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STRATEGIC DEVELOPMENT PARTNER FOR MKUSHI COPPER MINES

News Report
28 July 2006

AIM quoted African Eagle Resources plc ("African Eagle" or "the Company", ticker AIM: AFE) today announces that it has signed a Heads of Agreement ("Heads") with Central Asia Gold Limited (CAGL) for the joint venture development of its Mkushi Copper Mines project in Zambia. Under the Heads, CAGL will conduct and finance a bankable feasibility study ("BFS") at Mkushi, leading to a decision on mine development. The deal is a major landmark in AFE's strategy of realising the value in its asset holdings.

Under the Heads, AFE and CAGL will set up a joint venture vehicle to explore the licences and develop the Mkushi project, holding 49% and 51% interests respectively. CAGL will direct and fully fund the completion of the BFS within a defined part of the licence area. CAGL must spend at least US$1M on the BFS, which will include a scope of work set out in the Heads. If CAGL withdraws before the completion of the BFS, or does not meet its obligation to complete the BFS, its 51% interest will revert to AFE. On a decision to develop a mine, CAGL will use its best endeavours to arrange the project finance for development of a mine on behalf of the joint venture. AFE will continue to explore the rest of the licence area outside the defined zone, funded pro rata by the two parties.

Managing Director Mark Parker comments "This agreement is a milestone in our strategy of bringing in partners with the skills and cash to fast track our many highly prospective projects. It will accelerate our resource drilling, engineering studies and economic modelling, and should take us to a development decision significantly faster. It will also free up some of our resources to make progress on other key projects.

"The managers at CAGL have sound track records of bringing significant mines into production quickly and cost-effectively not only in Africa but also worldwide, including Golden Pride in Tanzania, Obotan in Ghana, Boroo in Mongolia and Bullabulling, Chalice and Marymia in Western Australia. Members of AFE's Board have worked successfully with the key CAGL people before, on the joint development by SAMAX and Resolute of Tanzania's first modern gold mine at Golden Pride."

The Heads are in line with the Company's objectives of bringing its nearest to market projects into production as quickly as possible, through development partnerships where appropriate, while retaining significant future upside by leveraging its exploration skills.

African Eagle has already drilled almost 10,000m of diamond and percussion drill holes and has recently engaged Snowden Mining Services to conduct a resource estimate. The Company is currently completing its final planned holes in the resource drilling programme at H-Zone and will then switch to exploration drilling, starting at the promising Munda target, while CAGL takes over the resource drilling programme.

The Heads of Agreement are conditional on satisfactory completion of due diligence by both companies before 31 August 2006 and on approval of the joint venture by the Zambian Ministry of Mines.

The Company also signed a Heads on similar terms over the Mokambo project in the Zambian Copperbelt, subject to resolution of issues of title.

John Park
Chairman
African Eagle Resources plc

About Central Asia Gold
The management at CAGL, which is listed on the Australian ASX and Toronto TSE exchanges, have a track record of successfully acquiring, financing, constructing and operating world class gold projects in emerging markets. CAGL is cash-rich from the sale of its interest in the 250,000 ounce per year Boroo gold mine in Mongolia and other assets. At the end of March 2006, CAGL reported cash assets of A$61M, and also has access to significant pools of capital for equity and debt financing of mining projects. The CAGL team has long-standing relationships with a number of contactors and consultants experienced in geology, mining and engineering.