Dutwa Project Update
(Thomson Reuters ONE) - 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 DutwaAfrican Eagle's Managing Director Mark Parker comments, "We arepleased to report significant progress at our exciting Dutwa NickelProject in Tanzania. Our 120-hole RC drilling programme is nowunderway and laboratory testwork is well advanced. We have chosen acontractor for a transport and logistics study and will appoint acontractor for advanced deposit modelling shortly.""We have also advertised for a Project Manager with a processmetallurgical background, one of a number of recruitments andmanagement changes required to transform African Eagle from anexploration group into a nickel development and mining company."The Dutwa Scoping Study, delivered in July, made a strong investmentcase for the project, indicating a likely Internal Rate of Return ofabout 25% at the current nickel price of around US$8.50/lb, or 17% atthe base case price of US$7/lb. Net Present Value estimates at thesenickel prices were US$530 million and US$200 million (pre-tax)respectively.The Study identified several key areas which could have majorpositive impacts on the economics of the project. These includeincreasing the global resource by delineating the adjacent Ngasamodeposit, determining the optimum processing method by conductingfurther metallurgical testwork, and reducing the cost of transportingchemical reagents to the mine site.Through a successful Offer and Placing in August, the Company raised£3.3 million additional capital to fund these studies and progressthe project towards feasibility.Drilling and deposit modellingAfrican Eagle has now begun a programme of approximately 60 infilland step-out drill holes on the main nickel deposit at WamangolaHill, with the objective of increasing the JORC Inferred MineralResource of 31 million tonnes at an average grade of 1.1% nickel,estimated by SRK in November 2008. The drilling should allow theresource to be delineated to Indicated category.After completion of this programme, drilling will move to the nearbyNgasamo Hill, which has a laterite blanket similar to Wamangola Hilland affords the opportunity to increase the current resource byanother 15-20 million tonnes. African Eagle is in joint venture withSafina a.s. of the Czech Republic, owners of the mineral title toNgasamo Hill, and can earn a 75% interest by including Ngasamo in theglobal feasibility study.An independent consultant will be contracted shortly to carry outdeposit modelling and mine planning on the drill results.Metallurgical TestworkAnother 250 kilograms of drill core has been despatched to Minteklaboratories in South Africa for the second phase of metallurgicaltestwork, which includes tank and column leach tests, rock strengthand abrasion measurements and agglomeration tests. This work willhelp to determine the best extraction process and optimise theparameters such as acid concentration, residence time and leachtemperature.Once the results of the phase two testwork are in hand, the Companyplans to undertake more diamond drilling to provide a further onetonne of drill core for advanced metallurgical testwork.Transport StudyTransport and logistics costs will be a significant contributor tooverall operating costs and the Company is currently assessing bidsto conduct a detailed investigation into the transport alternatives.The study will examine port options and road, rail and lake transportin both Tanzania and Kenya, with the aim of minimising transportcosts.Project ManagerAfrican Eagle has begun the process of transformation from anexploration group into a nickel development and mining company. Newstaff will be recruited to bring in the skills needed, and theCompany is currently advertising for a Project Manager with a processmetallurgical background and project management experience. Detailsof the post are available on the Company's web site and in the miningpress.Technical termsA glossary of technical terms used by African Eagle in thisannouncement and other published material may be found atwww.africaneagle.co.uk/p/glossary.aspFor further information:Mark ParkerManaging DirectorAfrican Eagle+44 20 7248 6059+44 77 5640 6899Nicola MarrinSeymour Pierce Limited, LondonNominated Adviser+ 44 20 7107 8000Charmane RussellRussell & Associates, Johannesburg+ 27 11 8803924+27 82 8928052Ed Portman / Leesa PetersConduit PR, London+44 20 7429 6607+44 77 3336 3501About African EagleAfrican Eagle is a diversified mineral exploration and developmentcompany operating in eastern and central Africa. The Company'sprincipal advanced assets are the Dutwa nickel laterite discovery inTanzania, where the Company completed a scoping study in June 2009,and its 49% interest in the Mkushi Copper Mines joint venture projectin Zambia, for which a draft feasibility study was completed in Q42008.African Eagle is evaluating a second promising nickel lateritedeposit at Zanzui in Tanzania and has defined a JORC gold resourceestimated at half a million ounces at its Miyabi gold project inTanzania. The Company holds a well-balanced portfolio of promisingearlier stage gold, copper, platinum and uranium projects, includingthe Ndola and Mokambo projects in the Zambian Copperbelt and theIgurubi gold project in Tanzania.Zambia, Tanzania and Mozambique, the sites of African Eagle'sprojects, are all countries which have highly prospective geology,relatively low above-ground risks and track records of successfulmajor investments in the metals and minerals industries.In December 2008, African Eagle resolved to prioritise the Dutwaproject, because the Board believes that, of all the Company'sprojects, it offered the greatest potential to add value. To take itsother discoveries into production, African Eagle is seeking industrypartners with records of successful mine development, by means ofjoint ventures, farm-ins, spin-outs or other mechanisms.About the Dutwa ProjectAfrican Eagle has discovered a significant nickel laterite deposit inthe Dutwa project area in the Lake Victoria Goldfield. WithinTanzania, the project is favourably situated 100km east of therailhead at Mwanza and close to the main Mwanza-Nairobi trunk road, amajor power line and the shore of Lake Victoria.The Company holds a 90% interest, with option to acquire 100%, overthe Dutwa laterite deposit and in 2009, signed a Letter of Intent foran option and joint venture over another nickel laterite at Ngasamo,5km west. In all, African Eagle has explored a total area of morethan 750km² in the project area.Since the discovery of the Dutwa nickel deposit in June 2008, AfricanEagle has explored the project very quickly and cost-effectively,including resource drilling and an independent resource estimate;laboratory metallurgical and mineralogical tests which revealed thatthe deposit could be processed efficiently by sulphuric acidleaching. 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 economicallyviable, and African Eagle has now begun work towards a definitivefeasibility study.The Study indicates that Dutwa, if it were in production today, wouldbe profitable. Earnings, on an EBIT basis, would be of the order of$110 million per annum on average over the life of mine, giving aninternal rate of return around 20%.As a potentially low-cost producer, the upside for the Dutwa projectis considerable if nickel prices are above the $7/lb used in the basecase. The following table shows the key metrics for several upsidecases.Ni price US$/lb 9.00 8.50 8.00 7.50 7.00 6.50Life of mine EBIT $M 2,600 2,300 2,000 1,800 1,500 1,200Pre-tax IRR % 31 27 24 21 17 13Post-tax IRR % 27 24 21 18 15 11Pre-tax NPV $M 640 530 420 310 200 90Post-tax NPV $M 430 350 270 190 110 30Base case: Abbreviations:Nickel price = US$ 7/lb ($15,430/tonne) EBIT = Earnings beforeCobalt price = US$ 10/lb interest and taxDiscount rate = 10% IRR = Internal Rate ofTransport cost = US$100/tonne Return(8¢/tonne/km) NPV = Net Present ValueTax rate = 30%, fiscal incentives not DCF = Discounted cash flowaccounted analysisRoyalty = 3% All numbers stated to 2The financial modelling was conducted in significant digitsUS 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 confidenceduring the forthcoming feasibility work.The Study identified several key areas where further testwork anddetailed study are especially likely to result in improvements to the"bottom line" or to important gains in confidence. These areasinclude:* 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 £3.3M additional capital through aPlacing and Offer, to address these issues and progress the projecttowards feasibility. Further metallurgical testing has commenced ondrill core samples at Mintek laboratories in South Africa and theCompany has started infill drilling at Dutwa and resource drilling atNgasamo.African Eagle acquired the Dutwa project for its gold potential, butthe Company's exploration team quickly recognised that there wassignificant nickel laterite potential. There is very little outcrop,so the Company conducted extensive ground magnetic surveys to revealthe underlying structure and geology. The Company also compiledhistorical data, including detailed geological maps and trenchresults dating from 1956, when rock chip samples from the trenchesover 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 andsedimentary rocks, with some banded iron formation in the east.Several large ultramafic bodies occur within the greenstones and thenickel laterites form a blanket up to 60m thick on top of these.To investigate the nickel discovery, the Company undertook trialdrilling in June 2008. The results were very encouraging and a139-hole reverse circulation (RC) drilling programme was completed todelineate the resource. African Eagle also undertook a 10-holediamond drill programme to obtain core samples for metallurgicaltesting and density measurements.In November 2008, African Eagle announced an initial Inferred MineralResource 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, thisgives Dutwa a contained metal endowment of some 340,000 tonnes ofnickel and 11,000 tonnes of cobalt. The estimate was prepared byindependent consultants SRK Consulting (UK) Ltd in line with theAustralasian Code for Reporting of Mineral Resources and Ore Reserves(the JORC Code). A little additional drilling and more advancedgeostatistics and deposit modelling will be needed to upgrade theresource to Indicated category.Ngasamo Hill, 5km west of the Dutwa deposit, is geologically verysimilar and holds a laterite deposit of the order of 15 to 20 milliontonnes, which would increase the global resource at Dutwa from thecurrently defined 31 million tonnes at 1.1% nickel, to some 45 - 50million tonnes. Drilling and metallurgical tests will be needed toconfirm the size, grade and compatibility of Ngasamo. Under itsagreement with Ngasamo's owners, (Safina a.s. of the Czech Republicand its Tanzanian subsidiary Precious Metals Refinery Company Ltd),African Eagle can earn an interest of at least 50% and up to 75% inNgasamo by carrying out exploration and evaluation work, up to afeasibility study.Mintek Laboratories in Johannesburg investigated the mineralogy andmetallurgy of mineralised drill samples from the deposit, includingextended 'bottle roll' sulphuric acid leach tests to investigatemetal recoveries and acid consumption. Mintek also carried outmineralogical characterisation by X-ray diffraction (XRD), scanningelectron microscopy (SEM) and polished section work.The bottle roll test results showed nickel extractions of 70-90% withan average of 83%. Cobalt extractions were mostly in the range 70 to85%. The acid consumptions, averaging 209kg/t, are very low comparedto other Ni laterite ores worldwide.The mineralogical investigations show that the laterite is extremelysilica-rich, with low iron and magnesium content, indicating thatDutwa is not a typical laterite nickel deposit. Mintek believes thatmuch of the nickel and cobalt occurs in "wad" with manganese contentof 20-60%, nickel content of up to 20% and cobalt content of up to10%.The unusual mineralogy of the deposit is highly beneficial, as itresults in lower acid consumption and is expected to give good heapleach permeability or favourable liquid-solid separation in tankleaching. The concentration of nickel and cobalt in the manganese wadoffers the possibility that mechanical selection of high-gradematerial may allow reduced throughput and hence a lower costprocessing plant.The Company is also investigating other potential nickel lateritedeposits in Tanzania, and has completed a trial programme of RCdrilling to test a laterite at its Zanzui project, 60km to the southof Dutwa. Results included 42m at 1.05% nickel (including 6m at2.80%) and 33m at 0.91% nickel (including 9m at 1.41%).---END OF MESSAGE---This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 20.10.2009 - 08:00 Uhr
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