African Eagle Resources: City analysts welcome US$5 mln investment from IFC

African Eagle Resources (LON:AFE) has confirmed that the World Bank’s investment arm, the IFC, has signed an agreement to invest US$5 million into the company.

This investment sees the IFC take a 10 per cent stake in the company.

The funds will help African Eagle evaluate the Dutwa Nickel project, primarily contributing to the bankable feasibility study. The pivotal study is already underway and is scheduled for completion by the end of the year.

African Eagle said it expects the funds to be disbursed by the IFC this month.

“We are pleased to have secured the IFC's investment through the signature of the final form subscription agreement and are working hard to satisfy the final outstanding conditions so that funds can be disbursed in January whilst progressing with our bankable feasibility study for Dutwa," said chief executive Trevor Moss.

As requested by the IFC African Eagle has agreed publicly to disclose any material payments to the Tanzanian Government.

"IFC is pleased to have signed an equity agreement with African Eagle Resources to support the company's Dutwa Nickel project in Tanzania, which has the potential to become a major African Nickel producer should the current feasibility study work continue to be successful,” added Tom Butler, Head of Mining at the IFC, Tom Butler. 

While the share price remains unmoved today at 5p, Seymour Pierce analyst Matthew McDonald says the IFC’s investment affirms the viability of the Dutwa project.

The analyst believes that having the IFC as a key investor will assist the company in attracting future investments for the project.

Seymour Pierce rates African Eagle as a ‘buy’ with a 20p target price, which implies some 290 per cent upside from the current price of 5.12p.

Similarly, Ocean Equities also welcomed the IFC’s investment in the company. Analyst Christopher Welch says it is a good deal for both African Eagle and the IFC.

“This agreement marks the completion of the investment process for the IFC and its rigorous due diligence process through which its investment projects and companies must go through. 

“It is a clear sign that the IFC has confidence in African Eagle, the geological and technical aspects of the project, and that the expected impact will have a large net benefit to the people of Tanzania,” Welch said in a note to clients.

The analyst explains that Dutwa has rare attributes that make it one of the most attractive Nickel laterite projects in development. 

He says that low estimated capital expenditure is particularly important. At US$600 million the project will cost just a fraction of what most other Nickel laterite projects cost to develop.

According to Welch, this low cost reflects the fact that Dutwa’s ore is amenable to atmospheric leaching at low acid consumption rates. As such it does not require the complex and expensive high pressure acid leach kit that many other projects require to be economic.

The analyst also picked out a number of potential catalysts that could lift the shares in coming months.  

He believes that upcoming metallurgical test results will reaffirm the group’s earlier results. He highlighted that the project’s viability rests on its metallurgical properties, so the results will be critical.

Meanwhile, Welch also highlighted that exploration drilling is nearing completion. He is expecting that a final resource expansion will take Dutwa above the 100 million tonne marker and that Dutwa’s resource will be upgraded into the indicated resource category.

Additionally, he says that exploration results from the Miyabi joint venture will also be positive for the company.