Thanks everyone for your replies, It does look like some neatsfoot came to the surface. In the last 24 hours it has faded a little. It all started when I was applying wax and heating it. I rubbed wax into the mouth of the sheath and I must have got a little to much heat in that area. I had the hair drier pointed directly into the mouth of the sheath. Its all making sense now. I need to be a little more careful.
Thanks again, John