TIDMKEFI
RNS Number : 6661L
KEFI Minerals plc
13 January 2016
13 January 2016
KEFI Minerals plc
("KEFI" or the "Company")
UPDATE OF DEVELOPMENT AND FINANCE PLAN
TULU KAPI GOLD PROJECT, ETHIOPIA
KEFI Minerals plc (AIM: KEFI), the gold exploration and
development company with projects in the Kingdom of Saudi Arabia
and the Federal Democratic Republic of Ethiopia, is pleased to
report progress on the development and financing plan for the Tulu
Kapi Gold Project ("Tulu Kapi") as refined since the 2015
Definitive Feasibility Study ("2015 DFS") published in August 2015.
This follows feedback from the financiers who have now been engaged
and other recent appointees, including project contractors
(selected in October 2015), project partner (in November 2015) and
debt financiers (in December 2015), along with the results of
now-completed reviews by the Independent Technical Consultants to
the financiers.
As previously foreshadowed, KEFI is now focused on selecting the
preferred gold-streamer based on tabled headline terms and then
formalising documentation for the financing syndicate (the
"Syndicate") as a whole. Front end development engineering and
design is now at an advanced stage, and the development schedule
along with that for community resettlement anticipates production
starting in 2017.
In refining the plans, the long-term gold price for corporate
planning, including equity valuation and the economic results
presented herein, is US$1,250/oz as per analysts' consensus. The
debt-finance structuring has been based on a conservative gold
price of US$1,000/oz.
Highlights of the Syndicate's 2016 Preferred Development Plan
(100% of Tulu Kapi Gold Project)
-- Gold production of 980,000 ounces over ten years with an
average of 115,000 ounces per year, excluding the start-up year and
the closure year. The comparative 2015 DFS estimates were 960,000
ounces over 13 years at a steady-state average of 95,000 ounces per
year for the core production period.
-- All-in Sustaining Costs estimated at US$742/oz, which ranks
the project in the lowest cost quartile globally for existing gold
producers. This includes all operating costs, royalties, sustaining
capital and closure, but excludes initial capital investment. The
comparative 2015 DFS estimate was US$780/oz.
-- Projected net operating cash flow has increased to US$66
million per annum compared with the 2015 DFS estimate of US$47
million.
-- The Syndicate's preferred financing plan would result in an
Internal Rate of Return ("IRR") of 50% and a projected Net Present
Value ("NPV") at the commencement of production at the end of 2017
of US$197 million (c. GBP123 million), at a discount rate of
8%.
Preferred Syndicate's Preferred Development Funding Plan (100%
of Tulu Kapi Gold Project)
-- The initial funding requirement is estimated at c. US$120
million, including working capital. The exact quantum will be
finalised nearer to financial closing, which is anticipated in
Q2-16 (for minor elements such as cost-overrun requirements and
pre-production costs of hedging and finance), to reflect final
plant procurement terms and the then-prevailing gold spot and
forward prices.
-- Gold price hedging will be c. 10% of base case production as
part of the risk-management program without detracting from project
upside.
-- Project debt-based and gold stream finance to be
approximately US$100 million, excluding cost-overrun facilities (to
be refined in due course), pre-production financing charges and
hedging facilities.
-- The equity financing component remains focused at the project
level for up to c. US$20 million from the Government of Ethiopia,
in addition to the more than US$50 million project investment to
date.
-- Net cash flow after tax and all charges including servicing
debt and gold stream, averages US$32 million per annum. At the
current spot price of gold of US$1,100/oz, this would be US$22
million per annum.
Refinements to the 2015 DFS are the product of collaboration
between the KEFI project management team, project contractors,
Ausdrill/African Mining Services and Sedgman, and the reviews by
the Independent Technical Consultants for the project financiers,
Micon (development and operating) and Environ (Social and
Environmental). This followed the 2015 DFS which combined inputs
from KEFI's independent specialist advisers including Senet
(assembly of DFS and ore processing), Snowden (Mineral Resources
and Ore Reserves), Epoch (tailings management), Cube Consulting
(grade control and mine optimisation), Golder (environmental and
social impact) and Endeavour Financial (project finance advisor and
arranger). Further details are set out in the explanatory comments
below.
Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals,
commented:
"The development and financing plan has been further improved
with the syndicate of contractors and bankers which has emerged
from our rigorous international selection process. Despite very
tough capital market conditions, Tulu Kapi's robust economics have
attracted support for production start-up in 2017 as planned.
Whilst we continue to optimise our financing options pending
finalisation and approval by the National Bank of Ethiopia in
mid-2016, we have already selected our preferred syndicate of
contractors and the investors of equity and non-equity capital, and
look forward to working with this high calibre consortium to bring
this project to fruition."
Webinar
Mr Anagnostaras-Adams, KEFI's Executive Chairman, will be
hosting a live webinar at 10am GMT on 14 January 2016, which can be
viewed via http://webcasting.brrmedia.co.uk/broadcast/141135.
Listeners are encouraged to submit questions by clicking on the
link at the foot of the page or by emailing uk@brrmedia.com. The
webinar will subsequently be available on the Company's website at
http://www.kefi-minerals.com/news/videos.
Enquiries
KEFI Minerals plc
Harry Anagnostaras-Adams (Executive
Chairman) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance
LLP (Nominated Adviser)
+44 20 3470
Ewan Leggat, Jeff Keating 0470
Brandon Hill Capital Ltd (Broker)
Oliver Stansfield, Jonathan +44 20 3463
Evans 5000
Luther Pendragon Ltd (Financial
PR)
Harry Chathli, Claire Norbury,
Oli Hibberd +44 207 618 9100
EXPLANATORY COMMENTS ON DEVELOPMENT AND FINANCE PLAN
The Tulu Kapi development plan is based on a conventional
open-pit mining operation and a 1.5-1.7Mtpa carbon-in-leach ("CIL")
processing plant, with gold recoveries averaging 93.3%.
Utilising semi-selective mining techniques, it is planned to
process ore mined above 0.5g/t gold. Based on this mining approach,
the following key mining and financial parameters for Tulu Kapi
were estimated and compared with those of the 2015 DFS, which
assumed a slightly different mining sequence and a slower
processing rate per annum:
2016 Contractors' 2015 DFS
and Bankers' Preferred 13-year open pit
Plan mine plan
9-year open pit
mine plan
---------------------- ------------------------ ------------------
Waste:ore ratio 7.4:1.0 7.4:1.0
---------------------- ------------------------ ------------------
Total ore processed 15.4Mt 15.4Mt
---------------------- ------------------------ ------------------
Average head 2.1g/t gold 2.1g/t gold
grade
---------------------- ------------------------ ------------------
Total gold production 980,000 ounces 961,000 ounces
---------------------- ------------------------ ------------------
Cash Operating US$634/oz US$661/oz
Costs
---------------------- ------------------------ ------------------
All-in Sustaining US$742/oz US$780/oz
Costs
---------------------- ------------------------ ------------------
All-in Costs US$872/oz US$906/oz
(including
initial capex)
---------------------- ------------------------ ------------------
Capital Expenditure
The table below provides the key components of the estimated
peak funding requirement:
2016 Contractors' 2015 DFS
and Bankers' Preferred 13-year open pit
Plan mine plan
9-year open pit US$M
mine plan US$M
----------------- ------------------------ ------------------
Processing 67.0 65.6
----------------- ------------------------ ------------------
Roads and Power
Connection 15.0 19.7
----------------- ------------------------ ------------------
Tailings (TSF) 10.0 7.5
----------------- ------------------------ ------------------
Other 15.9 14.3
----------------- ------------------------ ------------------
Owners Cost 8.2 8.9
----------------- ------------------------ ------------------
Subtotal 116.1 113.0
----------------- ------------------------ ------------------
Pre-Production
Funding 6.7 8.6
----------------- ------------------------ ------------------
Total Capital 122.9 121.6
(MORE TO FOLLOW) Dow Jones Newswires
January 13, 2016 02:00 ET (07:00 GMT)
----------------- ------------------------ ------------------
Financing Costs 3.4 N.A
----------------- ------------------------ ------------------
Cost Overrun 12.3 N.A
----------------- ------------------------ ------------------
Total 139.6 130-150
----------------- ------------------------ ------------------
Contingency provisions aggregate to approximately 10%.
Base Case Financial Metrics
The base--case financial metrics tabulated below are stated on
an after tax basis:
2016 Contractors' 2015 DFS
and Bankers' 13-year open pit
Preferred Plan mine plan
9-year open
pit mine plan
--------------------------- ------------------ ------------------
IRR Leveraged 50% 52%
--------------------------- ------------------ ------------------
NPV Leveraged (0%) US$253M US$187M
--------------------------- ------------------ ------------------
NPV at start construction US$136M US$106M
end-15
(8% real discount
rate)
--------------------------- ------------------ ------------------
NPV at start production US$197M US$156M
end-17
(8% real discount
rate)
--------------------------- ------------------ ------------------
Payback 4 years 4.5 years
--------------------------- ------------------ ------------------
Average Operating US$66M p.a. US$47M p.a.
cash flow before,
financing charges
and tax
--------------------------- ------------------ ------------------
Average Net cash US$32M p.a. US$24M p.a.
flow, after financing
charges and tax
--------------------------- ------------------ ------------------
Mineral Resources and Ore Reserves
The current Tulu Kapi Mineral Resource estimate totals 20.2
million tonnes at 2.65g/t gold, containing 1.72 million ounces:
JORC (2012) Resource category Reporting elevation Cut-off Tonnes Gold Ounces (million)
(g/t gold) (Mt) (g/t)
------------------------------- --------------------- ------------ ------- ------- -----------------
Indicated Above 1400 RL 0.45 17.7 2.49 1.42
Inferred Above 1400 RL 0.45 1.28 2.05 0.08
Indicated and Inferred Above 1400 RL 0.45 19.0 2.46 1.50
------------------------------- --------------------- ------------ ------- ------- -----------------
Indicated Below 1400 RL 2.50 1.08 5.63 0.20
Inferred Below 1400 RL 2.50 0.12 6.25 0.02
Indicated and Inferred Below 1400 RL 2.50 1.20 5.69 0.22
------------------------------- --------------------- ------------
Total Indicated All 18.8 2.67 1.62
Total Inferred All 1.40 2.40 0.10
Total Indicated and Inferred All 20.2 2.65 1.72
------------------------------- --------------------- ------------ ------- ------- -----------------
* "RL" means relative to sea level
The Mineral Resources were split above and below the 1,400m RL
to reasonably reflect the portions of the resource that may be
mined via open pit and underground mining methods.
The current Tulu Kapi Ore Reserve estimate totals 15.4 million
tonnes at 2.12g/t gold, containing 1.05 million ounces:
JORC (2012) Reserve category Cut-off Tonnes Gold Ounces
(g/t Au) (million) (g/t) (million)
------------------------------ ------------ ----------- ------- -----------
Probable - High grade 0.90 12.0 2.52 0.98
------------------------------ ------------ ----------- ------- -----------
Probable - Low grade 0.50 - 0.90 3.3 0.73 0.08
------------------------------ ------------ ----------- ------- -----------
Total 15.4 2.12 1.05
------------------------------ ------------ ----------- ------- -----------
Note: Mineral Resources are inclusive of Ore Reserves. All
numbers are reported to three significant figures. Small
discrepancies may occur due to the effects of rounding.
This Ore Reserve estimate is based on the Indicated Resource
above 1,400m RL and reflects KEFI's envisaged semi-selective mining
strategy that will utilise an elevated cut-off grade. Ore at a
cut-off of between 0.50g/t and 0.90g/t gold is planned to be
stockpiled and then processed in the final three years of the
project, resulting in a project life of 13 years for the 2015
DFS.
The high-grade portion of the Ore Reserve contains nearly all
the contained ounces and totals 12.0 million tonnes at 2.52g/t
gold, containing 0.98 million ounces.
The above Mineral Resources and Ore Reserves were estimated
using the guidelines of the JORC Code (2012).
Mining and Processing
The mining method planned for Tulu Kapi is conventional open-pit
drill and blast, load and haul, reflecting a semi-selective mining
approach.
The Tulu Kapi deposit contains three ore types with the fresh
ore becoming harder with increasing depth:
% of Total
Ore
---------------- -----------
Oxide ore 6%
---------------- -----------
Fresh ore 66%
---------------- -----------
Fresh hard ore 28%
---------------- -----------
The gold is free milling and all the processes included in the
CIL plant design are standard and common to many current gold
operations.
Location and Infrastructure
Tulu Kapi is located approximately 360km due west of Ethiopia's
capital, Addis Ababa. A main road to Addis Ababa is within 15km of
Tulu Kapi and was sealed with asphalt during 2014. The altitude of
the project area is between 1,600m and 1,765m above sea level. The
climate is temperate with annual rainfall averaging about
150cm.
The Tulu Kapi region has typical Precambrian-type geology which
is characterised by prominent hills of intrusive rocks and deeply
incised valleys containing metasediments and metavolcanic rocks.
Gold at the Tulu Kapi deposit is hosted in quartz-albite alteration
zones as stacked sub-horizontal lenses in a syenite pluton into
which a swarm of dolerite dykes and sills have been intruded. Gold
mineralisation extends over a 1,500m by 500m zone and is open at
depth (+550m).
The mine will require the construction of two roads outside the
mine licence area:
-- a 15.0km access road from the town of Keley; and
-- a 4.5km bypass road around the southern sided of the licence area.
The DFS envisages that process water requirements will be
satisfied by the collection and storage of rainwater during the
rainy season, between June and September.
The mine will be connected to Ethiopia's electricity grid via a
new 47km long, 132 kV power line. A 5 MW emergency diesel power
plant will provide emergency backup power to critical process
equipment and infrastructure in the event of a grid power failure.
This will allow critical equipment to remain in operation until it
can be safely shut down or until grid power is reinstated.
The mine layout has been designed to minimise the footprint of
the operation and minimise community disruption. The number of
households to be resettled has been reduced from c. 460 to c. 260,
with a phased resettlement programme being undertaken over two
years. The process is designed to comply with Equator Principles
and IFC Standards.
The tailings storage facility will be constructed in four stages
and has been designed with the capacity to support the planned
13-year mine life.
Legal Framework
The Tulu Kapi Mining Agreement ("MA") between the Ethiopian
Government and KEFI was formalised in April 2015. The terms of the
MA include:
-- 20-year Mining Licence covering an area of 7km(2) , with full
permits for the development and operation of the Tulu Kapi gold
project.
-- Fiscal arrangements:
o 5% Government free-carried interest;
o Royalty of 7%;
o Income tax rate for mining of 25%;
o Historical and future capital expenditure is tax deductible
over four years; and
o Stabilisation of fiscal arrangement to protect KEFI in case of
future legislative changes.
-- Government undertaking to facilitate international financing arrangements.
All project plans as submitted by KEFI have been approved and
now form legally binding attachments to the Mining Agreement:
-- Social Impact and Environmental plans for implementation, monitoring and management;
-- Development and Production Work Programme for mining, processing and sales; and
-- Community Resettlement Action Plan staged over 2015 and 2016.
Competent Person Statement
KEFI Minerals reports in accordance with the 2012 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (the "JORC Code 2012").
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