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Tethyan Resources entered into an option agreement over the Suva Ruda project in September 2016 (see press release dated 27th September 2016), currently owned by a Serbian private company Deep Reseach d.o.o. According to the option agreement, Tethyan holds the option to purchase 100% of the project at any time during an 8 year period for a EURO 6 million cash payment provided that Tethyan achieves certain exploration and payment milestones (discussed further in the ‘Option Agreement’ tab).

Location Southern Serbia, 240km south of Belgrade
Ownership Tethyan holds an exclusive Option for 100% purchase from Deep Research d.o.o. (private Serbian company)
License Area 87km2
Primary Targets Porphyry copper-gold, high-sulphidation gold, lead-zinc-silver veins

Regional Setting

Situated in in the Vardar Metallogenic Belt, an extension of the renowned Trepca mining district, historically the Suva Ruda area has been mined for lead and zinc, beginning in Roman times as is evidenced by more than 130 pits, shafts and development drives, and more recently during the 20th Century as larger open pit operations; however little exploration for porphyry copper and gold has occurred. More recently the Tulare porphyry (Dundee Precious Metals: 523Mt @ 0.24% Cu & 0.23 g/t Au) and Skouries porphyry (Eldorado Gold: 568Mt @ 0.35% Cu & 0.47 g/t Au) deposits have been discovered in the same geological belt.

Local Geology and Previous Exploration

The Suva Ruda exploration license covers Jurassic serpentinite and Cretaceous andesitic volcanics intruded by Tertiary dacite stocks. There are two well-defined targets within the Suva Ruda exploration license:

  • High-grade lead and zinc veins such as those mined historically and those on the periphery of the Rudnitza porphyry; and
  • A well-defined porphyry dacite stock with significant copper and gold mineralisation, named the ‘Rudnitza’ porphyry.

Phelps Dodge located the Rudnitza porphyry stock in 2004 and drilled 7 widely spaced drill holes over an area of 1.2 kilometers by 0.8 kilometers. The holes were centred on a porphyry stock with outcropping quartz stockwork occurring over an area 500 meters by 450 meters surrounded by more widely spread phyllic and advanced argillic alteration with massive silica and alunite occurring over a broader area. Three of the drill holes were drilled into the quartz stockwork and underlying potassic core, the other 4 holes were drilled on the periphery of the stock into phyllic alteration. Generally the holes were drilled to depths between 170 and 300 meters and did not test the porphyry at depth. The 3 holes drilled into the potassic core all intersected substantial mineralisation, see table 1, including drill hole PDRC 04-03 which intersected 144 meters @ 0.4% copper, 0.4 g/t gold from 100 meters and ended still in mineralisation. It should be noted that the Rudnitza porphyry outcrops as a hill which reaches up to an elevation 200 meters higher than the surrounding plain. Hence drill hole PDRC 04-03 only just intercepted the region defined by surrounding ground level, and hence any strip required in a future mining scenario will be substantially reduced.

The surface expression of the Rudnitza porphyry and initial drilling indicates that the exposed surface represents the upper portions of the mineralised system, as evidenced by an overlying, possibly high sulphidation, gold system in which drill hole PDRC 04-03 intercepted 100 meters of massive silica containing 0.4 g/t gold from surface. Thus potential exists for a heap-leach operation mining this oxide gold zone from above the main copper-gold porphyry below.

Drill Hole End Depth (m) From (m) To (m) Interval (m) Copper (%) Gold (g/t)
PDRC 04-01 171 5 170 165 0.2 0.2
PDRC 04-03 244 0 100 100 0.4
  100 244 144 0.4 0.4
PDRC 04-07 345 244 332 88 0.3 0.4

Table 1. Selected drill hole results from the Rudnitza porphyry, note that drill holes PDRC 04-01 and PDRC 04-03 drilled through a low grade gold mineralised silica cap from approximately 0 to 100 meters.

In addition to the porphyry type mineralisation identified, drill hole PDRC 04-04 which was drilled to the west of the porphyry intercepted significant lead-zinc mineralisation as shown in Table 2 below.

Drill Hole End Depth (m) From (m) To (m) Interval (m) Lead (%) Zinc (%) Silver (g/t)
PDRC 04-04 550 161 165 4 1.6 2.7 16
285 293 8 7.1 3.4 108
326 330 4 2.5 0.8 43
370 374 4 9.2 11.2 229
430 432 2 7.8 1.0 204
504 508 4 11.0 0.2 154

Table 2. Drill hole PDRC 04-04 results showing significant lead-zinc mineralisation existing at the periphery of the Rudnitza porphyry.

Local Setting

Suva Ruda occurs within an historical mining district and has excellent infrastructure. The town of Raska located near-by hosts a potential workforce and the area has abundant water and grid electricity. The area is also serviced by a railway with connections to ports located on the Adriatic Coast. In addition, the Serbian Government has declared porphyry copper-gold projects to have a high priority for development and any potential project is likely to receive strong governmental support.

Figures

Option Agreement

Under the terms of the Agreement Tethyan is entitled to purchase 100% of the License or Deep Research (at Tethyan’s discretion) for a cash payment of €6 million, plus a percentage of the eventual capital cost of building the mine (details set out below), at any time during the total duration of the License and any future extensions of the License (a minimum of 7 years from the date of the Agreement).

The decision whether or not to exercise the Option during this period is at the sole discretion of the Company. The percentage of the capital costs payable by Tethyan in relation to the building of the mine (the “CAPEX”), which will only become clear once a bankable feasibility study has been conducted over the License, will only become payable if Tethyan exercises the Option, secures the necessary financing and proceeds with the building of the mine. The percentage of these costs due to the shareholders of Deep Research will be calculated as follows:

  • 4% of CAPEX up to €200m;
  • 2% of CAPEX between €200 – 500m;
  • 1% of CAPEX in excess of €500m.

Pursuant to the terms of the Agreement, and in order to retain the Option, the Company will arrange to complete, at its sole discretion, the following work program on the License:

  • a minimum of 2,000m drilling before 28 December 2016;
  • a minimum of 5,000m additional drilling before 28 December 2018;
  • complete a preliminary economic assessment before the sixth anniversary of the date of the Agreement;
  • complete an economic feasibility study before the seventh anniversary of the Agreement.

The Company estimate that the full cost of the drilling programme to be completed by 28 December 2018 will be less than £500,000. The drilling programme can be stopped at any stage at the Company’s sole discretion. The purpose of the drilling programme is to assess the prospectivity of the License so that Tethyan can make an informed decision with regards to the exercise of the Option.

In order to satisfy the first requirement under the work programme Tethyan intends to start work immediately with respect to drilling 2,000 meters by 28 December 2016. Discussions have commenced with local drill contractors who have drill rigs standing-by to commence work. Land access is currently being assessed in order to allow for drilling during the next 3 years,

The Company will also make certain milestone payments, at its sole discretion, in order to retain the Option:

  • €100,000 by 1 March 2017;
  • €100,000 on each anniversary of the signing the Agreement up until the third year.

While the Company is pleased to have secured this Option there can be no guarantee that it will ever exercise the Option and take ownership of the License. The Company will also need to consider its regulatory obligations in respect of the AIM Rules for Companies at that time in the event it exercises the Option.

Tethyan Resources has executed an option agreement with Rockstone Group LLC (“RGS”) pursuant to which Tethyan can earn up to an 80% interest in the Gokcanica project licenses in Southern Serbia (“the Gokcanica Permits”).

The Gokcanica Permits consist of two adjoining permits with a combined area of 110km² located in southern Serbia, 5 km to the north of the town Josaniska Banja. The area is located within the 500 km² Rashka ore field. A Jurassic ophiolite sequence intruded and overlain by Tertiary andesitic volcanics and intermediate stocks covers the area. The board of Tethyan believes that good potential for porphyry and epithermal style mineralisation as well as deeper-level replacement base metal and gold deposits exists throughout the license.

Mining in the Gokcanica licence area dates back beyond contemporary records and is evidenced by many pits and shafts. Exploration from the 1970s focused on lead-zinc-silver veins. Euromax Resources Limited (“Euromax”) conducted exploration in the area from 2006 to 2008. Following this work a major copper company explored the area for porphyry copper mineralisation in 2014-2015.

Euromax completed a detailed mapping and soil geochemistry program over a 6 km long zone of phyllic to argillic altered andesite volcanics and intrusives with abundant ancient mine workings. Drilling at the northern end of this trend by Euromax intersected multiple gossan and massive sulphide intervals, one of which reported 12.4 metres at 1.5% copper, 1.4% lead, 0.8% zinc, 62 g/t silver and 1.6 g/t gold. This program also defined a 3 km by 2 km magmatic complex at the southern end of the trend which remains undrilled.

A major copper company followed-up this work on the large zone of phyllic to argillic alteration, which measures 6 km by 3 km wide, indicating the potential for a porphyry copper gold deposit. They identified a coincident Cu-Mo soil anomaly within this alteration. However after drilling 6 holes the major copper company did not locate the source of this Cu-Mo anomalism. In addition the phyllic alteration occurs within altered andesites immediately above an unconformity contact with the ophiolite basement. This is a classic contact zone for porphyry copper deposits to form, for example the Resk Project (700 million ton @ 0.7 % Cu, 0.3 g/t Au) in Hungary forms at an unconformity contact between basement and overlying altered volcanics.

More recent prospecting work has located a number of arsenopyrite and pyrite rich veins which outcrop over a 200 meter strike length, can be up to 20 meters wide, and with individual assays up to 67 g/t gold. Detailed channel sampling has not been completed on this zone and it has not been drilled. Tethyan plans to focus initial exploration on these zones for a potential high grade gold target. Exploration will consist of geological mapping, rock chip sampling, trenching and drilling.

With large areas of alteration and many undrilled gossan zones rich in precious metals we feel confident in moving the project forward to the drill stage and with the aim of discovering a significant gold deposit. Much of the previous work has been targeted at base metal veins and porphyry copper deposits and may therefore have overlooked the potential for significant gold mineralisation. The district as a whole is very under explored and previous exploration has mainly focussed on base metals and the Tethyan Resources management therefore feels that we can bring our gold exploration expertise to bear.

Currently Tethyan Resources is developing a regional deposit targeting framework to focus exploration on highly prospective and under explored areas of the Balkans region of Eastern Europe

The Balkans region is under explored as it has seen relatively little serious exploration since the 1980s when the former Soviet Union ceased geological exploration. Since this time technology has improved in both exploration and mining techniques which allows for exploration under cover and development of lower grade deposits previously considered uneconomic and of little interest.

The region is highly mineralised and proven to host world class deposits, importantly opportunity still exists to acquire exploration tenements over and around known mineralisation, a setting proven to be favourable for new discoveries year on year. Currently Tethyan Resources is developing a regional deposit targeting framework to focus exploration on the most prospective and under explored areas of the Balkans and is actively reviewing project opportunities in Serbia and Macedonia.

Conducting exploration in the Balkans where there is such a rich history of mining is an exciting task.

Southern and Central Europe has one of the oldest mining industry in the world. There is evidence of copper mining by the Cretians since the 5th millennium BC in Serbia, Romania and Bulgaria. From the 2d century AD, the Romans obtained gold from the Balkans, in particular in the Carpathian. Two of the oldest copper mines in Europe come from the Balkans.

The main one in Serbia is the Rudna Glava belonging to the Vinča culture. The discovery of these mines have changed the thinking of the Neolithic and the Chalcolithic periods of European history by pushing back European usage of copper by a thousand years or more.

Modern, industrialised mining was started by the Austrians and by the 20th Century the copper mines of Bor in Serbia and the Trepca lead complex in what is now Kosovo were among the largest operations of their kind in Europe. However this proud tradition of mining was dramatically interrupted by the breakup of Yugoslavia, the ensuing civil war and international economic sanctions. Today there is a momentum to carry exploration in this promising region.

SUVA RUDA PROJECT

Tethyan Resources entered into an option agreement over the Suva Ruda project in September 2016 (see press release dated 27th September 2016), currently owned by a Serbian private company Deep Reseach d.o.o. According to the option agreement, Tethyan holds the option to purchase 100% of the project at any time during an 8 year period for a EURO 6 million cash payment provided that Tethyan achieves certain exploration and payment milestones (discussed further in the ‘Option Agreement’ tab).

Location Southern Serbia, 240km south of Belgrade
Ownership Tethyan holds an exclusive Option for 100% purchase from Deep Research d.o.o. (private Serbian company)
License Area 87km2
Primary Targets Porphyry copper-gold, high-sulphidation gold, lead-zinc-silver veins

Regional Setting

Situated in in the Vardar Metallogenic Belt, an extension of the renowned Trepca mining district, historically the Suva Ruda area has been mined for lead and zinc, beginning in Roman times as is evidenced by more than 130 pits, shafts and development drives, and more recently during the 20th Century as larger open pit operations; however little exploration for porphyry copper and gold has occurred. More recently the Tulare porphyry (Dundee Precious Metals: 523Mt @ 0.24% Cu & 0.23 g/t Au) and Skouries porphyry (Eldorado Gold: 568Mt @ 0.35% Cu & 0.47 g/t Au) deposits have been discovered in the same geological belt.

Local Geology and Previous Exploration

The Suva Ruda exploration license covers Jurassic serpentinite and Cretaceous andesitic volcanics intruded by Tertiary dacite stocks. There are two well-defined targets within the Suva Ruda exploration license:

  • High-grade lead and zinc veins such as those mined historically and those on the periphery of the Rudnitza porphyry; and
  • A well-defined porphyry dacite stock with significant copper and gold mineralisation, named the ‘Rudnitza’ porphyry.

Phelps Dodge located the Rudnitza porphyry stock in 2004 and drilled 7 widely spaced drill holes over an area of 1.2 kilometers by 0.8 kilometers. The holes were centred on a porphyry stock with outcropping quartz stockwork occurring over an area 500 meters by 450 meters surrounded by more widely spread phyllic and advanced argillic alteration with massive silica and alunite occurring over a broader area. Three of the drill holes were drilled into the quartz stockwork and underlying potassic core, the other 4 holes were drilled on the periphery of the stock into phyllic alteration. Generally the holes were drilled to depths between 170 and 300 meters and did not test the porphyry at depth. The 3 holes drilled into the potassic core all intersected substantial mineralisation, see table 1, including drill hole PDRC 04-03 which intersected 144 meters @ 0.4% copper, 0.4 g/t gold from 100 meters and ended still in mineralisation. It should be noted that the Rudnitza porphyry outcrops as a hill which reaches up to an elevation 200 meters higher than the surrounding plain. Hence drill hole PDRC 04-03 only just intercepted the region defined by surrounding ground level, and hence any strip required in a future mining scenario will be substantially reduced.

The surface expression of the Rudnitza porphyry and initial drilling indicates that the exposed surface represents the upper portions of the mineralised system, as evidenced by an overlying, possibly high sulphidation, gold system in which drill hole PDRC 04-03 intercepted 100 meters of massive silica containing 0.4 g/t gold from surface. Thus potential exists for a heap-leach operation mining this oxide gold zone from above the main copper-gold porphyry below.

Drill Hole End Depth (m) From (m) To (m) Interval (m) Copper (%) Gold (g/t)
PDRC 04-01 171 5 170 165 0.2 0.2
PDRC 04-03 244 0 100 100 0.4
  100 244 144 0.4 0.4
PDRC 04-07 345 244 332 88 0.3 0.4

Table 1. Selected drill hole results from the Rudnitza porphyry, note that drill holes PDRC 04-01 and PDRC 04-03 drilled through a low grade gold mineralised silica cap from approximately 0 to 100 meters.

In addition to the porphyry type mineralisation identified, drill hole PDRC 04-04 which was drilled to the west of the porphyry intercepted significant lead-zinc mineralisation as shown in Table 2 below.

Drill Hole End Depth (m) From (m) To (m) Interval (m) Lead (%) Zinc (%) Silver (g/t)
PDRC 04-04 550 161 165 4 1.6 2.7 16
285 293 8 7.1 3.4 108
326 330 4 2.5 0.8 43
370 374 4 9.2 11.2 229
430 432 2 7.8 1.0 204
504 508 4 11.0 0.2 154

Table 2. Drill hole PDRC 04-04 results showing significant lead-zinc mineralisation existing at the periphery of the Rudnitza porphyry.

Local Setting

Suva Ruda occurs within an historical mining district and has excellent infrastructure. The town of Raska located near-by hosts a potential workforce and the area has abundant water and grid electricity. The area is also serviced by a railway with connections to ports located on the Adriatic Coast. In addition, the Serbian Government has declared porphyry copper-gold projects to have a high priority for development and any potential project is likely to receive strong governmental support.

Figures

Option Agreement

Under the terms of the Agreement Tethyan is entitled to purchase 100% of the License or Deep Research (at Tethyan’s discretion) for a cash payment of €6 million, plus a percentage of the eventual capital cost of building the mine (details set out below), at any time during the total duration of the License and any future extensions of the License (a minimum of 7 years from the date of the Agreement).

The decision whether or not to exercise the Option during this period is at the sole discretion of the Company. The percentage of the capital costs payable by Tethyan in relation to the building of the mine (the “CAPEX”), which will only become clear once a bankable feasibility study has been conducted over the License, will only become payable if Tethyan exercises the Option, secures the necessary financing and proceeds with the building of the mine. The percentage of these costs due to the shareholders of Deep Research will be calculated as follows:

  • 4% of CAPEX up to €200m;
  • 2% of CAPEX between €200 – 500m;
  • 1% of CAPEX in excess of €500m.

Pursuant to the terms of the Agreement, and in order to retain the Option, the Company will arrange to complete, at its sole discretion, the following work program on the License:

  • a minimum of 2,000m drilling before 28 December 2016;
  • a minimum of 5,000m additional drilling before 28 December 2018;
  • complete a preliminary economic assessment before the sixth anniversary of the date of the Agreement;
  • complete an economic feasibility study before the seventh anniversary of the Agreement.

The Company estimate that the full cost of the drilling programme to be completed by 28 December 2018 will be less than £500,000. The drilling programme can be stopped at any stage at the Company’s sole discretion. The purpose of the drilling programme is to assess the prospectivity of the License so that Tethyan can make an informed decision with regards to the exercise of the Option.

In order to satisfy the first requirement under the work programme Tethyan intends to start work immediately with respect to drilling 2,000 meters by 28 December 2016. Discussions have commenced with local drill contractors who have drill rigs standing-by to commence work. Land access is currently being assessed in order to allow for drilling during the next 3 years,

The Company will also make certain milestone payments, at its sole discretion, in order to retain the Option:

  • €100,000 by 1 March 2017;
  • €100,000 on each anniversary of the signing the Agreement up until the third year.

While the Company is pleased to have secured this Option there can be no guarantee that it will ever exercise the Option and take ownership of the License. The Company will also need to consider its regulatory obligations in respect of the AIM Rules for Companies at that time in the event it exercises the Option.

GOKCANICA PROJECT

Tethyan Resources has executed an option agreement with Rockstone Group LLC (“RGS”) pursuant to which Tethyan can earn up to an 80% interest in the Gokcanica project licenses in Southern Serbia (“the Gokcanica Permits”).

The Gokcanica Permits consist of two adjoining permits with a combined area of 110km² located in southern Serbia, 5 km to the north of the town Josaniska Banja. The area is located within the 500 km² Rashka ore field. A Jurassic ophiolite sequence intruded and overlain by Tertiary andesitic volcanics and intermediate stocks covers the area. The board of Tethyan believes that good potential for porphyry and epithermal style mineralisation as well as deeper-level replacement base metal and gold deposits exists throughout the license.

Mining in the Gokcanica licence area dates back beyond contemporary records and is evidenced by many pits and shafts. Exploration from the 1970s focused on lead-zinc-silver veins. Euromax Resources Limited (“Euromax”) conducted exploration in the area from 2006 to 2008. Following this work a major copper company explored the area for porphyry copper mineralisation in 2014-2015.

Euromax completed a detailed mapping and soil geochemistry program over a 6 km long zone of phyllic to argillic altered andesite volcanics and intrusives with abundant ancient mine workings. Drilling at the northern end of this trend by Euromax intersected multiple gossan and massive sulphide intervals, one of which reported 12.4 metres at 1.5% copper, 1.4% lead, 0.8% zinc, 62 g/t silver and 1.6 g/t gold. This program also defined a 3 km by 2 km magmatic complex at the southern end of the trend which remains undrilled.

A major copper company followed-up this work on the large zone of phyllic to argillic alteration, which measures 6 km by 3 km wide, indicating the potential for a porphyry copper gold deposit. They identified a coincident Cu-Mo soil anomaly within this alteration. However after drilling 6 holes the major copper company did not locate the source of this Cu-Mo anomalism. In addition the phyllic alteration occurs within altered andesites immediately above an unconformity contact with the ophiolite basement. This is a classic contact zone for porphyry copper deposits to form, for example the Resk Project (700 million ton @ 0.7 % Cu, 0.3 g/t Au) in Hungary forms at an unconformity contact between basement and overlying altered volcanics.

More recent prospecting work has located a number of arsenopyrite and pyrite rich veins which outcrop over a 200 meter strike length, can be up to 20 meters wide, and with individual assays up to 67 g/t gold. Detailed channel sampling has not been completed on this zone and it has not been drilled. Tethyan plans to focus initial exploration on these zones for a potential high grade gold target. Exploration will consist of geological mapping, rock chip sampling, trenching and drilling.

With large areas of alteration and many undrilled gossan zones rich in precious metals we feel confident in moving the project forward to the drill stage and with the aim of discovering a significant gold deposit. Much of the previous work has been targeted at base metal veins and porphyry copper deposits and may therefore have overlooked the potential for significant gold mineralisation. The district as a whole is very under explored and previous exploration has mainly focussed on base metals and the Tethyan Resources management therefore feels that we can bring our gold exploration expertise to bear.

REGIONAL EXPLORATION

Currently Tethyan Resources is developing a regional deposit targeting framework to focus exploration on highly prospective and under explored areas of the Balkans region of Eastern Europe

The Balkans region is under explored as it has seen relatively little serious exploration since the 1980s when the former Soviet Union ceased geological exploration. Since this time technology has improved in both exploration and mining techniques which allows for exploration under cover and development of lower grade deposits previously considered uneconomic and of little interest.

The region is highly mineralised and proven to host world class deposits, importantly opportunity still exists to acquire exploration tenements over and around known mineralisation, a setting proven to be favourable for new discoveries year on year. Currently Tethyan Resources is developing a regional deposit targeting framework to focus exploration on the most prospective and under explored areas of the Balkans and is actively reviewing project opportunities in Serbia and Macedonia.

Conducting exploration in the Balkans where there is such a rich history of mining is an exciting task.

Southern and Central Europe has one of the oldest mining industry in the world. There is evidence of copper mining by the Cretians since the 5th millennium BC in Serbia, Romania and Bulgaria. From the 2d century AD, the Romans obtained gold from the Balkans, in particular in the Carpathian. Two of the oldest copper mines in Europe come from the Balkans.

The main one in Serbia is the Rudna Glava belonging to the Vinča culture. The discovery of these mines have changed the thinking of the Neolithic and the Chalcolithic periods of European history by pushing back European usage of copper by a thousand years or more.

Modern, industrialised mining was started by the Austrians and by the 20th Century the copper mines of Bor in Serbia and the Trepca lead complex in what is now Kosovo were among the largest operations of their kind in Europe. However this proud tradition of mining was dramatically interrupted by the breakup of Yugoslavia, the ensuing civil war and international economic sanctions. Today there is a momentum to carry exploration in this promising region.