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Preliminary Results from Phase 2 Metallugical Testwork Received

01st December 2009

UPDATE ON METALLUGICAL TESTS ON
AFRICAN EAGLE'S DUTWA NICKEL PROJECT IN TANZANIA
 
Preliminary Results from Phase 2 Metallugical Testwork Received
 
  • Initial column test results show rapid leach kinetics
  • Up to 70% nickel extraction after just 16 days acid leaching
  • Low acid consumption of 200-230 kg/tonne
  • Promising initial tank leach results
African Eagle's Managing Director Mark Parker comments, "These results are extremely encouraging, showing very fast reaction kinetics and confirming the good nickel extraction and low acid consumption of the Dutwa ores.  The results show that the project is amenable to both heap leach and tank leach, and point the way to further tests to determine the optimum process parameters. The fast leaching reaction, low acid consumption and good nickel extraction are extremely positive indicators for the viability and profitability of the project."
 
African Eagle has received interim results from the current phase of metallurgical testwork, which is being conducted by Mintek of South Africa.  The results include the first tank leach and column leach test data, together with further "bottle roll" leach test results and rock property test results.
 
The test results will help to determine the best extraction process and to optimise parameters such as acid concentration, residence time and leach temperature in the engineering design for the feasibility study.
 
Column tests
 
Three column tests are being conducted to investigate the likely behaviour of the ore under heap leach conditions. Coarsely crushed ore (25mm or less in size) is packed into vertical plastic pipes, 1 metre high and 200mm diameter, and continuously irrigated with sulphuric acid.  The acid dissolves the nickel and other metals as it percolates down the column. 
 
After only 16 days, 60% to 70% of the nickel had been extracted, with low net acid consumption of 200 to 230kg/t.  This shows extremely fast leaching reaction kinetics, much faster than most published nickel laterite data.  Although column test data cannot be simply scaled up to determine full-sized heap behaviour, these results are extremely encouraging.
 
Fast reaction kinetics has important profitability implications for the heap leach method, as it means that working capital will not be tied up for many months while the heap reaches full productivity.  At Caldag in Turkey, for example, operator European Nickel plc reports that almost one year of leaching was required to extract 60% of the nickel from trial heaps and 540 days to extract 80%. Mintek reports that other nickel laterite ores it has column-tested have also taken much longer to achieve comparable recoveries.
 
Tank leach tests
 
Three tank leach tests have been conducted to investigate the ore behaviour under high temperature agitated vat leach conditions.  The ore samples were pulverised to three different particles sizes for these tests. The tests were conducted over 24 hours, but again, very fast reaction kinetics was seen and almost all of the nickel extraction occurred within the first hour. The fast initial leaching exhausted the acid quickly and nickel extractions reached 64%, but future tests using higher initial acid concentrations should give better recovery.
 
Bottle roll tests
 
Three additional bottle roll tests were conducted to investigate the effects of changing the acid concentration and the solids to liquid ratio.  The results showed that leaching efficiency falls if the acid concentration is reduced.
 
Physical property tests
 
The results of the following tests have also been received:
  • Bond impact work index
  • Bond abrasion index
  • Bond ball work index
  • Bond rod work index
  • Uni-axial compressive strength
  • Agglomerate stability tests
  • Bulk and true SG determination
  • Moisture content
  • Natural and complete sizing
The physical property test results will be used in the engineering design for the feasibility study.
 
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 750km² 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.
 
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 £3.3M 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%).
 

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