AFRICAN EAGLE RESOURCES PLC 
By 29 September 2011
African Eagle Resources plc
REVIEW OF PROGRESS AND RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011
African Eagle Resources plc ("African Eagle" or the "Company", ticker AIM: AFE, AltX: AEA) announces progress made so far in 2011 together with its financial results for the half year to 30 June 2011.
African Eagle's Half Year Report for the period ended 30 June 2011 can be viewed at:
Highlights - six months to 30 June 2011
Operations - Dutwa
- JORC compliant resource upgraded to 98.6 million tonnes
- Geotechnical studies for pre-feasibility study ("PFS") completed and mining studies delivered
- Metallurgical and other testwork well advanced
- Identified significant capital and operating cost savings
- Bulk ore sample 2 drilling completed ahead of schedule
Financials
- The loss after tax for the 6 months to 30 June 2011 at £712,583 is £324,752 higher than for the corresponding period last year. This variance is the result of: a one-off gain in 2010 relating to the recognition of shares in Kibo Mining (£120,000); higher other expenditure including business development, recruitment, legal and professional fees; and a higher share based option charge
- Cash in hand at 30 June of £4.7 million
- Net assets increased by 34% to £20.8 million
Corporate
- Raised £3.7 million (before expenses) in January for PFS work at Dutwa
- Cobra Copper Limited ("Cobra Copper") incorporated as Zambian copper spinout
- Canaccord Genuity Limited appointed as Nominated Adviser and Broker
- Julian McIntyre joins the board representing MWB Capital, the Company's largest shareholder
Since 30 June 2011
- Trevor Moss appointed CEO
- Dutwa mineralogical results suggest amenability to upgrading and cost savings
- Drilling commenced to further define Ngasamo nickel resource
- Additional gold mineralised system discovered by our partner at Miyabi
The Company's Chairman, Euan Worthington commented "Since we discovered Dutwa in 2008, we have made excellent progress. So far this year, we have upgraded half the resource to JORC Indicated category, delivered an updated financial model, completed drilling for the second bulk ore sample and received the mining geotechnical report. Our metallurgical process tests are well advanced and we are busy drilling the final resource programme. These studies have shown us several ways which should cut Dutwa's operating costs and improve the economics."
For further information please see the Company's web site at www.africaneagle.co.uk or contact one of the following:
African Eagle Resources plc
Mark Parker (Managing Director) Euan Worthington (Chairman) Sandra Spencer (PR Consultant) +44 20 7248 6059 +44 77 5640 6899 +44 75 1535 7790Canaccord Genuity Limited
Andrew Chubb Bhavesh Patel +44 20 7050 6500Ocean Equities Limited
Guy Wilkes +44 20 7786 4370Russell & Associates, Johannesburg
Charmane Russell Marion Brower +27 11 8803924 +27 82 8928052CHAIRMAN'S STATEMENT
Dear Shareholder,
It seems like it was only yesterday that I was writing my statement for the 2010 annual report, but I am pleased to report that we have been making excellent progress, especially towards the PFS on our headline Dutwa project.
Our key achievements since the year end have been:
- Appointment of a new CEO to take Dutwa through to production;
- Geotechnical studies for PFS completed;
- Progress on metallurgical and other testwork;
- Identifying significant capital and operating cost savings;
- Drilling completed for Bulk ore sample 2;
- In January we raised £3.7 million for PFS work; and
- Cobra Copper incorporated as Zambian copper spinout.
Board Reorganisation
As we announced earlier this month, we are very pleased to have secured the services of Trevor Moss to lead the Company and steer development of our Dutwa Nickel Mine. Trevor has extensive experience of mine development, with his most recent success being the building of Nevsun Resources' Bisha Project in Eritrea. Trevor led the team that was responsible for the construction, project management, completion and successful start up of the Bisha mine which was achieved under budget and ahead of schedule in a challenging operational environment.
Mark Parker will remain on the Board of AFE and once he has handed over the reins to Trevor, he will become Director of Corporate Development, responsible for overseeing our joint ventures and managing and developing new nickel opportunities.
We have also been interviewing candidates for a Finance Director as successor to Bevan Metcalf. Working with Trevor, the new FD will manage the project financing for the Dutwa development and an announcement will be made in due course.
In May 2011, Mr Julian McIntyre joined the Board in a non-executive capacity. A successful entrepreneur and investor, Julian is founder and principal of MWB Capital, a private investment company which has an 11.11% shareholding in African Eagle.
Dutwa Nickel Project
We have seen exceptional progress at Dutwa from our discovery in 2008, via a scoping study in mid-2009 and our resource update to almost 100 million tonnes in January 2011, to the pit optimisation and financial model announced this March - most mines take more than 10 years from discovery to production.
Now we are already well advanced on our feasibility study, which we hope to complete around the end of next year. We are currently doing a suite of lab tests on our first 12 tonne bulk sample to work out in detail the best way to process the ore. Additionally, we are drilling to upgrade the whole deposit to the JORC indicated category required for the definitive feasibility study ("DFS") and have recently received the rock property tests results and geotechnical study for the mining engineering and pit design. Our second 15 tonne bulk ore sample is ready to be shipped for testing once analysis of the first bulk sample has been completed. Studies of transport options and reagents are underway and the study of social and environmental aspects of the project will commence shortly.
One of the more exciting findings recently comes from a study by a team led by renowned Professor Richard Herrington at the Natural History Museum in London. This showed that the nickel bearing minerals in the ores in the Wamangola and Ngasamo deposits are mostly fine grained and can be upgraded by simple mechanical processes. Lab tests in Perth have since confirmed this. Upgrading would allow more efficient leaching of the ore and lower acid consumption, which in turn reduces the amount of sulphur to be transported from coastal ports and lowers the required tonnages of neutralising agents, lowering operating costs.
The financial modelling completed in March indicated that the cash cost of production from Dutwa is likely to be very competitive and that the capital costs to develop Dutwa will be among the world's lowest for a nickel laterite leach operation. Nonetheless, we are working hard to find ways to reduce these costs further, especially for reagents (sulphur and alkalis) and transport, which together account for three quarters of expected operating costs. The upgrading mentioned above is just one of several promising ideas African Eagle is pursuing in this area.
Key news expected over the coming months will include the JORC resource upgrade and the revised pit optimisation resulting from it, the metallurgical test results and the engineering design work. As these results become available, we will feed them into the engineering design and financial model, leading to a PFS report expected around the end of the year and a DFS at the end of 2012.
Cobra Copper
As I noted in April 2011, we plan to raise private equity, accelerate the work programme and then list shares in a new company holding our Zambian copper assets. We have called this company Cobra Copper, recruited a CFO and a new country manager and discussed the investment with a number of parties. Despite recent turmoil in financial markets, the outlook for the copper price buoyed by demand from China, is very positive.
Miyabi Gold Project
BrightStar Resources Limited ("BrightStar"), our partners in the Miyabi Gold Project in Tanzania, has wasted no time getting down to work testing extensions to the 520,000 oz JORC resource. In mid-August, BrightStar announced that it had completed a 400-hole, 11,000m RAB drilling programme.
The drilling outlined mineralised shear zones at the granite/greenstone contact and in splays off the contact, with good potential to host additional gold resources. Not all the assays results have been received yet, but intersections to date included:
- 9m @ 1.82g/t gold from 21m; and
- 6m @ 1.14 g/t gold from 18m including 3m at 2.1 g/t.
The holes were shallow, averaging 27m, and will now be followed up by deeper reverse circulation (RC) drilling. Higher grades are expected below the depleted oxide zone, as seen elsewhere on the project.
Plans and Milestones
Our key objective remains to complete the DFS around the end of 2012. Milestones for the coming months are:
- Upgrade the JORC resources to indicated category;
- Complete bench-scale testwork and decide on the best processing route;
- Update the optimisation mine plan and economic model;
- Prepare PFS report;
- Begin pilot scale testwork on bulk ore sample 2; and
- Secure funding for Cobra Copper.
Euan Worthington
Chairman
Condensed Interim Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2011
| 6 months to | 6 months to | Year to | ||
| 30 June | 30 June | 31 December | ||
| 2011 | 2010 | 2010 | ||
| Note | Unaudited | Unaudited | Audited | |
| £ | £ | £ | ||
| Depreciation expense | (15,961) | (21,062) | (41,661) | |
| Employee benefits expense | (326,004) | (211,274) | (588,557) | |
| Impairment of deferred exploration expenditure | (47,017) | (14,337) | (57,498) | |
| Share of loss in associates | (1,873) | (4,920) | (2,337) | |
| Other expenses | (354,104) | (256,822) | (469,169) | |
| Other income | 5 | - | 120,000 | 120,000 |
| Operating loss | (744,959) | (388,415) | (1,039,222) | |
| Finance income: | ||||
| Bank interest receivable | 7,168 | 19,217 | 28,182 | |
| Foreign exchange gain/(loss) | 25,208 | (18,633) | (23,490) | |
| Loss before tax | (712,583) | (387,831) | (1,034,530) | |
| Income tax expense | - | - | - | |
| Loss attributable to equity owners for the period | (712,583) | (387,831) | (1,034,530) | |
| Other comprehensive (loss)/income: | ||||
| Exchange differences on translation of foreign operations | (536,618) | 198,393 | 182,155 | |
| Available for sale investments: Fair value adjustment available for sale investments | (110,400) | 20,000 | 210,400 | |
| Other comprehensive (loss)/income for the period | (647,018) | 218,393 | 392,555 | |
| Total comprehensive loss attributable to equity owners for the period | (1,359,601) | (169,438) | (641,975) | |
| Loss per share: | ||||
| Basic/diluted loss per share from total and continuing operations | 3 | (0.2p) | (0.1p) | (0.3p) |
| Headline/diluted loss per share from total and continuing operations | 3 | (0.2p) | (0.2p) | (0.3p) |
All operations are continuing.
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
Condensed Interim Consolidated Statement of Financial Position
As at 30 June 2011
| Note | 30 June 2011Unaudited | 30 June 2010Unaudited | 31 December 2010Audited | |
| £ | £ | £ | ||
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 34,468 | 64,753 | 43,578 | |
| Available for sale investments | 5 | 220,000 | 140,000 | 330,400 |
| Investment in associates | 2,870,698 | 2,318,401 | 2,564,515 | |
| Investment in joint ventures | 33,300 | 35,054 | 33,664 | |
| Deferred exploration costs | 4 | 11,761,144 | 10,562,228 | 11,176,584 |
| Total non-current assets | 14,919,610 | 13,120,436 | 14,148,741 | |
| Current assets | ||||
| Cash and cash equivalents | 4,726,587 | 1,726,671 | 3,170,709 | |
| Other receivables | 635,751 | 253,422 | 451,239 | |
| Exploration assets held for sale | 6 | 1,078,634 | 882,148 | 1,098,843 |
| Total current assets | 6,440,972 | 2,862,241 | 4,720,791 | |
| Total assets | 21,360,582 | 15,982,677 | 18,869,532 | |
| LIABILITIES | ||||
| Current liabilities | ||||
| Other payables | (562,975) | (326,145) | (395,253) | |
| Total liabilities | (562,975) | (326,145) | (395,253) | |
| Net assets | 20,797,607 | 15,656,532 | 18,474,279 | |
| EQUITY | ||||
| Equity attributable to owners of the parent: | ||||
| Share capital | 4,093,472 | 2,967,622 | 3,847,622 | |
| Share premium account | 27,188,181 | 21,678,832 | 23,888,084 | |
| Merger reserve | 705,723 | 705,723 | 705,723 | |
| Available for sale revaluation reserve | 100,000 | 20,000 | 210,400 | |
| Foreign currency reserve | (493,753) | 59,103 | 42,865 | |
| Retained losses | (10,796,016) | (9,774,748) | (10,220,415) | |
| Total equity | 20,797,607 | 15,656,532 | 18,474,279 |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
Condensed Interim Consolidated Statement of Cash Flows
For the six months ended 30 June 2011
| 6 monthsto 30 June 2011Unaudited | 6 months to 30 June 2010Unaudited | Year to 31 December 2010Audited | ||
| Notes | £ | £ | £ | |
| Operating activities | ||||
| Loss before taxation | (712,583) | (387,831) | (1,034,530) | |
| Adjustments for: | ||||
| Depreciation | 15,961 | 21,062 | 41,661 | |
| Exchange gain | (953) | (391) | (1,115) | |
| Loss on disposal of property, plant and equipment | - | 238 | 423 | |
| Interest received | (7,168) | (19,217) | (28,182) | |
| Impairment of deferred exploration expenditure | 47,017 | 14,337 | 57,498 | |
| Share-based payments | 136,982 | 35,762 | 236,794 | |
| Share of loss in associate venture | 1,873 | 4,920 | 2,337 | |
| Increase in other receivables | (196,800) | (128,027) | (326,205) | |
| Increase in other payables | 74,794 | 24,523 | 2,043 | |
| Share of joint venture loss/(gain) | 368 | (460) | 975 | |
| Recognition of investment in a listed company | 5 | - | (120,000) | (120,000) |
| Cash flows from operating activities | (640,509) | (555,084) | (1,168,301) | |
| Investing activities | ||||
| Payments to acquire property, plant and equipment | (8,014) | (1,467) | (1,961) | |
| Payments for deferred exploration expenditure | (940,115) | (911,600) | (1,800,872) | |
| Interest received | 7,168 | 19,217 | 28,182 | |
| Investments in associates | (400,987) | (119,935) | (270,436) | |
| Cash flows used in investing activities | (1,341,948) | (1,013,785) | (2,045,087) | |
| Financing activities | ||||
| Proceeds from issue of share capital (net of issue costs) | 3,545,947 | - | 3,089,252 | |
| Cash flows from financing activities | 3,545,947 | - | 3,089,252 | |
| Net increase/(decrease) in cash and cash equivalents | 1,563,490 | (1,568,869) | (124,136) | |
| Cash and cash equivalents at beginning of year | 3,170,709 | 3,293,014 | 3,293,014 | |
| Exchange gain/(loss) | (7,612) | 2,526 | 1,831 | |
| Cash and cash equivalents at end of year | 4,726,587 | 1,726,671 | 3,170,709 |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
Condensed Interim Consolidated Statement of Changes in Equity
For the six months ended 30 June 2011
| Sharecapital | Share premiumaccount | Mergerreserve | Available for salerevaluationreserve | Foreign currencyreserve | Retained losses | Totalattributable to ownersUnaudited | ||
| £ | £ | £ | £ | £ | £ | £ | ||
| Balance at 1 January 2010 | 2,967,622 | 21,678,832 | 705,723 | - | (139,290) | (9,422,679) | 15,790,208 | |
| Loss for period | - | - | - | - | - | (387,831) | (387,831) | |
| Exchange differences on translation of foreign operations | - | - | - | - | 198,393 | - | 198,393 | |
| Available for sale investments | - | - | - | 20,000 | - | - | 20,000 | |
| Total comprehensive loss for the period | - | - | - | 20,000 | 198,393 | (387,831) | (169,438) | |
| Transactions with equity owners for the first half of 2010: | ||||||||
| Share based payments | - | - | - | - | - | 35,762 | 35,762 | |
| Total transactions with equity owners | - | - | - | - | - | 35,762 | 35,762 | |
| Balance at 30 June 2010 | 2,967,622 | 21,678,832 | 705,723 | 20,000 | 59,103 | (9,774,748) | 15,656,532 | |
| Loss for period | - | - | - | - | - | (646,699) | (646,699) | |
| Exchange differences on translation of foreign operations | - | - | - | - | (16,238) | - | (16,238) | |
| Available for sale investments | - | - | - | 190,400 | - | - | 190,400 | |
| Total comprehensive loss for the period | - | - | - | 190,400 | (16,238) | (646,699) | (472,537) | |
| Transactions with equity owners for the second half of 2010: | ||||||||
| Issue of share capital | 880,000 | 2,420,000 | - | - | - | - | 3,300,000 | |
| Share issue costs | - | (210,748) | - | - | - | - | (210,748) | |
| Share based payments | - | - | - | - | - | 201,032 | 201,032 | |
| Total transactions with equity owners | 880,000 | 2,209,252 | - | - | - | 201,032 | 3,290,284 | |
| Balance at 31 December 2010 | 3,847,622 | 23,888,084 | 705,723 | 210,400 | 42,865 | (10,220,415) | 18,474,279 | |
| Loss for period | - | - | - | - | - | (712,583) | (712,583) | |
| Exchange differences on translation of foreign operations | - | - | - | - | (536,618) | - | (536,618) | |
| Available for sale investments | - | - | - | (110,400) | - | - | (110,400) | |
| Total comprehensive loss for the period | - | - | - | (110,400) | (536,618) | (712,583) | (1,359,601) | |
| Transactions with equity owners for the first half of 2011: | ||||||||
| Issue of share capital | 245,850 | 3,499,575 | - | - | - | - | 3,745,425 | |
| Share issue costs | - | (199,478) | - | - | - | - | (199,478) | |
| Share based payments | - | - | - | - | - | 136,982 | 136,982 | |
| Total transactions with equity owners | 245,850 | 3,300,097 | - | - | - | 136,982 | 3,682,929 | |
| Balance at 30 June 2011 | 4,093,472 | 27,188,181 | 705,723 | 100,000 | (493,753) | (10,796,016) | 20,797,607 |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
Notes to the Condensed Interim Consolidated Financial Statements
For the six months ended 30 June 2011
1 Nature of Operations and General Information
African Eagle Resources plc ("African Eagle" or the "Company") is a public limited company incorporated and domiciled in England and is listed on the AIM market of the London Stock Exchange and the Alternative Exchange of the Johannesburg Stock Exchange Limited (AltX). African Eagle is a holding company of a mineral exploration and development group of companies (the "Group"). The Group is focused on becoming a nickel producer and is currently undertaking a pre-feasibility study on its Dutwa Nickel project in Tanzania.
The Company has prepared its unaudited condensed consolidated financial statements on a going concern basis which assumes that the Company will be able to realise assets and discharge liabilities in the normal course of business. At June 30, 2011 the Company had cash and cash equivalents of £4.7 million. The directors believe that the current funds will be sufficient to finance the completion of the PFS and general working capital.
African Eagle's unaudited condensed consolidated half year financial statements ("Financial Statements") are presented in pounds sterling (£), which is also the functional currency of the parent company. The Financial Statements were approved for issue by the Board of Directors on 26 September 2011.
2 Statement of Compliance and basis of preparation
The Financial Statements are for the six months ended 30 June 2011. They do not include all the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 December 2010, which were prepared under International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU").
The financial information is prepared under the historical cost convention and in accordance with the recognition and measurement principles contained within IFRS as endorsed by the EU.
The comparative amounts in the Financial Statements include extracts from the Company's consolidated financial statements for the year ended 31 December 2010. These extracts do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.
3 Loss Per Share
(a)Basic loss per share
The calculation of basic loss per share is based on the loss for the period divided by the weighted average number of shares in issue during the period. In calculating the diluted loss per share potential ordinary shares such as share options and warrants have not been included as they would have the effect of decreasing the loss per share. Decreasing the loss per share would be anti-dilutive.
| Loss per share | 30 June 2011£ | 30 June 2010£ | 31 December 2010£ |
| Loss for the period | (712,583) | (387,831) | (1,034,530) |
| Weighted average number of shares in issue | 405,960,448 | 296,762,128 | 318,942,950 |
| Basic & diluted headline loss per share | (0.2p) | (0.1p) | (0.3p) |
Notes to the Condensed Interim Consolidated Financial Statements
For the six months ended 30 June 2011
(b) Headline loss per share
Headline loss per share has been calculated in accordance with the South African Institute of Chartered Accountants Circular 3/2009 - Headline Earnings. Circular 3/2009 is effective for interim and/or annual financial periods ending on or after 31 August 2009.
The calculation of headline loss per share is based on the headline loss for the year divided by the weighted average number of shares in issue during the year. No diluted headline loss per share has been calculated as it would be antidilutive by reducing the headline loss per share.
| 30 June | 30 June | 31 December | ||
| 2011 | 2010 | 2010 | ||
| £ | £ | £ | ||
| Loss for the period | (712,583) | (387,831) | (1,034,530) | |
| Adjusted for: | ||||
| Plus loss on sale of fixed assets | - | 238 | 423 | |
| Plus impairment of deferred exploration assets | 47,017 | 14,337 | 57,498 | |
| Plus Group share of associated loss | 1,873 | 4,920 | 2,337 | |
| Plus/(Less) Group share of Joint Venture | 368 | (460) | 975 | |
| Less Recognition of investment in a listed company | - | (120,000) | (120,000) | |
| Headline loss | (663,325) | (488,796) | (1,093,297) | |
| Weighted average number of shares in issue | 405,960,448 | 296,762,128 | 318,942,950 | |
| Basic and undiluted headline loss per share | (0.2p) | (0.2p) | (0.3p) |
4 Deferred Exploration
| 30 June | 30 June | 31 December | |
| 2011 | 2010 | 2010 | |
| £ | £ | £ | |
| Cost: | |||
| At 1 January | 11,176,584 | 10,261,104 | 10,261,104 |
| Foreign currency exchange differences | (387,441) | 308,119 | 201,181 |
| Additions | 1,019,018 | 889,490 | 1,870,640 |
| Assets held for sale | - | (882,148) | (1,098,843) |
| Impairment charge | (47,017) | (14,337) | (57,498) |
| Balance at the period end | 11,761,144 | 10,562,228 | 11,176,584 |
Notes to the Condensed Interim Consolidated Financial Statements
For the six months ended 30 June 2011
5Available for sale investments
| 30 June | 30 June | 31 December | |
| 2011 | 2010 | 2010 | |
| £ | £ | £ | |
| Cost: | |||
| Balance brought forward | 330,400 | - | - |
| Investments during the period | - | 120,000 | 120,000 |
| Adjustment to fair value | (110,400) | 20,000 | 210,400 |
| Balance at the period end | 220,000 | 140,000 | 330,400 |
Investment in listed companies at 30 June 2011 represents the Company's 2.12% interest in Kibo Mining, a AIM listed explorer (ticker: KIBO). This investment was received in respect of compensation arising from the termination of a joint venture between the Company and Sloane Developments Limited (a wholly owned subsidiary of Kibo Mining). Available for sale assets in the 30 June 2010 Accounts, included the Igurubi gold project in Tanzania (£882,148), which has been reclassified as assets held for sale.
6 Assets held for sale
| 30 June | 30 June | 31 December | |
| 2011 | 2010 | 2010 | |
| £ | £ | £ | |
| Cost: | |||
| Balance brought forward | 1,098,843 | - | - |
| Foreign currency exchange (loss)/gain | (37,225) | - | - |
| Transfer from deferred exploration costs | - | 882,148 | 1,098,843 |
| Additions | 17,016 | - | - |
| Balance at the period end | 1,078,634 | 882,148 | 1,098,843 |
This relates to African Eagle's Igurubi gold project in Tanzania and uranium projects in Tanzania, Zambia and Mozambique. The Company has agreed terms for Peak Resources (Ticker: ASX: PEK) to acquire the Company's 75% interest in Igurubi. The delay in completing the deal is down to non-receipt of the licence due to administrative delays at the Ministry of Mines. In November 2010 the Company announced it had vended its uranium division to Jacana Resources Limited a privately owned Australian company in return for cash and shares. Jacana is progressing with its due diligence. An update on both agreements is expected shortly.
7 Events after the balance sheet date
On 1 July 2011 the Company announced that employees had exercised 239,000 share options at an exercise price of 6.5 pence.
On 1 August 2011 the Company announced that it had granted 4,996,000 share options to employees at an exercise price of 10 pence, being 19.3% above the closing price of the Company's shares on 29 July 2011. None of the options were granted to directors.
