| Fri 1 Feb 2008, 15:27 | | AEA - African Eagle Resources Plc - Positive Pre-Feasibility Study From |
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AEA
AEA
AEA - African Eagle Resources Plc - Positive Pre-Feasibility Study From
Mkushi Copper Project, Zambia And Latest Drill Results (Correction)
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
CORRECT VERSION OF ANNOUNCEMENT RELEASED EARLIER TODAY AT 13:32 ON SENS
POSITIVE PRE-FEASIBILITY STUDY FROM MKUSHI COPPER PROJECT, ZAMBIA
AND LATEST DRILL RESULTS
Highlights
- Pre-feasibility Study demonstrates viability of project
- Definitive Feasibility Study to be completed in Q4 this year
- Interim resource estimate of 10.7Mt at 1.11% copper
- Projected total net pre-tax cash flow
US$215M
- Estimated NPV US$ 60-70M and IRR 35-40%
- Capital requirement of US$65-70M
- Minimum mine life of 6 years at 1.6 Mt per annum
- Open pit contract mining
- Mill and float plant delivering 96% recovery to a 28% copper
concentrate
- New drill results include 1.75% copper over 26m and 2.71% over 9m
- Upside potential along strike, at depth and in surrounding area
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".
African Eagle Resources plc ("African Eagle", "AFE" or "the Company",
ticker AIM: AFE, AltX: AEA) today announces that its 49% owned Mkushi Copper
Joint Venture, has completed 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 the Joint Venture technical team supported by independent
technical consultants when required.
The study addressed the geological, 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, an interim resource
estimate of 10.7Mt at 1.11% copper was used for the Study, based on the
drill results to Q3 2007. This estimate was made internally by the Joint
Venture technical team and although not yet independently reviewed, provides
confidence that sufficient resources exist to make the project payable.
The Study concluded that the project is economically viable at current
prices and the Joint Venture is now committed to prepare a definitive
feasibility study, which will include an independently audited resource
report fully compliant to Canadian NI 43-101.
The premise of the Study was an open pit mine operated by contractors,
feeding 1.6Mt of ore per annum to a flotation plant delivering a 28% copper
concentrate. The estimated capital cost of the plant and infrastructure is
US$61M. On the basis of the interim resource estimate, the mine would have
a minimum life of 6 years. At the 2007 average copper price of US$3/lb, the
total net pre-tax cash flow would be around US$215M and the estimated NPV
and IRR, US$60-70M and 35-40% respectively, at 10% discount rate.
In addition to the Study, the Joint Venture has reported new results from
its 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
- 1.93% over 9m and 0.6% over 33m from H-Zone
Geological resource
Prior to establishment of the JV, AFE`s wholly owned Zambian operating
Company, Katanga Resources Limited, carried out almost 10,000m of
exploration drilling. Subsequently, the JV has carried out an additional
16,000m of diamond drilling and 6,100m of reverse circulation ("RC")
drilling, and combined all the drilling and sampling data into a digital
database.
Based on the results to mid-Q3 2007, the JV commissioned a geological
interpretation and evaluation of the orebody by an experienced geologist
with appropriate expertise in copper sulphide mineralisation and resources
modelling. The interim resource estimate made on this basis was 10.7Mt at
1.11% copper. Although this estimate was made internally by the JV and has
not yet been independently reviewed, it provides confidence that sufficient
resources exist to make the project economically viable. Drilling will
continue into Q2 2008 and as part of the definitive feasibility study, the
partners will prepare audited resource and reserve statements in accordance
with Canadian NI 43-101.
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.
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$5M. The breakdown of the capital cost estimate
is set out below.
US$M
Mine 3.3
Infrastructure, buildings and Utilities 15.7
Process Plant 33.1
EPCM 8.8
TOTAL 60.9
Based on these capital requirements, current standard industry costs and
productivity, the resource estimated from results of drilling to mid-Q3 2007
and assuming a copper price of US$3.0/lb, the indicative analysis set out in
the Study suggests that the net pre-tax cash flow from the project will be
of the order of US$215M over an estimated mine life of 6 years. On this
basis, at a discount rate of 10% and taking royalties and taxes into
account, the NPV would be US$ 60-70M and the IRR 35-40%.
Tenure and Ownership
The copper deposits at Mkushi which form the basis of the Study lie within
Exploration Licence No. PL114. This 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 history
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 2.2 million 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% copper. The concentrate was sold to smelters
within Zambia.
Exploration
Katanga as the manager and operator of the exploration activities outside
the area of the known resources 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.
Mining
The JV 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 the JV, 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.
The study 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.
The study contemplates the use of 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
The JV 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
The JV 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 the JV has received confirmation from the
regulatory body that the previous operators, not the current Joint Venture,
are responsible for any remediation. The JV 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.
Zambian Taxation
The Finance Minister of Zambia recently announced his intention to introduce
a new windfall tax regime for copper mines, scaled on the incremental copper
price from 25% for prices between $2.5 and $3/lb to 75% for prices above
$3.50/lb. He also announced a reduction in the depreciation allowance. The
proposed new tax regime will be included in the financial analysis for the
definitive feasibility study.
New Drill Results
Prior to the JV`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, 3km southwest of the main deposit, are of low order but warrant
further geological assessment to assist in planning of follow up
exploration.
SIGNIFICANT DIAMOND DRILL RESULTS
HOLE PROSPECT FROM WIDTH Cu %
NO
MH078 L ZONE 126 3 1.31
MH078 L ZONE 138 5 1.49
MH080 L ZONE 111 22 0.46
MH080 L ZONE 153 14 0.95
MH080 L ZONE 229 14 1.23
MH080 L ZONE 247 9 1.93
MH081 L ZONE 109 10 1.07
MH081A L ZONE 113 9 0.96
MH081A L ZONE 249 9 1.08
MH082 L ZONE 117 2 2.75
MH083 H ZONE 28 3 2.95
MH083 H ZONE 47 6 0.88
MH083 H ZONE 64 2 2.1
MH083 H ZONE 85 1 1.61
MH084 L ZONE 137 7 1.26
MH084 L ZONE 206 1 3.95
MH085 H ZONE 25 5 1.03
MH086 H ZONE 72 33 0.6
MH086 H ZONE 109 9 0.9
MH086 H ZONE 219 8 0.85
MMT005 MTUGA 62 10 0.74
MMU046 G ZONE 7 5 1.45
MMU047 G ZONE 87 9 2.05
MMU047 G ZONE 103 6 0.98
MMU049 MUNSHIWEMBA 34 4 0.98
MMU050 MUNSHIWEMBA 17 3 1.99
MMU050 MUNSHIWEMBA 31 26 1.75
MMU051 MUNSHIWEMBA 48 9 2.71
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 the JV Mr Jones is a fellow of the Australasian
Institute of Mining and Metallurgy (AusIMM), and a consultant to the JV
technical team.
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 the on site manager of the
project 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
Nicola Marrin
Seymour Pierce
+44 20 7107 8000
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 15:27:06 Produced by the JSE SENS Department.
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