Africo Resources Ltd.

Africo Resources Ltd.

December 21, 2006 10:49 ET

Africo Resources Ltd. Commences Trading on The Toronto Stock Exchange

Drill program and Phase I development underway on high grade Kalukundi copper-cobalt deposit

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 21, 2006) - Africo Resources Ltd. (TSX:ARL) is pleased to announce that its common shares have commenced trading, effective December 15, 2006, on The Toronto Stock Exchange under the symbol "ARL".

Africo Resources is a development stage copper-cobalt company with an operational base in the DRC and with corporate offices in Vancouver, Canada. Africo is developing the high-grade Kalukundi copper cobalt deposit near Kolwezi in the DRC.

Africo's President and CEO is Dr. Antony Harwood, formerly a vice president of Placer Dome. Tony brings over 20 years of experience in Africa to the Company and has attracted a seasoned mine building and operating team to the Company including Grant Pierce (formerly with Resolute and Barrick in Tanzania) as Country Manager. The development team will be based in the DRC.

Feasibility Study

A feasibility study was carried out on behalf of the Swanmines Joint Venture ("Swanmines") which controls the deposit. Gecamines, the state mining company, is a 25% carried shareholder of Swanmines. Africo has an option to acquire 100% of the shares of the remaining, 75% shareholder, which option is scheduled to be exercised by the end of 2006.

The independent feasibility study, dated May 15th, 2006, was prepared for Africo on behalf of Swanmines by MDM Engineering Ltd. of South Africa and included the following additional independent consultants:

- Mintek (Metallurgy)

- RSG Global Pty (Resource and Mining)

- MDM (Plant and Process)

- Knight Piesold (Geotechnical)

- Golders and Associates (Tailings)

- AMC Ltd. (Environmental)

The following summarizes the key assumptions and results of the study:

- Initial Life of Mine - 10 years

- Capital costs - $166.6 million

- Pre-stripping costs - $6.9 million

- IRR - 28.5%

- Project NPV - $162.9 million

- Profit Margin - 54.4%

- Copper revenue at $1.25 per pound - $452.7 million

- Cobalt revenue at $12 per pound - $1,018.1 million

- Cash per pound copper on a co-product basis - $0.64

- Cash cost per pound copper net of cobalt by-product credit - minus $1.17

- Total copper production - 164,296 tonnes

- Total cobalt production - 38,485 tonnes

- With copper revenue based on modeled copper price, cobalt price can decrease by 83% before break-even operating cost is reached.

- Recoveries to metal (SX-EW) - 88% Copper 71% Cobalt

- Mine operating costs per tonne of ore mined - $56.02 (Mining, Plant and G&A)

- Anticipated start up - mid 2008(i).


The 43-101 compliant mineral reserve at Kalukundi is as follows:

Copper Copper Cobalt Cobalt
Classification Tonnes Grade % Tonnes Grade % Tonnes
Proved 6.6 million 2.44 160,268 0.69 45,119
Probable 1.3 million 2.02 25,773 0.69 8,867
Total 7.8 million 2.37 186,041 0.69 53,986

The 43-101 compliant Mineral Resources at Kalukundi are as follows:

Copper Copper Cobalt Cobalt
Classification Tonnes Grade % Tonnes Grade % Tonnes
Measured to 150 m 9.65 million 2.45 236,625 0.61 59,031
Indicated to 150 m 2.46 million 2.31 56,856 0.61 15,088
Inferred to 200 m 15.02 million 2.63 395,044 0.58 87,120

The above resources and reserves are based upon 78 boreholes (9650 m). An additional 30 boreholes were drilled by Africo which were not used in the resource evaluation, for geotechnical, condemnation and exploration purposes. An additional eight mineralized fragments within the concession area have received only preliminary investigation. At least two of these are considered to warrant immediate resource-directed drilling.

The assay laboratory that conducted work for Africo is SGS Lakefield Laboratory in Johannesburg.


The project involves a conventional open pit selective mining exploitation method using a mining contractor. The Company will operate a multiple pit, multiple cut back method which will require timely pre-stripping and blending of ore to maintain continuity of feed.

Mining is currently modeled using a waste to ore stripping ratio of 4.02:1. Capital and mine operating costs estimates were developed by MDM Engineering Ltd. and RSG Global Pty., respectively. Capital costs of the process plant assume a lump sum, turnkey contract and include a contractors margin and average contingency of 7.6%. A shadow contractor mining cost model was developed by RSG Global to develop first principal costs estimates which provides a comparison against the current and future contract mining tender submissions.


The NPV sensitivity to discount rate and metal price is illustrated below for a range of prices and discount rates which, for comparison purposes, are broadly consistent with those reported in 2006 by competitors in the DRC:

Base Model +10% metal +20% metal
Discount Rate (%) (US$ millions) prices(i) prices(ii)
10 162.9 211.9 259.8
8 193.7 248.7 302.6
6 230.2 292.3 353.1
(i) $1.375 per pound copper and $13.20 per pound cobalt
(ii) $1.50 per pound copper and $14.40 per pound cobalt

(Current Prices: $2.95 per pound copper and $23-28 per pound cobalt.
Source 3 month LME (Copper) and BHP Billiton Cobalt Open Sales
System and Norlisk websites (Cobalt))

The following table also provides valuations for each of the shareholders in Swanmines for the base case and also shows project valuations based on 100% equity financing for the project.

70% Bank Financing 100% Equity
Cu Price Co Price Africo(i) IRR Gecamines(i) NPV(i) IRR
US$ US$ US$ millions % US$ millions US$ millions %
1.25 12.00 102.7 28.5 60.2 43.6 14.7
13.20 127.4 32.2 69.5 68.2 17.2
14.40 152.3 35.7 78.9 93.5 19.6
1.40 12.00 115.5 30.4 65.0 56.2 16.0
13.20 140.4 34.0 69.5 81.4 18.4
14.40 164.8 37.3 78.9 106.7 20.8
(i) 10% discount rate


Introduction of new technology and creation of value-added products

The study has demonstrated that metal recoveries can be achieved that are considerably higher than has been reported from past operations in the DRC. The planned introduction of SX-EW technology for both copper and cobalt at Kalukundi will be one of very few such plants planned in the copperbelt. Creation of high value metal products versus lower grade products maximizes the in-country value add for both metals to be produced.

Direct and indirect project benefits

Over the life of mine, income via royalties, income taxes, and witholding taxes is estimated at $207.8 million in 2006 money terms. In addition, the project expects to purchase $35.8 million of power for the operation. This is expected to have a significant positive impact in an immediate region that has little or no industry or employment. The project is expected to create approximately 540 direct jobs, over 80% of which will initially be Congolese, and which is expected to increase through implementation of training programs.

Swanmines anticipates during 2006-7 to be spending $1.6 million on maintenance and improvement of local roads which are currently in poor condition. Swanmines also has allowed for $0.8 million of expenditures in 2006 to provide significant improvements to the local community of Kisinkala. Swanmines will construct permanent housing, establish water supply and adequate sewage facilities, none of which currently exist. Over the life of mine, Swanmines will budget $2 million for social development programs in local communities. These programs will be developed in conjunction with local stakeholders and will be focused on health and educational initiatives. Swanmines will also commit to $950,000 over the life of mine to training programs to develop skills within the local population.


Significant opportunities exist to expand the current reserve base within 3-6 months. These can be summarized as follows:

1) Studies to convert existing Measured and Indicated Resources to reserves. Approximately 1.4 Mt of resource are currently not included in the mining plan as reserves due to the proximity of a powerline. The following is an extract from RSG Global's mining section regarding these resources:

"Some 1.4Mt at 2.29%Cu and 0.43%Co of ore within the optimised pit shell cannot be included in the design. At average recoveries of 90% for copper and 72% for cobalt, this represents 28,400t of recoverable copper and 4,280t of recoverable cobalt. This reduces the potential revenue of the project by approximately US$191.5M."

Africo will carry out a small scale study to examine the feasibility of including these resources in the mine plan.

2) Carrying out drilling on high priority surface mineralized bodies. At least two of these are known to exist on the property. These will be the subject of diamond drilling and associated programs designed to fast-track high quality oxide resources. It is anticipated that each target would require only about 2,500 metres of drilling to achieve this objective.

3) Drilling in the reported resource to convert resources to reserves. Significant resources exist beneath each proposed pit. Africo plans to carry out work designed to improve resource confidence and evaluate conversion to reserves through supplementary studies including metallurgical programs to evaluate mixed oxide-sulphide mineralization at increasing depths. Approximately 3,500 metres of drilling would likely be required to achieve these resource expansion objectives

4) Re-running the pit optimization using recently received gangue acid data (lower operating costs) which has potential to upgrade additional resources into reserves.

In summary, Kalukundi has potential to increase in size within three to six months at which time the feasibility study could be re-examined to evaluate project expansion.

This news release has been prepared under the supervision of Mike Evans, Africo's consulting geologist, who is a Qualified Person under National Instrument 43-101 ("NI 43-101"). The results summarized in this news release were generated by the independent consulting firms listed below, as reported in the NI 43-101 feasibility study technical report relating to the Kalukundi project and available on SEDAR. The individual qualified persons, as defined by NI 43-101 are:

John Hearne, RSG Global, for the Mining section including Mining Opex;

Julian Verbeek, RSG Global, for the Resources section;

Dave Dodd, MDM Engineering Ltd., for the Metallurgy, Process Design, Capex and Process Opex sections; and

Kees Dekker, RSG Global for the Financial Evaluation section.

(i) According to the feasibility study, the project requires total capital expenditures of US$198.9 million including working capital and pre stripping costs. Thus Africo will require additional capital to complete mine development and meet its targeted production.


Antony Harwood, President and Chief Executive Officer

This news release contains certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical fact, that address events or developments that Africo expects to occur, are forward-looking statements.

Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although Africo believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in forward-looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration success, continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Forward-looking statements are based on the beliefs, estimates and opinions of Africo's management on the date the statements are made. Africo undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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