REG - Kefi Gold and Copper - GM Statement

KEFI Gold and CopperAnnouncement

26/03/2024 07:00

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RNS Number : 2272I  Kefi Gold and Copper PLC  26 March 2024

26 March 2024

KEFI Gold and Copper plc

("KEFI" or the "Company")

GM Statement

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 hosting a General Meeting ("GM") today at 9.00 a.m. GMT in
Cyprus. At the GM, Harry Anagnostaras-Adams, Executive Chairman of the
Company, will make the following statement:

 

"Today we bring shareholders up to date and strive to convey a picture of
where your company is heading.

 

Ethiopia

 

We will start by focusing on Ethiopia where the identified US$320 million
funding package for the Tulu Kapi Gold Project is now progressing through the
approval process of each of the syndicate members.

 

In October 2023, the National Bank of Ethiopia (the central bank) approved
essential exemptions from exchange and capital controls.  This satisfied the
third of the three critical conditions precedent for the syndicate to proceed,
as had been foreshadowed.  Then, in December 2023, the lead lending bank,
Eastern and Southern Trade and Development Bank, a key member of the financing
syndicate, gave final credit committee approval for its US$95 million project
loan.  This was also ratified by its country-members' board in February. The
other members of the syndicate, being the co-lender (US$95 million) and the
equity risk note investors (US$100 million) (all major regional corporations)
duly activated their approval processes.  A longstanding and a large MNC
investor in the Equity Risk Note ("ERN") has now received its initial board
approvals.

The steps now underway to progress Tulu Kapi funding package are:

 

·    Finalisation of approvals by the rest of the financing syndicate
following the recent approval by the lead bank;

·    Preparation of the community for resettlement;

·    Satisfaction of conditions precedent such as readiness of security,
insurances, title confirmations, perfection of banks' security and similar
formal documentary requirements; and

·    Completion of detailed definitive documentation which will require
all syndicate parties to approve counterparty rights and obligations, among
other things.

 

After approval by all syndicate members, we can then proceed by mid-2024 to:

 

·    Sign the Definitive Documentation between the respective syndicate
counterparties;

·    Place insurances and complete other administrative tasks;

·    Draw down first capital, starting with project equity and then debt
months later;

·    Commence staged resettlement of approximately 350 households near
Tulu Kapi; and

·    Begin procurement and tendering local sub-contractors.

 

We are following this clear roadmap, and we will report material milestones
along the way.

 

The end result will be the launch of Ethiopia's first industrial-scale mining
project and its largest single export generator and, in so far as
environmental, social and governance aspects are concerned, the project is
designed to be in compliance with World Bank IFC Performance Standards,
creating direct and indirect employment for 5,000 to 10,000 people.

 

Its NPV is £304 million for KEFI's projected net beneficial interest,
assuming a gold price of US$2,166/oz, being the spot as at 22 March 2024 and
discounting at 5% of net estimated after tax cash flows for equity, the
industry standard approach, so as to allow market comparisons of listed
developers.  At the long-term consensus gold price of US$1,864/oz, the NPV is
£204 million.

 

Saudi Arabia

 

Tulu Kapi is one of KEFI's three advanced projects, the other two being Jibal
Qutman Gold and Hawiah Copper-Gold in Saudi Arabia, conducted via our
25%-owned GMCO operating company.  Both projects are GMCO's own discoveries
and are enjoying very positive regulatory support as the preferred development
plans are considered.

 

Both projects are enjoying growth, illustrated by recent announcements of
further discoveries and the associated drilling results.

 

At Jibal Qutman, initial drilling at the Asfingia prospect has intercepted
near-surface gold such as 13m at 8g/t gold.

 

At Abu Salal, approximately 50km south of Hawiah, drilling has intercepted
massive and semi-massive sulphide mineralisation containing copper, gold, zinc
and silver in multiple horizons across a 2,600m strike length, with true
widths of up to 11m.

 

Work remains ongoing with respect to the development feasibility studies.
Given the continued and expected expansion in resources, the Company is
focused on establishing the optimal scale, recoveries and start-up strategies.
 We look forward to reporting further positive results as the extent of
mineralisation at both projects is better understood.

 

Summary

 

After many demanding years in highly prospective, but extremely challenging
jurisdictions, we believe we are now well placed to charge ahead.

 

I am pleased to report that your company has not only maintained its excellent
record of safety and of tenure protection, but has also drawn together
first-tier partnerships, banking relationships and contractors into
project-finance alliances in each of Ethiopia and Saudi Arabia.

 

Our operating alliances are with the following strong organisations:

·  Partners:

o  in Ethiopia:

§ Federal Government of the Democratic Republic of Ethiopia

§ Oromia Regional Government

o  in Saudi Arabia: Abdul Rahman Saad Al Rashid and Sons Ltd ("ARTAR")

·  Principal contractors:

o  for process plants in both Ethiopia and Saudi Arabia: Lycopodium Ltd

o  for mining in Ethiopia: PW Mining

·  Senior project finance lenders:

o  For Tulu Kapi:

§ Eastern and Southern African Trade and Development Bank Ltd

§ African Finance Corporation Limited

o  For Saudi Arabia:

§ Saudi Industrial Development Fund

 

KEFI has deliberately assembled its development funding at the in-country
subsidiary level in a manner which has minimised dilution (to KEFI) of the
intrinsic value of the underlying assets.  Of course, we need to convert this
into value per KEFI share by closing the project financings, de-risking the
projects and getting them into production.  KEFI is also examining
dual-listings in those countries' fledgling stock exchanges because of the
strong demand for investments in the mining sector.

 

Conclusion

 

Our host countries have turned markedly better for the minerals sector and for
KEFI.  We are preparing to construct Tulu Kapi, advancing development studies
on Jibal Qutman and Hawiah and conducting reconnaissance over exploration
targets in Ethiopia and Saudi Arabia.

 

As stated last year, along with my fellow Directors, I am very sensitive to
the need to generate returns on investment.  It was frustrating that the
political reforms and ensuing conflicts in Ethiopia and the suspension of
licencing for some years pending Saudi Arabia's sweeping deregulation in
effect suspended our progress.  However, as foreshadowed last year, our
operating environment has indeed turned for the better in both countries and
we now progress on all fronts.

 

The fundamental value to KEFI of the three advanced projects is estimated at
£372 million (calculated as set out above for Tulu Kapi and ascribing market
average metrics to preliminary production projections in respect of the
advanced Saudi projects which are still at the pre-Definitive Feasibility
Study stage).  This valuation indicator is c.12 times KEFI's current share
market capitalisation.  This is no more than just one indicator for the
estimate of intrinsic valuation and requires that the projects are implemented
as assumed.  However, it is a notable indicator that there is plenty of scope
for share price rerating as the projects progress and de-risk.  The
dedication our teams and syndicates have already demonstrated augers well
given the expected ongoing improvements to the investment climate in our host
countries.

 

The KEFI directors are deeply appreciative of all personnel's tenacity, as
well as the support the Company receives from our shareholders, our in-country
partners, lenders and contractors, our host communities, and other
stakeholders."

 

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)  +44 (0) 20 3470 0470
 Jeff Keating, Adam Cowl

 Tavira Securities Limited (Lead Broker)             +44 (0) 20 7100 5100
 Oliver Stansfield, Jonathan Evans

 IFC Advisory Ltd (Financial PR and IR)              +44 (0) 20 3934 6630
 Tim Metcalfe, Florence Chandler

 3PPB LLC (Institutional IR)
 Patrick Chidley                                     +1 (917) 991 7701
 Paul Durham                                         +1-203-940-2538

 

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