Sheba Exploration (UK) plc
LSE : SHE

December 08, 2010 02:00 ET

ISSUE OF AN EXCLUSIVE EXPLORATION LICENCE FOR GOLD AND BASE METALS

                                                                              8 December2010
                                                                        GB00B02WHQ80/GBP/PLUS-exn


                                    SHEBA EXPLORATION (UK) PLC
                                    ("Sheba" or the "Company")

                ISSUE OF AN EXCLUSIVE EXPLORATION LICENCE FOR GOLD AND BASE METALS
                                                 
The  Directors  of Sheba Exploration (UK) Plc are pleased to announce the issue  of  an  exclusive
exploration licence (EEL) for gold and base metals covering approximately 110 square kilometres in
northern  Ethiopia.  The  licence  was issued on 3rd December, 2010  by  the  federal  government,
following a letter of grant dated 29th November, 2010. The licence is valid for an initial term of
three  years  and  thereafter may either be renewed for two years or be converted  into  a  mining
licence.  The  new  licence  is a consolidation of two pre-existing prospecting  licences,  namely
Finarwa  (71  square kilometres) and Winibo (39 square kilometres) on which significant  gold  and
copper  mineralization was identified by the Company in 2007-2009. Sheba's  interest  in  the  new
licence is 95%, with the remaining 5% being retained by the Ethiopian federal government as a free-
carried interest, in line with the terms of the Mining Proclamation of 2010.


A. FINARWA LICENCE

1.      Licence
The Finarwa EEL covers approximately 71 square kilometres and is located within the Southern Zone
of Tigray State in northern Ethiopia. The licence area is located approximately 110 kilometres to
the  southeast  of  Mekelle, where the Company has a base and where many support  facilities  are
available.  Access is by all-weather gravel roads.  A three-phase 1.2MW electric power  line  has
recently  been  extended to the village of Finarwa, which lies inside the licence  area.  Cutting
through  the  property on the south side is the Zamra River, which is perennial and has  adequate
water for any size of mining operation.

2.      Geology and Mineralization
The  dominant basement lithologies on the Finarwa EEL are metasediments comprising slate, quartz-
sericite-haematite  schist  and siliceous marble, intermediate metavolcanic  rocks,  granite  and
dolerite. North-north-east trending shear zones follow the principal foliation direction.

Sheba  has  identified a number of gold soil anomalies along a five kilometre long strike  length
that  is  open  in  both  directions.  Gold in bedrock has been found associated  with  siliceous
marbles and quartz/carbonate mylonite. The mylonite occupies a re-activated shear zone suggesting
that the gold target in the area will be late-stage fault/shear zones.

3.      Past Exploration
From  1995  to 1997, The Geological Survey of Ethiopia carried out a stream sediment survey  over
the  area  of the Finarwa EEL, taking approximately 150 samples.  Their samples were  panned  and
gold  grains  were counted in an attempt to quantify anomalous gold from the various  near-source
drainages.   Anomalies of over five grains of gold per sample were identified  in  at  least  six
samples  and  these were found to be associated with geochemical anomalies in  copper,  zinc  and
lead.

From  2007 to 2009, Sheba prospected the area with the aim of locating the bedrock source of  the
gold  and  base metal anomalies.  The area of the observed shear zones and some of  the  sediment
anomalies  was  traversed on one kilometre apart, east-west survey lines and  soil  samples  were
collected  every  100 metres together with selective rock grab samples. Of the 136  soil  samples
taken,  43  were found to be anomalous in gold (>50ppb) with 14 exceeding 100 parts  per  billion
gold,  with a maximum value of 320 parts per billion gold.  Rock sample results include 0.5 grams
of  gold  per tonne (with 423 parts per million copper) from siliceous marble and 3.65  grams  of
gold  per  tonne (with 468 parts per million copper) from mylonitic quartz-carbonate  schist.   A
sample of quartz with chalcocite returned 3.35% copper.  Several other rock samples had anomalous
levels gold.

4.      Potential
Sheba  believes  the  Finarwa  EEL  to be an excellent gold exploration  target,  given  (a)  the
intensive and widespread gold panning being carried out by local people on the licence  area  (b)
the  high incidence of gold anomalies discovered in soil and rock samples (c) the large area  (at
least  10  square kilometres) from which anomalies are currently being reported and  which  could
extend  further. The discovery of primary gold in a shear zone containing quartz-carbonate schist
suggests  as  a working model that hydrothermal gold was precipitated in shear zones by  reaction
with  carbonate-rich and possibly also graphite-rich rocks in a similar setting to  the  Navachab
gold mine in Namibia.

5.      Work programme
Sheba  has  a  work programme for the Finarwa EEL over the next 12 months that  will  consist  of
geological  mapping,  soil,  rock grab and channel sampling.  The main  aim  of  the  first  year
exploration is to locate the primary source of the gold which is being extracted by local  people
from  river  sediments in the southeast portion of the licence area and to accurately define  the
extent of the gold mineralised area through close spaced soil sampling.  The secondary aim is  to
complete  ground  coverage  (mapping, soil and rock grab sampling)  over  the  remainder  of  the
property in search of related mineralization.


B. WINIBO LICENCE

1.      Licence
The  Winibo  EEL covers 39 square kilometres located within the Central Zone of Tigray  State  in
northern  Ethiopia. It is located approximately 40 kilometres by good gravel road eastwards  from
the town of Adwa, where the Company has a second operational base, and 70 kilometres east of Axum
airport.   A 3-phase 1.2MW electric power line is located approximately 1.5 kilometres  from  the
western  boundary  of the licence area, in the small village of Edaga Arbi.  Perennial  water  is
available  in  the  Tsadia River, which passes through the northern part of the  property,  where
there are suitable sites for dam construction.

2.      Geology and Mineralization
At  Winibo EEL, a zone of copper mineralization is associated with a redox boundary in a sequence
of  marine shales. The zone of copper mineralization has been traced for a strike length  of  4.5
kilometres and is located in beds several metres thick.  The copper minerals observed  are  fine-
grained  bornite  and  chalcopyrite  which  are disseminated  between  the  grains  of  the  host
metasediments.  Higher  grades  are  expected in a zone of secondary  enrichment  below  surface.
Associated red and white shales show signs of hydrothermal mineralization which follows fractures
along and across bedding planes. These planes and fractures contain silica, clay and pyrite, with
traces  of  copper,  zinc  and gold, suggesting prospectivity for volcanogenic  massive  sulphide
deposits  in the area. Subordinate acid to intermediate metavolcanics occur in sequence with  the
metasediments.

3.      Past exploration
No previous exploration has been recorded, other than by Sheba, which discovered the
mineralization in 2006.

Between 2007 and 2009, Sheba carried out a soil orientation traverse and rock grab sampling along
strike of the cupriferous shale.  41 rock samples were taken along the boundary between the  grey
and red shale for a distance of 4.5 kilometres. The average grade of grab samples from the copper
zone  is  0.6%  copper  and  3.5 grams of silver per tonne (average of  41  samples,  no  cut-off
applied).  The maximum apparent width of mineralization is 7 metres, the maximum copper grade  is
4.3%  and  maximum  silver grade is 17.5 grams per tonne. O.1 to 0.2 grams  per  tonne  gold  was
encountered in rock samples at the north end.

Gossan  pods within the red shale were found to be slightly anomalous in gold (with approximately
0.15 grams per tonne gold in one sample). The gossan and ferruginous rocks were also anomalous in
copper (having values between 111 and 403 parts per million copper).

4.      Potential
Based  on  the  strike length of 4.5 kilometres of copper mineralization and an  average  surface
grade  of  0.6% copper, thickness up to 7 metres and assuming that there will be an  increase  in
grade at depth, Sheba believes that there is sufficient copper mineralization in the licence area
to  warrant  further work.  The Company has also targeted the red and white shales and associated
metavolcanics  which  could  contain multi-metallic mineralization of  the  volcanogenic  massive
sulphide variety, given the anomalous copper, zinc and gold found in some samples.

5.      Work programme
Sheba  has a work programme for the Winibo Licence Area over the next 12 months that will consist
of  geological mapping, soil, rock grab and channel sampling and approximately 200 metres of  RAB
drilling  to  test  the copper mineralization in order to determine if a more detailed  follow-up
programme is warranted.


C. CONCLUSION

In  conclusion, within the next year the Company aims to delineate an extensive gold  mineralized
system  at  Finarwa  while at Winibo, the Company aims to define a small to medium  scale  bedded
copper drill target.


The  Directors  of  Sheba  Exploration  (UK)  Plc  are  responsible  for  the  contents  of  this
announcement.

Contact Details:
Sheba Exploration (UK) Plc
Richard Brooker
Tel: 00 353 87699 8401

Corporate Adviser:
St Helens Capital Partners LLP
Duncan Vasey/Mark Anwyl
Tel: 020 7368 6959

Contact Information

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