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Drilling Report

06th November 2009

LATEST DRILLING RESULTS FROM
AFRICAN EAGLE'S DUTWA NICKEL PROJECT IN TANZANIA
 
First assay results from 2009 drilling programme
 
 
  • Results received from first 17 of approximately 120 planned holes.
  • Key mineralised intersections include
    • 18m at 1.2% nickel including 9m @ 1.7%
    • 15m at 1.1% nickel
    • 27m at 0.9% nickel
  • Option exercised on the Ngasamo deposit
  • Deposit modelling contract awarded to Snowden Mining Services
  • Logistics study awarded to Drum Resources Limited
African Eagle's Managing Director Mark Parker comments, "We are pleased to report that we have successfully completed our drilling programme to define the margins of the Wamangola Hill Deposit at the Dutwa Nickel Project in Tanzania. We recently received preliminary assay results from the first few drill holes, which are in line with our expectations. The rig will now move to Ngasamo Hill, where our recently completed surface surveys have confirmed that the laterite is nickel bearing. As a result, we have exercised our option to earn an interest in Ngasamo.
 
"The appointment of Snowden Mining Industry Consultants to conduct the deposit modelling and Drum Resources Limited to carry out the logistics study gets our feasibility study well under way."
 
Drilling
 
The programme of step-out and infill Reverse Circulation (RC) drilling at the main Wamangola deposit was completed last week, with 62 RC holes drilled for a total of 3299m, to an average depth of 53m.
 
The programme was designed to improve the definition of the deposit, especially around the edges, which were not fully investigated by previous drilling campaigns. The results should allow an  upgrade of the resource estimate to JORC indicated category and may also add to the 31 million tonnes, 1.1%  nickel resource announced last November.
 
Preliminary assay results for nickel have now been received from the first 17 drill holes and the results are in line with our expectations for the deposit margins, where the laterite is somewhat thinner and lower grade than in the centre. The samples are now being prepared for assay for a wider suite of chemical elements. 
 
Mineralised intersections with grade more than 0.5% nickel are listed below.
 
 
Ngasamo Option Exercised
 
Having completed the Wamangola step-out and infill programme, drilling will move 7km west to Ngasamo Hill.  African Eagle recently completed surface surveys over this area, which supported the Company's view that the laterite at Ngasamo Hill is geologically very similar to that at Wamangola and holds a potentially significant nickel endowment. African Eagle has therefore exercised its option with Ngasamo's owners, (Safina a.s. of the Czech Republic and its Tanzanian subsidiary Precious Metals Refinery Company Ltd), to earn an interest in the prospect.
 
Under the earn-in Agreement, announced 7 April 2009, the Company will now earn an initial 35% interest by conducting and co-funding the current RC drilling programme to delineate a JORC inferred resource at Ngasamo.  It can then increase this to 50% by sole-funding the promotion of the resource to indicated category and to 75% by including the Ngasamo deposit in the global feasibility study.  On completion of the feasibility study, Safina will convert its interest in Ngasamo into an interest in the whole project, according to the ratio of the two companies' attributable interests in the global resources.
 
Deposit modelling and logistics contracts
 
African Eagle has awarded two significant contracts which will form key parts of the Dutwa feasibility study.
 
The Company has appointed Snowden Mining Industry Consultants to carry out deposit modelling and mine planning on the drill results. Snowden has one the best records of any consulting group in nickel laterite advanced deposit modelling, resource estimation and/or mine engineering studies including Koniambo in New Caledonia (Xstrata Nickel, formerly Falconbridge); Caldag in Turkey and Acoje in the Philippines (European Nickel); Ravensthorpe (BHP Billiton) and Murrin Murrin (Anaconda Nickel) both in Australia. Other recent Snowden clients include Heron Resources, Intex Resources, Toledo Mining (Berong and Ipilan).
 
African Eagle has also awarded the contract for a logistics and transport study to Drum Resources Limited, a UK based group specialising in logistics in Africa.  Drum has extensive experience of providing logistics services to the mineral industry, including copper supply chain management from the Democratic Republic of Congo and for chrome and manganese mines in South Africa, as well as expertise in broader commodity import and export logistics.
 
 
Qualified Person (AFE)
 
Information in this report relating to exploration results is based on data reviewed by Mr Christopher Davies BSc, MSc, DIC, FSEG, FAusIMM, Operations Director for African Eagle, who is a Fellow of the Australasian Institute of Mining and Metallurgy, has more than 27 years' relevant experience in mineral exploration, and is a Qualified Person under AIM rules. Mr Davies consents to the inclusion of the 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
 
 
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%).

UK Office & Registered Address : 2nd Floor, 6-7 Queen Street, London, EC4N 1SP, UK,
+44 20 72 48 60 59 Fax +44 20 76 91 77 45 e-mail info@africaneagle.co.uk
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