----

----

****

|   | **NEVSUN RESOURCES LTD.**

Consolidated Financial Statements          Years ended December 31, 2016 and 2015          (Expressed in United States dollars) |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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**MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING**

The accompanying consolidatedfinancial statements of Nevsun Resources Ltd. and other information containedin the Management’s Discussion and Analysis are the responsibility ofmanagement and have been prepared in accordance with International FinancialReporting Standards as issued by the International Accounting Standards Board. Theconsolidated financial statements include amounts that are based onmanagement’s best judgements and estimates.

Management is responsible forestablishing and maintaining a system of internal control over financialreporting. This system is designed to provide management with reasonableassurance that the financial information is accurate, reliable and relevant,and that the Company’s assets are adequately safeguarded.

The Board of Directors, throughthe Audit Committee, approves the consolidated financial statements andManagement’s Discussion and Analysis and is responsible for ensuring thatmanagement fulfills its responsibilities for financial reporting and internalcontrol.  The Audit Committee, consisting of non-executive directors,meets periodically with management, as well as the external auditors, tosatisfy itself that each party is properly discharging its responsibilities.The auditors have full and free access to the Audit Committee, with or withoutmanagement present.

The consolidated financialstatements have been audited by KPMG LLP, Registered Public Accountants. Theirreport outlines the scope of their audit and the opinion rendered.

*“Cliff T. Davis”*Cliff T. DavisChiefExecutive Officer

*“Tom Whelan”*Tom WhelanChiefFinancial Officer

February22, 2017

----

|   | **KPMG LLP      Chartered Professional Accountants**      PO Box 10426 777 Dunsmuir Street      Vancouver BC V7Y 1K3      Canada | Telephone   (604)  691-3000      Fax             (604)  691-3031      Internet       www.kpmg.ca |
|--------|----------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLICACCOUNTING FIRM**

To the Shareholders of Nevsun Resources Ltd. 

 We have audited the accompanying consolidated financial statements of Nevsun Resources Ltd., which comprise the  consolidated balance sheets as  at December 31, 2016 and December 31, 2015, the consolidated statements  of comprehensive income, cash flows and changes in equity for the years then  ended, and notes, comprising a summary of significant accounting policies and other explanatory  information.

*Management's  Responsibility for the Consolidated Financial  Statements*

  Management  is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with  International Financial Reporting Standards as issued by the International  Accounting Standards Board, and for such internal control as management  determines is necessary to enable the preparation of consolidated financial statements that are free from  material misstatement, whether due to fraud or error.

*Auditors’  Responsibility*

  Our  responsibility is to express an opinion on these consolidated financial  statements based on our audits. We conducted our audits in accordance with  Canadian generally accepted auditing standards and the standards of the Public Company  Accounting Oversight Board (United States). Those standards require that we comply  with ethical requirements and plan and perform the audit to obtain reasonable  assurance about whether the consolidated financial statements are free  from material misstatement.

 An audit  involves performing procedures to obtain audit evidence about the amounts and  disclosures in the consolidated financial statements. The  procedures selected depend on our judgment, including the assessment of the  risks of material misstatement of the consolidated financial  statements, whether due to fraud or error. In making those risk assessments, we  consider internal control relevant to the entity's preparation and fair  presentation of the consolidated financial statements in order to  design audit procedures that are appropriate in the circumstances. An audit  also includes evaluating the appropriateness of accounting policies used and  the reasonableness of accounting estimates made by management, as well as  evaluating the overall presentation of the consolidated financial  statements.

 We  believe that the audit evidence we have obtained in our audits is sufficient  and appropriate to provide a basis for our audit opinion.

|   | KPMG LLP is a Canadian  limited liability partnership and a member firm of the KPMG network of  independent member firms affiliated with KPMG International Cooperative (“KPMG  International”), a Swiss entity.KPMG Canada provides  services to KPMG LLP. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Opinion*

 In our opinion, the consolidated  financial statements present fairly, in all material respects, the  consolidated financial position of Nevsun Resources Ltd. as at December 31,  2016 and December 31, 2015, and its consolidated financial performance and its consolidated cash flows for the  years then ended, in accordance with International Financial Reporting  Standards as issued by the International Accounting Standards Board.

*Other Matter*

 We also  have audited, in accordance with the standards of the Public Company Accounting  Oversight Board (United States), the Company’s internal control over financial  reporting as of December 31, 2016, based on the criteria established in Internal Control – Integrated Framework (2013)  issued by the Committee of Sponsoring Organizations of the Treadway Commission  (COSO),  and our report dated February 22, 2017 expressed an unqualified opinion on the  effectiveness of the Company’s internal control over financial reporting.

**//s//   KPMG LLP**

Chartered  Professional Accountants

February  22, 2017  Vancouver, Canada

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|   | **KPMG LLP      Chartered Professional Accountants**      PO Box 10426 777 Dunsmuir Street      Vancouver BC V7Y 1K3      Canada | Telephone   (604)  691-3000      Fax             (604)  691-3031      Internet       www.kpmg.ca |
|--------|----------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**REPORT OF  INDEPENDENT REGISTERED  PUBLIC ACCOUNTING FIRM**

To the  Shareholders of Nevsun Resources Ltd.

 We have audited  Nevsun Resources Ltd.’s (the “Company”) internal control over financial  reporting as of December 31, 2016, based on the criteria established in  Internal Control – Integrated Framework (2013) issued by the Committee of  Sponsoring Organizations of the Treadway Commission (COSO). The Company’s  management is responsible for maintaining effective internal control over  financial reporting and for its assessment of the effectiveness of internal  control over financial reporting, under the heading Changes in Internal Control  over Financial Reporting included in the accompanying Management’s Discussion  and Analysis. Our responsibility is to express an opinion on the Company’s  internal control over financial reporting based on our audit.

 We conducted our  audit in accordance with the standards of the Public Company Accounting  Oversight Board (United States). Those standards require that we plan and  perform the audit to obtain reasonable assurance about whether effective  internal control over financial reporting was maintained in all material  respects. Our audit included obtaining an understanding of internal control  over financial reporting, assessing the risk that a material weakness exists,  and testing and evaluating the design and operating effectiveness of internal  control based on the assessed risk. Our audit also included performing such  other procedures as we considered necessary in the circumstances. We believe  that our audit provides a reasonable basis for our opinion.

 A company’s internal  control over financial reporting is a process designed to provide reasonable  assurance regarding the reliability of financial reporting and the preparation  of financial statements for external purposes in accordance with generally  accepted accounting principles. A company’s 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 the assets of the company;  (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 receipts and expenditures of  the company are being made only in accordance with authorizations of management  and directors of the company; and (3) provide reasonable assurance  regarding prevention or timely detection of unauthorized acquisition, use, or  disposition of the company’s assets that could have a material effect on the  financial statements.

 Because of its  inherent limitations, internal control over financial reporting may not prevent  or detect 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.

|   | KPMG LLP is a Canadian  limited liability partnership and a member firm of the KPMG network of  independent member firms affiliated with KPMG International Cooperative (“KPMG  International”), a Swiss entity.      KPMG Canada provides  services to KPMG LLP. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

In our opinion, Nevsun  Resources Ltd. maintained, in all material respects, effective internal control  over financial reporting as of December 31, 2016, based on the criteria  established in Internal Control – Integrated Framework (2013) issued by the  Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 We also have audited,  in accordance with Canadian generally accepted auditing standards and the  standards of the Public Company Accounting Oversight Board (United States), the  consolidated balance sheets of Nevsun Resources Ltd. as of December 31,  2016 and 2015, and the related consolidated statements of comprehensive income,  cash flows and changes in equity for the years then ended, and our report dated  February 22, 2017 expressed an unqualified opinion on those consolidated  financial statements.

**//s//  KPMG LLP******

Chartered Professional Accountants 

February 22, 2017  Vancouver, Canada

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| **NEVSUN RESOURCES LTD.**Consolidated Balance Sheets      (Expressed in thousands of United States dollars) |
|-------------------------------------------------------------------------------------------------------------|

|                                                                     | Note   |   | December 31,2016 |   |   | December  31,2015 |   |
|--------------------------------------------------------------------------|--------|--------|------------------|--------|--------|-------------------|--------|
|                                                                     |   |   |                  |   |   |                   |   |
| Assets                                                                   |   |   |                  |   |   |                   |   |
|                                                                     |   |   |                  |   |   |                   |   |
| Current assets                                                           |   |   |                  |   |   |                   |   |
|      Cash and cash equivalents                  | 8      | $      | 199,256          |   | $      | 434,340           |   |
|      Accounts receivable and prepaids           | 9      |   | 14,986           |   |   | 15,209            |   |
|      Inventories                                | 10     |   | 75,462           |   |   | 77,495            |   |
|      Due from non-controlling interest          | 11     |   | 5,000            |   |   | 5,355             |   |
|                                                                     |   |   | 294,704          |   |   | 532,399           |   |
| Non-current assets                                                       |   |   |             |   |   |              |   |
|      Due from non-controlling interest          | 11     |   | -                |   |   | 38,825            |   |
|      Account receivable                         | 9      |   | 388              |   |   | 725               |   |
|      Inventories                                | 10     |   | 48,764           |   |   | 20,042            |   |
|      Mineral properties, plant and equipment    | 12     |   | 965,306          |   |   | 412,129           |   |
|                                                                     |   |   | 1,014,458        |   |   | 471,721           |   |
| Total assets                                                             |   | $      | 1,309,162        |   | $      | 1,004,120         |   |
|                                                                     |   |   |             |   |   |              |   |
| Liabilities and equity                                                   |   |   |             |   |   |              |   |
|                                                                     |   |   |             |   |   |              |   |
| Current liabilities                                                      |   |   |             |   |   |              |   |
|      Accounts payable and accrued liabilities   | 13     | $      | 64,730           |   | $      | 56,881            |   |
|      Dividends payable                          | 16     |   | 12,053           |   |   | 7,991             |   |
|      Income taxes payable                       | 14     |   | 10,090           |   |   | 5,385             |   |
|      Provision for Lower Zone commitment        | 6      |   | 6,718            |   |   | -                 |   |
|                                                                     |   |   | 93,591           |   |   | 70,257            |   |
|                                                                     |   |   |             |   |   |              |   |
| Non-current liabilities                                                  |   |   |             |   |   |              |   |
|      Deferred income taxes                      | 14     |   | 63,988           |   |   | 65,431            |   |
|      Provision for mine closure and reclamation | 15     |   | 40,676           |   |   | 38,732            |   |
|                                                                     |   |   | 104,664          |   |   | 104,163           |   |
| Total liabilities                                                        |   |   | 198,255          |   |   | 174,420           |   |
|                                                                     |   |   |             |   |   |              |   |
| Equity                                                                   |   |   |             |   |   |              |   |
|      Share capital                              | 16     |   | 700,133          |   |   | 407,945           |   |
|      Share-based payments reserve               |   |   | 12,775           |   |   | 15,796            |   |
|      Retained earnings                          |   |   | 217,629          |   |   | 245,580           |   |
|      Equity attributable to Nevsun shareholders |   |   | 930,537          |   |   | 669,321           |   |
|                                                                     |   |   |             |   |   |              |   |
|      Non-controlling interest                   |   |   | 180,370          |   |   | 160,379           |   |
| Total equity                                                             |   |   | 1,110,907        |   |   | 829,700           |   |
| Total liabilities and equity                                             |   | $      | 1,309,162        |   | $      | 1,004,120         |   |

Commitments and contingencies (notes 21, 26)             

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

| Approved on behalf of the Board:       |
|----------------------------------------|
|                                   |
| ****“*David S. Smith*”**** |   | Director |   | ***“R. Stuart Angus”*** |   | Director |
| David S. Smith                         |   |   |   | R. Stuart Angus |   |   |

2

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| **NEVSUN RESOURCES LTD.**Consolidated Statements of Comprehensive Income      (Expressed in thousands of United States dollars, except per share amounts)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                     | Note   |   | 2016     |   |   | 2015     |   |
|----------------------------------------------------------|--------|--------|----------|--------|--------|----------|--------|
|                                                     |   |   |          |   |   |          |   |
| Revenues                                                 | 18     | $      | 230,705  |   | $      | 356,872  |   |
| Cost of sales                                            |   |   |     |   |   |     |   |
|      Operating expenses         | 19     |   | (103,442 | )      |   | (200,890 | )      |
|      Royalties                  |   |   | (11,454  | )      |   | (18,176  | )      |
|      Depreciation and depletion | 12     |   | (35,327  | )      |   | (45,093  | )      |
| Operating income                                         |   |   | 80,482   |   |   | 92,713   |   |
|                                                     |   |   |     |   |   |     |   |
| Administrative expenses                                  | 20     |   | (19,213  | )      |   | (13,595  | )      |
| Finance income                                           | 11     |   | 3,515    |   |   | 3,210    |   |
| Finance costs                                            | 15     |   | (1,944   | )      |   | (1,536   | )      |
| Share of loss from associate (Reservoir)                 | 6      |   | (1,862   | )      |   | -        |   |
| Income before taxes                                      |   |   | 60,978   |   |   | 80,792   |   |
|                                                     |   |   |     |   |   |     |   |
| Income taxes                                             | 14     |   | (29,888  | )      |   | (34,919  | )      |
| Net income and comprehensive income                      |   | $      | 31,090   |   | $      | 45,873   |   |
|                                                     |   |   |     |   |   |     |   |
| Net income and comprehensive income attributable to:     |   |   |     |   |   |     |   |
|      Nevsun shareholders        |   | $      | 11,353   |   | $      | 22,794   |   |
|      Non-controlling interest   |   |   | 19,737   |   |   | 23,079   |   |
|                                                     |   | $      | 31,090   |   | $      | 45,873   |   |
|                                                     |   |   |     |   |   |     |   |
| Earnings per share attributable to Nevsun shareholders:  | 16     |   |     |   |   |     |   |
|      Basic                      |   | $      | 0.04     |   | $      | 0.11     |   |
|      Diluted                    |   | $      | 0.04     |   | $      | 0.11     |   |

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

3

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| **NEVSUN RESOURCES LTD.**Consolidated Statements of Cash Flows      (Expressed in thousands of United States dollars)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                      | Note   |   | 2016     |   |   | 2015    |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|---------|--------|
| Operating activities                                                                                      |   |   |          |   |   |         |   |
| Net income                                                                                                |   | $      | 31,090   |   | $      | 45,873  |   |
| Items not involving the use (receipt) of cash                                                             |   |   |     |   |   |    |   |
|      Depreciation and depletion                                                  |   |   | 35,366   |   |   | 45,120  |   |
|      Share of loss from associate                                                |   |   | 1,862    |   |   | -       |   |
|      Income taxes                                                                |   |   | 29,888   |   |   | 34,919  |   |
|      Share based compensation                                                    | 16     |   | 1,550    |   |   | 833     |   |
|      Interest income on due from non-controlling  interest                       | 11     |   | (898     | )      |   | (2,197  | )      |
|      Provisions for inventory obsolescence and net  realizable value adjustments |   |   | 4,049    |   |   | 5,373   |   |
|      Other                                                                       |   |   | 557      |   |   | 251     |   |
|                                                                                                      |   |   |     |   |   |    |   |
|                                                                                                      |   |   | 103,464  |   |   | 130,172 |   |
| Changes in non-cash operating capital                                                                     |   |   |     |   |   |    |   |
|      Accounts receivable and prepaids                                            |   |   | 1,845    |   |   | 18,853  |   |
|      Inventories                                                                 |   |   | (23,670  | )      |   | (9,209  | )      |
|      Accounts payable and accrued liabilities                                    |   |   | (10,505  | )      |   | 2,279   |   |
|                                                                                                      |   |   |     |   |   |    |   |
| Cash generated from operating activities                                                                  |   |   | 71,134   |   |   | 142,095 |   |
|      Income taxes paid                                                           | 14     |   | (26,626  | )      |   | (21,790 | )      |
|                                                                                                      |   |   |     |   |   |    |   |
| Net cash provided by operating activities                                                                 |   |   | 44,508   |   |   | 120,305 |   |
| Investing activities                                                                                      |   |   |     |   |   |    |   |
|      Acquisition of Reservoir Minerals Inc., net of  cash received               | 6      |   | (205,064 | )      |   | -       |   |
|      Pre-commercial production sales receipts                                    |   |   | 34,313   |   |   | -       |   |
|      Pre-commercial production costs capitalized                                 |   |   | (42,540  | )      |   | -       |   |
|      Expenditures on mineral properties, plant and  equipment                    |   |   | (42,915  | )      |   | (85,439 | )      |
|      Changes in non-cash working capital related to  investing activities        |   |   | 8,813    |   |   | 1,074   |   |
|                                                                                                      |   |   |     |   |   |    |   |
| Net cash used in investing activities                                                                     |   |   | (247,393 | )      |   | (84,365 | )      |
| Financing activities                                                                                      |   |   |     |   |   |    |   |
|      Dividends paid to Nevsun shareholders                                       | 16     |   | (34,407  | )      |   | (31,954 | )      |
|      Distributions to non-controlling interest                                   |   |   | (16,000  | )      |   | (19,000 | )      |
|      Amounts repaid by non-controlling interest,  including interest             | 11     |   | 17,500   |   |   | 6,500   |   |
|      Issuance of common shares, net of issue costs                               | 16     |   | 902      |   |   | 436     |   |
|      Share issue costs related to dividend  reinvestment program                 |   |   | (194     | )      |   | -       |   |
|                                                                                                      |   |   |     |   |   |    |   |
| Net cash used in financing activities                                                                     |   |   | (32,199  | )      |   | (44,018 | )      |
| Decrease in cash and cash equivalents                                                                     |   |   | (235,084 | )      |   | (8,078  | )      |
| Cash and cash equivalents, beginning of year                                                              |   |   | 434,340  |   |   | 442,418 |   |
| Cash and cash equivalents, end of year                                                                    |   | $      | 199,256  |   | $      | 434,340 |   |

Supplementary  cash flow information (note 8) 

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

4

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| **NEVSUN RESOURCES LTD.**Consolidated Statements of Changes in Equity       (Expressed in thousands of United States dollars)       Years ended December 31, 2016 and 2015 |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                             |   | Number ofshares(note 16) |   |   | Share capital(note 16) |   |   | Share-basedpaymentsreserve |   |   | Retainedearnings |   |   | Equity attributableto Nevsunshareholders |   |   | Non-controllinginterest |   |   | Totalequity |   |
|------------------------------------------------------------------|--------|--------------------------|--------|--------|------------------------|--------|--------|----------------------------|--------|--------|------------------|--------|--------|------------------------------------------|--------|--------|-------------------------|--------|--------|-------------|--------|
| December 31, 2014                                                |   | 199,652,802              |   | $      | 407,359                |   | $      | 16,202                     |   | $      | 253,035          |   | $      | 676,596                                  |   | $      | 156,300                 |   | $      | 832,896     |   |
| Exercise of stock options                                        |   | 128,667                  |   |   | 436                    |   |   | -                          |   |   | -                |   |   | 436                                      |   |   | -                       |   |   | 436         |   |
| Transfer to share capital on exercise of stock options           |   | -                        |   |   | 150                    |   |   | (150                       | )      |   | -                |   |   | -                                        |   |   | -                       |   |   | -           |   |
| Transfer on forfeiture of vested options                         |   | -                        |   |   | -                      |   |   | (1,710                     | )      |   | 1,710            |   |   | -                                        |   |   | -                       |   |   | -           |   |
| Share-based payments                                             |   | -                        |   |   | -                      |   |   | 1,454                      |   |   | -                |   |   | 1,454                                    |   |   | -                       |   |   | 1,454       |   |
| Income for the year                                              |   | -                        |   |   | -                      |   |   | -                          |   |   | 22,794           |   |   | 22,794                                   |   |   | 23,079                  |   |   | 45,873      |   |
| Dividends declared                                               |   | -                        |   |   | -                      |   |   | -                          |   |   | (31,959          | )      |   | (31,959                                  | )      |   | -                       |   |   | (31,959     | )      |
| Distributions to non-controlling interest                        |   | -                        |   |   | -                      |   |   | -                          |   |   | -                |   |   | -                                        |   |   | (19,000                 | )      |   | (19,000     | )      |
| December 31, 2015                                                |   | 199,781,469              |   | $      | 407,945                |   | $      | 15,796                     |   | $      | 245,580          |   | $      | 669,321                                  |   | $      | 160,379                 |   | $      | 829,700     |   |
| Shares issued on acquisition of Reservoir Minerals Inc. (note 6) |   | 99,870,330               |   |   | 287,033                |   |   | -                          |   |   | -                |   |   | 287,033                                  |   |   | -                       |   |   | 287,033     |   |
| Mineral properties  acquisition (note 7)                         |   | -                        |   |   | -                      |   |   | -                          |   |   | -                |   |   | -                                        |   |   | 15,052                  |   |   | 15,052      |   |
| Exercise of stock options                                        |   | 351,668                  |   |   | 902                    |   |   | -                          |   |   | -                |   |   | 902                                      |   |   | -                       |   |   | 902         |   |
| Exercise of SARs                                                 |   | 755,380                  |   |   | -                      |   |   | -                          |   |   | -                |   |   | -                                        |   |   | -                       |   |   | -           |   |
| Transfer to share capital on exercise of stock options           |   | -                        |   |   | 365                    |   |   | (365                       | )      |   | -                |   |   | -                                        |   |   | -                       |   |   | -           |   |
| Transfer to share capital on exercise of SARs                    |   | -                        |   |   | 2,492                  |   |   | (3,809                     | )      |   | 501              |   |   | (816                                     | )      |   |                    |   |   | (816        | )      |
| Transfer on forfeiture of vested options                         |   | -                        |   |   | -                      |   |   | (255                       | )      |   | 255              |   |   | -                                        |   |   | -                       |   |   | -           |   |
| Share-based payments                                             |   | -                        |   |   | -                      |   |   | 1,408                      |   |   | -                |   |   | 1,408                                    |   |   | -                       |   |   | 1,408       |   |
| Shares issued as part of dividend reinvestment program           |   | 564,044                  |   |   | 1,590                  |   |   | -                          |   |   | (1,590           | )      |   | -                                        |   |   | -                       |   |   | -           |   |
| Share issue costs related to dividend reinvestment program       |   | -                        |   |   | (194                   | )      |   | -                          |   |   | -                |   |   | (194                                     | )      |   | -                       |   |   | (194        | )      |
| Income for the year                                              |   | -                        |   |   | -                      |   |   | -                          |   |   | 11,353           |   |   | 11,353                                   |   |   | 19,737                  |   |   | 31,090      |   |
| Dividends declared                                               |   | -                        |   |   | -                      |   |   | -                          |   |   | (38,470          | )      |   | (38,470                                  | )      |   | -                       |   |   | (38,470     | )      |
| Distributions to non-controlling interest                        |   | -                        |   |   | -                      |   |   | -                          |   |   | -                |   |   | -                                        |   |   | (16,000                 | )      |   | (16,000     | )      |
| Spending on Lower Zone commitment (note 6)                       |   | -                        |   |   | -                      |   |   | -                          |   |   | -                |   |   | -                                        |   |   | 1,202                   |   |   | 1,202       |   |
| December 31, 2016                                                |   | 301,322,891              |   | $      | 700,133                |   | $      | 12,775                     |   | $      | 217,629          |   | $      | 930,537                                  |   | $      | 180,370                 |   | $      | 1,110,907   |   |

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

5

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **1.** | **Description of business and nature of    operations** |
|--------|---------------------------------------------------------|

|   | Nevsun Resources Ltd. and its subsidiaries   (collectively, Nevsun or the Company) are engaged in the acquisition,   exploration, development and operation of mineral property interests.  Nevsun   is a public company which is listed on the TSX and the NYSE MKT LLC, under   the trading symbol “NSU”.  Nevsun was incorporated under the laws of the   Province of British Columbia under the Company Act (British Columbia), is   currently governed by the Business Corporations Act (British Columbia) and   maintains its head office at Suite 760 – 669 Howe Street, Vancouver, British   Columbia, Canada, V6B 0C4 and its registered and records office at 1000 – 840   Howe Street, Vancouver, British Columbia, Canada, V6Z 2M1 and its website   address is www.nevsun.com. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company’s two principal assets are its ownership   interest in the Timok project, a copper-gold development project in Serbia   (“Timok Project”), which was acquired during Q2 2016 in connection with the   acquisition of Reservoir Minerals Inc. (“Reservoir”) which was completed on   June 23, 2016, and its 60% owned Bisha Mine in Eritrea (owned via an   Eritrean-registered corporation, Bisha Mining Share Company (“BMSC”)). The   Company owns a 100% interest in the Upper Zone of the Timok Project and   currently owns a 60.4% interest in the Lower Zone of the Timok Project with   Freeport-McMoRan Inc. (“Freeport”) owning the remaining interest in the Lower   Zone. Nevsun’s 40% partner in the Bisha Mine is the State-owned Eritrean   National Mining Corporation (“ENAMCO”), representing a non-controlling   interest. |
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|   | The consolidated financial statements of Nevsun for the   year ended December 31, 2016, were reviewed by the Audit Committee and   approved and authorized for issue by the Board of Directors on February 22,   2017. |
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| **2.** | **Basis of preparation** |
|--------|--------------------------|

|   | These consolidated financial statements have been   prepared in accordance with International Financial Reporting Standards   (IFRS) as issued by the International Accounting Standards Board (IASB). |
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|   | These consolidated financial statements have been   prepared on a historical cost basis except for derivative financial   instruments which have been measured at fair value. These consolidated   financial statements are presented in US dollars and all values are rounded   to the nearest thousand, except where otherwise noted. |
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|   | The significant accounting policies are presented in   Note 3 and have been applied consistently in each of the periods presented.   The critical judgements in applying accounting policies and sources of   estimation are presented in Note 5. |
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| **3.** | **Summary of significant accounting policies** |
|--------|------------------------------------------------|

|   | (a) | Principles of consolidation |
|--------|-----|-----------------------------|

|   | These consolidated financial statements include the   accounts of the Company and its subsidiaries.  Subsidiaries are entities   controlled by the Company.  Control over a subsidiary is defined to exist   when the Company is exposed to variable returns from involvement with an   investee and has the ability to affect the returns through power over the   investee. All intercompany transactions and balances are eliminated on   consolidation. For subsidiaries that the Company controls but does not own   100% of, the interest attributable to non-controlling shareholders is   reflected in non-controlling interest. Adjustments to non-controlling   interests are accounted for as equity transactions and adjustments that do   not involve the loss of control are based on a proportionate amount of the   net assets of the subsidiary. |
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|   | The Company consolidates its controlling   interest in Rakita Exploration d.o.o. Beograd (“Rakita”; Serbia), acquired   through the Reservoir Transaction (see note 6). The allocation of net assets   and profit or loss between Nevsun and the non-controlling shareholder is   based on each party’s economic rights to the underlying cash flows and net   assets associated with the Timok mineral property. |
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6

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
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| **3.** | **Summary of significant accounting policies (continued)** |
|--------|------------------------------------------------------------|

|   | (a) | Principles   of consolidation (continued) |
|--------|-----|-------------------------------------------|

|   | Significant subsidiaries of Nevsun Resources Ltd. are as follows: |
|--------|-------------------------------------------------------------------|

|   |                              |                     |               |                                          |
|--------|-----------------------------------|--------------------------|--------------------|-----------------------------------------------|
|   | Name                              | Country of incorporation | Principal activity | Nevsun’s  effective interest            |
|   | Nevsun Africa  (Barbados) Ltd.    | Barbados                 | Holding company    | 100%                                          |
|   | Bisha Mining  Share Company       | Eritrea                  | Mining             | 60%                                           |
|   | Rakita Exploration d.o.o. Beograd | Serbia                   | Project            | 100%  of Upper Zone and   60.4% of Lower Zone |

|   | (b) | Foreign currency translation |
|--------|-----|------------------------------|

|   | The functional and reporting currency   of the Company and all its subsidiaries is the United States dollar.    Transactions in currencies other than the functional currency are recorded at   the rate of exchange prevailing on the date of the transaction.  Monetary   assets and liabilities that are denominated in foreign currencies are   translated at the rate prevailing at each reporting date.  Non-monetary   assets and liabilities denominated in foreign currencies that are measured at   fair value are retranslated to the functional currency at the exchange rate   at the date the fair value was determined.  Non-monetary items that are   measured at historical cost in a foreign currency are translated at the   exchange rate on the date of the transaction.  Foreign currency translation   differences are recognized in profit or loss. |
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|   | (c) | Revenue recognition and trade receivables |
|--------|-----|-------------------------------------------|

|   | The Company includes proceeds from the   sale of product, including by-product, in revenue. Revenue is recognized when   the transfer of title and the risk and rewards of ownership pass to the   customer provided that collection is reasonably assured, the price can be   reliably measured, the Company has no significant continuing involvement and   the costs incurred or to be incurred in respect of the transaction can be   reliably measured. |
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|   | All sales are completed in the form of   executed sales agreements where final prices are determined by quoted market   prices on a date subsequent to the date of sale.  Revenue is recorded on a   provisional basis based on current market prices on the date of sale.   Adjustments are made to the sale price based on movements in quoted market   prices up to the date of final pricing. The adjustment mechanism in these   sales agreements is considered an embedded derivative.  The fair value of the   final sales price adjustment is adjusted each reporting period by reference   to forward market prices and the changes in fair value are recorded as an   adjustment to revenue.  Any subsequent variations in the final determination   of metal concentrate weight and metal content are also recognized as revenue   adjustments. |
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|   | Revenue is recorded net of treatment   and refining charges. |
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|   | (d) | Inventories |
|--------|-----|-------------|

|   | Inventories include materials and   supplies, work-in-progress and finished goods, and are valued at the lower of   weighted average cost and net realizable value. Average costs are calculated   by reference to the cost levels experienced in the current month together   with those in opening inventory.  Cost for materials and supplies includes   purchase price and freight, and cost for work-in-progress and finished goods are   the costs of production.  For this purpose, the costs of production include: |
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|   | (i) | fuel, power, labour costs, materials, and   contractor expenses that are all directly attributable to the extraction and   processing of ore; |
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7

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **Summary of significant accounting policies (continued)** |
|--------|------------------------------------------------------------|

|   | (d) | Inventories (continued) |
|--------|-----|-------------------------|

|   | (ii) | the depreciation of mineral properties and   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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|   | With respect to concentrate stockpiles,   in months when the Company is producing only one type of concentrate, costs   of production are allocated in their entirety to the concentrate produced   within that month. In months when the Company is producing multiple   concentrates, costs of production are determined on a co-product basis. Directly   attributable costs are allocated to the respective concentrate produced, and   common costs are allocated to each concentrate based on the ratio of payable   production volume within the respective concentrate, multiplied by budgeted   metal prices. Budgeted prices are used to eliminate price volatility and   improve comparability of reporting between periods. |
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|   | Write-downs of inventories to net   realizable value and all losses of inventories are recognized as an expense   in the period in which the write-down or loss occurred. Such write-downs are reversed   in the event that there is a subsequent increase in the net realizable value   of the inventory. Net realizable value is based on market prices less costs   of completion and selling expenses. |
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|   | (e) | Mineral properties, plant and equipment |
|--------|-----|-----------------------------------------|

|   | (i) | Exploration and evaluation |
|--------|-----|----------------------------|

|   | Once the legal rights to explore an area have been   secured, expenditures on exploration and evaluation activities are   capitalized to exploration and evaluation, and are included within mineral   properties, plant and equipment. Costs incurred prior to the   Company obtaining the legal rights are expensed.  Exploration   expenditures relate to acquisition costs, the initial search for deposits   with economic potential and to detailed assessments of deposits or other   projects that have been identified as having economic potential. Obligations for removal and restoration as a result of undertaking   the exploration and evaluation are capitalized.  Management reviews the   carrying value of capitalized exploration costs for indicators that the   carrying value is impaired at least annually. The review is based on the   Company’s intentions for further exploration and development of the   undeveloped property. Subsequent recovery of the resulting carrying value   depends on successful development or sale of the undeveloped project. If a property   does not prove viable, all irrecoverable costs associated with the project,   net of any previous impairment provisions, are written off. |
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8

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **Summary of significant accounting policies (continued)** |
|--------|------------------------------------------------------------|

|   | (e) | Mineral properties, plant and equipment   (continued) |
|--------|-----|-------------------------------------------------------|

|   | (ii) | Development and construction in progress |
|--------|------|------------------------------------------|

|   | When economically viable reserves have been determined   and the decision to proceed with development has been approved, exploration and evaluation assets are first assessed for   impairment, then reclassified to construction-in-progress or mineral   properties. The expenditures related to development and construction   are capitalized as construction-in-progress and are included within mineral properties,   plant and equipment.  Costs associated with the commissioning of new assets   incurred before they are operating in the way intended by management,   including directly attributable costs of testing, are capitalized.    Development expenditures are net of the proceeds of the sale of metals produced   during this phase. When developed or constructed assets are   operating in the way intended by management, construction-in-progress costs   are reclassified to mineral properties or plant and equipment. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The costs of removing overburden to access ore are   capitalized as pre-production stripping costs and are included within mineral   properties, plant and equipment. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Plant and equipment |
|--------|-------|---------------------|

|   | Plant and equipment is carried at cost,   less accumulated depreciation and accumulated impairment losses.  Cost   comprises the fair value of consideration given to acquire or construct an   asset and includes the direct charges associated with bringing the asset to   the location and condition necessary for putting it into use, along with the   future cost of dismantling and removing the asset. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Lease   arrangements |
|--------|------|----------------------|

|   | Leases that transfer substantially all of the benefits   and risks incidental to the ownership of property to the Company are   accounted for as finance leases. Assets under finance lease are originally   capitalized at the lower of the fair market value of the leased property and   the net present value of the minimum lease payments. Each lease payment is   allocated between the finance lease obligation and finance charge. The plant   and equipment acquired under finance lease is depreciated over the shorter of   the asset’s useful life and the lease term. All other leases are accounted   for as operating leases wherein rental payments are expensed as incurred.   Where a lease is prepaid, the obligation is offset against the prepayment. |
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|   | The Company has entered into arrangements that are in   substance leasing arrangements and have been accounted for in accordance with   this policy. |
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|   | (v) | Depreciation and depletion |
|--------|-----|----------------------------|

|   | Mineral properties, plant and equipment   associated with mining operations are depreciated over the estimated useful   lives of the assets on a units-of-production basis or on a declining balance   basis at rates of 5% to 33% per annum, as appropriate.  All other equipment   is depreciated on a declining balance basis at rates of 5% to 33%, as   appropriate. Depreciation methods and useful lives are reviewed at each   reporting date and adjusted as required. |
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9

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **Summary of significant accounting policies (continued)** |
|--------|------------------------------------------------------------|

|   | (e) | Mineral properties, plant and equipment   (continued) |
|--------|-----|-------------------------------------------------------|

|   | (vi) | 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 all of   the following criteria: (1) it is probable that the future economic benefit   associated with the stripping activity will flow to the Company; (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 mineral properties or construction-in-progress and are   depreciated on a units-of-production basis over the expected useful life of   the identified component of the ore body to which access has been improved as   a result of the stripping activity. |
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|   | (vii) | Impairment of non-financial assets |
|--------|-------|------------------------------------|

|   | Non-financial assets are evaluated at the end of each   reporting period by management for indicators that carrying value is impaired   and may not be recoverable. When indicators of impairment are present, the   recoverable amount of an asset is evaluated at the level of a cash generating   unit (CGU), the smallest identifiable group of assets that generates cash   inflows that are largely independent of the cash inflows from other assets or   groups of assets. The recoverable amount of a CGU is the greater of the CGU’s   fair value less costs to sell and its value in use. An impairment loss is   recognized in profit or loss to the extent the carrying amount exceeds the   recoverable amount. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In calculating the recoverable amount, the Company uses   discounted cash flow techniques to determine fair value less costs to sell   and value in use when it is not possible to determine fair value either by   quotes from an active market or a binding sales agreement. The determination   of discounted cash flows is dependent on a number of factors, including   future metal prices, the amount of reserves, the cost of bringing the project   into production, production schedules, production costs, sustaining capital   expenditures, and site closure, restoration and environmental rehabilitation   costs and the discount rate used. Additionally, the reviews take into account   factors such as political, social and legal, and environmental regulations.   These factors may change due to changing economic conditions or the accuracy   of certain assumptions and, hence, affect the recoverable amount. The Company   uses its best efforts to fully understand all of the aforementioned to make   an informed decision based upon historical and current facts surrounding the   projects. Discounted cash flow techniques require management to make estimates   and assumptions concerning reserves and expected future production revenues   and expenses. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Provision for mine closure and reclamation |
|--------|-----|--------------------------------------------|

|   | The Company records a liability based on the best   estimate of costs for site closure and reclamation activities that the   Company is legally or constructively required to remediate. The liability is   recognized at the time environmental disturbance occurs and the resulting estimated   costs are capitalized to the corresponding asset.  The provision for mine closure   and reclamation liabilities is estimated using expected cash flows based on   engineering and environmental reports prepared by third-party industry   specialists and discounted at a pre-tax rate specific to the liability. The   capitalized amount is depreciated on the same basis as the related asset. The   liability is adjusted for the accretion of the discounted obligation and any   changes in the amount or timing of the underlying future cash flows.    Significant judgements and estimates are involved in forming expectations of   the amounts and timing of future closure and reclamation cash flows. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Additional disturbances and changes in mine   closure and reclamation estimates are accounted for as incurred with a change   in the corresponding capitalized cost. Costs of rehabilitation projects for   which a provision has been recorded are recorded directly against the   provision as incurred, most of which are incurred at the end of the life of   mine. |
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10

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **Summary of significant accounting policies (continued)** |
|--------|------------------------------------------------------------|

|   | (g) | Financial instruments |
|--------|-----|-----------------------|

|   | (i) | Financial assets |
|--------|-----|------------------|

|   | The Company initially recognizes loans and receivables   on the date that they originate. All other financial assets are recognized   initially on the trade date, which is the date that the Company becomes a   party to the contractual provisions of the instrument. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

 The Company classifies its non-derivative financial   assets as loans and receivables. The classification depends on the purpose   for which the financial assets were acquired, and management determines the   classification of financial assets at recognition. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Loans and receivables are non-derivative financial   assets with fixed or determinable payments that are not quoted in an active   market. They are classified as current assets or non-current assets based on   their maturity date.  Loans and receivables are initially recognized at fair   value and subsequently carried at amortized cost less any impairment.  Loans   and receivables are comprised of cash and cash equivalents, trade and other   receivables, and loan to supplier. Trade receivables include embedded   derivatives which are provisionally priced and are measured at fair value   with changes recognized in profit or loss. |
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|   | (ii) | Financial liabilities |
|--------|------|-----------------------|

|   | The Company classifies all of its financial liabilities   as other financial liabilities. Other financial liabilities are   non-derivatives and are recognized initially at fair value, net of   transaction costs incurred and are subsequently stated at amortized cost. Any   difference between the amounts originally received, net of transaction costs,   and the redemption value is recognized in profit and loss over the period to   maturity using the effective interest method. |
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|   | (h) | Income taxes |
|--------|-----|--------------|

|   | Current tax is the expected tax payable   or receivable on the taxable income or loss for the year, using tax rates   enacted or substantively enacted at the reporting date, and any adjustment to   taxes payable or receivable in respect of previous years. The Company uses   the balance sheet method of accounting for deferred income taxes. Under the   balance sheet method, deferred tax assets and liabilities are recognized for   the future tax consequences attributable to differences between the financial   statement carrying amounts of existing assets and liabilities and their   respective tax bases. Deferred tax is not recognized for temporary   differences on the initial recognition of assets or liabilities in a   transaction that is not a business combination and that affects neither   accounting nor taxable profit or loss. Deferred tax assets and liabilities   are measured using substantively enacted tax rates expected to apply to   taxable income in the years in which those temporary differences are expected   to be recovered or settled. Deferred tax assets also result from unused loss carry   forwards, resource related pools and other deductions. A deferred tax   asset is recognized for unused tax losses, tax credits and deductible   temporary differences to the extent that it is probable that future taxable   income against which the deferred tax assets can be utilized will be   available. Deferred tax assets are reviewed at each reporting date and are   reduced to the extent that it is no longer probable that the related tax   benefit will be realized. |
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11

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **Summary of significant accounting policies (continued)** |
|--------|------------------------------------------------------------|

|   | (h) | Income taxes (continued) |
|--------|-----|--------------------------|

|   | In   determining the amount of current and deferred tax the Company takes into   account the impact of uncertain tax positions and whether additional taxes   and interest may be due. The Company believes that its accruals for tax   liabilities are adequate for all open tax years based on its assessment of   many factors, including interpretations of tax law and prior experience. This   assessment relies on estimates and assumptions and may involve a series of judgements   about future events. New information may become available that causes the   Company to change its judgement regarding the adequacy of existing tax   liabilities. Such changes to tax liabilities will impact tax expenses in the year   that such a determination is made. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Deferred   tax assets and liabilities are offset if there is a legally enforceable right   to offset current tax liabilities and assets, and they relate to taxes levied   by the same tax authority on the same taxable entity, or on different tax   entities, but they intend to settle current tax liabilities and assets on a   net basis or their tax assets and liabilities will be realized   simultaneously. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Share-based payments |
|--------|-----|----------------------|

|   | (i) | Stock options |
|--------|-----|---------------|

|   | The Company has a stock option plan that is described in   note 16(b). Stock options granted to employees and directors are measured at   the grant date fair value of the instruments issued and amortized as an   expense with a corresponding increase in equity over the vesting periods. The   amount recognized as an expense is adjusted to reflect the number of awards   expected to vest. Upon the exercise of stock options, consideration received   is recorded as share capital and the related share-based payments reserve is   transferred to share capital. Charges for options that are forfeited before   vesting are reversed from share-based payment reserve. For those options that   expire or are forfeited after vesting, the recorded value is transferred to   retained earnings. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Stock appreciation rights (SARs) |
|--------|------|----------------------------------|

|   | 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 fair   value of the SAR is recorded as a liability with no value assigned to an   equity component. Changes to the fair value of the liability are recognized   in profit or loss.  

 Where the holder elects to take common shares instead of   cash, the value of the related liability is transferred directly to share   capital; 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In certain cases, SARs allow for the Board to elect for   the option holder to receive the net value of the options held in shares. The   net value is calculated as the difference between the market price of the   Company’s shares on the date before exercise and the exercise price of the   option, less statutory withholdings required on the employee’s behalf. In   instances where the fair value on the date of exercise exceeds the original   estimated fair value already recognized, additional expense is recorded in   the period of exercise. The value allocated to the options, less withholding   taxes, is transferred to share capital. In instances where the fair value on   the date of exercise is less than the original estimated fair value, the   difference is credited to retained earnings. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Restricted, performance and deferred share units (RSUs, PSUs and   DSUs) |
|--------|-------|--------------------------------------------------------------------------|

|   | RSUs, PSUs and DSUs allow the holder to receive cash in an   amount calculated with reference to the value of the Company’s shares. The RSUs,   PSUs and DSUs are recorded as a liability at fair value at year end, with   changes in the fair value of the liability recognized in profit or loss. The   liability is extinguished when the units vest and cash is paid to the holder   or when the units otherwise expire. |
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12

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **Summary of significant accounting policies (continued)** |
|--------|------------------------------------------------------------|

|   | (i) | Share-based payments (continued) |
|--------|-----|----------------------------------|

|   | (iii) | Restricted, performance and deferred share units (RSUs, PSUs and   DSUs) (continued) |
|--------|-------|--------------------------------------------------------------------------------------|

|   | RSUs vest in thirds over a three year period, beginning   one year after the grant date, and are settled in cash upon vesting. PSUs   vest in full three years after the grant date and are settled in cash upon   vesting, with payout value based on the Company’s share price performance   relative to a group of peers. Both units are valued with reference to the   Company’s current share price. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | DSUs vest either immediately or over a specified time   period, and are settled in cash when the holder of the units retires or   resigns from the Company. DSUs are valued with reference to the Company’s   current share price. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (j) | Investments in associates |
|--------|-----|---------------------------|

|   | An associate is an entity   over which the Company has significant influence. The Company has significant   influence when it has the power to participate in the financial and operating   policy decisions of the associate but does not have control over those   policies. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Dividends and repayment of   capital received from an associate are accounted for as a reduction in the   carrying amount of the Company’s investment. Unrealized gains and losses   between the Company and its associates are recognized only to the extent of   unrelated investors’ interests in the associates. Intercompany balances  between the Company and its associates are not eliminated. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | At the end of each reporting   period, the Company assesses its investment in associates for impairment if   there is objective evidence of impairment as a result of one or more events   that occurred after the initial recognition and if the event or events have   an impact on the estimated future cash flows of the investment. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (k) | Non-monetary transactions |
|--------|-----|---------------------------|

|   | The cost   of an item of property, plant and equipment is measured at fair value unless   the exchange lacks commercial substance, or the fair value of neither the   asset received nor the asset given up is reliably measureable. If the   acquired item is not measured at fair value, its cost is measured at the   carrying amount of the asset given up. The Company determines whether an   exchange transaction has commercial substance by considering the extent to   which the Company’s future cash flows are expected to change as a result of  the transaction. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (l) | Earnings per share |
|--------|-----|--------------------|

|   | Earnings per share are calculated   using the weighted average number of common shares outstanding during the year.   Diluted earnings per share is calculated using the treasury stock method. The   weighted average number of common shares outstanding for the calculation of   diluted earnings per share assumes all in-the-money stock options and stock   appreciation rights are exercised at the beginning of the year and that the   proceeds to be received on their exercise are used to repurchase common   shares at the average market price during the year. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.** | **Accounting changes and recent accounting    pronouncements** |
|--------|----------------------------------------------------------------|

|   | In January 2016, the IASB announced its new leasing   standard, IFRS 16. The new standard will eliminate the current dual   accounting model for lessees, which distinguishes between on-balance sheet   finance leases and off-balance sheet operating leases. The new standard will,   instead, present a single on-balance sheet accounting model that is similar   to current finance lease accounting. The new standard will take effect for   fiscal years starting on or after January 1, 2019. The Company expects the   new standard to result in some leases that are currently accounted for under   the operating lease method being added to the balance sheet. Such   adjustments, however, are not yet quantifiable as the Company’s assets under   lease may be different at the time of standard implementation. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

13

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.** | **Accounting changes and recent accounting    pronouncements (continued)** |
|--------|----------------------------------------------------------------------------|

|   | In May 2014, the IASB issued the final revenue standard,   IFRS 15 - *Revenue From Contracts With Customers*, which will replace   IAS 18 - *Revenue*, among other standards that do not currently affect   the Company. The new standard becomes effective for fiscal years beginning on   or after January 1, 2018. The standard contains a single model that applies   to contracts with customers and two approaches to recognizing revenue: at a   point in time or over time. The Company intends to adopt IFRS 15 in its   financial statements for the annual period beginning January 1, 2018. The   Company does not expect the standard to have a material impact on the   financial statements. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In July 2014, the IASB published IFRS 9 – *Financial   Instruments: Recognition and Measurement*, which replaces IAS 39, the   existing guidance of the same name. IFRS 9 includes revised guidance on the   classification and measurement of financial instruments, including a new   expected credit loss model for calculating impairment on financial assets,   and the new general hedge accounting requirements. It also carries forward   the guidance on recognition and derecognition of financial instruments from   IAS 9. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | IFRS 9 is effective for annual reporting periods beginning   on or after January 1, 2018, and the Company intends to adopt the new   standard for the annual period beginning on that date. The Company does not   expect the standard to have a material impact on the financial statements. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **5.** | **Use of judgements and estimates** |
|--------|-------------------------------------|

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

|   | (a) | Judgements |
|--------|-----|------------|

|   | The critical judgements that the   Company’s management has made in the process of applying the Company’s   accounting policies, apart from those involving estimation uncertainty (note 5(b)), that have the   most significant effect on the amounts recognized in the Company’s  consolidated financial statements are as follows: |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Achievement of commercial production |
|--------|-----|--------------------------------------|

|   | Costs incurred to construct and develop mineral properties,   plant and equipment, including directly attributable costs of testing, are   capitalized until the assets are brought into the location and condition   necessary to be capable of operating in the manner intended by management. Net   proceeds from the sale of metals produced during this period are offset   against costs capitalized. Depletion of capitalized costs for mineral   properties and related plant and equipment begins when operating levels   intended by management have been reached. The results of operations of the   Company during the years presented in these consolidated financial statements   have been impacted by management’s determination that the Bisha Mine reached   the operating levels intended by management with regards to copper production   from supergene ore on December 1, 2013, and zinc production from primary ore  on October 1, 2016. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Economic recoverability and probability of future economic  benefits of exploration, evaluation and development costs |
|--------|------|-----------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

14

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **5.** | **Use of judgements and estimates (continued)** |
|--------|-------------------------------------------------|

|   | (a) | Judgements (continued) |
|--------|-----|------------------------|

|   | (iii) | Functional  currency |
|--------|-------|----------------------|

|   | 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   judgements 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Indicators of impairment |
|--------|------|--------------------------|

|   | Judgement is required in assessing whether certain   factors would be considered an indicator of impairment. Potential indicators   of impairment must be evaluated in conjunction with many factors, including   current and forecast economic conditions, internal projections and other   factors which may indicate whether there is an indicator of impairment   present, and accordingly, whether impairment testing is required. Management   has determined that there were no indicators of impairment as at December 31,   2016. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Reservoir transaction as an acquisition of an  asset |
|--------|-----|------------------------------------------------------|

|   | The Company has determined that the acquisition of   Reservoir constitutes the acquisition of an asset, rather than an acquisition   of a business. This decision required management to make certain qualitative   considerations with respect to whether or not the acquired company is capable   in its acquired state of producing economic outputs. Management concluded   that this was not the case. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vi) | Fair value of assets and liabilities acquired  in the Reservoir transaction |
|--------|------|-----------------------------------------------------------------------------|

|   | Management relied upon multiple sources of information   in order to allocate value to the assets and liabilities acquired as part of   the transaction with Reservoir. The information was considered in the context   of management’s intentions with the various properties acquired in order to  allocate value accordingly. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii) | Significant influence over Reservoir |
|--------|-------|--------------------------------------|

|   | On April 25, 2016, concurrent with the Arrangement   Agreement, Nevsun and Reservoir entered into a funding transaction totaling   $135,000 comprised of a private placement for 19.99% of Reservoir’s   outstanding common shares and a loan (together the “Funding Transaction”).   The Company exercised judgement in determining that it held significant   influence over Reservoir, which allowed for the Company to account for the   investment using the equity method. The Company maintained this accounting   treatment until Nevsun acquired the remaining outstanding shares of Reservoir  on June 23, 2016. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (viii) | Fair value of due from non-controlling  interest |
|--------|--------|--------------------------------------------------|

|   | As part of the non-monetary transaction through which   BMSC acquired additional exploration properties (note 7), management   exercised judgement in the determination of fair value of the amount due from   non-controlling interest exchanged as part of the transaction, and also in   the determination that the fair value of the due from non-controlling interest   was more reliably measured than that of the exploration properties received   in the exchange. Management considered multiple external factors in arriving   at these conclusions. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

15

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **5.** | **Use of judgements and estimates (continued)** |
|--------|-------------------------------------------------|

|   | (b) | Key sources of estimation uncertainty |
|--------|-----|---------------------------------------|

|   | The preparation of consolidated financial   statements requires that the Company’s management make assumptions and   estimates of effects of uncertain future events on the carrying amounts of   the Company’s assets and liabilities at the end of the reporting period.  Actual   results may differ from those estimates as the estimation process is   inherently uncertain. Actual future outcomes could differ from present   estimates and assumptions; potentially having material future effects on the   Company’s consolidated financial statements. Estimates are reviewed on an   ongoing basis and are based on historical experience and other facts and   circumstances. Revisions to estimates and the resulting effects on the   carrying amounts of the Company’s assets and liabilities are accounted for   prospectively. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The significant assumptions about the   future and other major sources of estimation uncertainty as at the end of the   reporting period that have a significant risk of resulting in a material   adjustment to the carrying amounts of the Company’s assets and liabilities   are as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Reserve estimates including life of mine plan |
|--------|-----|-----------------------------------------------|

|   | The Company estimates its ore reserves and mineral   resources based on information compiled by experts. Reserves are used in the   calculation of depreciation, impairment assessment and for forecasting the  timing of payment of mine closure, reclamation and rehabilitation costs. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | There are numerous uncertainties inherent in estimating   ore reserves, and assumptions that are valid at the time of estimation may   change significantly when new information becomes available. Changes in the   forecasted prices of commodities, exchange rates, production costs or   recovery rates may change the economic status of reserves and may,   ultimately, result in the reserves being restated. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The carrying amounts of the Company’s mineral properties,   plant and equipment are depleted based on recoverable base metal pounds or   ore reserve tonnes, depending on the use of the asset. Changes to estimates   of recoverable quantities of base metals, ore reserve tonnes and depletable costs,   including changes resulting from revisions to the Company’s mine plans and   changes in metals prices forecasts, can result in a change to future   depletion rates and impairment analysis. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Estimated mine closure and reclamation costs |
|--------|------|----------------------------------------------|

|   | The Company’s provision for mine closure and reclamation   cost obligations represents management’s best estimate of the present value   of the future cash outflows required to settle the liability which reflects   estimates of future costs, inflation, movements in foreign exchange rates and   assumptions of risks associated with the future cash outflows, and the   applicable risk-free interest rates for discounting the future cash outflows.   Changes in the above factors can result in a change to the provision   recognized by the Company. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Changes to mine closure and reclamation cost obligations   are recorded with a corresponding change to the carrying amounts of related mineral   properties, plant and equipment for the year. Adjustments to the carrying   amounts of related mineral properties, plant and equipment can result in a   change to future depletion expense. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Fair value of embedded derivative |
|--------|-------|-----------------------------------|

|   | The value of trade receivables from the sale of   concentrate and direct shipping ore is measured using quoted forward market   prices as at the balance sheet date that correspond to the settlement date of   the provisional pricing period for the estimated metals contained within the   concentrate or ore.  Fluctuations in the underlying market prices of zinc, copper,   gold and silver, metal content and concentrate weight can cause significant   changes to the ultimate final settlement value of the receivables and the final  revenue recorded can vary significantly as a result. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

16

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **5.** | **Use of judgements and estimates (continued)** |
|--------|-------------------------------------------------|

|   | (b) | Key sources of estimation uncertainty  (continued) |
|--------|-----|----------------------------------------------------|

|   | (iv) | Income  taxes |
|--------|------|---------------|

|   | 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 income from operations and the   application of existing tax laws in each jurisdiction. Forecasted income from   operations is based on life of mine projections internally developed and   reviewed by management. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Importance is given to tax planning opportunities that   are within the Company’s control, are feasible and can be implemented 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Share-based payments |
|--------|-----|----------------------|

|   | 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, whether a non-trading restriction has been imposed   by the Company, 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6.** | **Acquisition of Reservoir** |
|--------|------------------------------|

|   | On April 22, 2016, the Company and Reservoir   entered into an Arrangement Agreement pursuant to which the Company would   acquire all of the issued and outstanding common shares of Reservoir by a way   of a court-approved plan of arrangement (the “Reservoir Transaction”).  The   Reservoir Transaction closed on June 23, 2016. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under the terms of the Arrangement   Agreement, as amended June 16, 2016, each issued and outstanding common share   and restricted share unit of Reservoir was exchanged for two (2) Nevsun   common shares (the “Exchange Ratio”) plus CAD$2.00 in cash. Upon closing of   the arrangement, existing Nevsun and Reservoir shareholders owned   approximately 67% and 33% of Nevsun, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Concurrent with the Arrangement   Agreement, Nevsun and Reservoir entered into the Funding Transaction. Nevsun   purchased 12,174,928 common shares of Reservoir at a price of CAD$9.40 per   share, for a total price of CAD$114,444 ($90,297) and provided an unsecured   loan of $44,703 to Reservoir which bears interest at 12% per annum.  The   Funding Transaction provided $135,000 to enable Global Reservoir (BVI) Ltd.,   a wholly owned subsidiary of Reservoir, to exercise its right of first offer   (“ROFO”) under its joint venture with Freeport International Holdings (BVI)   Inc. (“Freeport (BVI)”) regarding the Timok Project, a copper-gold   development project in Serbia. On closing of the exercise of the ROFO (May 2,   2016), Global Reservoir (BVI) Inc. held a 100% interest in the Upper Zone and   a 60.4% interest in the Lower Zone of the Timok Project. Freeport presently   owns an indirect 39.6% interest in the Lower Zone through its Class B share   ownership of Freeport (BVI) and its ownership interest in the Lower Zone   could be increased to 54.0%. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

17

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6.** | **Acquisition of Reservoir (continued)** |
|--------|------------------------------------------|

|   | Under the terms of the ROFO, Reservoir is   required to make the following payments totaling up to $127,500, payable in   stages, upon the achievement of key development milestones in addition to the   $135,000 already paid to Freeport on the exercise of the ROFO: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a. | Up to a maximum of $20,000 to be spent in connection with agreed   exploration and study work on the Lower Zone (“$20,000 Lower Zone  commitment”); |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | $45,000 payable to Freeport upon the earliest to   occur of (i) a build decision on the Upper Zone, and (ii) access to either   ore body for direct ship ore; and |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | $50,000 payable to Freeport upon the achievement of   commercial production. |
|--------|----|------------------------------------------------------------------------------|

|   | Freeport is also entitled to be repaid   up to $12,500 in recoupment of project expenditures from Reservoir’s share of   future distributions. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Of the $127,500 of potential future payments   as described above, $7,920 of the $20,000 Lower Zone commitment was initially   treated as a liability, representing Freeport’s 39.6% interest in the $20,000   Lower Zone commitment for which the Company has a contractual obligation to   fund. The Company’s share of the $20,000 Lower Zone commitment has not been   accrued and is recognized as incurred.  Through December 31, 2016, the Company   has spent $3,035 on Lower Zone work, $1,202 of which has reduced Freeport’s   portion of the Lower Zone commitment liability. The Company has estimated   100% of the remaining $16,965 of Lower Zone commitment will be incurred over   the next twelve months and has classified Freeport’s interest of the   remaining commitment in accordance with this estimate. The remaining $107,500   of possible future payments have not been accrued as the payments are   dependent upon future events and will only be accrued for as and if the   future events occur. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

18

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6.** | **Acquisition of Reservoir (continued)** |
|--------|------------------------------------------|

|   | Total   consideration paid was comprised of the following: |
|--------|------------------------------------------------------------|

|   | Funding Transaction – April 25, 2016                                                     |   |       |   |
|--------|------------------------------------------------------------------------------------------------|--------|------------|--------|
|   |      19.99% investment held in    Reservoir prior to closing(1)       | $      | 90,297     |   |
|   |      Unsecured loan to Reservoir    by Nevsun                         |   | 44,703     |   |
|   | Total Funding Transaction                                                                      | $      | 135,000    |   |
|   |                                                                                           |   |       |   |
|   | Arrangement Transaction – June 23, 2016                                                  |   |       |   |
|   | Reservoir common shares outstanding(2)                                                         |   | 49,143,165 |   |
|   | Reservoir restricted share units (RSUs)                                                        |   | 792,000    |   |
|   | Total Reservoir common shares and RSUs to be exchanged                                         |   | 49,935,165 |   |
|   | Exchange ratio                                                                                 |   | 2.0        |   |
|   | Nevsun common shares issued to Reservoir shareholders and unitholders                          |   | 99,870,330 |   |
|   | Fair value of a Nevsun common share in CAD(3)                                                  | $      | 3.69       |   |
|   | Fair value of Nevsun common shares issued in CAD                                               | $      | 368,522    |   |
|   | CAD per USD exchange rate(3)                                                                   |   | 1.2839     |   |
|   | Fair value of Nevsun common shares issued in USD                                               | $      | 287,033    |   |
|   | Cash payment of CAD$2.00 per Reservoir share and RSU exchanged                                 |   | 77,787     |   |
|   | Fair value of outstanding Reservoir stock options redeemed in cash on closing(4)               |   | 7,724      |   |
|   | Equity investment loss in Reservoir (April 25, 2016 to June 22, 2016)(1)                       |   | (1,862     | )      |
|   | Interest accrued on unsecured loan to Reservoir by Nevsun (April 25,    2016 to June 22, 2016) |   | 872        |   |
|   | Nevsun transaction costs                                                                       |   | 6,000      |   |
|   | Purchase price excluding Funding Transaction                                                   | $      | 377,554    |   |
|   |                                                                                           |   |       |   |
|   | Total purchase price                                                                           | $      | 512,554    |   |

|   | 1. | The 12,174,928 common shares of   Reservoir owned by the Company at June 23, 2016 were purchased as part of the   Funding Transaction for cash consideration of CAD$114,444 ($90,297). The   Company accounted for its investment in Reservoir prior to closing of the   Reservoir Transaction as an equity investment as it had sufficient power to   exercise significant influence. At the date of acquisition, a $1,862 loss   representing the Company’s share of net loss of its 19.99% interest in   Reservoir was recognized in the Company’s net earnings and included in the  purchase price. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | The number of Reservoir common   shares outstanding at June 23, 2016, but excluding the 12,174,928 common   shares of Reservoir owned by the Company as a result of the Funding Transaction. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | The fair value per common share   of Nevsun of CAD $3.69 was the closing price on the Toronto Stock Exchange   (“TSX”) on June 22, 2016 and the foreign exchange rate of 1.2839 was the closing   CAD to USD exchange rate published by the Bank of Canada on June 22, 2016. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | Under the Arrangement Agreement,   each outstanding Reservoir stock option on the closing date was settled in   exchange for a cash payment equal to the amount by which CAD$9.40 exceeds the   exercise price of each option.  As at June 23, 2016, Reservoir had 1,356,500   outstanding stock options at an average exercise price of CAD$2.09 per   option. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

19

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6.** | **Acquisition of Reservoir (continued)** |
|--------|------------------------------------------|

|   | The allocation of the   purchase price has been determined as follows: |
|--------|------------------------------------------------------------------------|

|   | Net assets acquired:                     |   |    |   |
|--------|------------------------------------------|--------|---------|--------|
|   | Cash and cash equivalents                | $      | 21,150  |   |
|   | Accounts receivable and prepaids         |   | 2,185   |   |
|   | Restricted cash equivalents              |   | 146     |   |
|   | Mineral properties, plant and equipment  |   | 506,367 |   |
|   | Accounts payable and accrued liabilities |   | (9,374  | )      |
|   | Provision for Lower Zone commitment      |   | (7,920  | )      |
|   | Total fair value of net assets acquired  | $      | 512,554 |   |

|   | The principal development project acquired is a 100%   interest in the Upper Zone and a 60.4% interest in the Lower Zone of the Timok   Project. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company is the operator of the Timok Project until   the occurrence of certain events that are not expected to occur until at   least 15 years from the commencement of commercial production of the Upper   Zone of the Timok Project. The Company will advance the development of both   the Upper Zone and the Lower Zone.  The Company will fund 100% of the Upper   Zone development costs and will sole fund the first $20,000 of agreed Lower   Zone work. The Company and Freeport will fund additional Lower Zone work   based on their respective ownership interests in the Lower Zone. After   delivery of a feasibility study, Freeport will have increased ownership in   the Lower Zone of 54%, and the Company will have a 100% ownership interest in   the Upper Zone and a 46% ownership interest in the Lower Zone. The Company   and Freeport will be entitled to their pro rata share of the economic   benefits of the Lower Zone and the Company is entitled to 100% of the   economic benefits of the Upper Zone. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **7.** | **BMSC mineral properties acquisition** |
|--------|-----------------------------------------|

|   | On June 29, 2016, BMSC acquired additional mineral   exploration license areas, increasing its exploration licensed area to 814   square kilometres, from the previous 41 square kilometres. The new   exploration area consists of two licenses, the 184 square kilometer Tabakin   exploration license, surrounding the existing BMSC mining licenses, and 630   square kilometer New Mogoraib exploration license, which combines new and   previously relinquished property and the former Mogoraib River license. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Tabakin exploration license includes the area   between the Bisha and Harena mining licenses. BMSC will be permitted to hold   the area covered by the Tabakin exploration license for ten years before any   partial relinquishments. The New Mogoraib exploration license will be subject   to a relinquishment regime for exploration licenses (three years of no   relinquishment, followed by two one-year renewals with a 25% annual area   reduction beginning after year three). |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Nevsun funded its 60% share of these newly acquired   exploration licenses by way of a $22,578 reduction in the amount receivable   from ENAMCO. As part of this transaction, Nevsun will no longer charge   interest on the remaining receivable. This receivable originally arose in   2011 when ENAMCO agreed to a $254,000 purchase price for the acquisition of   an additional 30% interest in BMSC. Also see note 11. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **8.** | **Supplemental cash information** |
|--------|-----------------------------------|

|   |                      |   | 2016    |   |   | 2015    |   |
|--------|---------------------------|--------|---------|--------|--------|---------|--------|
|   | Cash and cash equivalents |   |         |   |   |         |   |
|   | Cash                      | $      | 56,014  |   | $      | 135,597 |   |
|   | Cash equivalents          |   | 143,242 |   |   | 298,743 |   |
|   |                      | $      | 199,256 |   | $      | 434,340 |   |

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

20

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **8.** | **Supplemental cash information (continued)** |
|--------|-----------------------------------------------|

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

|   |                                                                         |   | 2016    |   |   | 2015  |   |
|--------|------------------------------------------------------------------------------|--------|---------|--------|--------|-------|--------|
|   | Non-cash investing and financing  transactions                               |   |         |   |   |       |   |
|   | Mineral properties acquired by  way of non-monetary transaction (note 7)     | $      | 37,630  |   | $      | -     |   |
|   | Shares issued on acquisition of  Reservoir Minerals Inc. (note 6)            |   | 287,033 |   |   | -     |   |
|   | Shares issued as part of DRIP                                                |   | 1,590   |   |   | -     |   |
|   | Closure and reclamation increase  in mineral properties, plant and equipment |   | -       |   |   | 3,000 |   |
|   | Capital assets under finance  lease                                          |   | 623     |   |   | -     |   |
|   | Depreciation added to (relieved from) inventory                              |   | 4,743   |   |   | (356  | )      |

| **9.** | **Accounts receivable and prepaids ** |
|--------|--------------------------------------------|

|   |                                                          |   | 2016   |   |   | 2015   |   |
|--------|---------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|   | Trade receivables                                             | $      | 3,338  |   | $      | 5,109  |   |
|   | Advances to  vendors                                          |   | 7,725  |   |   | 7,698  |   |
|   | Loan receivable                                               |   | 902    |   |   | 1,339  |   |
|   | Prepaid expenses                                              |   | 1,702  |   |   | 1,483  |   |
|   | Other  receivables                                            |   | 1,707  |   |   | 305    |   |
|   | Total accounts  receivable and prepaids                       | $      | 15,374 |   | $      | 15,934 |   |
|   | Less: non-current  portion of loan receivable                 |   | (388   | )      |   | (725   | )      |
|   | Accounts receivable and prepaids recorded as a  current asset | $      | 14,986 |   | $      | 15,209 |   |

| **10.** | **Inventories** |
|---------|-----------------|

|   |                                            |   | 2016    |   |   | 2015    |   |
|--------|-------------------------------------------------|--------|---------|--------|--------|---------|--------|
|   | Materials and  supplies                         | $      | 52,198  |   | $      | 52,617  |   |
|   | Work-in-progress                                |   | 54,299  |   |   | 38,043  |   |
|   | Finished goods –  concentrates            |   | 17,729  |   |   | 6,877   |   |
|   | Total  inventories                              | $      | 124,226 |   | $      | 97,537  |   |
|   | Less:  non-current portion of ore in stockpiles |   | (48,764 | )      |   | (20,042 | )      |
|   | Inventory recorded as a current asset           | $      | 75,462  |   | $      | 77,495  |   |

|   | During the year ended December 31, 2016, the Company   recorded an inventory obsolescence provision of $1,919 (2015 – $5,373) to   account for slow-moving and obsolete materials and supplies inventory, and a   provision against work-in-progress inventory of $2,130 (2015 – $2,686) to   account for stockpiles that have a book value that exceeds the net realizable  value. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The non-current portion of ore in stockpiles is not   expected to be further processed in the next twelve months and consists of   primary ore, oxide ore, pyrite sand ore and supergene ore of $40,975, $2,852,   $4,174 and $763, respectively (December 31, 2015 - $10,530, $5,240, $4,272   and $nil, respectively). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Depreciation of $9,992 is included in work-in-progress   and finished goods inventories at December 31, 2016 (December 31, 2015 –   $5,249). All inventories are located at the Bisha Mine. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

21

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **11.** | **Due from non-controlling interest** |
|---------|---------------------------------------|

|   | The amounts due from ENAMCO arose originally in October   2007 when the Company entered into an agreement with ENAMCO whereby the State   increased its ownership in BMSC to 40% from its previous 10% free carried   interest provided by Eritrean mining legislation. In June 2016, the Company   signed an amended shareholders agreement with ENAMCO confirming that the   remaining amount due from non-controlling interest of $10,000 will be paid by   ENAMCO in two $5,000 installments in October 2016 (received) and April 2017,   respectively. Interest income of $898 was recorded during the year ended   December 31, 2016 (2015 - $2,197). |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                                |   | 2016    |   |   | 2015    |   |
|--------|---------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
|   | Opening Balance                                                     | $      | 44,180  |   | $      | 48,483  |   |
|   |                                                                |   |    |   |   |    |   |
|   | Accrued interest on purchase  price receivable                      |   | 898     |   |   | 2,197   |   |
|   | Amounts received from  non-controlling interest, including interest |   | (17,500 | )      |   | (6,500  | )      |
|   | Non-monetary exchange for mineral  properties                       |   | (22,578 | )      |   | -       |   |
|   | Total due from non-controlling  interest                            | $      | 5,000   |   | $      | 44,180  |   |
|   | Less: non-current portion of due  from non-controlling interest     |   | -       |   |   | (38,825 | )      |
|   | Due from non-controlling interest recorded as a current asset       | $      | 5,000   |   | $      | 5,355   |   |

| **12.** | **Mineral properties, plant and equipment** |
|---------|---------------------------------------------|

|   | The Company’s properties are located in Serbia, Eritrea   and Macedonia. The principal property in Serbia is the Brestovac – Metovnica exploration   license which hosts the Timok Project (see Note 6). The Company also holds as   part of the Timok Project three additional exploration licenses. The Company   holds eight additional exploration licenses in the Bor region of Serbia that   form the Tilva Joint Venture with Rio Tinto Mining and Exploration Ltd. (“Rio   Tinto”). All exploration expenditures on these eight exploration licenses are   funded by Rio Tinto. The Company also holds seven additional 100%-owned   exploration licenses in Serbia. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The properties in Eritrea consist of two mining   licenses, Bisha and Harena, and two exploration licenses, Tabakin and New   Mogoraib (note 7). All properties are subject to a mining agreement with the   Government of Eritrea. The Bisha mining license was granted in 2008 for an   initial period of 20 years and the Harena mining license was granted in 2012   for 10 years. Both licenses can be extended if required. The Tabakin   exploration license was granted in 2016 for 10 years before land   relinquishment requirements begin. The New Mogoraib license, also granted in   2016, is valid for three years with no relinquishments, followed by two   one-year renewals with a 25% annual area reduction after year three. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Properties in Macedonia include two exploration permits   and the East and Southeast prospecting licenses. |
|--------|------------------------------------------------------------------------------------------------------------|

|   | Costs classified as mineral properties   represent historic acquisition, exploration, evaluation and development costs   at Bisha and Harena. Construction-in-progress at December 31, 2016,   represents costs associated with the Bisha tailings facility expansion. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

22

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **12.** | **Mineral properties, plant and equipment (continued)** |
|---------|---------------------------------------------------------|

|   | Year ended  December 31, 2016                                                                     |   | Explorationand evaluation                           |   |   | Construction-in-progress                     |   |   | Mineralproperties                     |   |   | Plant andequipment                            |   |   | Total                   |   |
|--------|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|---------------------------------------|--------|--------|-----------------------------------------------|--------|--------|-------------------------|--------|
|   | **Cost**                                                                                          |   |                                                     |   |   |                                              |   |   |                                       |   |   |                                               |   |   |                         |   |
|   | December 31, 2015                                                                                 | $      | 36,191                                              |   | $      | 64,906                                       |   | $      | 52,629                                |   | $      | 431,863                                       |   | $      | 585,589                 |   |
|   |      Acquisition of Reservoir Minerals Inc.                              |   | 504,501                                             |   |   | -                                            |   |   | -                                     |   |   | 1,866                                         |   |   | 506,367                 |   |
|   |      Mineral property acquisition (note 7)                               |   | 37,630                                              |   |   | -                                            |   |   | -                                     |   |   | -                                             |   |   | 37,630                  |   |
|   |      Additions                                                           |   |                                                |   |   |                                         |   |   |                                  |   |   |                                          |   |   |                    |   |
|   |           BMSC                                  |   | 9,322                                               |   |   | 13,548                                       |   |   | 1,321                                 |   |   | 7,208                                         |   |   | 31,399                  |   |
|   |           Timok – Upper Zone              |   | 8,709                                               |   |   | -                                            |   |   | -                                     |   |   | -                                             |   |   | 8,709                   |   |
|   |           Timok – Lower Zone              |   | 3,035                                               |   |   | -                                            |   |   | -                                     |   |   | -                                             |   |   | 3,035                   |   |
|   |           Other                                 |   | 993                                                 |   |   | -                                            |   |   | -                                     |   |   | 28                                            |   |   | 1,021                   |   |
|   |      Pre-commercial production costs capitalized,  net of sales receipts |   | -                                                   |   |   | 21,072                                       |   |   | -                                     |   |   | -                                             |   |   | 21,072                  |   |
|   |      Disposals                                                           |   | -                                                   |   |   | -                                            |   |   | -                                     |   |   | (2,494                                        | )      |   | (2,494                  | )      |
|   |      Transfers                                                           |   | -                                                   |   |   | (99,218                                      | )      |   | -                                     |   |   | 99,218                                        |   |   | -                       |   |
|   |      Transfers to inventory                                              |   | -                                                   |   |   | -                                            |   |   | -                                     |   |   | (2,317                                        | )      |   | (2,317                  | )      |
|   | December 31, 2016                                                                                 |   | 600,381                                             |   |   | 308                                          |   |   | 53,950                                |   |   | 535,372                                       |   |   | 1,190,011               |   |
|   | **Accumulated  depreciation**                                                                     |   |                                                |   |   |                                         |   |   |                                  |   |   |                                          |   |   |                    |   |
|   | December 31, 2015                                                                                 |   | -                                                   |   |   | -                                            |   |   | 14,641                                |   |   | 158,819                                       |   |   | 173,460                 |   |
|   |      Charge for the year                                                 |   | -                                                   |   |   | -                                            |   |   | 4,639                                 |   |   | 48,329                                        |   |   | 52,968                  |   |
|   |      Disposals                                                           |   | -                                                   |   |   | -                                            |   |   | -                                     |   |   | (1,723                                        | )      |   | (1,723                  | )      |
|   | December 31, 2016                                                                                 |   | -                                                   |   |   | -                                            |   |   | 19,280                                |   |   | 205,425                                       |   |   | 224,705                 |   |
|   | Net book value   December 31, 2016                                                                | $      |   600,381                                 |   | $      |  308                                    |   | $      |  34,670                          |   | $      |  329,947                                 |   | $      |  965,306           |   |
|   |                                                                                              |   |                                                |   |   |                                         |   |   |                                  |   |   |                                          |   |   |                    |   |
|   | Year ended  December 31, 2015                                                                     |   |    Exploration  and evaluation  |   |   |   Construction-  in-progress  |   |   |   Mineral  properties  |   |   |   Plant  and  equipment   |   |   |   Total  |   |
|   | **Cost**                                                                                          |   |                                                |   |   |                                         |   |   |                                  |   |   |                                          |   |   |                    |   |
|   | December 31, 2014                                                                                 | $      |  29,504                                        |   | $      |  16,704                                 |   | $      |  47,938                          |   | $      |  395,391 $                          |   |   | 489,537                 |   |
|   |      Additions                                                           |   | 6,687                                               |   |   | 48,202                                       |   |   | 4,691                                 |   |   | 28,859                                        |   |   | 88,439                  |   |
|   |      Disposals                                                           |   | -                                                   |   |   | -                                            |   |   | -                                     |   |   | -                                             |   |   | -                       |   |
|   |      Transfers                                                           |   | -                                                   |   |   | -                                            |   |   | -                                     |   |   | 7,613                                         |   |   | 7,613                   |   |
|   | December 31, 2015                                                                                 |   | 36,191                                              |   |   | 64,906                                       |   |   | 52,629                                |   |   | 431,863                                       |   |   | 585,589                 |   |
|   | **Accumulated depreciation**                                                                      |   |                                                |   |   |                                         |   |   |                                  |   |   |                                          |   |   |                    |   |
|   | December 31, 2014                                                                                 |   | -                                                   |   |   | -                                            |   |   | 10,327                                |   |   | 118,370                                       |   |   | 128,697                 |   |
|   |      Charge for the year                                                 |   | -                                                   |   |   | -                                            |   |   | 4,314                                 |   |   | 40,449                                        |   |   | 44,763                  |   |
|   | December 31, 2015                                                                                 |   | -                                                   |   |   | -                                            |   |   | 14,641                                |   |   | 158,819                                       |   |   | 173,460                 |   |
|   | Net book value   December 31, 2015                                                                | $      |  36,191                                        |   | $      |  64,906                                 |   | $      |  37,988                          |   | $      |  273,044 $                          |   |   | 412,129                 |   |

23

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **12.** | **Mineral properties, plant and equipment (continued)** |
|---------|---------------------------------------------------------|

|   | For the year ended December   31, 2016, the Company capitalized $21,072 (2015 – $nil) of net testing costs   directly attributable to bringing the Bisha zinc phase expansion plant to the   condition necessary for it to be capable of operating in the manner intended   by Management. The $21,072 capitalized costs consists of directly   attributable commissioning costs of $41,205, depreciation and amortization of   $12,845, and royalties of $1,335, net of sales receipts of $34,313. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Transfers of   construction-in-progress for the year ended December 31, 2016 and 2015 to   plant and equipment are comprised as follows: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                                                              |   | 2016      |   |   | 2015   |   |
|--------|---------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|
|   | Opening balance of  Construction-in-progress                                                      | $      | 64,906    |   | $      | 16,704 |   |
|   | Additions                                                                                         |   |      |   |   |   |   |
|   |      Tailings dam                                                        |   | 308       |   |   | -      |   |
|   |      Zinc  phase construction                                            |   | 13,240    |   |   | 48,202 |   |
|   |      Pre-commercial  production costs capitalized, net of sales receipts |   | 21,072    |   |   | -      |   |
|   | Balance before transfers                                                                          |   | 99,526    |   |   | 64,906 |   |
|   | Zinc phase assets transferred to plant and equipment                                              |   | (99,218   | )      |   | -      |   |
|   | Closing  balance of Construction-in-progress                                                      | $      |  308 |   | $      | 64,906 |   |
|   |                                                                                              |   |      |   |   |   |   |

|   | As at December 31, 2016, plant and   equipment includes finance-leased assets with a net book value of $2,764   (2014 - $3,426). As at December 31, 2016, the Company had unsettled obligations   for property, plant and equipment of $4,500, $4,300 of which is comprised of   amounts remaining to be paid related to the zinc phase expansion. Payment is   expected by June 30, 2017. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Exploration and evaluation is comprised   of assets in the following locations: |
|--------|---------------------------------------------------------------------------------|

|   |                                                                            |   | BMSC         |   |   | Timok         |   |   | Other     |   |   | Total         |   |
|--------|---------------------------------------------------------------------------------|--------|--------------|--------|--------|---------------|--------|--------|-----------|--------|--------|---------------|--------|
|   | December 31, 2015                                                               | $      | 36,191       |   | $      | -             |   | $      | -         |   | $      | 36,191        |   |
|   |      Assets  acquired through acquisition of Reservoir |   | -            |   |   | 504,501       |   |   | -         |   |   | 504,501       |   |
|   |      Mineral  property acquisition                     |   | 37,630       |   |   | -             |   |   | -         |   |   | 37,630        |   |
|   |      Additions                                         |   | 9,322        |   |   | 11,744        |   |   | 993       |   |   | 22,059        |   |
|   | December 31,  2016                                                              | $      |  83,143 |   | $      |  516,245 |   | $      |  993 |   | $      |  600,381 |   |

|   | Other exploration and evaluation assets   are comprised of the Company’s other holdings in Serbia and Macedonia. |
|--------|------------------------------------------------------------------------------------------------------------------------|

| **13.** | **Accounts payable and accrued liabilities** |
|---------|----------------------------------------------|

|   |                    |   | 2016   |   |   | 2015   |   |
|--------|-------------------------|--------|--------|--------|--------|--------|--------|
|   | Trade accounts  payable | $      | 39,415 |   | $      | 32,271 |   |
|   | Accrued  royalties      |   | 2,823  |   |   | 4,374  |   |
|   | Accrued  liabilities    |   | 22,492 |   |   | 20,236 |   |
|   |                    | $      | 64,730 |   | $      | 56,881 |   |

|   | Included in accrued liabilities are   incentive amounts due to employees (RSUs, PSUs) of $2,324 (December 31, 2015   - $2,070) and directors (DSUs) of $5,830 (December 31, 2015 – $2,837). The   Company recorded in administrative expenses $3,454 (2015 - $1,323) for RSUs   and PSUs and $3,054 (2015 – $838) for DSUs. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

24

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **14.** | **Income taxes** |
|---------|------------------|

|   | (a) | Income tax expense |
|--------|-----|--------------------|

|   | Income   tax expense was recorded for income earned in the years ended December 31,   2016 and 2015, as follows: |
|--------|------------------------------------------------------------------------------------------------------------------|

|   |                                   |   | 2016          |   |   | 2015          |   |
|--------|----------------------------------------|--------|---------------|--------|--------|---------------|--------|
|   | Current income tax expense             | $      | (31,331       | )      | $      | (26,394       | )      |
|   | Deferred income tax recovery (expense) |   | 1,443         |   |   | (8,525        | )      |
|   | Income tax expense                     | $      |  (29,888 | )      | $      |  (34,919 | )      |

|   | (b) | Reconciliation of income taxes |
|--------|-----|--------------------------------|

|   | A reconciliation of the income tax expense to the amount   calculated using the Company’s statutory tax rate is as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   |                                                |   | 2016          |   |   | 2015    |   |
|--------|-----------------------------------------------------|--------|---------------|--------|--------|---------|--------|
|   | Income tax expense at statutory rate of 26.0%       | $      | (15,854       | )      | $      | (21,006 | )      |
|   | Tax effect of:                                      |   |          |   |   |    |   |
|   | Difference in tax rates of foreign jurisdictions(1) |   | (9,586        | )      |   | (10,869 | )      |
|   | Benefit of tax losses not recognized                |   | (5,755        | )      |   | (56     | )      |
|   | Non-deductible and other items                      |   | 1,307         |   |   | (2,988  | )      |
|   |                                                | $      |  (29,888 | )      | $      | (34,919 | )      |

|   | (1) | The Eritrean statutory mining income tax rate is 38%. |
|--------|-----|-------------------------------------------------------|

|   | (c) | Recognized deferred tax assets and liabilities |
|--------|-----|------------------------------------------------|

|   | The tax effects of temporary differences that give rise to   deferred tax assets and liabilities are as follows: |
|--------|------------------------------------------------------------------------------------------------------------------|

|   |                                     |   | 2016          |   |   | 2015    |   |
|--------|------------------------------------------|--------|---------------|--------|--------|---------|--------|
|   | Deferred tax liabilities                 |   |               |   |   |         |   |
|   | Mineral  properties, plant and equipment | $      | (63,988       | )      | $      | (65,431 | )      |
|   | Net deferred tax liabilities             | $      |  (63,988 | )      | $      | (65,431 | )      |

|   | (d) | Unrecognized tax losses and tax assets |
|--------|-----|----------------------------------------|

|   | At December 31, 2016, the Company has   available losses for income tax purposes in Canada of approximately $73,680   (2015 – $26,897), approximately $10,383 of which were acquired in 2016 as   part of the Reservoir transaction and are subject to restricted future use. The   Company also has available losses for income tax purposes in Serbia of   approximately $43,307 (2015 – $nil), in Macedonia of approximately $847 (2015   – $nil), in Barbados of approximately $7,158 (2015 – $9,869) and in Eritrea   of $1,394 (2015 – $1,394). If not utilized to reduce income in future   periods, all losses will expire through 2031. The benefits of these available   tax losses and tax assets have not been recognized.  Access to some of the   losses carried forward in the future may be restricted. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Deferred tax assets have not been recognized in respect of the   following items: |
|--------|-----------------------------------------------------------------------------------|

|   |                                    |   | 2016          |   |   | 2015   |   |
|--------|-----------------------------------------|--------|---------------|--------|--------|--------|--------|
|   | Mineral properties, plant and equipment | $      | 2,974         |   | $      | 2,849  |   |
|   | Tax losses carried forward              |   | 126,386       |   |   | 38,161 |   |
|   |                                    | $      |  129,360 |   | $      | 41,010 |   |

25

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **15.** | **Provision for mine closure and reclamation** |
|---------|------------------------------------------------|

|   |                        |   | 2016   |   |   | 2015   |   |
|--------|-----------------------------|--------|--------|--------|--------|--------|--------|
|   | Balance, beginning  of year | $      | 38,732 |   | $      | 34,196 |   |
|   | Accretion                   |   | 1,944  |   |   | 1,536  |   |
|   | Additional liability        |   | -      |   |   | 3,000  |   |
|   | Balance, end of  year       | $      | 40,676 |   | $      | 38,732 |   |

|   | The Company’s provision for mine   closure and reclamation consists of costs accrued based on the current best   estimate of mine closure and reclamation activities that will be required at   the Bisha and Harena sites upon completion of mining.  These activities   include costs for earthworks, including land re-contouring and re-vegetation,   water treatment and demolition. The Company’s provision for future site   closure and reclamation costs is based on the level of known disturbance at   the reporting date, known legal requirements and cost estimates prepared by a   third party specialist. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During 2012 estimates prepared by the   third-party specialist were updated to include the Harena mining license area   as well as increases in cost estimates for certain reclamation activities.   This report was updated internally with input from the third-party specialist   as at December 31, 2015, to reflect additional disturbances incurred during   the 2015 year.  No such update was considered necessary as at December 31,   2016. Management used a pre-tax discount rate of 5.01% and an inflation   factor of 3.0% in preparing the Company’s provision for mine closure and   reclamation. Although the ultimate amount to be incurred is uncertain, based   on development, legal requirements and estimated costs as at December 31, 2016,   the undiscounted inflation-adjusted liability for provision for mine closure   and reclamation is estimated to be approximately $59,076 (December 31, 2015 –   $59,100). The cash expenditures are expected to occur over a period of time   extending several years after the projected closure of the Bisha and Harena   sites. Accretion expense of $1,944 (2015 – $1,536) is recorded in finance   costs. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **16.** | **Share capital** |
|---------|-------------------|

|   | (a) | Authorized share capital consists of an  unlimited number of common shares without par value. |
|--------|-----|-----------------------------------------------------------------------------------------------|

|   | (b) | Stock options |
|--------|-----|---------------|

|   | The shareholders of the Company renewed a stock option   plan on May 4, 2015 (the Plan). The Plan expires after three years and has   not materially changed since September 5, 2012. The maximum number of options   that can be issued under the Plan is 6.75% of outstanding shares, for a   maximum option life of 5 years. As at December 31, 2016, there are no longer   any options remaining granted under the former stock option plan. Total   options outstanding are 9,068,765 at December 31, 2016. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company has recorded the fair value   of all options granted using the Black-Scholes model.  Share-based payment   costs are amortized over vesting periods ranging between one and three years.   During 2016, share-based payments costs were calculated using the following   weighted average assumptions:  expected life of option 2.9 years (2015 – 3.9   years), stock price volatility 39% (2015 – 46%), dividend yield 4.7% (2015 – 6.3%)   and a risk-free interest rate yield of 0.8% (2015 – 0.7%).  The fair value is  particularly impacted by the Company’s stock price volatility. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The year ended December 31, 2016 includes   $1,408 (2015 - $1,454) in share-based payment costs related to stock options,   all of which were presented in administrative expenses. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

26

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **16.** | **Share capital (continued)** |
|---------|-------------------------------|

|   | (b) | Stock options (continued) |
|--------|-----|---------------------------|

|   |                            |   | Number  of options |   |   | Weighted  averageexercise price (CAD) |   |
|--------|---------------------------------|--------|--------------------|--------|--------|---------------------------------------|--------|
|   | Outstanding, December  31, 2014 |   | 12,182,000         |   | $      | 4.00                                  |   |
|   | Granted                         |   | 2,010,500          |   |   | 3.49                                  |   |
|   | Exercised as stock options      |   | (128,667           | )      |   | 4.13                                  |   |
|   | Forfeited or expired            |   | (1,170,000         | )      |   | 4.16                                  |   |
|   | Outstanding, December  31, 2015 |   | 12,893,833         |   |   | 3.90                                  |   |
|   | Granted                         |   | 2,193,100          |   |   | 4.31                                  |   |
|   | Exercised as stock options      |   | (351,668           | )      |   | 3.43                                  |   |
|   | Exercised as SARs               |   | (3,750,000         | )      |   | 3.22                                  |   |
|   | Forfeited or expired            |   | (1,916,500         | )      |   | 5.54                                  |   |
|   | Outstanding, December 31, 2016  |   | 9,068,765          |   | $      | 3.95                                  |   |

|   | Type                  |   | Range  of exerciseprice (CAD) |   |   | Number  of options |   |   | Average  remaininglife in years |   |
|--------|-----------------------|--------|-------------------------------|--------|--------|--------------------|--------|--------|---------------------------------|--------|
|   | Vested  (exercisable) | $      | 3.28 –  $4.81           |   |   | 4,996,989          |   |   | 2.0                             |   |
|   | Unvested              | $      | 3.49 –  $4.40           |   |   | 4,071,776          |   |   | 4.2                             |   |
|   | Total                 | $      | 3.28 –  $5.71           |   |   | 9,068,765          |   |   | 3.0                             |   |

|   | The weighted average share price of the   Company on the dates options were exercised in 2016 was CAD $4.32 (2015 – CAD   $4.95).  The weighted average exercise price of options exercisable at the   end of the year was CAD $4.28 (December 31, 2015 – CAD $3.98). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Stock appreciation rights |
|--------|-----|---------------------------|

|   | At December 31, 2016, $151 (December   31, 2015 - $33) was recorded in accounts payable and accrued liabilities to   account for the liability associated with cash-settled SARs. The intrinsic   value of vested SARs outstanding as at December 31, 2016, is $151. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During the year ended December 31, 2016,   the Company recorded $118 in administrative expenses related to changes in   the fair value of the stock appreciation rights during the year (2015 – credit   of $621). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In August 2016, the Board of Directors   elected for the holders of 3,750,000 stock options with tandem SARs to   receive the fair value of the SARs, less applicable statutory withholdings,   in shares, resulting in the issuance of 755,389 shares. On the date of   exercise, the fair value of the shares of $2,492, or $CAD 4.32 per share,   combined with withholding taxes of $816, was less than the previously   recognized share-based payment expense of $3,809. The difference of $501 was   removed from share based payments reserve and credited to retained earnings. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Shares – fully diluted |
|--------|-----|------------------------------|

|   |                                               |   | Number  of shares |   |
|--------|----------------------------------------------------|--------|-------------------|--------|
|   | Issued and fully paid at December 31, 2016         |   | 301,322,891       |   |
|   | Reserved for  options (note 16(b))                 |   | 9,068,765         |   |
|   | Shares – fully diluted, at December 31, 2016 |   | 310,391,656       |   |

|   | Subsequent to December 31, 2016, the   Company announced the retirement of two directors from the Board and   concurrent signing of a consulting agreement. The consulting agreement will   end on December 31, 2017. At the end of the consulting term, the Company will   issue to each retiring director 50,000 shares on January 1, 2018. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

27

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **16.** | **Share capital (continued)** |
|---------|-------------------------------|

|   | (e) | Earnings per share |
|--------|-----|--------------------|

|   | The calculations of earnings per share is based on the following   data: |
|--------|--------------------------------------------------------------------------|

|   |                                                                                                       |   | 2016         |   |   | 2015         |   |
|--------|------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------|--------------|--------|
|   | Net income attributable to Nevsun  shareholders                                                            | $      | 11,353       |   | $      | 22,794       |   |
|   | Effect of dilutive securities:                                                                             |   |         |   |   |         |   |
|   | Change in stock appreciation  rights liability                                                             |   | -            |   |   | -            |   |
|   | Diluted net income attributable  to Nevsun shareholders                                                    | $      |  11,353 |   | $      |  22,794 |   |
|   | Weighted average number of common shares outstanding for the purpose  of basic earnings per share (000s)   |   | 252,392      |   |   | 199,736      |   |
|   | Dilutive options and SARs                                                                                  |   | 608          |   |   | 1,725        |   |
|   | Weighted average number of common  shares outstanding for the purpose of diluted earnings per share (000s) |   | 253,000      |   |   | 201,461      |   |
|   | Earnings per share                                                                                         |   |         |   |   |         |   |
|   |      Basic                                                                        | $      |  0.04   |   | $      |  0.11   |   |
|   |      Diluted                                                                      | $      |  0.04   |   | $      |  0.11   |   |

|   | Basic earnings per share is computed by   dividing the net income attributable to Nevsun shareholders by the weighted   average number of common shares outstanding during the year. Diluted earnings   per share reflects the potential dilution of outstanding SARs and stock   options in the weighted average number of common shares outstanding during   the year, if dilutive. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Dividends |
|--------|-----|-----------|

|   | The Company declared in 2016 four   quarterly dividends of $0.04 per share for total declarations of $40,060. In   2015, the Company declared four quarterly dividends of $0.04 per share for   total declarations of $31,959. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In September 2016, the Company implemented   a Dividend Reinvestment Plan (“DRIP”) which allows shareholders to purchase   additional common shares of the Company at a 3% discount to fair market value   by reinvesting their cash dividends. Approximately 13% of common shareholders   elected to participate in the DRIP for the Q3 2016 dividend.  Accordingly,   the Company paid dividends of $10,476 in cash and $1,590 in common shares   (564,044 shares) in October 2016. Approximately 12% of common shareholders   elected to participate in the DRIP for the Q4 2016 dividend. Accordingly, the   Company paid dividends of $10,562 in cash and $1,537 in common shares   (465,369 shares) in January 2017. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **17.** | **Interest in subsidiaries** |
|---------|------------------------------|

|   | The following table   presents the financial position of the Company’s 60% owned subsidiary, BMSC,   as at December 31, 2016 and 2015.  The information is presented on a 100%   basis. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                |   | 2016     |   |   | 2015     |   |
|--------|-----------------------------------------------------|--------|----------|--------|--------|----------|--------|
|   | Current assets                                      | $      | 116,141  |   | $      | 129,778  |   |
|   | Non-current assets                                  |   | 493,542  |   |   | 429,513  |   |
|   |                                                |   |     |   |   |     |   |
|   | Current liabilities                                 |   | (57,102  | )      |   | (55,225  | )      |
|   | Non-current liabilities                             |   | (104,664 | )      |   | (103,119 | )      |
|   | Net assets                                          | $      | 447,917  |   | $      | 400,947  |   |
|   | Net assets attributable to non-controlling interest | $      | 179,168  |   | $      | 160,379  |   |

28

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **17.** | **Interest in subsidiaries (continued)** |
|---------|------------------------------------------|

|   | The following table   presents the financial results of BMSC for the years ended December 31, 2016 and   2015, respectively: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

|   |                                                                          |   | 2016    |   |   | 2015    |   |
|--------|-------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
|   | Revenues                                                                      | $      | 230,705 |   | $      | 356,872 |   |
|   | Net income and comprehensive income                                           |   | 49,344  |   |   | 57,698  |   |
|   | Net income and comprehensive income attributable to non-controlling  interest | $      | 19,737  |   | $      | 23,079  |   |

|   | The   following table presents the summary cash flow information of BMSC for the years   ended December 31, 2016 and 2015, respectively: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                              |   | 2016    |   |   | 2015    |   |
|--------|---------------------------------------------------|--------|---------|--------|--------|---------|--------|
|   | Net cash provided by operating activities         | $      | 67,209  |   | $      | 131,906 |   |
|   | Net cash used in investing activities             |   | (36,162 | )      |   | (84,351 | )      |
|   | Net cash used in financing activities             |   | (40,000 | )      |   | (47,500 | )      |
|   | Increase (decrease) in cash and cash  equivalents | $      | (8,953  | )      | $      | 55      |   |

|   | The   following table presents the financial position of the Company’s subsidiary, Rakita,   as at December 31, 2016 and 2015. The information is presented on a 100%   basis. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                 |   | 2016    |   |   | 2015   |   |
|--------|------------------------------------------------------|--------|---------|--------|--------|--------|--------|
|   | Current assets                                       | $      | 8,299   |   | $      | -      |   |
|   | Non-current assets                                   |   | 518,345 |   |   | -      |   |
|   |                                                 |   |    |   |   |   |   |
|   | Current liabilities                                  |   | (11,849 | )      |   | -      |   |
|   | Non-current liabilities                              |   | -       |   |   | -      |   |
|   | Net assets                                           | $      | 514,795 |   | $      | -      |   |
|   | Net assets attributable to non-controlling  interest | $      | 1,202   |   | $      | -      |   |

|   | The following table presents the financial results   of Rakita for the years ended December 31, 2016 and 2015, respectively: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

|   |                                                                          |   | 2016 |   |   | 2015 |   |
|--------|-------------------------------------------------------------------------------|--------|------|--------|--------|------|--------|
|   | Net income and comprehensive income                                           | $      | (616 | )      | $      | -    |   |
|   | Net income and comprehensive income  attributable to non-controlling interest |   | -    |   |   | -    |   |

|   | The following table presents the summary cash flow   information of Rakita for the years ended December 31, 2016 and 2015,   respectively. The 2016 year represents cash flows that occurred subsequent to   the closing of the Reservoir transaction on June 23, 2016. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                              |   | 2016   |   |   | 2015 |   |
|--------|---------------------------------------------------|--------|--------|--------|--------|------|--------|
|   | Net cash provided by operating activities         | $      | (550   | )      | $      | -    |   |
|   | Net cash used in investing activities             |   | (7,497 | )      |   | -    |   |
|   | Net cash used in financing activities             |   | 14,450 |   |   | -    |   |
|   | Increase (decrease) in cash and cash  equivalents | $      | 6,403  |   | $      | -    |   |

29

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **18.** | **Revenues** |
|---------|--------------|

|   |                                               |   | 2016    |   |   | 2015    |   |
|--------|----------------------------------------------------|--------|---------|--------|--------|---------|--------|
|   | Zinc concentrate  sales                            | $      | 26,567  |   | $      | -       |   |
|   | Zinc concentrate by-product sales                  |   | 1,358   |   |   | -       |   |
|   | Copper concentrate sales                           |   | 125,046 |   |   | 320,797 |   |
|   | Copper concentrate by-product  sales               |   | 19,934  |   |   | 61,891  |   |
|   | Other                                              |   | 78,415  |   |   | 21,537  |   |
|   | Zinc concentrate treatment charges                 |   | (2,678  | )      |   | -       |   |
|   | Copper concentrate treatment and  refining charges |   | (17,937 | )      |   | (47,353 | )      |
|   |                                               | $      | 230,705 |   | $      | 356,872 |   |

|   | For the year ended December 31, 2016, copper concentrate   sales include positive provisional and final pricing and physical quantity adjustments   of $601 (2015 – net of charges of $33,415), while zinc concentrate sales include   positive provisional and final pricing and physical quantity adjustments of $106   (2015 – $nil). As at December 31, 2016, a 10% change to the underlying metals   prices would result in a change in revenue and accounts receivable of $1,576,   based on the total quantities of metals in sales contracts for which the   provisional pricing periods were not yet closed.  Provisional pricing periods   are typically one to four months after shipment (see also note 23). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For the year ended December 31, 2015, copper concentrate   by-product sales include $16,414 of revenue, net of final pricing and   physical quantity adjustments of $877, recorded on the sale of precious metal   concentrate derived from pyrite sand ore. No such sale took place in 2016. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Other revenue consists of stockpiled gold and silver   bearing ore shipped directly to buyers. |
|--------|------------------------------------------------------------------------------------------------|

|   | For the year ended December 31, 2016, the Company recorded   pre-commercial production zinc and zinc by-product sales of $34,313. When   offset by pre-commercial production operating costs of $41,205, depreciation   and amortization of $12,845, and royalties of $1,335, the resultant net cost   of $21,072 was capitalized to the cost of the zinc expansion phase plant and   equipment. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **19.** | **Operating expenses** |
|---------|------------------------|

|   |                                                      |   | 2016    |   |   | 2015    |   |
|--------|-----------------------------------------------------------|--------|---------|--------|--------|---------|--------|
|   | Raw materials, consumables and  supplies                  | $      | 51,899  |   | $      | 65,495  |   |
|   | Employment,  benefits and contractors                     |   | 41,355  |   |   | 48,082  |   |
|   | Transport, port and shipping                              |   | 53,474  |   |   | 72,963  |   |
|   | Repairs and maintenance                                   |   | 7,608   |   |   | 11,598  |   |
|   | Overheads                                                 |   | 11,109  |   |   | 8,350   |   |
|   | Changes in inventories                                    |   | (20,798 | )      |   | (5,598  | )      |
|   | Pre-commercial production  operating expenses capitalized |   | (41,205 | )      |   | -       |   |
|   |                                                      | $      | 103,442 |   | $      | 200,890 |   |

| **20.** | **Administrative expenses** |
|---------|-----------------------------|

|   |                           |   | 2016   |   |   | 2015   |   |
|--------|--------------------------------|--------|--------|--------|--------|--------|--------|
|   | Salaries and employee benefits | $      | 5,757  |   | $      | 5,496  |   |
|   | Share-based payments           |   | 1,550  |   |   | 833    |   |
|   | Long-term incentives           |   | 6,508  |   |   | 2,161  |   |
|   | Business development           |   | 521    |   |   | 1,730  |   |
|   | Other                          |   | 4,877  |   |   | 3,375  |   |
|   |                           | $      | 19,213 |   | $      | 13,595 |   |

30

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **21.** | **Commitments** |
|---------|-----------------|

|   | As of December 31, 2016, the Company had the following contractual   obligations: |
|--------|-----------------------------------------------------------------------------------|

|   |                                             |   | Total   |   |   | Less than 1   year |   |   | 1-3 years |   |   | 3-5 years |   |   | Over 5 years |   |
|--------|--------------------------------------------------|--------|---------|--------|--------|--------------------|--------|--------|-----------|--------|--------|-----------|--------|--------|--------------|--------|
|   | Purchase commitments and contractual obligations | $      | 64,107  |   | $      | 64,107             |   | $      |      |   | $      |      |   | $      |         |   |
|   | Mine closure and reclamation                     |   | 59,076  |   |   | 298                |   |   | -         |   |   | -         |   |   | 58,778       |   |
|   | Minimum operating lease payments                 |   | 2,306   |   |   | 2,306              |   |   | -         |   |   | -         |   |   | -            |   |
|   | Total contractual obligations                    | $      | 125,489 |   | $      | 66,711             |   | $      | -         |   | $      | -         |   | $      | 58,778       |   |

|   | The Company has arranged an annually renewable   environmental bond for the Bisha Project for $30,000 at a cost of 1% per   annum. |
|--------|------------------------------------------------------------------------------------------------------------------------------------|

| **22.** | **Segment information** |
|---------|-------------------------|

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

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

|   | The   principal products of the Company’s mining operations in Africa are   copper and zinc concentrates, containing by-products of gold and silver. Cash   and cash equivalents of $197,936 are located outside of Africa at December 31,   2016 (December 31, 2015 - $432,090). Information related to the reportable   operating segments is as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Total assets      |   |    December  31,   2016 |   |   |   December  31,   2015 |   |
|--------|-------------------|--------|----------------------------------------|--------|--------|----------------------------------|--------|
|   | Europe            | $      | 528,061                                |   | $      | -                                |   |
|   | Africa            |   | 609,683                                |   |   | 559,291                          |   |
|   | North America     |   | 171,418                                |   |   | 444,829                          |   |
|   | Total             |   | 1,309,162                              |   |   | 1,004,120                        |   |
|   | Total liabilities |   |    December 31, 2016    |   |   |   December 31, 2015    |   |
|   | Europe            | $      | 6,005                                  |   | $      | -                                |   |
|   | Africa            |   | 161,766                                |   |   | 158,344                          |   |
|   | North America     |   | 30,484                                 |   |   | 16,076                           |   |
|   | Total             | $      | 198,255                                |   | $      | 174,420                          |   |

|   |          |   | Revenues                     |   |   | Cost of sales |   |   | Net income (loss)  attributable to     Nevsun shareholders |   |
|--------|---------------|--------|------------------------------|--------|--------|---------------|--------|--------|------------------------------------------------------------|--------|
|   |          |   | Year ended December      31, |   |
|   |          |   | 2016                         |   |   | 2015          |   |   | 2016                                                       |   |   | 2015 |   |   |   2016 |   |   | 2015 |   |
|   | Europe        | $      | -                            |   | $      | -             |   | $      | -                                                          |   | $ | - |   | $ | (616 | ) | $ | - |   |
|   | Africa        |   | 230,705                      |   |   | 356,872       |   |   | 150,223                                                    |   |   | 264,159 |   |   | 29,607 |   |   | 34,619 |   |
|   | North America |   | -                            |   |   | -             |   |   | -                                                          |   |   | - |   |   | (17,638 | ) |   | (11,825 | ) |
|   | Total         | $      | 230,705                      |   | $      | 356,872       |   | $      | 150,223                                                    |   | $ | 264,159 |   | $ | 11,353 |   | $ | 22,794 |   |

| **23.** | **Financial instruments and risk management** |
|---------|-----------------------------------------------|

|   | Financial instruments are agreements between two parties   that result in promises to pay or receive cash or equity instruments. |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

31

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **23.** | **Financial instruments and risk management (continued)** |
|---------|-----------------------------------------------------------|

|   | The Company has exposure to the following risks from its  use of financial instruments: |
|--------|-----------------------------------------------------------------------------------------|

|   | - market risk, including commodity price, fuel price and currency        risks;
- redit risk; and
- liquidity risk. |
|--------|---------------------------------------------------------------------------------------------------------------------|

|   | This note presents information about the Company’s   exposure to each of the above risks, the Company’s objectives, procedures and   processes for measuring and managing risk, and the Company’s management of   capital. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Board of Directors has overall responsibility for   the establishment and oversight of the Company’s risk management framework.   The Company’s risk management procedures are established to identify and   analyze the risks faced by the Company.  The Company, through its training   and management standards and procedures, aims to develop a disciplined and   constructive control environment in which all employees understand their   roles and obligations. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company’s Audit Committee oversees how management   monitors compliance with the Company’s financial risk management procedures   and processes and reviews the adequacy of the risk management framework in   relation to the risks faced by the Company. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) | Market risk |
|--------|-----|-------------|

|   | Market risk is the risk that changes in   market prices, such as foreign exchange rates, commodity prices, interest   rates, fuel prices and equity prices will affect the Company’s income or the   value of its holdings of financial instruments.  The objective of market risk   management is to manage and control market risk exposures within acceptable  parameters, while optimizing the return on capital. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Metals price risk |
|--------|-----|-------------------|

|   | The Company is subject to price risk fluctuations in   market prices of zinc, copper, gold, and silver, and the profitability of the   Company’s operations is highly correlated to the market prices of these   metals.  Historically, zinc, copper, gold, and silver prices have fluctuated   widely and are affected by numerous factors outside the Company’s control. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company is subject to price risk from these fluctuations   for sales that have not yet settled as of the balance sheet date.  The   commodity price risk associated with financial instruments relates to changes   in fair value caused by final pricing adjustments to receivables for these   metals. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The   Company has not hedged any of its concentrate sales or DSO sales. The quantities   of payable zinc, copper, gold, and silver subject to final settlement as at   December 31, 2016, and the weighted average forward prices per pound or ounce   used to value the related receivables are as follows: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                  |   | 2016                               |   |
|--------|-------------------------------------------------------|--------|------------------------------------|--------|
|   |                                                  |   | Quantity(000s payable pounds) |   |   | Weighted average forward  price per pound |   |
|   | Zinc in zinc  concentrate subject to final settlement |   | 8,197                              |   | $ | 1.16 |   |
|   |                                                  |   | Quantity (payable ounces      | )      |   |   Weighted average forward  price per ounce |   |
|   | Gold subject  to final settlement                     |   | 2,905                              |   | $ |  1,140 |   |
|   | Silver subject to final settlement                    |   | 189,330                            |   | $ |  15.40 |   |

32

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **23.** | **Financial instruments and risk management (continued)** |
|---------|-----------------------------------------------------------|

|   | (a) | Market  risk (continued) |
|--------|-----|--------------------------|

|   | (i) | Metals price risk (continued) |
|--------|-----|-------------------------------|

|   | Sales of zinc and copper concentrates as well as DSO   material are recognized on a provisional pricing basis when risks and   rewards, transfers and the rights and obligations of ownership pass to the   customer, which usually occurs on shipment. However, the final pricing for   the product sold and purchased is not determined at that time as it is   contractually linked to market prices on a subsequent date. These   arrangements have the characteristics of a derivative instrument as the value   of the related receivables will vary as the price for the underlying   commodity varies in the metal markets. These pricing adjustments result in   gains in a rising price environment and losses in a declining price   environment and are recorded as a change in revenue at each balance sheet   date and at final settlement. The effect on revenue and accounts receivable   and payable of a 10% change to the underlying metals prices is disclosed in   note 18. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Fuel price risk |
|--------|------|-----------------|

|   | Fuel consumption comprises a significant portion of the   Company’s operating expenses and the Company is therefore subject to fuel   price risk on fluctuations of the market price of diesel. Based on an   estimated annual consumption of 40 million litres of diesel fuel, a $0.10   change in the price per litre of fuel would have a $4.0 million impact on  earnings before tax. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Currency risk |
|--------|-------|---------------|

|   | The Company’s functional currency is the United States   dollar (USD). The Eritrean nakfa (ERN) is directly tied to the USD and   therefore does not present a foreign exchange risk in terms of the functional   currency.  The Company is exposed to currency risk on settlements of   purchases that were denominated in currencies other than the functional   currency.  Historically the currency exposures are primarily to the Canadian   dollar (CAD), South African rand (ZAR), Australian dollar (AUD), and Euro   (EUR). With the acquisition of Reservoir, the Company is now also subject to   fluctuations in the Serbian dinar (RSD) and Macedonian dinar (MKD). |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The   following is a break-down of financial assets and liabilities denominated in   foreign currencies to which the Company is exposed: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                     |   | 2016    |   |
|--------|------------------------------------------|--------|---------|--------|
|   |                                     |   | CAD     |   |   | ZAR |   |   |  AUD   |   |   |  EUR   |   |   | RSD |   |   | MKD |   |
|   | Cash and cash equivalents                |   | 3,370   |   |   | 500 |   |   | - |   |   | 450 |   |   | 27,606 |   |   | 9,083 |   |
|   | Accounts receivable                      |   | 314     |   |   | - |   |   | - |   |   | - |   |   | 154,850 |   |   | 1,330 |   |
|   | Payables and accruals                    |   | (14,755 | )      |   | (2,640 | ) |   | (121 | ) |   | (576 | ) |   | (610,122 | ) |   | (270 | ) |
|   | Net financial assets (liabilities)       |   | (11,071 | )      |   | (2,140 | ) |   | (121 | ) |   | (126 | ) |   | (427,667 | ) |   | 10,143 |   |
|   | USD foreign exchange rate                |   | 0.74    |   |   | 0.07 |   |   | 0.72 |   |   | 1.05 |   |   | 0.01 |   |   | 0.02 |   |
|   | Balance sheet exposure in equivalent USD |   | (8,221  | )      |   | (156 | ) |   | (87 | ) |   | (132 | ) |   | (3,628 | ) |   | 174 |   |
|   |                                     |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   |                                     |   | 2015    |   |
|   |                                     |   | CAD     |   |   | ZAR |   |   |  AUD   |   |   |  EUR   |   |   | RSD |   |   | MKD |   |
|   | Cash and cash equivalents                |   | 675     |   |   | 506 |   |   | - |   |   | - |   |   | - |   |   | - |   |
|   | Accounts receivable                      |   | 117     |   |   | 1 |   |   | - |   |   | - |   |   | - |   |   | - |   |
|   | Payables and accruals                    |   | (9,740  | )      |   | (5,341 | ) |   | (129 | ) |   | (444 | ) |   | - |   |   | - |   |
|   | Net financial assets (liabilities)       |   | (8,948  | )      |   | (4,837 | ) |   | (129 | ) |   | (444 | ) |   | - |   |   | - |   |
|   | USD foreign exchange rate                |   | 0.72    |   |   | 0.06 |   |   | 0.73 |   |   | 1.09 |   |   | - |   |   | - |   |
|   | Balance sheet exposure in equivalent USD |   | (6,465  | )      |   | (311 | ) |   | (94 | ) |   | (484 | ) |   | - |   |   | - |   |

33

----

 
| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **23.** | **Financial instruments and risk management (continued)** |
|---------|-----------------------------------------------------------|

|   | (a) | Market risk (continued) |
|--------|-----|-------------------------|

|   | (iii) | Currency risk (continued) |
|--------|-------|---------------------------|

|   | A 10% percent strengthening of the US dollar against the   above currencies at December 31, 2016 would have increased (decreased) net   income by the amounts shown below.  This analysis assumes that all other   variables remain constant: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   |   2016 |   |   |   2015 |   |
|--------|--------|--------|------------------|--------|--------|------------------|--------|
|   | CAD    | $      | 822              |   | $      | 647              |   |
|   | ZAR    |   | 16               |   |   | 31               |   |
|   | AUD    |   | 9                |   |   | 9                |   |
|   | EUR    |   | 13               |   |   | 48               |   |
|   | RSD    |   | 363              |   |   | -                |   |
|   | MKD    |   | (17              | )      |   | -                |   |

|   | (b) | Credit risk |
|--------|-----|-------------|

|   | Credit risk is the risk of financial loss to the Company if a   counterparty to a financial instrument fails to meet its contractual  obligations, and arises principally from the Company’s financial assets. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Cash equivalents |
|--------|-----|------------------|

|   | The Company limits its exposure to credit risk by only   investing in highly liquid securities and only with counterparties that have   a strong credit rating.  Given these high credit ratings, management does not  expect any counterparty to fail to meet its obligations. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Accounts receivable |
|--------|------|---------------------|

|   | The Company’s accounts receivable are due primarily from   the smelters and metals traders to which the Company sells zinc and copper   concentrates and have maximum settlement periods of approximately four   months. The Company also makes significant advances to vendors at its Bisha   Mine, mostly with respect to the procurement of materials and supplies   inventory. Management does not expect these counterparties to fail to meet  their obligations. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Exposure   to credit risk |
|--------|-------|---------------------------|

|   | The carrying amount of financial assets represents the   maximum credit exposure.  Cash and cash equivalents held by the Company have   contractual maturities of less than 90 days.  The maximum exposure to credit   risk at the reporting date was: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                              |   |   2016 |   |   |   2015 |   |
|--------|-----------------------------------|--------|------------------|--------|--------|------------------|--------|
|   | Cash and cash equivalents         | $      | 199,256          |   | $      | 434,340          |   |
|   | Due from non-controlling interest |   | 5,000            |   |   | 44,180           |   |
|   | Trade accounts receivable         |   | 3,338            |   |   | 7,990            |   |
|   | Advances to vendors               |   | 7,725            |   |   | 7,698            |   |
|   |                              | $      | 215,319          |   | $      | 494,208          |   |

|   | The Company does not have any amounts receivable that it   considers impaired or otherwise uncollectible. |
|--------|-----------------------------------------------------------------------------------------------------------|

34

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **23.** | **Financial instruments and risk management (continued)** |
|---------|-----------------------------------------------------------|

|   | (c) | Liquidity risk |
|--------|-----|----------------|

|   | Liquidity risk is the risk that the   Company will not be able to meet its financial obligations as they fall due.   The Company’s approach to managing liquidity is to ensure, as far as   possible, that it will always have sufficient liquid funds to meet its   liabilities when due, under both normal and stressed conditions, without   incurring unacceptable losses or risking damage to the Company’s reputation. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Typically, the Company ensures that it   has sufficient cash on hand to meet expected operational expenses including   the servicing of financial obligations, if any; this excludes the potential   impact of extreme circumstances that cannot reasonably be predicted, such as   natural disasters. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The contractual financial liabilities   of the Company as of December 31, 2016, total $86,873 (December 31, 2015 - $70,257).    The undiscounted cash flows of the liabilities are equal to their contractual   amounts. Substantially all of the liabilities presented as accounts payable   and accrued liabilities are due within ninety days of December 31, 2016. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Fair value versus carrying amounts |
|--------|-----|------------------------------------|

|   | The carrying amount of financial assets   and liabilities carried at amortized cost is a reasonable approximation of   fair value. |
|--------|------------------------------------------------------------------------------------------------------------------------------------|

| **24.** | **Capital management** |
|---------|------------------------|

|   | The Board’s policy is to maintain a strong capital base   so as to maintain investor, creditor and market confidence and to sustain   future development of the business. The capital of the Company consists of   equity attributable to Nevsun shareholders and amounts related to  non-controlling interest. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company manages its capital structure and makes   adjustments in light of the changes in its economic environment and the risk   characteristics of the Company’s assets. To effectively manage the Company’s   capital requirements, the Company has in place a planning, budgeting and   forecasting process to help determine the funds required to ensure the   Company has the appropriate liquidity to meet its operating and growth   objectives. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **25.** | **Key management personnel compensation** |
|---------|-------------------------------------------|

|   | Key management personnel   consists of directors, executive officers, management at a vice president   level, the Bisha Mine General Manager, and the Timok Project Senior VP   Projects. Long-term incentives consists of RSUs, PSUs and DSUs. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                    |   | 2016   |   |   | 2015  |   |
|--------|---------------------------------------------------------|--------|--------|--------|--------|-------|--------|
|   | Salaries,  directors fees and other short-term benefits | $      | 6,507  |   | $      | 4,897 |   |
|   | Share-based payments                                    |   | 1,205  |   |   | 592   |   |
|   | Long-term incentives                                    |   | 6,395  |   |   | 1,859 |   |
|   | Total key management personnel compensation             | $      | 14,107 |   | $      | 7,348 |   |

|   | The Chief Executive Officer (“CEO”) has announced plans   to retire in 2017. At the time of the CEO’s retirement, the Company expects   to incur outlays in a range of $8,000 to $9,200, comprised primarily of   long-term incentive compensation, based on recent trading prices of the   Company’s common shares. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

35

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| **NEVSUN RESOURCES LTD.**Notes to Consolidated Financial Statements      (Expressed in thousands of United States dollars, unless otherwise stated)      Years ended December 31, 2016 and 2015 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **26.** | **Contingency** |
|---------|-----------------|

|   | (a) | Legal Claims |
|--------|-----|--------------|

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

|   | (b) | Contractual dispute with Canaccord |
|--------|-----|------------------------------------|

|   | Canaccord Genuity Corp.   (“Canaccord”) was an advisor to Reservoir in connection with the transaction   described in note 6 to these consolidated financial statements (the   “Transaction”). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In March 2016, Canaccord and   Reservoir entered into an advisory agreement to evaluate third party funding   arrangements which related to the potential exercise by Reservoir of a right   of first refusal (“ROFO”) under its joint venture agreement with Freeport.   Canaccord was paid a fee of $1,000 for providing financial advisory services   in connection with Reservoir’s exercise of the ROFO. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In early April 2016,   Canaccord and Reservoir entered into a new advisory agreement regarding a   potential acquisition of control of Reservoir (the “April Advisory   Agreement”). Canaccord has filed a Notice of Claim in the British Columbia   Supreme Court regarding the fees under the April Advisory Agreement.   Canaccord initially demanded an advisory fee of CAD$11,658 (the “Transaction   Fee”) and has subsequently increased its claim for a Transaction Fee to   CAD$14,670, which would represent approximately 3.0% of the overall   transaction value of approximately CAD$482,000 based on the closing price of the Company’s shares (CAD$4.70), the last   trading day prior to the date of announcement of the Transaction. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On September 12, 2016, Reservoir filed a Reply to the Notice of Claim to dispute the Transaction Fee demanded by Canaccord on the basis that, among other things, it is not determined in accordance with the terms of the April Advisory Agreement. Reservoir has paid to Canaccord the sum of CAD$6,047 (which includes a transaction fee of CAD$5,617 and a second fairness opinion fee of $100, taxes and expenses). Reservoir believes that this constitutes all fees that Canaccord is entitled under the April Advisory Agreement. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | No provision has been   recorded in these consolidated financial statements as the outcome of this   claim is not determinable. |
|--------|---------------------------------------------------------------------------------------------------------------------------------|

36

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