Monday, November 3, 2008

African Eagle highly optimistic about Zambia copper project

By: Guy Copans, Published on 1st August 2008

The Mkushi copper project, in central Zambia, has the potential to be a highly successful project for mineral exploration company African Eagle, says operations director Chris Davies.

He says that the project is the company’s most advanced. He notes that it is located in one of the places in Zambia where copper was first mined on a commercial scale outside the Copperbelt. The geology, which is much older than the Copperbelt’s, was first mined in the 1920s using underground operations.

Davies says that the Zambian government is keen to see the development of the project, which is situated in a large farming area in Zambia, which provides a good network of dirt roads.

African Eagle started exploring the area toward the end of 2004. It has completed 10 000 m of drilling on the southern part of the old openpit, and defined resources of 11-million tons at 0,75% copper.

African Eagle signed a joint-venture agreement with Australian company CGA, which is providing mining expertise on the project, in 2006. CGA has a 51% interest in the project, while African Eagle has a 49% interest.

The prefeasibility study on the project was completed in February, and an upgraded resource of 18,5-million tons of 0,83% copper has been identified, meaning that the resource has increased by 20%, providing a further increase of eight to nine years on the life-of-mine. It will potentially provide 1,6-million tons a year, with 17 000 t of concentrate.

CGA will complete a bankable feasibility study by the fourth quarter of this year, and a decision to proceed with the project will be made in November. CGA is using consultants in Australia to work out the actual reserves and, within the next few weeks, the mine scheduling and financial model will be worked out, says Davies.

Metallurgically speaking, says Davies, it will produce concentrate with a 30% copper grade. He says that the strategy is to get up to four to five deposits into commercial production. The project, he says, also represents a great oppor- tunity for African Eagle to be able to get involved in other projects.

“The idea of the project initially was to identify a sufficient reserve, get into cash flow, and use that flow to fund other exploration,” he notes.

Other Zambian projects that African Eagle is currently involved in, located on the Zambian Copperbelt, are Mokambo and Ndola, which are about 60 km apart. African Eagle was awarded both projects in 2005. Davies describes them as “good geological addresses”, adding that African Eagle has completed eight diamond drill holes at Mokambo and hit areas of copper mineralisation.

“It is highly prospective, and we are drilling there at the moment,” Davies notes.

He adds that the company’s main focus is East Africa, Central Africa and Southern Africa, with involvement only in the African countries of Tanzania, Mozambique and Zambia. He says that the company has had an unofficial policy not to enter other countries.

While in the immediate future African Eagle has no plans to conduct exploration elsewhere in Africa, Davies says that it is “not out of the question” for it to do so in the long term if it were to identify a project that presented a substantial opportunity.

He admits that the political climate in countries is a factor in the decision whether or not the company takes up projects. He says that Tanzania, Mozambique and Zambia are stable, good countries to invest in, with Tanzania not having many political problems, and Mozambique coming on in leaps and bounds from its political troubles of the early 1990s.

“Places such as the Democratic Republic of Congo have tremendous geological potential, but are not easy to operate in owing to their political environments,” he says.

Meanwhile, Davies notes that funding and partnerships have been key to the company’s success.

“As a company, the positive aspect is that we are well funded. “Most junior companies face the problem of funding, and the best way forward is to use funds for core projects, and bring in partners for other projects,” he says.

“Our core competence is mineral exploration. There-fore, what we normally do is bring in partners with the skills to take projects through to production. “If we make a discovery, we have companies such as TWP that can get involved and leverage into projects,” he notes.

African Eagle listed on London’s Aim in 2003. It received a dual listing in South Africa in 2003, and raised £7,5-million. It now has £4-million in the bank, which, Davies says, will carry the company for at least another 12 months, and possibly 18 months.