TIDMKEFI
RNS Number : 0011T
KEFI Minerals plc
09 October 2017
9 October 2017
KEFI Minerals plc
("KEFI" or the "Company")
QUARTERLY OPERATIONAL UPDATE
KEFI Minerals (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 provide an
operational update for the period from 1 July 2017 to 30 September
2017.
This quarterly operational report encompasses the activities of
KEFI Minerals (Ethiopia) Ltd ("KME") and Tulu Kapi Gold Mines Share
Company Limited ("TKGM") in Ethiopia and Gold & Minerals Ltd
("G&M") in Saudi Arabia. Some of these matters have been
reported previously.
Commenting, KEFI's Executive Chairman, Harry Anagnostaras-Adams,
said:
"It has been an exceptionally busy quarter, pulling together our
project funding for the Tulu Kapi Gold Project in Ethiopia for the
closing planned for this year. We are pleased to have now also
incorporated plans for extra processing capacity and for the
drilling work required to add additional resources.
"In Saudi Arabia, we await the announcement of the new
regulations intended to overhaul the mining industry with a view to
facilitating growth and making it the third pillar of the Saudi
economy. In the meantime KEFI has upgraded its portfolio and
tenure.
"This is a transformational time for KEFI as the team works
hard, together with our partners, to build KEFI during the next two
years into a +100,000 oz gold producer. At a gold price of
$1,250/oz, the first three production years' projected net free
cash flow per annum (after debt service and tax) exceeds the
Company's current market capitalisation.
"And our existing project pipeline in Ethiopia and Saudi Arabia
provides the opportunity to build a production base of 180,000 oz
of gold per annum during Tulu Kapi's first three production
years."
Tulu Kapi Gold Project, Ethiopia
-- KEFI received all of its VAT refund in accordance with the
agreement entered with the Government of Ethiopia in 2014 upon
assuming control of the Tulu Kapi Gold Project (the "Project").
-- Ethiopia has recently been named by the World Bank as the
highest growth country in the world, improving its ranking within
the top 10 growth countries where is has been for 15 years
running.
-- KEFI and the Government of Ethiopia formed TKGM as the
project company for developing the Project. Two of the six
Directors of TKGM are representatives of the Government of Ethiopia
- an endorsement of the joint commitment to developing the gold
sector, starting with the Project which ranks as a priority in the
Government's Growth and Transformation Plan.
-- The Ethiopian Government lifted the State of Emergency
restrictions imposed in October 2016. During the State of
Emergency, many improvements to governance were made by the
Government, which used its executive powers to create independent
review agencies and transparent procedures. Whilst day to day life
in Ethiopia was largely unaffected and KEFI's activities
specifically were unaffected throughout, its lifting is
positive.
Project Funding
-- Implementation of the preferred finance plan was triggered on
17 July 2017 upon signing a detailed Heads of Terms and Mandate
with Oryx Management Limited ("Oryx") with the goal of closing the
funding package this year, which remains on track.
-- Drafts of documentation have either been agreed or are
advancing as planned. Oryx has submitted its draft financing
agreement to the Ethiopian authorities for approval.
-- Oryx has appointed a placing agent for the issue of listed
bonds and is forming its Finance Special Purpose Vehicle which will
be the bond issuer.
-- The agreements with Oryx, the Government, Ausdrill and
Lycopodium are being documented in detail for approval by the
counterparties and the regulators.
-- The effect of these arrangements is that KEFI will have
reduced the residual capital requirement for development to proceed
to approximately US$20 million, as compared with approximately
US$289 million (adjusted by KEFI from the then-published US$235
million to include assumed working capital and financing costs)
when KEFI assumed Project control in 2014. The key arrangements
that have reduced the residual requirement are:
o Having first expanded the resource base by some 50% and
re-designed the open pit, KEFI then introduced targeted selective
mining to down-scale the mining operation and improve
head-grade:
-- total tonnage movement has been reduced from the 2012 DFS 160
million tonnes (17Mt of ore and 143Mt of waste) to 140 million
tonnes (15Mt of ore and 125Mt waste).
-- head grade has been increased from 1.8 grammes per tonne
("g/t") to 2.1g/t.
o introducing contract mining, whereby Ausdrill will fund the
mining fleet, which transfers some US$50 million of project capital
into operating costs which is paid per tonne delivered.
o arranging project funding with Oryx (debt-style) and the
Government of Ethiopia (project-equity):
-- Oryx proposes to fund all on-site plant and infrastructure
(other than that provided by the Mining Contractor) up to a limit
of c. US$100 million as well as transaction expenses and
debt-service costs during the 30-month grace period for
construction and start-up of up to c. US$40 million.
-- The Government proposes to fund all off-site infrastructure
up to a limit of US$20 million.
-- KEFI guarantees that it will meet any shortfall of TKGM
funding for the development of the Project as required. The precise
amount of such funding (if any) is expected to become clear after
taking into account actual progress as regards cost and schedule
over the 2018-2019 construction period.
-- Having finalised the structuring of the proposed project
finance, KEFI can now move to arrange the residual capital
requirement. Key considerations include the following:
o Whilst the Company has sown the seeds for an institutional
equity raising at the parent company level, KEFI can now bring to a
head its discussions with potential Project level, TKGM,
investors.
o Additional project-level equity investment may minimise the
dilution of KEFI shareholders' beneficial interests. A
project-equity transaction on the same terms as with the Government
would imply a project valuation of c. US$100 million and KEFI would
expect to retain an equity ownership interest in the order of 55%
in the Project.
o KEFI is in discussion with several Project level
investors.
o KEFI has deliberately not yet committed to any product offtake
arrangements as that aspect may now form a useful part of arranging
the residual funding requirement.
-- The financing remains subject to completion of due diligence,
regulatory approvals and execution of binding documentation.
Project Plans
-- Oryx has agreed to expand its proposed finance facility from
US$135 million to US$140 million as part of the set of arrangements
to allow for an increase in ore processing capacity from 1.5 to 1.7
million tonnes per annum ("Mtpa") to 1.9 to 2.1 Mtpa, with the
upper and lower limits depending upon the hardness of the ore.
-- Oryx's proposed support is welcome as the increased
processing capacity has always been sought after, but has been a
matter of keeping the cost and funding thereof within manageable
levels. Taking the plant capacity back to that proposed in the 2012
DFS will now provide KEFI (through project company TKGM) with the
opportunity to achieve the following:
o Mitigate against the build-up of ore stockpiles to what
otherwise would have exceeded two years of production.
o allow the flexibility to mine at a faster rate as and when
warranted in the open pit as well as from what we expect will come
from satellite deposits which have been the subject of further
positive evaluation recently.
o cater for underground ore from the already reported
underground resources.
-- The capital required for the capacity increase is being
minimised by offsetting against savings in other aspects of the
construction budget. Notably, KEFI, Lycopodium and Oryx have agreed
an organisation plan which allows us to convert the arrangement
with Lycopodium from a (necessarily more expensive) fixed price
lump sum arrangement (EPC) to an open book cost-based arrangement
with incentivisation built around target cost and schedule
(incentivised EPCM). One organisational aspect is the installation
of an added layer of management control via the appointment of an
independent Client Representative Engineer to oversee construction
under guidance from KEFI's project management team, and to
independently certify progress claims.
-- The community preparations progress to the stage where all
data has been tabled so that the Government can trigger the
resettlement this year, synchronised with the closing of TKGM's
development finance package.
Gold & Minerals Ltd, an incorporated joint venture with
60%-partner ARTAR, Kingdom of Saudi Arabia
-- New Regulatory Regime to be announced by the Saudi
Government: The newly created Energy, Industry and Mineral
Resources Ministry is preparing new mining policies and regulations
- intended to overhaul the mining industry with a view to
facilitating growth and making it the third pillar of the Saudi
economy.
-- Portfolio of Licence Applications: G&M awaits these
regulatory clarifications and, in the meantime, has upgraded its
portfolio.
Webinar
The Company will host a live webinar at 4pm BST on Thursday 12
October 2017 via:
http://webcasting.brrmedia.co.uk/broadcast/59d7864f50ca3d72baf4407f
Listeners are encouraged to submit questions by emailing:
questions@brrmedia.co.uk. The webinar will subsequently be
available on the Company's website at
http://www.kefi-minerals.com/news/webcasts.
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
ENQUIRIES
KEFI Minerals plc
Harry Anagnostaras-Adams (Executive
Chairman) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance
LLP (Nominated Adviser)
Ewan Leggat, Jeff Keating +44 20 3470 0470
Brandon Hill Capital Ltd (Joint
Broker)
Oliver Stansfield, Alex Walker,
Jonathan Evans +44 20 7936 5200
RFC Ambrian Ltd (Joint Broker)
Jonathan Williams
Beaufort Securities Ltd (Joint
Broker) +44 20 3440 6817
Elliot Hance +44 20 7382 8300
IFC Advisory Ltd (Financial
PR and IR)
Tim Metcalfe, Heather Armstrong +44 20 3053 8671
Further information can be viewed on www.kefi-minerals.com
NOTES TO EDITOR
KEFI Minerals plc
KEFI is the operator of two advanced gold development projects
within the highly prospective Arabian-Nubian Shield, with an
attributable 1.93Moz (100% of Tulu Kapi's 1.72Moz and 40% of Jibal
Qutman's 0.73Moz) gold Mineral Resources (JORC 2012) plus
significant resource growth potential. KEFI targets that production
at these projects generates cash flows for further exploration and
expansion as warranted, recoupment of development costs and, when
appropriate, dividends to shareholders.
KEFI Minerals in Ethiopia
The Tulu Kapi gold project in western Ethiopia is being
progressed towards development, following a grant of a Mining
Licence in April 2015.
Following completion of KEFI's Definitive Feasibility Study for
Tulu Kapi, the Company is now refining contractual terms for
project construction and operation. Latest estimates are that gold
production may be brought forward by increasing processing
capacity, as compared with the DFS estimates of c. 100,000oz pa for
a 10-year period. All-in Sustaining Costs (including operating,
sustaining capital and closure but not including leasing and other
financing charges) remain <US$800/oz. Tulu Kapi's Ore Reserve
estimate totals 15.4Mt at 2.1g/t gold, containing 1.1Moz. Ongoing
refinements will be reported as they get finalised.
All aspects of the Tulu Kapi (open pit) gold project have been
reported in compliance with the JORC Code (2012) and subjected to
reviews by appropriate independent experts. These plans now also
reflect the agreed construction and operating terms with project
contractors, and have been independently reviewed by experts
appointed for the project finance syndicate.
A Preliminary Economic Assessment has been published that
indicates the economic attractiveness of mining the underground
deposit adjacent to the Tulu Kapi open pit, after the start-up of
the open pit and after positive cash flows have begun to repay
project debts.
KEFI Minerals in the Kingdom of Saudi Arabia
In 2009, KEFI formed G&M in Saudi Arabia with local Saudi
partner, Abdul Rahman Saad Al Rashid & Sons Company Limited
("ARTAR"), to explore for gold and associated metals in the
Arabian-Nubian Shield. KEFI has a 40% interest in G&M and is
the operating partner. To date, G&M has conducted preliminary
regional reconnaissance and has had five exploration licences
("ELs") granted, including Jibal Qutman and the more recently
granted Hawiah EL that contains over 6km strike length of
outcropping gossans developed on altered and mineralised rocks with
all the hallmarks of a copper-gold-zinc VHMS deposit.
At Jibal Qutman, G&M's flagship project, Mineral Resources
are estimated to total 28.4Mt at 0.80g/t gold for 733,045 contained
ounces. The shallow oxide portion of this resource is being
evaluated as a low capital expenditure heap-leach mine
development.
ARTAR, on behalf of G&M, holds over 20 EL applications. ELs
are renewable for up to three years and bestow the exclusive right
to explore and to obtain a 30-year exploitation (mining) lease
within the area. The Kingdom of Saudi Arabia has instituted, and is
further overhauling, policies to encourage minerals exploration and
development, and KEFI Minerals supports this priority by serving as
the technical partner within G&M. ARTAR also serves this
government policy as the major partner in G&M, which is one of
the early movers in the modern resurgence of the Kingdom's minerals
sector.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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