TIDMKEFI
RNS Number : 9201G
Kefi Gold and Copper PLC
01 April 2022
1 April 2022
KEFI Gold and Copper plc
("KEFI" or the "Company")
Q1 2022 Operational Update
KEFI (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 latest
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 January 2022 to 31 March 2022
("Q1 2022"). The Tulu Kapi Gold Project ("Tulu Kapi") is under TKGM
(planned to be c. 70% owned by KEFI). The Hawiah Copper-Gold
Project ("Hawiah") and the Jibal Qutman Gold Project ("Jibal
Qutman") are under G&M (planned to be c. 30% owned by KEFI).
Both TKGM and G&M are operated by KEFI.
Ethiopia
The security situation has improved enormously in Ethiopia over
the past few months, with the end of the civil war in the country's
northern regions during December 2021, the lifting of the national
state of emergency in February 2022, the agreed ceasefire in March
2022, and the focus of the security forces having now switched to
the policing of priority areas like the Tulu Kapi district.
Until a few years ago, Ethiopia was one of the world's top 10
growth countries for nearly 20 years running and now, having
overcome its recent security issues, is demonstrating a clear
determination to expedite the economic recovery and the pursuit of
its economic objectives. Tulu Kapi will be the country's first
large scale mining project for some 30 years and is designed to the
highest international standards. It therefore is imposing many
demands on a regulatory system which the Ethiopian Government is
upgrading, under strong Ministerial leadership, determined to build
a modern minerals sector.
During Q1 2022 TKGM reactivated Tulu Kapi project launch
preparations and has recently formally advised the Ministry of
Mines of its progress being on schedule and that it can close
project finance by mid-year if the security situation is
satisfactory and if the few remaining regulatory administrative
tasks are also completed punctually.
In collaboration with the regulatory agencies at all four levels
of the Ethiopian Government, TKGM is implementing a staged Tulu
Kapi project launch, with progress to date as follows:
-- essentially completed technical and legal due diligence, as
directed by senior lenders' independent advisers - to satisfy
conditions precedent to finance closing;
-- triggered detailed engineering - minimising procurement and construction time;
-- recommenced widespread community engagement, which had been
suspended for some months due to previously reported security
incidents;
-- restarted district works which have a quick local impact,
such as upgrading the exploration camp for the construction
workforce and re-establishing the nursery for environmental
management programmes. Some of these programmes were scheduled for
post-launch, but have been brought forward to rebuild stakeholder
"safety confidence" over several months of undisturbed progress in
the lead-up to financial close, along with the requisite
independent security assessments;
-- commenced regular independent security monitoring;
-- facilitated the completion of the few remaining regulatory administrative tasks:
o the Ministry of Mines has now endorsed historical costs up to
2020 of c.US$60 million and is now addressing the remainder,
incurred after that date or by other companies on behalf of
TKGM;
o the Ministry of Mines formally requested to allow
re-commencement of exploration at satellite deposit prospects in
the Tulu Kapi district;
o the central bank now addressing permission for both
development banks to be allowed to lend on the same terms. It has
already revised, at TKGM's request, local restrictions which
effectively blocked modern mining project finance until now - such
as the working rules for the London clearing account to avoid
restrictions of capital controls, the capital ratio for project
debt up to 70/30 debt/equity, the use of gold price hedging if
desired, the use of offshore leasing and the application of
market-based interest rates
-- maintained the project syndicate, triggered final pricing by
the principal contractors and distributed for review an updated
term sheet in respect of the offtake-linked mezzanine facility, now
to involve the senior lenders as well as the metals trader.
Saudi Arabia
On 6 January 2022, KEFI announced an updated Mineral Resource
Estimate ("MRE") for the Hawiah volcanic massive sulphide ("VMS")
deposit of 24.9 million tonnes at 0.90% copper, 0.85% zinc, 0.62
g/t gold and 9.81 g/t silver. This represents a c.30% increase in
resource tonnage and c.5% increase in grade over the previous MRE.
As a scale-comparison with the Company's Tulu Kapi Gold Project,
Hawiah's recoverable metal is now estimated to be in the order of
2.2 million gold-equivalent ounces versus Tulu Kapi's 1.2 million
ounces.
Work at the Hawiah Copper-Gold Project during Q1 2022 has
focussed on providing data for the Hawiah Preliminary Feasibility
Study ("PFS") and included:
-- a 3,700m reverse-circulation ("RC") drilling programme aimed
at upgrading and expanding the oxide portion of the Hawiah MRE to
an Indicated Resource category for open-pit mine planning;
-- trenching across the Camp and Crossroad Lodes to collect bulk
samples of the oxide mineralisation;
-- further metallurgical test work on the sulphide
mineralisation to determine the preferred flowsheets to recover the
copper concentrates and zinc concentrates, as well as the gold and
silver;
-- a 1,800 metre geotechnical diamond drilling programme; and
-- a 1,350 metre hydrogeological drilling and pump testing programme.
Two Exploration Licences ("ELs") located immediately west of the
Hawiah EL were granted in December 2021. Initial exploration of
these Al Godeyer ELs has confirmed similar copper-gold
mineralisation to the Hawiah VMS deposit and indicated good
continuity of the mineralised horizon. Exploration during the
quarter included:
-- a Self-Potential ("SP") geophysical survey that defined a
continuous anomaly 1.3km in strike and a second, shorter anomaly
which correlate well with outcropping gossans;
-- the presence of gold and copper gossans in all trenches over
the main SP anomaly and the majority of trenches over the second SP
anomaly. Rock chips taken during mapping these trenches confirmed
copper-gold mineralisation with grades of up to 1.8% copper and
7.2g/t gold; and
-- RC drilling intersected oxide and transition sulphides down
to a vertical depth of 35 metres in the first six holes - assay
results are pending for all drillholes.
The Al Godeyer's exploration focus is to deliver an initial JORC
Mineral Resource during 2022, with a diamond drilling programme set
to commence in early April.
At the Jibal Qutman Project, development planning was
re-activated following indications from the Saudi Arabian Ministry
of Mineral Resources that the Mining Licence would progress in
2022. Jibal Qutman was KEFI's first discovery in Saudi Arabia with
a maiden MRE in excess of 700,000 oz of gold.
KEFI Group
The improvement in the local working environment in both
Ethiopia (security) and Saudi Arabia (regulatory) since late 2021
has allowed KEFI to achieve rapid progress in both jurisdictions
during Q1 2022. Combined with the recently reported excellent
exploration results at Hawiah in Saudi Arabia, KEFI now has a
much-improved position as an early-mover in both countries and with
a more balanced portfolio of advancing projects.
Now having three (not one) advanced projects in two countries
places the Company into a much better risk position than was
hitherto the case.
Based on metal prices current at 31 December (note 1 below), the
following high-level statistics illustrate the importance of KEFI's
newly-established position across the advanced projects and the two
countries:
-- KEFI's beneficial interest in gold-equivalent mineral
resources has grown from 1.2 million ounces in mid-2020 to 2.1
million ounces at the end of 2021 with growth anticipated for 2022
and subsequent years;
-- KEFI's market capitalisation at 0.8 pence per share represents the following:
-- US$18/oz-equivalent on JORC resources;
-- 7% of NPV (8%) at current metal prices, 13% on Ethiopia alone and 16% on Saudi alone;
-- Estimated potential Net Operating Cash Flow (see note 2
below) is GBP137 million (c. US$185 million) per annum from the
combination of all three development projects at their targeted
start-up production rates.
-- NPV (see note 3 below) for KEFI of its projects has tripled
since mid-2020, at 31 December 2021 metal prices and represents 12p
per share in issue (6.5 pence per share Ethiopia and 5.3 pence per
share Saudi Arabia). All KEFI's projects have resources which
remain open and there is a pipeline of nearby additional
exploration projects with walk-up drill targets.
Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented
:
"During the first quarter of 2022 KEFI has made excellent
progress on three now-advanced projects in two now-pro-development
countries. This is in stark contrast to our situation only months
ago when our priority was simply to preserve the Ethiopian project
finance syndicate against security challenges and to prove up
sufficient resources in Saudi Arabia to warrant development.
"I believe this recent pivot means that the first quarter of
2022 represents KEFI's watershed quarter and the most important
since the IPO in 2006."
Investor Webinar
The Company will provide a Quarterly Update presentation via the
Investor Meet Company platform on Friday 8 April 2022 at 3pm London
time.
The presentation is open to all existing and potential
shareholders. Questions can be submitted pre-event via your
Investor Meet Company dashboard up until 9am the day before the
meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add
to meet KEFI via:
https://www.investormeetcompany.com/kefi-gold-and-copper-plc/register-investor
Investors who already follow KEFI on the Investor Meet Company
platform will automatically be invited.
The webinar will subsequently be available on the Company's
website at:
http://www.kefi-minerals.com/news/webcasts .
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 and Joint Broker) +44 (0) 20 3470 0470
Jeff Keating, Adam Cowl
Tavira Securities Limited (Joint 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
(1) Metal prices:
31 December 2021 Metal Prices: 31 January 2021 Analyst
Consensus
Long Term Prices:
-------------------------------------------
Gold Price is US$1,830/oz Gold Price is US$1,607/oz (2) (3)
-------------------------------------------------- ----------- -----------
Copper Price is: US$9,750/t Copper Price is: US$7,590/t (4) (5)
-------------------------------------------------- ----------- -----------
Zinc Price is US$3,590/t Zinc Price is US$2,442/t (6) (7) (8)
--------------------------------------- ---------- ----------- -----------
Silver Price is US$23/oz Silver Price is US$21/oz (9) (10) (11)
--------------------------------------- ---------- ----------- -----------
(12) Net Operating Cash Flow: Same as Earnings Before Interest,
Taxes (taxes and royalties payable), Depreciation and
Amortisation
(13) NPV
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.
KEFI Gold and Copper plc
KEFI is focused primarily on the development of the Tulu Kapi
Gold Project in Ethiopia and its pipeline of highly prospective
exploration projects in the Arabian-Nubian Shield. KEFI targets
that production at Tulu Kapi will generate cash flows for capital
repayments, further exploration and dividends to shareholders.
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
31.2% 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 three 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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