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PROGRESS REPORT AND ACCOUNTS
OF THE AFRICAN EAGLE GROUP TO 31st DECEMBER 2003

News Report
3 June 2004

Chairman’s statement

Last year, especially in the months following our AIM admission, saw the first sustained rise in metals prices for many years, fuelled for the most part by rising demand from China and the weak US dollar. Whilst we've since seen something of a correction to this rapid escalation in the prices of metals and mining shares, the future for explorers with quality projects remains a positive one.

Although rising prices have stimulated the listing of new exploration companies and the search for new sources of supply, the practical difficulties involved in finding new projects and bringing them on-stream mean that it is likely to be several years before a new market equilibrium is established.

With cash in the bank and a portfolio of promising projects in countries which have under-explored mineral wealth, growing economies and relatively low political risk, the Company is well placed to take advantage of this period.

I am also pleased to report that the Company's headquarters are now located in the City of London. Opened in March 2004, the Group's new office will allow the Company to maintain better contact with its investors and stakeholders, and to expand its UK-based technical capabilities and corporate relationships.

For reviews of all our projects and to see our news releases, please visit www.africaneagle.co.uk

The exploration highlight of 2003 was our discovery of the Eagle Eye IOCG (iron-oxide-copper-gold) deposit on the Sasare licence in southeast Zambia. In the course of the year, Chris Davies, Dinis Napido and Boniface Lefayi, supported by a contract exploration team from GeoQuest, completed surface surveys over the target area and began a drill programme. The initial drilling results, which your executive directors will expand on later in this report, were highly promising, and we are looking forward eagerly to re-starting drilling in June this year.

The mineralisation at Eagle Eye is very extensive and has many of the characteristics of IOCG deposits like Olympic Dam and Ernest Henry in Australia, Candelaria in Chile and Salobo in Brazil. While there are no guarantees in early stage mineral exploration, IOCG deposits can be very large.

With all the excitement at Eagle Eye, our other Zambian projects remained rather on the back-burner during 2003, but we have now recruited Clive Arthur as full-time exploration manager for Zambia to be based in Lusaka and we are planning airborne and surface surveys over Eagle Eye, the adjacent Sasare gold project and several other areas, notably Kampumba which contains promising copper-silver-gold mineralisation.

In Tanzania, we made steady progress on the Miyabi gold project. Because of the large area of the Miyabi Gold Corridor (7km x 2km), much of our exploration focussed on tracking down the individual gold-bearing structures within it. The results of all our surface surveys and exploratory drilling were thoroughly reviewed by Mark Davey, revealing a number of new target structures which are now being tested by drilling.

As well as the work on the Miyabi Corridor, we have been exploring the rest of our 626 sq km holdings in the area, using airborne geophysical and multi-element soil geochemical surveys to identify other mineralised targets, and these surveys have already revealed at least one significant new gold anomaly.

Our exploration partner at Miyabi, Gold Fields Limited, chose not to exercise its option to enter into a formal joint venture. African Eagle now retains the whole Miyabi project largely unencumbered and will continue its aggressive exploration there, focussing on resource definition. Gold Fields will remain a significant shareholder in African Eagle and will continue to monitor progress at Miyabi in that capacity. The directors believe that this demonstrates Gold Fields' belief that our exploration programme has the potential to uncover a significant gold resource.

Work has also progressed on our other Tanzanian holdings: our shear zone gold discoveries at Kakumbi and Msasa, and the nickel / platinum target at Zanzui. Tanzanian Exploration Manager John McDonald also negotiated options over seven new licences in the Lake Victoria Goldfield.

This year saw the introduction of Mozambique's new mining law, and our two licences have been converted to new-style 5-year holdings. We plan to carry out geochemical soil sampling over the Muazua nickel and Majele gold and base metals targets, with trenching and magnetic surveys to follow.

The Annual Report can be obtained from the Company's website, www.africaneagle.co.uk, and is also available free of charge until 1 July 2004 from the Company's office: 2nd floor, 6-7 Queen Street, London EC4N 1SP (Tel: 020 7248 6059).

John Park
Chairman
African Eagle Resources plc

Notes

1. Increase in intangible assets represents deferred exploration costs for the period
2. See the Company's Annual Report of 1 June 2004 for a full set of notes to these accounts, including details of accounting policies. The report can be downloaded at www.africaneagle.co.uk/downloads.html
3. The maintenance and integrity of the Company's website is the responsibility of the Directors: the work carried out by the Auditors does not involve consideration of these matters and accordingly the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
4. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
5. The financial information set out above does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The consolidated profit and loss account and balance sheet have been extracted from the Group's 2003 statutory financial statements upon which the auditors' opinion is unqualified