REG - Kefi Gold and Copper - Development Activities Recommence at Tulu Kapi

KEFI Gold and CopperAnnouncement

03/03/2022 07:00

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RNS Number : 4310D  Kefi Gold and Copper PLC  03 March 2022

3 March 2022

KEFI Gold and Copper plc

("KEFI" or the "Company")

 

Recommencement of Development Activities at Tulu Kapi

 

KEFI (AIM: KEFI), the gold and copper exploration and development company with
projects in the Federal Democratic Republic of Ethiopia and the Kingdom of
Saudi Arabia, is pleased to announce that development activities at the Tulu
Kapi Gold Project (the "Project" or "Tulu Kapi"), part of the KEFI-operated
Ethiopia joint-venture Tulu Kapi Gold Mines Share Company ("TKGM") have
recommenced.

Following the abatement of Ethiopia's civil war at the end of 2021 and its
State of Emergency being lifted, TKGM has worked intensely with the Ethiopian
Ministry of Mines (the "Ministry") to monitor the situation to ensure that it
is appropriate for the recommencement of activities at the Tulu Kapi site and
in the wider district.  The Company is pleased to report that over the past
two months the security situation has remained stable at both the site and the
preferred transport routes, enabling activities at the Tulu Kapi site to
recommence in an appropriately managed manner.

The Project's principal contractors, Lycopodium (plant construction) and
Corica (mine services), are expected to deliver the final costings for
confirmation at the end of April 2022.  The anticipated final capital
estimate for the Project has not changed from previous guidance and remains
fully covered by the previously announced non-binding subscriptions from the
Project's financing syndicate, with any required residual contribution also
now covered in the event of exercise of the Company's warrants issued in
December 2021.

Recent meetings with the Project's senior lenders and other finance syndicate
members have reconfirmed the targeted financial closing in in mid-2022,
subject to the security situation remaining stable as activities increase over
the coming months, and various documentation and government administrative
tasks being completed.  The independent security assessors have commenced
regular field inspections.

TKGM is now recommencing refurbishment of the existing site camp to
accommodate the initial construction workforce and have recently completed
detailed design for the procurement and construction of: the security camp; a
new all-weather access road; the permanent camp; water dam 1; plant and
administrative buildings; Bir-Bir river pump station and pipeline; tailings
storage facility - stage 1; process plant; bulk fuel and lubricant storage
area; grade control drilling; on site metallurgical testing laboratory;
explosive supply and storage; and the mining fleet service area.

Tasks to be undertaken ahead of Project finance closing are summarised as
follows:

·    March 2022:

o  All field programmes recommenced for community consultations and new host
land preparations, with regular independent security monitoring over the
ensuing months.

o  Remaining few Ethiopia regulatory administrative tasks completed, such as
endorsement of historical costs, working rules for the London clearing account
to avoid restrictions of capital controls and clearance for both banks to lend
on same terms.

o  Updated term sheet for offtake-linked mezzanine facility now involving
senior lenders as well the metals trader.

·    April 2022:

o  Launch of Tulu Kapi Foundation, administered with local authorities,
community representatives and Ethiopian Evangelical Church of Mekane Yesus.

o  Final pricing agreed with contractors.

·    May-June 2022:

o  Drafting of the remaining detailed documents, flowing from the regulatory
approvals, mezzanine term sheets and Project contractor pricing updates in
March and April.

o  Insurance package and pricing confirmations.

o  Independent security review and decision as to when to sign final
documents.

o  Signing of binding documents by all

Harry Anagnostaras-Adams, KEFI Executive Chairman, commented: "It is great to
see that Ethiopia has settled down so quickly over the past two months and
that TKGM's teams are back in the field for launch preparations.  Everyone is
now pushing for full Project launch.

"And it's doubly impactful that the turnaround in Ethiopia has coincided with
a take-off of our projects in Saudi Arabia. KEFI has turned onto the front
foot in both jurisdictions, after particularly frustrating years in both.

"KEFI now has three advanced development gold and copper-gold projects with
significant resource upside in two now-supportive jurisdictions of the Arabian
Nubian Shield, and in which our beneficial interest is already the equivalent
of 2.1 million oz gold. I look forward to keeping shareholders appraised of
our progress."

 

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)  +44 (0) 20 3470 0470
 Jeff Keating, Adam Cowl
 Tavira Securities Limited (Lead 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 to Editor

KEFI Gold and Copper plc

KEFI started as a grassroots explorer equity-funded via AIM and is now the
operator of large exploration and development joint ventures with strong local
partners in the Arabian-Nubian Shield, with most of the funding being sourced
at the project level.

KEFI is focused primarily on the development of its advanced projects in both
Ethiopia and Saudi Arabia, plus the expansion of its resource base at these
projects and through exploration of its other prospects in the Arabian-Nubian
Shield. KEFI targets that production at its three development projects,
starting with Tulu Kapi Gold in Ethiopia and adding production from Jibal
Qutman Gold and Hawiah Copper-Gold in Saudi Arabia will generate cash flows
for capital repayments, further exploration and dividends to shareholders.

The following tabular summary presents KEFI's updated estimated share of the
projects' aggregate NPV's, as at mid-2022:

                                                                            Tulu Kapi                Hawiah        Jibal Qutman  Total         Issued        Pence Per
                                                                            NPV                      NPV           NPV           NPV           Shares        Share
 Net Present Value for KEFI as at mid-2022 start of Tulu Kapi Construction
     30/06/2020                                                             £114m                    0             0             £114m         1,867m        6
     31/12/2020                                                             £164m                    £80m          0             £244m         2,137m        11
     30/06/2021                                                             £205m                    £74m          0             £279m         2,153m        13
     31/12/2021                                                             £191m                    £128m         £29m          £348m         2,939m        12
 Footnotes:
 Assumed exchange rate was rate US$1.35:£1.00
 31 December 2021 Metal Prices:
 Gold Price is US$1,830/oz
 Copper Price is: US$9,750/t
 Zinc Price is US$3,590/t
 Silver Price is US$23/oz

 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.

 

Note that aggregate NPV's in mid-2025 using the same underlying assumptions as
above, are estimated to be approximately 80% higher than those at mid-2022,
reflecting that production will have commenced at Tulu Kapi, assumed to be
imminent at Jibal Qutman and soon-to-follow at Hawiah. This project sequencing
will be refined as the Saudi development studies progress. The scale of the
projects in value terms to KEFI is highlighted by the table above as at
mid-2022, but of equal importance from a financing viewpoint is the emphasis
of project-level capital funding as well as the sequencing of their
development. These aspects are illustrated in the table below:

 

                                                                              TULU KAPI  HAWIAH  JIBAL QUTMAN  TOTAL
                                                                              Current                          ALL 3
                                                                              Estimate                         PROJECTS
                                                                              US$m       US$m    US$m          US$m

 Assumed Year of Commencing Construction                                      2022       2025    2024

 Total Applications, including Mine Fleet                                     358        160     39            557

 Less Mine Fleet Provided by Corica                                           56         0       0             56

 Senior Debt                                                                  140        120     29            289

 Equity-Risk Capital Requirement                                              162        40      10            212

 Project Partners' Share Subscriptions into TKGM/G&M                          38         28      7             73

 Offtake-Linked Mezzanine Finance                                             45         0       0             45
 Cost Overrun Facility, Part of Mezzanine Facility                            15         0       0             15

 TKGM/G&M Share Capital to be subscribed by KEFI                              64         12      3             79

 Funded by Subordinated Convertible into KEFI Shares at Year 3 market price   20         0       0             20

 Funded by KEFI Shares Issued at end Year 2 at the then market price          7          0       0             7

 Budgeted internal spare cash generated                                       9          12      0             21

 KEFI Convertible Note Issued after signing, at premium to market in H2-2022  20         0       0             20

 KEFI Share Issue after closing each project financing in 2022, 2024, 2025    8          0       3             11
 Note that the Dec 2021 warrants at 1.6p bring in approximately US$8m
 Residual Requirement                                                         0          0       0             0

 

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 30% 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 3
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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