TIDMKEFI
RNS Number : 4310D
Kefi Gold and Copper PLC
03 March 2022
3 March 2022
KEFI Gold and Copper plc
("KEFI" or the "Company")
Recommencement of Development Activities at Tulu Kapi
KEFI (AIM: KEFI), the gold and copper exploration and
development company with projects in the Federal Democratic
Republic of Ethiopia and the Kingdom of Saudi Arabia, is pleased to
announce that development activities at the Tulu Kapi Gold Project
(the "Project" or "Tulu Kapi"), part of the KEFI-operated Ethiopia
joint-venture Tulu Kapi Gold Mines Share Company ("TKGM") have
recommenced.
Following the abatement of Ethiopia's civil war at the end of
2021 and its State of Emergency being lifted, TKGM has worked
intensely with the Ethiopian Ministry of Mines (the "Ministry") to
monitor the situation to ensure that it is appropriate for the
recommencement of activities at the Tulu Kapi site and in the wider
district. The Company is pleased to report that over the past two
months the security situation has remained stable at both the site
and the preferred transport routes, enabling activities at the Tulu
Kapi site to recommence in an appropriately managed manner.
The Project's principal contractors, Lycopodium (plant
construction) and Corica (mine services), are expected to deliver
the final costings for confirmation at the end of April 2022. The
anticipated final capital estimate for the Project has not changed
from previous guidance and remains fully covered by the previously
announced non-binding subscriptions from the Project's financing
syndicate, with any required residual contribution also now covered
in the event of exercise of the Company's warrants issued in
December 2021.
Recent meetings with the Project's senior lenders and other
finance syndicate members have reconfirmed the targeted financial
closing in in mid-2022, subject to the security situation remaining
stable as activities increase over the coming months, and various
documentation and government administrative tasks being completed.
The independent security assessors have commenced regular field
inspections.
TKGM is now recommencing refurbishment of the existing site camp
to accommodate the initial construction workforce and have recently
completed detailed design for the procurement and construction of:
the security camp; a new all-weather access road; the permanent
camp; water dam 1; plant and administrative buildings; Bir-Bir
river pump station and pipeline; tailings storage facility - stage
1; process plant; bulk fuel and lubricant storage area; grade
control drilling; on site metallurgical testing laboratory;
explosive supply and storage; and the mining fleet service
area.
Tasks to be undertaken ahead of Project finance closing are
summarised as follows:
-- March 2022:
o All field programmes recommenced for community consultations
and new host land preparations, with regular independent security
monitoring over the ensuing months.
o Remaining few Ethiopia regulatory administrative tasks
completed, such as endorsement of historical costs, working rules
for the London clearing account to avoid restrictions of capital
controls and clearance for both banks to lend on same terms.
o Updated term sheet for offtake-linked mezzanine facility now
involving senior lenders as well the metals trader.
-- April 2022:
o Launch of Tulu Kapi Foundation, administered with local
authorities, community representatives and Ethiopian Evangelical
Church of Mekane Yesus.
o Final pricing agreed with contractors.
-- May-June 2022:
o Drafting of the remaining detailed documents, flowing from the
regulatory approvals, mezzanine term sheets and Project contractor
pricing updates in March and April.
o Insurance package and pricing confirmations.
o Independent security review and decision as to when to sign
final documents.
o Signing of binding documents by all
Harry Anagnostaras-Adams, KEFI Executive Chairman, commented:
"It is great to see that Ethiopia has settled down so quickly over
the past two months and that TKGM's teams are back in the field for
launch preparations. Everyone is now pushing for full Project
launch.
"And it's doubly impactful that the turnaround in Ethiopia has
coincided with a take-off of our projects in Saudi Arabia. KEFI has
turned onto the front foot in both jurisdictions, after
particularly frustrating years in both.
"KEFI now has three advanced development gold and copper-gold
projects with significant resource upside in two now-supportive
jurisdictions of the Arabian Nubian Shield, and in which our
beneficial interest is already the equivalent of 2.1 million oz
gold. I look forward to keeping shareholders appraised of our
progress."
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
KEFI started as a grassroots explorer equity-funded via AIM and
is now the operator of large exploration and development joint
ventures with strong local partners in the Arabian-Nubian Shield,
with most of the funding being sourced at the project level.
KEFI is focused primarily on the development of its advanced
projects in both Ethiopia and Saudi Arabia, plus the expansion of
its resource base at these projects and through exploration of its
other prospects in the Arabian-Nubian Shield. KEFI targets that
production at its three development projects, starting with Tulu
Kapi Gold in Ethiopia and adding production from Jibal Qutman Gold
and Hawiah Copper-Gold in Saudi Arabia will generate cash flows for
capital repayments, further exploration and dividends to
shareholders.
The following tabular summary presents KEFI's updated estimated
share of the projects' aggregate NPV's, as at mid-2022:
Pence
Tulu Kapi Hawiah Jibal Qutman Total Issued Per
NPV NPV NPV NPV Shares Share
Net Present Value
for KEFI as at mid-2022
start of Tulu Kapi
Construction
30/06/2020 GBP114m 0 0 GBP114m 1,867m 6
31/12/2020 GBP164m GBP80m 0 GBP244m 2,137m 11
30/06/2021 GBP205m GBP74m 0 GBP279m 2,153m 13
31/12/2021 GBP191m GBP128m GBP29m GBP348m 2,939m 12
Footnotes:
Assumed exchange rate was rate
US$1.35:GBP1.00
31 December 2021 Metal Prices:
Gold Price is US$1,830/oz
Copper Price is:
US$9,750/t
Zinc Price is US$3,590/t
Silver Price is
US$23/oz
Explanatory Notes:
* NPV is derived by KEFI using independently created financial
models of net cash flows after tax
and debt service, using a discount rate of 8%;
* Tulu Kapi open pit model is based on the Definitive Feasibility
Study ("DFS") as updated for any
refinements during project contracting and in-country experience;
* Tulu Kapi underground mine model is based on the internal Preliminary
Economic Assessment ("PEA");
* Hawiah assumes preliminary mine modelling for open pit and
underground because the MRE has only recently been updated. Also
includes preliminary debt leverage;
* Jibal Qutman model is based on the internal PEA, preliminary
debt-leverage applied.
Note that aggregate NPV's in mid-2025 using the same underlying
assumptions as above, are estimated to be approximately 80% higher
than those at mid-2022, reflecting that production will have
commenced at Tulu Kapi, assumed to be imminent at Jibal Qutman and
soon-to-follow at Hawiah. This project sequencing will be refined
as the Saudi development studies progress. The scale of the
projects in value terms to KEFI is highlighted by the table above
as at mid-2022, but of equal importance from a financing viewpoint
is the emphasis of project-level capital funding as well as the
sequencing of their development. These aspects are illustrated in
the table below:
TULU JIBAL
KAPI HAWIAH QUTMAN TOTAL
Current ALL 3
Estimate PROJECTS
US$m US$m US$m US$m
--------- ------- -------- ---------
Assumed Year of Commencing Construction 2022 2025 2024
----------------------------------------- --------- ------- -------- ---------
Total Applications, including
Mine Fleet 358 160 39 557
Less Mine Fleet Provided by
Corica 56 0 0 56
Senior Debt 140 120 29 289
Equity-Risk Capital Requirement 162 40 10 212
--------- ------- -------- ---------
Project Partners' Share Subscriptions
into TKGM/G&M 38 28 7 73
Offtake-Linked Mezzanine Finance 45 0 0 45
Cost Overrun Facility, Part
of Mezzanine Facility 15 0 0 15
TKGM/G&M Share Capital to be
subscribed by KEFI 64 12 3 79
--------- ------- -------- ---------
Funded by Subordinated Convertible
into KEFI Shares at Year 3 market
price 20 0 0 20
Funded by KEFI Shares Issued
at end Year 2 at the then market
price 7 0 0 7
Budgeted internal spare cash
generated 9 12 0 21
KEFI Convertible Note Issued
after signing, at premium to
market in H2-2022 20 0 0 20
KEFI Share Issue after closing
each project financing in 2022,
2024, 2025 8 0 3 11
Note that the Dec 2021 warrants
at 1.6p bring in approximately
US$8m
Residual Requirement 0 0 0 0
--------- ------- -------- ---------
KEFI Gold and Copper in Ethiopia
Ethiopia is currently undergoing a remarkable transformation
both politically and economically.
The Tulu Kapi gold project in western Ethiopia is being
progressed towards development, following a grant of a Mining
Licence in April 2015.
The Company has now refined contractual terms for project
construction and operation. Estimates include open pit gold
production of c. 140,000oz pa for a 7-year period. 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.
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's wholly-owned
Ethiopian subsidiaries upon commencement of development by TKGM,
with a view to adding satellite deposits to development and
production plans.
KEFI Gold and Copper 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 30%
interest in G&M and is the operating partner.
ARTAR, on behalf of G&M, and G&M directly hold over 16
Exploration Licence (EL) applications pending the introduction of
the new Mining Law. These new regulations have recently been
proclaimed and G&M now holds 3 EL's. ELs are renewable for up
to three years and bestow the exclusive right to explore and to
obtain a 30-year exploitation (mining) licence within the area.
In addition, G&M has a Mining Licence Application over the
Jibal Qutman Gold Project which recent informal indications by the
authorities provide some confidence that the licence will be
granted in 2022.
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