TIDMKEFI
RNS Number : 7728I
Kefi Gold and Copper PLC
09 August 2023
9 August 2023
KEFI Gold and Copper plc
("KEFI" or the "Company")
Q2 2023 Quarterly Operational Update
Progress on All Fronts
KEFI (AIM: KEFI), the gold and copper exploration and
development company, has focused on the Arabian-Nubian Shield since
2008, assembling a pipeline of projects in the Kingdom of Saudi
Arabia and in the Federal Democratic Republic of Ethiopia. We are
pleased to provide this Q2 2023 operational update covering the
three months to 30 June 2023 and more recent developments.
This update encompasses the activities of the Company, as well
as wholly owned KEFI Minerals (Ethiopia) Ltd ("KME"),
majority-owned Tulu Kapi Gold Mines Share Company ("TKGM") in
Ethiopia, and minority-owned Gold & Minerals Ltd ("GMCO") in
Saudi Arabia .
The Tulu Kapi Gold Project ("Tulu Kapi") is planned to be
greater than 70% beneficially owned by KEFI and held via KME. The
Jibal Qutman Gold Project ("Jibal Qutman"), the Hawiah Copper-Gold
Project ("Hawiah") and the other Saudi projects are under GMCO (27%
beneficially owned by KEFI).
HIGHLIGHTS
-- The plan is to launch Tulu Kapi over the next few months in
line with the Ethiopian Government's continued upgrade of security
protections around the country and preparation of the community.
The state of emergency in the region of Amhara is in respect of
local issues, which are not expected to disturb Tulu Kapi's
launch
-- KEFI has now assembled with regional financiers both debt and
equity development capital of US$320 million, in addition to which
the mining contractor is supplying the required US$70 million
mining fleet
-- We consider TKGM to now be essentially fully permitted, with
funding assembled and ready for final credit committee and board
approvals of our banks and project investors, who have already
drafted proposed final funding package documentation
-- The planned KEFI project development sequencing is as follows:
o 2023 launch Tulu Kapi open-pit in Ethiopia for first
production end-2025;
o 2024 launch Jibal Qutman Gold open-pit in Saudi Arabia for
first production end-2025;
o 2025 launch of the Hawiah Copper-Gold open-pit in Saudi Arabia
for first production 2027; and
o 2026 and thereafter launch of underground mine development at
Tulu Kapi and at Hawiah for first production two years later.
KEFI GROUP
Group Metrics
Aggregate Mineral Resources across all three projects are 4.7
million ounces of gold-equivalent in-situ, of which 2.0 million
ounces is KEFI beneficial interest.
Aggregate annual production from the three advanced projects is
currently projected at 326,000 ounces of gold-equivalent, of which
148,000 ounces is KEFI's beneficial interest, over an initial seven
year period
The Tulu Kapi open pit is already bankable with a 1 million
ounce Ore Reserve. Combined with the first preliminary planned
200,000 ounce contribution from the underground mine, Tulu Kapi is
planned to produce c.144,000 ounces per annum, at an
All-In-Sustaining Costs of c.US$950 per ounce, at gold prices of
US$1,600-2,000 per ounce. At those same prices, this provides Net
Operating Cash Flow of US$110-167 million per annum (100% basis)
for the first seven full years of production (2026-2032).
Regional Financing Support for KEFI's Mining Ventures in
Ethiopia and Saudi Arabia
We essentially rely on financiers based in, or at least
familiar, with our host countries.
In light of a surge in local and regional support for the mining
sector and for KEFI's particular projects in both Ethiopia and
Saudi Arabia, we have commenced establishing separate corporate
structures for the Company's individual projects and transferring
the respective licences within the group as appropriate.
Going forward, we anticipate relatively little, if any, reliance
on raising equity from the UK investor market, despite its
historical support for the Company's initial phase of exploration,
permitting, engineering studies and assembly of development
financing.
Both Saudi Arabia and Ethiopia are now actively promoting their
stock exchanges, with an exchange in Addis Ababa planned for
mid-2024, for their growing mining sectors and domestic investor
markets.
Working Capital
KEFI has working capital in place to underpin its planned runway
to the intended closing of the Tulu Kapi Project finance and launch
in the coming months.
This follows the Company's repayment of all debts in June 2023
upon completing an equity placing that raised gross proceeds of
GBP7.2 million via a GBP5.50 million Firm Placing, GBP0.70 million
Conditional Subscription, GBP0.24 million Retail Offer and GBP0.75
million Issue of Remuneration Shares in lieu of cash to senior
executives. The issue of the Conditional Subscription, Retail Offer
and Remuneration Shares were approved at the Company's Annual
General Meeting on 30 June 2023 and these shares have subsequently
been issued.
Board and Management Team
KEFI welcomed a new Non-Executive Director Dr Alistair Clark to
the Board on 30 June, who is a pre-eminent authority on
environmental, social, and corporate governance matters. From 2001
until 2021, Dr Clark was Managing Director, Environment and
Sustainability Department, at the European Bank for Reconstruction
and Development ("EBRD").
KEFI's recently appointed Chief Operating Officer, Eddy
Solbrandt, has assumed formal responsibility for all development
and has operational line management of the Company's majority-owned
projects and provides support and advice for its minority-owned
projects.
The in-country project teams have been expanded under Managing
Directors Theron Brand, in majority-owned TKGM in Ethiopia, and
Brian Hosking in minority-owned GMCO in Saudi Arabia.
General Manager Corporate Development, Rob Williams, has
switched from part-time to full-time and the Tulu Kapi Project
development execution team is now being assembled within TKGM and
Lycopodium.
Investor relations arrangements have also been enhanced to
capture the heightened interest from regional, corporate and sector
specialist international investors.
INVESTOR WEBINARS
The quarterly open-forum webinar for all investors will be
complemented with a separate presentation and webinar directed at
industry specialist analysts. The Webinar for all Investors will be
at midday London on Friday 8 September 2023, scheduled midway
between the last one on 30 June 2023 and the next one at about the
end of October 2023.
Details of these two events will be announced in due course.
ETHIOPIA
Tulu Kapi - Project Finance Closing Process
During recent months, the three key pre-requisites for
proceeding with project finance were satisfied, subject only to
normal follow-through by the respective Ethiopian Government agency
involved, as follows:
-- approval of Ethiopian country membership for Africa Finance
Corporation ("AFC") by the Federal Ministry of Finance. This
enshrined the same style of protective rights for both the Senior
Lenders, the other being Eastern and Southern Africa Trade and
Development Bank ("TDB");
-- deployment of Federal and Regional Government security around
the Tulu Kapi project district and transport routes.
Notwithstanding the continuing non-threatening conditions in these
areas, these protective measures are agreed and committed; and
-- agreement with the Ethiopian central bank, the National Bank
of Ethiopia, as regards TKGM's right to operate banking in a major
international financial centre, as part of the conventional
international project finance arrangements.
These measures reflect the broad-sweeping policy initiatives
requested of, and taken by, the Ethiopian Government to facilitate
the take-off of the mining sector.
The ongoing risk-mitigation is in respect of security. TKGM's
policy is to manage security in accordance with 'red zone' (higher
risk category) protocols despite the project area typically not
rating as such. Independent security assessors recently reported
that TKGM's approach to security at the project site and the
transport routes in and out, are sensible, pragmatic and in line
with security best management practice.
As regards analysing the potential influence of internal
conflicts such as that currently in the Amhara Region, it is worth
noting that Ethiopia is approximately five times the size of the UK
and double the population. For context, the city of Gondar, where
the current conflict is centred in Amhara, is more than 700km from
Tulu Kapi and the actions there are not reflective of the situation
at Tulu Kapi and the surrounding environs.
We have now assembled with regional investors familiar with
Ethiopia, the funding needed for both debt and equity development
capital of US$320 million, in addition to which the mining
contractor is supplying the required US$70 million mining
fleet.
We expect some last-minute refinement of the amounts and sources
of funding upon confirmation of final lump sum fixed plant pricing
because, as always planned, we are adopting a fixed price approach
to engineering and procurement of the plant. Our observation of
pricing trends is that cost-inflation in this sector has tapered
off over the past year and, in some cases, prices have dropped.
We are pleased to have assembled and preserved such a strong
project syndicate, which has avoided reliance on the stock market.
We look forward to the project launch over the coming months by
maintaining the recent rate of progress and continuing to upgrade
security.
All information requests so far received from the finance
syndicate have been satisfied.
We consider TKGM to now be essentially fully permitted, with
funding assembled and ready for final credit committee and board
approvals of our banks and project investors.
Upon receiving these approvals, we will then mobilise our social
performance teams into the community to prepare the project
affected persons for resettlement, who we have engaged with for
some time and are looking forward to this step. Whilst these
community arrangements are being agreed at the household level, we
still plan to execute the already-drafted project finance detailed
definitive documentation and satisfy standard procedural conditions
precedent to funds drawdown.
Whilst the community neither owns the land title nor has the
right to obstruct a national priority project, the resettlement
will be conducted collegiately and in a phased manner, governed by
the leading international standard, the World Bank IFC Performance
Principles.
The overall project launch sequence remains as follows and has
been approved by the boards of KEFI and TKGM:
-- final lender credit approvals and investor board approvals;
-- mobilisation of social performance teams to implement the
first phase of the resettlement action plan in close collaboration
with local government, which carries the legal responsibility and
authority for dealing with the project affected persons;
-- finalisation and execution of already-drafted detailed definitive documentation;
-- final independent reviews by SLR as regards community
readiness and by Constellis as regards security readiness;
-- lock-in final pricing and then place lump sum plant procurement orders;
-- final equity capital allocations, drawdowns and issuance of
notices to proceed to contractors; and
-- placement of insurances. opening project bank accounts in
London, registration of security and satisfaction of the usual set
of conditions subsequent during the months leading to debt
drawdown.
In essence, we plan to start community preparations this quarter
(Q3 2023), procurement and construction in the next quarter (Q4
2023), first for the community, and then at the site, in
preparation for delivery and assembly of plant and equipment
fabricated at various international specialist suppliers; with
production targeted for late 2025.
Ethiopia Project Pipeline
We have commenced administrative proceedings in respect of our
long-standing proximal Exploration Licenses ("ELs") surrounding the
Tulu Kapi Project Mining Licence area, in order to continue
exploration programmes and community development which have always
complemented the Tulu Kapi project. During an overhaul of the
title-regulatory system in 2022, these ELs were over-pegged by a
Hong Kong shell company owned by a British Virgin Islands shell
company. We are confident that this situation can be resolved
satisfactorily.
SAUDI ARABIA
Two of KEFI's three advanced projects are in Saudi Arabia -
Jibal Qutman Gold and Hawiah Copper-Gold. Both projects are GMCO
discoveries and are enjoying very positive regulatory support as
preferred development plans are determined.
The country's prospectivity for further discovery is now
becoming widely recognised and the international industry is
mobilising at the invitation of the Saudi Government.
GMCO has one of the largest exploration teams in the country and
holds 15 ELs, providing extensive potential for further discoveries
near the Jibal Qutman Gold and Hawiah Copper-Gold project sites, as
well as the two other already targeted project areas. GMCO has six
drill rigs running, mainly conducting in-fill drilling, but also
doing some extensional drilling on current resources and
exploration drilling.
The Jibal Qutman Gold Project
The Jibal Qutman Definitive Feasibility Study ("DFS") is
evaluating the economic and technical feasibility for building a
set of adjacent open-pit mines and a centrally sited
Carbon-in-Leach ("CIL") processing plant, to recover more than
500,000 ounces of gold, rather than the 169,000 ounces of gold
originally envisaged in the 2015 Preliminary Economic Assessment
("PEA"). The 2015 PEA focused on a small heap-leach approach as a
starter-project when, at that time, planning was based on a gold
price of c.US$1,200/oz. GMCO also continues to explore for
additional resources on the same and similar structural belts at
this project area.
Current activities at Jibal Qutman are focused on the work
required to complete the DFS and its approval by GMCO and our
project finance lenders in Saudi Arabia. This work includes:
-- metallurgical and geotechnical drilling, completed during the quarter;
-- infill drilling to upgrade the resource classification, also completed;
-- metallurgical tests, now indicating recovery of c.90% and
69-74 for oxidised and fresh ore respectively;
-- mine planning in more detail as drilling and metallurgical programs are wrapped up;
-- analysis of data from a ground magnetics survey and 23
trenches completed during the quarter, to better define drill
targets and also to finalise the location for site
infrastructure;
-- resource-extensional drilling and the testing of nearby
targets, including having recently extended the Red Hill deposit to
the south; and
-- completion of a substantial portion the initial accommodation and works compound at site.
The current Mineral Resources of 733,000 ounces gold is now
being updated.
The above work is designed to finalise the DFS over the coming
months. Based on encouragement from regulators and development
financiers, we expect that upon GMCO resolving its commitment to
develop, there will be minimal delay in obtaining a mining licence,
closing project finance within Saudi Arabia and starting
development in 2024, with the exact timing depending upon these
reviews and regulatory processes.
Hawiah Copper-Gold Project
Drilling since the discovery of Hawiah in 2019 has established a
Mineral Resource Estimate ("MRE") of 29.0 million tonnes ("Mt") at
0.89% copper, 0.94% zinc, 0.67g/t gold and 10.1g/t silver (see the
Company's announcement on 9 January 2023). This MRE contains a
total of 258,000 tonnes (569 million lbs) of copper, 272,000 tonnes
(600 million lbs) of zinc, 620,000 ounces of gold and 9.4 million
ounces of silver.
Hawiah is a part of a larger mineralised system and the deposit
already ranks amongst the top three base metal projects in Saudi
Arabia and in the largest 15% of VMS ("Volcanogenic Massive
Sulphide") systems globally.
During the quarter, KEFI announced the following results
achieved by GMCO:
-- a maiden MRE for the nearby (12km from Hawiah) Al Godeyer
deposit of 1.35Mt at 0.6% copper, 0.54% zinc, 1.4g/t gold and
6.6g/t silver (see the Company's announcement on 3 April 2023);
and
-- Hawiah Pre-Feasibility Study ("PFS") outcomes on the open-pit
and associated studies on the underground mine (see the Company's
announcement on 28 June 2023).
Based on mining current Indicated and Inferred Resources, key
outcomes of these studies were:
-- Project NPV(8) of US$301 million and post-tax IRR of 75%;
-- Life-of-Mine ("LOM") revenue of US$2.7 billion;
-- Operating cashflow of US$1.1 billion; and
-- Pre-production capital expenditure of US$295 million.
The above preliminary internal estimates are merely intended to
test the merits of ongoing work programmes and are based on spot
gold prices as at 30 April 2023 and an assumed mining rate starting
at 2 million tonnes per annum ("Mtpa") and peaking at 3 Mtpa over
10 years. The development concept is still being finalised, but it
is envisaged that initial open pit mining will be followed by, and
complemented by, underground mining. Mining optimisation studies
will in due course consider a range of scenarios including various
aggregate production rates and the ideal timing for starting-up the
underground operation.
Metallurgical test results, based on limited samples to date,
indicate that a conventional processing flowsheet provides good
recovery to a c.25% copper concentrate and a c.50% zinc concentrate
along with gold doré. However, other processing flowsheets remain
under consideration.
Whilst the primary focus of the PFS was on the relatively
close-to-surface portion of the MRE in the Indicated Resource
category, complementary studies on the Inferred Resource, reported
for the deeper part of the orebody (the near-vertical tabular
structure drill-intercepted over more than four kilometres strike
length), have allowed a positive internal preliminary assessment to
be made of Hawiah's economic potential at this stage. Further
resource growth is expected to improve the economics to eventually
be reported in the DFS.
Ongoing drilling is currently aimed at upgrading and expanding
the Hawiah and Al Godeyer resources. Earlier stage exploration
programmes in this project area are aimed at discovering other VMS
deposits. The current focus is the Al Godeyer area (12km from
Hawiah) and the Abul Salal Exploration Licences (50km from Hawiah).
Current mapping, SP geophysical surveys and trenching of these
gossans at Abul Salal will be followed by drilling.
Saudi Project Pipeline
Following the expansion of GMCO's exploration portfolio to 15
ELs covering four project areas of more than 1,000km(2) , regional
exploration teams have mobilised to the new ELs. As was the case at
Jibal Qutman and Hawiah, many of these ELs have abundant evidence
of historical workings and surface expression of
mineralisation.
GMCO has begun comprehensive mapping and sampling campaigns over
the newly awarded licences. The outcomes of this fieldwork will be
to ground-truth historical data, assess the surface mineralisation
and describe the structural framework controlling mineralisation.
These programmes are expected to build into progressively advanced
exploration works, including geophysics and trenching.
Regional exploration during the quarter included:
-- Jabal Hillit EL - interpretation of multispectral satellite
imagery provided a good indication of the areas of gold
mineralisation. These gold-bearing vein systems are now being
mapped, characterised and sampled; and
-- Jadib Al Qahtanah EL - reconnaissance sampling has returned
positive gold grades and a soil sampling programme has proven
effective in highlighting the trend of new and existing areas of
mineralisation.
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
IFC Advisory Ltd (Financial PR and IR) +44 (0) 20 3934 6630
Tim Metcalfe, Florence Chandler
3PPB International (Institutional IR)
Patrick Chidley +1 (917) 991 7701
Paul Durham + 1-203-940-2538
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