Sutton expands Tanzanian holdings

Already the owner of a large nickel deposit in western Tanzania, Sutton Resources (VSE) recently signed an agreement with the government of Tanzania which, if completed, would give the company exploration rights on about 9,700 square miles in western Tanzania.

The area known as the Kagera region is host to more than 100 anomalies identified by a United Nations development program initiated in the late 1970s. None of the anomalies have been drilled and Sutton is confident the area has the potential to host elephant-sized deposits.

Although the company will not finalize exploration plans for the ground until a deal is completed, Michael Kenyon, president of Sutton, noted expenditures in the area over the next few years could approach US$10 million.

Sutton is in excellent financial shape to fund a major exploration program. The company’s annual report shows working capital of about $750,000 at the end of 1990, including marketable securities valued at a cost of about $72,000. The marketable securities include 294,830 shares of Crown Resources currently valued at over $2.9 million.

The Kagera region, identified as a nickel metallogenic belt, extends to the north from the company’s Kabanga nickel deposit.

Sutton is now completing a 10,000-ft. drilling program on the deposit including both infill and stepout holes in an effort to confirm and expand previous reserve estimates. The United Nations’ preliminary estimate of reserves on the deposit was 40.5 million tons grading 1.05% nickel, 0.21% copper, and 0.11% cobalt based on about 60 holes drilled in the late 1970s.

Sutton recently commissioned an order of magnitude study on the project based on a 22-million-ton minable reserve grading 1.22% nickel, 0.17% copper and 0.08% cobalt.

Capital cost for a 6,600-ton-per-day operation is estimated at US$210 million, including the construction of an on-site flash smelter.

At an operating cost of US$41.40 per ton and with a net smelter return of US$85.75 per oz., the project would yield an estimated US$88 million per year in pretax profit over its 10-year life. The net smelter return is based on US$4 per lb. nickel, US$1 per lb. copper and US$10 per lb. cobalt.

The Tanzanian government has a minimum 7.5% interest in the Kabanga property increasing to a maximum of 37.5% depending on the after-tax real rate of return generated by a mining operation.

Sutton is also active in Guyana, South America where the company is exploring a 20-square-mile mining lease in the Marudi Mountain area in the southern part of the country.

Sutton is now working on a 3,000-ft., first phase drilling program to test surface targets and define rock units.

The first hole intersected 551 ft. grading 0.075 oz. gold per ton and included a 39.4-ft. intersection grading 0.32 oz. gold per ton.

Gold mineralization occurs in a deformed quartz-magnetite iron formation and Kenyon noted that the high-grade section likely represented a vein structure.

Sutton’s international activities have not gone unnoticed in the market. The price of the company’s stock is up to the $5.75 level from a low of $1.05 in 1990. Sutton has about 7.9 million shares outstanding.