**ANNUAL INFORMATION FORM**

**FOR THE FISCALYEAR ENDED DECEMBER 31, 2012**

**Dated: March 20, 2013**

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| ANNUAL INFORMATION FORM - 2012 |
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**TABLE OF CONTENTS**

| **PRELIMINARY NOTES.**                                                                                  | **3**  |
|---------------------------------------------------------------------------------------------------------|--------|
|      Incorporation of Financial Statements and MD&A.                       | 3      |
|      Currency and Exchange Rates.                                              | 3      |
|      Forward Looking Statements.                                               | 4      |
|      Information Concerning Preparation of Reserve and Resource Estimates.     | 5      |
|      Glossary and Defined Terms.                                               | 5      |
| **CORPORATE STRUCTURE.**                                                                                | **10** |
|      Name and Incorporation.                                                   | 10     |
|      Intercorporate Relationships.                                             | 10     |
| G**ENERAL DEVELOPMENT OF THE BUSINESS.**                                                                | 11     |
|      Three Year History.                                                       | 11     |
|      Description of the Business.                                              | 13     |
|      The Bisha Mine.                                                           | 13     |
|      Gold Sales.                                                               | 13     |
|      Methods of Production.                                                    | 13     |
|      Skill and Knowledge.                                                      | 13     |
|      Employees.                                                                | 14     |
|      Corporate Social Responsibility.                                          | 14     |
|      Risk Factors.                                                             | 15     |
| **MINERAL PROPERTIES.**                                                                                 | 24     |
|      Project Description and Location.                                         | 24     |
|      Accessibility, Climate, Local Resources, Infrastructure and Physiography. | 25     |
|      Exploration.                                                              | 26     |
|      Geology and Mineralization.                                               | 28     |
|      Drilling.                                                                 | 28     |
|      Sampling and Analysis.                                                    | 29     |
|      Security of Samples.                                                      | 30     |
|      Mineral Resource Estimate.                                                | 30     |
|      Mineral Reserves.                                                         | 34     |
|      Operations.                                                               | 36     |
|      Metallurgical Test Work and Process Plant Design.                         | 37     |
|      Copper Plant Phase II Update.                                             | 38     |
|      Mine Waste and Water Management.                                          | 38     |
|      Infrastructure.                                                           | 39     |
|      Socioeconomic and Environmental Assessment and Approval.                  | 39     |
|      Exploration and Development.                                              | 40     |
| **DIVIDENDS.**                                                                                          | **40** |
| **DESCRIPTION OF CAPITAL STRUCTURE.**                                                                   | **40** |
| **MARKET FOR SECURITIES.**                                                                              | **41** |
| **DIRECTORS AND OFFICERS.**                                                                             | 42     |
|      Name, Occupation and Security Holding.                                    | 42     |
|      Cease Trade Orders, Bankruptcies, Penalties or Sanctions.                 | 43     |
|      Conflicts of Interest.                                                    | 44     |
|      Audit Committee.                                                          | 45     |
|      Audit Committee Charter.                                                  | 45     |
|      Independent Advice and Funding.                                           | 45     |
|      Composition of Audit Committee.                                           | 45     |
|      Pre-Approval Policies and Procedures.                                     | 46     |
|      External Auditor Fees.                                                    | 47     |
| **LEGAL PROCEEDINGS AND REGULATORY ACTIONS.**                                                           | **47** |
| **INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS.**                                         | **48** |
| **TRANSFER AGENTS AND REGISTRARS.**                                                                     | **48** |
| **MATERIAL CONTRACTS.**                                                                                 | **48** |
| **NAMES AND INTERESTS OF EXPERTS.**                                                                     | **48** |
| **ADDITIONAL INFORMATION.**                                                                             | **49** |
| **SCHEDULE A:  AUDIT COMMITTEE CHARTER.**                                                          | **50** |

| **2 |**Nevsun Resources Ltd. |
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| ANNUAL INFORMATION FORM - 2012 |
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**PRELIMINARY NOTES**

**Incorporationof Financial Statements and MD&A**

The following documents are incorporated by referenceand form part of this annual information form (the “Annual Information Form” or“AIF”) which is prepared in accordance with Form 51-102F2 – *AnnualInformation Form*(“Form 51-102F2”).  These documents may be accessed usingthe System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and the Electronic Data GatheringAnalysis and Retrieval (“EDGAR”) at http://www.sec.gov/edgar.shtml: 

Consolidated financial statements for the year endedDecember 31, 2012, together with the auditors’ report thereon dated March 20, 2013;and

Management’s Discussion and Analysis (“MD&A”) forthe year ended December 31, 2012 and 2011.

**Currency and Exchange Rates**

Alldollar amounts in this AIF are expressed in United States dollars, unlessotherwise indicated (“CAD” denotes Canadian dollars).  The following table setsforth the value of the Canadian dollar expressed in United States dollars onDecember 31 of each year and the average, high and low exchange rates duringthe year indicated based on the noon rate of exchange as reported by the Bankof Canada:

| **Canadian Dollars into****United States Dollars** | **2012** | **2011** | **2010** |
|----------------------------------------------------|----------|----------|----------|
| Closing                                            | 1.01     | 0.98     | 1.01     |
| Average                                            | 1.00     | 1.01     | 0.97     |
| High                                               | 1.03     | 1.06     | 1.01     |
| Low                                                | 0.96     | 0.94     | 0.93     |

The noon rate of exchange on March 19, 2013, asreported by the Bank of Canada for the conversion of Canadian dollars intoUnited States dollars was CAD$1.00 equals US$0.9733.

For ease of reference, the following factors forconverting metric measurements to imperial equivalents are provided:

| **To Convert from Metric** | **To Imperial**     | **Multiply by** |
|----------------------------|---------------------|-----------------|
| Hectares                   | Acres               | 2.471           |
| Meters                     | Feet                | 3.281           |
| Kilometers                 | Miles               | 0.621           |
| Tonnes                     | Tons (2,000 pounds) | 1.102           |
| Grams/tonne                | Ounces (troy/ton)   | 0.029           |

| **3 |**Nevsun Resources Ltd. |
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**Forward-Looking Statements**

This AnnualInformation Form contains forward-looking statements within the meaning of the United States PrivateSecurities Litigation Reform Act of 1995 and applicable Canadian securitieslegislation concerning anticipateddevelopments in the Company’s continuing and future operations in Eritrea andin the putative class action lawsuit, the adequacy of the Company’s financialresources and financial projections.  Forward-looking statements include, butare not limited to, statements concerning or the assumptions related to estimatesof capital and operating costs, the timing, nature and extent of future goldand copper production and grade, the timing, nature and extent of copper phaseexpansion, expanding exploration licenses, the estimation of mineral reserves and resources, therealization of mineral reserve estimates, theconversion of mineral properties to reserves and resources, the potential toexpand resources, reserves and mine life, future exploration budgets, targets andwork programs, capital expenditures and objectives, anticipated timing of grantof permits, mining and development plans and activities, construction and productiontargets and timetables, grades, processing rates, life of mine, net cash flows,metal prices, exchange rates, reclamation costs, results of the drill program, dividendplans and policy, litigation matters, integration or expansion of operations, requirements for additional capital,government regulation of mining operations, environmental risks, politicalrisks and uncertainties, unanticipated reclamation expenses, and other events or conditions that may occur in thefuture.  Forward-looking statements are frequently, but not always, identifiedby words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,”“potential,” “possible,” “budget” and similar expressions, or statements thatevents, conditions or results “will,” “may,” “could” or “should” occur or beachieved.  Information concerning the interpretation of drill results andmineral resource and reserve estimates also may be deemed to be forward-lookingstatements, as such information constitutes a prediction of what mineralizationmight be found to be present if and when a project is actually developed, andin the case of mineral reserves, such statements reflect the conclusion basedon certain assumptions that the mineral deposit can be economically exploited. 

Forward-lookingstatements are statements about the future and are inherently uncertain, andactual achievements of the Company or other future events or conditions maydiffer materially from those reflected in the forward-looking statements due toa variety of risks, uncertainties and other factors, including, withoutlimitation, the risks that:  (i) any of the assumptions in the historicalresource estimates turn out to be incorrect, incomplete, or flawed in anyrespect; (ii) the methodologies and models used to prepare the resource andreserve estimates either underestimate or overestimate the resources or reservesdue to hidden or unknown conditions, (iii) any unanticipated costs or delays inthe transition from the oxide phase of the Bisha mining operations to thecopper phase in 2013 adversely affect any of the Company’s estimates orprojections of future production from later phases of its mining operations; (iv)the mine operations are disrupted or suspended due to acts of God, conflicts inthe country of Eritrea, unforeseen government actions or other events; (v) theCompany experiences the loss of key personnel; (vi) the mine operations areadversely affected by other political or military, or terrorist activities; (vii)new government regulations in Canada, the United States or other countries inwhich the Company operates adversely affect the Company’s future business andoperations; (viii) the Company fails to successfully integrate any acquiredbusinesses, or discovers unforeseen financial or operational issues with suchbusinesses;   (ix) the Company becomes involved in any material disputes withany of its key business partners, lenders, suppliers or customers, includingbut not limited to the Eritrean National Mining Corporation; (x) the Company issubjected to any hostile takeover or other unsolicited attempts to acquirecontrol of the Company; or (xi) the Company or any of its directors or officersis subject to any adverse ruling in any of the pending litigation to which theyare a party, or become the subject of any government investigation orproceeding. For a fuller discussion of these and other risks, see “RiskFactors” below. 

| **4 |**Nevsun Resources Ltd. |
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Althoughthe Company has attempted to identify important factors that could cause actualresults to differ materially from those contained in forward-lookingstatements, there may be other factors that cause results not to be asanticipated, estimated or intended. TheCompany’s forward-looking statements are based on the beliefs, expectations andopinions of management on the date the statements are made and the Companyassumes no obligation to update such forward-looking statements in the future,except as required by law.  Therecan be no assurance that such statements will prove to be accurate, as actualresults and future events could differ materially from those anticipated insuch statements. For the reasons setforth above, investors should not place undue reliance on forward-looking statements.

**Information ConcerningPreparation of Reserve and Resource Estimates**

All reserve and resourceestimates included or incorporated by reference in this Annual Information Formhave been prepared in accordance with Canadian National Instrument 43-101 - *Standardsof Disclosure for Mineral Projects*(“NI 43-101”) and the Canadian Instituteof Mining, Metallurgy and Petroleum’s Classification System. These standardsdiffer significantly from the requirements of the United States Securities andExchange Commission (the “SEC”). Under SEC Industry Guide 7, mineralization maynot be classified as a “reserve” unless the determination has been made that is“part of a mineral deposit which could be economically and legally extracted orproduced at the time of the reserve determination”. In addition, the term “resource”does not equate to the term “reserve”. The SEC’s disclosure standards normallydo not permit the inclusion of information concerning “measured mineralresources”, “indicated mineral resources” or “inferred mineral resources” indocuments filed with the SEC, unless such information is required to bedisclosed by the law of the Company’s jurisdiction of incorporation or of ajurisdiction in which its securities are traded. Accordingly, informationconcerning descriptions of mineralization and resources contained in thisAnnual Information Form or incorporated by reference may not be comparable toinformation made public by U.S. companies subject to the reporting anddisclosure requirements of the SEC.

**Glossaryand Defined Terms**

The following is a glossary of certain mining terms usedin this Annual Information Form.

| alteration: | Refers toprocess of changing primary rock minerals (such as quartz, feldspar andhornblende) to secondary minerals (quartz, carbonate, and clay minerals) byhydrothermal fluids (hot water). |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| breccia: | Arock in which angular fragments are surrounded by a mass of fine-grainedminerals. |
|----------|------------------------------------------------------------------------------------|

| CIL (Carbon-in-leach): | Aprocess where soluble complexes of gold and silver attach (without a chemicalreaction) to the surfaces of activated carbon particles. |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| CIM: | CanadianInstitute of Mining, Metallurgy and Petroleum. |
|------|--------------------------------------------------------|

| concentrate: | Powderyproduct of high grade ore which has the majority of the waste (gangue) removed. |
|--------------|----------------------------------------------------------------------------------------|

| deposit: | Naturalmineralization under the ground in sufficient quantities to warrant furtherstudies. |
|----------|--------------------------------------------------------------------------------------------|

| doré: | A semi-purealloy of gold and silver, usually created at the site of a mine. It is then transportedto a refinery for further purification. |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| feasibility study: | A feasibilitystudy is a comprehensive technical and economic study of the selecteddevelopment option for a mineral project that includes appropriately detailedassessments of realistically assumed mining, processing, metallurgical,economic, marketing, legal, environmental, social and governmentalconsiderations together with any other relevant operational factors anddetailed financial analysis, that are necessary to demonstrate at the time ofreporting that extraction is reasonably justified (economically mineable). Theresults of the study may reasonably serve as the basis for a final decision bya proponent or financial institution to proceed with, or finance, thedevelopment of the project. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **5 |**Nevsun Resources Ltd. |
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| flotation: | Millingprocess that uses bubbles to capture valuable minerals particles that float tothe surface, thereby separating them from waste which sinks to the bottom. |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g/t or gpt: | Gramsper metric tonne. |
|-------------|------------------------|

| geotechnical work: | Tasks thatprovide representative data of the geological rock quality in a known volume. |
|--------------------|-----------------------------------------------------------------------------------------|

| gossan: | Aniron-bearing weathered product overlying a sulphide deposit. It is formed bythe oxidation of sulphides and the leaching-out of the sulphur and most metals,leaving hydrated iron oxides and rarely sulphates. |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| gravity: | Amethodology using instrumentation allowing the accurate measuring of thedifference between densities of various geological units in situ. |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------|

| indicated mineral resource: | That part of a mineral resource for whichquantity, grade or quality, densities, shape and physical characteristics canbe estimated with a level of confidence sufficient to allow the appropriateapplication of technical and economic parameters, to support mine planning andevaluation of the economic viability of the deposit. The estimate is based ondetailed and reliable exploration and testing information gathered throughappropriate techniques from locations such as outcrops, trenches, pits,workings and drill holes that are spaced closely enough for geological andgrade continuity to be reasonably assumed. |
|-----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| inferred mineral resource: | That part of a mineral resource for whichquantity and grade or quality can be estimated on the basis of geologicalevidence and limited sampling and reasonably assumed, but not verified,geological and grade continuity. The estimate is based on limited informationand sampling gathered through appropriate techniques from locations such asoutcrops, trenches, pits, workings and drill holes. |
|----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| in-situ: | Natural material or processes prior totransport. |
|----------|--------------------------------------------------|

| lithologic: | Pertainingto lithology. |
|-------------|-------------------------|

| lithology: | The studyof rocks, with particular emphasis on their description and classification. |
|------------|--------------------------------------------------------------------------------------|

| measured mineral resource: | That part of a mineral resource for whichquantity, grade or quality, densities, shape, physical characteristics are sowell established that they can be estimated with confidence sufficient to allowthe appropriate application of technical and economic parameters, to supportproduction planning and evaluation of the economic viability of the deposit.The estimate is based on detailed and reliable exploration, sampling andtesting information gathered through appropriate techniques from locations suchas outcrops, trenches, pits, workings and drill holes that are spaced closelyenough to confirm both geological and grade continuity. |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6 |**Nevsun Resources Ltd. |
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| mineralization: | Ananomalous occurrence of metal or other commodity of value defined by any methodof sampling (surface outcrops, drill core, underground channels). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| mineralogic: | Pertainingto mineralogy |
|--------------|-------------------------|

| mineralogy: | The studyof chemistry, crystal structure, and physical (including optical) properties ofminerals. Specific studies within mineralogy include the processes of mineralorigin and formation, classification of minerals, their geographicaldistribution, as well as their utilization. |
|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| mineral reserve: | Theeconomically mineable part of a measured mineral resource or indicated mineralresource demonstrated by at least a preliminary feasibility study.  This studymust include adequate information on mining, processing, metallurgical,economic and other relevant factors that demonstrate, at the time of reporting,that economic extraction can be justified.  A mineral reserve includes dilutingmaterials and allowances for losses that may occur when the material is mined. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| mineralresource: | A concentration or occurrence of diamonds,natural solid inorganic material, or natural solid fossilized organic materialincluding base and precious metals, coal and industrial minerals in or on theearth’s crust in such form and quantity and of such a grade or quality that ithas reasonable prospects for economic extraction. The location, quantity,grade, geological characteristics and continuity of a mineral resource areknown, estimated or interpreted from specific geological evidence andknowledge. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*While the terms “mineral resource,” “measured mineralresource,” “indicated mineral resource,” and “inferred mineral resource” arerecognized and required by Canadian regulations, they are not defined termsunder SEC Industry Guide 7. As such, information contained or incorporated byreference in this report concerning descriptions of mineralization andresources under Canadian standards may not be comparable to, or in conflictwith, similar information made public by U.S. companies subject to thereporting and disclosure requirements of the SEC, but not subject to Canadianregulations. “Inferred mineral resources” have a great amount of uncertainty asto existence and a great uncertainty as to economic and legal feasibility. Itcannot be assumed that all or any part of an “inferred mineral resource” willever be upgraded to a higher category. Investors are cautioned not to assumethat any part or all of mineral deposits in these categories will ever beconverted into mineral reserves***.**

| multiple indicator kriging: | The probabilityin the distribution of values using deciles that are transformed to 1, if equalor less than the value or 0, if greater than the value, used to determine theaverage of a group of values. |
|-----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NAG: | Non-acidgenerating. |
|------|---------------------|

| ore: | Rock,generally containing metallic or non-metallic materials, which can be mined andprocessed at a profit. |
|------|------------------------------------------------------------------------------------------------------------|

| PAG: | Potentiallyacid generating. |
|------|-----------------------------|

| pyrite: | Aniron sulphide mineral (FeS2), the most common naturally occurring sulphidemineral. |
|---------|--------------------------------------------------------------------------------------|

| **7 |**Nevsun Resources Ltd. |
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| probable mineral reserve: | The economicallymineable part of an indicated mineral resource and, in some circumstances, ameasured mineral resource demonstrated by at least a preliminary feasibilitystudy.  This study must include adequate information on mining, processing,metallurgical, economic, and other relevant factors that demonstrate, at thetime of reporting, that economic extraction can be justified. |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| proven mineral reserve: | Theeconomically mineable part of a measured mineral resource demonstrated by atleast a preliminary feasibility study.  This study must include adequateinformation on mining, processing, metallurgical, economic, and other relevantfactors that demonstrate, at the time of reporting, that economic extraction isjustified.                                                                                                                                                                                                                                                                    |
|-------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                    | The terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” used in this Annual Information Form are Canadian mining terms as defined in accordance with NI 43-101 under the guidelines set out in the CIM’s Definition Standards on Mineral Resources and Mineral Reserves adopted by the CIM Council, as those definitions may be amended from time to time by CIM (the “CIM Standards”). |

*Under SEC Industry Guide 7, a mineral “reserve” isdefined as a part of a mineral deposit which could be economically and legallyextracted or produced at the time the mineral reserve determination is made,where:*

-   A “final” or “bankable” feasibility study is required to meetthe requirements to designate reserves; 
- A historic three year average price is to be used in any reserveor cash flow analysis to designate reserves; and
- To meet the “legal” part of the reserve definition, the primaryenvironmental analysis or document should have been submitted to governmentalauthorities.

*Mineral reserves are categorized as follows on thebasis of the degree of confidence in the estimate of the quantity and grade ofthe deposit.*

*Information contained or incorporated by reference inthis report concerning descriptions of reserves under Canadian standards maynot be comparable to similar information made public by U.S. companies subjectto reporting and disclosure requirements of the SEC. Under SEC Industry Guide7, proven or measured reserves are defined as reserves for which (a) quantityis computed from dimensions revealed in outcrops, trenches, workings or drillholes; (b) grade and/or quality are computed from the results of detailedsampling and (c) the sites for inspection, sampling and measurement are spaced soclosely and the geographic character is so well defined that size, shape, depthand mineral content of reserves are well established.*

*Under SEC Industry Guide 7, probable or indicated reserves  are defined as reserves for which quantity and grade and/or quality are  computed from information similar to that of proven reserves (as defined under  SEC Industry Guide 7), but the sites for inspection, sampling, and measurement  are further apart or are otherwise less adequately spaced. The degree of  assurance, although lower than that for proven mineral reserves, is high enough  to assume continuity between points of observation.*

| **8 |**Nevsun Resources Ltd. |
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| Qualified Person: | A qualified person (QP) as defined in NI 43-101 as anindividual who:a) is an engineer orgeoscientist with at least five years of experience in mineral exploration,mine development or operation or mineral project assessment, or any combinationof these;b) has experience relevant to the subject matter of the mineral project  and the technical report; andc) is a member in good standing of a professional association. |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| RC drilling: | Reversecirculation drilling. |
|--------------|------------------------------|

| reserve: | see“mineral reserve” |
|----------|----------------------------------|

| resource: | see“mineral resource” |
|-----------|-----------------------------------|

| ROM (Run of mine): | Material from amine that has not been crushed or screened. |
|--------------------|------------------------------------------------------------|

| sphalerite: | Zinc sulphidemineral (Zn Fe)S. |
|-------------|--------------------------------|

| SRM: | Standardreference material. |
|------|-----------------------------|

| strike: | Thedirection, or bearing from true north, of a vein or rock formation measured ona horizontal surface. |
|---------|--------------------------------------------------------------------------------------------------------|

| sulphide(sulfide): | A compound of sulphur (sulfur) and some othermetallic element. |
|--------------------|----------------------------------------------------------------|

| supergene: | A wordsuggesting an origin literally “from above”. It is used almost exclusively forprocesses involving water, with or without dissolved material, percolating downfrom the surface. Typical supergene processes are solution, hydration, oxidation,deposition from solution, reactions of ions in solution with ions in existingminerals (replacement or enrichment). |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| tailings: | Gangueminerals extracted from ore through various mineral processes and deposited inan enclosed ground storage area. |
|-----------|----------------------------------------------------------------------------------------------------------------------|

| terrane: | A fragment of crustal material formed on,or broken off from, one techtonic plate and accreted or sutured crust lying onanother plate. |
|----------|---------------------------------------------------------------------------------------------------------------------------------------|

| trenching: | Themechanical or human excavation of ground material to expose material belowsurface. |
|------------|---------------------------------------------------------------------------------------|

| UTM: | The UniversalTransverse Mercator coordinate system. |
|------|-----------------------------------------------------|

| VMS: | Volcanichosted massive sulphides. |
|------|-----------------------------------|

| WGS84: | The WorldGeodetic System, 1984. |
|--------|---------------------------------|

| **9 |**Nevsun Resources Ltd. |
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**CORPORATE STRUCTURE**

**Name and Incorporation**

The Company was incorporatedunder the laws of the Province of British Columbia under the *Companies Act*(British Columbia) on July 19, 1965, originally under the name of “HoganMines Ltd.” Since inception, the Company has undergone four name changes untilDecember 19, 1991 when it adopted the name of “Nevsun Resources Ltd.” TheCompany is governed by the *Business Corporations Act* (British Columbia).

The head office of Nevsun Resources Ltd. (“Nevsun” orthe “Company”) is located at 760-669 Howe Street, Vancouver, British Columbia,V6C 0B4 and the Company’s registered and records office is located at 1000‐840 HoweStreet, Vancouver, British Columbia, V6Z 2M1.

**IntercorporateRelationships**

The following diagram explains the intercorporaterelationships among the Company and its wholly or partially owned subsidiaries;the name and place of incorporation of each such subsidiary; and the percentageof voting securities beneficially owned or over which direction or significantinfluence is exercised by the Company:

British Columbia, Canada

*The    balance of 40% is owned by the Eritrean National Mining Corporation (refer    to notes to audited financial statements for financial arrangements)

| **10 |**Nevsun Resources Ltd. |
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**GENERAL DEVELOPMENT OF THE BUSINESS**

**Three Year History**

Nevsun is a gold and base metal mining and explorationcompany and is engaged primarily in the exploration for, and the developmentand production of, mineral resource properties.  Its major achievements in thepast three fiscal years were the commencement of commercial production at itsBisha mine in Eritrea (the “Bisha Mine” or “Bisha”) early in 2011, maintaining astrong safety record at Bisha, generating substantial cash flows in 2011 and2012, and declaring and paying semi-annual dividends to shareholders in 2011and 2012. 

The most significant activities impacting the Companyduring the three year period ended December 31, 2012 are set out below.  

***2012 Developments***

The Company produced 313,000ounces of gold doré from the Bisha Mine in 2012.

The copper plant expansion at the Bisha Mine hasprogressed on schedule and on budget with concentrate production expected inmid-2013.

The Company has maintained top quartile safetyperformance at Bisha operations and advanced its corporate responsibilityinitiatives to reflect evolving international standards for the safety andhealth of its employees, protecting the environment, respecting human rights ofits employees and residents of the communities in which it operates, andcontributing to the sustainable development of those communities.

The Company began personnel expansion to supportmanagement in its operations, to oversee its strategy and implementation of theCompany’s corporate social responsibility programs, and to drive organic growthand Nevsun’s acquisition and expansion strategy.

On May 15, 2012 and November 15, 2012 the Company declaredcash dividends of $0.05 per common share ($0.10 per common share annually)which were paid to shareholders on July 16, 2012 and January 15, 2013,respectively.

On October 10, 2012 the Company announced that it had acquiredthe Mogoraib River exploration license in Eritrea containing 97.4 squarekilometers of area located 16 kilometers southwest of the Bisha Mine and hasidentified high priority exploration targets.  The Hambok historic resource ispotential additional feed for the Bisha plant.

On September 7, 2012 the Company filed an updated technicalreport to support the mineral resources and reserves estimates at Bisha andHarena.  The probable mineral reserves (effective date May 31, 2012) consist of26.5 million tonnes. This includes 0.9 million tonnes of oxide ores grading5.79 grams per tonne gold for a total of 167,000 troy ounces of gold, 6.4million tonnes of supergene ore grading 4.09% copper for a total of 579 millionpounds of copper, and 19.2 million tonnes of primary ores grading 1.09% copperand 6.33% zinc for a total of 462 million pounds of copper and 2,680 millionpounds of zinc.

On August 8, 2012 the Company announced that it hadcompleted its 13,500 meter exploration drill program at the North West Zonewhich lies 3 kilometers from the Bisha deposit, and expects to release aresource estimate in the first half of 2013.

On July 9, 2012 the Company announced that it wasgranted a mining licence for the Harena deposit, located approximately 9kilometers south of the Bisha plant.  Harena is a satellite volcanogenicmassive sulphide (“VMS”) deposit with oxide gold and base metal sulphide ores,similar in configuration to Bisha but smaller and lower in grade.

On June 18, 2012 the Company announced that it hadpurchased all required equipment to allow for a containerized transport andhandling solution for its copper concentrate, termed a Rotainer system. TheRotainer spreader, associated mobile crane and all port ancillary gear providea solution for delivery of direct shipping concentrate into bulk shippingcarriers, using the Massawa container port.  The Rotainer system is designedwith industry leading dust suppression allowing Bisha to operate out of theexisting Massawa container port.  The Rotainer system meets both the needs forcopper concentrate export while setting high environmental standards for miningoperations in Eritrea.

| **11 |**Nevsun Resources Ltd. |
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On March 19, 2012 the Company announced a sharerepurchase program of up to 4,009,408 of its outstanding common shares.  Theshare repurchase program was prompted by the Company’s belief that its currentmarket price was not reflective of the underlying value of its business. TheCompany repurchased a total of 1,732,600 common shares during the year ended December31, 2012.

In March 2012 a class action lawsuit was commencedagainst the Company and certain of its executive officers. The action is stillpending (see “Legal Proceeding and Regulatory Actions”).

***2011 Developments***

The Company produced 379,000 ounces of gold doré in itsfirst year of operations at the Bisha Mine.

The Company declared its first dividends which were paidto shareholders in July 2011 and January 2012.

In June 2011 the Company began of civil works inpreparation for construction of the second phase copper flotation plant.

The Company adopted a shareholder rights plan which wasratified by shareholders at a Special Meeting of Shareholders in November 2011.

The 30% purchase of BMSC by the Eritrean National MiningCorporation (“ENAMCO”) was finalized in August 2011.

The Company successfully completed another phase ofsignificant exploration and development drill programs at the Bisha Main Zoneand hanging wall copper zone adjacent to Bisha.  

***2010 Developments***

The Company began resource expansion drilling at theHarena deposit, 9 kilometers southwest of Bisha.

In August 2010, the Company bought out a 1.5% Bisha netsmelter return royalty.

In March 2010, the pre-strip mining commenced at Bisha.

In February2010, the Company closed a CAD$117 million non-brokered private placement toprovide funding to complete the Bisha construction, in lieu of debt facilitiespreviously arranged.

| **12 |**Nevsun Resources Ltd. |
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**DESCRIPTION OF THE BUSINESS**

TheCompany is a Canadian mineral resource company engaged, through itssubsidiaries, in the acquisition, exploration, development, and production ofmineral properties.  The Company’s principal mineral property is the Bishaproperty located in Eritrea, North-East Africa, (the “Bisha Property”).  Its primaryoperating asset is the Bisha Mine located on the Bisha Property with gold,silver and base metal (copper and zinc) mineral resources and mineralreserves.  In addition, the Company owns the Mogoraib exploration licensecontaining 97.4 square kilometers of area located 16 kilometers southwest ofthe Bisha Mine, and a mining licence for the Harena deposit, locatedapproximately 9 kilometers south of the Bisha Mine.

**TheBisha Mine**

The Bisha Mine is owned by BMSC, the voting securitiesof which are held 60% by the Company and 40% by ENAMCO, and began commercialproduction of gold in February 2011.  Gold production at the Bisha Mine isexpected to continue until mid-2013.  Base metal (copper) production isforecast to begin in the second half of 2013.

**Gold****Sales**

The Company recorded revenues of $566.0 million based onsales of 320,500 ounces of gold and by-product sales of 962,000 ounces ofsilver in 2012 compared to revenues of $547.8 million based on sales of 334,500ounces of gold and by-product sales of 142,000 ounces of silver in 2011.  Anadditional 35,400 ounces of gold were sold prior to February 22, 2011, the dateon which commercial production was declared at the Bisha Mine, and are notincluded in revenues of $547.8 million. There are numerous purchasers of goldand base metals.  Therefore, the Company is not dependent upon any onepurchaser.  Current production from Bisha is in the form of doré bars (gold andsilver) which are flown from the Bisha site to the capital city of Asmara, andthen flown to refiners in Europe and Canada. Bisha is not expected to commenceany material sales of base metal concentrates until the second half of 2013. 

**Methods of Production**

Bisha uses an owner-operated mining fleet and standardcarbon-in-leach (“CIL”) processing facilities to initially process the goldoxide cap by traditional cyanide leaching.  Upon completion of processing thegold oxide cap, the Company will process supergene and primary ores byflotation to extract copper and zinc.  The current mine life is estimated to be12 years projected to 2024.  The Company also expects to further expand itsmineral resources, with the involvement of Qualified Persons, to extend the BishaMine life by continued additional drilling in the Northwest Zone during 2013. TheCompany plans to test new targets that are immediately along strike of Bishaand have the potential to provide near term new resources for the Bishaoperations.  The Company’s objective is to evaluate through a cost-benefitanalysis if there are sufficient economic resources to transport and process atthe Bisha mill, after a planned exhaustive review of Hambok coupled withtesting other nearby prospective targets within the Mogoraib license. 

**Skill and Knowledge**

BMSC has built a management team of skilled mining,environmental, financial, and administrative personnel reporting to the countryGeneral Manager who is in charge of mine production, exploration programs, andfuture operations of the Bisha Mine.   The specialized knowledge and skillsrequired in all areas of mining include engineering, geology, metallurgy,environmental permitting, drilling, and exploration program planning. The BishaMine is the first modern mining operation in Eritrea. Training and re-trainingof local staff to attain and maintain the requisite skills in all aspects ofmining operations is and has been a priority. 

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**Employees**

At December 31, 2012, the Company had 11 employees atthe parent company in Canada, 984 full-time employees and contractors at itssubsidiary in Eritrea, and another 199 casual or part-time staff at itssubsidiary in Eritrea.  In addition, the Company had 472 independent contractorsworking on the copper flotation plant construction in Eritrea.

**Corporate SocialResponsibility**

The Company’s objective is to generate sustainableprosperity through its business operations, which means respecting the safetyand health of its employees, protecting the environment, respecting the humanrights of its employees and the residents of the communities in which it operates,and contributing to the sustainable development of those communities.  TheSocial, Environmental, Health and Safety Committee (“SEHS”) established by theCompany’s board of directors oversees the Company’s efforts in meeting these objectives.

While not a member of the Extractive IndustriesTransparency Initiative (“EITI”), the Company supports the goals of fiscaltransparency and governance and has taken the approach of disclosing paymentsmade to governments in countries in which it operates, whether or not the hostgovernment is a member of EITI. 

***Social Responsibility***

The Company recognizes that its activities have thepotential to impact the human rights of individuals affected by its businessoperations.  As such, the Company seeks to integrate human rights bestpractices into its business processes and conducts itsbusiness within a framework that promotes worker and community health andsafety, environmental protection, community involvement, community benefits andquality of life for employees and their families.  The Company is committed to responsible operations and practices at its BishaMine, based on international standards of safety, governance and human rightsand strives to ensure that the Company’s presence has a positive social andeconomic impact to the national economy and the local communities. Some of the Company’s social responsibility commitments andpractices include:

- actively promoting understanding by all employeesof the culture, language and history of the communities, regions and countriesin which it operates;
- working to protect cultural heritage resourcespotentially affected by the Company’s activities;
- conducting activities in a manner that respectstraditional-use rights, cultures, customs and social values;
- promoting job equity and equal access toemployment opportunities for women;
- maintaining formal human resources practices andprocedures to ensure that conscripted labour is prohibited at Bisha, includinginspection of national service discharge documentation for all Eritrean workersat Bisha;
- building capacity by sharing environmental andsocial experiences and solutions with local communities and regional andnational governments;
- actively consulting with local communities toidentify and resolve environmental and social issues;
- procuring materials, goods and services in amanner that enhances local benefits and protects against unethical practicessuch as child labour and forced labour;
- establishing social responsibility performancecriteria; and
- monitoring and reporting performance to seniormanagement through periodic audits.

***Health and Safety***

The Company recognizes that the safetyand security of its employees and the communities in which it operates is anintegral part of its business.  The Company has maintained top quartilesafety performance at Bisha operations and advancement of its CorporateResponsibility initiatives to reflect evolving international standards. As to safety, the long-term goal is for employees of the Company tooperate injury-free, regardless of what role they perform. 

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To achieve its health and safetyobjectives, the Company is training employees to work in a safe and responsiblemanner, carrying out risk assessments for all construction and operationalactivities, ensuring that health and safety performances comply with relevantlegislation and regulation, adhering to local laws as well as internationalstandards on law enforcement in securing its operations, particularly thosethat relate to the use of force, carrying out risk assessments in relation tosecurity issues at each of its project sites, ensuring that security is managedin a way that respects and protects human rights, avoids creating conflict and addressessecurity threats in as peaceful a way as possible and assisting the localcommunity in health awareness activities.

***Environment***

The Company is committed to achieving high standards ofenvironmental responsibility in its operations and compliance with allapplicable regulations and laws.  

The Company is committed to devoting its resources tothe goal of:

- complying with all host country environmentallaws and regulations together with industry best practice standards, orwhichever is the more stringent of the two;
- ensuring the necessary resources are provided tosupport and implement the Company’s environmental policy;
- continual improvement in environmentalperformance by developing environmental indicators, monitoring and auditingperformance, and by implementing corrective actions where needed;
- reporting externally on environmentalperformance and encouraging dialogue with employees, local communities andother stakeholders to promote environmental awareness;
- including environmental performance criteria indecisions on promotions, salary increases and awarding contracts;
- applying the principles of BAT (Best AvailableTechnology) to environment management;
- reducing, re-using and recycling resources andimplementing proper waste management practices;
- training, motivating and ensuring that allemployees adhere to environmental protection and pollution prevention policies;
- incorporating an emergency preparedness andresponse system into standard operating practices; and
- monitoring and reporting on performance to seniormanagement through periodic audits.

**Risk Factors**

The business and operations of the Company are highlyspeculative due to the high-risk nature of its business in the mining industry,including but not limited tothe acquisition, financing, exploration, development, operation and productionof metals at its mining properties. Therisks below, some of which are summarized elsewhere in this Report, are not theonly ones facing the Company. Additional risks not currently known to theCompany, or that the Company currently deems immaterial, may also impair theCompany’s operations. If any of the following risks actually occur, theCompany’s business, financial condition and operating results could beadversely affected.

**Commodity price risk.**  Revenue and profitabilityof the Company’s operations will be dependent upon the market price of mineraland materials commodities.  In 2012, substantially all of the Company’srevenues were attributable to gold sales, the market prices for which werevolatile.  In 2013, it is expected that the Company’s revenues will be derivedfrom the sale of gold, copper and other metals.  The Company does not enterinto any commodity hedging and accordingly is fully exposed to price risk.  Theprice of gold, copper and other metals can and has experienced volatile andsignificant price movements

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 over short periods of time, and is affected by  numerous factors beyond the control of the Company, including international  economic and political trends, expectations of inflation or deflation, currency  exchange fluctuations (specifically, the U.S. dollar relative to other  currencies), interest rates, global or regional consumption patterns,  speculative activities and increased production due to improved mining and  production methods.  The supply of and demand for gold, copper and other metals  are affected by various factors, including political events, economic  conditions and production costs, and governmental policies.  Fluctuations in  gold or copper prices may have an adverse material effect on the Company’s  financial performance or results of operations.  If the market price of gold or  copper falls significantly from its current level, the mine development  projects may be rendered uneconomic and the development of the mine project may  be suspended or delayed.  In addition, if the market price of gold and copper were  to drop and the prices realized by the Company on gold sales and future copper  sales were to decrease significantly and remain at this level for a significant  period of time, profitability of the Company and cash flow would be negatively  affected.  

Mineral reserve calculations and life-of-mine plansusing significantly lower metal prices could result in material write-downs ofthe Company’s investment in mining properties and increased amortization,reclamation and closure charges.  In addition to adversely affecting theCompany’s mineral reserve estimates and its financial condition, decliningcommodity prices can impact operations by requiring a reassessment of thefeasibility of a particular project. Such a reassessment may be the result of amanagement decision or may be required under financing arrangements related toa particular project. Even if the project is ultimately determined to beeconomically viable, the need to conduct such a reassessment may causesubstantial delays or may interrupt operations until the reassessment can becompleted.

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

**Exploration, development and operating risks.** Mining operations generally involve a high degree of risk.  The Company’soperating mine in Eritrea is subject to all the hazards and risks normallyassociated with mineral production, including damage to or destruction of plantand equipment, unexpected geologic formations, pit collapse, injury or lifeendangerment, environmental damage, fire, equipment failure or structuralfailures, such as retaining walls or tailings dams, potentially resulting inenvironmental pollution and consequent liability.  The payment of suchliabilities may have a material, adverse effect on the Company’s financialposition.  

Theexploration for and development of mineral deposits involves significant risks,which even a combination of careful evaluation, experience and knowledge maynot eliminate. While the discovery of an ore body may result in substantialrewards, few properties that are explored are ultimately developed intoproducing mines. There is no certainty that expenditures made by the Companytowards the search and evaluation of mineral deposits will result indiscoveries or future development.  Whether a mineral deposit will be commercially viable depends on anumber of factors, which include, among other things, the interpretation ofgeological data obtained from drill holes and other sampling techniques,feasibility studies (which include estimates of cash operating costs based uponanticipated tonnage and grades of ore to be mined and processed), theparticular attributes of the deposit such as size, grade and metallurgy,expected recovery rates of metals from the ore, proximity to infrastructure andlabour, the cost of water and power, anticipated climatic conditions, cyclicalmetal prices, fluctuations in inflation and currency exchange rates, higherinput commodity and labour costs, and government regulations, includingregulations relating to prices, taxes, royalties, land tenure, land use,importing and exporting of minerals, and environmental protection.

Major expenses may be required to locate and establishadditional mineral reserves.  It is impossible to ensure that the explorationor development programs planned by Nevsun will result in additional profitablecommercial mining operations. Whether a mineral deposit will be commerciallyviable depends 

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on a number of factors, some of which are: the particular  attributes of the deposit, such as size, grade and proximity to infrastructure,  metal prices that are highly cyclical, and government regulations, including  regulations relating to prices, taxes, royalties, land tenure, land use,  importing and exporting of minerals and environmental protection. The exact  effect of these factors cannot be accurately predicted, but the combination of  these factors may result in Nevsun not receiving an adequate return on invested  capital.  The Company significantly relies on the analyses performed by its  Qualified Persons to estimate resources and reserves, and such estimates may be  subject to material risks and uncertainties. 

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

**Foreign operation and political risks.**  TheCompany conducts operations through foreign subsidiaries with financial assetsin Barbados and mining operations in Eritrea, and substantially all of itsassets are held in such entities.  While the Company believes that thepolitical climate of these countries and strong government support in Eritreaprovide a stable environment for its operations, there is no guarantee againstany future political, or economic instability in these countries orneighbouring countries which might adversely affect the Company.  

Political unrest in Egypt, Libya, Syria, Yemen, SaudiArabia, Somalia and other countries in the region has had an impact on investorconfidence with companies operating in northern Africa, including Eritrea, eventhough no direct effect is evident or anticipated in the operations at Bisha orcommunications with the Eritrean government.  In addition, intervention by theinternational community through organizations such as the United Nations couldaffect the political risk of operating in Eritrea. In December 2009 the UnitedNations Security Council (UNSC) imposed sanctions on Eritrea related to an armsembargo, which in itself has had no direct impact to the Bisha Project, exceptto cause some uncertainty as to how UN member states may continue to deal withthe country. In December 2011 the UNSC provided additional sanctions guidanceto member states.  Effects of the sanctions could restrict the Company’sability to fund its operations efficiently and to repatriate cash.  

Other risks the Company may face in operating in foreignjurisdictions include terrorism, hostage taking, military repression, extremefluctuations in currency exchange rates, high rates of inflation, labourunrest, the risks of war or civil unrest, expropriation and nationalization,renegotiation or nullification of existing concessions, licenses, permits andcontracts, illegal mining, changes in taxation policies, restrictions onforeign exchange and repatriation, and changing political conditions, currencycontrols, export controls, and governmental regulations that favour or requirethe awarding of contracts to local contractors or require foreign contractorsto employ citizens of, or purchase supplies from, a particular jurisdiction.

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

**Infrastructure risk.**  Mining, processing anddevelopment activities depend, to some degree, on adequate infrastructure.Reliable roads, bridges, power sources and water supply are importantdeterminants that affect capital and operating costs.  Unusual or infrequentweather phenomena, sabotage, government or other interference in themaintenance or provision of such infrastructure could adversely affect theCompany’s operations, financial condition and results of operations. 

**Key executive risk.**  The Company is to a largedegree dependent on the services of key executives and senior personnel.  Theloss of these persons or the Company’s inability to attract and retainexecutives and personnel with the qualifications necessary to operate thebusiness successfully may adversely affect its business and future operations.

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

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

**Mineral reserve and mineral resource estimate risk.** The figures for mineral reserves and mineral resources presented in thisdocument and contained in the Company’s continuous disclosure documents filedon SEDAR (www.sedar.com) and EDGAR (http://www.sec.gov/edgar.shtml) areestimates generated by Qualified Persons, and no assurance can be given thatthe anticipated tonnages and grades will be achieved or, in the case of reserves,that the indicated level of metallurgical recovery will be realized.  Actual reservesmay not conform to geological, metallurgical or other expectations, and thevolume and grade of ore recovered may be below the estimated levels.  Marketfluctuations in the price of mineral commodities or increases in the costs torecover minerals may render the mining of ore reserves uneconomical and requirethe Company to take a write-down of the asset or to discontinue development orproduction.  Moreover, short-term operating factors relating to the reserves,such as the need for orderly development of the ore body or the processing ofnew or different ore grades, may cause a mining operation to be unprofitable inany particular accounting period.         

There are numerous uncertainties inherent in estimatingquantities of mineral resources and reserves, including many factors that arebeyond the Company’s control.  The estimates are based on various assumptions relatingto metal prices and exchange rates during the expected life of production,mineralization of the area to be mined, the projected cost of mining, and theresults of additional planned development work.  Actual future production ratesand amounts, revenues, taxes, operating expenses, environmental and regulatorycompliance expenditures, development expenditures and recovery rates may varysubstantially from those assumed in the estimates.  Any significant change inthese assumptions, including changes that result from variances betweenprojected and actual results, could result in material downward or upwardrevision of current estimates.

**Production risk.**  As is typically the case withthe mining industry, no assurances can be given that future mineral productionestimates will be achieved. Estimates of future production for the Company’smining operations are derived from the Company’s mining plans.   Theseestimates and plans are subject to change, including changes based on actualmining results at various phases of the mining operations.  The Company cannotgive any assurance that it will achieve its production estimates.  TheCompany’s failure to achieve its production estimates could have a material andadverse effect on the Company’s future cash flows, results of operations,production cost, financial condition and prospects.  The plans are developedbased on, among other things, mining experience, reserve estimates, assumptionsregarding ground conditions, hydrologic conditions and physical characteristicsof ores (such as hardness and presence or absence of certain metallurgicalcharacteristics) and estimated rates and costs of production, and includeassumptions derived by block models developed by the Qualified Person inconsultation with Company personnel.  Actual production may vary from such estimatesfor a variety of reasons, including risks and hazards of the types discussedabove, and as set out below, including:

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- mining dilution;
- accidents;
- equipment failures;
- natural phenomena such as inclement weatherconditions, floods, droughts, rock slides and earthquakes;
- encountering unusual or unexpected geologicalconditions;
- changes in power costs and potential powershortages;
- shortages of principal supplies needed foroperations;
- strikes and other actions by labour; and
- regulatory restrictions imposed by governmentagencies.

Such occurrences could, in addition to stopping ordelaying mineral production, result in damage to mineral properties, injury ordeath to persons, damage to the Company’s property or the property of others,monetary losses and legal liabilities.  These factors may also cause a mineraldeposit that has been mined profitably in the past to become unprofitable. Estimates of production from properties not yet in production or fromoperations that are to be expanded are based on similar factors (including, insome instances, feasibility studies prepared by the Company’s personnel andoutside consultants) but it is possible that actual operating costs andeconomic returns will differ significantly from those currently estimated.  Itis not unusual in new mining operations or mine expansion to experienceunexpected problems during the startup phase.  Delays often can occur in thecommencement of production.

**Need for additional reserves risk.**  Given thatmines have limited lives based on proven and probable mineral reserves, theCompany must continually replace and expand its reserves at its mines.  Thelife-of-mine estimates included in the Company’s continuous disclosuredocuments filed on SEDAR and EDGAR are subject to adjustment.  The Company’sability to maintain or increase its annual production of gold and othercommodities will be dependent in significant part on its ability to bring newmines into production and to expand reserves at existing mines.  The Bisha Minehas an estimated 12 year mine life remaining.

**Permitting risk.**  The Company’s operations aresubject to receiving and maintaining permits from appropriate governmentalauthorities.  There is no assurance that delays will not occur in connectionwith obtaining all necessary renewals of permits for any new or existingoperations, or for additional permits for any possible future changes tooperations, or additional permits associated with new legislation. Prior to anydevelopment on any of its properties, the Company must receive permits fromappropriate governmental authorities. There can be no assurance that theCompany will obtain or continue to hold all permits necessary to develop orcontinue operating at any particular property.  Any failure to obtain ormaintain requisite permits could have a material adverse effect on the Companyand its future production.

**Putative class action andlitigation risk.**  The Company is party to legal proceedings,which, if decided adversely to the Company, may have a material effect on thefinancial or business position or prospects of the Company.  Investors areurged to read the description of the pending legal proceedings set out underthe heading, “Legal Proceedings and Regulatory Actions”.  Any litigation could result in substantial costs anddamages and divert management’s attention and resources.  

**Risks related to the construction, plant expansion,transition to supergene production at Bisha, and start-up of new miningoperations or mining phases.**  The success of construction projects, plantexpansions, the transition to supergene production at Bisha or the start-up ofnew mines by the Company is subject to a number of factors including theavailability and performance of engineering and construction contractors,mining contractors, suppliers and consultants, the receipt of requiredgovernmental approvals and permits in connection with the construction ofmining facilities and the conduct of mining operations, including environmentalpermits, price escalation on all components of construction, plant expansion,transition to supergene production or start-up of new mines, the underlyingcharacteristics, quality and unpredictability of the exact nature of mineralogyof a deposit and the consequent accurate understanding of doré or concentrateproduction, the successful completion and 

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operation of ore passes and conveyors  to move ore and other operational elements. Any delay in the performance of any  one or more of the contractors, suppliers, consultants or other persons on  which the Company is dependent in connection with its construction, expansion  or transition activities or start-up of new mines, a delay in or failure to  receive the required governmental approvals and permits in a timely manner or  on reasonable terms, or a delay in or failure in connection with the completion  and successful operation of the construction or operational elements could  delay or prevent the construction projects, plant expansions, the transition to  supergene production at Bisha as planned, or the start-up of new mines. There  can be no assurance that current or future construction projects, plant  expansions, the transition to supergene production at Bisha as planned or the  start-up of new mines by the Company will be successful.

**Environmental risk.**  Production at the Company’smine involves the use of toxic materials. Should toxic materials leak orotherwise be discharged from the containment system then the Company may becomesubject to liability for clean-up work that may not be insured. While theCompany intends to prevent discharges of pollutants into the ground water andthe environment, it may be unsuccessful and may become subject to liability forhazards that it may not be insured against. Losses from these events may causethe Company to incur significant costs that could have a material adverseeffect upon its financial performance and results of operations.

The Company’s operations are subject to environmentalregulations promulgated by the government of Eritrea.  Environmentallegislation provides for restrictions and prohibitions on spills, releases oremissions of various substances produced in association with certain miningindustry operations, such as seepage from tailings disposal areas that couldresult in environmental pollution.  A breach of such legislation may result inthe imposition of fines and penalties.  Environmental legislation is evolvingin general in a manner that means standards and enforcement, fines andpenalties for non-compliance are becoming more stringent.  Environmentalassessments for projects carry a heightened degree of responsibility forcompanies, directors, officers and employees.  The cost of compliance withchanges in government regulations has the potential to reduce the profitabilityof operations.  The Company plans to devote significant time and resources tomeeting the goal of complete compliance with all environmental regulations inthe countries in which the Company has operations and comply with prudentinternational standards.

The Company adopted the International FinanceCorporation (“IFC”) Social and Environmental Performance Standards of April2006 and developed its management plans accordingly.  The plans have beensubject to review by the host country, as well as part of an extensive duediligence by international bankers who at one time were considered forfunding.  The social and environmental plans have been implemented and havesubsequently been audited by an independent third party. Staff training andengagement with local authorities, as well as significant employment from bothlocal and other in-country sources are key elements of the Company’s social andenvironmental management.  Department heads for both Human Resources andEnvironment are experienced professionals with a solid understanding of localrequirements as well as IFC Performance Standards.  The Company continues toplace significant emphasis on all social and environmental impacts of itsoperations.

Environmental hazards may also exist on the propertieson which the Company holds interests that are unknown to the Company at presentand that have been caused previous to the Company receiving title to theproperties.

Failure to comply with applicable laws, regulations andpermitting requirements may result in enforcement actions, including ordersissued by regulatory or judicial authorities causing operations to cease or becurtailed, and may include corrective measures requiring capital expenditures,installation of additional equipment, or remedial actions. Parties engaged inmining operations, including the Company, may be required to compensate thosesuffering loss or damage by reason of the mining activities and may have civilor criminal fines or penalties imposed for violations of applicable laws orregulations.

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Amendments to current laws, regulations and permitsgoverning operations and activities of mining companies, or more stringentimplementation thereof, could have a material adverse impact on the Company andcause increases in exploration expenses, capital expenditures or productioncosts, reduction in levels of production at producing properties, orabandonment or delays in development of new mining properties.

**Currency risks.**  At present all of the Company’sactivities are carried on outside of Canada and are subject to risks associatedwith fluctuations of the rate of exchange of foreign currencies.  The UnitedStates dollar (USD) is the Company’s functional currency, exposing the Companyto risk on any fluctuations of the USD with other currencies to which theCompany is exposed, which are primarily the Canadian dollar (CAD), SouthAfrican rand (ZAR), and the Eritrea Nakfa (ERN).  While only a small portion ofthe Bisha Mine’s operating expenses are denominated in ERN, which is currentlypegged to the USD at 15 ERN to 1 USD, a re-valuation or de-pegging of thiscurrency to the USD could expose the Company to additional currency risk.

**Funding risks.**  The exploration, development,operations, acquisitions or other activities may require substantial additionalfinancing.  Failure to obtain sufficient financing may result in delaying orindefinite postponement of exploration, development, operations, acquisitionsor other activities of the Company including a loss of property interest.  Historically,the Company has financed its activities through the sale of equity capital. The sale of metals from Bisha currently provides and is expected to continue toprovide revenue from operations, which the Company expects will be sufficientto fund its future needs. Factors which may impact cash flows include changesin metal prices, taxes, operating costs, capital expenditures or otherunexpected occurrences such as slowdown or stoppage of operations.  Failure toobtain sufficient financing to continue operations if such needs arise mayadversely affect the Company’s business and financial position. Should theCompany require additional funding for exploration, development, operations,acquisitions or other activities, there is no assurance that sources offinancing will be available on acceptable terms or at all.  

**Counterparty risks.**  The Company is exposed tovarious counterparty risks including, but not limited to: (i) financialinstitutions that hold the Company’s cash and cash equivalents; (ii) companiesthat have payables to the Company, including doré customers and non-controllinginterest; and (iii) insurance providers.  As a result, the Company may becomeexposed to credit-related losses in the event of non-performance by suchcounterparties.  

**Insurance risks.**  Although the Company maintainsinsurance to protect against certain risks in such amounts as it considers to bereasonable, its insurance will not cover all the potential risks associatedwith a mining company’s operations. Nevsun may also be unable to maintaininsurance to cover these risks at economically feasible premiums. Insurancecoverage may not continue to be available or may not be adequate to cover anyresulting liability.  

**Land title risk.**  The acquisition of title tomineral properties is a very detailed and time-consuming process. Title to, andthe area of, mineral concessions may be disputed.  Although the Companybelieves it has taken reasonable measures to ensure proper title to itsproperties, there is no guarantee that title to any of its properties will notbe challenged or impaired.  Third parties may have valid claims underlyingportions of the Company’s interests, including prior unregistered liens,agreements, transfers or claims, including indigenous land claims, and titlemay be affected by, among other things, undetected defects.  In addition, theCompany may be unable to operate its properties as permitted or to enforce itsrights with respect to its properties.

**Competition risks.**  The mining industry isintensely competitive in all of its phases and the Company competes with manycompanies possessing greater financial and technical resources than itself. There is intense competition in the mining industry for mineral rich propertiesthat can be developed and produced economically, the technical expertise tofind, develop, and operate such properties, the labour to operate theproperties, and the capital for the purpose of funding such properties.  Manycompetitors not only explore for minerals, but conduct refining and marketingoperations on a global basis.  Such current and future competition may resultin the Company being unable to acquire desired properties.

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**Write-downs and impairments risk.**  Mining andmineral interests are the most significant assets of the Company and representcapitalized expenditures related to the development of mining properties andrelated plant and equipment and the value assigned to exploration potential onacquisition.  The costs associated with mining properties are separatelyallocated to exploration potential, reserves and resources and include acquiredinterests in production, development and exploration-stage propertiesrepresenting the fair value at the time they were acquired.  The values of suchmineral properties are primarily driven by the nature and amount of orebelieved to be contained or potentially contained, in properties to which theyrelate.

The Company reviews and evaluates its mining interestsfor impairment at least annually or when events or changes in circumstancesindicate that the related carrying amounts may not be recoverable, whichbecomes more of a risk in the global economic conditions that exist currently. An impairment is considered to exist if the total estimated future undiscountedcash flows are less than the carrying amount of the assets.  An impairment lossis measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on expected future production, commodityprices, operating costs and capital costs.  There are numerous uncertaintiesinherent in estimating mineral reserves and mineral resources.  Differencesbetween management’s assumptions and market conditions could have a materialeffect in the future on the Company’s financial position and results ofoperation.

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

**Derivatives risk.**  In the future the Company mayuse certain derivatives products to manage the risks associated with changes ingold prices, silver prices, interest rates, foreign currency exchange rates andfuel prices.  The use of derivative instruments involves certain inherent risksincluding, among other things: (i) credit risk — the risk of default on amountsowing to the Company by the counterparties with which Company has entered intosuch transaction; (ii) market liquidity risk — risk that the Company hasentered into a derivative position that cannot be closed out quickly, by eitherliquidating such derivative instrument or by establishing an offsettingposition; and (iii) unrealized mark-to-market risk — the risk that, in respectof certain derivative products, an adverse change in market prices forcommodities, currencies or interest rates will result in the Company incurringan unrealized mark-to-market loss in respect of such derivative products.

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

Any acquisition would be accompanied by risks.  Forexample, a material ore body may prove to be below expectations; the Companymay have difficulty integrating and assimilating the operations and personnelof any acquired companies, integrating internal controls over financialreporting of such acquired companies, identifying and mitigating any potentialdomestic or foreign liabilities, including potential liabilities due to foreignanti-corruption laws, realizing anticipated synergies and maximizing thefinancial and strategic position of the combined enterprise, and maintaininguniform standards, policies and practices across the organization; theintegration of the acquired business or assets may disrupt the Company’songoing business and its relationships with employees, customers, suppliers andcontractors; and the acquired business or assets may have unknown liabilitieswhich may be significant. 

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

**Governmental regulatory risks.**  The Company’smineral exploration, development and production activities are subject tovarious laws governing prospecting, development, production, taxes, labourstandards and occupational health, mine safety, toxic substances, environmentalprotection and preservation, and other matters.  No assurance can be providedthat the Company will be successful in its efforts to comply with all existingrules and regulations, that new rules and regulations will not be enacted, orthat existing rules and regulations will not be modified in a manner that couldlimit or curtail production or development of the Company’s properties.  Allsuch rules and regulations governing the operations and activities of theCompany could have a material adverse effect on the Company’s business,financial condition and results of operations.

**Share price risk.**  The market price of a publiclytraded stock is affected by many variables not directly related to the successof the Company, including the market for all resource sector shares, thebreadth of the public market for the stock, and the attractiveness ofalternative investments.  The effect of these and other factors on the marketprice of the common shares of the Company on the exchanges on which the commonshares are listed suggests that the share price will be volatile.  In the previouseight quarters, between January 1, 2011 and December 31, 2012 the Company’sshares traded in a range between CAD$2.65 and CAD$7.04.

**Dividend policy risks.**  The Company hasestablished a dividend policy providing for a dividend yield that is consistentwith the yield of comparable companies’ dividend rates and will be reviewed ona periodic basis and assessed in relation to the growth of the operating cashflows of the Company.

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

**Conflictsof Interest. **Certain ofthe directors and officers of the Company also serve as directors and/orofficers of other companies involved in natural resource exploration and developmentand consequently there exists the possibility for such directors and officersto be in a position of conflict. Any decision made by any of such directors andofficers involving the Company will be made in accordance with their duties andobligations to deal fairly and in good faith with a view to the best interestsof the Company and its shareholders. In addition, each of the directors isrequired to declare and refrain from voting on any matter in which suchdirectors may have a conflict of interest in accordance with the procedures setforth in the Business Corporations Act (British Columbia) and other applicablelaws.

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**MINERAL PROPERTIES**

The Company has one material mineral property located inEritrea, the Bisha Mine.  Unless otherwise stated, the technical and scientificinformation included in this Annual Information Form concerning Bisha are derivedfrom the independent technical report titled “Bisha Polymetallic Operation,Eritrea, Africa NI 43-101 Technical Report” prepared by AGP Mining Consultants(“AGP”) effective August 31, 2012, (the “2012 Technical Report”).  The authorsof the 2012 Technical Report are independent “Qualified Persons” within themeaning of NI 43-101.  The information included herein is also based on theassumptions, qualifications and procedures which are set out in the 2012Technical Report.  For a complete description of assumptions, qualificationsand procedures associated with the following information, reference should bemade to the full text of the 2012 Technical Report which has been filed and isavailable for review on SEDAR (www.sedar.com)and EDGAR (http://www.sec.gov/edgar.shtml).

Commercial production of oxide ores at Bisha wasachieved in February, 2011. The oxide phase is nearing completion in mid-2013and the transition to supergene production is underway.

**Project Description and Location**

The Bisha Mine is located 150 kilometers west ofAsmara, 43 kilometers southwest of the regional town of Akurdat, and50 kilometers north of Barentu, the regional or Zone Administration Centreof the Gash-Barka District, in Eritrea, East Africa.  Access to the Property isby paved road from Asmara to Akurdat, a distance by road of 181 kilometers andthen 52 kilometers from Akurdat via an all-weather unpaved road, which iscurrently being upgraded. The drive from Asmara to the Bisha camp (alsoreferred to as Bisha Village) takes approximately four hours. Current onsiteproject infrastructure includes:  an open pit, process plant, tailings andwaste rock storage facilities, offices, maintenance and laboratory facilities,fuel storage areas, on-site power plant, and an airstrip. The Bisha Mine islocated at approximate latitude 15°28'N and longitude 37°27'E.  The UTMcoordinates (WGS84) of the centre of the Bisha property are 1,711,000 N and334,500 E (UTM Zone 37).

The property area contains the Bisha deposit, which is alarge precious metal (Au) and base metal rich (Cu, Zn) VMS deposit, as well as onesatellite deposit, known as the “Harena” deposit. Another potential satellitedeposit which as yet has no defined mineral resources is termed the “NorthwestZone”. A mining license, valid for 20 years, was issued for the project during2008 covering a 16.5 square kilometer area (which includes the “Bisha MainZone” deposit and the “Northwest Zone” potential deposit), all within a miningagreement area of 39 square kilometres (the “Mining License”).  

Under the terms of the Mining Agreement, BMSC has theexclusive right of land use in the Mining License Areas and within the MiningAgreement Area. This right is subject to the acquisition and settlement of anythird-party land-use rights by payment of compensation and/or relocation at theexpense of BMSC.  

A separate mining license, valid for 10 years, wasissued for the Harena deposit during 2012 covering a 7.5 square kilometer area.

The Company also has the Mogoraib exploration licensecovering 97.4 square kilometers, acquired from Sanu Resources (a subsidiary ofNGEx Resources Inc.), which includes the Hambok VMS historic resource. TheMogoraib Exploration License is valid until July 2013 with a right of renewalupon application. The Company intends to apply for a renewal.

The Mining Licenses and the Exploration License are heldby BMSC who is the operator for all of the licenses.

The Company intends to apply in 2013 for further expandedexploration rights around Bisha Mine.

The annual rental fee for the Exploration Licence is53,200 Nakfa, and the annual licence renewal fee is 6,000 Nakfa (about US$3,500and US$400 respectively).

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In October 2007 the Government of Eritrea indicated itsstrong support for the Bisha Project and for the development of a new andstrong mining sector in Eritrea through its purchase of a 30% paidparticipating interest through ENAMCO. The purchase price and settlement forthe 30% interest was determined during 2011, as disclosed in the notes to the Company’sannual financial statements. The shareholder structure of the BMSC is 60%Nevsun and 40% ENAMCO; with the ENAMCO shareholding comprising a 30% paidparticipating interest and a 10% free participating interest as provided by thecountry’s mining legislation.  In December 2007 BMSC concluded a miningagreement with the Government of the State of Eritrea containing all the normalprovisions governing the future development and operations for the BishaProject, including all substantive requirements of international financialinstitutions. 

Royalties payable include Eritrean Government royaltiesof 5.0% on precious metal sales and 3.5% on base metal sales.

**Accessibility, Climate, Local Resources, Infrastructure& Physiography**

Eritrea is located above the Horn of Africa on thecontinent’s east coast, between Sudan to the north and west, and Ethiopia andDjibouti to the south.  Eritrea has an area of 124,320 square kilometersand a 1,151 kilometer long coastline on the Red Sea, which separatesthe country from Saudi Arabia and Yemen.

The country is divided into three main geographicalzones: (1) the fertile and intensively farmed mountainous central plateau thatvaries from 1,800 to 3,000 metres above sea level (“masl”); (2) theeastern escarpment and coastal plain which are mainly desert, and (3) semi-aridwestern lowlands.       The Bisha Property is located in the western lowlands.

Eritrea has no year-round rivers and the climate istemperate in the mountains and hot in the lowlands.  The weather is usuallysunny and dry, with the short or “belg” rains occurring between February toApril and heavy or “meher” rains beginning in late June and ending inmid-September.

Asmara, the capital, is located at about 2,300 masl(7,500 ft.) and is serviced by regular international flights includingflights out of Frankfurt, Cairo, Sanaa and Jeddah. There is a good network ofpaved roads connecting Asmara with the major regional centres of Keren,Massawa, Assab, Adi Quala and Barentu.  Power generation from the Hirgigo plantnear Massawa supplies electrical power to Asmara and other major regionalcentres.  Landline telephone service is available from larger towns andcellular service is available in Asmara and surrounding towns, including Keren.Access to the Bisha Property is by paved road from Asmara to Akurdat, adistance by road of 181 kilometers.  From Akurdat access is via a 52 kilometerall-weather unpaved road, a portion of which is undergoing paving upgrade.

Comprehensive medical services are found in the larger townswith rudimentary medical clinics available in the smaller villages.  Schoolsare located in most villages.

Under the terms of the Mining Agreement, BMSC has theexclusive right of land use in the Mining License Area that is granted withinthe Mining Agreement Area and in the Harena Mining License Area.  This right issubject to the acquisition and settlement of any third-party land-use rights bypayment of compensation and/or relocation at the expense of BMSC, in accordancewith Eritrean Government Proclamation No. 68/1995, “Proclamation to Promote theDevelopment of Mineral Resources and the Mining Agreement”.

BMSC holds all the necessary permits to support a miningoperation.  For the mining operations, grant of the mining lease providespermission to construct and operate the Bisha Mine.  A permit had been grantedfor use of water from the Mogoraib River (currently being used with permission)and for the construction of a water diversion dyke which has been completed. 

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**Exploration**

Nevsun has no record of anyprevious exploration or mining activities on the property or surrounding areasprior to 1998. In June 1998, Nevsun signed the Bisha Area ProspectingLicence Agreement with the State of Eritrea that was converted to theExploration Licence in June 1999 covering an area of 49 square kilometers,later expanding to an area of 224 square kilometers in 2003. From 1998 to1999, exploration activities consisted of reconnaissance-scale geologicalmapping, multi-element stream sediment sampling, ground geophysical surveys andlimited “orientation” soil sampling, which showed the Bisha Gossan Zone to behighly anomalous in lead with significant values of copper, zinc and silver.Grab samples of the gossan returned anomalous gold values ranging up to30.4 g/t Au.  

Work was suspended between 1999 until late 2002 due tothe border war with Ethiopia.

In November 2002, Nevsun completed a diamond-drillingprogram of six holes totalling 811meters at the Bisha Property to test thegeophysical and geochemical anomalies at the gossan outcrop area. Thedrilling was sufficient to confirm the presence of a VMS deposit overlain by a supergenecopper-enriched zone and a gold-enriched gossan cap.

Two phases of diamond drilling were completed in 2003for a total of 18,619 meters in 141 holes. Additional work conducted duringthis program included mapping, geochemical sampling, trenching, geophysics(airborne and ground), metallurgical test work, petrographic work and bulkdensity measurements.

Further diamond drilling (163 holes totalling28,879 meters), RC drilling (33 holes totalling 1,814 meters) and core/RCcombination holes (9 holes totalling 592 meters) were completed betweenJanuary and June 2004.  Additional work completed during this program includedgeophysical surveys, mapping, geochemical sampling, petrographic work, bulkdensity measurements, geotechnical work, environmental baseline work, andmetallurgical test work.

During 2005, Nevsun completed diamond drilling of135 holes in three zones (86 holes in Bisha Main Zone, 22 holesin the NW Zone, 27 holes in the Harena Zone totalling 18,053 meters).  TheBisha Main Zone drilling included 20 geotechnical and 8 metallurgical drillholes, drilled to provide further information on the deposit for use in thefeasibility study on the Bisha Property dated November 15, 2006 (the “BishaFeasibility Study”).  The mineral resource and mineral reserve contained inthis study was updated in a technical report at that time.

In 2006, 8 diamond drill holes (1,680 meters), includingone deep drill hole at the Bisha Main Zone, three drill holes at the Bishahanging wall copper zone and 4 drill holes at the NW Zone satellite depositwere completed.  These holes were not included in the database used for mineralresource estimation in the Bisha Feasibility Study.

In 2007 additional ground geophysical (gravity) surveyswere performed on new target areas within the Exploration License which werefollowed up in 2008 with mechanical trenching/pitting and geological mapping.

In 2009, 29 diamond drill holes (3,578 meters) werecompleted in the Bisha Main Zone and in the Harena Zone.  The Bisha Main Zonedrilling consisted of 9 geotechnical holes to provide additional informationfor the pit design and 3 metallurgical holes, drilled to collect additionalsamples for designing the copper phase of the mill.  Harena Zone drillingconsisted of 17 infill holes drilled at 50 meter spacings to better define themineralization. An additional ground gravity survey was also performed on theExploration License to the southwest of the Harena Zone.

In June-July 2010, 13 diamond drill holes (1,918 meters)were drilled to test gravity targets within the Exploration License.  Nosignificant mineralization was intersected.  During this program an additional6 metallurgical holes were drilled in the Bisha Main Zone to collect additionalsamples for designing the copper phase of the mill.  In November-December 2010,34 diamond drill holes (2,448 meters) were drilled to infill the Harena Zone toreduce the drill hole spacing to 12.5 meters by 25 meters and 25 meters by 25 meters. This infill drilling was focused on defining the oxide and supergenemineralization.

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In 2011, 167 diamond drill holes (33,788 meters) weredrilled to define infill drill areas of known mineralization for resourceexpansion as well as for metallurgical and geotechnical studies andexploration.  At the Bisha Main Zone, 41 holes (15,950 meters) were drilled toinfill drill the primary zone portion of the deposit currently classified asinferred resources in order provide additional confidence in the understandingof the mineralization in this area with the goal of upgrading theclassification from inferred to indicated mineral resource estimates. As well,3 holes (1,572 meters) were drilled to test the depth extents of the primaryzone in the southern portion of the deposit. In addition to these explorationdrill holes throughout the Bisha Main Zone, 6 holes (695 meters) were drilledfor further geotechnical studies and 2 holes (180 meters) for supplementary supergenemetallurgical test work. For the hanging wall copper zone that lies immediatelywest of the Bisha Main Zone, 82 holes (9,421 meters) were drilled in thiswestern extension of the supergene in order to outline this expanded mineralresource.  These hanging wall copper exploration drill holes were drilled in 2phases to define the mineralized area and infill with sufficient spacing tosupport mineral resource estimation.  At Harena, 4 holes (603 meters) weredrilled for geotechnical studies, 2 holes (182 meters) were drilled formetallurgical studies and 5 holes (859 meters) were drilled to test coincidentgravity/EM/soil geochemical anomalies 300 meters southwest along strike fromthe Harena deposit.  No significant mineralization was encountered.  In the NWZone, 22 holes (4,325 meters) were drilled as part of an infill drill programand that continued in 2012.

In 2012, diamond drilling programs were undertakenacross Bisha Main, Bisha Hangingwall (HW) Copper, Harena and the Northwest (NW)Zone, for a total of 112 holes and 19,432 meters.  This was a combination ofexploration extension and infill drilling, as well as geotechnical andmetallurgical investigative drilling required for mineral resource and mineralreserve estimations.

At Bisha Main, 12 geotechnical holes (3,049 meters) weredrilled to provide data for a pit design optimization that included the HWCopper Zone extension to the Bisha Main deposit. Metallurgical drilling for atotal of 12 holes (821 meters) was completed across the Supergene Zone of BishaMain and HW Copper extension to provide supplemental data for the Bisha Mainmineral resource estimate (effective date May 31, 2012).  A further 7 diamondcored holes for 410 meters were completed in October 2012 to test for goldpotential above the HW Copper Zone within the Phase 5 Cutback of the Bisha Mainopen pit.  

The majority of drilling in 2012 was centred on thedevelopment of the NW Zone to help facilitate the planned NI-43-101 resourceestimate to be completed in third quarter 2013.  From March to July, 2012, 49diamond cored holes (9,215 meters) completed another phase of the NW Zone drillprogram (which had commenced in 2011) focused on infill holes. The drillingcompleted a pattern of 25 meters by 50 meters as well as 50 meters by 50 metersdrill spacing to a depth of 200 meters below surface for a central portion ofthe zone.  Further analysis of the NW zone showed potential for further strike,near surface and down dip extensions and a need to both extend and infill thispotential economic deposit in order to produce a mineral resource estimate atan Indicated level during 2013.  Eight geotechnical holes (1,568 meters) andtwo metallurgical holes (471 meters) were also completed at Northwest.  Whiledrilling the geotechnical holes north of the current outlined NW zone,mineralization was encountered as well as a separate gold and base metalsenriched horizon east of the main body of mineralization.  This discovery ofadditional strike extension to the NW Zone was followed up in November andDecember with 16 additional diamond drill holes (2,776 meters) all intersectingfurther mineralization.  Drilling is planned to continue into 2013 to continuethe process of expanding the NW Zone along strike, closer to surface anddown-dip, as well as infilling  the deposit to a 25 meter by 50 meter spacingprior to complete the NI 43-101 resource estimate.

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At Harena, exploration diamond drilling in 2012 includeda total of 6 holes (1,123 meters) with one of two drill holes at Harenaintersecting mineralization peripheral to the Harena open pit.  Thesignificance of the mineralization is yet to be fully understood. Of the fourholes drilled just south of Harena, two intersected volcaniclastic stratigraphywell south of Harena and east of Hambok. 

**Geology and Mineralization**

Mineralization found to date within the Project istypical of precious and base metal-rich volcanogenic massive sulphide (VMS)deposits.  

Eritrea is divided into several north or northeasttrending Proterozoic terranes, which are separated by major crustal sutures. The Nacfa Terrane comprises low-grade metamorphosed calc-alkaline volcanics andsediments, and hosts base metal mineralization in the region surrounding thecity of Asmara, and in the Gash-Barka district, including the Bishapolymetallic mineralization.

The VMS deposits at Bisha are hosted by a tightly andcomplexly folded, intensely foliated, bimodal sequence of generally weaklystratified, predominantly tuffaceous metavolcanic rocks.  Felsic lithologiesappear to directly host the mineralization, predominate overall, and form thehanging wall stratigraphy.   A significant component of mafic metavolcanicrocks occurred in the more obviously bimodal footwall, which is exposed mainlyto the east of the known mineralized zones.

The Bisha Main Zone deposit extends for over 1.2 kilometersalong a north-trending strike, and has been folded (and overturned, dipping tothe west) into an antiform so that there are two western and one easternlenses.  The thickness of the lenses is variable from 0 meters to 70 meters. The primary sulphide zone is below the weathering zone.  The massive sulphidelenses can locally exceed 70 meters in true thickness and show typicalcopper-rich bases and zinc-rich tops.  

Deep weathering has affected Bisha Main Zone lenses thatoccur in low-lying areas by removing most of the sulphide and producinghigh-grade supergene blankets enriched in gold, silver, and copper inparticular.  The gossan zone can vary in composition from highly siliceous andsomewhat ferruginous to a massive goethite-hematite-jarosite gossan.  The depthof oxidation appears to be on the order of 30 meters to 35 meters inoutcrop areas, but is variable in sand-covered areas.  

The oxidation of the massive sulphides generated strongacid solutions that have progressively destroyed the sulphides and host rock. A horizon of extremely acid-leached material or “soap” has developed betweenthe oxide and supergene/primary domains.

The Harena deposit has been traced over a strike lengthof 400 meters, and is interpreted to be a northwest-dipping, tabular massivesulphide body, closed off by drilling to the northwest, but open to thesoutheast.  Host rocks to the Harena deposit are a bimodal,hydrothermally-altered suite of basalts and rhyolite-dacite volcanics. Surficial weathering processes have produced three distinct zones ofmineralization.  These include a surface oxide/gossan overlaying a secondary supergenehorizon, which grades into a primary massive sulphide horizon at depth.  Thegossanous horizon contains frequently anomalous levels of gold and silver. Oxide and sulphide mineralized zones are approximately 400 meters in length andvary in thickness between 5 meters and 15 meters.  

Additional prospects are known within the Project area;the most advanced is the Northwest (NW) Zone, located approximately 1.5 kilometersnorth of the Bisha Main Zone.

**Drilling**

Drilling on the Project has beenundertaken in a number of core and one RC campaign from 2002 to December,2012.  Drilling comprised a total of 804 drill holes (132,788 meters), of which771 were core drill holes (130,003 meters) and 33 were RC drill holes (2,097meters).  Drill programs have been completed primarily by a contract drillingcrew, earlier supervised by Nevsun geological staff and now supervised by BMSCgeological staff.  

A total of 514 drill holes support mineral resourceestimation at the Bisha Main Zone.  Much of the massive sulphide mineralizationin the Bisha Main Zone has been well defined by drilling patterns of 25 metersspaced holes on sections spaced 12.5 or 25 meters apart.  This densitydecreases with depth on the deepest portions of the primary mineralization. The deposit remains open at depth in the south, with the deepest intersectionsobtained to date returning long lengths of medium- to high-grade zincmineralization.

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Core was logged for geological and geotechnicalparameters, and photographed.  Drill collar locations have been verified bysurvey.  Down-hole surveys were not performed for the first 20 drill holes onthe Project while all subsequent drilling has been down-hole surveyed usingacid tests, Sperry-Sun Single-Shot and Reflex instrumentation.

Average drill core recoveries are 71% in the oxides, 71%in the breccia, 61% in the “soap” lithological unit, 91% in the supergenedomain, and 98% in the primary sulphides.  Most of the low core-recovery assayswere associated with the gold-rich oxidized portion of the deposit. Thesezones, which are now largely depleted, proved very challenging for gradeprediction. Less grade variability is expected in the supergene as drill corerecoveries are significantly better; however, localized variability may existwith respect to both in-situ grades and metallurgical response. 

RC samples were 2 meters in length.  The maximum coresample length is 12 meters (only within wall rock away from mineralizedintervals) and the minimum is 0.15 meters.  Within the zones ofmineralization, sample lengths are generally between 1 meter and 3 meters. Sample intervals are determined based upon mineralogical and lithologicalcontacts.  

Mine grade control initially consisted of one-metre RCsamples weighing approximately 6 kilograms which were split in-pit andsubmitted to the on-site laboratory for sample preparation. Due to poor groundconditions in the Bisha Main oxide material, this plan was abandoned early inthe mine life.  In most areas of oxide mineralization, reliable blast-holesamples could not be obtained either.  To mitigate for these conditions, a ripline sampling procedure was implemented. The rip lines are spaced 10 metersapart, vary in depth 0.2 meters to 1 meter with 3 to 4 kilogram samplescollected every 2 meters. The Bisha Mine is preparing to revert back to RCdrilling for the Supergene Zone when ground conditions improve significantly.

**Sampling and Analysis**

Sampling programs at the Bisha Property included drillcore samples, RC samples and various geochemical samples, which included:surface rock chip, trench, auger, pit, soil, and stream sediment sampling.Nevsun established detailed logging, sample collection, and sample preparationprotocols for core and RC sampling, and implemented procedures for thecollection of geotechnical data.

All trench, rock chip and geochemical samples, includingsoil and auger, stream sediment, pit and termite mound samples collected duringthe drilling program conducted between February and June 2003 (the “2003 PhaseI Program”) were shipped to the Horn of Africa Preparation Laboratory, inAsmara, which provided preparation services for Genalysis Laboratory ServicesPty (Genalysis) of Maddington, Australia.  The preparation laboratory producedpulp samples that were subsequently shipped to Genalysis in Australia foranalysis.  Following the 2003 Phase I Program, geochemical and rock chipsamples were shipped to ALS Chemex Ltd. (ALS Chemex), in Vancouver, Canada.

The primary laboratory used by Nevsun for analytical workon the drilling programs was ALS Chemex.  Nevsun used the laboratory for bothsample preparation and analyses from the initiation of the first drill programin 2002.  During the 2002 and 2003 Phase I Program, samples were shipped ashalf-core from the Bisha camp to Asmara and forwarded to ALS Chemex inVancouver.  After establishing a sample preparation facility, designed andinstalled by ALS Chemex, at camp in September 2003, Nevsun sent coarse crushedand split material (-2 millimeters)for core, RC, and rock samples to ALS Chemex for subsequent pulverization andanalyses.  All assay data contained in the database for mineral resourceestimation was assayed by ALS Chemex.

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Both ALS Chemex and Genalysis are registered with theInternational Organization for Standardization (“ISO”) and are internationallyrecognized facilities.  ALS Chemex is registered to ISO 9001:2000 for the“provision of assay and geochemical analytical services” by BSI QualityRegistrars.  The National Association of Testing Authorities Australia hasaccredited Genalysis, following demonstration of its technical competence, tooperate in accordance with ISO/IEC 17025 (1999), which includes the managementrequirements of ISO 9002:1994.  The facility is accredited in the field ofChemical Testing for the tests, calibrations and measurements that are shown inthe Scope of Accreditation issued by the NationalAssociation of Testing Authorities, Australia. 

In 2009 the Company switched from ALS Chemex inVancouver to ALS Chemex in Romania in order to save on shipping costs and tospeed up turn-around times for obtaining analytical results. This proved to beof no benefit so the Company switched back to ALS Chemex in Vancouver in 2010.For metallurgical testing the Company has used Mintek and Maelgwyn in SouthAfrica, and ALS Chemex and SGS Laboratories in Canada.

Sample programs included insertion of blank, duplicateand Standard Reference Material (SRM) samples.  The QA/QC program results donot indicate any significant problems with the analytical programs that wouldpreclude use of the data.

The initial process of data verification for the Projectwas performed by Nevsun, and by external consultancies contracted by Nevsunstaff.  During the Feasibility Study, and as part of the checks on data forthis, and previous technical reports, AMEC reviewed drilling and otherexploration and project data.  AMEC also submitted independent samples forverification of mineralization tenor at the Project.

The run-of-mine laboratory was established by SGSMineral Services (SGS) and continued to be managed by SGS but operated bySGS-trained BMSC staff. With the transition to mining and processing of thecopper supergene, operatorship as well as management of this laboratory willrevert fully to SGS by mid-2013.

A detailed description of the sampling methods andquality control procedures are described in the Company’s 2012 Technical Reportfiled on SEDAR (www.sedar.com) and EDGAR (http://www.sec.gov/edgar.shtml).

**Security of Samples**

The chain-of-custody for core samples collected andbeing shipped from site is as follows:

- Core is transported to the Bisha camp by Bisha personneland placed in the core logging area.
- The logging and sample preparation area and theBisha camp is within a fenced and guarded compound.
- Core samples are crushed and sub-sampled.
- Prepared samples are placed in sealed barrels.
- Each barrel has a list of samples written on theoutside of the container.
- A sample submission form accompanies eachbarrel.
- Barrels are transported to Asmara incompany-owned vehicles arranged by BMSC.

The sample barrels are submitted to the EritreanMinistry of Energy and Mines for inspection and submission to customs, acustoms seal is placed on the barrels and they are shipped via air transportdirectly to ALS Chemex.

**MineralResource Estimate**

Commencing 2005, an initial mineral resource model forBisha Main was constructed as were subsequent models with updated information. Subsequentlyin 2012, the resource model was again reviewed as part of Bisha’s MineralResources and Reserves Estimation Review by AGP, an independent mining andgeological consulting firm that had not previously reported on the property.  AGPestimated the new mineral resources at Bisha.  AGP’s estimate was in turnreviewed by another independent third party engineering company.  AMEC AmericasLimited estimated the new mineral resources at Harena.  In August 2012, AGPprepared the new combined Bisha and Harena mineral reserves estimate (May 31,2012 effective date) and a NI 43-101 compliant Technical Report titled “BishaPolymetallic Operation, Eritrea, Africa” is filed on SEDAR (www.sedar.com) and EDGAR (http://www.sec.gov/edgar.shtml). 

| **30 |**Nevsun Resources Ltd. |
|-------------------------------|

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| ANNUAL INFORMATION FORM - 2012 |
|--------------------------------|

The original geological interpretation was completed byNevsun based on lithologic, mineralogic and alteration features logged in drillcore.  The overall interpretation at the Bisha Property changed little since theinitial mineral resource estimate in 2004 and subsequent 2005 mineral resourcemodel.           The deposit has been subdivided into six mineralized domains:  breccia,oxide, acid, supergene, primary Zn, and primary.  Some of the domain contactshave been revised relative to the 2004 interpretation based on new drill holeinformation or revised interpretations.  The general sizes of the domains andtheir positions relative to each other are consistent with the initial interpretations.

A 3D geological model was prepared in Gemcom® softwareto outline the six mineralized domains.    The resource model prepared in 2005used ordinary kriging for grade interpolation.  The 2005 Bisha mineral resourceestimate was based on 347 diamond and 9 reverse circulation pre-collardiamond drill holes covering a strike length of 1,200 meters and to depthsvarying from surface to 475 meters.

The 2012 Mineral Resource by AGP is the primary basisupon which the Company has publicly estimated its current resource and reserveestimates. The 2012 Mineral Resource, certified by the Qualified Person, resultedin a total mineral resource and reserve estimate as a result of 27,000 metersof diamond drilling in 2011 and from adjustments to the mine plan based on anew resource model cognisant of actual mining data in 2011 and early 2012. The2012 Mineral Resource and Reserve estimate provided by AGP is compliant withCIM Definition Standards for Mineral Resource and Mineral Reserves as requiredby NI43-101 and has been filed on SEDAR (www.sedar.com)and EDGAR (http://www.sec.gov/edgar.shtml). 

Mineral Resources were estimated using Gem’s 3D miningsoftware version 6.3 (Gems) supplied by Gemcom Software International and werereported within a constraining pit shell. AGP received drill hole data fromBMSC for the 2006, 2011 and 2012 drilling programs and imported them into theBisha Gems drill hole database that included drill hole data to the end of2005. A total of 116 delineation drill holes had been completed since the lastresource estimate. AGP received sample data from rip-lines completed in theBisha pit from the 2011 – 2012 grade control program. Sample collection fromthe grade control program and metallurgical drilling was ongoing at the time ofthe estimate, and as such, a cut-off date of February 14, 2012 was applied tothe input data.

The final Gem’s drill hole assay database comprised32,674 assayed samples from 472 diamond drill holes, 33 RC drill holes, and 9diamond drill holes that were pre-collared to some depth as RC drill holes and43,472 grade control samples from rip-lines.

| **31 |**Nevsun Resources Ltd. |
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| ANNUAL INFORMATION FORM - 2012 |
|--------------------------------|

**Table 1-1: Bisha Mineral Resources Estimate**

The following tables are based on the 2012 MineralResource Review, as certified by the identified Qualified Persons as of theEffective Dates indicated. Mineral resources that are not mineral reserves donot have demonstrated economic viability.

| **Michael Waldegger,  P.Geo., Effective Date: May 31, 2012** |
|--------------------------------------------------------------|
| **Indicated**                                                |   |   |   |   |   |   | **Contained Metal** |   |   |
|                                                         | **NSR Cut-Off** | **Tonnes** | **Copper** | **Zinc** | **Gold** | **Silver** | **Cu** | **Zn** | **Au** | **Ag** |
| **Zone**                                                     | **($/t)** | **('000’s)** | **%** | **%** | **g/t** | **g/t** | **('000 lbs)** | **('000 lbs)** | **('000 Oz)** | **('000 Oz)** |
| **Oxide Zone**                                               | 46.42 | 740 |   |   | 6.08 | 43 | - | - | 145 | 1,020 |
| **Supergene Zone**                                           | 35.29 | 8,000 | 3.75 |   | 0.72 | 28 | 661,390 | - | 185 | 7,200 |
| **Primary Zone**                                             | 35.29 | 21,150 | 0.96 | 6.47 | 0.71 | 47 | 447,630 | 3,016,810 | 483 | 31,960 |
| **Total**                                                    |   |   |   |   |   |   | 1,109,020 | 3,016,810 | 813 | 40,180 |
|                                                         |   |   |   |   |   |   |   |   |   |   |
| **Inferred**                                                 |   |   |   |   |   |   | **Contained Metal** |   |   |
|                                                         |   | **Tonnes** | **Copper** | **Zinc** | **Gold** | **Silver** | **Cu** | **Zn** | **Au** | **Ag** |
| **Zone**                                                     |   | **('000’s)** | **%** | **%** | **g/t** | **g/t** | **('000 lbs)** | **('000 lbs)** | **('000 Oz)** | **('000 Oz)** |
| **Oxide Zone**                                               | 46.42 | 330 |   |   | 5.31 | 111 | - | - | 56 | 1,180 |
| **Supergene Zone**                                           | 35.29 | 300 | 1.73 |   | 0.19 | 5 | 11,440 | - | 2 | 50 |
| **Primary Zone**                                             | 35.29 | 1,000 | 1.06 | 9.58 | 0.76 | 59 | 23,370 | 211,200 | 24 | 1,900 |
| **Total**                                                    |   |   |   |   |   |   | 34,810 | 211,200 | 82 | 3,130 |

The following notes should be read inconjunction with Table 1-1 above:

| (1) | Domains weremodeled in 3D to separate oxide, supergene and primary massive sulphide rocktypes from surrounding waste rock. The domains conformed to lithologicalcontacts logged in diamond drill core and reverse circulation chips.Sub-domaining was further warranted to separate different grade populationswithin domains. The mined out portion of the oxide domain was also modeled,using an extensive grade control dataset. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Raw drillhole assays were composited to 2.5m lengths interrupted by domain boundaries. |
|-----|----------------------------------------------------------------------------------------|

| (3) | Block gradesfor copper, zinc, gold and silver, as well as lead and arsenic were estimatedfrom the composites using a combination of ordinary kriging (OK) and inversedistance weighted to the second power (ID2) into 5 x 5 x 5m blocks coded bydomain. Blocks in the Oxide domain were estimated using grade control sampledataset as well as the drill hole dataset. All other domains used only thedrill hole dataset. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Restrictivesearch distances were applied to high grade composites in order to limit theirrange of influence on block grade without entirely ignoring their high value. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Dry bulk densitywas estimated using ID2 from drill core samples collected throughout thedeposit. The density of the Oxide domain was estimated from hand samplescollected from within the open pit as well as from drill core samples. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Blocks wereclassified as indicated or inferred in accordance with CIM DefinitionStandards. |
|-----|--------------------------------------------------------------------------------------------|

| (7) | NSR wasestimated using diluted grades, metal prices, recoveries and appropriatesmelter terms and downstream costs. |
|-----|--------------------------------------------------------------------------------------------------------------------|

|   | - | Grades were diluted to a 5 x 5 x5m block. |
|--------|---|-------------------------------------------|

|   | - | Metal prices used for copper,zinc, gold and silver were $3.30/lb, $1.05/lb, $1350/oz and $26/ozrespectively. |
|--------|---|--------------------------------------------------------------------------------------------------------------|

|   | - | Metallurgical recoveries,supported by metallurgical test work were applied as follows: |
|--------|---|----------------------------------------------------------------------------------------|

|   | a. | Oxide zone: recoveries of 88% and 22%were applied for gold and silver respectively, based on actual production. Copper and zinc are not recovered during the oxide phase and therefore are notconsidered a part of the oxide mineral resources. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Supergene zone: recoveries of 88%, 56%,and 54% were applied for copper, gold and silver respectively.  Zinc has notbeen assigned a recovery as most of the supergene zone will be processed priorto start-up of the zinc flotation plant. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | Hanging wall zone (included in the supergenezone total): recoveries of 88%, 56%, and 54% were applied for copper, gold andsilver respectively.  Zinc has not been assigned a metallurgical recovery asmost of this zone will be processed prior to start-up of the zinc flotationplant. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d. | Primary zone: recoveries to copperconcentrate of 85%, 36%, and 29%, were applied for copper, gold and silverrespectively.  Recoveries to zinc concentrate of 83.5%, 9% and 20% were appliedfor zinc, gold and silver respectively.  Due to uncertainty whether candidatesmelters will pay gold and silver credits, they have been disregarded for cashflow estimates. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | ALerchs-Grossman pit shell was generated from the NSR and using mining costs of$2.08/t, plus $0.01/t/5 m bench for ore and $0.02/t/5 m bench for waste belowthe reference elevation of 540 m.  The total ore based costs (process, G&Aand stockpile re-handle) are $46.42/t for oxide, and $35.29/t for supergene andprimary rock types.  Overall pit slopes used in the pit optimization varied from34.5o to 44o. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **32 |**Nevsun Resources Ltd. |
|-------------------------------|

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| ANNUAL INFORMATION FORM - 2012 |
|--------------------------------|

| (9) | Mineralresources were reported within the Lerchs-Grossman pit shell above an NSRcut-off equivalent to the total ore based costs stated above. The containedmetal figures shown are in situ.  No assurance can be given that the estimatedquantities will be produced.  All figures have been rounded to reflect accuracyand to comply with securities regulatory requirements.  Summations within thetables may not agree due to rounding. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | AGPundertook data verification, and reviewed Bisha’s quality assurance and qualitycontrol programs on the mineral resource data.  AGP concluded that the collar,survey, assay and lithology data were adequate to support mineral resourcesestimation. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Table 1-2: Harena MineralResources Estimate**

| **David Thomas P. Geo., Effective Date May 31, 2012** |
|-------------------------------------------------------|
| **Indicated**                                         |   |   |   |   |   |   | **Contained Metal** |   |   |
|                                                  | **NSR Cut-Off** | **Tonnes** | **Copper** | **Zinc** | **Gold** | **Silver** | **Cu** | **Zn** | **Au** | **Ag** |
| **Zone**                                              | **($/t)** | **('000’s)** | **%** | **%** | **g/t** | **g/t** | **('000 lbs)** | **('000 lbs)** | **('000 Oz)** | **('000 Oz)** |
| **Oxide Zone**                                        | 48.92 | 220 |   |   | 3.79 |   | - | - | 27 | - |
| **Primary Zone**                                      | 37.79 | 1,850 | 0.65 | 3.90 | 0.56 | 23 | 26,510 | 159,060 | 33 | 1,370 |
| **Total**                                             |   |   |   |   |   |   | 26,510 | 159,060 | 60 | 1,370 |
|                                                  |   |   |   |   |   |   |   |   |   |   |
| **Inferred**                                          |   |   |   |   |   |   | **Contained Metal** |   |   |
|                                                  |   | **Tonnes** | **Copper** | **Zinc** | **Gold** | **Silver** | **Cu** | **Zn** | **Au** | **Ag** |
| **Zone**                                              |   | **('000’s)** | **%** | **%** | **g/t** | **g/t** | **('000 lbs)** | **('000 lbs)** | **('000 Oz)** | **('000 Oz)** |
| **Oxide Zone**                                        | 48.92 | 40 |   |   | 4.49 |   | - | - | 6 | - |
| **Primary Zone**                                      | 37.79 | 370 | 0.74 | 4.06 | 0.79 | 32 | 6,040 | 33,120 | 9 | 380 |
| **Total**                                             |   |   |   |   |   |   | 6,040 | 33,120 | 15 | 380 |

Thefollowing notes should be read in conjunction with Table 1-2 above:

| (1) | AMECundertook data verification, and reviewed Bisha’s quality assurance and qualitycontrol programs on the mineral resources data.  AMEC concluded that thecollar, survey, assay and lithology data were adequate to support mineralresources estimation. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Domains weremodeled in 3D to separate oxide, supergene and primary massive sulphide rocktypes from surrounding waste rock. The domains conformed to lithologicalcontacts logged in diamond drill core. Sub-domaining was further warranted toseparate different grade populations and zones with differing strike and diporientation within domains. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Raw drillhole assays were composited to 3.0 m lengths broken at domain boundaries. |
|-----|------------------------------------------------------------------------------------|

| (4) | High gradeassays were capped prior to compositing. Capping thresholds were assessedwithin each domain independently. |
|-----|----------------------------------------------------------------------------------------------------------------------|

| (5) | Block gradesfor copper, zinc, gold and silver and lead were estimated from the compositesusing a combination of ordinary kriging (OK) and inverse distance weighted tothe third power (ID3) into 5 x 5 x 3 m blocks coded by domain. Grade estimationused only the exploration drill core dataset as the grade control drilling datawas not available at the time of mineral resources estimation. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | The densityof the Oxide domain was assigned from the length weighted mean of core samplescollected from drill holes. Dry bulk density of the primary sulphide wasestimated by a regression of block grade estimates. The regression was derivedfrom assays of sulphur, barium, iron, copper, zinc and lead. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | AMECreviewed the available grade control drill hole data. The results generallysupport the grades intercepted in the exploration core drilling. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Blocks wereclassified as indicated and inferred in accordance with CIM DefinitionStandards. |
|-----|---------------------------------------------------------------------------------------------|

| (9) | NSR wasestimated using undiluted grades, metal prices, recoveries and appropriatesmelter terms and downstream costs. |
|-----|----------------------------------------------------------------------------------------------------------------------|

| (10) | Metal pricesused for copper, zinc, gold and silver were $3.30/lb, $1.05/lb, $1350/oz, and$26/oz respectively. |
|------|---------------------------------------------------------------------------------------------------------------|

| (11) | Metallurgicalrecoveries, supported by metallurgical test work were applied as follows: |
|------|----------------------------------------------------------------------------------------|

|   | a. | Oxide zone: a recovery of 75% wasapplied for gold. No metallurgical test work was completed to support arecovery for silver.  Copper and zinc are not recovered during the oxide phaseand therefore are not considered a part of the oxide mineral resources. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Supergene zone: No recoveries wereassigned as preliminary metallurgical test work was considered insufficient tosupport classification of the material as part of the mineral resources. Withfurther metallurgical test work, the potential exists to add this 100kt to150kt of material to the mineral resources. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | Primary zone: recoveries to copperconcentrate of 85%, 36%, and 29%, were applied for copper, gold and silverrespectively.  A recovery to zinc concentrate of 72%, was applied for zinc. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | A Lerchs-Grossmanpit shell was generated from the NSR and using mining costs of $2.08/t. Orebased costs include $2.50/t for overland ore haulage.  The total ore basedcosts (process, G&A and stockpile re-handle) are $48.92/t for oxide, and$37.79/t for the primary rock type.  Overall pit slopes used in the pitoptimization varied from 29 ̊ to 35.5 ̊. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | Mineralresources were reported within the Lerchs-Grossman pit shell above an NSRcut-off equivalent to the total ore based costs stated above. The containedmetal figures shown are in situ.  No assurance can be given that the estimatedquantities will be produced.  All figures have been rounded to reflect accuracyand to comply with securities regulatory requirements.  Summations within thetables may not agree due to rounding. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **33 |**Nevsun Resources Ltd. |
|-------------------------------|

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| ANNUAL INFORMATION FORM - 2012 |
|--------------------------------|

**Table 1-3: Combined Bishaand Harena Mineral Resources Estimate**

| **Michael Waldegger, P.Geo. (Bisha) and David Thomas  P. Geo. (Harena)****Effective Date: May 31, 2012** |
|----------------------------------------------------------------------------------------------------------|
| **Indicated**                                                                                            |   |   |   |   |   | **Contained Metal** |   |   |
|                                                                                                     | **Tonnes** | **Copper** | **Zinc** | **Gold** | **Silver** | **Cu** | **Zn** | **Au** | **Ag** |
| **Zone**                                                                                                 | **(000's)** | **%** | **%** | **g/t** | **g/t** | **('000 lbs)** | **('000 lbs)** | **('000 Oz)** | **('000 Oz)** |
| **Oxide Zone**                                                                                           | 960 |   |   | 5.56 | 33 | - | - | 172 | 1,020 |
| **Supergene Zone**                                                                                       | 8,000 | 3.75 |   | 0.72 | 28 | 661,390 | - | 185 | 7,200 |
| **Primary Zone**                                                                                         | 23,000 | 0.94 | 6.26 | 0.70 | 45 | 474,140 | 3,175,870 | 516 | 33,330 |
| **Total**                                                                                                |   |   |   |   |   | 1,135,530 | 3,175,870 | 873 | 41,550 |
|                                                                                                     |   |   |   |   |   |   |   |   |   |
| **Inferred**                                                                                             |   |   |   |   |   | **Contained Metal** |   |   |
|                                                                                                     | **Tonnes** | **Copper** | **Zinc** | **Gold** | **Silver** | **Cu** | **Zn** | **Au** | **Ag** |
| **Zone**                                                                                                 | **(000's)** | **%** | **%** | **g/t** | **g/t** | **('000 lbs)** | **('000 lbs)** | **('000 Oz)** | **('000 Oz)** |
| **Oxide Zone**                                                                                           | 370 |   |   | 5.22 | 99 | - | - | 62 | 1,180 |
| **Supergene Zone**                                                                                       | 300 | 1.73 |   | 0.19 | 5 | 11,440 | - | 2 | 50 |
| **Primary Zone**                                                                                         | 1,370 | 0.97 | 8.09 | 0.77 | 52 | 29,410 | 244,320 | 33 | 2,280 |
| **Total**                                                                                                |   |   |   |   |   | 40,850 | 244,320 | 97 | 3,510 |

**Mi****neralReserves**

The Proven and Probable Mineral Reserves at theoperation have been classified in accordance with the 2010 CIM DefinitionStandards for Mineral Resources and Mineral Reserves.  Mineral Reserves aredefined within a mine plan, with open pit phase designs guided byLerchs–Grossmann optimized pit shells, generated using metal prices for copper,zinc, gold and silver of $2.80/pound, $0.92/pound, $1,175/ounce, $22/ouncerespectively. The NSR Cut-Offs ($US/t) are: Oxide Zone $46.42 for Bisha and$48.92 for Harena; Supergene Zone $35.29 for Bisha; and Primary Zone $35.29 forBisha, and $37.79 for Harena. 

The summary of the Mineral Reserves are shown in Table 1-4. No re-estimates have been done by Nevsun nor have existing estimates been depletedby 2012 production. Although the contained gold estimate in the oxide zonesfrom Bisha Main and Harena deposits noted in the Table below is 167,000 ounces,actual mining for the final 7 months of 2012 resulted in mill feed of 192,000contained ounces. BMSCwill conclude gold production in late Q2 2013. Recent Q42012 production resulted in the latest oxide ore mineral reserve estimate(167,000 gold ounces) being exceeded by 15 percent.  In 2013 BMSC estimates toproduce a further 60 percent more gold than the oxide mineral reserve estimates.   While not yet reconciled, this implies the oxide mineral reserve estimatesfor gold from the 2012 Technical Report may have under-estimated contained goldby as much as 75 percent.  This not-in-reserve (NIR) gold production is notconsidered a material mineral reserve increase when viewed in the context ofthe entire oxide, supergene and primary mineral reserve estimates at Bisha.

| **34 |**Nevsun Resources Ltd. |
|-------------------------------|

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| ANNUAL INFORMATION FORM - 2012 |
|--------------------------------|

**Table1-4:  Bisha andHarena Reserves Estimate(Effective Date: May 31, 2012)**

| **Zone**                                                               | **Tonnes      (‘000s)** |       | **Contained Metal** |
|------------------------------------------------------------------------|-------------------------------|------------|---------------------|
| **Cu %**                                                               | **Zn %**                      | **Au g/t** | **Ag g/t**          | **Cu      ('000s lb)** | **Zn      ('000s lb)** | **Au      ('000s oz)** | **Ag      ('000s oz)** |
| ***Bisha Probable Mineral Reserve      Estimate***                     |
| Oxide Zone                                                             | 720                           |       |                | 6.18 | 44 | - | - | 143 | 1,020 |
| Supergene Zone                                                         | 6,420                         | 4.09       |                | 0.67 | 28 | 578,880 | - | 138 | 5,780 |
| Primary Zone                                                           | 17,660                        | 1.13       | 6.54                | 0.73 | 49 | 439,950 | 2,546,260 | 414 | 27,820 |
| **Total**                                                              |                          |       |                |   |   | **1,018,830** | **2,546,260** | **695** | **34,620** |
| ***Harena Probable Mineral Reserve      Estimate***                    |
| Oxide Zone                                                             | 180                           | -          | -                   | 4.21 | - | - | - | 24 | - |
| Primary Zone                                                           | 1,530                         | 0.64       | 3.95                | 0.55 | 23 | 21,590 | 133,240 | 27 | 1,130 |
| **Total**                                                              |                          |       |                |   |   | **21,590** | **133,240** | **51** | **1,130** |
| ***Combined Bisha and Harena Probable      Mineral Reserve Estimate*** |
| Oxide Zone                                                             | 900                           | -          | -                   | 5.79 | 35 | - | - | 167 | 1,020 |
| Supergene Zone                                                         | 6,420                         | 4.09       | -                   | 0.67 | 28 | 578,880 | - | 138 | 5,780 |
| Primary Zone                                                           | 19,190                        | 1.09       | 6.33                | 0.72 | 47 | 461,540 | 2,679,500 | 441 | 28,950 |
| **Total**                                                              |                          |       |                |   |   | **1,040,420** | **2,679,500** | **746** | **35,750** |

Notesto accompany Mineral Reserve Table:

| (1) | NSR Cut-Off ($US/t): Oxide Zone$46.42 for Bisha and $48.92 for Harena; Supergene Zone $35.29 for Bisha; and PrimaryZone $35.29 for Bisha and $37.79 for Harena. Mineral reserves are definedwithin a mine plan, with pit phase designs guided by Lerchs–Grossmann (LG) pitshells and generated using metal prices for copper, zinc, gold and silver of$2.80/lb, $0.92/lb, $1175/oz, $22/oz respectively. The mining cost was $2.08/t,plus $0.01/t/5 m bench for ore and $0.02/t/5 m bench for waste below thereference elevations of 540 meters above mean sea level and 600 meters abovemean sea level for Bisha and Harena respectively.  The total ore based costs(process, G&A and stockpile re-handle) are $46.42/t for oxide, and $35.29/tfor supergene and primary ores. Harena ore based costs include an additional$2.50/t overland ore haulage cost. Overall pit slopes varied from 34.5o to 44ofor Bisha and from 29o to 35.5o for Harena. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Economic values for themulti-metal, multi-zone deposits were modeled using Net Smelter Return values.For each block, NSR values were calculated using diluted indicated grades,metal prices, recoveries and appropriate smelter terms and downstream costs.  Metallurgicalrecoveries, supported by metallurgical test work, were applied as follows: |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Bisha oxide zone: recoveries of 88%and 22% were applied for gold and silver respectively, based on actualproduction.  Copper and zinc are not recovered during the oxide phase andtherefore are not considered a part of the oxide mineral reserves. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Harena oxide zone: a recovery of75% was applied for gold. Test work was not performed to support a silverrecovery.  Copper and zinc are not recovered during the oxide phase andtherefore are not considered a part of the oxide mineral reserves. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Bisha supergene zone: recoveries of88%, 56%, and 54% were applied for copper, gold and silver respectively. Zinchas not been assigned a recovery as most of the supergene zone will beprocessed prior to start-up of the zinc flotation plant.  An arsenic recoveryof 67.5% was applied for smelter penalty inclusion in the NSR calculation andcash flow analysis. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Bisha hanging wall zone: recoveriesof 88%, 56%, and 54% were applied for copper, gold and silver respectively.Zinc has not been assigned a metallurgical recovery as most of this zone willbe processed prior to start-up of the zinc flotation plant. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Bisha primary zone: recoveries tocopper concentrate of 85%, 36%, and 29%, were applied for copper, gold andsilver respectively.  Recoveries to zinc concentrate of 83.5%, 9% and 20% wereapplied for zinc, gold and silver respectively.  Due to uncertainty whethercandidate zinc smelters will pay gold and silver credits, they have beendisregarded for cash flow estimates. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Harena primary zone: recoveries tocopper concentrate of 85%, 36%, and 29%, were applied for copper, gold andsilver respectively.  A zinc recovery of 72% to zinc concentrate was applied. Gold and silver recoveries to zinc concentrate were not available at the timeof analysis. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Mineral reserves are reportedwithin the Bisha and Harena ultimate pit designs, using the NSR block grade,where the marginal cut-off is the total ore based cost stated above. Tonnagesare rounded to the nearest 10,000 tonnes and grades are rounded to two decimalplaces with the exception of silver which was rounded to zero decimal places. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Rounding as required by reporting guidelines may resultin apparent summation differences between tonnes, grade and contained metalcontent. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Tonnage and grade measurements are in metric units. Contained gold and silver ounces are reported as troy ounces, contained copperand zinc pounds as imperial pounds. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | The life of mine strip ratios for Bisha and Harena are6.5:1 and 10.2:1 respectively. |
|------|--------------------------------------------------------------------------------------|

| (13) | The Bisha probable mineral reservesfor oxide material are inclusive of 284 kt at 4.69 g/t Au in stockpile as of 31May 2012. |
|------|-----------------------------------------------------------------------------------------------------------------------------|

| **35 |**Nevsun Resources Ltd. |
|-------------------------------|

----

 
| ANNUAL INFORMATION FORM - 2012 |
|--------------------------------|

| (14) | The Mineral Reserves have not beenadjusted for the mining depletion since the effective date.  The oxide mineralreserves are now largely depleted and the supergene and primary mineralreserves are unchanged. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The Bisha Main and Harena deposits are being mined byconventional open pit mining methods.          The Bisha Main pit consists ofnine individual pit phases, where the first three phases targeted oxideproduction, the second three will target supergene production and the finalthree phases will target primary production.  The oxide zones are currentlyproviding mill feed to the plant, and Phases 5 and 6 are currently beingstripped to prepare for supergene production.  The Harena pit features two pitphases, one targeting oxide production and the final phase targeting primaryproduction (there are no supergene reserves at Harena).  At the time ofwriting, the oxide zones are nearing completion.

The mine has an estimated life of approximately 12 yearsless one partial year of depletion (June 2012 to December 2012) at millthroughputs of between 1.6 million tonnes to 1.8 million tonnes per annum foroxide, 2.4 million tonnes per annum for supergene, and 2.4 million tonnes perannum for primary materials. 

The mining method is conventional selective open pitmining, with mining rates (ore plus waste) of approximately 40,000 tonnes perday during the oxide phase in 2012.  Mining rates increase to a peak of justunder 65,000 tonnes per day later in the mine life as deeper primarymineralization is mined with higher strip ratios.

**Operations**

As summarized in Table 1-5, during2012 the Bisha Mine has produced 313,000 ounces of gold.

**Table 1-5:**

|                                                             | **Q4  2012****3  monthsending December 31** | **Q3  2012****3  monthsendingSeptember 30** | **Q2  2012****3  monthsendin****June  30** | **Q1  2012****3  months****ending****March  31** | **2012****12  months****ending****December  31** |
|------------------------------------------------------------------|---------------------------------------------|---------------------------------------------|--------------------------------------------|--------------------------------------------------|--------------------------------------------------|
| **Mining**                                                       |                                        |                                        |                                       |                                             |                                             |
|      Ore mined, tonnes                  | 426,000                                     | 316,000                                     | 500,000                                    | 349,000                                          | 1,591,000                                        |
|      Waste mined, tonnes                | 2,602,000                                   | 2,590,000                                   | 1,659,000                                  | 1,826,000                                        | 8,677,000                                        |
|      Strip ratio, (calc in BCM’s) | 7.1                                         | 10.3                                        | 4.0                                        | 6.2                                              | 7.4                                              |
|      Cu phase prestrip, tonnes          | -                                           | -                                           | 481,000                                    | 739,000                                          | 1,220,000                                        |
| **Milling**                                                      |                                        |                                        |                                       |                                             |                                             |
|      Ore milled, tonnes                 | 447,000                                     | 465,000                                     | 465,000                                    | 430,000                                          | 1,807,000                                        |
|      Feed grade, g/t                    | 3.85                                        | 7.40                                        | 6.93                                       | 6.58                                             | 6.21                                             |
| **Processing**                                                   |                                        |                                        |                                       |                                             |                                             |
|      Recovery % of gold                 | 84%                                         | 87%                                         | 85%                                        | 86%                                              | 86%                                              |
|      Gold in doré, ounces poured   | 46,000                                      | 98,000                                      | 87,000                                     | 82,000                                           | 313,000                                          |

The Bisha Mine operated in excess of plan for gold feedgrade while meeting plan for milling and just short of plan for gold recovery.   

Nevsun is currently reconciling its 2012 ore controlmodel with the May 2012 mineral resource model and mineral reserve estimate atBisha, based on actual production data from 2012. 

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**Metallurgical Test Work and ProcessPlant Design**

The Bisha Property mineral resource contains three oretypes: the gold and silver bearing oxide cap (should be exhausted by Q2 2013),underlain by a more complex secondary copper mineralized supergene ore, whichis in turn underlain by the primary ore with chalcopyrite (copper) andsphalerite (zinc) mineralization.

The metallurgical performances of the three ore typescorresponding with the May 2012 mineral reserves are summarized in Table 1-6.  

| **Table 1-6: Expected Metallurgical   Performance of the Three Ore Types** |
|----------------------------------------------------------------------------|
|                                                                       | **%AuRecovery** | **%AgRecovery** | **%CuGrade** | **%CuRecovery** | **%ZnGrade** | **%ZnRecovery** |
| Bullion  from Bisha Oxide Ore                                              | 88 | 22 | - | - | - | - |
| Bullion  from Harena Oxide Ore                                             | 75 | n/a |   |   |   |   |
| Cu  Concentrate from Bisha Supergene Ore                                   | 56 | 54 | 30 | 88 | - | - |
| Cu  Concentrate from Bisha Primary Ore                                     | 36 | 29 | 25 | 85 | 3.9 | 2.1 |
| Zn  Concentrate from Bisha Primary Ore                                     | 9 | 20 | 0.3 | - | 55 | 83.5 |
| Cu  Concentrate from Harena Primary Ore                                    | 36 | 29 |   | 85 | - | - |
| Zn  Concentrate from Harena Primary Ore                                    | n/a | n/a |   | - |   | 72 |

The oxide, supergene and primary ores will requiredifferent processing techniques and equipment.      The current plan aftercompletion of the oxide ores, will be to mine the remaining two zones(supergene zone at Bisha Main and the primary zones Bisha Main and Harena) insuccession with a potential two year overlap of the supergene and primary ore pendingfurther review to optimize the mine production schedule from an economicperspective. When the oxide ore is exhausted anticipated at the end of Q2 2013,the supergene ore process flotation equipment will be ready to accept its firstcopper ore as it will be commissioned prior to cessation of oxide goldoperations.  There is not expected to be much delay following the gold plantbeing placed on care and maintenance apart from expected transition andcommissioning start-up.  This will allow a manageable transition fromprocessing the oxide ore to the processing of the supergene ore.  Before the supergeneore is exhausted, the additional flotation equipment required to process the primaryore will be installed and commissioned to permit the ability to process primaryore.   In this instance, there will be some amount of transition period where campaigningof both ore types will be required, likely no more than two years.  Nointerruption to production is anticipated to be required for this latter interwoventransition from supergene ore to primary ore.

The oxide ore is currently processed by cyanide leachingand the supergene and primary ores will be processed by flotation.  Thecrushing, grinding and tailing systems will be common for the three plants.  Inthe first two years of production, gold and silver was recovered by cyanideleaching, adsorption on to activated carbon, stripped and recovered and then smeltedinto doré bars and flown to refiners.  Production of copper concentrate isexpected to begin mid-2013, with significant quantities for 2014-2015, andsmaller quantities in 2016-2023 due to lower copper grades.  Zinc concentrateproduction occurs in 2015-2023.  Concentrate will be transported by road inspecial reusable half-height sealed containers to the existing container portof Massawa.  The contents of the containers will be loaded into oceanfreighters for shipment to smelters.

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**Copper Plant Phase II Update**

Starting with the copperproduction phase in 2013, the Company expects to increase ore tonnagethroughput by 20%.  An engineering, procurement, construction, and management(“EPCM”) contract awarded to SENET, the same company which built the goldplant, has progressed well.

All major process critical and long lead orders havebeen placed. Manufacturing/fabrication works are essentially complete and allmajor structural steel work has been delivered to site. Process criticaldeliveries are 99.7% complete. The bulk of the civil foundations are completewith the exception of the concentrate storage pad, and with only the regrindmill area remaining, surface beds are essentially complete. The ramp for theweighbridge is also in process of completion. Mechanical installations arenearing completion with efforts being focused on finalizing the filter pressinstallation. Piping installation is underway and electrical tests and checkshave been carried out on electrical transformers, cables, and motors. Someequipment has been inspected, accepted, and signed-off by the Company.  Actualproject progress as at January 31, 2013 was 85%. As at January 31, 2013, theforecast for the start of ore/hot commissioning is May 2013 with copperconcentrate production expected to commence in mid-2013.

The total cost commitments for the execution phase tothe end of January 2013 amount to US$74 million (excluding spares, owners’costs and the port facilities) against a budget of US$97 million (budget of$125 million including spares, owners’ costs and the port facilities).

The completion of the Copper Plan Phase 2 activitiesdescribed above are subject to all of the Risk Factors noted elsewhere in thisReport. 

**Mine Waste and Water Management**

Wasterock from the Bisha open pit is being placed in two separate waste rock dumps,non-acid generating (NAG) and potentially acid generating (PAG). The decision onwhere to place future waste rock excavated during pit stripping will be basedupon final waste rock characterization laboratory work currently being updated.Waste rock characterization at Harena has indicated there is no PAG for theoxide zone and consequently no requirement for drainage and sump systems. Wasterock dump locations are determined taking into account the level ofenvironmental impact, optimizing mining operations, and permit expansion ofmining areas based on further exploration programs. The Bisha PAG waste rockdump has been designed with compacted low permeable soil base layer, drainageand seepage collection system, and sumps to facilitate re-use of any seepage inthe process plant. Design criteria at both pits allows for gravity drainage tothe open pits on closure.

Tailings generated from the processes are pumped to theTailings Management Facility (TMF) situated to the north of the process plant.Site selection of the TMF was based on storage characteristics of the basin andnatural topography, extent of environmental impact and embankment constructionrequirements.  The TMF is lined with an impermeable HDPE liner to reduce anypotential impact to groundwater aquifer and/or downstream users.  An aggressivereturn water methodology of operation ensures maximum re-use of this valuableresource.  A vigorous cyanide monitoring program is in place to ensurecompliance with International Cyanide Management Code requirements. The next 3meter lift of the existing TMF is planned to be complete by end of June 2013. 

Surface water flow in the project area is non-existentfor much of the year; however, river and stream flow can be significant duringprecipitation events.  Three separate diversions in the Freketetet River ensurethat storm water is directed away from operations to both the east (ShateraRiver) and the west (Mogoraib). These diversions have enabled downstreamcommunities to develop river-fed agricultural opportunities. Groundwater is themain water source for the process plant, the volume of which is reduced by azero discharge policy, judicious re-use of poor quality pit sump water andmaximum use of dewatering well waters.  

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**Infrastructure**

The major infrastructureincludes electrical power supply, and a well farm for freshwater supply. Electrical power is by a containerised diesel generating plant supplied andoperated by a reputable international contractor through a rental contract. 

Freshwater which is used to supplement the minere-cycling initiatives, is supplied from groundwater produced from acombination of a well field located approximately 1.5 kilometers southeastof the process plant site and another well field located approximately 6.5kilometers southeast of the process plant along the base of the slope of theadjacent mountain range.  

A port site for the storage and loading of copper andzinc concentrate, produced from the later second (copper) and third (zinc andcopper) phases of project development is already well advanced at the Port ofMassawa. The port has sufficient draught and the Company has selected andordered a handling system which is flexible and able to be expanded through amodular design to accommodate both copper and future zinc concentrates.  Thecontainer-based system will be available for shipping concentrate in Q2 2013. 

**Socioeconomic and EnvironmentalAssessment and Approval**

The environmental assessment phase of Bisha Minecommenced with baseline studies in 2004. The Terms of Reference for the Socialand Environmental Impact Assessment (SEIA) project was approved by the EritreanMinistry of Energy and Mines in March 2006 and the SEIA was completed inDecember 2006.  During 2009 the Company completed an update report whichaugmented the 2006 SEIA and addressed the revisions to the configuration of theproject that had occurred since the Bisha Feasibility Study.  The projectsocial and environmental management plans were extended to capture theadditional details of the project resulting from the advancement of engineeringand development and to ensure full compliance with the Eritrean NationalStandards, and the 2006 International Finance Corporation Performance Standardsas applied to the Equator Principles. The Company continues to consult and workclosely with government ministries on matters pertaining to social andenvironmental aspects and will continue to do so through the life of the mine. There have been no material adverse social or environmental impacts identified.

Social and environmental management plans (SEMP) are inplace and serve to assist the Company in achieving compliance of the operationto both Eritrean legislation and where this is not available, to internationalbest practice or standards. An in-house review and update of the SEMP wasconducted during 2012 based on comments received by the Impact Review Committee(IRC). An independent review and update of the SEMP is planned for completionduring Quarter 2 of 2013 and will address the roles and responsibilities, newoperations and new areas to be included in the SEMP. In 2013 the Companyexpects to develop a fully functional Environmental Management System (EMS) basedon ISO 14001 (the International Organization for Standardization’senvironmental management system) with the aim of improving the management,review, and governance of environmental aspects associated with the operation.Internally, policies and statements of intent have been developed with respectto environmental policy, water conservation, energy conservation, cyanidemanagement and materials management. These policies are expected to beaugmented with training, awareness and toolbox talks, with the goal ofimplementing these policies throughout the workforce. An extensiveenvironmental monitoring program which includes air quality (ambient andoperational dust and emissions), noise (ambient and operational), waterqualities and quantities, natural resources (soils, wildlife, livestock,erosion, ecology, and botanical) measure the effectiveness of the proposedmitigation actions in the environmental management plans. The conceptualclosure plan of 2009 has been updated to include the new operations at theHarena deposit.

The Company continues to consult and work closely withgovernment ministries through the submission of annual and quarterly reportsand quarterly inspections by the IRC and will continue to do so throughout thelife of the mine.  There were no adverse social or environmental incidents for2012. 

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**Exploration & Development**

Development ofthe Bisha Project commenced in 2008.

At 2010 year-end, plant constructionwas complete.  The first gold pour took place in late December 2010. Commercial production was declared in February 2011. 

Prior to commencement of operations themine life was modeled for thirteen years; however, the Bisha deposit has beendrilled to depths lower than the 200 meter currently modeled pit andmineralization has been identified as low as 380 meters and open beyond thatdepth.  Accordingly, the Company intends to further identify and quantifyresources beyond the current pit with the goal of extending the life of minewell beyond thirteen years.

Work is currently in progress to evaluate the NorthwestZone as a potential feed source for the Bisha operations, and an initialresource estimate is expected to be completed in Q3, 2013.  Evaluation of thenewly acquired Hambok historic mineral resource will also commence withcompilation of the acquired data, assaying additional drilling, as well asgeological and resource modeling being completed in 2013.

Further exploration work is also plannedto explore new targets on the Mining and Exploration Licenses.  Highpriority targets have been identified adjacent to the Bisha pit and regionallyon the newly acquired Mogoraib Exploration License.

**DIVIDENDS**

In 2012 the Company declared two cash dividends of $0.05per common share ($0.10 per common share annually) on May 15, 2012 and November15, 2012 which were paid to shareholders on July 16, 2012 and January 15, 2013respectively.

The Company declared its first cash dividend of $0.03per share in May, 2011, which was paid to shareholders of record at the closeof business on June 30, 2011.  The second dividend was declared in November,2011 for $0.05 per share to shareholders of record at December 31, 2011, givingshareholders an accumulated annual dividend of $0.08 for a total payment of$15,947,885.

The Company intends to continue to pay a semi-annualdividend as cash flow permits, with the amount to be decided by the Company’sboard of directors.

**DESCRIPTION OF CAPITAL STRUCTURE**

The Company has authorized capital of an unlimited  number of common shares without par value, 199,007,815 of which are issued and  outstanding at the date of this AIF.  All  shares in the capital of the Company are of the same class.  The holders of common shares are entitled to  dividends, if, as and when declared by the board of directors, to one vote per  common share at meetings of the shareholders of the Company and, upon liquidation,  to share equally in such assets of the Company as are distributable to the  holders of common shares.

The Company also has stock optionsoutstanding in accordance with its Former and New Stock Option Plans.  OnAugust 1, 2012, the Board approved the New Plan to replace the Former Planwhich was approved by Shareholders on September 5, 2012 and was approved by theTSX.  

The Company’s ability to grant options under the Former  Plan expired on April 27, 2012. At the date of this AIF, the Former Plan had 7,967,500  options outstanding (of which 7,007,500 are vested), representing 4.0% of the  Company’s outstanding shares, and as such, will remain in existence under the  terms of the Former Plan until they have been exercised, cancelled or have  otherwise expired. Each vested option is exercisable for one common share of  the Company.  No warrants are  outstanding. 

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The Company also has 2,865,000 stock options outstanding  in accordance with its New Stock Option Plan, of which zero are vested,  representing 1.43% of the Company’s outstanding shares; each vested option is  exercisable for one common share of the Company.  No warrants are outstanding.

 The total number of Company stock options outstanding  (total of Former Plan and New Stock Option Plan) is 10,832,500 representing 5.44%  of the Company’s outstanding shares.

 As at  January 1, 2012, 11,382,972 stock options were available for grant, but not  granted pursuant to the Company’s Former Plan.   The Company’s ability to grant options under the Former Plan expired on  April 27, 2012.  As at December 31, 2012,  2,573,840 stock  options were available for grant, but not yet granted, pursuant to the  Company’s New Stock Option Plan.

The New Plan is more restrictive thanthe Former Plan in that it reduces the number of shares which can be issued andthe length of time before expiry.  It most notably restricts the number ofoptions which may be granted to non-employee directors which aims to achieve anequitable balance of cash and share compensation that is both attractive to itsdirectors and reasonable to its shareholders, without compromising theobjective views which are a key element in decisions made or agreed upon bydirectors.  

The New Plan will be engagedunder its new terms, providing for a maximum number of securities equaling6.75% of the outstanding shares which may be granted as options and includingin this calculation the number of options currently outstanding in the FormerPlan.  

The Company has not asked for, and is not aware of anystability or provisional ratings on the Company’s securities set by anyapproved rating organization.

**MARKET FOR SECURITIES**

The Company’s common shares have traded on the TorontoStock Exchange (“TSX”) since March 8, 1996 and on the NYSE MKT LLC (“NYSE MKT”)since January 12, 2005.  During the 2012 financial year, the closing price ofthe Company’s stock on the TSX ranged from CAD$2.65 to CAD$6.51, with monthlytrading volume on the TSX ranging from 5.4 million shares in November to 18.7million shares in February, with an average monthly volume of 11.2 millionshares on TSX plus 13.0 million shares on NYSE MKT, for a total average monthlyvolume of 24.2 million shares.  There are no seasonal trends to fluctuations involume or trading price.  The monthly high/low trading prices and closingprices on the TSX and monthly volume for 2012 is as follows:

| **Common Shares** |
|-------------------|
| **CAD      $**    | **High ($)** | **Low ($)** | **Close ($)** | **Volume** |
| January           | 6.10 | 5.80 | 6.41 | 9,125,800 |
| February          | 6.80 | 3.72 | 3.98 | 18,740,500 |
| March             | 4.19 | 3.13 | 3.58 | 13,651,700 |
| April             | 3.82 | 3.11 | 3.54 | 7,584,700 |
| May               | 3.46 | 2.71 | 3.62 | 15,138,800 |
| June              | 3.87 | 3.28 | 3.27 | 10,781,200 |
| July              | 3.33 | 2.75 | 3.46 | 13,171,100 |
| August            | 3.79 | 3.25 | 3.91 | 8,909,300 |
| September         | 4.55 | 3.95 | 4.55 | 14,711,400 |
| October           | 4.72 | 4.31 | 4.67 | 7,430,700 |
| November          | 4.51 | 3.93 | 3.98 | 5,407,300 |
| December          | 4.25 | 4.11 | 4.25 | 9,305,200 |

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**DIRECTORS AND OFFICERS**

**Name, Occupation and Security Holding**

The following table sets forth, for each director andofficer of the Company as of the date of this AIF, the name, municipality ofresidence, office, periods of service and the principal occupations in whicheach director and executive officer of the Company has been engaged during theimmediately preceding five years.  Each director of the Company holds officeuntil the next annual general meeting of the shareholders of the Company oruntil his successor is duly elected or appointed, unless his office is earliervacated in accordance with the articles of the Company or he becomesdisqualified to act as a director.  Each executive officer is appointed by theBoard of Directors.

| **Name,   Municipality Of Residence and Position Held**                                       | **Principal   Occupation for the Past Five Years**                                                                                                                                                                                   | **Director   Since** | **Number & Percentage of Shares Held** |
|-----------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------|--------------------------------------------|
| R.  Stuart Angus(1)(3)(5)(6)  Sechelt, British  Columbia  Chairman and Director               | Business  advisor to the mining industry 2006-present.                                                                                                                                                                               | January  2003        | 402,392  (<1%)                          |
| Robert  J. Gayton(1)(2)(5)(6)  West Vancouver, British Columbia  Director                     | Financial  Consultant since 1994.                                                                                                                                                                                                    | November  2003       | 62,470  (<1%)                           |
| Gary  E. German(1)(2)(3)(4)(5)  Toronto, Ontario  Director                                    | Independent  Director and Advisor for international resource companies 2005-present; President,  Old Saw Mill Investments Inc. 2009-present.                                                                                    | April  1996          | 291,794  (<1%)                          |
| Gerard  E. Munera(1)(2)(3) (5)  Greenwich, Connecticut  Director                              | Managing  Director, Synergex Group, investment holding company; Executive Chairman,  Arcadia Inc., manufacturer of building parts, since 1995.                                                                                       | April  1996          | 582,618  (<1%)                          |
| Clifford  T. Davis  Vancouver, British Columbia  President, Chief Executive Officer, Director | President  and Chief Executive Officer of the Company since August 2008; Chief Financial  Officer and Executive Vice President of the Company 2005-2008.                                                                             | December  1997       | 1,553,219  (<1%)                        |
| Frazer  W. Bourchier  North Vancouver, BC  Chief Operating Officer(4)                         | COO of  the Company since 2012; VP Business Development & Technical Services,  Silver Wheaton Corp. 2010-2012; Consultant, Aurizon Mines Oct-Dec 2009; VP  Operations & Business Development, Intrepid Mines Ltd. 2008-2009. | N/A                  | 0                                          |
| Joseph  Giuffre  North  Vancouver, BC  Chief  Legal Officer and Corporate Secretary           | CLO and  Secretary of the Company since January 2013; partner of Axium Law  Corporation, 2005-2012.                                                                                                                                  | N/A                  | 24,500  (<1%)                           |

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| **Name,      Municipality Of Residence and Position Held**                                        | **Principal      Occupation for the Past Five Years**                                                                                                                                                                                                                                                             | **Director      Since** | **Number & Percentage of Shares Held** |
|---------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|--------------------------------------------|
| Fausto  Taddei  Burnaby,  BC  Chief  Financial Officer                                            | CFO of  the Company since January 2013; VP and CFO, Aura Minerals Inc. 2008-2012.                                                                                                                                                                                                                                 | N/A                     | 0                                          |
| Peter  J. Hardie  Maple Ridge, British Columbia  VP Finance                                       | VP  Finance of the Company since January 2013; CFO of the Company August 2008-December  2012; Controller & Sr. Accountant of the Company 2005-2008.                                                                                                                                                           | N/A                     | 2,000(<1%)                              |
| Peter  Manojlovic  Delta,  British Columbia  VP  Exploration                                      | VP  Exploration of the Company since 2012; VP Exploration, Sabina Gold &  Silver Corp., 2010-2012; Chief Geologist, Sabina Gold & Silver Corp.,  2009-2010; Consultant, Paragon Minerals Corporation, February 2009; Senior  Project Leader – New Ventures, Teck Resources April 2007-January 2009. | N/A                     | 0                                          |
| Todd  Romaine  West  Vancouver, British Columbia  VP  Corporate Social Responsibility             | VP  Corporate Social Responsibility of the Company since November 2012; Senior  Manager, Land Services (Operations), Enbridge Inc. 2008-2012; Chief Land  Administrator, Inuvialuit Regional Corporation 2006-2009.                                                                                               | N/A                     | 0                                          |
| Scott  Trebilcock  Vancouver,  British Columbia  VP Business Development & Investor Relations | VP  Business Development & Investor Relations of the Company since 2010; VP  Business Development, Nautilus Minerals 2007-2010.                                                                                                                                                                               | N/A                     | 0                                          |

| (1) | Member of the Governance Committee |
|-----|------------------------------------|

| (2) | Member of the Audit Committee |
|-----|-------------------------------|

| (3) | Member of the Human Resources Committee |
|-----|-----------------------------------------|

| (4) | Member of the Social Environment, Health & Safety Committee |
|-----|-----------------------------------------------------------------|

| (5) | Member of Special Committee |
|-----|-----------------------------|

| (6) | Member of the Litigation Committee |
|-----|------------------------------------|

As of March 20, 2013, the directors and executive officers  of the Company, as a group, beneficially owned directly or indirectly, or  exercised control or direction over 2,918,993 common  shares or approximately 1.5% of the issued and outstanding common shares of the  Company.  The same directors and  executive officers, as a group, have been granted and currently hold options to  purchase up to 6,500,000 shares of the Company, 1,745,000 of which were granted  in 2012.

**Cease TradeOrders, Bankruptcies, Penalties or Sanctions**

Certain directors or executive officersof the Company are, at the date of this AIF, or have been within the 10 years before the date of this AIF, a director, chiefexecutive officer or chief financial officer of a company that: 

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(a)     was subject to a cease trade or similar order, or an order that deniedthe relevant company access to any exemption under securities legislation, thatwas in effect for a period of more than 30 consecutive days (an “Order”) thatwas issued while the director or executive officer was acting in the capacityas director, chief executive officer or chief financial officer, or

(b)     was subject to an Order that was issued after the director or executiveofficer ceased to be a director, chief executive officer or chief financialofficer and which resulted from an event that occurred while that person wasacting in the capacity as director, chief executive officer or chief financialofficer, 

details of which are described as follows:

> 
Robert Gayton was a director andofficer of Newcoast Silver Mines Ltd. at the date of a Cease Trade Order issuedby the British Columbia Securities Commission on September 30, 2003 and by theAlberta Securities Commission on October 31, 2003 for failure to file financialstatements.  The orders were revoked on October 23, 2003 and March 25, 2004respectively.

> 
R. Stuart Angus is a director of Wildcat Silver Corporation(“Wildcat”), which requested and received notice from the British ColumbiaSecurities Commission of the issuance of a management cease trade order (the“MCTO”) on October 30, 2007 in connection with the late filing of its annualaudited consolidated financial statements for the fiscal year ending June 30,2007.  Wildcat’s failure to make the filing within the required time frame wasdue to the need to clarify potential foreign tax obligations relating to anacquisition it made.  The required filing was made on January 7, 2008 and theMCTO was revoked on January 8, 2008.

One director of the Company has been, within the 10years before the date of the AIF, a director or executive officer of a companythat, while that person was acting in that capacity, or within a year of thatperson ceasing to act in that capacity, became bankrupt, made a proposal underany legislation relating to bankruptcy or insolvency or was subject to orinstituted any proceedings, arrangement or compromise with creditors or had areceiver, receiver manager or trustee appointed to hold its assets, details ofwhich are as follows:

> 
Gerard E. Munera resigned from the board of SiVaultSystems Inc. on October 10, 2006; in July of 2007, SiVault Systems Inc. startedbankruptcy proceedings.

No director or executive officer of the Company, orshareholder holding a sufficient number of securities of the Company to affectmaterially the control of the Company has, within the 10 years before the dateof this AIF, become bankrupt, made a proposal under any legislation relating tobankruptcy or insolvency, or was subject to or instituted any proceedings,arrangement or compromise with creditors, or had a receiver, receiver manageror trustee appointed to hold the assets of the director, executive officer orshareholder.

No director or officer of the Company,or to the Company’s knowledge, a shareholder holding a sufficient number ofsecurities of the Company to affect materially the control of the Company, has 

(a)     been subject to any penalties or sanctionsimposed by a court relating to securities legislation or by a securitiesregulatory authority or has entered into a settlement agreement with asecurities regulatory authority; or

(b)      been subject to any other penalties or sanctionsimposed by a court or regulatory body that would likely be considered importantto a reasonable investor in making an investment decision.  

**Conflicts ofInterest**

To the best of the Company’s knowledge,there are no existing or potential material conflicts of interest between theCompany or a subsidiary of the Company and a director or officer of the Companyor a subsidiary of the Company.   

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**Audit Committee**

The Company has a separately-designatedstanding audit committee in accordance with CSA National Instrument 52-110Audit Committees and with Section 3(a)(58)(A) of the United States SecuritiesExchange Act of 1934, as amended.

**Audit Committee Charter**

The Board has adopted a charter for theAudit Committee which sets out the committee’s mandate, composition, responsibilitiesand duties.  A copy of the Audit Committee Charter is attached to this AIF asSchedule “A”.

**Independent Advice & Funding**

The Audit Committee shall have the authority todetermine the appropriate funding for the ordinary administrative expenses ofthe Audit Committee.  In addition, the Audit Committee may, in its solediscretion, retain, at the expense of the Company, and determine thecompensation to be received by, such legal, financial or other advisors orconsultants as it may deem necessary or advisable in order to properly andfully perform its duties and responsibilities hereunder.    

**Composition of the Audit Committee**

The Audit Committee has three members,all of whom are independent and financially literate. An outlineof each member’s relevant education and experience follows:

> 
***Robert J. Gayton, Chairman.***Mr. Gaytonis a Chartered Accountant with a Ph.D Business from the University ofCalifornia (1973).  He is a director and audit committee chairman of a numberof companies, including Western Copper and Gold Corp., Amerigo Resources Ltd.and B2Gold.  Mr. Gayton is a current member of the Institute of CharteredAccountants of B.C.  From 1976-1987 he was a partner with the accounting firmPeat Marwick Mitchell in Mississauga, Coquitlam and Vancouver. Mr. Gayton hasshown that he has a clear understanding of the relevant accounting principles,internal controls and procedures for financial reporting, and the relevantexperience preparing, auditing, analyzing and evaluating financial statementsand their associated complex issues.

> 
The Audit Committee has determined that Mr. Gayton isan audit committee financial expert within the meaning of the rules promulgatedby the SEC and that Mr. Gayton is independent within the meaning of the NYSE MKTCompany Guide.

***Gary E. German.***Mr. German has over thirty five years    of senior management and executive positions in global resource projects and    companies, including the provision of strategic and corporate finance direction    and international commodity brokerage operations. Previously he was Managing    Director, Corporate Finance Group (resources), Kingsdale Capital Corp.    (02-03), and prior to this Chairman of the Finance Committee and Senior Advisor    to the President-CEO of Ma'aden, the Kingdom of Saudi Arabia's mineral resource    development corporation. Mr. German is a graduate of the University of Toronto    (Bachelor of Applied Science, Industrial Engineering) and the University of  Western Ontario (Diploma, International Management). 

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> 
***Gerard E. Munera.***Mr. Munera, a UScitizen, is Managing Director of Synergex Group LLC, an investment holdingcompany, and Executive Chairman of Arcadia Inc., a manufacturer of buildingproducts.  He has served on the Audit Committees of three public company boardsand has a diverse background which includes engineering, economics, sales,finance, operations, mining and metals. His tenures have included ChiefFinancial Officer or Chief Executive Officer of several mining and metalscompanies, including 20 years with Pechiney, first as CFO and then as CEO oftheir Argentine subsidiary, then as CEO of their US subsidiary Howmet Aluminumand then as Senior Vice President of their Ferro Alloys, Uranium and Carbonbusinesses in several international locations, all of which included detailedfinancial involvement with the company.  Mr. Munera was also CEO of UnionMiniere for five years and CEO of Minorco USA for three years.

**Pre-Approval Policies and Procedures**

The Audit Committee has adoptedpolicies and procedures for the engagement of non-audit services, described asfollows:

The Company and its subsidiaries will not engage itsexternal auditor KPMG LLP (“KPMG”) to carry out any non-audit services that aredeemed inconsistent with an auditor’s independence (“Prohibited Service”).  TheAudit Committee will consider the pre-approval of permitted services to beperformed by the external auditor in each of the following broad categories: 

> 
Audit Services, Audit Related Services, Tax Services,    as well as Compliance Services, Tax Planning Services, Commodity Tax Services,    Executive Tax Services.

Other Services:  Valuation Services, Information    Technology Advisory and Risk Management Services, Actuarial Services, Forensic    and Related Services, Corporate Recovery Services, Transaction Services,    Corporate Finance Services, Project Risk Management Services, Operational    Advisory and Risk Management Services, Regulatory and Compliance Services

For permitted services the following pre-approvalpolicies will apply:

A.     Audit Services

The Audit Committee will pre-approve all Audit Servicesprovided by KPMG through the Audit Committee’s recommendation to shareholdersat the Company’s annual meeting, of KPMG as the Company’s external auditor and throughthe Audit Committee’s review of KPMG’s annual Audit Plan.  

B.     Pre-Approval of Audit Related, Tax and Other Non-Audit Services

Periodically (e.g. annually), the Audit Committee willupdate a list of pre-approved services that are recurring or otherwisereasonably expected to be provided.  

The Audit Committee will besubsequently informed at least annually of the services on the attachedlist for which the auditor has been actually engaged.

Any additional requests forpre-approval will be addressed on a case-by-case specific engagement basis asdescribed in (C) below.  

C.     Approval of Additional Services

The Company employee making the request will submit therequest for service to the CFO.  The request for service should include adescription of the service, the estimated fee, a statement that the service isnot a “Prohibited Service” and the reason KPMG is being engaged.

***Serviceswhere the aggregate fees are estimated to be less than or equal to $25,000***

Recommendations, in respect of each engagement, will besubmitted by the CFO to the Chairman of the Audit Committee for considerationand approval.  The full Audit Committee will subsequently be informed of theservice at its next meeting.  The engagement may commence upon approval of theChairman of the Audit Committee.

***Services where theaggregate fees are estimated to be greater than $25,000***

Recommendations, in respect of each engagement, will besubmitted by the CFO to the full Audit Committee for consideration andapproval, generally at its next meeting or at a special meeting called for thepurpose of approving such services.  The engagement may commence upon approvalof the full Committee.

| **46 |**Nevsun Resources Ltd. |
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| ANNUAL INFORMATION FORM - 2012 |
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**External AuditorFees**

All dollar amounts in this section areexpressed in Canadian currency.

The following table sets forth the aggregate fees incurredby the Company for the years ended December 31, 2012 and 2011 by KPMG:  

|                   | **Year ended****December 31,2012** | **Year endedDecember 31,2011** |
|------------------------|------------------------------------|--------------------------------|
| Audit  fees(1)         | $ 508,800                          | $ 530,300                      |
| Audit-related  fees(2) | -0-                                | -0-                            |
| Tax  fees(3)           | 50,334                             | 14,086                         |
| All  other fees(4)     | -0-                                | -0-                            |
| Total                  | $ 559,134                          | $ 544,386                      |

| (1) | Audit fees include fees related to the audit of the year-end financialstatements, audit of the internal control over financial reporting, review of theinterim financial statements, and services that are normally provided by theAuditors in connection with statutory and regulatory filings or engagements forsuch year. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Audit related fees consist of fees for assurance and related services bythe Auditors that are reasonably related to the performance of the audit orreview of the financial statements and are not reported above as Audit Fees. No audit-related fees were billed by the Auditors in 2012 or 2011. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Tax feesfor 2012 and 2011 are primarily for tax compliance and other minor tax advisorymatters, all in accordance with the pre-approval policies of the AuditCommittee. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | No otherfees were billed by the Auditors in 2012 or 2011 for other services. |
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**LEGALPROCEEDINGS AND REGULATORY ACTIONS**

Two putativeclass actions were filed in the United States District Court for the SouthernDistrict of New York, on March 13, 2012 and March 28, 2012, respectively,naming the Company and certain officers of the Company as defendants (hereafterthe “US Actions").  The plaintiffs assert claims under Sections 10(b)and 20(a) of the Securities Exchange Act of 1934, based on allegedmisrepresentations and omissions relating to the amount of gold reserves at theBisha Mine.  The plaintiffs purport to bring suit on behalf of allpurchasers of the Company's publicly traded securities between March 31, 2011and February 6, 2012.  Plaintiffs seek unspecified damages, interest,costs and attorneys' fees on behalf of the putative class.  By order ofcourt, the two cases have been consolidated, and a consolidated amendedcomplaint was filed on August 21, 2012. The consolidated amended complaintexpanded the purported class period to run from March 28, 2011 until February6, 2012 and asserted alleged misrepresentations and omissions, including  (i)alleged misrepresentations concerning  the Bisha Mine’s “strip ratio”throughout 2011, (ii) the omission of “material negative trends,” allegedly inviolation of a disclosure duty under U.S. Regulation S-K, and (iii) omission ofinformation concerning the departure of certain key personnel at the Company’ssubsidiary in Eritrea.  On September 20, 2012, the Company filed a motionto dismiss all claims against the Company and its officers. The legal briefingof that motion was completed on November 7, 2012 and the Company is awaiting aruling from the court.

A putative classaction also was filed in the Ontario Superior Court of Justice on July 12, 2012naming the Company and certain officers of the Company as defendants (hereafterthe “Canadian Actions”).  The plaintiff’s Statement of Claim assertsclaims for (i) violation of certain provisions of the Ontario Securities Act,as well as the equivalent statutes of other provinces; (ii) negligentmisrepresentation; and (iii) vicarious liability of the Company, based onalleged misrepresentations and omissions relating to the amount of goldreserves, and the grade of the mineable gold reserves, at the Bisha Mine. The plaintiffs purport to bring suit on behalf of all purchasers of theCompany’s publicly traded securities between March 31, 2011 to and includingFebruary 6, 2012, including purchasers of the Company’s stock on the Torontoand American Stock Exchanges.  The plaintiffs amended their claim onFebruary 13, 2013 to add further detail to their factual allegations.  TheCanadian Actions are based on essentially the same set of facts and the samealleged misrepresentations as the U.S. Actions. The plaintiff seeks damages in thesum of $100 million plus interest and costs, on behalf of the putativeclass.  The Canadian Actions are expected to proceed more slowly than theU.S. Actions, due to differences between U.S. and Canadian proceduralrules.  

| **47 |**Nevsun Resources Ltd. |
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| ANNUAL INFORMATION FORM - 2012 |
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It is not possibleat this time to estimate the ultimate outcome of the US and CanadianActions.  The Company believes the allegations are without merit and willvigorously defend itself in these Actions.

**INTEREST OF MANAGEMENT AND OTHERS IN****MATERIALTRANSACTIONS**

No director, officer or other insider of the Company,nor any associate or affiliate of any director, officer or other insider hasparticipated in, directly or indirectly, nor had any material interest in, anymaterial transaction of the Company in the most recently completed financialyear or any of the three preceding financial years.

**TRANSFER AGENTS AND REGISTRARS**

The Company’s registrar and transfer agent isComputershare Investor Services Inc., located in Vancouver, British Columbia.

**MATERIAL CONTRACTS**

There were no material contracts other than in theordinary course of business entered into during 2012 and no such contracts fromprior years having continuing effect. 

**NAMES AND INTERESTS OF EXPERTS**

The August 31, 2012 NI 43-101 TechnicalReport for the Bisha Project which is referenced in this AIF was prepared bythe following Qualified Persons, each of whom are employed by AGP MiningConsultants Inc., of Barrie, Ontario, Canada.

Jay Melnyk, P.Eng., AGP Mining Consultants, Inc.

Mike Waldegger, P. Geo.,AGP Mining Consultants, Inc.

David Thomas, P.Geo., AMECAmericas Ltd.

Peter Munro, BAppSc.,Mineralurgy Pty. Ltd.

To the best of the knowledge of the Company, APG MiningConsultants Inc. and the “designated professionals” (as such term is defined inForm 51-102F2) thereof hold less than a 1% interest in the outstandingsecurities of the Company.

KPMG is the auditor for the Company and has audited theannual financial statements of the Company for the year ended December 31, 2012. KPMG have confirmed that they are independent with respect to the Companywithin the meaning of the Rules of Professional Conduct of the Institute ofChartered Accountants of British Columbia.

| **48 |**Nevsun Resources Ltd. |
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**ADDITIONAL INFORMATION**

Additional information relating to the Company, may befound by using the System for Electronic Document Analysis and Retrieval(“SEDAR”) on the internet at www.sedar.com or the SEC ElectronicData Gathering Analysis and Retrieval (“EDGAR”) filing system at http://www.sec.gov/edgar.shtml. 

Additional information includingdirectors' and officers' remuneration and indebtedness, principal holders ofthe Company's securities and options to purchase securities is contained in theCompany's information circular for its most recent annual meeting ofshareholders that involves the election of directors. 

Additional financial information isalso provided in the Company's audited consolidated financial statements andMD&A for its most recently completed financial year, copies of which may befound on SEDAR or EDGAR, or be obtained by contacting the Company at:

NevsunResources Ltd.Suite 760 – 669 Howe StreetVancouver, BC V6C 0B4Tel: 604-623-4700 or Toll-free 1-888-600-2200Email: contact@nevsun.com

| **49 |**Nevsun Resources Ltd. |
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| ANNUAL INFORMATION FORM - 2012 |
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**SCHEDULE “A”**

**NEVSUN RESOURCES LTD. (the “Company”)**

**AUDIT COMMITTEE CHARTER**

TheAudit Committee is appointed by the Board of Directors to: 

|   | i.  | ensure the Company has in place an effective     system of internal controls over financial reporting which     meets high standards of quality and integrity and complies with legal and    regulatory requirements, and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ii. | monitor the performance, independence and  qualification of the Company’s independent auditor.                                                                                                                      |

**Composition**

The Audit Committee shallconsist of at least three members of the Board of Directors.  Each member ofthe Audit Committee shall be “independent” of the Company within the meaning ofall applicable legal and regulatory requirements, and eachsuch member must not have participated in the preparation of the Company’sfinancial statements, or that of the Company’s subsidiaries, at any time duringthe three years prior to becoming a member of the Audit Committee (exceptin the circumstances, and only to the extent, permitted by all applicable legaland regulatory requirements).  Each member of the Audit Committee shall also be“financially literate”, which means that he or she must have the ability toread and understand a set of financial statements that present a breadth andlevel of complexity of accounting issues that are generally comparable to thebreadth and complexity of the issues that can reasonably be expected to beraised by the Company’s financial statements.  In addition, at least one memberof the Audit Committee shall be a “financial expert” within the meaning of therules and forms adopted by the U.S. Securities and Exchange Commission and shall be financial sophisticated, in that he or she haspast employment experience in finance or accounting, requisite professionalcertification in accounting or any other comparable experience or backgroundwhich results in the individual’s financial sophistication, including but notlimited to being or having been a chief executive officer, chief financialofficer, or other senior officer with financial oversight responsibilities (exceptin the circumstances, and only to the extent, permitted by all applicable legaland regulatory requirements).

**Responsibilities**

Theoverall responsibilities of the Audit Committee are to:

| 1. | assist the Board of Directors andManagement with meeting their responsibilities with respect to financialreporting; |
|----|---------------------------------------------------------------------------------------------------------------------|

| 2. | be directly responsible for (i)the selection of an external auditor to be proposed for election as theexternal auditor of the Company, (ii) the oversight of the work of the of theCompany’s external auditor, (iii) the retention of the Company’s externalauditor, and (iv) fixing thecompensation of the external auditor of the Company, subject to the grantby the shareholders of the authority to do so, if required; |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | ensure that at all times there aredirect communication channels between the Audit Committee and the Company’sexternal auditor; |
|----|--------------------------------------------------------------------------------------------------------------------------------------|

| 4. | ensure the independence of theCompany’s external auditor, including ensuring receipt from the externalauditor of a formal written statement delineating all relationships between theexternal auditor and the Company and actively engaging in dialogue with theexternal auditor with respect to any disclosed relationships or services thatmay impact the objectivity and independence of the external auditor; |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ANNUAL INFORMATION FORM - 2012 |
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| 5. | periodically review and report tothe Board of Directors whether Management has designed and implemented aneffective system of internal controls over financial reporting for reviewingand reporting on the Company’s financial statements; |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6. | review and report to the Board ofDirectors on all financial statements (including interim financial statements)prepared by the Company and enhance the credibility and objectivity of allfinancial reports; and |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7. | otherwise review the Company’scompliance with regulatory and statutory requirements as they relate tofinancial statements, taxation matters and disclosure of related materialfacts. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Duties**

For the purposes of fulfillingits responsibilities, the Audit Committee will:

| 1. | schedule meetings to take place on a regular basis; |
|----|-----------------------------------------------------|

| 2. | afford an opportunity periodically to the externalauditor and to senior Management to meet separately with the Audit Committee,and when required,   meet independently of the external auditor and Management; |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | keep minutes of all meetings of the Audit Committee; |
|----|------------------------------------------------------|

| 4. | periodically report the results of the reviewsundertaken and any associated recommendations to the Board of Directors; |
|----|------------------------------------------------------------------------------------------------------------------------|

| 5. | select an external auditor to be proposed byManagement to the shareholders for election by the shareholders as the externalauditor for the Company, review and approve the terms of the external auditor'sengagement and determine the appropriateness and reasonableness of the proposedaudit fees and any unpaid fees; |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6. | review and evaluate the qualifications, performanceand independence of the lead partner of the external auditor, discuss withManagement the timing and process for implementing the rotation of the leadaudit partner and the reviewing partners of the external auditor, and otherissues related to a change of the external auditor and the planned steps for anorderly transition; |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7. | obtain confirmation from the external auditor that itwill report directly to the Audit Committee; |
|----|---------------------------------------------------------------------------------------------------|

| 8. | obtain confirmation from the external auditor that itwill report in a timely matter to the Audit Committee all critical accountingpolicies and practices to be used, all alternative accounting policies andpractices, the ramifications of each of such accounting policy and practice andthe accounting policy and practice preferred by the external auditor, for thefinancial information of the Company within applicable generally acceptedaccounting principles (GAAP), which have been discussed with Management; |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9. | obtain confirmation from the external auditor that itwill provide a copy of all material written communications between the externalauditor and Management including, without limitation, any Management letter orschedule of unadjusted differences; |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10. | obtain confirmation from the external auditor that itwill ensure that all reports filed under the United States Securities ExchangeAct of 1934, as amended, which contain financial statements required to beprepared in accordance with GAAP and reflect all material correctingadjustments identified by the external auditor of the Company; |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11. | review and approve the Company’s hiring policiesregarding partners, employees and former partners and employees of the presentand any former external auditor of the Company; |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12. | review all reportable events, including disagreements,unresolved issues and consultations, as defined in National Instrument 51-102of the Canadian Securities Administrators, on a routine basis; |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **51 |**Nevsun Resources Ltd. |
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| ANNUAL INFORMATION FORM - 2012 |
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| 13. | review and pre-approve any and all engagements fornon-audit services to be provided to the Company or to any of its subsidiariesby the Company’s external auditor or any affiliates of the external auditor,together with estimated fees, and review and approve the audit plan with theexternal auditor and with Management; |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14. | review with Management and with the external auditorany  proposed changes in major accounting policies, the presentation and impactof significant financial risks and uncertainties and key estimates andjudgments of Management that may be material to financial reporting and thesteps Management has taken to minimize such risks to the Company; |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15. | assist in the preparation of any internal controlreport by Management, which provides that Management is responsible forestablishing and maintaining an adequate control structure and procedures forfinancial reporting by the Company, assessing the effectiveness of such controlstructure and procedures and ensuring that the external auditor of the Company,if required by governing legislation or regulation, attest to and report on theassessment of such control structure and procedures by Management; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 16. | assist the Chief Executive Officer and the ChiefFinancial Officer of the Company in their assessment of the effectiveness ofthe Company’s internal control over financial reporting and in determiningwhether there has been any material change in the Company’s internal controlover financial reporting which has materially affected or could materiallyaffect such internal control subsequent to the date of the evaluation; |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 17. | assist the Chief Executive Officer and the ChiefFinancial Officer of the Company in identifying and addressing any significantdeficiencies or material weaknesses in the design or operation of the Company’sinternal control over financial information and any fraud, whether or notmaterial, that involves Management or other employees who have a significantrole in the Company’s internal control over financial reporting; |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 18. | question Management and the external auditor regardingsignificant financial reporting issues discussed during the fiscal period andthe method of resolution; |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 19. | review any problems experienced by the externalauditor in performing the audit, including any restrictions imposed byManagement or significant  accounting issues to which there was a disagreementwith Management; |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 20. | review audited annual financial statements, inconjunction with the report of the external auditor, and obtain an explanationfrom Management of all significant variances between comparative reportingperiods; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 21. | review the post-audit or Management letter, containingthe recommendations of the external auditor and Management’s response andsubsequent follow up to any identified weaknesses; |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 22. | review all interim unaudited financial statementsbefore release to the public; |
|-----|--------------------------------------------------------------------------------|

| 23. | review all public disclosure documents containingaudited or unaudited financial information before release, including anyprospectus, the annual report, the annual information form and Management’sdiscussion and analysis; |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 24. | ensure that the Company discloses in the periodicreports of the Company, as appropriate, whether at least one member of theAudit Committee is a “financial expert” within the meaning of the rules andforms adopted by the U.S. Securities and Exchange Commission; |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 25. | ensure that all non-audit services provided by theexternal auditor are approved by or on behalf of the Audit Committee and aredisclosed in the periodic reports of the Company; |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 26. | ensure that each annual report and, to the extentrequired by any applicable legal or regulatory requirement, any quarterlyreport of the Company includes disclosure with respect to all materialoff-balance sheet transactions, arrangements, obligations (including contingentobligations) and other relationships of the Company with unconsolidatedentities which may have a current or future effect on the Company in accordancewith all applicable legal and regulatory requirements; |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ANNUAL INFORMATION FORM - 2012 |
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| 27. | ensure that all financial statements and otherfinancial information, including pro forma financial information, included inany report filed by the Company with any regulatory authority or contained inany public disclosure or press release of the Company is presented in a mannerwhich does not contain a material misstatement or omission and reconciles thepro forma information contained therein to GAAP, and which otherwise complieswith all applicable legal and regulatory requirements; |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 28. | review the evaluation of internal control by theexternal auditor, together with Management’s responses; |
|-----|---------------------------------------------------------------------------------------------------------------|

| 29. | to assist Management with its annual risk assessmentand reporting strategy to manage the process of the identification, evaluationand mitigation of the Company’s principal enterprise risks; |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 30. | review the appointments of the chief financial officerand any key financial executives involved in the financial reporting process; |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|

| 31. | establish procedures for (i) the receipt, retentionand treatment of complaints regarding accounting, internal accounting controls,or auditing matters, and (ii) the confidential, anonymous submission byemployees of concerns regarding questionable accounting or auditing matters; |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32. | annually assess the adequacy of the Audit CommitteeCharter; and |
|-----|-----------------------------------------------------------------|

| 33. | annually evaluate the Audit Committee’s performance. |
|-----|------------------------------------------------------------|

**Independent Advice & Funding**

The Audit Committee shall havethe authority to determine the appropriate funding for the ordinary administrativeexpenses of the Audit Committee.  In addition, the Audit Committee may, in itssole discretion, retain, at the expense of the Company, and determine thecompensation to be received by, such legal, financial or other advisors orconsultants as it may deem necessary or advisable in order to properly andfully perform its duties and responsibilities hereunder.  

Amended and approved by the Audit Committee on March 18,2010,June 26, 2012, and March 19, 2013.

| **53 |**Nevsun Resources Ltd. |
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