Dutwa

Project Summary

Dutwa is a significant nickel laterite deposit, in a favourable location 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 in the Dutwa deposit, with option to acquire 100%, and recently exercised an option to joint venture a nearby nickel deposit at Ngasamo, 5km west.

Since discovering the deposit in June 2008, African Eagle has explored the project very quickly and cost-effectively, completing laboratory metallurgical and mineralogical tests which showed that the deposit can be processed efficiently by sulphuric acid leaching and a JORC-compliant independent resource estimate based on drilling.

In July 2009, the Company announced the results of a "proof of concept" scoping study by GRD Minproc, which indicated that the project would be profitable if it were in production today. Earnings over the life of mine would be of the order of $2.3 billion on an EBIT basis, giving an internal rate of return around 25%. African Eagle has now begun work towards a definitive feasibility study.

Geology

The project area is underlain by Archaean greenstones and granites. The greenstones are composed of intermediate and mafic volcanics, schistose metasediments and, in the east of the area, banded iron formation (BIF). Abundant dykes have been intruded parallel or sub parallel to the regional east-northeast structural and lithological trend.

The nickel deposits occur as thick blankets over ultramafic bodies, described as peridotites with olivine picrite, gabbro-norite and silicified serpentinite, which occur within the greenstones.

Resource

African Eagle has announced an initial Inferred Mineral Resource estimate of 31 million tonnes at an average grade of 1.1% nickel and 0.034% cobalt, with a contained metal endowment of some 340,000 tonnes of nickel and 11,000 tonnes of cobalt. The resource will probably increase following step-out drilling and the delineation of the Ngasamo deposit, now underway.

The initial estimate was prepared in November 2008, by independent consultants SRK Consulting (UK) Ltd, as an Inferred Mineral Resource in terms of the industry standard JORC code. SRK noted that this could be promoted to an Indicated Resource with more work on density measurements, infill and step-out drilling, and improved knowledge of the mineralogy and metallurgy of the deposit.

The Company recently appointed Snowden Mining Industry Consultants to carry out advanced deposit modelling and mine planning on the latest drill results. Click here for a table of drill results to date.

Table1: Mineral Resource Statement
(0.5% nickel cut off)

TONNES (Mt)	t/m3	Ni%	Co%	Cu%	Fe%	Mg%
31	1.6	1.1	0.03	0.01	8.5	3.5

the numbers in this table have been rounded to two significant digits

Metallurgy

The economic viability of any nickel laterite deposit depends on its metallurgy, resource geology and location. Metallurgical tests have shown that the Dutwa ore is unusually, perhaps uniquely, amenable to acid leaching. Acid consumption is very low and the leach reaction is very fast compared to other nickel laterites around the world.

African Eagle’s column leach tests gave 60% to 70% nickel extraction after just 16 days, rising to 80% after 55 days. For comparison, 540 days of leaching was required to extract 80% of the nickel from trial heaps at one of the few operating nickel heap leach projects for which published data are available. Tank leach tests also showed very fast reaction rates. The fast leaching reaction, low acid consumption and good nickel extraction shown by these tests are extremely positive indicators for the viability and profitability of the project.

Dutwa’s exceptional performance is due to the mineralogy of the deposit, which has a very low iron, magnesium and clay content but comprises more than 50% silica – in fact, Dutwa could best be described as a silica oxide nickel deposit. This contrasts with many other nickel laterite deposits elsewhere in the world, which have much higher iron and clay contents and have to be treated using capital intensive high-pressure acid leaching. We believe that nature has removed much of the iron and magnesium from the deposit while leaving the nickel and cobalt largely untouched, thanks to the geological history of East Africa.

Indeed, it seems that the Company may have identified a whole new province of nickel laterites which are uniquely amenable to low-cost leaching. As well as Dutwa and Ngasamo, African Eagle holds the Zanzui nickel project, which is only 60km from Dutwa and offers potential economies of scale. Zanzui is possibly twice as large as Dutwa and preliminary metallurgical tests showed that it shares the same fast, low-acid leaching characteristics.

Economics

A "proof of concept" scoping study by GRD Minproc, delivered in July 2008, made a strong investment case for the project, indicating a likely Internal Rate of Return of about 25% at the current nickel price of around US$8.50/lb, or 17% at the base case price of US$7/lb. Net Present Value estimates at these nickel prices were US$530 million and US$200 million (pre-tax) respectively.

Of necessity, 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.

Future Programme

In August 2009, the Company raised £3.3M additional capital through a Placing and Offer, to progress the project towards feasibility. The work planned for the coming months will include:

• Appointment of a project metallurgist
• Complete resource drilling at Ngasamo
• Perform comprehensive deposit modelling of Dutwa and Ngasamo
• Publish measured and indicated resources for the deposits
• Conduct advanced metallurgical tests to determine the best processing options
• Review and refine transport and logistics options
• Conduct resource definition drilling and metallurgical test work at Zanzui.

 

Westward view of the ore-body at Wamangola Hill with vertical RC drill holes [Enlarge]

Drilling to date at Wamangola Enlarge

Drilling to date at Ngasamo Enlarge

Related Pages

Phase I Metallurgical Results
Phase II Metallurgical Results
Most Significant Drilling Intervals - Wamangola
Most Significant Drilling Intervals - Ngasamo
Zanzui Project

Dutwa fact sheet - January 2010
(PDF - 232KB)