Dwyka plots gold, platinum strategies

Allan Seccombe | Wed, 29 Jul 2009 14:11

[miningmx.com] -- DWYKA Resources, which has taken control of Minerva Resources, plans to spin out the platinum assets as a separately listed company and could possibly sell its gold prospect in Swaziland, said CEO Melissa Sturgess.

AIM-traded Dwyka intends focusing on its Muremera nickel exploration project in Burundi as well as the gold assets in Ethiopia it acquired when it took an 87.7% stake in fellow exploration company Minerva in an all-share offer.

Dwyka has extended the 1-for-5 all-share offer to remaining Minerva shareholders until August 11 to mop up the shares it needs to take it to 90%. At this point it can trigger a mandatory offer for the remaining shares, leaving Minerva wholly owned by Dwyka. Minerva is already delisted from AIM.

Dwyka’s board will figure out an exact strategy as regards its suite of assets in the next few months, but it appears likely that Swaziland is not a top priority and the Ethiopian platinum assets would be better served by being housed in a separate company, possibly a listed one.

Minerva’s 44 holes into the shallow, relatively high-grade gold deposits 530km west of Addis Ababa and metallurgical work showing 94% recoveries will be fed into a new work programme to establish JORC-compliant maiden resource and a full technical report by Venmyn.

“My expectation is that by beginning September we’ll have 500,000 oz of inferred resource; our job then is to use the Venmyn report and results from a trenching work to drill out to a million ounces and begin production,” Sturgess told Miningmx.

Dwyka will spend $2.6m over the next 12 months on Tulu Kapi, the gold project. The company, with a market capitalisation of Ł13.6m, has about $10m in cash. It will husband this carefully, based on outcomes of the resource statement, Venmyn’s report and the trenching work.

“We won’t blindly put money into the ground if the world is still looking quite tricky, but we are certainly on a path to get us towards being a production company rather than an exploration company much faster than any other way, with more return on capital because it’s very easy geology,” Sturgess said.

The platinum strategy will be interesting to watch, given the inclusion on Dwyka’s board of Terry McConnachie., Sylvania Resources CEO. This company is unfolding a growing platinum strategy in South Africa, and Evan Kirby, who has built up sound experience in platinum group metallurgy at Impala Platinum, Sylvania and other firms.

Minerva has a 51% stake in Yubdo Platinum, where there is a small-scale recovery operation as well as exploration. Kirby’s expertise will be an obvious asset in boosting the recoveries at the plant from below 20% and generating a cash stream.

It’s not clear whether Sylvania will play a role in Yubdo, but Sturgess said Dwyka has had three overtures from groups interested in participating in the deposit.

“We don’t consider ourselves to be in the business of platinum mining or exploration,” she said. “We will look to spin it out into a separate vehicle with its own expertise and funding. We don’t want to spend Dwyka cash on a platinum project. We want to focus on gold.”

Dwyka is talking to the Ethiopian businesses owning the remaining 49% to do just that, she said. Dwyka would retain an equity stake in the platinum venture, possibly a listed company.

The other interesting aspect to watch will be what Dwyka does with its stake in the Swaziland gold project, and whether it has the financial resources to continue participating in it.

One of the challenges with the Swaziland gold project is that it is a greenstone deposit and needs extra capital on a process to extract gold from the sulphides. This normally entails the construction of a Biox plant, which raises the hurdle rate when considering the economic viability of such a project.

“The decision we’ll have to take in the coming months is whether we continue to push both gold projects or take a view which one is the front runner. That will come down to a return on capital,” Sturgess said.

“Muremera is non-negotiable. It stays in the portfolio,” she added.

If the Swazi asset doesn’t offer competitive returns, it could very well be sold. The most likely buyer would be AIM- and JSE-listed Pan African Resources. It operates the Barberton mines directly across the border in South Africa, and, importantly, has a Biox plant.

Dwyka holds 45% of Swazigold. It can earn in up to 100% ownership if it funds the project to the completion of a bankable feasibility study, and pays cash and shares to its partners in the project.

Other assets deemed non-core are Minerva’s stakes in gold and diamond exploration ventures in Sierra Leone. The partners in those projects are aware of Dwyka’s intention to exit them.