African Eagle Resources plc

PHELPS DODGE MINING (ZAMBIA) LIMITED TO PARTNER AFRICAN EAGLE AND FUND THE NDOLA COPPERBELT PROJECT

News Report
8 August 2006

AIM quoted African Eagle Resources plc ("African Eagle" or "the Company", ticker AIM: AFE) today announces that it has signed an Earn-in Agreement with Phelps Dodge Mining (Zambia) Limited (PDMZ), a wholly owned subsidiary of the Phelps Dodge Exploration Corporation, for the exploration and joint venture development of its Ndola Copperbelt project in Zambia.

Under the Agreement, PDMZ will subscribe for AFE shares to the value of US$2.73 million in two tranches, at a 10% premium to the market price of AFE's shares. AFE will use 75% of the funds on an agreed exploration programme at Ndola and the balance on other AFE projects and general working capital. PDMZ will gain an exclusive right to earn an ownership interest of up to 70% in the Ndola project by making agreed expenditures on further exploration up to and including completion of a bankable feasibility study.

This Agreement is in line with AFE's strategy of working with other companies inthe joint development of its projects and complements the recent announcement that the Company's Mkushi Copper Mines project, also in Zambia, will be developed in partnership with Central Asia Gold Limited.

The principal terms of the Agreement are:

PDMZ will subscribe for an initial tranche of AFE shares to a value of US$1,273,333 (approximately £680,000) and within 12 months will subscribe to a second tranche of AFE shares to a value of US$1 million (approximately £530,000), both at a 10% premium to the average closing mid-market price of AFE's shares for the 10 consecutive dealing days immediately preceding the relevant subscription date. At AFE's current share price of 11.75p, PDMZ would hold approximately 3.4% of the Company's share capital after the first subscription and almost 6% after the second tranche.
AFE will undertake an agreed 15-month exploration programme on the Ndola licence, spending at least 75% of the amount subscribed on that programme.
AFE will grant PDMZ the exclusive right to enter into a joint venture with AFE on the Ndola project at the end of the 15 month period. Under the joint venture, PD can earn a 51% interest in the Ndola project by spending a further US$3m on exploration and then an additional 19% by completing a bankable feasibility study on the property.

The share subscription will be subject to approval of the contemplated joint venture by the Zambian Ministry of Mines and to satisfactory completion of due diligence by PDMZ.

The Ndola licence area is considered highly prospective, being underlain by the Mine Series and Lower Kundelungu geological sequences which host most of the world-class copper deposits of Zambia and the DRC. The licence occupies a little-explored gap between First Quantum Minerals' Frontier and Lonshi mines in the DRC. Drilling of the Mine Series northeast of Ndola town during the 1950s and 60s revealed extensive copper mineralisation, with a historical estimate (not JORC-compliant) of 40 million tonnes at 0.75% copper. African Eagle's top priority will be to re-evaluate the resource and test for extensions to.

At the same time, the Company will conduct surface surveys over the whole licence, including soil geochemistry, geological mapping, gravity and airborne geophysics, which are likely to reveal new drilling targets.

African Eagle's Managing Director Mark Parker comments "I am delighted that Phelps Dodge, the world's third largest copper miner, will be exploring this highly prospective area with us."

John Park
Chairman
African Eagle Resources plc

About Phelps Dodge Corporation
Phelps Dodge Mining (Zambia) Limited is a wholly owned subsidiary of Phelps Dodge Exploration Corporation. The parent, Phelps Dodge Corporation (Ticker NYSE: PD) is one of the world's leading producers of copper and molybdenum and is the largest producer of molybdenum-based chemicals and continuous-cast copper rod. The company employs 14,500 people worldwide.