KEFI Gold and Copper plc (LON:KEFI), the gold exploration and development company with projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, has provided its latest quarterly operational update.
This update encompasses the activities of KEFI Minerals (Ethiopia) Ltd and Tulu Kapi Gold Mines Share Company in Ethiopia, and Gold & Minerals Ltd in Saudi Arabia for the period from 1 July 2020 to 30 September 2020, together with more recent developments where appropriate.
Any material events have already been reported in separate announcements, which are referred to below.
Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented:
“I am delighted our Tulu Kapi funding consortium has recently been finalised and the overall Project timetable of targeting production start-up in Q4 2022 has been maintained.
“The improved gold price outlook and our negotiations over the past few months have switched KEFI’s focus from owning 45% of a 140,000 oz p.a. operation to potentially owning c.65% of 190,000 oz p.a. operation, essentially doubling KEFI’s beneficial interest in Tulu Kapi in terms of net production per annum.
“I’m also delighted that the maiden Mineral Resource and Preliminary Economic Assessment (“PEA”) for our Hawiah Project in Saudi Arabia were both delivered during the quarter. The positive Hawiah PEA demonstrates how far this project has advanced after only seven months of initial drilling.”
Ethiopia – Funding consortium for the Tulu Kapi Gold Project finalised
On 22 October 2020, KEFI announced that it had assembled the full funding consortium and set the conditional terms for the development funding package of c.US$221 million for the Company’s flagship Tulu Kapi Gold Project.
The Project finance structure now comprises KEFI’s Government Partners (both the Federal Government of Ethiopia and the Regional Government of Oromia), leading African banks as Mandated Senior Project Lenders (Eastern and Southern African Trade and Development Bank and Africa Finance Corporation), African-experienced preferred principal contractors and strong African specialist investors into KEFI Group companies.
The recent additions to the consortium are two African specialist investors:
· the Ethiopian division of global industrial company, which is listed on the London Stock Exchange with a market capitalisation exceeding £1 billion; and
· One of the world’s leading commodity trading companies.
Both organisations have extensive experience in Africa. The terms sheets are complementary to and consistent with the plans already approved by the board of TKGM and the Ethiopian regulatory authorities.
As KEFI has succeeded in sourcing the Mining Financier to conditionally provide offtake-linked financing, the Company and its Government Partners will be able to retain a higher beneficial ownership of the Project. For KEFI, this is now expected to be c.65%, compared with the previously envisaged 45% ownership. This approach is expected to materially increase the value of the Project to both the Company and its Government Partners.
Total Tulu Kapi funding requirements remain at US$221 million, compared with US$242 reported in the 2018 Annual Report. For further information on the Tulu Kapi consortium and components of the funding package were detailed in the Company’s announcement on 22 October 2020.
Over recent months, KEFI has successfully focused on:
a) minimising the COVID-19 impacts on the Project schedule;
b) responding to the higher gold price by bringing forward the planning for underground mining; and
c) sourcing development capital at the subsidiary level, substantially increasing the beneficial ownership in the Project for both KEFI and our Government Partners.
More specifically:
a) COVID-19 impacts have required continual refinement of operational policies, procedures, schedules and activities;
b) because of the improved gold price outlook, we are revising the planning assumption of US$1,098/oz gold for determination of Project Ore Reserves and also looking to bring forward the timing of underground development once open pit production has settled down. In this context, it is now reasonable to assume a lift, during the first three years of the open pit, of combined production to an average of 190,000 oz pa; and
c) The inhouse NPV projections for the Project are presented below, highlighting the impact of increased ownership to c. 65%.
Saudi Arabia – positive PEA outcomes confirm strong potential of Hawiah Project
KEFI’s operations in Saudi Arabia are conducted through its 34% owned joint-venture company, G&M, where KEFI is the operating partner.
During the quarter, KEFI released the maiden Hawiah Mineral Resource Estimate totalling 19.3 million tonnes at 0.9% copper, 0.8% zinc, 0.6 g/t gold and 10.3g/t silver.
For further information regarding the Hawiah MRE, see the KEFI announcement “Hawiah Maiden Resource” dated 19 August 2020.
The Hawiah deposit has only been drilled to a vertical depth of 350m and remains open at depth and along strike. Increasing copper grades intersected in the deepest drill hole at the Camp Lode indicate an excellent opportunity to add additional high-grade copper-gold resources during the next phase of drilling.
Following the completion of the MRE, KEFI released the key outcomes of the initial PEA for the Hawiah Project. This internal PEA is likely to be the first of several studies as we expand the resource and, in collaboration with our independent consultants, complete the work required for an Independent Preliminary Feasibility Study to support an initial mine development within a district which is considered to have world-class prospectivity.
The positive PEA included the following outcomes:
o confirms Hawiah is a high priority project, with a significant maiden resource of 19.3Mt at 1.9% copper equivalent in-situ (0.9% copper, 0.8% zinc, 0.6g/t gold, 10.3g/t silver), after only seven months of initial drilling;
o the maiden resource alone potentially supports a production rate of 2Mtpa for seven years for net operating cash flow of c.US$70 million p.a. at current metal prices. After initial and sustaining capital expenditure of c.US$222 million and c.US$46 million respectively, this would indicate an estimated net cash surplus of over US$200 million before financing costs and tax; and
o clear potential for expansion of resources with further drilling below the currently drilled depth of 350m of this structurally consistent tabular structure. A doubling of the resource with material of similar characteristics as the maiden resource would indicate an estimated net cash surplus of over US$500 million before financing costs and tax.
For further information regarding the Hawiah PEA, see KEFI’s announcement “Preliminary Economic Assessment Confirms Hawiah as a High Priority Project” dated 22 September 2020.
The Directors of KEFI-operated Saudi joint-venture company G&M have resolved to trigger the KEFI-recommended next stage of the Project, comprising the following:
o deeper drilling targeting with the goal of seeking to double the maiden resource during the next drilling phase;
o infill drilling to upgrade the resource to the indicated category so as to warrant mine planning and estimation of an Ore Reserve;
o staged studies and surveys required for completion of a PFS during 2021; and
o scout drill for a large stockwork zone or “feeder zone” to the massive sulphides which represents a separate and even larger-scale target.
A summary of the previously announced Hawiah drill results is contained in Appendix A.
Investor Webinar
The Company will host its live quarterly webinar at 2pm London time on Monday 26 October 2020 which will be accessed via:
https://webcasting.brrmedia.co.uk/broadcast/5f914a85c4d0076f2b9449d3
Shareholders are encouraged to submit questions by emailing: questions@brrmedia.co.uk
The webinar will subsequently be available on the Company’s website at:
http://www.kefi-minerals.com/news/webcasts.
