| Fri 1 Feb 2008, 13:32 | | AEA - African Eagle Resources plc - Mkushi Pre-Feasibility Study |
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AEA
AEA
AEA - African Eagle Resources plc - Mkushi Pre-Feasibility Study
New Drill Results
African Eagle Resources plc
(Incorporated in England and Wales, registered number 3912362)
AIM share code: AFE AIM ISIN: GB0003394813
JSE share code: AEA JSE ISIN: GB0003394813
AFRICAN EAGLE RESOURCES PLC
MKUSHI PRE-FEASIBILITY STUDY
NEW DRILL RESULTS
Highlights
- Study confirms that project is likely to be viable
- Projected total net pre-tax cash flow
US$215M
- Estimated NPV US$ 60-70M and IRR 35-40%
- Capital requirement US$ 65-70M
- Minimum mine life 8 years at 1.6 Mt per annum
- Open pit contract mining
- Mill and float plant delivering 96% recovery to a 23% copper concentrate
- Sale of concentrate to smelters in Zambia
- Definitive feasibility study in Q4 2008
- New drill results include 1.75% copper over 26m and 2.71% over 9m
African Eagle`s Managing Director Mark Parker said: "The results of this study
are very positive. We look forward to completion of the definitive feasibility
study leading to a final production decision later this year. Development of
Mkushi will be a turning point in African Eagle`s history".
CGA Mining Limited ("CGA"), African Eagle`s partner in the Mkushi joint venture,
has completed and delivered a study to assess the viability of developing an
open pit copper mine, processing facility and associated infrastructure at the
Mkushi Copper Project in Zambia (the "Study"). The Study was undertaken by
CGA`s own technical team supported by independent technical consultants when
required.
The study addressed the mining engineering, metallurgy, mineral processing,
tailings disposal, environmental impact, infrastructure, utilities and manpower
aspects of the project in some detail, and conducted a financial analysis
including tests of the sensitivity of the project to such variables as copper
price, input costs, ore grade, ore/waste ratio and mine life. Because the
drilling programme is still underway, no formal reserve or resource estimates
were finalised, but internal calculations based on the drill results to Q3 2007
provide confidence that sufficient resources exist to make the project payable.
The Study concluded that the project is likely to be economically viable, with
(some key conclusions and parameters here).
In addition, new results have been received from CGA`s continuing drilling
programme, which is directed towards defining the copper reserves and resources
for the definitive feasibility study due for completion in late 2008. The new
results include 1.75% copper over 26m and 2.71% over 9m from the Munshiwemba
Zone, 2.05% over 9m from G-Zone and 0.6% over 33m and 1.93% over 9m from H-Zone.
Financial Analysis
The preliminary financial analysis from the Study indicates that the project is
likely to be economically viable and the joint venture now intends to prepare a
detailed feasibility study, including a report by an independent competent
person, compliant to Canadian NI 43-101 standards. The estimated capital
requirements determined by the Study (based primarily on work carried out by
Metplant Engineering Services Pty Ltd) is US$61M, including a contingency of
U$5M. The estimated breakdown of the capital cost is set out below (US$M)
Mine 3.3
Infrastructure, buildings and Utilities 15.7
Process Plant 33.1
EPCM 8.8
TOTAL 60.9
As part of the planned detailed feasibility study we will prepare resource and
reserve statements in accordance with NI 43-101 (which at that time will then
demonstrate economic viability). In order to assess the merits of undertaking
the detailed feasibility study and preparation of the technical NI 43-101
reports, we have prepared an indicative in-house analysis as part of the Study,
which shows the development potential of the Mkushi Project. Based on current
standard industry costs and productivities, and results of drilling to date, the
indicative analysis set out in the Study suggest the potential for net project
cash flow (pre-tax) in the order of US$215M over an estimated life of 8 years
(assuming a copper price of US$6615/t or US$3.0/lb).
Tenure and Ownership
The copper deposits at Mkushi which form the basis of the Study lie within
Exploration Licence No. PL114. This is is surrounded by a larger Exploration
Licence, No. PL290. Both licences are held by Mkushi Copper Joint Venture
Company ("MCJV") which is a joint venture owned 51% by Seringa Mining Company
("Seringa", a wholly owned subsidiary of CGA) and 49% by Katanga Resources
Company ("Katanga", African Eagle`s wholly owned Zambian subsidiary).
Location
The project is located in north central Zambia, some 220 km northeast of the
capital city of Lusaka and 35 km east of the regional township of Kapiri Mposhi.
The site is easily accessible via a 20km gravel road leading from the sealed
highway from Lusaka through Kapiri Mposhi towards Tanzania. Plentiful water and
electrical power is available nearby. The site lies at an altitude of 1100m ASL.
Geology and exploration
The main Mkushi copper deposit is a shear hosted sub-vertical suite of
mineralisation extending over a distance of 2km, a length of 800m of which is
exposed in an existing open pit. The deposit is part of a broader mineralized
belt extending over more than 12km within the tenements. The deposit, hosted by
metamorphic gneissic rocks and associated with a suite of felsic intrusive
rocks, is structurally complex, with evidence of several generations of
faulting. The mineralisation pinches and swells along strike and to depth.
Copper mineralisation has been intersected to 300m vertical depth.
The project is located close to the southern end of the Zambian Copperbelt, but
the style of mineralisation is quite different to that of the stratabound
deposits for which the copper belt is well known.
The deposit was developed by an Italian mining company in the 1970s and in its 5
years of operation, produced 2.2million tonnes of ore at a grade of about 0.98%
copper. The ore was processed in a small concentration facility (part of which
still exists on site), to produce 78,000 tonne of copper concentrate at a grade
of 24%Cu. The concentrate was sold to smelters within Zambia.
Exploration drilling carried out by Katanga in the period prior to CGA`s
involvement totalled almost 10,000m. Subsequent to the formation of the joint
venture in May 2007 an additional 16,000 m of diamond drilling and 6,100 m of
reverse circulation ("RC") has been carried out. Katanga is currently exploring
the wider tenements on behalf of the Joint Venture, to identify additional
resources.
As part of the Study CGA combined all of the previous drilling and sampling data
into a digital database and reviewed the geological interpretation. The database
contains 81 drill holes, and 8,000 core and 3,600 RC chip sample assays.
CGA`s geological interpretation and orebody evaluation were conducted by an
experienced geologist with appropriate expertise in the copper sulphide
mineralisation and resources modelling.
Mining
CGA appointed Zambia-based African Mining Consultants (AMC) to review the
geotechnical conditions within the existing pit on site and develop design
parameters on which to base the preliminary open pit design. The Australian
Company AMC Consultants (AMCC), with involvement from CGA and Seringa, carried
out an optimization of the in-house geological model and developed a preliminary
open pit proposal.
AMC advise that the pit slopes could be designed with a final overall angle of
up to 70 degrees, based on tests on drill core.
Review of hydrogeological records and recent observations made since the
existing pit was dewatered, suggests that the mine will not make significant
water.
CGA has assumed an annual production rate of 1.6Mt per annum with an 18 month
pre-production period. Mining would probably progress from the north to the
south along the strike of the deposit.
CGA plan to utilize a mining contractor, operating 60t haul trucks and 100t
excavators, on a two shift per day basis, six days a week. Local labour would be
used extensively, with the mining contractors training local operators.
Indicative costs, based on the preliminary pit designs, have been obtained from
Zambian South African and Australian contractors.
Metallurgy
CGA commissioned AMMTEC Laboratories in Perth to conduct a metallurgical test
programme on 196kg of sample, which was made up by quartering core from a total
of 12 diamond drill holes, representing three depth zones and covering the
entire mineralized zone. A consultant metallurgist with 40 years experience in
Australia and overseas oversaw the collection of appropriate drill core samples
and supervised the test programme.
The results of the programme indicate a potential 96% recovery of copper using
conventional copper sulphide flotation technology, yielding a concentrate
containing 28% copper. The samples tested, which are believed to be
representative, do not have significant levels of any onerous minerals and the
concentrate is therefore unlikely to be liable to any smelter penalties.
Ore Processing
Metplant Engineering Pty Ltd, which has relevant experience in sulphide
developments, was commissioned to design and cost the process plant. The
facility proposed by Metplant will comprise primary crushing followed by single
stage autogenous milling and a standard flotation circuit followed by pressure
filter drying, to recover a concentrate from the run-of-mine ore. The
concentrate will be trucked about 200km to nearby smelters in Zambia for sale.
Tailings Disposal
D. Cooper and Associates planned and supervised the tailings disposal
investigation and testwork. Process plant tailings would be sent to an
appropriately designed and constructed impoundment located nearby to the
processing facility.
The proposed tailings dam is designed to allow surplus water to be recovered and
returned for use in the process plant.
Environmental Impact Assessment
CGA commissioned AMC to carry out a baseline study and to produce an
environmental brief setting out the guidelines for a full environmental impact
assessment to be conducted as part of the feasibility study. The investigation
did not discover any significant issues that may affect any development at the
project area. The existing tailings dump is eroding and requires remedial
action, but CGA has received confirmation from the regulatory body that the
previous operators, not the current joint venture, are responsible for any
remediation. CGA is considering enclosing the existing tailings within a new
development so as to mitigate any possible remedial action.
Infrastructure and Utilities
Process water can be abstracted either directly from the nearby Lumsemfwa River
or from a dam to be constructed on the Lumsemfwa or one of its tributaries. A
final decision will be made as part of the feasibility study.
Potable water could be sourced from the nearby river and treated to an
acceptable standard.
Electrical power can be sourced from either an existing National Grid power
line, located 300m north of the planned open pit or from the nearby Lumsemfwa
hydrostation. Power in Zambia is presently charged at US$0.34 per kW.
It is proposed to upgrade the existing gravel road to allow for all year round
access of people and materials.
Domestic suppliers of consumables, presently supplying the requirements of the
Zambian Copperbelt, would likely be contracted to deliver into appropriately
designed and constructed buildings established onsite at Mkushi.
Management
It is planned for experienced expatriate senior management to supervise the
Zambian operational staff on site.
Future Exploration
Katanga as the manager and operator of the exploration activities outside of the
immediate project (core) area at Mkushi, has identified a number of prospective
zones with potential for discovery of additional copper deposits. These will be
investigated using either diamond drilling or RC drilling during the project
development phase.
New Drill Results
Prior to CGA`s involvement in the project, Katanga carried out almost 10,000m of
exploration drilling. Subsequently, CGA carried out an additional 16,000m of
diamond drilling and 6,100m of reverse circulation ("RC") drilling.
Significant assay results from the final quarter of 2007 are indicated in the
following table. The results are encouraging and have extended the resource
potential of the three principal mineralisation zones H, L and G Zones. The
promising results from L Zone, including 14m at 1.23%Cu and 9m at 1.93m from
MH080, highlight the potential of L zone at depth and are the target of ongoing
drilling. Additional copper mineralisation has been located in the hanging wall
to both L and H Zones and this will be further targeted in the ongoing drilling
programmes. The results from the Mtuga Prospect, southwest of the main deposit,
are of low order but warrant further geological assessment to assist in planning
of follow up exploration.
MKUSHI SIGNIFICANT RESULTS - >0.2% CU
HOLE PROSPECT EAST NORTH FROM TO WIDTH Cu % TYPE
NO
MH078 L ZONE 731093 8456896 126 129 3 1.31 DD
MH078 L ZONE 138 143 5 1.49 DD
MH078 L ZONE 209 222 13 0.52 DD
MH079 L ZONE 730960 8456737 114 118 4 0.56 DD
MH080 L ZONE 731096 8456828 54 58 4 0.23 DD
MH080 L ZONE 86 92 6 0.23 DD
MH080 L ZONE 111 133 22 0.46 DD
MH080 L ZONE 153 167 14 0.95 DD
MH080 L ZONE 177 181 4 0.84 DD
MH080 L ZONE 196 203 7 0.68 DD
MH080 L ZONE 206 217 11 0.42 DD
MH080 L ZONE 220 223 3 0.82 DD
MH080 L ZONE 229 243 14 1.23 DD
MH080 L ZONE 247 255 9 1.93 DD
MH080 L ZONE 257 276 19 0.36 DD
MH081 L ZONE 731024 8456822 104 107 3 0.49 DD
MH081 L ZONE 109 119 10 1.07 DD
MH081 L ZONE 137 146 9 0.36 DD
MH081 L ZONE 189 198 9 0.31 DD
MH081A L ZONE 731024 8456822 113 122 9 0.96 DD
MH081A L ZONE 131 136 5 0.29 DD
MH081A L ZONE 140 144 4 0.61 DD
MH081A L ZONE 194 197 3 0.56 DD
MH081A L ZONE 222 225 3 0.62 DD
MH081A L ZONE 249 258 9 1.08 DD
MH082 L ZONE 730979 8456760 117 119 2 2.75 DD
MH082 L ZONE 730979 8456760 130 133 3 0.82 DD
MH082 L ZONE 192 194 2 0.30 DD
MH082 H ZONE 248 251 3 0.28 DD
MH082 H ZONE 255 257 2 0.37 DD
MH083 H ZONE 731164 8456705 28 31 3 2.95 DD
MH083 H ZONE 38 40 2 0.41 DD
MH083 H ZONE 47 53 6 0.88 DD
MH083 H ZONE 64 66 2 2.10 DD
MH083 H ZONE 70 74 4 0.41 DD
MH083 H ZONE 85 86 1 1.61 DD
MH083 H ZONE 91 94 3 0.53 DD
MH083 H ZONE 189 192 3 0.45 DD
MH083 L ZONE 731164 8456705 200 204 4 0.29 DD
MH084 L ZONE 731050 8456855 112 115 3 0.76 DD
MH084 L ZONE 137 144 7 1.26 DD
MH084 L ZONE 206 207 1 3.95 DD
MH084 L ZONE 255 257 2 0.47 DD
MH085 H ZONE 731216 8456882 18 22 4 0.33 DD
MH085 H ZONE 25 30 5 1.03 DD
MH086 H ZONE 731214 8456885 13 32 19 0.34 DD
MH086 H ZONE 35 43 8 0.38 DD
MH086 H ZONE 49 54 5 0.23 DD
MH086 H ZONE 61 69 8 0.42 DD
MH086 H ZONE 72 104 33 0.60 DD
MH086 H ZONE 109 118 9 0.90 DD
MH086 H ZONE 168 170 2 0.72 DD
MH086 H ZONE 173 176 3 0.49 DD
MH086 H ZONE 219 227 8 0.85 DD
MH087 sth 730673 8456223 NSA RC
extension
MH088 sth 730641 8456264 NSA RC
extension
MH089 sth 730611 8456302 NSA RC
extension
MH090 sth 730580 8456340 NSA RC
extension
MH095 L ZONE 730993 8456862 70 72 2 0.70 DD
MH095 L ZONE 730993 8456862 75 76 1 0.73 DD
MH097 L ZONE 731101 8457026 51 53 2 0.39 DD
MMT005 MTUGA 728406 8454757 52 55 3 0.75 DD
MMT005 MTUGA 62 72 10 0.74 DD
MMU024 MUNSHIWEMBA 731649 8457730 NSA DD
MMU044 731726 8457430 NSA DD
MMU045 G ZONE 731543 8457094 14 21 7 0.32 DD
MMU045 G ZONE 56 59 3 0.42 DD
MMU045 G ZONE 63 77 14 0.64 DD
MMU045 G ZONE 79 94 15 0.41 DD
MMU046 G ZONE 7 12 5 1.45 DD
MMU047 G ZONE 731522 8457506 53 57 4 0.42 DD
MMU047 G ZONE 731522 8457506 87 96 9 2.05 DD
MMU047 G ZONE 103 109 6 0.98 DD
MMU047 G ZONE 131 140 9 0.48 DD
MMU047 G ZONE 146 149 3 0.41 DD
MMU048 MUNSHIWEMBA 731559 8457538 12 19 9 0.67 DD
MMU049 MUNSHIWEMBA 731582 8457578 34 38 4 0.98 DD
MMU050 MUNSHIWEMBA 731623 8457676 17 20 3 1.99 DD
MMU050 MUNSHIWEMBA 31 57 26 1.75 DD
MMU050 MUNSHIWEMBA 83 86 3 0.58 DD
MMU051 MUNSHIWEMBA 731596 8457631 48 57 9 2.71 DD
John Park
Chairman
African Eagle Resources plc
4thFebruary 2008
Qualified Person
The Study from which much of this report was abstracted was prepared under the
supervision of Mr Geoff.G.Jones, F.Aus.I.M.M.CP Mng, who is acting as the
Qualified Person for CGA Mr Jones is a fellow of the Australasian Institute of
Mining and Metallurgy (AusIMM), and a consultant to CGA.
Information of a technical nature in this report is based on information
compiled by, or under the supervision of, and approved by Mr Geoff G Jones and
Mr Simon Plunkett. Mr Plunkett is a Professional member of the Australian
Institute of Geoscientists and is a full-time employee of CGA. The drilling
results were assayed by Genalysis Laboratory Services Pty Ltd in Perth, Western
Australia.
Both Mr Jones and Mr Plunkett have sufficient experience relevant to the style
of mineralisation and type of deposit under consideration to be recognised as
Competent Persons as defined in the 2004 Edition of the `Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Resources`. Mr Jones
and Mr Plunkett consent to the inclusion in the report of the matters based on
their information in the form and context in which it appears.
Information in this report relating to exploration results is based on data
reviewed by Mr Christopher Davies BSc, MSc, DIC, FSEG, FAusIMM, Operations
Director for African Eagle, who is a Fellow of the Australasian Institute of
Mining and Metallurgy, has more than 26 years relevant experience in mineral
exploration and is a Qualified Person under AIM rules. Mr Davies consents to the
inclusion of the information in the form and context in which it appears.
For further information, see the Company`s web site www.africaneagle.co.uk or
contact one of the following:
Mark Parker
Managing Director
+44 20 7248 6059
+44 77 5640 6899
Ed Portman/ Leesa Peters
Conduit PR
+44 20 7429 6607 / +44 (0) 7733 635 01
James Duncan
Russell & Associates, Johannesburg
+ 27 11 8803924 / +27 82 8928052
About African Eagle
African Eagle is a diversified mineral exploration and development company
operating in eastern and central Africa. The Company`s principal advanced
projects are the Mkushi Copper Mines project in Zambia and the Miyabi gold
project in Tanzania, which are being fast-tracked towards production. The
Company also holds a large well-balanced portfolio of promising earlier stage
gold and base metal projects, including the Ndola copper project and the Eagle
Eye iron-oxide copper gold project.
Zambia, Tanzania and Mozambique, the sites of African Eagle`s projects, are all
countries which have highly prospective geology, relatively low aboveground
risks and track records of successful major investments in the metals and
minerals industries.
African Eagle specialises in project generation and exploration. To take its
discoveries into production, it seeks to sign up industry partners with records
of successful mine development. These joint ventures and, in time, the revenue
from advanced projects, will finance future exploration and new discoveries.
Technical terms
A glossary of technical terms used by African Eagle in this announcement and
other published material may be found at www.africaneagle.co.uk/african-eagle-
projects-glossary.html
Date: 01/02/2008 13:32:29 Produced by the JSE SENS Department.
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