TIDMKEFI
RNS Number : 7682T
Kefi Gold and Copper PLC
22 March 2023
22 March 2023
KEFI Gold and Copper plc
("KEFI" or the "Company")
Quarterly Operational Update - Progress On All Fronts
KEFI (AIM: KEFI), the gold and copper exploration and
development company with a focus on the Arabian Nubian Shield and
with projects in the Kingdom of Saudi Arabia since 2008 and the
Federal Democratic Republic of Ethiopia since 2014, is pleased to
provide its Q1 2023 Quarterly Operational Update.
Highlights
-- Tulu Kapi Gold finance package of US$390 million agreed in principle
-- Working intensely with Government on few remaining security and administrative arrangements
-- Significant progress in Saudi Arabia
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 ("GMCO") in Saudi
Arabia, since release of the Q4 2022 Quarterly Update on 2 February
2023 and is being announced ahead of the end of the quarter to
facilitate discussions at various events in Ethiopia and the Middle
East in the coming days.
The Tulu Kapi Gold Project ("Tulu Kapi" or the "Project") is
under TKGM (now planned to be 70-80% owned by KEFI). The Jibal
Qutman Gold Project ("Jibal Qutman"), the Hawiah Copper-Gold
Project ("Hawiah") and the other Saudi projects are under GMCO (now
planned to be 25-30% owned by KEFI), depending on refinements to
final financing refinements.
ETHIOPIA
As first mover for modern industrial-scale metal mining in
Ethiopia, it has been our privilege to be consulted in respect of
regulatory systems for mining and international financing. This has
taken some years as has our need to traverse the widely-publicised
security challenges in the country, which thankfully subsided last
year. Having borne the costs and delays involved over the recent
years, it is especially pleasing that we are now preparing to
trigger full project development at KEFI's first development
project, with few loose ends now expected to be imminently resolved
with the Government.
We also await Government permission to follow up our other
exploration discoveries in the Tulu Kapi district and, to that end,
based on discussions with the Government have recently re-assembled
our Ethiopian prospecting team for that and other initiatives.
Tulu Kapi Gold Project
This is KEFI's most advanced project. The Definitive Feasibility
Study has been updated for contracted terms and pricing as well as
for the outcome of a series of internal and independent reviews.
The Project is at the project financing and construction stage and
is launch-ready upon Government regulatory clearances and security
installation.
Since release of the last Operational Update on 2 February 2023,
the Tulu Kapi Gold Project financing has advanced as follows:
-- The project finance banks have, as of last week, both been
formally provided certain specific protections and benefits from
the Government of Ethiopia, which had become conditions precedent
for financing.
-- The total Project finance package of US$390 million (mining
fleet US$70 million provided by the mining contractor and US$320
million provided by debt and equity financiers) is now
conditionally in place within the syndicate.
-- Drafting of the numerous definitive agreements is either
complete or advancing well and all parties have indicated that they
intend to proceed to seek formal final approvals on satisfaction of
the conditions precedent in the hands of Government in respect of
administrative matters and security.
-- TKGM now has the intense attention of the Ethiopian Ministry
of Mines, National Bank of Ethiopia and the other Ministries and
agencies and expects to resolve all outstanding issues in the
coming weeks, so that the syndicate can then proceed to seek
all-party formal approvals including KEFI shareholder approval.
Upon all approvals being formally confirmed, we can then proceed
with drawdowns and Project launch so as to be in full production by
mid-2025.
SAUDI ARABIA
Despite making two significant discoveries in Saudi Arabia since
entering the country in 2008, our progress has only progressed
rapidly in the past 18 months as a result of Saudi Arabian
Government regulatory overhauls. The country's prospectivity for
further discovery is widely recognised and the international
industry is mobilising at the invitation of the Government.
The Jibal Qutman Gold Project
-- We applied for a mining licence in 2015 on the basis of an
assumed gold price of US$1,200/oz, and the heap leach processing
oxide ore containing c.200,000 oz within a 733,000 oz gold
Resource. This was seen as a starter project pending the proving-up
of a larger scale project warranting the higher capital investment
for Carbon-in-Leach ("CIL") process
-- As the current consensus long-term gold price of US$1,650/oz
is now significantly higher, the focus of the Jibal Qutman
feasibility study has moved to the larger CIL-based project.
-- Current activities on and around site are focused on the work
required to complete a Definitive Feasibility Study ("DFS") to the
standard required by our project finance lenders in Saudi Arabia.
This work includes:
o a 13,000 metre drilling programme (to be completed in April
2023) which is aimed at upgrading and expanding the current 733,000
oz Resource;
o metallurgical, geotechnical and hydrological drilling
programmes;
o detailed mine plans;
o metallurgical testwork;
o finalising environmental and social responsibility plans and
permitting;
o a trenching programme over the planned locations for the
processing plant and other infrastructure to ensure these areas do
not contain mineralisation;
o water source optimisation; and
o detailed costings of capex and opex.
-- We target to complete the DFS this year and, based on
encouragement from regulators and development financiers, we expect
minimal delay in closing finance within Saudi Arabia and starting
development so that we can be in production around mid-2025.
The current 13,000 metre drilling programme focuses particularly
on the South Zone, 3K Hill, 4K Hill and Red Hill areas shown on the
plan in the appendix, which can be accessed via:
http://www.rns-pdf.londonstockexchange.com/rns/7682T_1-2023-3-21.pdf.
The Red Hill deposit and nearby areas have particularly good
potential to provide additional ounces from the current drilling
programme.
Hawiah Copper-Gold Project
This deposit is a 2019 discovery of KEFI and we have so far
declared a Resource of 29.0 million tonnes ("Mt") at 0.89% copper,
0.94% zinc, 0.67 g/t gold and 10.1 g/t silver, after 54,439 metres
of drilling. We expect this Resource to increase as well as
defining additional Resources at nearby prospects including Al
Godeyer where we have already completed 4,176 metres of drilling
and expect to report its Maiden Resource Estimate and detailed
assay results in April.
We have already identified an apparently economic starter
project in 11.1Mt of open pittable Resource at 0.9% copper, 0.75%
zinc, 0.81g/t gold and 10.3 g/t silver for contained metals of:
100kt copper, 83Kt zinc, 288Koz gold and 3,685Koz silver.
Current activities include the following:
-- completing over the next 18 months the recently launched
56,000 metre drilling programme to establish Ore Reserves for
mining by both open pit and underground techniques;
-- optimising design of the process plant to maximise
metallurgical recovery and perhaps produce copper cathode (finished
copper product), water source optimisation and detailed costings of
capex and opex; and
-- the Pre-Feasibility Study is nearing completion for internal
review. We target to secure finance and launch shortly after the
start-ups at Tulu Kapi and Jibal Qutman.
Exploration Projects
During the past 15 months we have been granted 14 new
exploration licences, about three times what we were granted in the
previous 13 years, including five new licences in January 2023.
This demonstrates the seriousness of the country's commitment to
the development of the minerals sector.
We have formed regional exploration teams which have mobilised
onto all projects for initial prospecting of what we now see as 4
project areas spread over the new licences. As was the case at
Jibal Qutman and Hawiah, many of these licenses have abundant
evidence of historical workings and surface expression of
mineralisation.
CORPORATE
Over 90% of development capital for all three advanced projects
has already been conditionally arranged at the project or
subsidiary level, subject to the final feasibility studies in Saudi
Arabia confirming our expectations and to the various conditions
precedent applicable to funds drawdown on all projects.
At today's gold price and assuming an ownership level in TKGM of
say 77%, the NPV to KEFI of just our Ethiopian project is estimated
at US$251 million or GBP207 million. Comparing this potential value
indicator with current market capitalisation of c. GBP30 million
highlights the enormous opportunity to add value for shareholders
as we de-risk the Project.
KEFI's beneficial interest in our Saudi projects, at various
commodity price levels, presents an aggregate (preliminary estimate
of) NPV similar to that of the Ethiopian project, serving to
reinforce the scale of the value-adding opportunity.
Whilst the process of de-risking the projects in both countries
has involved very time-consuming security and regulatory
challenges, both countries have recently turned the corner and we
make steady progress.
Harry Anagnostaras-Adams, Executive Chairman of KEFI,
commented:
"The Company's working environment has improved significantly in
both Ethiopia and Saudi Arabia. Our teams are working intensely
with the host governments to launch the first two of our three
development projects. We start first with Tulu Kapi Gold in
Ethiopia, then Jibal Qutman Gold in Saudi Arabia. KEFI's beneficial
interest in their aggregate gold production from 2025 is estimated
to be in the order of 140,000 oz.
"At the current gold price of c. US$2,000/oz, KEFI's beneficial
interest in the estimated Net Operating Cash Flow from Tulu Kapi
alone is estimated to be c. GBP75 million average per annum and in
the NPV is estimated at GBP207 million , or respectively 1.8 pence
and 5 pence per current KEFI share in issue.
"At Tulu Kapi in Ethiopia, the project finance is conditionally
in place and, with the Government, we are ensuring that all
security and administrative arrangements are also in place.
"At Jibal Qutman in Saudi Arabia, whilst we had originally
defined a starter project at then-lower gold prices, we are
completing a feasibility study on a larger project at today's
higher gold prices."
Market Abuse Regulation (MAR) Disclosure
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
Enquiries
KEFI Gold and Copper plc
Harry Anagnostaras-Adams (Managing Director) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance LLP (Nominated
Adviser) +44 (0) 20 3470 0470
Jeff Keating, Adam Cowl
Tavira Securities Limited (Lead Broker) +44 (0) 20 7100 5100
Oliver Stansfield, Jonathan Evans
WH Ireland Limited (Joint Broker) +44 (0) 20 7220 1666
Katy Mitchell, Andrew de Andrade
IFC Advisory Ltd (Financial PR and IR) +44 (0) 20 3934 6630
Tim Metcalfe, Florence Chandler
Notes to Editor
KEFI Gold and Copper PLC
Mission
The mission of KEFI is to discover and acquire economic gold and
copper mineralisation and follow through with cost-effective
responsible exploration, mine development and production in
compliance with local laws and international best practice.
Our geological region of focus is the Arabian-Nubian Shield, due
to its outstanding prospectivity, especially for gold and
copper.
Our activities provide a strong project pipeline covering the
spectrum from our Tulu Kapi Gold Project at the funding stage in
Ethiopia, to our Jibal Qutman Gold and Hawiah Copper-Gold Projects
at the feasibility study stage in Saudi Arabia, and to walk-up
drill targets in both countries.
Since incorporation 17 years ago, KEFI has invested some GBP80
million in these activities and today the Company sits with
advanced projects that have project NPV's that are many multiples
of the amount invested. KEFI has a leading position in the two
countries that contain the majority of the Arabian-Nubian Shield.
We now have three advanced projects in these now strongly
pro-development countries and are focused on a sequential mine
development path to build a mid-tier mining company over the next
few years.
Our mission now takes us to the stage of de-risking our
development project to close the gap between our stock market
capitalisation and the underlying intrinsic values.
Approach
KEFI was launched in 2006 as a GBP2.5 million initial public
offering ("IPO") on the AIM Market of the London Stock Exchange and
was then led by exploration specialists.
The 2014 acquisition of the Tulu Kapi Gold Project triggered the
appointment of management with track records in developing and
operating mines in Africa.
KEFI partners with appropriate local organisations, such as
Abdul Rahman Saad Al Rashid and Sons Limited ("ARTAR") in the
Kingdom of Saudi Arabia in our Gold and Minerals Limited ("GMCO")
joint venture and with the Federal Government and the Oromia
Regional Government in Ethiopia for our TKGM joint venture.
Our community plans are in accordance with the International
Finance Corporation (World Bank) Performance Standards and Equator
Principles. Operationally, we align with industry specialists such
as Lycopodium Limited ("Lycopodium") - our principal process plant
contractors in both Ethiopia and Saudi Arabia.
Timing
KEFI's objective is to have its two most advanced projects in
production by 2025 and the third in 2027.
The next few years will be focused on multi-pronged development
and concurrent aggressive exploration.
During this period our cash flow production should commence and
escalate.
This period coincides with the likely take-off in the minerals
sector of both of our host countries.
Notes
Explanatory Comments on the Use of NPV (Net Present Value) and
the Basis of Calculations
KEFI's advanced projects report NPV's as at today based on:
-- recoverable JORC Resources as reported up to the end of 2021;
-- net cash flows after debt service and after taxes, i.e. net cash available for shareholders;
-- 8% discount rate; and
-- nil value for potential expansion of project resources or any other discovery.
For our most advanced project, Tulu Kapi's planned open pit
mine, the modelling was built independently for use by the project
syndicate and is based on the DFS (Definitive Feasibility Study) as
updated for refinements in consultation with lenders, contractors
and input pricing updates generally. KEFI management use this
modelling as the basis for analyses from equity investors'
viewpoint.
The other KEFI projects are less advanced and are at various
stages of feasibility study. Accordingly, any statistics are based
on Preliminary Economic Assessments based on models derived with
the input of our specialist advisers and consultants. We highlight
that the integration of the preliminary plans for the Tulu Kapi
underground mine into a combined profile with the open pit mine
will be revised to DFS-stage during construction of the open pit
mine.
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