Sutton earns interest in African nickel bet

Vancouver-based Sutton Resources (VSE), through an agreement with Romanex International, has acquired the right to earn a controlling interest in a large nickel deposit in western Tanzania. By spending US$1.25 million on exploration and issuing 280,000 shares to Romanex, Sutton will earn 55% of Romanex’ interest in the Kabanga nickel deposit. The government of Tanzania has recently agreed to issue Kabanga Nickel Co., a wholly owned subsidiary of Romanex, with a licence to explore the property.

The Kabanga deposit, discovered and explored by the United Nations Development Program (UNDP) in the late 1970s, contains preliminary reserves of 40.5 million tons grading 1.05% nickel, 0.11% cobalt, 0.21% copper and 0.01 oz. combined gold/platinum per ton. A separate block, estimated to contain an additional 37.8 million tons, grades 0.42% nickel, 0.04% cobalt and 0.06% copper. All mineralization is open along strike and other targets have been identified.

The deposit has been identified as a nickel sulphide magmatic separation deposit. Mineralization, occurring to depths of 1,500 ft., is hosted by several ultramafic sills which intrude Precambrian sediments.

The UNDP spent $7 million drilling a total of 60 holes into the two main zones, but since then no other organization has been able to secure rights to the property. Recently, however, the Tanzanian government has become more receptive to foreign investment. Earlier this year, Placer Dome (TSE) managed to secure an agreement to explore the Bulyanhulu gold deposit, not far from the Kabanga nickel find.

After earning its 55% interest in the property, Sutton will form a joint venture with Kabanga Nickel. Kabanga must spend $3.5 million on exploration over a 3-year period and complete a mine evaluation report at the end of this period.

If a production decision is made, the Tanzanian government will be entitled to a minimum 7.5% equity interest in the Kabanga and a 3% net smelter royalty. At this stage, the government may acquire additional equity interests up to a maximum of 32.5% or increase the mine tax rates. With an interest of 32.5%, the government will be entitled to purchase an additional 18.5% interest at market value.

In Tanzania, tax rates on income are 22.5% in the first four years, 50% thereafter. There are no restrictions on mineral exports or repatriation of profit.