| Mon 14 Mar 2011, 9:00 | | AEA - African Eagle Resources Plc - Updated economic model for the Dutwa |
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AEA
AEA
AEA - African Eagle Resources Plc - Updated economic model for the Dutwa
Nickel Project, Tanzania
African Eagle Resources plc
Incorporated in England and Wales
(Registration number 3912362)
(AIM share code: AFE AIM ISIN: GB0003394813)
(JSE share code: AEA JSE ISIN: GB0003394813)
UPDATED ECONOMIC MODEL FOR THE DUTWA NICKEL PROJECT, TANZANIA
African Eagle Resources plc (AIM: AFE; AltX AEA) announces that it has
received the second iteration of the feasibility study economic model for
its Dutwa nickel project in Tanzania from independent engineering
consultant Simulus. The latest economic model evaluates both of the ore
process routes available to the Company, heap leaching as well as
atmospheric agitated tank leaching ("tank leaching") and includes ore
throughputs of up to 5Mt per annum.
In this announcement, the currency is US dollars and all net present
values ("NPVs") are at a 10% discount rate.
Key headlines:
Ore Throughput - 3Mtpa Heap Leach Tank Leach
Nickel price $/lb $10 $8 $10 $8
NPV post-tax $M 705 260 870 385
IRR post-tax % 26 17 29 20
- Capex estimates for heap leach of $550M and for tank leach of $600M
- Capital payback for both methods is between 3 and 5 years
- Cash operating cost estimates of $3.37/lb for tank leach and
$3.56/lb for heap leach
- Throughput boost from 3Mtpa to 5Mtpa improves economics but
increases logistics challenge
African Eagle`s Managing Director Mark Parker commented:
"This latest economic modelling indicates that atmospheric tank leaching,
rather than heap leaching, will give a better economic return at Dutwa.
Our final selection of the best process option will be based on the
outcome of bench-scale and pilot-scale metallurgical testwork now
commencing in Perth, WA, leading to a pre-feasibility study, scheduled
for completion by end Q3 2011.
A higher throughput of 5Mt per annum would improve the project returns,
but under present conditions, logistical challenges are likely to make
3Mt per annum a more realistic production target. The throughput could
be scaled up if proposed infrastructure developments allow."
The results reported here represent an expansion of the economic model
announced in December 2010, to include heap leaching as well as agitated
tank leaching and ore throughputs between 2Mt per annum and 5Mt per
annum. In all cases, the model assumed that a mixed nickel-cobalt
hydroxide intermediate product would be generated.
The mining and processing schedules used in the model were developed by
Snowden Mining Industry Consultants (Perth, WA) from the Whittle pit
optimisations, as recently announced.
The capital and operating cost estimates were made by AMEC Minproc
(Perth, WA), to approximately +/-20%, using the best data currently
available. The estimates indicate that the initial capital cost of a tank
leach operation is not likely to be more than 10% greater than the cost
of a heap leach operation for 3Mtpa or 5Mtpa throughputs. The capital
intensity values for both process routes are far lower than those
published for comparable projects which use the more expensive high
pressure acid leach process.
The full results of the modelling for tank and heap leach, for
throughputs of 3Mtpa and 5Mtpa are given in the tables below, on a 100%
project ownership basis with debt financing not considered.
Over the coming months, the Dutwa economic model will be further
developed and refined to take into account the results of the current
metallurgical testwork and to assess the impact of producing a mixed
sulphide intermediate product rather than a hydroxide and of using rail
transport rather than road.
The next major milestones for the Dutwa Project are:
- Commencement of the Environmental and Social Impact Assessment (Q2
2011)
- Completion of JORC indicated resource estimation (Q2 2011)
- Completion of Pre-Feasibility Study (Q3 2011)
- Commencement of Definitive Feasibility Study ("DFS") (Q4 2011)
- Completion of DFS (end Q4 2012)
- Seek project financing during 2012
- Construction of the plant and other infrastructure (2013-2014)
- First production (Q1 2015)
Economic model results: Tank Leach
Ore Throughput 3Mtpa 5 Mtpa
Nickel price $/lb $10 $8 $10 $8
NPV post-tax $M 870 385 1125 475
IRR post-tax % 29 20 31 20
Payback period Years 3.1 4.9 2.7 4.2
Capital expenditure $M 600 600 840 840
Capital intensity $/lb nickel / yr 11.7 11.7 10.4 10.4
Cash operating costs, $/lb contained nickel $/lb $/lb
Consumables 0.08 0.09
General & Admin 0.20 0.16
Labour 0.12 0.08
Maintenance 0.26 0.23
Mining 0.23 0.22
Power 0.01 0.01
Reagents 1.63 1.65
Transportation 0.99 1.01
Cobalt credits -0.15 -0.15
TOTAL 3.37 3.30
Model assumptions and parameters
Mine life years 26 17
Ore mined and processed million tonnes 78.2 82.2
Strip Ratio waste/ore 0.43 0.45
Intermediate Product MHP MHP
Nickel payability % of LME nickel 75 75
price
Average nickel grade % 0.97 0.95
Total contained nickel in 000 tonnes 603 623
product
Average cobalt grade % 0.03 0.03
Total contained cobalt in 000 tonnes 15 15.7
product
Life of mine capital cost $M 659 918
Economic model results: Heap Leach
Ore Throughput 3Mtpa 5 Mtpa
Nickel price $/lb $10 $8 $10 $8
NPV post-tax $M 705 260 910 310
IRR post-tax % 26 17 27 17
Payback period years 3.2 5.2 2.8 4.5
Capital expenditure $M 550 550 770 770
Capital intensity $/lb nickel / yr 11.5 11.5 10.3 10.3
Cash operating costs, $/lb contained nickel $/lb $/lb
Consumables 0.14 0.14
General & Admin 0.21 0.16
Labour 0.12 0.08
Maintenance 0.25 0.21
Mining 0.24 0.23
Power 0.08 0.06
Reagents 1.64 1.68
Transportation 1.03 1.06
Cobalt credits -0.15 -0.15
TOTAL 3.56 3.47
Model assumptions and parameters
Mine life years 25 17
Ore mined and processed million tonnes 72.1 78.3
Strip Ratio waste/ore 0.52 0.48
Intermediate Product MHP MHP
Nickel payability % of LME nickel 75 75
price
Average nickel grade % 0.99 0.97
Total contained nickel in 000 tonnes 543 574
product
Average cobalt grade % 0.03 0.03
Total contained cobalt in 000 tonnes 13.5 14.4
product
Life of mine capital cost $M 603 839
Qualified Person
Information in this report is based on financial simulations prepared by
Tim Newton, BEng (Chem), MSc (Min Econ). Tim Newton is a Member of the
Australasian Institute of Mining and Metallurgy (AusIMM) and is Technical
Director and a full-time employee of Simulus Ltd. Tim Newton consents to
the inclusion in the report of the matters based on his information in
the form and context in which it appears.
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
Sponsor
Merchantec Capital
14 March 2011
For further information:
Chris Davies (Operations Director)
Bevan Metcalf (Finance Director)
African Eagle
+44 78 6672 9959
Andrew Chubb/Bhavesh Patel
Canaccord Genuity Limited
+44 20 7050 6500
Guy Wilkes
Ocean Equities Limited
+44 20 7786 4370
Charmane Russell/Marion Brower
Russell & Associates, Johannesburg
+ 27 11 8803924
+ 27 82 8928052
Dutwa Project Overview
African Eagle is developing the major Dutwa nickel project in Tanzania.
The Company discovered Dutwa in 2008 and is now conducting a pre-
feasibility study for the project.
Economic modelling in late 2010 indicated a pre-tax project NPV of $650
million at a nickel price of $8/lb, with an estimated average cash cost
of $3.37/lb nickel. The model was based on throughput of 3 million tonnes
per year for 26 years with processing by atmospheric tank leaching to a
mixed hydroxide intermediate product, requiring estimated initial capital
expenditure of $600M and yielding life of mine earnings of $8.2bn at
$8/lb nickel. The mining schedule was derived from Whittle optimisations
of block models of an October 2010 inferred mineral resources. The
financial models will be progressively improved as the feasibility study
progresses.
Mineral resources are currently 98.6 million tonnes grading 0.93% nickel
and 0.02% cobalt, of which 46.2 million tonnes are in the JORC indicated
category and the remainder in the JORC inferred category. The Company
believes that further drilling will increase the total resource by up to
10Mt.
The Dutwa project consists of two nickel laterite deposits which form the
caps of two ridges about 7km apart. The current JORC mineral resources,
at a 0.43% nickel equivalent cut-off, are 98.6Mt grading 0.93% nickel and
0.02% cobalt, containing in total 948,000 tonnes nickel metal equivalent.
Of this, about half is now in the indicated category and half in the
inferred. Because the deposits are at the surface, mining will be
straightforward and strip ratios very low. The Ni equivalent (NiEq) was
calculated using the formula:
NiEq Ni + ( Co * (RCo/RNi)
= * (PCo/PNi) )
= Ni + (Co * 1.32)
using metal prices (P) of $10/pound Ni and $17/pound Co, and metal
recovery factors (R) of 90% for Ni and 70% for Co, derived from
metallurgical test work conducted by African Eagle.
The Company believes that the resources can be increased by another 8Mt
to 10Mt with further drilling. There is also future upside at Zanzui,
50km to the south, where the Company is evaluating another significant
nickel laterite resource, and at Nyawa, 15km west of Dutwa.
Metallurgical tests have shown that the nickel ores are unusually easy to
process, giving good recoveries from heap or tank leaching at atmospheric
pressure, with no need for costly high pressure acid leach (HPAL).
African Eagle currently holds a 90% interest in the eastern Wamangola
deposit, which hosts approximately 60% of the total Dutwa resource, with
an option to acquire 100%. The smaller western Ngasamo deposit is subject
to a joint venture between African Eagle and the SAFINA Group of the
Czech Republic under which African Eagle is in the process of earning an
interest of between 50% and 75% by conducting and funding evaluation work
there.
On completion of the feasibility study covering both deposits, African
Eagle`s own interest in Wamangola, together with the two companies`
respective joint venture interests in Ngasamo will be converted into
equity in the mining company formed to develop and operate the combined
project. African Eagle estimates that it will then hold about 76% of the
equity.
About African Eagle
Since discovering a major nickel oxide deposit at Dutwa in Tanzania,
African Eagle is in transition from an explorer into a nickel company.
The Company completed a positive scoping study on the Dutwa deposit in
July 2009 and is now working towards a feasibility study.
In addition to Dutwa, African Eagle is also evaluating a second promising
nickel oxide at Zanzui, which is located 60 km from Dutwa. The Company
holds a 49% interest in the Mkushi Copper Mines joint venture in Zambia,
for which a draft feasibility study was completed in Q4 2008. It also
holds a half million ounce gold resource at the Miyabi project in
Tanzania, and a portfolio of gold and base metal exploration assets,
including two projects in the Zambian Copperbelt.
Date: 14/03/2011 09:00:01 Produced by the JSE SENS Department.
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