African Metals Purchases a Concentration Plant and is Preparing to Commence Mining and Processing of Oxide Material at its Luisha South Project, Katanga Province, Democratic Republic of Congo. Secures Financing and Off-Take Agreement from Traxys.

Sep 19, 2011, 12:41 ET from African Metals Corporation

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TSXV: AFR
Frankfurt: OWW

VANCOUVER, Sept. 19, 2011 /PRNewswire/ - African Metals Corporation (the "Company" or "AFR") is pleased to report that one of its subsidiaries has purchased a Dense Media Separation (DMS) plant, spiral bank and associated ancillary plant equipment, to commence mining and processing of oxide material from the Luisha South Project in the Democratic Republic of the Congo ("DRC").

Highlights

AFR's subsidiaries have:

  • Secured a US$3.7 million loan agreement with Traxys Europe SA
  • Executed a 4 year Off-take Agreement with Traxys Europe SA
  • Purchased a DMS Plant and Spiral bank with associated equipment
  • Executed a Management Contract with M&J Investments for managing the mining and processing of the Luisha South material, and
  • Expect to commence production in October 2011

Loan Facility by Traxys Europe SA

Kundelungu Minerals sprl ("Kundelungu"), a subsidiary of AFR in the DRC, has entered into a secured Loan Agreement with Traxys Europe SA, ("Traxys"), whereby Traxys has provided a loan facility of US$3.7 million to purchase a DMS Plant and associated equipment which will enable AFR's 75% owned DRC subsidiary, Luisha Mining Enterprise Sprl ("LME"), to commence production at its Luisha South Project.

Under the terms of the agreement, Kundelungu will repay the loan facility from 60% of production profits.  The Company has organized the pledge of the shares of certain of its key subsidiaries to Traxys to provide security for the loan.

Off-Take Agreement with Traxys Europe SA

African Metals Corp through LME has executed an exclusive Off-Take Agreement with Traxys. The Agreement is for Traxys to purchase at a competitive London Metal Exchange market price the copper oxide and sulphide concentrates produced from the Luisha South Project for a period of 48 months from commencement of production.

Operating from more than 20 global offices with over 250 employees, Traxys primarily focuses on the marketing and sourcing of base metals and concentrates, minor and alloying metals, industrial minerals and chemicals, materials for steel mills and foundries and carbon products. Traxys also offers financial and logistical solutions for the Ferroalloy, Metal, Mineral, Mining and Energy Industries. Traxys has annual revenue of approximately US$5 billion.

Plant Purchase Agreement

Kundelungu has purchased a 100% interest and ownership of a DMS Plant, Spiral bank and ancillary equipment located in the Katanga Province, DRC for a purchase price of US$3 million. The plant is the same one used by AFR to conduct a 200 tonne bulk processing trial of oxide stockpile material in May 2011 (see AFR's news release of May 20, 2011). Approximately 200 tonnes of material was successfully processed by the DMS plant to produce a DMS concentrate grading approximately 32% copper, 1.2% cobalt and a fines concentrate from the spirals bank grading approximately 28% copper and 1.6% cobalt. These results highlighted the efficiency of the DMS and Spirals plant in processing the Luisha South Project material to produce a saleable product on which AFR could build a profitable business.

The DMS Plant has already been decommissioned ready for transport to LME's Luisha South Project where commissioning will take place over the next three weeks. The plant is rated at a maximum through put of 100 tonnes per hour which will more than accommodate AFR's production plans.

Management Agreement

M&J Investments sprl ("M&J"), current operators of the DMS Plant, have also entered into a binding Management Contract with Kundelungu for the mining and processing of Luisha South material for a period of 6 calendar months starting from commission of the DMS plant. M&J are also engaged to undertake the necessary training of AFR's key personnel in the ongoing processing of material through the DMS plant. AFR have supplemented the M&J contract by engaging mineral processing professionals to assist in the smooth transition of operations after the first 6 month period. AFR will also be entering into a period of recruitment of suitably qualified support personnel to ensure proper management and control of the operations.

The Management Contract includes payments to M&J for decommissioning, transportation to the Luisha South Project and full commissioning of the DMS plants, spirals bank, recycling ponds, accommodation camp and plant infrastructure.

Plans for the DMS Plant

AFR has completed extensive modelling of the mining and processing of the Luisha material. The Company will inject a total of US$5.5 million in capital expenditure during the first 15 months to enable initial processing of the oxide material and then subsequent processing of the sulphide material. Part of this funding comes from the Traxys loan and the remainder will come from production revenues. The bulk of this capital expenditure will be for the DMS plant and floatation cells.

Initially, the Company plans to throughput oxide material derived from the waste rock stockpile. A staged installation of floatation cells is also scheduled for the future treatment of sulphide material as well as oxide tailings.

Internal economic modelling has been completed and is favourable for the Project however the Company intends to undertake independent cash flow modelling and present those findings as they become available.

Nigel Ferguson, CEO and President of African Metals Corp, commented:

"The Company is very pleased to report the purchase of the DMS plant with assistance from Traxys. The experience of the M&J team during the term of the management agreement will ensure the Luisha Project quickly enters into oxide copper concentrate production, which we believe will enable Kundelungu to retire all debt within 9 months and bring the Company into positive cash flow based on conservative input parameters. The off-take agreement with Traxys augurs well for the mid to longer term outlook of the Project. Concurrently the Company will continue surface drilling to seek extensional mineralisation outside the current resource area and is also actively assessing several other projects, from which it hopes it will be able to multiply production levels."

"AFR has achieved great success in the field during the last 18 months and with a larger resource estimate recently announced the Company is confident that this will support commercial operations well into the future. With the commissioning of the DMS concentration plant and subsequent floatation circuits, the anticipated cash flow will make the Company well funded and able to service its expanding operations in the copper belt through recently acquired projects. The Company is targeting initial concentrate production at the Luisha South Project by the middle of October, 2011."

CAUTION TO INVESTORS

The Luisha South Project includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Company's plans to commence production of the Luisha South Project will be realized. The Company has not completed a feasibility study, a pre-feasibility study, a scoping study or a preliminary economic assessment to analyse the economics of the planned operations, and as a result there is a higher risk and no guarantee that the operations will be economic.

ON BEHALF OF THE BOARD OF DIRECTORS OF AFRICAN METALS CORPORATION

"Nigel Ferguson"

Nigel Ferguson
President & CEO

Ronald J. Lawrence, AIG, the Vice President, Exploration of the Company and a qualified person under National Instrument 43-101, has verified the data disclosed in this release.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEW RELEASE.

This News Release contains forward-looking statements.  Forward-looking statements are statements which relate to future events.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our industry, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

About African Metals Corporation.

African Metals Corporation [TSXV "AFR"] is a Canadian listed company focused on the discovery and development of Copper and Cobalt deposits in the highly mineralized Katanga Copper Belt of the world renowned Africa Copper Belt in the Democratic Republic of Congo ("DRC").

AFR purchased the assets of Chevalier Resources Inc. in March 2010 including an initial 57% interest in the Luisha South Project within licence PEPM 4881. In July 2010, AFR negotiated a further 18% interest in the Project with the option to increase the equity interest to 90% based on results. The Project is located 75 kilometres northwest of Lubumbashi, the capital of Katanga Province and consists of approximately 16.2km².

The Luisha South Project includes a small historical open pit mine and associated waste rock stockpile and is underlain by Roan Group sediments which host major Cu-Co deposits in the DRC. The Luisha South material body was explored between 1923 and 1928 and an oxide deposit with an estimated pre-production tonnage of approximately 350,000 tonnes at 8.6% Cu was delineated (the resource estimate non-compliant in terms of NI 43-101).

AFR completed a 2,002 metre RC percussion drilling program that enabled the estimation of a NI 43-101 compliant maiden Inferred Resource of 5.8 Million tonnes at 1.3% Cu for 75,400 tonnes of contained copper metal and 0.4% Co for 23,200 tonnes of contained cobalt metal (using 0.5% Cu cut-off). See the technical report of Geosure Exploration & Mining Solutions Pty Ltd, dated November 15, 2010 and filed on www.sedar.com on December 2, 2010. A further 1,538.73 metres of diamond core drilling at the Project in January 2011 enabled a re-estimation of the resource to produce a NI 43-101 compliant Inferred Resource of 14.7 Million tonnes at 1.1% Cu for 161,700 tonnes of contained copper metal and 0.3% Co for 44,100 tonnes of contained cobalt metal (using a 0.5% Cu cut-off). The revised resource represented an increase of 114% and 90% respectively of the previous contained copper and cobalt metal estimates. See the Company's news release dated August 29, 2011.

The Luisha South Project also covers some three kilometres of the Roan Group strike length which is favorable for Cu-Co mineralization.

AFR has also secured option rights over several projects in Zambia that are considered prospective for both copper cobalt and in some cases, gold mineralization. AFR is currently completing initial exploration of these licences to confirm its intention to continue with the agreements.

SOURCE African Metals Corporation