TIDMKEFI
RNS Number : 2981S
Kefi Gold and Copper PLC
13 July 2022
13 July 2022
KEFI Gold and Copper plc
("KEFI" or the "Company")
Q2 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 April 2022 to 30 June 2022 ("Q2
2022"), along with any material subsequent developments .
The Tulu Kapi Gold Project ("Tulu Kapi") is under TKGM (planned
to be c. 70% owned by KEFI). The Hawiah Copper-Gold Project
("Hawiah"), the Jibal Qutman Gold Project ("Jibal Qutman") and
other Saudi projects are under G&M (planned to be c. 30% owned
by KEFI). Both TKGM and G&M are technically guided and
supported by KEFI so that each of these operating joint venture
companies as soon as possible builds the local organisational
structure suitable for long term production as well as exploration
and future development opportunities.
Ethiopia
The security situation has materially improved in Ethiopia since
the end of last year, 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 and the agreed
ceasefire in March 2022. The focus of the political rivals is now
peaceful negotiation and the focus of the domestic security forces
has now switched to the policing of priority areas which still
experience localised conflicts from time to time. No such conflicts
have taken place in the vicinity of the project site. Tulu Kapi's
stakeholder management and security systems (apparatus, policies,
procedures and team structure) have been upgraded, whilst field
activities within the Tulu Kapi district have continued to build
ahead of full project launch, focusing both on the site and its
transport and supply routes.
TKGM seeks to maintain its strong social licence through intense
relationship management. There is no artisanal activity at or near
Tulu Kapi, no mining legacy issues, no inter-ethnic rivalry and
despite the wide-ranging changes in local politics over recent
years it remains the case that no local parties have ever sought to
obstruct TKGM and that the community's enthusiasm for the project
remains strong.
Tulu Kapi
No other mining project of this scale in Ethiopia has been
brought to Tulu Kapi's stage of advancement during recent years and
Tulu Kapi will be the first industrial scale mine development in
Ethiopia in over 30 years. It has taken years of extensive
technical re-design of the project, years of overhaul by the
Ethiopian authorities of financial policies which previously
hindered mining project finance and the patient and cautious
traversing by the Company of recent well-publicised events within
the country. The project has imposed many demands on a regulatory
system which the Ethiopian Government continues to upgrade,
determined to build a modern minerals sector. KEFI is honored to
play its part in this process and has assembled a first-tier
syndicate of international industry expert management, contractors,
banks and investors.
During Q2-2022 TKGM continued its project launch preparations
and has regularly formally advised the Ethiopian Ministry of Mines
of its progress and of the tasks outstanding to ensure joint
collaborative focus. The project financing Umbrella Agreement has
been signed in Q2 2022, the associated documentation has been
assembled with the project's lead lenders and equity investors, and
the focus has been maintained on full project launch in the
Ethiopian dry season starting in October 2022, pre-conditioned on
the security situation being independently assessed as completely
ready and the few remaining regulatory administrative tasks being
completed.
In collaboration with the regulatory agencies at all four levels
of the Ethiopian Government, notable progress during Q2-2022
included:
-- initial community youth employment programmes being
established which support the project, such as those covering road
maintenance and expansion of revegetation nurseries;
-- the Ministry of Mines has now audited and endorsed the
historical project costs incurred up to 2020 of c.US$80 million and
can now report this to the Ethiopian central bank; and
-- the central bank has now permitted that both development
banks be allowed to lend on the same terms and formal ratification
is awaited from the Government.
Tulu Kapi District Exploration
KEFI remains keen to re-commence its exploration of the
additional prospects it has successfully identified within the Tulu
Kapi district exploration area from within which the mining licence
was duly excised as a result of the successful discovery of the
Tulu Kapi deposit. Whilst most historical drilling was naturally of
the Tulu Kapi deposit, there was significant work done on many
further prospects which await follow-up.
Whilst awaiting regulatory permission to re-activate the
Company's Ethiopian exploration, which is critical for long term
planning for all stakeholders in the community as well as the
Company, the exploration focus has been successfully switched to
Saudi Arabia.
Saudi Arabia
In recent years KEFI's Saudi operating joint venture company
G&M has built the largest exploration team in the country and
has brought two major projects to the feasibility study stage for
development. This has coincided with the Saudi Government's widely
publicised recent initiatives to welcome international expertise
and fast-track the development of its mining sector. G&M's
activities during Q2 2022 showed rapid progress, as outlined
below.
Jibal Qutman
As previously announced, KEFI's local partner ARTAR (on behalf
of G&M) has been actively engaged in discussions with the Saudi
Arabian Ministry for Industry and Mineral Resources ("MIM")
regarding its Jibal Qutman mining licence application. These
discussions have now reached an advanced stage and it is the view
of G&M's management that a positive outcome to these
discussions is now imminent.
In line with these discussions, G&M will need to submit an
updated Development Plan and Environmental and Social Impact
Assessment to enable the resubmission of the mining licence
application under the new Saudi Arabian Mining Investment law,
ahead of the award of the expected Jibal Qutman Mining Licence
("ML").
In advance of this, it is anticipated that G&M will be
granted three exploration licences covering the Jibal Qutman area
to enable the above studies to be completed.
As announced on 16 June 2022, G&M has engaged one of TKGM's
principal contractors Lycopodium to complete a Detailed Feasibility
Study ("DFS") for Jibal Qutman by December 2022. In addition to
this, the Company has initiated steps to re-establish its
operational base in the nearby city of Bisha.
The initial Jibal Qutman development project is now seen as a +
500,000 oz production plan for extraction over 10 years based on a
conventional open pit/CIL (Carbon-in-Leach Process). Subject to
regulatory approvals and financing, Jibal Qutman may be in
production around the same time or potentially before Tulu Kapi in
Ethiopia.
Hawiah
Work at the Hawiah Copper-Gold Project (including its adjacent
recently granted Al Godeyer exploration licences) continued during
Q2 2022, focusing on providing inputs across all required fronts
for the Hawiah Preliminary Feasibility Study ("PFS"), also
scheduled for completion in H2 2022.
Hawiah's in-situ metal content already ranks this project as
KEFI's largest at present and it is intended to produce copper,
gold, zinc and silver. Four drill rigs were operational in the
period, enabling significant progress on the resource upgrade and
expansion programme. Early assay results from this programme are
expected to be reported during the current quarter, contributing to
an upgraded JORC Resource being released later this year. A
positive outcome of ongoing exploration work is the expectation of
an initial open pit mine, which would have the effect of reducing
initial capital expenditure and expediting early cash flows from a
development that would likely follow soon after the start-up of
Tulu Kapi and Jibal Qutman.
Two New Projects Added in Saudi Arabia - Jabal Hillit and
Qunnah
The granting of the Jabal Hillit and Qunnah "Al Qassim"
exploration licences, as announced on 12 July 2022, represents the
start of a new and exciting phase of exploration and discovery for
the Company. These licences are situated approximately 30km apart,
straddling the Ad Dawadimi and Afif terranes in the eastern portion
of the Arabian Shield in Saudi Arabia. Both represent attractive
gold exploration targets, and the granting of these additional
licences represents a new frontier for the G&M exploration
team.
-- The exploration licences are situated within the eastern area
of the Arabian Shield, located 30km apart and cover a combined area
of 184.29 km (2) of prospective ground
-- 23 known gold occurrences have been historically documented,
with significant ancient workings located within the tenements
-- The exploration licences have identified gold within
shear-hosted quartz veins, with grades of up to 15.3g/t at Jabal
Hillit and 46 g/t Au at Qunnah as noted by the Bureau de Recherches
Géologiques et Minières (BRGM) and United States Geological Survey
(USGS)
-- The Exploration Licences present an excellent opportunity to
make discoveries within a highly prospective and under explored
area of the Arabian shield
The G&M regional exploration team are gearing up for a busy
summer of mapping and sampling within these new licences to ground
truth historical data, extend the known limits of mineralisation
and define the structural framework controlling mineralisation,
ahead of more advanced exploration works this year.
KEFI Group
The improvement in the local working environment in both
Ethiopia (security) and Saudi Arabia (regulatory) since late 2021
has allowed KEFI to continue the rapid progress of the previous
quarter in both jurisdictions. 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. KEFI also de-risked the balance sheet by raising
GBP8 million of equity in April 2022 to repay all outstanding
liabilities and reinforce the momentum of its projects.
Since that capital raising, broader financial markets, and the
AIM Market in particular, have shown some volatility and weakness
flowing from global events. We note that long term consensus metal
prices (as published by CIBC) have remained relatively stable based
on the comparison as at 2 May 2022 and as at 30 June 2022, with the
consensus forecast for gold moving from US$1,641/oz to US$1,651/oz,
copper from US$3.51/lb to US$3.60/lb, zinc US$1.13/lb to US$1.14/lb
and silver remaining unchanged at US$22/oz.
The following high-level statistics illustrate the importance of
KEFI's newly-established position across its three advanced
projects in 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 further growth anticipated
in 2022 and subsequent years.
-- KEFI's market capitalisation of approximately GBP28 million at 0.7 pence per share represents US$17/oz-equivalent on JORC resources and the following at December 2021 metal prices:
-- Estimated 7% of NPV (8%); and
-- Estimated potential net operating cash flow ( earnings before
interest, taxes (taxes and royalties payable), depreciation and
amortisation ) is GBP137 million (c. US$185 million) per annum from
the combination of all three development projects at their targeted
start-up production rates.
-- The NPV (see note 2 below) for KEFI of its projects has
tripled from mid-2020 (GBP114 million) to mid-2022 (GBP348
million), at the same set of 31 December 2021 metal prices. At the
current KEFI shares in issue this represents a tripling from 3p per
share to 9p per share (now approximately 50/50 split between
Ethiopia and Saudi Arabia). All KEFI's projects have resources
which remain open and there is a pipeline of additional exploration
projects with walk-up drill targets.
Harry Anagnostaras-Adams, Executive Chairman of KEFI,
commented:
"Work is gathering pace on many fronts. We are firmly on track
to achieve the following milestones in Q4 2022: in Ethiopia for
financial close and the launch of construction of our Tulu Kapi
Gold Project and in Saudi Arabia our larger Hawiah Copper-Gold
Project to deliver its PFS.
"In addition, we have other exciting developments in Saudi
Arabia. Our Jibal Qutman Gold Project is fast-tracking its DFS,
mining licence and financing work so as to launch in 2023. Plus we
have been greatly honoured by the Saudi authorities to be granted
two new exciting gold exploration projects.
"KEFI now has an excellent project pipeline in two
fast-improving (for mining) large jurisdictions within the highly
prospective Arabian Nubian Shield. Three development projects lined
up for sequential construction schedules leading to combined
production of c. 400,000 oz gold or gold-equivalent per annum by
2026. Plus exciting earlier-stage exploration projects which can be
addressed concurrently.
"This marks the beginning of an exciting chapter for both our
joint-venture partnerships and continues to demonstrate our ability
to operate as a first-mover explorer and developer in challenging
environments."
Investor Webinar
The Company will provide a presentation and live webinar via the
Investor Meet Company platform during August 2022, in light of
having recently conducted the Annual General Meeting presentation.
Details will be published closer to the time.
The webinar will subsequently be available on the Company's
website at:
http://www.kefi-minerals.com/news/webcasts .
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
Note 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
Copper Price is: US$9,750/t Copper Price is: US$7,590/t
Zinc Price is US$3,590/t Zinc Price is US$2,442/t
Silver Price is US$23/oz Silver Price is US$21/oz
Note 2 - 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 advancement of its three
development projects in Ethiopia and Saudi Arabia, plus its
pipeline of highly prospective exploration projects in these two
large jurisdictions of the under-explored Arabian-Nubian Shield.
KEFI targets that production at Tulu Kapi in Ethiopia and Jibal
Qutman in Saudi Arabia will, between them, generate cash flows for
capital repayments, further organic growth and dividends to
shareholders.
Both TKGM and G&M are technically guided and supported by
KEFI so that each of these operating joint venture companies as
soon as possible builds the local organisational structure suitable
for long term production as well as exploration and future
development opportunities.
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. No other mining project of this scale in
Ethiopia has been brought to Tulu Kapi's stage of advancement
during recent years and Tulu Kapi will be the first industrial
scale mine development in Ethiopia in over 30 years. It has taken
years of extensive technical re-design of the project, years of
overhaul by the Ethiopian authorities of financial policies which
previously hindered mining project finance and the patient and
cautious traversing by the Company of recent well-publicised events
within the country. The project has imposed many demands on a
regulatory system which the Ethiopian Government continues to
upgrade, determined to build a modern minerals sector. KEFI is
honored to play its part in this process and has assembled a
first-tier syndicate of international industry expert management,
contractors, banks and investors.
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,
royalties and closure but not including leasing and other financing
charges) remain c. US$800-900/oz depending on the gold price. 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.
KEFI remains keen to re-commence its exploration of the
additional prospects it has successfully identified within the Tulu
Kapi district exploration area from within which the mining licence
was duly excised as a result of the successful discovery of the
Tulu Kapi deposit. Whilst most historical drilling was naturally of
the Tulu Kapi deposit, there was significant work done on many
further prospects which await follow-up.
Whilst awaiting regulatory permission to re-activate the
Company's Ethiopian exploration, which is critical for long term
planning for all stakeholders in the community as well as the
Company, the exploration focus has been successfully switched to
Saudi Arabia.
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 c.
30% interest in G&M.
ARTAR, on behalf of G&M, and G&M directly held over 16
Exploration Licence (EL) applications pending the introduction of
the new Mining Law. These new regulations have recently been
proclaimed and G&M has had five new licences issued in the past
seven months. ELs are renewable for up to five 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 shortly.
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