Nyota Minerals: Early-mover advantage in Ethiopia

It’s not given to many junior exploration companies to purchase – at fire sale prices – the deposit which will define their future and make their fortune!

But that’s exactly the situation Dwyka Diamonds found themselves in 2 years ago. Having failed to establish a worthwhile diamond project, the company had diversified into coal in the Philippines, gold in Swaziland and nickel in Burundi in order to take the best advantage from the resources boom. 

But then came the opportunity to purchase the cash-strapped Minerva Resources, which had a significant portfolio of assets in Ethiopia but no money with which to further their work, and little hope of raising any, given the market conditions at the time. 

Included in that portfolio was a drilled-out initial resource at a gold project hosted in the Ethiopian portion of the Arabian-Nubian Shield called Tulu Kapi – but Minerva had not had the cash to pursue the definition of a JORC compliant resource. 

In June 2009, Dwyka Diamonds made an all-share offer for Minerva which valued the entire company at just £1.8 million. The purchase was finalised on 13th August, when the last few shares in Minerva were compulsorily purchased. 

Just one month later, on 14th September, the now-renamed Nyota Minerals announced a maiden resource at Tulu Kapi, based on Minerva’s drilling, amounting to 690,000 ounces of gold at 0.5 grams per tonne gold cut off. At even 1 per cent of the in-situ value, this maiden resource demonstrated clearly the massive upside Nyota had acquired along with the purchase of Minerva Resources. 

Nonetheless, Tulu Kapi has not proved to be the fast-trackable production opportunity that Nyota may have been expecting. 

The Arabian-Nubian Shield, which plays host to the Tulu Kapi deposit on its Ethiopian portion, is not a straightforward geological setting. The Shield is formed from several successive island arcs, generated by the clashing of tectonic plates over a period of some 250 million years, way back in Neoproterozoic times, each with their own distinct geological characteristics and located in close proximity to each other. 

Major geological events forced these different terranes hard up against each other and squeezed out any intervening ocean to form a single landmass, before opening them up a little, creating major extensional faults, one of which eventually gave rise to the Red Sea, which split the Shield into two.

That’s how the Arabian-Nubian Shield was born. It was a long gestation period, which at one point involved it submerging once again beneath the ocean, evidence provided by the sandstones and carbonates which, in places, overlay the more ancient rocks. 

And throughout this period of crustal thickening and thinning, various mineralising events drove up the volcanic massive sulphide intrusions, epithermal systems and quartz vein swarms we see today at properties like Tulu Kapi, Nevsun’s Bisha mine, the Sukari project operated by Centamin and several mines in Saudi Arabia operated by Ma’aden.

The Tulu Kapi deposit is hosted by Upper Proterozoic age intrusive rocks which have pushed up through the volcano-sedimentary sequences of the Shield which pre-dominate in the region. 

Gold mineralisation at Tulu Kapi is hosted by a coarse-grained syenite pluton which includes coarse- and fine-grained phases and is itself intruded by crosscutting dykes/sills of dolerite and numerous faults and fractures into which gold-bearing hydrothermal fluids have found their way. 

The structural controls on the deposit are not yet fully understood, but thus far it comprises a series of stacked lens-like sub-horizontal to shallowly dipping gold-bearing quartz-carbonate veins, veinlets and stockwork directly related to albite alteration. 

Four such “lodes” of broad mineralisation have been defined by drilling to date, all of which are sharply cut off to the south east by the Bedele Shear.  These zones have probably been fed by an underlying higher-grade structure – known as the Feeder Zone – which lies beneath them all. 

Discovered by deep drilling last December, this zone hosts high grade gold at the sub-400 metre level, evidenced by an intersection of 25.76 metres grading 23.05 grams per tonne, which included 15.70 metres  at 37.04 grams per tonne and a sweet spot of 4.65 metres with a grade of 89.70 grams per tonne. 

Further drilling has confirmed the continuity of the Feeder Zone and provided additional evidence for Lodes 3 and 4, and led to a revised resource estimate in July of this year.  

The in-situ modelling of the orebody by Wardell Armstrong International (WAI) produced a resource of 1.46 million ounces of gold in total, of which almost one-third lies in the Indicated category. 

However, as mine planning is now well advanced, WAI also produced a second resource statement, which included only those parts of the resource which fell into the defined open pit area of the deposit. This – which excluded the Feeder Zone and other deposit extensions which will ultimately be mined by underground methods - produced a mineable “in-pit” resource of 1.25 million ounces with a grade of 1.96g/t, significantly higher than the previous estimate of mineable grade. 

The company is presently engaged in more drilling, both infill and exploration, which will aim to upgrade the resource to measured status, and further indicate potential extensions to the current “in-pit” resource. 

Coupled with the existing data, this will allow more confident mine planning and give guidance on the most cost-effective manner for the development of the deposit.  

The current mine plan, as presented in the PEA published earlier in the year, envisaged surface mining for the upper lodes accompanied by underground mining – with access via a decline – of the Feeder Zone and the lower lodes. 

The company now has several further options due to the increased mineable grade in the open pit area, and these will be assessed as part of the definitive feasibility study which is about to commence. 

Metallurgical testing of the free-milling Tulu Kapi ore from all four lodes has demonstrated 95-96 per cent recovery using a straightforward industry-standard carbon-in-pulp flowsheet. Although the company are also considering an alternative flowsheet involving the production of a concentrate and then cyanidation of the concentrate, which has advantages in environmentally sensitive areas.

But the Tulu Kapi open pit is just the start for Nyota in what is – effectively - a new gold province. 

In addition to the extensions in immediate proximity to the planned open pit – the Northern and South Eastern Extensions, the UNDP Zone and the Feeder Zone – the Tulu Kapi area hosts up to 20 additional targets within a radius of less than 10 kilometres.  

These include Chalti, where a 1.2 kilometre gold in soil geochemical anomaly and airborne geophysics show a similar intrusive syenite with albitized zones at surface; Guji, a 1,200 by 200 metre soil and geophysical anomaly, where trench results include 10 metres at 1.9 grams per tonne gold and drilling has shown 17.4 metres at 2.77 grams per tonne gold; Kobera, where trenching has come up with 6.9 metres at 1.34 grams per tonne and 5.8 metres at 8 grams per tonne; and Dina, where previous diamond drilling has shown best intersections of 7.1 metres at 30.3 grams per tonne. 

All of these have the potential to become satellites for the main Tulu Kapi plant, thus extending mine life beyond the anticipated 9 years. And right next door to Tulu Kapi is Chago – a volcanic massive sulphide structure which is now ready to drill. 

In addition, Tulu Kapi, although it is the flagship project and the most advanced of the Nyota properties, is only one of several, spread over six separate licence areas in Ethiopia, where exploration targets have been identified for further work. 

Given the almost untouched nature of the Arabian-Nubian Shield, and the high prospectivity of the structures which shape it, it is hard to conceive that Tulu Kapi – whilst it is no doubt the foundation of their future fortunes - will remain Nyota’s sole pre-production asset.