| Tue 20 Oct 2009, 8:00 | | AEA - African Eagle Resources Plc - Encouraging progress at African Eagle`s |
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AEA
AEA
AEA - African Eagle Resources Plc - Encouraging progress at African Eagle`s
Dutwa Nickel project in Tanzania
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
ENCOURAGING PROGRESS AT AFRICAN EAGLE`S DUTWA NICKEL PROJECT IN TANZANIA
Drilling programme started and metallurgical testwork well advanced
- Drilling programme underway
- Phase two metallurgical testwork well advanced
- Updated resource estimate expected Q1 2010
- Recruitment in progress of a Project Manager for Dutwa
African Eagle`s Managing Director Mark Parker comments, "We are pleased to
report significant progress at our exciting Dutwa Nickel Project in Tanzania.
Our 120-hole RC drilling programme is now underway and laboratory testwork is
well advanced. We have chosen a contractor for a transport and logistics study
and will appoint a contractor for advanced deposit modelling shortly."
"We have also advertised for a Project Manager with a process metallurgical
background, one of a number of recruitments and management changes required to
transform African Eagle from an exploration group into a nickel development and
mining company."
The Dutwa Scoping Study, delivered in July, made a strong investment case for
the project, indicating a likely Internal Rate of Return of about 25% at the
current nickel price of around US$8.50/lb, or 17% at the base case price of
US$7/lb. Net Present Value estimates at these nickel prices were US$530 million
and US$200 million (pre-tax) respectively.
The Study identified several key areas which could have major positive impacts
on the economics of the project. These include increasing the global resource by
delineating the adjacent Ngasamo deposit, determining the optimum processing
method by conducting further metallurgical testwork, and reducing the cost of
transporting chemical reagents to the mine site.
Through a successful Offer and Placing in August, the Company raised GBP3.3
million additional capital to fund these studies and progress the project
towards feasibility.
Drilling and deposit modelling
African Eagle has now begun a programme of approximately 60 infill and step-out
drill holes on the main nickel deposit at Wamangola Hill, with the objective of
increasing the JORC Inferred Mineral Resource of 31 million tonnes at an average
grade of 1.1% nickel, estimated by SRK in November 2008. The drilling should
allow the resource to be delineated to Indicated category.
After completion of this programme, drilling will move to the nearby Ngasamo
Hill, which has a laterite blanket similar to Wamangola Hill and affords the
opportunity to increase the current resource by another 15-20 million tonnes.
African Eagle is in joint venture with Safina a.s. of the Czech Republic, owners
of the mineral title to Ngasamo Hill, and can earn a 75% interest by including
Ngasamo in the global feasibility study.
An independent consultant will be contracted shortly to carry out deposit
modelling and mine planning on the drill results.
Metallurgical Testwork
Another 250 kilograms of drill core has been despatched to Mintek laboratories
in South Africa for the second phase of metallurgical testwork, which includes
tank and column leach tests, rock strength and abrasion measurements and
agglomeration tests. This work will help to determine the best extraction
process and optimise the parameters such as acid concentration, residence time
and leach temperature.
Once the results of the phase two testwork are in hand, the Company plans to
undertake more diamond drilling to provide a further one tonne of drill core for
advanced metallurgical testwork.
Transport Study
Transport and logistics costs will be a significant contributor to overall
operating costs and the Company is currently assessing bids to conduct a
detailed investigation into the transport alternatives. The study will examine
port options and road, rail and lake transport in both Tanzania and Kenya, with
the aim of minimising transport costs.
Project Manager
African Eagle has begun the process of transformation from an exploration group
into a nickel development and mining company. New staff will be recruited to
bring in the skills needed, and the Company is currently advertising for a
Project Manager with a process metallurgical background and project management
experience. Details of the post are available on the Company`s web site and in
the mining press.
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/p/glossary.asp
For further information:
Mark Parker
Managing Director
African Eagle
+44 20 7248 6059
+44 77 5640 6899
Nicola Marrin
Seymour Pierce Limited, London
Nominated Adviser
+ 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 77 3336 3501
About African Eagle
African Eagle is a diversified mineral exploration and development company
operating in eastern and central Africa. The Company`s principal advanced assets
are the Dutwa nickel laterite discovery in Tanzania, where the Company completed
a scoping study in June 2009, and its 49% interest in the Mkushi Copper Mines
joint venture project in Zambia, for which a draft feasibility study was
completed in Q4 2008.
African Eagle is evaluating a second promising nickel laterite deposit at Zanzui
in Tanzania and has defined a JORC gold resource estimated at half a million
ounces at its Miyabi gold project in Tanzania. The Company holds a well-balanced
portfolio of promising earlier stage gold, copper, platinum and uranium
projects, including the Ndola and Mokambo projects in the Zambian Copperbelt and
the Igurubi gold project in Tanzania.
Zambia, Tanzania and Mozambique, the sites of African Eagle`s projects, are all
countries which have highly prospective geology, relatively low above-ground
risks and track records of successful major investments in the metals and
minerals industries.
In December 2008, African Eagle resolved to prioritise the Dutwa project,
because the Board believes that, of all the Company`s projects, it offered the
greatest potential to add value. To take its other discoveries into production,
African Eagle is seeking industry partners with records of successful mine
development, by means of joint ventures, farm-ins, spin-outs or other
mechanisms.
About the Dutwa Project
African Eagle has discovered a significant nickel laterite deposit in the Dutwa
project area in the Lake Victoria Goldfield. Within Tanzania, the project is
favourably situated 100km east of the railhead at Mwanza and close to the main
Mwanza-Nairobi trunk road, a major power line and the shore of Lake Victoria.
The Company holds a 90% interest, with option to acquire 100%, over the Dutwa
laterite deposit and in 2009, signed a Letter of Intent for an option and joint
venture over another nickel laterite at Ngasamo, 5km west. In all, African Eagle
has explored a total area of more than 750kmSquared in the project area.
Since the discovery of the Dutwa nickel deposit in June 2008, African Eagle has
explored the project very quickly and cost-effectively, including resource
drilling and an independent resource estimate; laboratory metallurgical and
mineralogical tests which revealed that the deposit could be processed
efficiently by sulphuric acid leaching. On 24 June 2009, the Company announced
the results of its "proof of concept" scoping study. The study, by GRD Minproc
of Perth, Western Australia, indicated that the project can be economically
viable, and African Eagle has now begun work towards a definitive feasibility
study.
The Study indicates that Dutwa, if it were in production today, would be
profitable. Earnings, on an EBIT basis, would be of the order of $110 million
per annum on average over the life of mine, giving an internal rate of return
around 20%.
As a potentially low-cost producer, the upside for the Dutwa project is
considerable if nickel prices are above the $7/lb used in the base case. The
following table shows the key metrics for several upside cases.
Ni price US$/ 9.00 8.50 8.00 7.50 7.00 6.50
lb
Life of mine $M 2,600 2,300 2,000 1,800 1,500 1,200
EBIT
Pre-tax IRR % 31 27 24 21 17 13
Post-tax IRR % 27 24 21 18 15 11
Pre-tax NPV $M 640 530 420 310 200 90
Post-tax NPV $M 430 350 270 190 110 30
Base case: Abbreviations:
Nickel price = US$ 7/lb EBIT = Earnings before
($15,430/tonne) interest and tax
Cobalt price = US$ 10/lb IRR = Internal Rate of
Discount rate = 10% Return
Transport cost = US$100/tonne NPV = Net Present Value
(8Cents (USD)/tonne/km) DCF = Discounted cash flow
Tax rate = 30%, fiscal analysis
incentives not accounted
Royalty = 3% All numbers stated to 2
significant digits
The financial modelling was
conducted in US dollars with
an estimated accuracy of +/-
30%
The Study adopted a fairly broad brush approach to many of the costs, to
demonstrate "proof of concept" and provide indicative economics. GRD Minproc
estimated individual capital and operating costs to +/- 30%, based on their
considerable experience with nickel laterites. These variables will be
determined with more accuracy and confidence during the forthcoming feasibility
work.
The Study identified several key areas where further testwork and detailed study
are especially likely to result in improvements to the "bottom line" or to
important gains in confidence. These areas include:
- Improved global deposit model and the potential for early "high-grading".
The Ngasamo resource will be drilled and incorporated into a more
sophisticated global resource model and mining plan. From this, it will be
possible to establish whether richer ore can be mined first, giving
increased early cash-flow and an improved NPV.
- Ore beneficiation and project scale. The capital and operating costs of the
plant would be reduced if mechanical beneficiation of the ore prior to
leaching yields a smaller tonnage of richer material for processing through
the plant.
- Advanced leaching testwork. Column and vat leach tests at bench and pilot
scale will determine the best operating conditions to optimise nickel
extraction, including acid concentration, residence time and temperature.
- Reagent cost reductions. The cost of reagents, notably sulphur and lime,
will be a significant component of operating costs and profitability will
increase considerably if these costs are minimised. Transport is a
substantial part of the reagent costs and ways to minimise this will be
investigated, as will the availability of more local sources, particularly
of lime.
- More sophisticated fiscal and economic modelling. Tanzania offers a number
of tax incentives for exploration and mine development, which were not
fully accounted in the Study economic model.
In August, the Company raised GBP3.3M additional capital through a Placing and
Offer, to address these issues and progress the project towards feasibility.
Further metallurgical testing has commenced on drill core samples at Mintek
laboratories in South Africa and the Company has started infill drilling at
Dutwa and resource drilling at Ngasamo.
African Eagle acquired the Dutwa project for its gold potential, but the
Company`s exploration team quickly recognised that there was significant nickel
laterite potential. There is very little outcrop, so the Company conducted
extensive ground magnetic surveys to reveal the underlying structure and
geology. The Company also compiled historical data, including detailed
geological maps and trench results dating from 1956, when rock chip samples from
the trenches over the ultramafic rocks were reported as yielding up to 1.9%
nickel.
Greenstones and granites underlie the project area. The greenstones, of Archaean
Nyanzian age, are mostly metamorphosed volcanic and sedimentary rocks, with some
banded iron formation in the east. Several large ultramafic bodies occur within
the greenstones and the nickel laterites form a blanket up to 60m thick on top
of these.
To investigate the nickel discovery, the Company undertook trial drilling in
June 2008. The results were very encouraging and a 139-hole reverse circulation
(RC) drilling programme was completed to delineate the resource. African Eagle
also undertook a 10-hole diamond drill programme to obtain core samples for
metallurgical testing and density measurements.
In November 2008, African Eagle announced an initial Inferred Mineral Resource
estimate of 31 million tonnes at an average grade of 1.1% nickel and 0.034%
cobalt. At a cut-off grade of 0.5% nickel, this gives Dutwa a contained metal
endowment of some 340,000 tonnes of nickel and 11,000 tonnes of cobalt. The
estimate was prepared by independent consultants SRK Consulting (UK) Ltd in line
with the Australasian Code for Reporting of Mineral Resources and Ore Reserves
(the JORC Code). A little additional drilling and more advanced geostatistics
and deposit modelling will be needed to upgrade the resource to Indicated
category.
Ngasamo Hill, 5km west of the Dutwa deposit, is geologically very similar and
holds a laterite deposit of the order of 15 to 20 million tonnes, which would
increase the global resource at Dutwa from the currently defined 31 million
tonnes at 1.1% nickel, to some 45 - 50 million tonnes. Drilling and
metallurgical tests will be needed to confirm the size, grade and compatibility
of Ngasamo. Under its agreement with Ngasamo`s owners, (Safina a.s. of the
Czech Republic and its Tanzanian subsidiary Precious Metals Refinery Company
Ltd), African Eagle can earn an interest of at least 50% and up to 75% in
Ngasamo by carrying out exploration and evaluation work, up to a feasibility
study.
Mintek Laboratories in Johannesburg investigated the mineralogy and metallurgy
of mineralised drill samples from the deposit, including extended `bottle roll`
sulphuric acid leach tests to investigate metal recoveries and acid consumption.
Mintek also carried out mineralogical characterisation by X-ray diffraction
(XRD), scanning electron microscopy (SEM) and polished section work.
The bottle roll test results showed nickel extractions of 70-90% with an average
of 83%. Cobalt extractions were mostly in the range 70 to 85%. The acid
consumptions, averaging 209kg/t, are very low compared to other Ni laterite ores
worldwide.
The mineralogical investigations show that the laterite is extremely silica-
rich, with low iron and magnesium content, indicating that Dutwa is not a
typical laterite nickel deposit. Mintek believes that much of the nickel and
cobalt occurs in "wad" with manganese content of 20-60%, nickel content of up to
20% and cobalt content of up to 10%.
The unusual mineralogy of the deposit is highly beneficial, as it results in
lower acid consumption and is expected to give good heap leach permeability or
favourable liquid-solid separation in tank leaching. The concentration of nickel
and cobalt in the manganese wad offers the possibility that mechanical selection
of high-grade material may allow reduced throughput and hence a lower cost
processing plant.
The Company is also investigating other potential nickel laterite deposits in
Tanzania, and has completed a trial programme of RC drilling to test a laterite
at its Zanzui project, 60km to the south of Dutwa. Results included 42m at
1.05% nickel (including 6m at 2.80%) and 33m at 0.91% nickel (including 9m at
1.41%).
20 October 2009
Sponsor
Nedbank Capital
Date: 20/10/2009 08:00:03 Produced by the JSE SENS Department.
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