While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards: While all Performance Standards (PSs) are applicable to this investment, IFC’s environmental and social due diligence indicates that the project financed by IFC (exploration and feasibility studies) will have impacts which must be managed in a manner consistent with the following Performance Standards: -PS1: Social and Environmental Assessment and Management Systems -PS2: Labor and Working Conditions -PS3: Pollution Prevention and Abatement -PS4: Community Health, Safety and Security -PS5: Land Acquisition and Involuntary Resettlement The project is in its early stages and the only activities are further exploration and drilling activities and completion of feasibility studies. There are a number of communities in close proximity to the Company’s exploration activities. Whilst the concession area is degraded having been subjected to small scale colonial era mining operations, the surrounding area supports grazing land and agricultural activities. No high value habitat was identified and therefore at this exploration stage of the project, PS 6: Biodiversity Conservation and Sustainable Resource Management is not applicable. The people in the Tulu Kapi project area belong to the Oromo ethnic group, the main group in the Oromiya Region and the single most populous group in Ethiopia. There are no groups of indigenous people in Ethiopia; ethnicity is the defining trait and each region has one or more ethnic group that share similar cultural habits and religion. In addition to Amharic which is the national language, each region has a local dialect. The local dialect in the Oromiya region is Oromiffa. Thus PS 7: Indigenous People is not applicable. According to a preliminary study undertaken by Coffey Systems (2007), there are no known sites of archaeological or cultural significance. A detailed study would form part of the full ESIA if the project progresses to the development/exploitation phase. Thus PS 8: Cultural Heritage is not applicable at this stage. IFC’s Environmental Health & Safety (EHS) Guidelines applicable to this investment are: -General EHS Guidelines, April 2007; and -Mining EHS Guidelines, December 2007.

This is a category B project according to IFC’s Environmental and Social Review Procedure because the Environmental, Health & Safety, and Social (EHSS) impacts of the project are limited, site specific and therefore manageable through implementation of appropriate mitigation measures. IFC’s review did not identify any significant adverse impacts or high risk exposures. IFC’s categorization of this project is based on the impacts of exploration activities, which consist primarily of construction of access roads and drill pads for exploration drilling, construction of base camps for worker accommodation and site office, limited emissions of dust and water, and waste streams from camp activities and machinery maintenance. The key social and environmental issues associated with the exploration drilling currently ongoing in Tulu Kapi are (i) Management of exploration activities - specifically control of erosion and rehabilitation of drill roads and drill sites, safe disposal of oils and waste, dust control, water and effluent management, occupational health and safety, hazardous materials (e.g. fuel) handling and management, public safety and emergency preparedness & response, (ii) temporary loss of economic livelihoods, (iii) temporary limited land access resulting in reduced grazing grounds for livestock, (iv) disturbance and noise resulting from movement of heavy equipment and drilling activities, (v) potential impacts to local communities from use of local water sources, (vi) influx of potential workers seeking employment, (vii) managing community expectations with respect to potential job opportunities, (viii) ongoing community consultations and resettlement planning ; Any IFC investment in any future mining development would be assessed as a new project and its categorization would be determined after the necessary due diligence. Even without an additional investment, IFC would require any future mine development with major impacts to follow PS 1 in its requirements for independent monitoring of project social and environmental performance and free, prior, and informed consultation with project affected people. Nyota will ensure that social and environmental assessment documents associated with such a development will be consistent with the IFC Performance Standards and EHS Guidelines and be publicly available and consulted upon in accordance with IFC’s disclosure policy prior to the start of construction. To address the above identified issues and meet the requirements of IFC’s Performance Standards, Nyota has committed to an Environmental and Social Action Plan (ESAP) covering its exploration activities, feasibility and potential future mine development. As noted above, IFC will assist Nyota in adapting existing company procedures to become a comprehensive Health, Safety, Environment & Community (HSEC) Policy which will contain management plans through the exploration stage with commitments relating to any future mine development.

PS1: Social and Environmental Assessment and Management Systems

Environmental and Social Impact Assessment

Management of risks discussed in this ESRS consists of those associated with exploration as IFC is only financing exploration and feasibility study activities, which have limited impacts on social and environmental receptors. Nyota commits to meet the IFC Policy and Performance Standards on Social and Environmental Sustainability. If any of the exploration prospects proceeds to the mining development phase, Nyota will prepare the environmental and social assessment documentation needed to demonstrate compliance with IFC’s Performance Standards, as per action item 1 of the ESAP.

Baseline studies for the Tulu Kapi area were conducted in March 2008 by Mid-Day International Consultants (an Ethiopian environmental consultancy) who identified and listed a number of generic risks should the company move towards mine development, these would require further assessment at the appropriate stage in project development. The main objectives of the Mid-Day studies were to:

-Produce and provide land and resource use maps of the three project sites;
-Ascertain whether land use may pose constraints on exploration drilling, the sitting of exploration facilities or otherwise require particular management;
-Provide socioeconomic baseline data that can help the company to understand the impacts of its planned operations on the environment and communities around Yubdo, Tulu Kapi and Guji and its concession area; and
-Identify and provide basis for compensation payment calculation.

Conceptual metallurgical test-work indicates the possible use of a Gravity-Float-Intensive Leach (GFIL) type gold recovery process which if proven viable would result in a significantly reduced footprint in terms of both the treatment plant and tailings dam sites. This process would also minimize the use of cyanide although Nyota has committed to comply with the International Cyanide Management Code. The conceptual flotation process will remove the bulk of the sulphides thus minimizing the ARD potential of wastes. There is a market for any sulphide residues in the local cement industry.

The baseline study also identified that in the event that a mine is established at Tulu Kapi, it will be necessary to relocate a small number of farmers who have established smallholdings within the perceived area of influence of the future mine site. Dialogue has already commenced with these farmers which is undertaken jointly by the Company and the regional authorities. The baseline study includes a census of some of the villages in the project’s area of influence. Should the project progress to mine development, a comprehensive resettlement action plan will be developed in coordination with the regional authorities and participation of the affected community.

The Company reported that the Regional Authority has already identified and allocated suitable farmland to which the farmers would be relocated. The resettlement will follow the Ethiopian resettlement law and the baseline study which complies with the Ethiopian regulations forms a solid basis upon which a series of specific specialist studies could be undertaken for preparation of a Resettlement Action Plan, appropriately consulted upon and disclosed in accordance with IFC disclosure policy prior to any relocation taking place. Where gaps exist between national Ethiopian law and the requirements of PS 5, Nyota will commit to any additional measures necessary to supplement government action to achieve outcomes consistent with PS 5.

Environmental Policy

Nyota is in the process of developing an environmental, health and safety policy and will adapt these existing operational procedures into a formal Health, Safety, Environment and Community Policy and Procedures (“HSEC Policy”) document, which will be developed with IFC assistance [as per action item #1 of the ESAP]. In addition, Nyota will develop site-specific operational procedures and guidelines consistent with the HSEC Policy for the Tulu Kapi operations.

The Company will also prepare a Stakeholder Engagement Plan (SEP) [as per action item #1 of the ESAP] to foster positive stakeholder relationships, monitor community support, and identify needs and priorities for sustainable development.

Management and Organization

As an exploration company, Nyota has relied on consultants to undertake various studies with responsibility for HSEC matters shared between Company managers. Most issues can be managed via the HSEC Policy defined above at the current stage of the project development. Nyota’s administration clerk at Tulu Kapi presently manages relations with local communities, particularly with respect to temporary land access and local hire. The level of consultation with local communities appeared to be appropriate given the limited impact of the exploration activities. However, the Company has recognized the need for a dedicated community liaison officer and is currently in the process of recruiting an officer. Nyota will strengthen its E&S capacity through appointment of a full-time HSEC officer with responsibility for both Tula Kapi and other exploration sites supplemented by local staff should the project progress to mine development. The HSEC Policy development and implementation is currently the responsibility of the Project Geologist.

Nyota’s management team values a relationship with IFC in carrying out its exploration activities in line with industry good practices for mining sector governance, transparency and sustainability. Nyota’s management team has extensive experience in the resources industry, ranging through project acquisition, exploration, resource definition, mining, mineral processing and financing.

Monitoring

A substantial number of baseline studies covering land and land resource survey, and socio-economic assessment were completed by Mid-day International. Two separate reports on land and land resource survey, and socio-economic assessment were produced together with production of community data incorporated into GIS maps defining land use boundaries and land resources.

The streams are reported to show excessive turbidity and are contaminated by waste and sewage deposited upstream by villages with poor non potable water quality. Nyota has drilled a potable water supply borehole near the campsite but this has not yet been pump tested to determine its capacity. Going forward, Nyota has agreed to initiate some specific baseline data collection of community water resources (e.g. well and stream quality and quantity) and by erecting an onsite weather station to measure rainfall, temperature, wind etc. Nyota will also monitor and record their spring water abstraction as well as the borehole water yield. Nyota will also monitor the implementation of its HSEC Policy in compliance with the Ethiopia regulations and the IFC PSs’.

Reporting

At present, no E&S reporting is required by the Ethiopian government. According to the Mining code, Nyota will be required to report every three months in relation to various operational matters once it starts mining. The only aspect that is closely monitored by the government is compensation for land access and use. The process is managed by the regional administrative office in close coordination with Nyota.

For the purposes of IFC’s investment, Nyota will submit an Annual Environmental & Social Monitoring Report (AMR) to IFC describing its environmental and social performance including incidents and monitoring, as appropriate. The Company will also be reporting regularly, at a minimum on a quarterly basis to the local communities on progress made in drilling out the resource and at a minimum annually, to the local communities on progress made in implementing the Company’s environmental and social action plan.

Influx management

For its current drilling program, Nyota has hired the majority of its staff from the local area which included skilled and unskilled workers. The hiring process was conducted at the Tulu Kapi camp site offices whereby potential candidates deliver their resumes in person. This has resulted in a daily queue of potential job seekers that now wait at the camp site gates due to perceived job opportunity. Whereas the number of workers seeking employment is currently small, there is a risk that the area experiences a large influx due to potential economic opportunities the project is perceived to create.

As mentioned above, Nyota will undertake focused engagement sessions to manage this phenomenon and explicitly explain to the local communities employment requirements for the drilling program. For the ongoing exploration stage, Nyota is evaluating options for establishing an information and employment centre in the nearest town to manage influx of potential job seekers to the project area.

Should the project progress to feasibility stage, Nyota will prepare a coherent influx management plan (including developing a strategy to relocate the hiring process to an off-site location) to address project-induced in-migration during exploration, feasibility and subsequent construction phases.

PS2: Labor and Working Conditions

Nyota is a junior exploration company that has only recently commenced drilling out a potential mineable resource. Nyota currently employs a total 64 people in Ethiopia; eight based in Addis Ababa and 56 at the Tulu Kapi project site. With the exception of one expatriate employee, all staff are Ethiopian nationals. The majority of the staff were employees of Minerva Resources Plc, which Nyota acquired in 2009.

For its exploration drilling program, Nyota has recruited skilled, semi-skilled and unskilled workers from the local area surrounding the Tulu Kapi project site and has provided specialized training to staff that were hired as laboratory technicians, drillers and drill assistants etc.

Human Resources Policy

Nyota is still in the process of maturing its management systems and is developing procedures. Nyota has recently developed a Human Resource Policy which is currently in draft form. The policy was developed in accordance with the Ethiopian Labor Law and aims to establish a formal work guideline for its employees. The policy addresses aspects related to working conditions and terms of employment, job classifications and salary grid, leave, performance evaluation, grievance mechanism and disciplinary action and termination.

Nyota will update its Human Resources Policy consistent with the requirements of Performance Standard 2 on labor and working conditions. The update will include provisions for addressing non-employee workers performing core functions (e.g. contractors used by Nyota for drilling operations are a core function of exploration).

Subsequent to taking over from the previous owner, Nyota conducted a performance evaluation of all its employees. With the exception of a few, the majority of the existing staff were retained and salaries were increased to take into account inflation and increase in the cost of living.

Given that Nyota has recently completed drafting of its Human Resources Policy, terms of employment and work conditions are currently communicated verbally prior to contract signing. All staff are enrolled in a pension scheme and have medical insurance. Nyota follows the Ethiopian labor law with respect to working age, working hours, non-discrimination and other labor practices.

In its HR policy, Nyota has provisions for a grievance mechanism for its employees. Nyota will conduct internal training for its employees to raise awareness on the HR Policy and the grievance mechanism (its use and applicability).

Nyota will provide a copy of the HR policy to all its employees both in the corporate office in Addis Ababa and the field office at Tulu Kapi.

Occupational Health and Safety

Nyota has in place a Health and Safety policy and a committee responsible for reviewing the policy on an annual basis. To date, there have been no OHS accidents. For the current operations at the Tulu Kapi project site, team leaders and senior geologists develop OHS requirements for specific job types on an on-going basis.

Nyota will incorporate its Health & Safety Policy into the HSEC Policy described above and will develop detailed procedures consistent with international industry good practice to minimize accidents and incidents associated with its operations. The procedures will include provisions for employee training on OHS and emergency preparedness. Nyota will also establish a formal OHS incident reporting system to document incidents and monitor and review safety issues and implement corrective action.

Nyota will include provisions on OHS requirements in all its contracts for Contractors.

PS3: Pollution Prevention and Abatement

Solid Waste

Nyota generates minimal amounts of waste but it is all segregated appropriately. The company responsibly manages their waste streams and the final disposal methods. The main solid waste includes domestic and sewage. Domestic waste disposal could be improved including papers, plastic material, packaging material and cafeteria. This equates to less than 5kg per week. Nyota has been burning these wastes but will in future bury such non-hazardous waste in pits, compact the material and cover with soil. The sewage system currently uses “long drop” toilet facilities. These long drop latrines will be closed and sealed off and Nyota intends to install septic tanks and plans are underway for implementation.

Liquid Waste

Wastewater (domestic) is disposed of by soak away. Nyota will investigate alternative methods of domestic effluent disposal including simple and site-appropriate treatment such as filter beds.

Drilling & Drilling Waste

The Nyota exploration drilling program is undertaken by Geosearch who use two Reverse Circulation (RC) rigs and one diamond drill rig. Geosearch avoids spillage of used drilling media and lubricants into water channels and the soil via the construction and use of sumps. Further, Geosearch uses foams and biodegradable drilling fluids manufactured by SAMCHEM Drilling Fluids and Chemicals (Samchem), Africa''s largest supplier and stockists of drilling fluids and chemicals to the mining industry. Drilling waste (chippings and mud) are buried at a depth of one meter. Used oil from machinery is currently absorbed onto mats which are then burned in a pit together with packaging material. Nyota has agreed that such disposal is not appropriate and will investigate options for recycling spent oils back to the fuel suppliers.

Topsoil and organic material from drilling sumps and pads stripping is stockpiled for use in the rehabilitation process as part of drill hole closures. Drilled areas are rehabilitated as soon as they are no longer required by re-vegetation and natural growth is rapid.

With the exception of fuel, Nyota does not ordinarily handle hazardous or toxic materials at this stage of the operation.

Energy Use

Power for the camp is supplied from an 80KVA generator operated from 06h00 in the morning until 12 midnight everyday of the week except on Sundays. The generator consumes an average of 150 liters of diesel per day. A smaller 15KVA standby generator supplies the camp with power on Sundays and every other time when the sample preparation laboratory is not running. The smaller generator uses an average of 60 - 70 L of diesel fuel/day. In future, and should the project move into development/production, power will be obtained from the national grid at Gimbi town, 20km away from site

On average, 20 000 L of diesel fuel stock is stored on site in 200L drums, under a roof. The average draw-down of this fuel is 2 000 L of diesel per day for six days a week. Nyota is in the process of constructing a bund wall at the fuel storage site.

The camp uses a combination of natural gas and dead wood for cooking. The gas is supplied in tanks by Ghion Gas and firewood is supplied by the locals. Nyota will house the gas tanks outside of the cooking areas and install cut off switches for the gas supply to the cooking areas.

Water Quality and Use

Nyota uses 20 000L of water per day and this water is drawn from two springs that are shared with the local communities. The water is collected in a sump at source and pumped to a 3 000 L tank from which it is pumped to the camp for distribution. The 3 000 L tank is located in field whose owner was compensated and offered employment as the pump attendant. About 1 000 L of the water is treated using tablets and is used for drinking and cooking. Occasionally, a water bowser is used to collect water from the nearby Birbir River for use at camp.

Nyota has recognized that it would be preferable to develop their own water supply source for the exploration stage and as a result will assess various possible options including extracting water from the Birbir river. This will eliminate the need to extract water from local springs which are also used by the communities.

In the meantime Nyota have drilled a potable water supply borehole next to the camp. The borehole has not yet been capacity tested and is still to be equipped. Once equipped, Nyota will make provision to share the same source with the local communities through the use of a trough.

Occasionally exploration boreholes intersect groundwater resources and to avoid the borehole acting as a potential pathway for contaminants to enter the groundwater both from surface runoff and from other (even lower) horizons, the drill holes are sealed using Polyset A & B.

The availability of water for any future mining operation will be fully studied at the ESIA stage.

Air Quality

Dust from the drilling operations is carefully managed to avoid impacting the local communities. However, dust on some of the tracks that traverse through local villages was observed to be a nuisance during the site visit. Nyota agreed to address the issue and implement mitigation measures including watering down the affected areas with a water bowser. Other emissions are from the drilling rig itself and small fleet of light vehicles.

Emergency Response and Preparedness Plan

As per action item # 1 of the ESAP Nyota will develop a separate Emergency Response Plan or Procedures (ERP). The key tenants of such a plan are included in the outline HSEC Policy noted above.

PS4: Community Health, Safety and Security

The Tulu Kapi project site is located in the Genji Woreda of the Oromiya region, 5 km west of Woreda town (the nearest town center). A number of villages are located within the vicinity of the project site with a total population of approximately 206 households. The nearest village is located less than one kilometer from the mine site necessitating measures for dust and noise control, movement of heavy equipment and project personnel.

The key risk to community safety is increased vehicular traffic and the potential for accidents involving both humans and livestock. To minimize risks associated with its vehicular movements, Nyota uses access roads that avoid villages. The community’s main compliant is dust and noise from the drilling rigs.

Nyota will provide defensive driver training to its workers and will ensure that their Contractors follow similar requirements.

According to the baseline study undertaken in 2008, abdominal parasites, malaria and skin diseases are the most prevalent diseases in the Genji Woreda. HIV/AIDs is a growing concern in the area.

Nyota will develop prevention and treatment programs for malaria and other prevalent diseases. Nyota will also develop and implement an HIV/AIDs awareness program to ensure protection of both staff and local communities.

Nyota is not expected to use armed security as the area is relatively safe and to date there have been no issues related to security. Currently, the Company employs unarmed security guards that are hired from the local villages.

PS 5: Land Acquisition and Involuntary Resettlement

As mentioned earlier, the Tulu Kapi project site is surrounded by a number of villages and farmlands. For its early exploration drilling program, Nyota acquired access rights from land owners for temporary use of farmlands and in some cases land located within the dwelling compounds. According to Nyota, 40 – 50 households are affected by the current drilling program. The owners are compensated for lost crops, crops damaged during clearing of land for drill pads and construction of access roads. Nyota will return the land to the farmers after completion of its current drilling program.

Nyota is following the Ethiopian regulations for payment of compensation for crop and property. In accordance with the regulation, the compensation process (i.e. crop valuation, negotiating compensation rates and overseeing payment) is administered by the Woreda office (the regional zonal administrative unit). Nyota is closely involved in the process and is present during consultation and negotiations with the farmers. All the farmers are compensated for temporary loss of economic livelihood. The main crops grown in the area are coffee, maize, sorghum, teff and mango. In addition, Nyota compensates farmers for any crop damage incurred during the drilling operations.

Should Nyota progress to mine development, a number of households will likely need to be resettled resulting in both physical and economic displacement. Consultation with these households has commenced and Nyota has convened a number of meetings with the affected community in coordination with the local authorities to provide the farmers with information on the exploration program, the current compensation process, discuss the potential resettlement and alternative sites for relocation. The farmers in the Tulu Kapi area lease the land from the Government and pay annual rent specified by the Government. According to the Ethiopian mining law, the Government is responsible for allocating replacement land to the displaced persons and the Company will bear the costs associated with compensation and resettlement including livelihood restoration.

Discussions are underway with the affected community on potential relocation sites. It is recommended that Nyota in coordination with the Woreda and Kebele office work closely with the affected population for selection and preparation of the resettlement site.

Nyota will develop a Land Acquisition and Compensation Plan (LACP). The LACP will outline the principles, guidelines and approaches that will be followed for land acquisition activities.

Nyota will also document the process followed for compensation of farmers during the early exploration program. This document will include the policies and procedures and requirements under the Ethiopian regulation and of IFC Performance Standards.

Community engagement commenced early during the exploration phase as a large part of the project’s footprint is surrounded by cultivated agricultural and grazing land. Nyota organized a number of public meetings to introduce Nyota, the proposed drilling program and provide information on the project. Nyota also held a number of community meetings with affected land owners to discuss temporary access and use of the land for the drilling operations. These meetings were organized in coordination with the local authorities who spearheaded the compensation process. Nyota and the local authorities co-ordinate the initiation of dialogue with the affected communities for potential permanent resettlement should the Tulu Kapi prospect proceed to mine development. Nyota will formalize its engagement program to ensure that the local communities are kept up to date with the project progress and to manage community expectations with respect to employment opportunities, issues associated with land access and compensation. Given the proximity of the operations to the local community, this is the key to building a positive relationship with the communities to minimize grievances associated with project activities. Nyota will also tailor a number of focused sessions to address issues related to job creation and opportunity. Nyota will explicitly explain to local communities its employment strategy, envisaged job opportunities during different phases of the project (current drilling program, feasibility, mine development). Nyota will hire a dedicated community liaison officer to manage social aspects of its operations including engagement with communities and compensation issues. Nyota will prepare a Stakeholder Engagement Plan (“SEP”) that describes the Company’s policies and procedures for engagement with all the relevant stakeholders and provide a schedule for consultation. The SEP will include a grievance mechanism for local communities and will be consistent with IFC’s Performance Standards and international best practice. It will also include provisions for disclosure of project information to local communities dependent on project activities and information disclosure needs.

Nyota will make a copy of the ESRS and the attached ESAP available in the following locations in Addis Ababa and near the project site for a period of 30 days starting April 13, 2010. 1 st Floor, Daminarof boulevard CMC Road Bole Sub-City, Kebele 13 P.O. Box 57100 Addis Ababa, Ethiopia For any further questions and/or comments, please contact: Dr. Kebede Hailu Belete Telephone: + 251 11647 9970 Fax: + 251 11 647 9975 Email: kebede.belete@nyotaminerals.com Nyota will undertake a number of consultation sessions at the villages in proximity to the Tulu Kapi project site and the West Wellega zonal town of Gimbi to explain to the local communities the contents of the ESRS and ESAP. Nyota will also make available a copy of the project documentation at the local school located near the project site.