LONDON (Alliance News) - Nyota Minerals shares slid by almost a third early Tuesday after the company said its Towchester Investment Company Ltd subsidiary hadn't been granted a mining license for alluvial gold mining on the Abay River in Ethiopia and it won't be appealing the decision.
"Nyota's 100% owned subsidiary, Towchester Investment Company Limited, has been informed by the Ministry of Mines of the Government of the Federal Democratic Republic of Ethiopia that it has decided against issuing any mining licences for alluvial mining along those parts of the Abay River and its tributaries that will be flooded by the Grand Ethiopian Renaissance Dam," the company said in a statement.
It said the Ethiopian government had decided that a new dam being built on the river with the aim of transforming the country's economy was so much in the national interest that it wasn't going to risk any negative impact from mining activities. The government decided the risks outweigh the potential economic gains it would get from gold royalties and taxes from mining ahead of the flooding that would follow completion of the dam.
"The Minister for the Ministry of Mines stated that the decision was in no way a reflection of the application or the applicant and that Nyota would continue to receive support if it wished to identify new areas of interest and specifically those that are sparsely populated," Nyota said in a statement.
Nyota said the decision was a surprise. Towchester had submitted its application for a mining licence in April 2014, having received a positive response from the Ministry to the concept. There were delays to the process, but the parties had agreed revisions to the application in September.
"Nyota has however considered its position and in the light of the rationale it has been given, the board has decided that an appeal, which is allowed for under the relevant legislation, would be a non-productive use of resources given the negligible chance of success," it said.
The company added that the recent renewal of exploration licenses in the Northern Block in the country was unaffected, although the size of the area has been reduced by the planned flooding relating to the dam, as it previously announced.
"Nyota will be conducting a strategic review of activities and opportunities in Ethiopia but will make future decisions in the light of the Minister's comment on resettlement, the competitiveness of the investment climate and the timing and manner in which applications are being dealt with," Nyota added.
It said it is continuing to asses opportunities outside Ethiopia.
Nyota Minerals shares were down 32.2% at 0.0610 pence early Tuesday.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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