Nyota Minerals Limited is a junior mining exploration company with offices in London and Perth, listed on both the Australian Stock Exchange and the London Alternative Investment Market. Nyota has a market capitalization of approximately GBP32 million (as of April 7, 2010) and its largest shareholders are Chase Nominees Ltd (11.62%) and Pershing Nominees Ltd (5.82%).

The Company has established a budget for the next 12-18 months of up to approximately GBP 10 million. This includes the following activities: (i) further exploration drilling; (ii) completion of a scoping/prefeasibility study; and (iii) preparation of environmental and social impact assessment reports.

The proposed IFC investment is an equity investment of up to approximately GBP 7.5 million.

15.64 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	15.64

* These investment figures are indicative

The Tulu Kapi exploration license covers an area of approximately 11 km2 and is located in western Ethiopia (the nearest town is Ayra-Gulliso, located 28 km away), in Oromia Regional State, Ghimbi zone and in the Ganji Wereda. It is approximately 510 km from Addis Ababa. The main economic activity in this frontier region is farming. It is a sparsely populated and relatively underdeveloped region with limited formal employment opportunities.

Although Ethiopia has considerable mineral resources, the mining sector’s contribution to the country’s GDP is still small. The Government of Ethiopia has made the development of its mineral resources an important strategic priority in order to diversify its economy, grow its sources of foreign currency (reducing its dependence on coffee exports) and attract foreign direct investment. A successful exploration program by Nyota would have notable demonstration effect and help establish mining as an attractive sector for private investors, promoting sustainable resource development and economic growth through infrastructure development and employment generation.

The Project is in an early exploration phase so its developmental impacts are limited in scope at this stage. The key impacts of the project that IFC will monitor include: (i) finalization of drilling program, completion of the scoping study and acquisition of a mining license; (ii) number of local employees; and (iii) completion of Social and Environmental Impact Assessment (SEIA).

Should the project move to a fully operating mine, it promises to generate notable, additional developmental benefits both for the country as a whole and particularly for the area around the mine, which is located in an underdeveloped part of the country.

IFC’s expected contribution during the pre-development phase includes:

• Provider of Capital: IFC’s investment will provide the much needed capital for further exploration and completion of studies which will take the project closer to development. Furthermore, an IFC investment provides comfort to its current investors that the project will be better prepared to attract equity and debt financiers, as it will be developed in line with international best practices.
• Long-term Shareholder: IFC’s role as a long-term strategic investor provides comfort to the Company and other investors that adequate funding would be available notwithstanding a credit crunch. The Company seeks a partner who is willing to play a significant role in the future mobilization of funds.
• Environmental and Social expertise: IFC’s involvement in the development of Tulu Kapi will help set benchmarks on environmental and social sustainability practices in the Ethiopian mining sector. IFC will provide guidance to Nyota and help build its internal environmental and social management systems and ensure implementation for sustainable development. Community engagement and influx management is an area where IFC could particularly add value.

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, and (viii) Ongoing community consultations and resettlement planning.

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.

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. Nyota has committed to undertake a comprehensive environmental and social impact assessment study consistent with the requirements of IFC Performance Standards prior to any substantive mine development.

Tulu Kapi is at early exploration stage and its developmental impacts are limited at this stage. In evaluating this investment, IFC took into account governance and other risks to these potential benefits. Having considered the potential benefits and governance risks, IFC believes that the project should be supported. The Company has agreed to make material payments to Government public as per IFC’s requirements.

In evaluating this investment, IFC has reviewed a variety of governance metrics, including the World Bank Institute’s governance indicators, the World Bank’s Doing Business Report and the Transparency International’s Corruption Perception Index (“CPI”). The Government of Ethiopia is continuing its efforts to implement a number of reforms in the mining sector in order to improve the regulatory framework, including proposed revisions to the mining code that will be presented to parliament shortly. Ethiopia applied in September 2009 to be an EITI (Extractive Industry Transparency Initiative) candidate country and its application is currently being evaluated by the EITI board. The World Bank’s Mining Policy group has been assisting the Government of Ethiopia on these reforms and on the implementation of EITI.