African Eagle Resources Regulatory News (AFE)

1 Jun 2007 07:01

African Eagle Resources PLC01 June 2007 AFRICAN EAGLE RESOURCES plc PROGRESS REPORT AND ACCOUNTS OF AFRICAN EAGLE RESOURCES plc TO 31st DECEMBER 2006 News Report1 June 2007 African Eagle Resources plc ("African Eagle" or "the Company", ticker AIM: AFE)today announces its annual results for the year to 31 December 2006. The Year in Brief Our focus during the year has been on developing partnerships with companiesthat have the financial resources and technical expertise in developing mines tocomplement African Eagle's excellence in exploration. We have now signed upquality partners on three of our four main projects. Our goal is to realisevalue for our shareholders by bringing our nearest to market projects intoproduction and cash flow generation as soon as possible. The foundations are nowin place and African Eagle is well positioned to push ahead with this strategy. Milestones In 2006: •Gold resource at Miyabi, Tanzania increased by 30% to 520,000oz •MDN Northern Mining signed an option agreement over Msasa, Tanzania and has indicated it wants to earn-in •Australian based miner, CGA Mining signed Heads of Agreement to fast-track the Mkushi Copper Project, Zambia towards production •Phelps Dodge, one of the world's largest copper producers, signed an earn-in and funding agreement on the Ndola project, Zambia •First JORC compliant copper resource announced at Mkushi •Resolute elected to proceed with an earn-in arrangement on Kakumbi, Tanzania To date in 2007: •Phelps Dodge subscribed for an initial tranche of shares in the Company, to the value of US$1.27M •Farm-out of the Fingoe Project in Mozambique to Pan African Mining Corp •An option and farm-in agreement on Miyabi was signed with Randgold Resources, one of Africa's most successful gold companies •A strategic alliance was announced with Troll Mining to explore their uranium, copper and gold licences in Tanzania •CGA signed a joint venture agreement and a Zambian joint venture company was established to develop and explore Mkushi Chairman's statement Dear Shareholder, 2006 saw further advances in the evolution of your Company's strategy which isbased on maximising the benefits provided by the quality and experience of ourexploration personnel by coupling them with the expertise of industry partnerswith skills in the development and exploitation of mining projects. We arejustifiably proud of our people, their skills and their ability to find goodprojects in the countries in which we operate and to advance them to a stagewhere they become attractive to other parties. Our Review of Operations this year expands more on the individual projects thanin previous years, giving me the luxury of using my statement to elaborate onand illustrate that strategy by addressing some of the points which shareholdershave raised during the year. As you will see from the Review of Operations, we have made, and continue tomake, excellent progress at Mkushi and Ndola. Despite the heaviest rains indecades we've completed airborne and geochemical surveys and undertakenadditional drilling programmes enabling further resource definition, as well assecuring development partners of high quality for three of our four keyprojects. Elsewhere, we have carried out a major review of the entire data basefor Eagle Eye to identify new drill targets, we've conducted extensive surfacesurveys on several of our Lake Victoria properties and we've continued toevaluate new projects and potential partners in line with our strategy. Only atMiyabi has a combination of the weather and bureaucratic delays hinderedprogress during 2006. Our joint venture with Randgold signed on 2 May 2007 willnow benefit the project enormously as Randgold commences work under thatagreement. Turning to some of those points I'm regularly asked about. Why does African Eagle bring in partners to progress its projects? African Eagle's expertise lies in exploration: the identification, acquisitionand evaluation of good projects with clear development potential and a stronglikelihood of value realisation. Mine development takes time, money, a differentcorporate culture and people with different skill sets. For these reasons, totake good projects through to production, we choose to work with high-qualityindustry partners who have the financial strength and the requisite developmentskills and experience. This enables us to reach production decisions more quickly and to mitigateproject risk through involvement in several shared projects. With developmentand exploration projects with several partners in three countries and in variouscommodities, we believe we are protected if any single project should notdeliver - our eggs are not all in one basket! Moreover, our partners' investments free up our own cash for the projectgeneration and exploration activities which are African Eagle's corecapabilities. If all our partners complete their full commitments under ourvarious farm-in agreements, we expect that they will invest US$50M or more intoAfrican Eagle's projects. We now have excellent partners at three of our four key projects: Miyabi, Ndolaand Mkushi. Randgold, our partner at Miyabi, is arguably one of the mostaccomplished gold project developers operating in Africa. Phelps Dodge, withwhom we are exploring Ndola, is one of the world's largest copper producers andthe management team at CGA Mining, our Mkushi partner, was instrumental in thedevelopment of the first modern gold mines in Tanzania (at Golden Pride) and inMongolia. We have also signed up good partners for some of our non-coreprojects, we are in negotiation with potential partners of similar qualityfor many of our other projects and we are looking at different deal structures,including royalty deals, to get the maximum benefit out of future partnershipson non-core projects. How far are African Eagle's projects from starting production? A decision to develop a mining operation can be made as soon as we (or one ofour partners) can demonstrate that a project is economically feasible, that is,as soon as we have identified a mineral reserve of sufficient size, grade andcharacter to be mined and processed at a profit. With our most advancedprojects, this decision could be as little as 12 months away. We are alwayslooking for opportunities to get production started quickly. Has African Eagle got a balanced property portfolio? We believe so. As an exploration and project generation company, we are alwaysevaluating our current project portfolio and considering new properties thatmeet our criteria for economic potential. We have been able to take forward keyprojects like Mkushi and Miyabi to resources status and to make them attractiveto partners. In both cases it was our partner who initiated the approach.We believe that the current buoyant metals market is a good time to be projectrich, as mining companies are very keen to acquire new projects to replenishtheir depleting reserves. Their investment leverages our expertise and skills intarget generation and the quality of our exploration teams in the field. We knowthat not all good ideas bear fruit, however, and we relinquish properties whosecommercial value we have assessed and determined to be minimal, or where layingoff the risk has proved impossible or too time consuming. For example, werecently dropped the Muazua project in Mozambique when the strong nickelgeochemical anomalies turned out to be caused by localised surface enrichmentand we have relinquished a number of Tanzanian gold licences which failed tomeet our criteria. How does African Eagle promote the Company through Investor Relationsactivities? In the last 8 months, we have presented at seven major shows and conferences inLondon, Lusaka, Cape Town, Livingstone and Toronto, conducted a site visit toMkushi for fund managers and analysts, participated twice on Stockmarket-TV,been the subject of two very bullish analysts' Buy Notes and talked with scoresof analysts, investors and fund managers. The IR programme for the next 12months promises to be just as busy. In October 2006, we appointed Euan Worthington as our Deputy Chairman withspecific responsibility for Investor Relations. Euan has more than 20 years'experience in the City of London as a mining analyst and corporate financespecialist. As a service to our shareholders, African Eagle has consented to its sharesbeing traded on PLUS Markets in London to supplement our primary listing on AIMand our trading facility on the Berlin-Bremen exchange in Germany. At a timewhen the number of minerals exploration and mining companies on AIM has grown towell over 300, we continue to investigate ways to differentiate ourselves fromthe herd. Will African Eagle have to raise new funds in the market? As soon as we have a positive feasibility study on one of our projects, we willhave to raise our share of the capital costs and other development costs tobring the mine into production. As a rule, part of these costs will be met fromequity and part by bank debt raised on the basis that a feasibility study is adetailed business plan which will include clear forecasts of revenue andprofits. In the meantime, however, it is likely that we will need to raise moreworking capital to pursue our current exploration projects and to continue togenerate new projects. A good deal of exploration, as I've said, is now beingfunded by our farm-in partners. How can investors place a value on a company like African Eagle? African Eagle's stage of development, the nature of our assets and the way wemanage them makes it difficult to compare us directly with many of our peers. Wedo not have a producing mine, or a project with very near term production. Wedo, however, have two projects with JORC-compliant resources, both being takenforward by experienced mine operators and both capable of being valuedobjectively by the criteria used for any such resources. We also have a suite of earlier stage projects, some wholly owned by us andothers being explored by partners. We have the potential, and intention, togenerate many more projects and we are looking to the means by which westructure our partnership agreements in order to add and realise value. In his review of operations, our Managing Director Mark Parker sets out where weare now and our objectives for each of our projects. I believe that mostcommentators would agree that our current market capitalisation belies the valueof our assets. As a substantial shareholder myself, I think that the current lowshare price represents a considerable opportunity, and I hope that this annualreport will convince you of it. John ParkChairman Managing Director's Review African Eagle continues to implement the strategy which it adopted in early2006: • To take the most advanced projects rapidly towards production and revenue generation • To prioritise other projects according to their fit to its business model • To sign up well-qualified industry partners • To maintain future upside by acquiring promising new projects To this end, African Eagle has signed farm-out and joint venture agreementswhich will see development and exploration partners invest more than US$50M inAfrican Eagle's projects, if feasibility studies are completed. With thesepartners and on its own, the Group has added substantial value to its assetssince the start of 2006. The mineral resources on the Group's two most advanced projects, defined to JORCstandards, firmly underpin the portfolio's asset value. In contained metal valueterms, the JORC copper resource already outlined at Mkushi is equivalent to aone million ounce gold deposit, and current drilling will almost certainlyincrease this significantly. The JORC resource at the Miyabi gold project isalready more than 500,000 ounces and we are confident that this will also beincreased substantially. Several other projects, while not holding resources defined to JORC standards,none the less contain significant deposits discovered by African Eagle ordetermined by previous explorers. In Zambia, Ndola holds a reported 40Mt deposit grading 0.75% copper, the Lungaand Mokambo licences also host known copper deposits, the Group has intersectedsignificant copper mineralisation at Eagle Eye and the Tandalwe Hill deposit atKampumba could form the basis for a low-cost oxide copper operation. InTanzania, the Group plans to drill promising geochemical gold targets atKagulamu in the Geita area, Dutwa, Kiwasi Hills and elsewhere, and for the firsttime, has acquired base metal and uranium assets outside the Lake Victoria GoldFields. After a review of its projects in Mozambique, the Group farmed out theFingoe licences and made application for a number of new areas. African Eagle is also currently packaging up its uranium prospecting rights intoan energy metals division, which it may spin out or joint venture. Overview Zambia - inside and outside the Copperbelt African Eagle's most advanced project is Mkushi in Zambia. The preliminaryresource, based only on the drilling results to July 2006 (when African Eaglesigned its partnership with CGA), has an estimated 80,000 tonnes of containedcopper. CGA has been conducting a programme of resource definition drilling andthere are strong indications that the resource will increase significantly whenan update is carried out. Financial modelling indicates that a decision could bemade to develop a mine as soon as a deposit with around 150,000 tonnes of copperhas been defined. Interestingly, the Mkushi copper deposits lie outside the hugely prolificCentral African Copperbelt which is Zambia's traditional mining area. In thelast few years, new geological models and improved exploration methods havesparked great interest in these non-traditional targets and some verysignificant discoveries are being made. African Eagle holds projects both insideand outside the Copperbelt. African Eagle's largest asset within the Zambian Copperbelt is the Ndolaproject. When African Eagle acquired this project, it was known to hold adeposit which was estimated in the 1960s to contain 300,000 tonnes of copper,although at the relatively low grade of 0.76% copper. African Eagle's surfacesurveys and drilling, funded by Phelps Dodge have revealed several other targetswithin the licence and drilling at one of these has already intersected coppermineralisation. Also inside the Copperbelt, the Mokambo project area is known to contain asignificant copper deposit. A title dispute delayed operations at Mokambo butwas resolved by African Eagle and Copperbelt Minerals Ltd agreeing to exploreand develop the licence in partnership. African Eagle's Lunga licence covers rocks of the same Katangan age as those ofthe Copperbelt, but lies outside the Copperbelt itself. Relatively littleexploration has been carried out in the area since the 1950s, when several smallcopper deposits were evaluated. African Eagle and its partner MinEx Projectshave conducted airborne geophysical and extensive geochemical surveys which haveidentified several promising targets including copper-gold and uraniumanomalies. Our Eagle Eye IOCG project is well outside the Copperbelt and lies in much olderrocks is a very exciting major target. We have recently completed a thoroughreview of all exploration results, identifying a number of promising drilltargets. Tanzania - the Lake Victoria Goldfields and beyond Following its announcement in March 2006 of a 520,000 ounce gold resource at theMiyabi Gold project in the Lake Victoria Goldfields, the Group's emphasis hasshifted towards a pre-feasibility study, with a view to getting the project intoproduction. To further this aim, African Eagle has recently signed an option andfarm-in agreement with a wholly owned subsidiary of Randgold Resources("Randgold"). Randgold is one of Africa's most successful gold companies and anexcellent development partner for Miyabi. African Eagle holds a number of other licences, both within and beyond the LakeVictoria Goldfields. One of the most promising projects in the Goldfields isDutwa, where African Eagle will drill three soil geochemical anomalies in 2007,including one with values up to 7g/t gold. Geochemical and geophysical surveys have also identified promising anomalies anddrill targets on the Kagulamu, Kiwasi and Mabale licence areas. Another recent highlight is the joint venture agreement with Troll Mining Ltd, aTanzanian company with several large exploration licences with known uranium,copper and gold occurrences in the southwest of the country. MDN Northern Mining entered an option agreement on the Msasa gold project andhas indicated that it would like to earn-in to this project. Resolute Mining ourpartner at Kakumbi elected to exercise its option during the year and they havebegun to earn-in to this gold project. African Eagle is also talking to severalother potential farm-in partners on its Tanzanian assets. Mozambique - going boldly During 2006, African Eagle acquired the services of one of the top explorationgeologists in Mozambique and conducted a target generation exercise and reviewof its existing holdings. As a result of this, African Eagle applied for anumber of new licence areas with potential for precious and base metals, nickel,uranium and other commodities. In 2007 African Eagle signed an agreement withPan African Mining Corporation over the Fingoe licences. Mark ParkerManaging Director AFRICAN EAGLE RESOURCES plc - EXTRACT FROM AUDITED CONSOLIDATED FINANCIALSTATEMENTS FOR THE YEAR FROM 1 JANUARY 2006 TO 31 DECEMBER 2006 PROFIT AND LOSS ACCOUNT Restated Year to Year to 31 Dec 2006 31 Dec 2005 £ £ Administrative expenses (1,003,826) (655,147)Share based payments Note 1 (199,584) (92,871)Exchange (losses)/gains (263,378) 473,436 ---------- -----------Operating loss (1,466,788) (274,582)Interest receivable and similar income 101,266 89,593 ---------- -----------Loss on ordinary activities before taxation (1,365,522) (184,989)Tax on loss on ordinary activities - - ---------- -----------Loss for the financial year (1,365,522) (184,989) ========== ===========Loss per share (pence) Note 2 (1.0p) (0.2p)--------------------------------- ---------- ----------- STATEMENT OF TOTAL RECOGNISED GAINS AND RestatedLOSSES Year to Year to 31 Dec 2006 31 Dec 2005 £ £ Loss for the financial year (1,365,522) (184,989)Currency differences on foreign currency netinvestments (1,471,535) 701,379 ---------- -----------Total recognised (losses) and gains (2,837,057) 516,390 ========== ===========--------------------------------- ---------- ----------- BALANCE SHEET Restated At 31 Dec At 31 Dec 2006 2005 £ £Fixed assetsIntangible assets Note 3 7,212,462 7,275,475Tangible assets 153,495 250,362Investments 18,046 18,372 ---------- ----------- 7,384,003 7,544,209 ---------- -----------Current assetsDebtors 240,466 176,039Cash at bank and in hand 2,516,712 1,097,881 ---------- ----------- 2,757,178 1,273,920 ---------- -----------Creditors - amounts falling due within oneyear (180,820) (418,939) ---------- -----------Net current assets 2,576,358 854,981 ---------- -----------Total assets less current liabilities 9,960,361 8,399,190 ========== ===========Capital and reservesCalled up share capital 1,478,249 1,129,550Share premium account 11,803,913 7,953,968Other reserves 705,723 705,723Share based payments reserve 292,455 92,871Profit and loss account (4,319,979) (1,482,922) ---------- -----------Shareholders' funds 9,960,361 8,399,190 ========== ===========CASH FLOW STATEMENT Year to Year to 31 Dec 2006 31 Dec 2005 £ £Net cash outflow from operating activities (998,297) (38,855)Returns on investments and servicing offinance - interest received 101,266 89,593Net cash outflow from capital expenditureand financial investment (1,853,912) (3,460,081)Management of liquid resources (1,501,742) (190,315)Net cash inflow from financing 4,198,644 2,192,197 ---------- -----------Decrease in cash Note 5 (54,041) (1,407,461) ========== ===========Notes: 1. The requirements of Financial Reporting Standard ('FRS 20'), Share BasedPayments were applied to the Group and Company results, in accordance with thetransitional provisions, to all equity instruments granted after 7 November 2002that had not vested as of 1 January 2006. As a result, the consolidated profitand loss account for 2005 has been restated to include a charge for share basedpayments of £92,871, increasing the loss for the year from £92,118 to £184,989.2. The loss per share was calculated from the loss for the periodattributable to ordinary shareholders of £1,365,522 (2005: £184,989) divided bythe time-weighted average number of shares in issue during the year 135,728,466(2005: 104,105,259). There is no dilutive effect of share options or warrants onthe basic loss per share.3. The increase in intangible assets represents exploration expenditureduring the year (£1,633,299), off-set by project write-off costs (£215,201) andforeign currency exchange losses (£1,414,516).4. The financial information set out above does not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. The consolidatedprofit and loss account and balance sheet have been extracted from the Group's2006 statutory financial statements upon which the auditors' opinion isunqualified. 5. Analysis of changes in net funds: At 1 January 2006 Cash flow Exchange At 31 December Difference 2006 £ £ £ £ Liquidresources 878,242 1,501,742 - 2,379,984Cash 219,639 (54,041) (28,870) 136,728 1,097,881 1,447,701 (28,870) 2,516,712 The Company's Annual Report and Accounts for the year ended 31 December 2006 canbe downloaded at www.africaneagle.co.uk/african-eagle-investors-annual-reports.html. For further information, see the Company's web site www.africaneagle.co.uk orcontact one of the following: Mark ParkerManaging Director+44 20 7248 6059+44 77 5640 6899 Nicola MarrinSeymour Pierce+44 20 7107 8000 Ed Portman/ Leesa PetersConduit PR+44 20 7429 6607 Qualified Person Information in this report relating to exploration results is based on datareviewed by Mr Christopher Davies BSc, MSc, DIC, Operations Director for AfricanEagle, who is a Fellow of the Australasian Institute of Mining and Metallurgy,has more than 25 years relevant experience in mineral exploration and is aQualified Person under AIM rules. Mr Davies consents to the inclusion of theinformation in the form and context in which it appears. Technical terms A glossary of technical terms used by African Eagle in this announcement andother published material may be found at www.africaneagle.co.uk/african-eagle-projects-glossary.html About African Eagle African Eagle is a mineral exploration and development company operating ineastern and central Africa. The Company's principal advanced projects are theMkushi Copper Mines project in Zambia and the Miyabi gold project in Tanzania,which are being prioritised towards production. The Company also holds a largewell-balanced portfolio of promising earlier stage gold and base metal projects,including the Ndola copper project and the Eagle Eye iron-oxide copper goldproject. African Eagle's projects are in Zambia, Tanzania and Mozambique, countries whichall have highly prospective geology, relatively low above-ground risks and trackrecords of successful major investments in the metals and minerals industries. African Eagle specialises in project generation and exploration and has a highlymotivated team, proven management and an experienced board. To take itsdiscoveries into production, it seeks to sign up industry partners with recordsof successful mine development. These joint ventures and, in time, the revenuefrom advanced projects, will finance future exploration and new discoveries. This information is provided by RNS The company news service from the London Stock Exchange