Nyota Minerals excited by Ethiopia’s potential

Nyota Minerals (LON:NYO, ASX:NYO) plans to get the definitive feasibility study for its flagship gold project at Tulu Kapi in Ethiopia completed by the middle of next year.

Richard Chase, chief executive said: “First priority is completion of the DFS for Tulu Kapi. We are now three months into that and the target completion date is the end of June next year.” 

“That is obviously crucial because we need to get the DFS done so that we can engage with the banks on the project finance,” he added.

After that, he expects a go or no go decision on the Tulu Kapi project, though he says he has “no doubt” it’s a go. 

It’s really a case of whether debt and equity markets are there to finance it, he says. “The debt markets for Ethiopia appear to be strong,” he adds.

“Banks doing business in the country are accepting the country risk but are looking for diversification of investment opportunity. Most have no permanent presence in the country but are financing infrastructure projects, telecoms, floriculture and the like. We are the only mining project at this stage, so several banks have expressed an interest in our project.”

Chase believes this also reflects the enormous potential for mining in Ethiopia.

“One of the reasons I am doing the job is that I was involved in Tanzania during the 1990s when it saw an explosion of mining activity over a five or six year period.  I think Ethiopia could do the same as it has that type of potential.” 

Tulu Kapi is currently estimated to contain one and a half million ounces, but the deposit is centred on one hill and volumetrically constrained and unlikely to contain more than two million ounces.

“We have five drills rigs contracted and operating. Most are working on the feasibility study but we also have rigs drilling the proximal exploration, which is within a 20km radius, and the Northern Block exploration tenements 100km north of Tulu Kapi, where we are to start drilling the large new gold anomalies.”

He said the group is holding off deep drilling in the vicinity of the Tulu Kapi project until it becomes clear it can develop the mine because, he says: “At the end of the day, if we can’t build a mine there, what’s a million ounces next door to it.”

The company is still in discussions with the Ethiopian government over a mining licence for the project.

One reason for the slow progress says Chase is that Nyota is the only company currently negotiating a large scale mining licence for either precious or base metals licence with the Ethiopians.

The relationship with the Ethiopian mining ministry is good, he says, and both sides have a real desire to license a new mine, but it comes back to putting together a mining agreement they are both happy with.

“It is a slow steady education process on both sides,” he said “we have to get our head round what they want as well”. The only existing gold mine in Ethiopia was government built and subsequently privatised, and significantly pre-dates the 2010 mining act.

He is not one of those who predicts gold going to US$2,000 per ounce, but he cannot see the gold price retracing much over the medium term.

“If we can get a gold mine up and running over the next couple of years, it will do very well” he says.

“Western Ethiopia has good infrastructure and we will benefit from the competitively priced hydro-electric power that feeds the national grid. Although land-locked, there are excellent port facilities in Djibouti and a very good working agreement between the two countries."