| Tue 5 May 2009, 8:00 | | AEA - African Eagle Resources plc - Preliminary results for the year ended 31 |
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AEA
AEA
AEA - African Eagle Resources plc - Preliminary results for the year ended 31
December 2008
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: PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER
2008
5 May 2009
African Eagle Resources plc ("African Eagle" or "the Company", ticker AIM: AFE,
AltX: AEA) today announces its preliminary results for the year ended 31
December 2008. The Company`s annual consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards ("IFRS")
as adopted by the European Union. The information in this preliminary
announcement has been extracted from the audited financial statements for the
year ended 31 December 2008 and as such, does not contain all of the information
required to be disclosed in the financial statements prepared in accordance with
IFRS. The Company will publish its full Annual Report and Financial Statements
to shareholders later this month.
CHAIRMAN`S STATEMENT
Dear Shareholder
When I was writing to you a year ago, copper was trading at US$4/lb and nickel
was US$13/lb. I was looking forward to a positive feasibility study from Mkushi
and a resource statement from Mokambo. Dutwa was a gold exploration project in
the eastern Lake Victoria Goldfields and barely got a mention!
Today, copper is just starting to claw its way back from January`s low of
$1.30/lb and nickel from $4/lb. Mkushi is on hold while we seek additional
resources within the highly prospective zone surrounding the central area on
which we based the feasibility study, and Mokambo is no longer a priority
although we have increased our interest in the licence area in anticipation of a
future recognition of value. At Dutwa, however, we have made one of the most
significant base metal discoveries in East Africa in the last 50 years.
The cataclysmic period that resulted in the dramatic changes that we experienced
through 2008, in which metal prices and project viabilities plunged as a
function of markets that recoiled from risk, actual or perceived, was for the
most part, a crisis generated by factors and actions outside of the resources
world but one with major consequences for it as demand for metals and the values
placed on almost all resource companies were slashed.
As the crisis resolves itself, and it will, with the implementation of the G20
agenda and an eventual return to growth with the consequent pressure that will
bring to bear on the supply of resources, sanity will return to a sector that
needs explorers to provide for the future. There are going to be troughs and
peaks in market sentiment and metal prices but I believe that the first signs of
a recovery are already apparent and that we are in a better position than many
of our peers to both survive and emerge stronger into that future, with cash in
the bank, four JORC-compliant resources (and two pre-JORC resource estimates),
and the importance of the Dutwa discovery much clearer now.
Strategic Review
Because of the dramatic changes in our market, and because we did not know for
how long the hard times would last, we conducted a thorough review of our
priorities and strategy in the second half of 2008 and implemented a number of
outcomes of that review in the period prior to January 2009 when we announced
the most significant elements of the strategy we are now pursuing.
We also introduced a number of cost-cutting measures, including a reduction in
directors` remuneration, renegotiation of all active contracts and cuts in
general operating costs. For operational reasons we have not retrenched any of
our senior exploration staff, but we have placed our Mozambique operations and
most of our advanced projects of merit on care and maintenance. We are also
relinquishing many of our earliest stage projects.
Since the publication of our strategic review the board and I have been asked
why we opted for a course of action that placed a relatively new nickel project
discovery ahead of our other projects, some more advanced than Dutwa. In brief,
our review showed us that, for each dollar spent, Dutwa would give us the
greatest added value, and we therefore made the project our top priority.
Dutwa Nickel Project
In the 9 months since our discovery of the Dutwa nickel laterite we have
explored and drilled out a 31Mt nickel resource in Tanzania containing some
$3.5 billion dollars in gross nickel value with significant cobalt credits of
the order of $400M in value at current prices. We have conducted metallurgical
and mineralogical testing at Mintek`s South African laboratories to establish
that this resource is unique and likely to be able to be developed using
atmospheric leaching techniques. We have commissioned GRD Minproc to conduct a
scoping study to be completed in June 2009, to evaluate the economics and
potential processing methods to be used at Dutwa. As I write this we have just
concluded and signed an option and joint venture agreement over the adjacent
Ngasamo deposit which we anticipate will increase the global resource in the
Dutwa project area to some 50Mt.
We believe that the Dutwa project has advantages which are likely to make it
viable even at the current low nickel price.
* Acid consumption is lower than for any other published nickel laterite
worldwide
* Good nickel extraction by heap or tank acid leaching at atmospheric
pressure will result in capital costs an order of magnitude less than
comparably sized nickel laterites forced to use HPAL processing
* High silica, low iron, low magnesium chemistry, which promises good heap
or tank leach characteristics
* Favourable infrastructure, environmental setting and relatively easy mining
* Within the global resource of 31Mt at a grade of 1.1% nickel, there are
rich zones such as a drill intersection from surface of 57m at 2.57%
nickel including 15m at 6.91% nickel, and we believe the potential
exists for high-grading to improve early cash flow.
By June we will know the likelihood that the Dutwa project will go ahead and
the timeframe in which that can happen and that will place us in a strong
position to be able to develop a nickel project that can take advantage of the
expected upturn in demand and metal prices. We believe that we are fortunate to
be developing the project during a downturn, as it will force us to keep
capital and operating costs to a minimum, and to use realistic or pessimistic
projections of revenue. A project which can survive such stress-testing will
be highly profitable when prices recover.
Why a Nickel Laterite then?
Dutwa is a landmark in African Eagle`s history and for the cash we will spend to
conclude a scoping study there is simply no better or comparable addition to
internal value we could make by applying those funds to any of our other more
advanced projects.
Mkushi Copper Mines
At Mkushi our partners, CGA, completed the feasibility study in October at a
time that coincided with the bottom of the copper price and the peak of energy,
construction steel and consumables prices. We had drilled out what 6 months
previously would have been a viable open pit mining operation producing some
20,000 tonnes of contained copper per year for sale to local or regional
smelters. Had we any idea that the copper price would fall as drastically as it
did we would have delineated a larger resource, but at the time it would have
been poor use of capital to drill out significantly more than we did.
Mkushi is secure for the future with a 25 year Mining Licence issued and we are
working with CGA to modify the project`s parameters and increase copper
resources, which we have considerable scope to do, to bring the project back to
viability which even a relatively modest increase in the copper price would
assist.
Other Copper Projects
We made excellent progress during 2008 at Ndola and Mokambo generating a
number of drill ready targets at Ndola and receiving promising results
including 2.44% copper over 15m and 2.47% copper over 12m from our 3,000m
diamond drilling programme at Mokambo. Parallel development of multiple
exploration projects using our own funds, however, is no longer sustainable
in today`s climate. With Dutwa as our top priority for 2009, we are therefore
seeking partners to earn interests in our more advanced copper projects at
Mokambo, where we increased our interest to 87% at the end of 2008 and at
Ndola where we retain a 100% interest in the property.
Gold Projects
Since the implementation of our current strategy African Eagle`s geologists
and exploration teams have, particularly over recent months, focussed on
reviewing in detail the great wealth of exploration data that has been generated
from our gold projects in Tanzania.
This review enabled our geologists to identify a number of new targets at Miyabi
where I still expect that we will be able to increase the resource to 1M oz or
more from the current 520,000oz. In addition, we are currently estimating an
internal, non JORC compliant gold resource, at Igurubi, which we will announce
shortly.
Whist we have chosen not to direct our cash resources into our gold projects,
we have received a number of approaches, especially with respect to Miyabi and
Igurubi, to farm them out, vend them into new vehicles or even sell them
outright. We are currently examining several proposals.
Corporate
To our longstanding, and I suspect long suffering, shareholders for whom the
increasingly positive news from Dutwa has halted the decline in the share price,
I would say that we really appreciate your support and that we are as confident
as we can be in the quality of Dutwa and our other projects` ability to continue
delivering good news. Our inherent belief in African Eagle`s fundamentals - and
it`s almost a requirement in the resource business that you need to be an
optimist - has manifested itself in our own directors and senior staff being
significant buyers of African Eagle stock until the close period rules overtook
us. The fall in our share price until February, as well as mirroring the junior
mining sector as a whole, was amplified in our case by the ability to sell our
stock in the market as over the last nine months we have been in the top
quartile of AIM minerals companies for liquidity. Generally, this is a good
thing, but last year particularly, it allowed easy sales by distressed funds
which needed to cover redemptions and debt repayments. This was painful, but
we have emerged stronger, with a bigger free float and a strong base of private
investors with no dominant shareholders.
We perceive potentially good news for shareholders from a revival in interest
in the AIM mining sector and the creation of new resource funds. We also
believe that the fundamentals of metals supply and demand remain broadly
positive and prices will improve in the longer term. The future will belong
to companies which survive the present downturn and that have sound assets with
low production costs. We believe that Dutwa will place us in this category.
With many others in the resources business I`ve learned over time and
particularly over the past 12 months that foresight is not one of my long suits
so I`m not going to list what I think will be our achievements in 2009 as
confidently as I did last year. I would emphasise, however, that I continue to
look forward to a successful future for the Company, for Dutwa and for our
other key projects.
John Park
Chairman
30 April 2009
Consolidated Income Statement For The Year Ended 31 December 2008
Year to 31 Year to 31
December December
2008 2007
Note
GBP GBP
Depreciation expense (86,405) (83,023)
Employee benefits expense (979,613) (622,395)
Impairment of deferred exploration expenditure 3 (4,442,563) (131,668)
Impairment of goodwill (103,188) (3,000)
Other expenses (462,229) (531,542)
Operating loss (6,073,998) (1,371,628)
Finance costs:
Bank interest receivable 228,856 216,623
Foreign exchange gain/(loss) 363,183 28,137
Loss before tax (5,481,959) (1,126,868)
Income tax expense - -
Loss for the year (5,481,959) (1,126,868)
Loss per share:
Basic loss per share from total and continuing 1 (2.6p) (0.7p)
operations
Diluted loss per share from total and 1 (2.6p) (0.7p)
continuing operations
Headline loss per share from total and 1 (1.0p) (0.6p)
continuing operations
Diluted headline loss per share from total and 1 (1.0p) (0.6p)
continuing operations
All operations are continuing.
Consolidated Balance Sheet For The Year Ended 31 December 2008
Year to Year to
31 31
December December
Note 2008 2007
GBP GBP
ASSETS
Non-current assets
Property, plant and equipment 122,246 156,337
Goodwill 2 - 103,188
Available for sale investments 1,967 6,462
Investment in associates 2,123,371 1,809,901
Investment in joint ventures 35,293 -
Deferred exploration costs 2 9,717,268 8,441,854
Total non-current assets 12,000,14 10,517,74
5 2
Current assets
Other receivables 137,636 383,339
Cash and cash equivalents 2,709,957 7,051,744
Total current assets 2,847,593 7,435,083
Total assets 14,847,73 17,952,82
8 5
LIABILITIES
Current liabilities
Other payables (269,218) (392,628)
Total liabilities (269,218) (392,628)
Net assets 14,578,52 17,560,19
0 7
EQUITY
Equity attributable to equity holders of
parent
Share capital 2,125,402 2,123,402
Share premium account 19,323,78 19,311,62
4 2
Merger reserve 705,723 705,723
Available for sale revaluation reserve (13,694) (9,199)
Foreign currency reserve 717,750 (1,189,27
4)
Retained losses (8,280,44 (3,382,07
5) 7)
Total equity 14,578,52 17,560,19
0 7
Consolidated Cash Flow For The Year Ended 31 December 2008
Year to Year to
31 31
December December
Note 2008 2007
GBP GBP
Cash flows from operating activities
Loss after taxation (5,481,95 (1,126,86
9) 8)
Adjustments for:
Depreciation 86,405 83,023
Exchange loss (8,141) (25)
Loss/(Profit) on disposal of property, 1,839 (516)
plant and equipment
Interest received (228,856) (216,623)
Impairment of deferred exploration 3 4,442,563 131,668
expenditure
Share-based payments 583,591 234,185
MCJV - Group share of associate loss 15,385 4,118
Impairment of investments for resale - 2,335
Impairment of goodwill 2 103,188 3,000
Decrease/(Increase) in other receivables 273,662 (135,999)
(Decrease)/Increase in other payables (116,230) 32,068
Kujima - Group share of joint venture (1,540) -
gain
Net cash used in operating activities (330,093) (989,634)
Cash flows from investing activities
Payments to acquire property, plant and (43,892) (78,280)
equipment
Payments for deferred exploration (4,020,51 (2,775,40
expenditure 0) 1)
Proceeds from sale of tangible assets - 516
Interest received 228,856 216,623
Investment in associates (185,718) -
Investment in joint ventures (33,753) -
Net cash used in investing activities (4,055,01 (2,636,54
7) 2)
Cash flows from financing activities
Proceeds from issue of share capital 14,162 8,152,862
Net cash used from financing activities 14,162 8,152,862
Net (decrease)/increase in cash and cash (4,370,94 4,526,686
equivalents 8)
Cash and cash equivalents at beginning 7,051,744 2,516,712
of period
Exchange gain 29,161 8,346
Cash and cash equivalents at end of 2,709,957 7,051,744
period
Notes to the Consolidated Statements For The Year Ended 31 December 2008
1. LOSS PER SHARE
Basic loss per share
The calculation of basic loss per share is based on the loss for the period
divided by the weighted average number of shares in issue during the year. In
calculating the diluted loss per share potential ordinary shares such as share
options and warrants have not been included as they would have the effect of
decreasing the loss per share. Decreasing the loss per share would be
antidilutive.
Loss Per Share
2008 2007
GBP GBP
Loss for the period (5,481,959 (1,126,868
) )
Weighted average number of 212,467,52 172,383,88
shares in issue 5 3
Basic & diluted loss per share (2.6p) (0.7p)
Headline loss per share
Headline loss per share has been calculated in accordance with the Institute of
Investment Management and Research`s ("IIMR") Statement of Investment Practice
No. 1 entitled `The Definition of Headline Earnings` and The South African
Institute of Chartered Accountants Circular 8/2007 entitled `Headline Earnings`.
The calculation of headline loss per share is based on the loss for the period
of GBP2,197,724 (2007: GBP1,028,443) divided by the weighted average number of
shares in issue during the year. No diluted headline loss per share has been
calculated as it would be antidilutive by reducing the headline loss per share.
2008 2007
Gross Net Gross Net
Headline loss GBP GBP GBP GBP
Loss for the period (1,126,868)
(5,481,959)
Adjusted for:
(Less)/plus loss/(profit) (516) (361)
on sale of fixed 1,839 1,324
assets
Plus impairment on 131,668 92,168
exploration assets 4,442,563 3,198,646
Plus Group share of 4,118 2,883
associated loss 15,385 11,077
Less Group share of joint - -
venture (1,540) (1,109)
Plus impairment of 2,335 1,635
available for sale financial - -
assets
Plus impairment of goodwill 3,000 2,100
103,189 74,296
Headline loss for the period (1,028,443)
(2,197,725)
Weighted average number of 172,383,883
shares in issue 212,467,525
Basic and diluted headline (0.6p)
loss per share (1.0p)
2. INTANGIBLES
The Group 2008
Goodwill Deferred Total
on Explorat
Consolidat ion
ion costs
GBP GBP GBP
Cost:
At 1 January 2008 103,188 8,441,85 8,545,04
4 2
Foreign currency exchange - 1,758,21 1,758,21
differences 7 7
Additions - 3,959,76 3,959,76
0 0
Impairment costs (103,188) (4,442,5 (4,545,7
63) 51)
At 31 December 2008 - 9,717,26 9,717,26
8 8
The Group 2007
Goodwill Purchase Deferred Total
on d Explorat
Consolidat goodwill ion
ion costs
GBP GBP GBP GBP
Cost:
At 1 January 2007 103,188 3,000 7,172,86 7,279,05
9 7
Foreign currency exchange - - 260,330 260,330
differences
Additions - - 2,954,34 2,954,34
2 2
Transfers (1,814,0 (1,814,0
19) 19)
Impairment costs - (3,000) (131,668 (134,668
) )
At 31 December 2007 103,188 - 8,441,85 8,545,04
4 2
Goodwill on consolidation relates to the acquisition of Katanga Resources Ltd in
2002. The goodwill is linked to the recovery of the deferred exploration costs
on the Katanga mineral licences. The licences existing at the time of the
acquisition have been fully impaired in 2008. For this reason the directors have
decided to fully impair the goodwill on consolidation.
3. IMPAIRMENT OF DEFERRED EXPLORATION
During the year a number of projects were impaired on the grounds they were not
economically feasible. The geographical location of these projects is shown
below:
2008 2007
GBP GBP
Tanzania 657,597 118,484
Zambia 2,918,989 -
Mozambique 865,977 13,184
4,442,563 131,668
The projects written off in 2008 are detailed below. The Tanzania write-off in
2007 relates to the Mbeya project.
2008
Project Country Mineral Write-off Reason for write-
GBP off
Fingoe Mozambique Gold 165,996 Not prospective
Majele Mozambique Gold, base 518,494 Not prospective
metals
Tambara Mozambique Gold, silver 166,145 Not prospective
Kakumbi Tanzania Gold 132,784 Not prospective
Kiwasi Tanzania Gold 78,866 Not prospective
Kisamamba Tanzania Gold 65,760 Not prospective
Mabale Tanzania Gold 53,426 Not prospective
Mbeya Tanzania Gold, Uranium 70,453 Not prospective
Sasare Zambia Iron-oxide- 1,737,829 Licence expired**
copper-gold
Kampumba Zambia Copper 554,208 Licence expired**
Lunga Zambia Copper, gold, 626,952 Licence expired**
uranium
Other* Tanzania/Mozambique Gold 271,650 Not prospective
Total 4,442,563
* Write-offs less than GBP50,000.
** The three Zambian licences were dropped as under new government rules
prospecting licences cannot be held for more than seven years. Certain areas
within these licenses have been applied for by Kujima, a joint venture
company set up between African Eagle and a local Zambian partner.
4. GOING CONCERN
The current economic conditions provide particular challenges to the
Board and it is their prime responsibility to ensure the Company remains
a going concern. At the year ended December 31, 2008 the Company had cash
and cash equivalents of GBP2.7M and no borrowings. The Board considers this is
sufficient to maintain the Company as a going concern for a period of over
twelve months from the date of signing the annual report and accounts. In the
later part of 2008 and in quarter one 2009 the Company took measures to reduce
its overheads. This resulted in some of its projects being placed on care and
maintenance and overheads generally being reduced. However, the directors are
aware that the Group will need additional working capital in the foreseeable
future to support corporate overheads, exploration programmes and to finance
the Dutwa nickel project`s Feasibility Study. The Company has historically
entered into joint venture agreements with partners to share the risks and
costs of exploration. A partner also brings with it technical expertise in
development and mining in addition to financial resources. The Company has
been speaking to prospective partners about the Dutwa project but to date no
deal has been concluded. Besides looking for the right joint venture partner
the Company is considering other options to raise finance including the sale
of an asset and the raising of finance on the equity markets. Although African
Eagle has been successful in raising finance in the past, there is no assurance
that it will be able to obtain adequate finance in the future. However, the
directors have a reasonable expectation that they will secure additional
funding when required to continue operating for the foreseeable future. For
this reason, the directors continue to adopt the going concern basis in
preparing the financial statements.
5. Summary Accounts
The summary accounts set out above do not constitute statutory accounts as
defined by Section 240 of the UK Companies Act 1985. The summarised consolidated
balance sheet at 31 December 2008, together with the summarised consolidated
income statement and the summarised consolidated cash flow statement for the
year then ended have been extracted from the Group`s 2008 audited statutory
financial statements. The auditor`s report on the statutory financial
statements for the two years ended 31 December 2008 were unqualified and did not
contain any statement under Section 237(2) or (3) of the Companies Act 1985.
6. PRELIMINARY STATEMENT
Copies of the Annual Report will be sent to shareholders that have elected to
receive hardcopy documents later this month and will be available from the
Company at 2nd Floor, 6-7 Queen Street, London, EC4N 1SP. The full financial
statements will be made available on the Company`s website
www.africaneagle.co.uk at the same time they are mailed to shareholders.
For further information, see the Company`s website www.africaneagle.co.uk or
contact one of the following:
Bevan Metcalf
African Eagle
+44 20 7248 6059
Nicola Marrin
Seymour Pierce Limited, London
+44 20 7107 8000
Charmane Russell
Russell & Associates, Johannesburg
+27 11 8803924
+27 82 8928052
Ed Portman / Leesa Peters
Conduit PR, London
+44 20 7429 6607
+44 7733 363 501
05 May 2009
Sponsor
Nedbank Capital
Date: 05/05/2009 08:00:02 Produced by the JSE SENS Department.
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