TIDMKEFI
RNS Number : 7122O
Kefi Gold and Copper PLC
02 February 2023
2 February 2023
KEFI Gold and Copper plc
("KEFI" or the "Company")
Q4 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 ("GMCO") in Saudi
Arabia, for the period from 1 October 2022 to 31 December 2022 ("Q4
2022"), along with any material subsequent developments .
The Tulu Kapi Gold Project ("Tulu Kapi" or "Project") is under
TKGM (planned to be c.80% owned by KEFI). The Hawiah Copper-Gold
Project ("Hawiah"), the Jibal Qutman Gold Project ("Jibal Qutman")
and other Saudi projects are under GMCO (planned to be c.30% owned
by KEFI). Both TKGM and GMCO 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:
"KEFI continues to progress its three advanced projects: the
Tulu Kapi Gold Project in Ethiopia which is now finalising the
project's US$320 million financing, the Jibal Qutman Gold project
in Saudi Arabia targeting start-up at the same time as Tulu Kapi
and the Hawiah Copper-Gold project, also in Saudi Arabia, already
larger than the other two projects combined and planning
construction after the two gold projects have started
production.
"In Ethiopia we have already launched key initial aspects of the
Tulu Kapi development and intend to continue our staged build up to
full launch in full collaboration and support of all key
stakeholders. Our holding is now planned to be c.80%.
"In Saudi Arabia during 2023 we focus on the Definitive
Feasibility Study and project financing for Jibal Qutman, the
Pre-Feasibility Study for Hawiah and the regional exploration
programme. Our holding is now planned to be 30%.
"It has taken a huge effort over a much longer period than we
had anticipated in both countries to deal with innumerable frontier
market (for mining) challenges and we greatly appreciate the
patience and support of all stakeholders and, in particular, of our
host governments and communities, our partners and of course our
financiers and shareholders.
"We have built a growing resource inventory of c. 5 million
ounces in gold-equivalent terms. That, together with 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.
"We also note that some international stock markets appear to be
recovering and we have prioritised our planning for a dual-listing
and, in particular, we are examining a dual-listing in Saudi
Arabia, which is rapidly emerging with a significant role in our
region of operations, especially within the minerals sector."
Investor Webinar
The Company will soon provide a presentation and live webinar
via the Investor Meet Company platform, the details of which will
be announced in due course.
The presentation will be open to all existing and potential
shareholders. Questions will be able to be submitted at any time
during the live presentation.
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
challenges in a situation which continues to settle down.
Tulu Kapi Gold Project
The Company announced on 21 November 2022 that the finance plan
for the c.US$320 million financing of Tulu Kapi had been agreed in
principle by the lenders so that draft definitive agreements could
be finalised for approval by syndicate members and regulators.
KEFI announced on 23 January 2023 that:
-- All lead contracting and equity investment parties had agreed
their draft agreements and confirmed their intention to sign.
-- Likewise, for nearly all Ethiopian Government ("Government")
agencies which have to also sign agreements within the
syndicate.
-- The lenders have re-affirmed the financing plan in principle
and have formally set out their indicative terms and conditions
which include, as expected, satisfaction by all parties of their
respective conditions and the receipt of all the necessary
remaining Government approvals.
-- To this end, during the last months of 2022 the various
relevant regulatory agencies were advised of the specific
conditions and clarifications required from them in order that
progress can be made with the financing and definitive
documentation signed.
-- Whilst the Government is clarifying the outstanding
regulatory matters, it is also reorganising its systems around the
Project, including for upgraded security and for preparing the
community for resettlement.
Following the completion of these steps, and the receipt of
final credit committee approval by the lenders, KEFI will call a
General Meeting of KEFI shareholders to seek formal shareholder
approval for the transaction, in particular any convertibility
rights (into KEFI shares) embedded in the financings at the KME
level by regional investors as previously outlined.
The Company expects all outstanding issues to be addressed
imminently, the exact timing of which will largely be driven by the
Government process, so that final lender documentation can be
completed, and signing can take place, enabling the KEFI General
Meeting to be called, funds to flow and full Project launch to
proceed.
The principal tasks required to commence development of Tulu
Kapi are expected to be completed in the following sequence:
-- Principal Government regulatory confirmations:
o Central bank: Approve final financing and bank account terms
and conditions.
o Ministry of Mines: confirm tenure of production and
exploration licences.
-- Final lender credit approval and signing by all parties of
lender-approved definitive documents.
-- Independent confirmation of compliance with international banking standards for:
o Upgraded security systems in project area and transport
routes.
o Upgraded community preparations for resettlement and
compensation.
-- Approval at KEFI General Meeting of any conversion rights into KEFI shares.
-- Equity funds flow.
-- Commence procurement, community resettlement, site works, exploration.
KEFI and the full syndicate remain focused on achieving full
Project launch as soon as practicable. KEFI remains focused on
achieving full production from the open pit operations in 2025 and
from the combined open pit-underground operation a few years later
for combined gold exports approaching 200,000 oz per annum (KEFI
beneficial interest 80% or approaching 160,000 oz per annum).
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 was 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 GMCO is at the forefront.
GMCO is rapidly becoming a leading explorer/developer/producer
in the fast-emerging Saudi minerals sector with:
-- one of the largest exploration teams 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.
GMCO'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
relatively short gestation, approval, financing and development
schedules given:
-- GMCO'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.
GMCO's activities during Q4 2022 continued to show rapid
progress, as outlined below.
Jibal Qutman Gold Project - Our First Discovery
Due to the improved gold price since this discovery
approximately 10 years ago, our initially contemplated heap-leach
development of Jibal Qutman producing 30,000 oz per annum over six
years has been enlarged to a 50,000 oz per annum production plan
over 10 years, based on a conventional open pit/CIL
(Carbon-in-Leach process).
The three Jibal Qutman E xploration Licences ("EL's") cover an
area of over 270km(2) . An area of 26km(2) within the southern
portion of the main Jibal Qutman EL contains the principal
discovery area and the previously reported 733,000 oz gold
resource. Exploration programmes targeting other known gold
occurrences within the expanded land package will commence in Q1
2023 and aims to significantly increase the overall resource.
Field programmes are progressing since site access was obtained
in November 2022, including the construction of the pioneer's camp
and environmental baseline studies, as well as geotechnical and
metallurgical diamond drilling. Work is simultaneously underway to
upgrade areas of Inferred Resources to Indicated classification for
inclusion in the Ore Reserve.
The Definitive Feasibility Study ("DFS") being undertaken by
Lycopodium continues to progress, with Front End Engineering and
Design ("FEED") and plant layout. This will be finalised upon
completion of the Ore Reserve definition programme. Metallurgical
testing continues and preliminary geotechnical design parameters
have been agreed.
GMCO 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 plans its submissions for financing and Mining
Licence in H2 2023.
The principal tasks required to commence development of Jibal
Qutman are planned to be completed in the following sequence during
2023:
-- drilling for upgrading and expanding resources, geotechnical investigations and water supply;
-- updated MRE following the conclusion of infill and expansion drilling;
-- mine plan and Ore Reserves to be finalised following drilling results;
-- processing flowsheet finalised;
-- finance plan approved with SIDF; and
-- commence procurement and site works.
Subject to regulatory approvals and financing, Jibal Qutman
targets commissioning gold production in mid-2025.
Hawiah Copper-Gold Project - Our Second Discovery
Hawiah was first drilled in September 2019 and now ranks in
the:
-- top three base metal projects in Saudi Arabia; and
-- top 15% VMS projects worldwide.
Work at the Hawiah Project (including its adjacent recently
granted Al Godeyer exploration licences) continued during Q4 2022,
focusing on providing inputs across all required fronts for the
updated Mineral Resource Estimate ("MRE") and Hawiah PFS.
On 9 January 2023, KEFI announced an upgraded Hawiah MRE of 29.0
million tonnes ("Mt") at 0.89% copper, 0.94% zinc, 0.67 g/t gold
and 10.1 g/t silver . Total contained metal is now:
-- 258,000 tonnes of copper (up 16% from 223,000 tonnes);
-- 272,000 tonnes of zinc (up 30% from 210,000 tonnes);
-- 620,000 ounces of gold (up 25% from 497,000 ounces); and
-- 9.4 million ounces of silver (up 20% from 7.8 million ounces).
The updated Hawiah MRE achieved our key objectives:
-- a tonnage increase of approximately 16%,
-- a higher overall increase in metal content due to overall improved grades,
-- an increase in the Indicated Resource category, and
-- an increased tonnage to be open-pit mined.
The Indicated and Inferred Resources reporting to the Open-Pit
Scenario increased to a total of 11.1Mt at 0.90% copper 0.75% zinc,
0.81 g/t gold and 10.3 g/t silver. This increase reaffirms the
potential for an initial open-pit mining operation and a lower
start-up capital requirement.
Ongoing drilling at Hawiah is aimed at extending planned mine
life by further increasing the Mineral Resource and converting more
Inferred Resources to the Indicated category.
It is notable that in gold-equivalent terms, the Hawiah resource
is already larger than Tulu Kapi and Jibal Qutman combined before
any further resource uplift.
New Exploration Opportunities in Saudi Arabia
GMCO continued to be awarded more EL's in Saudi Arabia where the
overhauled regulatory regime is speeding up progress. These
additional EL's further accelerate the start of a new and exciting
phase of exploration and discovery for the Company.
Five additional EL's were awarded during the quarter (announced
10 January 2023), bringing the number of EL's issued to GMCO to a
total of fifteen EL's covering an area of over 1,035km (2) . These
five new EL's host sites of ancient mining within prospective
mineral belts:
-- Abu Salal North and Umm Al Khabath contain VMS prospects
within the Wadi Bidah Mineral Belt south of Hawiah;
-- Wadi Na'afa and Al Awja are within the underexplored and only recently accessible Lorelon gold-silver-copper mineral belt, located within the southwestern portion of the Arabian Shield; and
-- Jabal Selm is a quartz-vein hosted gold prospect within the Al Miyah Mineral District.
The GMCO regional exploration team has begun comprehensive
mapping and sampling campaigns over these new licences. The
outcomes of this fieldwork will be to ground-truth historical data,
assess the surface grade limits of mineralisation and describe the
structural frameworks controlling mineralisation. These programmes
are expected to then build into progressively advanced exploration
works, including geophysics and trenching.
Al Godeyer and Abu Salal Exploration licences
The Al Godeyer and Abu Salal represent the most advanced of
GMCO's regional exploration projects.
Drilling activities were completed at Al Godeyer in September
2022 with 3D modelling now underway ahead of a maiden MRE in Q1
2023. Located only 13km from the Hawiah deposit, Al Godeyer is
shaping up to be an attractive satellite deposit, particularly from
an oxide gold prospective where an open-pit resource is anticipated
to be developed.
Exploration activities at Abu Salal South, which is located
approximately 50km south of Hawiah, have recently included
geological mapping of the main gossan ridgeline and the completion
of a self-potential ("SP") geophysical survey. The geological
mapping has established two significant north-south trending
outcropping gossans which appear to be situated on the same
paleohorizon. This horizon extends beyond the Abu Salal South EL
northern boundary into the recently granted Abu Salal North EL
where outcropping gossans have also been confirmed. Gossans widths
range from 40m down to several centimetres, with the SP survey
demonstrating a robust and continuous anomaly across the 1.6km
strike length of the northern gossan suggesting mineralisation is
continuous at depth. The shorter strike length southern gossan has
returned a less encouraging geophysical response. Rock chip
sampling of these gossans has confirmed gold mineralisation with
grades of up to 4.75 g/t Au. Trenching and scout drilling of these
gossans is planned to be undertaken later this year.
KEFI Group
The working environment in both Ethiopia (security) and Saudi
Arabia (regulatory) since late 2021 continued to allow KEFI to make
rapid progress 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 advanced projects in two countries places the
Company into a much better risk position than was previously 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. This has reinforced KEFI's strategy of primarily sourcing
project-level and subsidiary-level project financing.
At the same time, the Saudi capital market has shown relative
strength and particular interest in natural resources, as have the
Canadian and Australian stock markets. KEFI has appointed advisers
to consider a dual-listing of the Company's shares and, in
particular, focusing on the Saudi stock exchange.
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 1 December 2022, with the consensus forecast
for gold remaining at US$1,641/oz, copper up slightly from
US$3.51/lb to US$3.61/lb, zinc US$1.13/lb to US$1.15/lb and silver
from US$21/oz to US$22/oz.
We also note that current spot prices on 1 February 2023 are
higher, with gold at c.US$1,940/oz, copper US$4.15/lb, zinc
US$1.54/lb and silver US$24/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 2.3
million ounces at the end of 2022, with further growth anticipated
in 2023 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;
-- Comparing results at current spot prices and at analysts'
consensus prices (as at 1 December 2022), KEFI's market
capitalisation of approximately GBP32 million (US$38 million) at
0.8 pence per share represents US$17/oz-equivalent on JORC
resources and 8-14% of NPV (see explanatory note below) of all 3
development projects GBP222-413 million (US$265-491 million);
and
-- The NPV (see explanatory note below) for KEFI of its projects
now approximates a c.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 the end of 2021;
-- net cash flows after debt service and after taxes, i.e. net cash available for shareholders;
-- 8% discount rate; and
-- 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 also sometimes as at 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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