations.  

Amendments to current laws, regulations  and permits governing operations and activities of mining companies, or more  stringent implementation thereof, could have a material adverse impact on the  Company and cause increases in exploration expenses, capital expenditures or  production costs, reduction in levels of production at producing properties,  or abandonment or delays in development of new mining properties.

**Currency risk** At present all of the Company’s activities are carried on outside  of Canada and are subject to risks associated with fluctuations of the rate  of exchange of foreign currencies. The United States dollar (USD) is the  Company’s functional currency, exposing the Company to risk on any  fluctuations of the USD with other currencies to which the Company is  exposed, which are primarily the European euro (EUR), Canadian dollar (CAD),  British pound (GBP) and South African rand (ZAR).

**Funding risk** Historically, the Company has financed its activities through the  sale of equity capital. The sale of metals from Bisha currently provides and  is expected to continue to provide revenue from operations, which the Company  expects will be sufficient to fund its future needs. However, factors which  may impact cash flows include changes in metal prices, taxes, operating  costs, capital expenditures or other unexpected occurrences such as slowdown  or stoppage of operations. Failure to obtain sufficient financing to  continue operations if such needs arise may adversely affect the Company’s  business and financial position. Should the Company require additional  funding for exploration, development, operations, acquisitions or other  activities, there is no assurance that sources of financing will be available  on acceptable terms or at all.

**Counterparty risk** The Company is exposed to various counterparty risks including,  but not limited to: (i) financial institutions that hold the Company’s cash and  cash equivalents; and (ii) companies that have payables to the Company,  including dore customers and non-controlling interest.

**Insurance and uninsured Risks** Although the Company maintains insurance  to protect against certain risks in such amounts as it considers to be reasonable,  its insurance will not cover all the potential risks associated with a mining  company’s operations. Nevsun may also be unable to maintain insurance to  cover these risks at economically feasible premiums. Insurance coverage may  not continue to be available or may not be adequate to cover any resulting  liability.   

Production at the Company’s mine  involves the use of toxic materials. Should toxic materials leak or otherwise  be discharged from the containment system then the Company may become subject  to liability for clean-up work that may not be insured. While the Company  intends to prevent discharges of pollutants into the ground water and the  environment, it may be unsuccessful and may become subject to liability for  hazards that it may not be insured against. Losses from these events may  cause the Company to incur significant costs that could have a material  adverse effect upon its financial performance and results of  operations.

**Land title risk **The acquisition of title to mineral properties is a very detailed  and time-consuming process. Title to, and the area of, mineral concessions  may be disputed. Although the Company believes it has taken reasonable  measures to ensure proper title to its properties, there is no guarantee that  title to any of its properties will not be challenged or impaired. Third  parties may have valid claims underlying portions of the Company’s interests,  including prior unregistered liens, agreements, transfers or claims,  including indigenous land claims, and title may be affected by, among other  things, undetected defects. In addition, the Company may be unable to  operate its properties as permitted or to enforce its rights with  respect to its properties.

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**Competition****risk** The mining industry is intensely competitive in all  of its phases and the Company competes with many companies possessing greater  financial and technical resources than itself. There is intense competition  in the mining industry for mineral rich properties that can be developed and  produced economically, the technical expertise to find, develop, and operate  such properties, the labour to operate the properties, and the capital for  the purpose of funding such properties. Many competitors not only explore  for and minerals, but conduct refining and marketing operations on a global  basis. Such current and future competition may result in the Company being unable  to acquire desired properties.

**Write-downs and impairments risk **Mining and mineral interests are the most significant assets of  the Company and represent capitalized expenditures related to the development  of mining properties and related plant and equipment and the value assigned to  exploration potential on acquisition. The costs associated with mining properties  are separately allocated to exploration potential, reserves and resources and  include acquired interests in production, development and exploration-stage  properties representing the fair value at the time they were acquired. The  values of such mineral properties are primarily driven by the nature and  amount of ore believed to be contained or potentially contained, in  properties to which they relate.  

The Company reviews and evaluates its  mining interests for impairment at least annually or when events or changes  in circumstances indicate that the related carrying amounts may not be  recoverable, which becomes more of a risk in the global economic conditions  that exist currently. An impairment is considered to exist if the total estimated  future undiscounted cash flows are less than the carrying amount of the  assets. An impairment loss is measured and recorded based on discounted  estimated future cash flows. Future cash flows are estimated based on expected  future production, commodity prices, operating costs and capital costs. There  are numerous uncertainties inherent in estimating mineral reserves and  mineral resources. Differences between management’s assumptions and market  conditions could have a material effect in the future on the Company’s financial  position and results of operation.

 In addition, with a weaker global  economy, there is a larger risk surrounding inventory levels. The assumptions  used in the valuation of work-in process inventories by the Company include  estimates of gold contained in the ore stock piles, crushed ore piles,  processing plant circuits, and an assumption of the gold price expected to be  realized when the gold is recovered. If these estimates or assumptions prove  to be inaccurate, the Company could be required to write-down the recorded  value of its work-in-process inventories, which would reduce the  Company’s earnings and working capital.

**Derivatives****risk **In the future the Company may use certain derivatives  products to manage the risks associated with changes in gold prices, silver  prices, interest rates, foreign currency exchange rates and fuel prices. The  use of derivative instruments involves certain inherent risks including,  among other things: (i) credit risk — the risk of default on amounts owing to  the Company by the counterparties with which Company has entered into such  transaction; (ii) market liquidity risk — risk that the Company has entered  into a derivative position that cannot be closed out quickly, by either  liquidating such derivative instrument or by establishing an offsetting  position; and (iii) unrealized mark-to-market risk — the risk that, in  respect of certain derivative products, an adverse change in market prices  for commodities, currencies or interest rates will result in the Company  incurring an unrealized mark-to-market loss in respect of such  derivative products.

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**Acquisitions and integration risk** From time to time, the Company  examines opportunities to acquire additional mining assets and businesses. Any  acquisition that the Company may choose to complete may be of a significant  size, may change the scale of the Company’s business and operations, and may  expose the Company to new geographic, political, operating, financial and  geological risks. The Company’s success in its acquisition activities  depends on its ability to identify suitable acquisition candidates, negotiate  acceptable terms for any such acquisition, and integrate the acquired  operations successfully with those of the Company. 

Any acquisition would be accompanied by  risks. For example, a material ore body may prove to be below expectations;  the Company may have difficulty integrating and assimilating the operations  and personnel of any acquired companies, realizing anticipated synergies and  maximizing the financial and strategic position of the combined enterprise,  and maintaining uniform standards, policies and controls across the  organization; the integration of the acquired business or assets may disrupt  the Company’s ongoing business and its relationships with employees,  customers, suppliers and contractors; and the acquired business or assets may  have unknown liabilities which may be significant. 

In the event that the Company chooses  to raise debt capital to finance any such acquisition, the Company’s leverage  will be increased. If the Company chooses to use equity as consideration for such  acquisition, existing shareholders may suffer dilution. Alternatively, the  Company may choose to finance any such acquisition with its existing  resources. There can be no assurance that the Company would be successful in  overcoming these risks or any other problems encountered in connection  with such acquisitions.

**Governmental regulation risk **The Company’s mineral exploration, development and production activities  are subject to various laws governing prospecting, development, production,  taxes, labour standards and occupational health, mine safety, toxic  substances, environmental protection and preservation, and other matters. No  assurance can be provided that the Company will be successful in its efforts  to comply with all applicable rules and regulations, no assurance can be  given that new rules and regulations will not be enacted or that existing  rules and regulations will not be applied in a manner that could limit or  curtail production or development of the Company’s properties. Amendments to  current laws and regulations governing the operations and activities of the  Company or more stringent implementation thereof could have a material  adverse effect on the Company’s business, financial condition and  results of operations.

**Dividend policy risk T**he Company has established a dividend policy providing for a  dividend yield that is consistent with the yield of comparable companies’  dividend rates and will be reviewed on a periodic basis and assessed in  relation to the growth of the operating cash flows of the Company. 

Payment of any future dividends will be  at the discretion of the Company’s board of directors after taking into  account many factors, including the Company’s operating results, financial  condition, comparability of the dividend yield to peer gold companies  and current and anticipated cash needs. There can be no assurance that the  Company will continue to pay dividends at the current yield or at all.

| **NYSE Amex corporate governance** |
|------------------------------------|

The Company’s common shares are listed  on NYSE Amex LLC (“NYSE Amex”), which was previously the American Stock  Exchange. Section 110 of the NYSE Amex company guide permits NYSE Amex  to consider the laws, customs and practices of foreign issuers in relaxing  certain NYSE Amex listing criteria, and to grant exemptions from NYSE Amex  listing criteria based on these considerations. A company seeking  relief under these provisions is required to provide written certification  from independent local counsel that the non-complying practice is not  prohibited by home country law. A description of the significant ways  in which the Company’s governance practices differ from those followed by  U.S. domestic companies pursuant to NYSE Amex standards is posted on the  Company’s website at http://www.nevsun.com/corporate/governance/nyse-amex/  and a copy of such description is available by written request made to the  Company.

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| **Cautionary Note Regarding  Preparation of Reserves and Resources** |
|----------------------------------------------------------------------|

This Management’s Discussion and  Analysis uses the terms “reserves” and “resources” and derivations thereof.  These terms have the meanings set forth in Canadian National Instrument  43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian  Institute of Mining, Metallurgy and Petroleum’s Classification System (“CIM  Standards”). NI 43-101 and CIM Standards differ significantly from the  requirements of the United States Securities and Exchange Commission (the  “SEC”). Under SEC Industry Guide 7, mineralization may not be classified as a  “reserve” unless the determination has been made that is “part of a mineral  deposit which could be economically and legallyextracted or produced at  the time of the reserve determination”. In addition, the term “resource”,  which does not equate to the term “reserve”, is not recognized by the SEC and  the SEC’s disclosure standards normally do not permit the inclusion of  information concerning resources in documents filed with the SEC, unless such  information is required to be disclosed by the law of the Company’s  jurisdiction of incorporation or of a jurisdiction in which its securities  are traded. Accordingly, information concerning descriptions of mineralization  and resources contained in this Management’s Discussion and Analysis may not  be comparable to information made public by U.S. domestic companies subject  to the reporting and disclosure requirements of the SEC.

*Forward  Looking Statements*

*This report contains forward-looking  statements concerning anticipated developments on the Company’s continuing  operations in Eritrea and in the putative class action lawsuit, the adequacy  of the Company’s financial resources, financial projections, including, but  not limited to, estimates of capital and operating costs, mining activities,  production, grades, processing rates, life of mine, net cash flows, metal  prices, exchange rates, reclamation costs, results of the drill program, the  conversion of mineral properties to reserves and resources and other events  or conditions that may occur in the future. Forward-looking statements are  frequently, but not always, identified by words such as “expects,”  “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible,”  “budget” and similar expressions, or statements that events, conditions or  results “will,” “may,” “could” or “should” occur or be achieved. Information  concerning the interpretation of drill results and mineral resource and  reserve estimates also may be deemed to be forward-looking statements, as  such information constitutes a prediction of what mineralization might be  found to be present if and when a project is actually developed.  Forward-looking statements are statements about the future and are inherently  uncertain, and actual achievements of the Company or other future events or  conditions may differ materially from those reflected in the forward-looking  statements due to a variety of risks, uncertainties and other factors,  including, without limitation, those described in this MD&A .*

*The Company’s forward-looking  statements are based on the beliefs, expectations and opinions of management  on the date the statements are made and the Company assumes no obligation to  update such forward-looking statements in the future, except as required by  law. For the reasons set forth above, investors should not place undue  reliance on forward-looking statements.*

*“Cliff T.Davis”*Cliff T. Davis

President & CEOMarch 20,2012

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