TIDMKEFI
RNS Number : 4198E
KEFI Minerals plc
28 February 2020
28 February 2020
KEFI Minerals plc
("KEFI" or the "Company")
Q4 2019 Operational Update
KEFI Minerals (AIM: KEFI), the gold exploration and development
company with projects in the Federal Democratic Republic of
Ethiopia and the Kingdom of Saudi Arabia, is pleased to provide its
quarterly operational update.
This update encompasses the activities of KEFI Minerals
(Ethiopia) Ltd ("KME") and Tulu Kapi Gold Mines Share Company
("TKGM") in Ethiopia, and Gold & Minerals Ltd ("G&M") in
Saudi Arabia for the period from 1 October 2019 to 31 December 2019
("Q4"), together with more recent developments where
appropriate.
Any material events have already been reported in separate
announcements, which are referred to below along with appropriate
updates.
Highlights
Ethiopia's Tulu Kapi Gold Project (the "Project")
-- The commencement of the off-site development programme for
the Tulu Kapi Gold Mine in late 2019 and closing with KEFI's public
sector equity partner.
-- The next steps are to:
o launch the on-site development and community resettlement;
o execute all documentation, which is well advanced, for KEFI's
private sector equity partner ANS Mining Share Company ("ANS");
and
o complete scheduled preparations and finance milestones leading
to major works starting in the local dry season from October
2020.
-- KEFI approved a new Project infrastructure debt-finance
proposal, being a bank-loan based proposal received from two
leading African banks as underwriters and co-lenders. A terms sheet
was signed, which is subject to credit approval, and which provides
better economics for TKGM.
-- The gold price has firmed significantly since Q3 2019. Using
the proposed bank loan infrastructure financing at the current gold
price of circa US$1,650/oz, KEFI estimates:
-- net cash flow of the open pit mine to be US$502 million;
-- the Definitive Feasibility Study or DFS-based NPV of the open
pit (US$333 million) added to that of the PEA-based NPV of the
underground mine (US$103 million), totals to the aggregate Project
NPV of US$436 million. NPV's are based on after tax cash net cash
flows as at today; and
-- On this basis and after taking into account that KEFI has
already invested nearly all of its contribution to the Project
equity, KEFI's 45% beneficial interest is US$196 million
(approximately GBP153 million), about seven times the current
market capitalisation of the Company.
Saudi Arabia's Hawiah copper-gold-zinc-silver exploration
project
-- We discovered in Saudi Arabia's Hawiah licence area a
polymetallic deposit. The first 45 drill holes identified three
distinct massive sulphide lodes which vary in thickness from 3m up
to a maximum of 19m. All of the massive sulphide assays received to
date had encouraging grades of copper, gold, zinc and silver.
-- The system remains open at depth and for the purposes of
indicating the potential importance for KEFI shareholders, at an
assumed 2% copper-equivalent which initial assay results would
suggest is reasonable. The in-situ metal content of the indicated
12 million tonnes at current metal prices would approximate the
analogous in-situ metal content of the one million ounce reserve in
the open-pit at KEFI's Tulu Kapi Gold Project in Ethiopia, but the
system is open at depth.
-- The next step is to complete the current stage 2 drilling
program with a view to reporting in mid-2020, a maiden resource in
compliance with the JORC Code.
Investor Webinar
The Company will host a live webinar at 3pm Greenwich Mean Time
(GMT) on Friday 6 March 2020, which can be accessed via:
https://webcasting.brrmedia.co.uk/broadcast/5e5654752cd9120cce9f96b0
Shareholders 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 (Managing Director) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance LLP (Nominated
Adviser and Joint Broker) +44 20 3470 0470
Jeff Keating, Soltan Tagiev
Brandon Hill Capital Ltd (Joint Broker) +44 20 7936 5200
Oliver Stansfield, Jonathan Evans
IFC Advisory Ltd (Financial PR and IR) +44 20 3934 6630
Tim Metcalfe, Florence Chandler
Company Background
KEFI is focused on the prospective Arabian Nubian Shield and in
particular on Ethiopia and Saudi Arabia both of which are
prioritising development of the minerals sector. KEFI is an
early-mover in both jurisdictions and manages joint ventures with
prominent local partners.
Tulu Kapi Gold Project in Ethiopia (the "Project")
Project Background
Ethiopia is Africa's highest-growth country and undergoing a
positive political transformation.
The TKGM is the first-mover for modern mining in the country and
is structured as a public-private partnership with majority
Ethiopian ownership and KEFI operatorship and support.
TKGM proceeds in compliance with relevant local and
international governance standards for security, social and
environmental aspects with independent monitoring.
Further background is set out below:
-- KEFI acquired control of the Project in 2014 and overhauled
its plans during 2014 and 2015. Of particular note was the extra
drilling, trenching and quality-control/quality-assurance programs
which led to (a) expansion of mineral resources from 1.1 million
ounces to 1.6 million ounces, (b) lifting of head-grade from 1.8g/t
to 2.1 g/t and (c) staging of development to improve early cash
flows for faster payback.
-- International experts involved in the overhauled DFS included
Golders (Environment and Social), Snowden (Resources and Reserves)
and Senet (processing and overall planning). Subsequent
optimisations and independent reviews have been conducted as have
tenders for construction and operations.
-- International tenders of mining services and process plant
led to the appointment of leading contractors Perenti (mining) and
Lycopodium (processing) respectively.
-- Other notable appointments include:
o Senior development and operational management.
o The preferred suppliers, refiners and other service
providers.
o The preferred project partners and principal project
lenders.
Project Planning and Scheduling
-- Project-equity funded programs underpin the following initial development activities:
o Offsite Infrastructure: commencement of road and electricity
connections. Initial works are principally surveying, engineering,
tendering and procurement.
o Onsite Infrastructure: resettlement program plus construction
engineering & procurement.
-- Major expenditures from the start of Ethiopia's dry season follow debt-finance close
-- The two-year development includes the following activities as well as major works:
o Operational readiness programs start in 2020 with a major
emphasis on training of local personnel.
o Optimisation studies in light of the gold price now being
significantly higher than that assumed in mine planning, noting
that ore reserves were based on cut-off grade derived from an
assumed gold price of US$1,098/oz.
o Exploration and feasibility studies of the underground deposit
beneath the Tulu Kapi open pit, the resource grade of which is
5-6g/t.
o Exploration of the district for satellite deposits where
several areas of mineralisation have been intercepted in the
past.
Project Equity Financing - Ethiopia's first Public Private
Partnership for Mine Development
KEFI has executed project-equity subscription agreements with
partners in the public and private sector and KEFI's beneficial
interest is planned at 45%. The Ethiopian investors have committed
to ensuring that 55% is Ethiopian-owned and are working closely
together to refine the syndicate structure as a public-private
partnership between KEFI, the Federal and Regional Governments and
private investment company, ANS.
Principal announcements made during the quarter include the
following, with subsequent events noted:
-- In October 2019, KEFI's project company TKGM had received all
the Government permits and independent consultants reports required
and development of offsite infrastructure.
-- In February 2020, TKGM shareholder meetings passed the
requisite shareholder resolutions and associated draft shareholder
agreements have been circulated. All consequential subscription and
shareholder documents are in the process of review by Government
departments and ANS syndicate members for execution by the TKGM
partners during March.
Project Debt-Financing - a conventional mining project
financing
Between 2016 and 2018 the Company's project finance activities
were hampered by states of emergency in Ethiopia. Conventional
mining project contracting was nevertheless implemented, and for
debt-finance, an innovative bond-lease based financing was mandated
and progressed from 2017 until 2019. In 2019 the banks once again
became interested in Ethiopian mining project finance and TKGM
accepted a conventional bank-loan based proposal.
On 2 December 2019, KEFI announced that it had selected its
preferred project infrastructure finance proposal, being a
bank-loan based proposal received from two leading African banks as
underwriters and co-lenders. A terms sheet was signed, subject to
credit approval.
The bank-based proposal is considered by the Directors of the
Project company, TKGM, to be more attractive and more
straightforward to execute. In addition, the proposed bank lenders
are actively working in Ethiopia, are familiar with the local
market and many of our local stakeholders and thus considered more
compatible with the Project consortium.
The amount of Project equity (US$68 million) and subordinated
working capital facility requirements (US$14-24 million) remain
essentially unchanged from those which applied under the previous
bond-lease proposal, as do the contribution towards capital
expenditure. However, material savings are expected from the
bank-loan proposal in the cost of debt-servicing and
administration, especially during the Project development and
start-up period.
Project Economics
Using the proposed bank loan infrastructure financing at the
current gold price of circa US$1,650/oz, KEFI estimates:
-- net cash flow of the open pit mine to be US$502 million;
-- the Definitive Feasibility Study or DFS-based NPV of the open
pit (US$333 million) added to that of the PEA-based NPV of the
underground mine (US$103 million), totals to the aggregate Project
NPV of US$436 million NPV's are on after tax cash net cash flows as
at today.
On this basis and after taking into account that KEFI has
already invested nearly all of its contribution to the Project
equity, KEFI's 45% beneficial interest is US$196 million
(approximately GBP153 million), about seven times the current
market capitalisation of the Company.
This does not include further potential upside offered by
exploration underground where extensions of the 5-6 g/t indicated
resource remain untested, in the adjacent Tulu Kapi district, where
several areas of drill-intercepted pre-resource mineralisation
require follow-up and in Saudi Arabia where drilling is currently
intercepting massive sulphides in a large Volcanogenic Massive
Sulphide occurrence.
Saudi Arabia
The Stage 1 Hawiah diamond drilling programme completed 26
drillholes in December 2019 and the initial results were announced
on 23 January 2020. The results confirm the large-scale Volcanic
Massive Sulphide ("VMS") style of mineralisation that underlies the
4km+ long surface gossanous ridgeline and coincident extensive and
exceptionally strong geophysical anomalies. Copper-zinc-gold-silver
sulphide mineralisation has been intercepted in drilling
consistently over more than 4km of strike length, with intercepts
of up to 5% copper equivalent.
The Stage 2 Hawiah drilling programme has to date added a
further 19 drillholes, all of which have intercepted massive
sulphide and confirms the positive progress towards delineating an
initial Mineral Resource in accordance with the JORC Code by
mid-2020. 45 diamond drillholes have now been completed in total
(Stage 1 and Stage 2) and assays have been received for 20
drillholes.
Sufficient drilling has now been completed to identify three
separate zones with the following preliminary parameters for
potentially mineable lodes, with all zones remaining open at
depth:
-- The 'Camp Lode': 1.2km long, with an average width of 6m with
the widest intersection of 19m found at a depth of 90m. The lode
has been drilled to a depth of 300m where 9m of massive sulphide
was intersected;
-- The 'Crossroads Lode': 700m long, with an average width of 4m
with the widest intersection being 8m. This lode has been explored
to a maximum depth of 385m where 5m of massive sulphide was
intersected; and
-- The 'Crossroads Extension Lode': 1,000m long, with average
width of 4m with the widest intersection being 12m at a depth of
112m. This part of the orebody is also open at depth and the
deepest drillhole of 130m intersected 8m of massive sulphide.
At present the assay results from the massive sulphide
intercepts are summarised as follows:
-- Camp Lode which provides a preliminary indication that this
part of the orebody carries the following grades: Copper 1.4%; Zinc
0.6%; Gold 0.74 g/t and Silver 12g/t over average true width of
6.2m.
-- Assay results from the Crossroads lodes (including the
extension) which so far provide a preliminary indication that this
part of the ore body carries the following grades: Copper 1.5%;
Zinc 1.12%; Gold 0.77g/t and Silver 14.4g/t over average true width
of 4.9m.
The combination of these lodes on the sub-vertical structure
drilled to date is considered likely to exceed 12 million tonnes in
aggregate based on the results to date. For the purposes of
indicating the potential relative importance for KEFI shareholders,
at an assumed 2% copper-equivalent, the in-situ metal content of 12
million tonnes at current metal prices would approximate the
analogous in-situ metal content of the 1 million ounce reserve at
KEFI's Tulu Kapi Gold Project in Ethiopia.
A comprehensive update, including all details of all drillholes
will be provided as soon as the majority of assays are received. In
addition, the Company will also continue to assess the additional
resource potential of Hawiah outside of the current drill
programme, given drilling to date is yet to establish the
extremities of the mineralisation at depth.
Competent Person Statement
The information in this announcement that relates to exploration
results is based on information compiled by Mr Jeffrey Rayner. He
is exploration adviser to KEFI, the Company's former Managing
Director and a Member of the Australian Institute of Geoscientists
("AIG"). Mr Rayner is a geologist with sufficient relevant
experience for Group reporting to qualify as a Competent Person as
defined in the JORC Code 2012. Mr Rayner consents to the inclusion
in this report of the matters based on this information in the form
and context in which it appears.
Notes to Editor
KEFI Minerals plc
KEFI is focused primarily on the advanced Tulu Kapi Gold Project
development project in Ethiopia, along with its pipeline of other
projects within the highly prospective Arabian-Nubian Shield. KEFI
targets that production at Tulu Kapi generates cash flows for
capital repayments, further exploration and expansion as warranted
and, when appropriate, dividends to shareholders.
KEFI Minerals in Ethiopia
The Company has regularly refined contractual terms for project
construction and operation with principal contractors Lycopodium
(processing) and Perenti (mining), both Australian mining industry
leaders with some 30 years of successful track record in various
African countries. Estimates include open pit gold production of c.
140,000oz pa for a 7-year period. These contractual arrangements
are now entering the closing phase for sign-offs. Based on the most
recent estimates, All-in Sustaining Costs (including operating,
sustaining capital and closure but not including leasing and other
financing charges) remain c. US$800/oz. Tulu Kapi's Ore Reserve
estimate totals 15.4Mt at 2.1g/t gold, containing 1.1Moz.
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.
All plans are made with regard to the World Bank IFC Standards
for social, environmental and other aspects.
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.
An area of over 1,000 square kilometres adjacent to Tulu Kapi
has been reserved for exploration by KEFI upon commencement of
development, with a view to adding satellite deposits to
development and production plans.
KEFI Minerals in the Kingdom of Saudi Arabia
In 2009, KEFI formed Gold & Minerals Limited ("G&M") in
Saudi Arabia with local Saudi partner, ARTAR, to explore for gold
and associated metals in the Arabian-Nubian Shield. KEFI has a
37.5%% interest in G&M and is the operating partner.
ARTAR, on behalf of G&M, holds over 16 Exploration Licence
(EL) applications pending the introduction of the new Mining Law.
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 announced 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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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