AFRICAN EAGLE RESOURCES plc: PRELIMINARY RESULTS FOR THE YEAR ENDED
31 DECEMBER 2008
5 May 2009
African Eagle Resources plc ("African Eagle" or "the Company", ticker
AIM: AFE, AltX: AEA) today announces its preliminary results for the
year ended 31 December 2008. The Company's annual consolidated
financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union. The information in this preliminary announcement
has been extracted from the audited financial statements for the year
ended 31 December 2008 and as such, does not contain all of the
information required to be disclosed in the financial statements
prepared in accordance with IFRS. The Company will publish its full
Annual Report and Financial Statements to shareholders later this
month.
CHAIRMAN'S STATEMENT
Dear Shareholder
When I was writing to you a year ago, copper was trading at US$4/lb
and nickel was US$13/lb. I was looking forward to a positive
feasibility study from Mkushi and a resource statement from Mokambo.
Dutwa was a gold exploration project in the eastern Lake Victoria
Goldfields and barely got a mention!
Today, copper is just starting to claw its way back from January's
low of $1.30/lb and nickel from $4/lb. Mkushi is on hold while we
seek additional resources within the highly prospective zone
surrounding the central area on which we based the feasibility study,
and Mokambo is no longer a priority although we have increased our
interest in the licence area in anticipation of a future recognition
of value. At Dutwa, however, we have made one of the most significant
base metal discoveries in East Africa in the last 50 years.
The cataclysmic period that resulted in the dramatic changes that we
experienced through 2008, in which metal prices and project
viabilities plunged as a function of markets that recoiled from risk,
actual or perceived, was for the most part, a crisis generated by
factors and actions outside of the resources world but one with major
consequences for it as demand for metals and the values placed on
almost all resource companies were slashed.
As the crisis resolves itself, and it will, with the implementation
of the G20 agenda and an eventual return to growth with the
consequent pressure that will bring to bear on the supply of
resources, sanity will return to a sector that needs explorers to
provide for the future. There are going to be troughs and peaks in
market sentiment and metal prices but I believe that the first signs
of a recovery are already apparent and that we are in a better
position than many of our peers to both survive and emerge stronger
into that future, with cash in the bank, four JORC-compliant
resources (and two pre-JORC resource estimates), and the importance
of the Dutwa discovery much clearer now.
Strategic Review
Because of the dramatic changes in our market, and because we did not
know for how long the hard times would last, we conducted a thorough
review of our priorities and strategy in the second half of 2008 and
implemented a number of outcomes of that review in the period prior
to January 2009 when we announced the most significant elements of
the strategy we are now pursuing.
We also introduced a number of cost-cutting measures, including a
reduction in directors' remuneration, renegotiation of all active
contracts and cuts in general operating costs. For operational
reasons we have not retrenched any of our senior exploration staff,
but we have placed our Mozambique operations and most of our advanced
projects of merit on care and maintenance. We are also relinquishing
many of our earliest stage projects.
Since the publication of our strategic review the board and I have
been asked why we opted for a course of action that placed a
relatively new nickel project discovery ahead of our other projects,
some more advanced than Dutwa. In brief, our review showed us that,
for each dollar spent, Dutwa would give us the greatest added value,
and we therefore made the project our top priority.
Dutwa Nickel Project
In the 9 months since our discovery of the Dutwa nickel laterite we
have explored and drilled out a 31Mt nickel resource in Tanzania
containing some $3.5 billion dollars in gross nickel value with
significant cobalt credits of the order of $400M in value at current
prices. We have conducted metallurgical and mineralogical testing at
Mintek's South African laboratories to establish that this resource
is unique and likely to be able to be developed using atmospheric
leaching techniques. We have commissioned GRD Minproc to conduct a
scoping study to be completed in June 2009, to evaluate the economics
and potential processing methods to be used at Dutwa. As I write this
we have just concluded and signed an option and joint venture
agreement over the adjacent Ngasamo deposit which we anticipate will
increase the global resource in the Dutwa project area to some 50Mt.
We believe that the Dutwa project has advantages which are likely to
make it viable even at the current low nickel price.
* Acid consumption is lower than for any other published
nickel laterite worldwide
* Good nickel extraction by heap or tank acid leaching at
atmospheric pressure will result in capital costs an order of
magnitude less than comparably sized nickel laterites forced to use
HPAL processing
* High silica, low iron, low magnesium chemistry, which
promises good heap or tank leach characteristics
* Favourable infrastructure, environmental setting and
relatively easy mining
* Within the global resource of 31Mt at a grade of 1.1%
nickel, there are rich zones such as a drill intersection from
surface of 57m at 2.57% nickel including 15m at 6.91% nickel, and
we believe the potential exists for high-grading to improve early
cash flow.
By June we will know the likelihood that the Dutwa project will go
ahead and the timeframe in which that can happen and that will place
us in a strong position to be able to develop a nickel project that
can take advantage of the expected upturn in demand and metal prices.
We believe that we are fortunate to be developing the project during
a downturn, as it will force us to keep capital and operating costs
to a minimum, and to use realistic or pessimistic projections of
revenue. A project which can survive such stress-testing will be
highly profitable when prices recover.
Why a Nickel Laterite then?
Dutwa is a landmark in African Eagle's history and for the cash we
will spend to conclude a scoping study there is simply no better or
comparable addition to internal value we could make by applying those
funds to any of our other more advanced projects.
Mkushi Copper Mines
At Mkushi our partners, CGA, completed the feasibility study in
October at a time that coincided with the bottom of the copper price
and the peak of energy, construction steel and consumables prices. We
had drilled out what 6 months previously would have been a viable
open pit mining operation producing some 20,000 tonnes of contained
copper per year for sale to local or regional smelters. Had we any
idea that the copper price would fall as drastically as it did we
would have delineated a larger resource, but at the time it would
have been poor use of capital to drill out significantly more than we
did.
Mkushi is secure for the future with a 25 year Mining Licence issued
and we are working with CGA to modify the project's parameters and
increase copper resources, which we have considerable scope to do, to
bring the project back to viability which even a relatively modest
increase in the copper price would assist.
Other Copper Projects
We made excellent progress during 2008 at Ndola and Mokambo
generating a number of drill ready targets at Ndola and receiving
promising results including 2.44% copper over 15m and 2.47% copper
over 12m from our 3,000m diamond drilling programme at Mokambo.
Parallel development of multiple exploration projects using our own
funds, however, is no longer sustainable in today's climate. With
Dutwa as our top priority for 2009, we are therefore seeking partners
to earn interests in our more advanced copper projects at Mokambo,
where we increased our interest to 87% at the end of 2008 and at
Ndola where we retain a 100% interest in the property.
Gold Projects
Since the implementation of our current strategy African Eagle's
geologists and exploration teams have, particularly over recent
months, focussed on reviewing in detail the great wealth of
exploration data that has been generated from our gold projects in
Tanzania.
This review enabled our geologists to identify a number of new
targets at Miyabi where I still expect that we will be able to
increase the resource to 1M oz or more from the current 520,000oz. In
addition, we are currently estimating an internal, non JORC compliant
gold resource, at Igurubi, which we will announce shortly.
Whist we have chosen not to direct our cash resources into our gold
projects, we have received a number of approaches, especially with
respect to Miyabi and Igurubi, to farm them out, vend them into new
vehicles or even sell them outright. We are currently examining
several proposals.
Corporate
To our longstanding, and I suspect long suffering, shareholders for
whom the increasingly positive news from Dutwa has halted the decline
in the share price, I would say that we really appreciate your
support and that we are as confident as we can be in the quality of
Dutwa and our other projects' ability to continue delivering good
news. Our inherent belief in African Eagle's fundamentals - and it's
almost a requirement in the resource business that you need to be an
optimist - has manifested itself in our own directors and senior
staff being significant buyers of African Eagle stock until the close
period rules overtook us. The fall in our share price until February,
as well as mirroring the junior mining sector as a whole, was
amplified in our case by the ability to sell our stock in the market
as over the last nine months we have been in the top quartile of AIM
minerals companies for liquidity. Generally, this is a good thing,
but last year particularly, it allowed easy sales by distressed funds
which needed to cover redemptions and debt repayments. This was
painful, but we have emerged stronger, with a bigger free float and a
strong base of private investors with no dominant shareholders.
We perceive potentially good news for shareholders from a revival in
interest in the AIM mining sector and the creation of new resource
funds. We also believe that the fundamentals of metals supply and
demand remain broadly positive and prices will improve in the longer
term. The future will belong to companies which survive the present
downturn and that have sound assets with low production costs. We
believe that Dutwa will place us in this category.
With many others in the resources business I've learned over time and
particularly over the past 12 months that foresight is not one of my
long suits so I'm not going to list what I think will be our
achievements in 2009 as confidently as I did last year. I would
emphasise, however, that I continue to look forward to a successful
future for the Company, for Dutwa and for our other key projects.
John Park
Chairman
30 April 2009
Consolidated Income Statement For The Year Ended 31 December 2008
+-------------------------------------------------------------------+
| | | | |
|-----------------------------+---------+-------------+-------------|
| | | Year to 31 | Year to 31 |
| | | December | December |
| | | 2008 | 2007 |
| | Note | | |
|-----------------------------+---------+-------------+-------------|
| | | £ | £ |
|-----------------------------+---------+-------------+-------------|
| | | | |
|-----------------------------+---------+-------------+-------------|
| Depreciation expense | | (86,405) | (83,023) |
|-----------------------------+---------+-------------+-------------|
| Employee benefits expense | | (979,613) | (622,395) |
|---------------------------------------+-------------+-------------|
| Impairment of deferred | 3 | (4,442,563) | (131,668) |
| exploration expenditure | | | |
|-----------------------------------+---+-------------+-------------|
| Impairment of goodwill | | (103,188) | (3,000) |
|-----------------------------------+---+-------------+-------------|
| Other expenses | | (462,229) | (531,542) |
|-----------------------------------+---+-------------+-------------|
| | | | |
|-----------------------------------+---+-------------+-------------|
| Operating loss | | (6,073,998) | (1,371,628) |
|-----------------------------------+---+-------------+-------------|
| | | | |
|-----------------------------------+---+-------------+-------------|
| Finance costs: | | | |
|-----------------------------------+---+-------------+-------------|
| Bank interest receivable | | 228,856 | 216,623 |
|-----------------------------------+---+-------------+-------------|
| Foreign exchange gain/(loss) | | 363,183 | 28,137 |
|-----------------------------------+---+-------------+-------------|
| | | | |
|-----------------------------------+---+-------------+-------------|
| Loss before tax | | (5,481,959) | (1,126,868) |
|-----------------------------------+---+-------------+-------------|
| | | | |
|-----------------------------------+---+-------------+-------------|
| Income tax expense | | - | - |
|-----------------------------------+---+-------------+-------------|
| | | | |
|-----------------------------------+---+-------------+-------------|
| Loss for the year | | (5,481,959) | (1,126,868) |
|-----------------------------------+---+-------------+-------------|
| | | | |
|-----------------------------------+---+-------------+-------------|
| | | | |
|-----------------------------------+---+-------------+-------------|
| Loss per share: | | | |
|-----------------------------------+---+-------------+-------------|
| Basic loss per share from total | 1 | (2.6p) | (0.7p) |
| and continuing operations | | | |
|-----------------------------------+---+-------------+-------------|
| Diluted loss per share from total | 1 | (2.6p) | (0.7p) |
| and continuing operations | | | |
|-----------------------------------+---+-------------+-------------|
| Headline loss per share from | 1 | (1.0p) | (0.6p) |
| total and continuing operations | | | |
|-----------------------------------+---+-------------+-------------|
| Diluted headline loss per share | 1 | (1.0p) | (0.6p) |
| from total and continuing | | | |
| operations | | | |
+-------------------------------------------------------------------+
All operations are continuing.
Consolidated Balance Sheet For The Year Ended 31 December 2008
+-------------------------------------------------------------------+
| | | | |
|-------------------------------+-------+-------------+-------------|
| | | Year to 31 | Year to 31 |
| | | December | December |
| | | 2008 | 2007 |
| | Note | | |
|-------------------------------+-------+-------------+-------------|
| | | £ | £ |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| ASSETS | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Non-current assets | | | |
|-------------------------------+-------+-------------+-------------|
| Property, plant and equipment | | 122,246 | 156,337 |
|-------------------------------+-------+-------------+-------------|
| Goodwill | 2 | - | 103,188 |
|-------------------------------+-------+-------------+-------------|
| Available for sale | | 1,967 | 6,462 |
| investments | | | |
|-------------------------------+-------+-------------+-------------|
| Investment in associates | | 2,123,371 | 1,809,901 |
|-------------------------------+-------+-------------+-------------|
| Investment in joint ventures | | 35,293 | - |
|-------------------------------+-------+-------------+-------------|
| Deferred exploration costs | 2 | 9,717,268 | 8,441,854 |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Total non-current assets | | 12,000,145 | 10,517,742 |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Current assets | | | |
|-------------------------------+-------+-------------+-------------|
| Other receivables | | 137,636 | 383,339 |
|-------------------------------+-------+-------------+-------------|
| Cash and cash equivalents | | 2,709,957 | 7,051,744 |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Total current assets | | 2,847,593 | 7,435,083 |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Total assets | | 14,847,738 | 17,952,825 |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| LIABILITIES | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Current liabilities | | | |
|-------------------------------+-------+-------------+-------------|
| Other payables | | (269,218) | (392,628) |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Total liabilities | | (269,218) | (392,628) |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Net assets | | 14,578,520 | 17,560,197 |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| EQUITY | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Equity attributable to equity | | | |
| holders of parent | | | |
|-------------------------------+-------+-------------+-------------|
| Share capital | | 2,125,402 | 2,123,402 |
|-------------------------------+-------+-------------+-------------|
| Share premium account | | 19,323,784 | 19,311,622 |
|-------------------------------+-------+-------------+-------------|
| Merger reserve | | 705,723 | 705,723 |
|-------------------------------+-------+-------------+-------------|
| Available for sale | | (13,694) | (9,199) |
| revaluation reserve | | | |
|-------------------------------+-------+-------------+-------------|
| Foreign currency reserve | | 717,750 | (1,189,274) |
|-------------------------------+-------+-------------+-------------|
| Retained losses | | (8,280,445) | (3,382,077) |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Total equity | | 14,578,520 | 17,560,197 |
+-------------------------------------------------------------------+
Consolidated Cash Flow For The Year Ended 31 December 2008
+-------------------------------------------------------------------+
| | | | |
|---------------------------------------+-------------+-------------|
| | | Year to 31 | Year to 31 |
| | | December | December |
| | | 2008 | 2007 |
| | Note | | |
|-------------------------------+-------+-------------+-------------|
| | | £ | £ |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Cash flows from operating | | | |
| activities | | | |
|-------------------------------+-------+-------------+-------------|
| Loss after taxation | | (5,481,959) | (1,126,868) |
|-------------------------------+-------+-------------+-------------|
| Adjustments for: | | | |
|-------------------------------+-------+-------------+-------------|
| Depreciation | | 86,405 | 83,023 |
|-------------------------------+-------+-------------+-------------|
| Exchange loss | | (8,141) | (25) |
|-------------------------------+-------+-------------+-------------|
| Loss/(Profit) on disposal of | | 1,839 | (516) |
| property, plant and equipment | | | |
|-------------------------------+-------+-------------+-------------|
| Interest received | | (228,856) | (216,623) |
|-------------------------------+-------+-------------+-------------|
| Impairment of deferred | 3 | 4,442,563 | 131,668 |
| exploration expenditure | | | |
|-------------------------------+-------+-------------+-------------|
| Share-based payments | | 583,591 | 234,185 |
|-------------------------------+-------+-------------+-------------|
| MCJV - Group share of | | 15,385 | 4,118 |
| associate loss | | | |
|-------------------------------+-------+-------------+-------------|
| Impairment of investments for | | - | 2,335 |
| resale | | | |
|-------------------------------+-------+-------------+-------------|
| Impairment of goodwill | 2 | 103,188 | 3,000 |
|-------------------------------+-------+-------------+-------------|
| Decrease/(Increase) in other | | 273,662 | (135,999) |
| receivables | | | |
|-------------------------------+-------+-------------+-------------|
| (Decrease)/Increase in other | | (116,230) | 32,068 |
| payables | | | |
|-------------------------------+-------+-------------+-------------|
| Kujima - Group share of joint | | (1,540) | - |
| venture gain | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Net cash used in operating | | (330,093) | (989,634) |
| activities | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Cash flows from investing | | | |
| activities | | | |
|-------------------------------+-------+-------------+-------------|
| Payments to acquire property, | | (43,892) | (78,280) |
| plant and equipment | | | |
|-------------------------------+-------+-------------+-------------|
| Payments for deferred | | (4,020,510) | (2,775,401) |
| exploration expenditure | | | |
|-------------------------------+-------+-------------+-------------|
| Proceeds from sale of | | - | 516 |
| tangible assets | | | |
|-------------------------------+-------+-------------+-------------|
| Interest received | | 228,856 | 216,623 |
|-------------------------------+-------+-------------+-------------|
| Investment in associates | | (185,718) | - |
|-------------------------------+-------+-------------+-------------|
| Investment in joint ventures | | (33,753) | - |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Net cash used in investing | | (4,055,017) | (2,636,542) |
| activities | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Cash flows from financing | | | |
| activities | | | |
|-------------------------------+-------+-------------+-------------|
| Proceeds from issue of share | | 14,162 | 8,152,862 |
| capital | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Net cash used from financing | | 14,162 | 8,152,862 |
| activities | | | |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Net (decrease)/increase in | | (4,370,948) | 4,526,686 |
| cash and cash equivalents | | | |
|-------------------------------+-------+-------------+-------------|
| Cash and cash equivalents at | | 7,051,744 | 2,516,712 |
| beginning of period | | | |
|-------------------------------+-------+-------------+-------------|
| Exchange gain | | 29,161 | 8,346 |
|-------------------------------+-------+-------------+-------------|
| | | | |
|-------------------------------+-------+-------------+-------------|
| Cash and cash equivalents at | | 2,709,957 | 7,051,744 |
| end of period | | | |
+-------------------------------------------------------------------+
Notes to the Consolidated Statements For The Year Ended 31 December
2008
1. LOSS PER SHARE
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 year. 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 antidilutive.
Loss Per Share
2008 2007
£ £
Loss for the period (5,481,959) (1,126,868)
Weighted average number of shares in issue 212,467,525 172,383,883
Basic & diluted loss per share (2.6p) (0.7p)
Headline loss per share
Headline loss per share has been calculated in accordance with the
Institute of Investment Management and Research's ("IIMR") Statement
of Investment Practice No. 1 entitled 'The Definition of Headline
Earnings' and The South African Institute of Chartered Accountants
Circular 8/2007 entitled 'Headline Earnings'. The calculation of
headline loss per share is based on the loss for the period of
£2,197,724 (2007: £1,028,443) 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.
+--------------------------------------------------------------------------------+
| | 2008| 2007|
|--------------------+---------------------------------------+-------------------|
| | Gross| Net| Gross| Net|
|Headline loss | £| £| £| £|
|--------------------+-------------------------+-------------+-------+-----------|
| | | | | |
|Loss for the period | | (5,481,959)| |(1,126,868)|
|--------------------+-------------------------+-------------+-------+-----------|
|Adjusted for: | | | | |
|--------------------+-------------------------+-------------+-------+-----------|
| (Less)/plus | | | | |
|loss/(profit) on | | | | |
|sale of fixed | | | | |
| assets | 1,839| 1,324| (516)| (361)|
|--------------------+-------------------------+-------------+-------+-----------|
| Plus impairment | | | | |
|on exploration | | | | |
|assets | 4,442,563| 3,198,646|131,668| 92,168|
|--------------------+-------------------------+-------------+-------+-----------|
| Plus Group share | | | | |
|of associated loss | 15,385| 11,077| 4,118| 2,883|
|--------------------+-------------------------+-------------+-------+-----------|
| Less Group share | | | | |
|of joint venture | (1,540)| (1,109)| -| -|
|--------------------+-------------------------+-------------+-------+-----------|
| Plus impairment | | | | |
|of available for | | | | |
|sale financial | | | | |
| assets | -| -| 2,335| 1,635|
|--------------------+-------------------------+-------------+-------+-----------|
| Plus impairment | | | | |
|of goodwill | | | | |
| | 103,189| 74,296| 3,000| 2,100|
|--------------------+-------------------------+-------------+-------+-----------|
|Headline loss for | | | | |
|the period | | | | |
| | | (2,197,725)| |(1,028,443)|
|--------------------+-------------------------+-------------+-------+-----------|
|Weighted average | | | | |
|number of shares in | | | | |
|issue | | | | |
| | | 212,467,525| |172,383,883|
|--------------------+-------------------------+-------------+-------+-----------|
|Basic and diluted | | | | |
|headline loss per | | | | |
|share | | | | |
| | | (1.0p)| | (0.6p)|
+--------------------------------------------------------------------------------+
2. INTANGIBLES
The Group 2008
+-------------------------------------------------------------------+
| | Goodwill on | Deferred | Total |
| | Consolidation | Exploration | |
| | | costs | |
|-----------------------+---------------+-------------+-------------|
| | £ | £ | £ |
|-----------------------+---------------+-------------+-------------|
| | | | |
|-----------------------+---------------+-------------+-------------|
| Cost: | | | |
|-----------------------+---------------+-------------+-------------|
| At 1 January 2008 | 103,188 | 8,441,854 | 8,545,042 |
|-----------------------+---------------+-------------+-------------|
| Foreign currency | - | 1,758,217 | 1,758,217 |
| exchange differences | | | |
|-----------------------+---------------+-------------+-------------|
| Additions | - | 3,959,760 | 3,959,760 |
|-----------------------+---------------+-------------+-------------|
| Impairment costs | (103,188) | (4,442,563) | (4,545,751) |
|-----------------------+---------------+-------------+-------------|
| | | | |
|-----------------------+---------------+-------------+-------------|
| At 31 December 2008 | - | 9,717,268 | 9,717,268 |
+-------------------------------------------------------------------+
The Group 2007
+---------------------------------------------------------------------+
| | Goodwill on|Purchased| Deferred| Total|
| |Consolidation| goodwill|Exploration| |
| | | | costs| |
|---------------------+-------------+---------+-----------+-----------|
| | £| £| £| £|
|---------------------+-------------+---------+-----------+-----------|
| | | | | |
|---------------------+-------------+---------+-----------+-----------|
|Cost: | | | | |
|---------------------+-------------+---------+-----------+-----------|
|At 1 January 2007 | 103,188| 3,000| 7,172,869| 7,279,057|
|---------------------+-------------+---------+-----------+-----------|
|Foreign currency | -| -| 260,330| 260,330|
|exchange differences | | | | |
|---------------------+-------------+---------+-----------+-----------|
|Additions | -| -| 2,954,342| 2,954,342|
|---------------------+-------------+---------+-----------+-----------|
|Transfers | | |(1,814,019)|(1,814,019)|
|---------------------+-------------+---------+-----------+-----------|
|Impairment costs | -| (3,000)| (131,668)| (134,668)|
|---------------------+-------------+---------+-----------+-----------|
| | | | | |
|---------------------+-------------+---------+-----------+-----------|
|At 31 December 2007 | 103,188| -| 8,441,854| 8,545,042|
+---------------------------------------------------------------------+
Goodwill on consolidation relates to the acquisition of Katanga
Resources Ltd in 2002. The goodwill is linked to the recovery of the
deferred exploration costs on the Katanga mineral licences. The
licences existing at the time of the acquisition have been fully
impaired in 2008. For this reason the directors have decided to fully
impair the goodwill on consolidation.
3. IMPAIRMENT OF DEFERRED EXPLORATION
During the year a number of projects were impaired on the grounds
they were not economically feasible. The geographical location of
these projects is shown below:
+--------------------------------------+
| | | | |
|------------+---+-----------+---------|
| | | 2008 | 2007 |
|------------+---+-----------+---------|
| | | £ | £ |
|------------+---+-----------+---------|
| Tanzania | | 657,597 | 118,484 |
|------------+---+-----------+---------|
| Zambia | | 2,918,989 | - |
|------------+---+-----------+---------|
| Mozambique | | 865,977 | 13,184 |
|------------+---+-----------+---------|
| | | | |
|------------+---+-----------+---------|
| | | 4,442,563 | 131,668 |
+--------------------------------------+
The projects written off in 2008 are detailed below. The Tanzania
write-off in 2007 relates to the Mbeya project.
2008
Write-off Reason for
Project Country Mineral £ write-off
Not
Fingoe Mozambique Gold 165,996 prospective
Not
Majele Mozambique Gold, base metals 518,494 prospective
Not
Tambara Mozambique Gold, silver 166,145 prospective
Not
Kakumbi Tanzania Gold 132,784 prospective
Not
Kiwasi Tanzania Gold 78,866 prospective
Not
Kisamamba Tanzania Gold 65,760 prospective
Not
Mabale Tanzania Gold 53,426 prospective
Not
Mbeya Tanzania Gold, Uranium 70,453 prospective
Licence
Sasare Zambia Iron-oxide-copper-gold 1,737,829 expired**
Licence
Kampumba Zambia Copper 554,208 expired**
Licence
Lunga Zambia Copper, gold, uranium 626,952 expired**
Not
Other* Tanzania/Mozambique Gold 271,650 prospective
Total 4,442,563
* Write-offs less than £50,000.
** The three Zambian licences were dropped as under new government rules
prospecting licences cannot be held for more than seven years. Certain
areas within these licenses have been applied for by Kujima, a joint
venture company set up between African Eagle and a local Zambian partner.
4. GOING CONCERN
The current economic conditions provide particular challenges to the
Board and it is their prime responsibility to ensure the Company
remains a going concern. At the year ended December 31, 2008 the
Company had cash and cash equivalents of £2.7M and no borrowings. The
Board considers this is sufficient to maintain the Company as a going
concern for a period of over twelve months from the date of signing
the annual report and accounts. In the later part of 2008 and in
quarter one 2009 the Company took measures to reduce its overheads.
This resulted in some of its projects being placed on care and
maintenance and overheads generally being reduced. However, the
directors are aware that the Group will need additional working
capital in the foreseeable future to support corporate overheads,
exploration programmes and to finance the Dutwa nickel project's
Feasibility Study. The Company has historically entered into joint
venture agreements with partners to share the risks and costs of
exploration. A partner also brings with it technical expertise in
development and mining in addition to financial resources. The
Company has been speaking to prospective partners about the Dutwa
project but to date no deal has been concluded. Besides looking for
the right joint venture partner the Company is considering other
options to raise finance including the sale of an asset and the
raising of finance on the equity markets. Although African Eagle has
been successful in raising finance in the past, there is no assurance
that it will be able to obtain adequate finance in the future.
However, the directors have a reasonable expectation that they will
secure additional funding when required to continue operating for the
foreseeable future. For this reason, the directors continue to adopt
the going concern basis in preparing the financial statements.
5. Summary Accounts
The summary accounts set out above do not constitute statutory
accounts as defined by Section 240 of the UK Companies Act 1985. The
summarised consolidated balance sheet at 31 December 2008, together
with the summarised consolidated income statement and the summarised
consolidated cash flow statement for the year then ended have been
extracted from the Group's 2008 audited statutory financial
statements. The auditor's report on the statutory financial
statements for the two years ended 31 December 2008 were unqualified
and did not contain any statement under Section 237(2) or (3) of the
Companies Act 1985.
6. PRELIMINARY STATEMENT
Copies of the Annual Report will be sent to shareholders that have
elected to receive hardcopy documents later this month and will be
available from the Company at 2nd Floor, 6-7 Queen Street, London,
EC4N 1SP. The full financial statements will be made available on the
Company's website www.africaneagle.co.uk at the same time they are
mailed to shareholders.
For further information, see the Company's website
www.africaneagle.co.uk or contact one of the following:
Bevan Metcalf
African Eagle
+44 20 7248 6059
Nicola Marrin
Seymour Pierce Limited, London
+44 20 7107 8000
Charmane Russell
Russell & Associates, Johannesburg
+27 11 8803924
+27 82 8928052
Ed Portman / Leesa Peters
Conduit PR, London
+44 20 7429 6607
+44 7733 363 501
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