Nyota Minerals Limited (AIM,ASX: NYO): Highly Prospective Gold...

Nyota Minerals Limited (AIM,ASX: NYO): Highly Prospective Gold in Ethiopia with Clear Upside **Ocean Equities Research Initiation** (Nov 30th)
OCEAN EQUITIES Ltd /www.oceanequities.co.uk

Source of the opportunity:

Highly prospective package of gold assets in an under explored but highly prospective terrane.
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West and North Ethiopia is underlain by highly prospective basement volcanics and metasediments that have been vastly underexplored over the last 40 years compared to the rest of sub-Saharan Africa.
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Western Ethiopia has infrastructure and support to make many operators in Africa jealous.
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Nyota has had recent publicly vocal support form the Ethiopian Minister for Mining.
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Opportunity for quick increase in ounces – 1moz short-term target, 3moz medium term.
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Nyota currently has a JORC resource of 690koz (13.5mt @ 1.58g/t Au).
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If the deposit is tracked up-dip, the resource could expand quickly and cheaply due to the shallow drilling depths required – we think 1moz within 6 months is achievable.
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In the medium term (within 2 years) we think that 3moz at Tulu Kapi is a realistic target although we would consider that 2moz at ~2g/t Au would be sufficient to undertake engineering studies to look at a potential mine.
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Potential to prove a mineable deposit at Tulu Kapi with relatively low capex.
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Experienced and capable operational team – both at corporate level and on the ground.
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Potential to become a take-over target in 18-24 months.
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We feel that if Nyota proves a substantial gold resource with minable potential, that there will be no shortage of interested parties.
Analysis: After taking into account the high prospectivity of Tulu Kapi as a development project, we are valuing the project at $50 per in-situ gold ounce (in line with comparable African gold developers). For the currently defined resource of 690koz Au, this implies a value of £21m (which compares well to Nyota’s current market capitalisation of £16m). However, we are confident that Nyota’s drilling campaign that is now underway will be able to expand the JORC resource at Tulu Kapi to one million ounces and for this reason, we are using this for our short term valuation target. This implies a value for Nyota of £39m.

We feel that our 6-9 month valuation of £0.17/share is justified for an exploration company that has a rapidly developing gold asset in a highly-prospective area with highly supportive local and federal government that is keen to advance and support a burgeoning mining industry.
Risks: The standard exploration risk applies to Nyota – exploration spend is no guarantee of success. We feel that the sovereign risk of Ethiopia is low – public government support of the mining industry drives that belief, along with our impressions from our site visit in October.