African Eagle’s Dutwa project economics welcomed by brokers

Brokers noted African Eagle Resources’ (LON:AFE) comments today that the Dutwa project is likely to be economically viable whatever processing route is chosen, according to a report by Snowden Mining Consultants.

This morning the group revealed the findings of a report on Whittle Optimisation for the Tanzanian nickel project.  It is currently working towards the completion of Dutwa’s pre-feasibility study, which is due in the third quarter of 2011.

The report included mining and processing schedules for a new financial model and a mining plan that will determine Dutwa’s mining costs.

It indicated that mining costs will be low and it will have a strip ratio of about 0.5 to 1. The report concluded that Dutwa is likely to be economically viable, irrespective of whether agitated tank leach or heap leach is eventually chosen to process the Dutwa ore.

Seymour Pierce reiterated its ‘buy’ recommendation on African Eagle, saying the report, which assumes a conservative nickel price, goes some way to validating the economic viability of the project.

“At a current share price of 11.875p the stock has 68 percent upside to our 20p target price,” the broker said.

In its ‘Morning View’, Fairfax said that while the low strip ratio is not surprising, it is good to see this confirmed from the Whittle study.

Fairfax welcomed that management is systematically de-risking the Dutwa project and said results thus far appear encouraging. 

“There are few ways for pure nickel exposure in the London market and although not without risks, African Eagle is an attractive option with potentially very significant upside. 

“We look forward to updates as the project is further de-risked, most importantly will be further work on the metallurgy and the best route for processing e.g. agitation leach versus heap leach.  Another key item to work through will be the optimised logistics for raw materials in and concentrate out,” the broker added.

The study was based on October’s inferred resource model - some of which has since been upgraded into the indicated resource category - and it will be revised when the resource model has been upgraded further.

With better data the confidence will improve in the capital and operating cost estimations.

Importantly the report concluded that mining will be relatively straightforward because the Dutwa deposits are at the surface and the waste to ore strip ratio very low - between 0.45 and 0.53 to one.