TIDMKEFI
RNS Number : 9435D
Kefi Gold and Copper PLC
25 October 2022
25 October 2022
KEFI Gold and Copper plc
("KEFI" or the "Company")
Q3 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 July 2022 to 30 September 2022
("Q3 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 can build a local organisation suitable to manage
long-term production activities, further exploration programmes and
exploit future development opportunities.
Harry Anagnostaras-Adams, Executive Chairman of KEFI,
commented:
"The improvement of our working environments in both Ethiopia
and Saudi Arabia means that we now have a rapidly advancing gold
project in each country. Both Tulu Kapi and Jibal Qutman are
heading for commissioning in 2024 and steady-state production from
2025 and have 95% of their development financing needs being met at
the subsidiary levels.
"We are completing the Preliminary Feasibility Study on our
copper-gold VMS discovery at Hawiah in Saudi Arabia which is
expected in Q4 2022.
"The quality of our projects and our teams is the reason we have
assembled first-tier partners, contractors and financiers. We look
forward to reporting more details as we advance each project."
Investor Webinar
The Company will provide a presentation and live webinar via the
Investor Meet Company platform on Wednesday 26 October 2022 at
16.30 London time.
The presentation is open to all existing and potential
shareholders. Questions can be submitted 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
The webinar will subsequently be available on the Company's
website at:
https://www.kefi-goldandcopper.com/news/webcasts
Ethiopia
Since acquiring Tulu Kapi in 2014, KEFI has completed an
extensive technical re-design of the project with independent
reviews by leading international experts and we supported a
modernisation of the finance-related regulations and policies by
the relevant authorities. We also traversed the recent unpredicted,
but well-publicised, events within the country and withstood many
unpredicted challenges in a situation which continues to settle
down.
Tulu Kapi Gold Project
During Q3-2022 TKGM continued to prepare for project launch
which is now lining up for year-end as security conditions continue
to improve, documentation continues to be agreed within the project
syndicate and the other normal conditions precedent continue to be
satisfied. We recently reported that:
-- Project costs had been updated by suppliers and a 7% increase
to US$320 million in capital requirements (excluding the mining
fleet supplied by the contractor) was accommodated within the
planned syndicate.
-- The updated project finance plan was distributed within the
syndicate to be approved mid-November 2022 and, subject to senior
lender consent in due course after open pit production has started,
now caters for the start-up of the underground mine as well as the
open-pit mine. This further improves project economics.
-- A key condition precedent which had caused serious delays to
financing progress to date was waived by the relevant financier,
because sufficient progress had been achieved between that party
and the Government in respect of that matter.
-- The Ethiopian Ministry of Mines is regularly formally advised
of TKGM's progress and of the tasks outstanding to preserve our
record of compliance and to co-ordinate with all the Government
agencies involved.
-- TKGM held a three-day workshop in September with
representatives of various Ethiopian Government agencies and
community representatives. The group agreed on action plans,
including the implementation of the first phase of the community
resettlement, increasing employment of local personnel for site
preparations, and upgrading of security protection as the movement
of people increases.
-- The updated cash flow estimates at current consensus gold
price of US$1,650/oz, and reflecting the preliminary integration of
initial production from the underground mine, have been
incorporated into the summary economic outlook set out below:
o 1.7M oz JORC Resource; 1.3M oz processed; 1.2M oz recovered
over 9 years
o AISC US$970/oz and AIC US$1,200/oz
o EBITDA US$127 million (US$89 million KEFI interest) average
per annum first 7 years
o Cash projected in first 2 years of production sufficient to
repay debt
o NPV to KEFI GBP113 million (US$125 million) and at start of
production estimated to have increased to GBP241 million (US$268
million). Explanatory Footnotes below.
-- The integrated (open-pit plus underground) mine plan will be
optimised during construction of the open-pit when we can
incorporate the results of scheduled in-fill and other targeted
drilling. We expect these optimisations to extend mine life to c.15
years, unless we choose to lift plant throughput rates to produce
more quickly.
-- We will then re-confirm the open-pit design with the updated
gold price rather than the original design using US$1,100/oz. And
the in-fill closed-space drilling can concurrently define what our
exploration team interprets as a high-grade domain (the "feeder
structures within the open pit") which could not hitherto be
adequately assessed due to the angles of historical drilling. A
separate announcement will be made on this topic.
-- Below the open pit, we will target to extend the underground
resource which remains open, with the last drill-intercept being
c.90m at 3g/t gold.
-- We also wish to re-commence exploration of the additional
prospects KEFI 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.
Saudi Arabia
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 at what appears to have been a particularly propitious
time. Saudi Arabia is taking off as a global mining destination and
KEFI's G&M is at the forefront.
G&M is rapidly becoming a leading
explorer/developer/producer in the fast-emerging Saudi minerals
sector with:
-- the largest exploration team in the country; and
-- two major projects advancing towards development:
o Hawiah Copper Gold Project at the Preliminary Feasibility
Study ('PFS') stage; and
o Jibal Qutman Gold Project at the Definitive Feasibility Study
('DFS') stage.
G&M's growth has coincided with the Saudi Government's
widely publicised recent initiatives to welcome international
expertise and fast-track the growth of its mining sector.
Going forward the Company's Saudi assets are expected to have
shorter gestation, approval, financing and development schedules
given:
-- G&M's long-established proprietary database and successful exploration teams;
-- there is no need to resettle communities;
-- less restrictive security protocols; and
-- established capital markets and funding options.
G&M's activities during Q3 2022 showed rapid progress, as
outlined below.
Jibal Qutman Gold Project - Our First Discovery
Because of the gold price improvement since this discovery
approximately 10 years ago, our initially contemplated c.200.000 oz
heap leach development of Jibal Qutman has been enlarged to a +
500,000 oz production plan for extraction over 10 years based on a
conventional open pit/CIL (Carbon-in-Leach process).
G&M received formal notification from the Saudi Arabian
Ministry of Industry and Mineral Resources ("MIM") that land access
issues which halted the mine development application in 2016 are
now resolved.
G&M has recently been granted E xploration Licences ("EL's")
covering an area of over 270Km(2) . These EL's contain Jibal
Qutman's 733,045 oz gold resource as well as a significant land
package along strike to the north and south along the highly
prospective 'Nabitah-Tathlith' gold belt.
Having awaited the grant of the three EL' s, field programmes
can now commence which include the construction of the pioneer's
camp, environmental baseline studies, as well as geotechnical and
metallurgical diamond drilling,
The Definitive Feasibility Study ("DFS") being undertaken by
Lycopodium continues to progress, with Front End Engineering and
Design ("FEED"), plant layout and reserve definition nearing
completion. Metallurgical testing continues and preliminary
geotechnical design parameters have been agreed.
Whilst much of the DFS is being completed remotely, recent
access to the project area has allowed us to mobilise the teams so
as to establish the baseline as part of the Environmental and
Social Impact Assessment ("ESIA") and to complete the final
geotechnical evaluation of the proposed open pits as well as
metallurgical and comminution testwork.
G&M has also initiated discussions with the Saudi Investment
Development Fund (SIDF) and other local development finance
institutions regarding project funding to be finalised once the
Mining Licence has been awarded.
Jibal Qutman remains on track to proceed with financing and
Mining Licence submission in early 2023. Subject to regulatory
approvals and financing, Jibal Qutman may be commissioning gold
production around the same time as targeted for Tulu Kapi in
Ethiopia at the end of 2024.
Hawiah Copper-Gold Project - Our Second Discovery
Hawiah was discovered in September 2019 and now ranks in
the:
-- top three base metal projects in Saudi Arabia; and
-- top 15% VMS projects worldwide.
A three-year 42,000m drilling programme has delineated a Mineral
Resource of 24.9 million tonnes at 0.90% copper, 0.85% zinc,
0.62g/t gold and 9.8g/t silver.
Work at the Hawiah Project (including its adjacent recently
granted Al Godeyer exploration licences) continued during Q3 2022,
focusing on providing inputs across all required fronts for the
updated Mineral Resource Estimate and Hawiah Preliminary
Feasibility Study ("PFS"), also scheduled for completion by end of
2022.
The recent drilling at Hawiah is expected to upgrade and
increase resources which, in gold-equivalent terms, are already
approximately those of Tulu Kapi and Jibal Qutman combined before
any further resource uplift.
More New Projects Added in Saudi Arabia - Abu Salal South ,
Jadib Al Qahtanah , Jabal Hillit and Qunnah
G&M's exploration areas are being expanded in Saudi Arabia
where the newly overhauled regulatory regime is speeding up
progress. Four further EL's have now been awarded (outside of the
Hawiah and Jibal Qutman project areas) for an initial five-year
term, bringing the number of EL's issued to G&M to a total of
nine EL's covering an area of 634km (2) .
The granting of the Jabal Hillit and Qunnah "Al Qassim" EL's
(announced on 12 July 2022) and the granting of Abu Salal south and
Jadib Al Qahtanah EL's (announced 1 August 2022) represents the
start of a new and exciting phase of exploration and discovery for
the Company.
G&M's exploration teams have mobilised to these new
frontiers:
-- the Jabal Hillit and Qunnah "Al Qassim" EL's straddle the
prospective Ad Dawadimi and Afif terranes in the eastern portion of
the Arabian Shield in Saudi Arabia;
-- the Jadib Al Qahtanah EL is located 45km east of the Mahad Ad
Dahab mine, the principal historic Saudi gold and silver mine;
and
-- the Abu Salal South EL is 50km south of Hawiah in the Wadhi
Bidha Mineral Belt and is a VMS target where exploration work is
concentrated on a 2km long surface anomaly.
Most of these EL's have ancient workings and identified gold
occurrences within shear-hosted quartz veins, with grades of up to
15.3g/t gold at Jabal Hillit and 46g/t gold at Qunnah as noted by
the BRGM and USGS.
KEFI Group
The working environment in both Ethiopia (security) and Saudi
Arabia (regulatory) since late 2021 allows 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. These projects rank as highly important in both
countries - as first movers in their respective revitalised
minerals sectors.
Financial markets, and the AIM Market in particular, have shown
some volatility and weakness flowing from global and UK political
events. However, 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 2 September 2022, with the
consensus forecast for gold moving from US$1,641/oz to US$1,650/oz,
copper from US$3.51/lb to US$3.59/lb, zinc US$1.13/lb to US$1.14/lb
and silver remaining unchanged at US$21/oz. Nevertheless, the
current weakness of the AIM Market reinforces KEFI's strategy of
primarily sourcing project-level and subsidiary-level project
financing.
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. All of KEFI's projects have resources
which remain open and there is a pipeline of additional exploration
projects with walk-up drill targets;
-- At 2 September 2022 consensus gold prices, KEFI's market
capitalisation of approximately GBP24 million at 0.6 pence per
share represents US$12/oz-equivalent on JORC resources and 9% of
NPV (see explanatory note below) of all 3 development projects
GBP244 million; and
-- The NPV (see explanatory note below) for KEFI of its projects
now approximates a 50/50 split between Ethiopia and Saudi
Arabia.
Enquiries
KEFI Gold and Copper plc
Harry Anagnostaras-Adams (Executive Chairman) +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
Explanatory Comments on the Use of NPV (Net Present Value) and
the Basis of Calculations
All three of KEFI's advanced projects report NPV's based on:
-- recoverable JORC Resources as reported up to end 2021
-- net cash flows after debt service and after taxes i.e. net cash available for shareholders
-- 8% discount rate
-- Nil value for potential expansion of project resources or any other discovery
We report NPV as at today and as at completion of the first two
projects and commencement of their production in 2025. This
provides a measure of where NPV attributable to KEFI is
heading.
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
All other KEFI projects are less advanced and are at various
stages of feasibility study. Accordingly we present 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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