REG - Kefi Gold and Copper - Positive PFS and Associated Studies for Hawiah

KEFI Gold and CopperAnnouncement

28/06/2023 07:00

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RNS Number : 1140E  Kefi Gold and Copper PLC  28 June 2023

28 June 2023

KEFI Gold and Copper plc

("KEFI" or the "Company")

Positive PFS and Associated Studies for Hawiah Copper-Gold Project ("Hawiah")

 

Highlights

·    The  Pre-Feasibility Study ("PFS") on the Hawiah open-pit and
associated studies on the underground mine have provided a positive foundation
for the optimisation and development of Hawiah, in Saudi Arabia;

 

·    Project NPV(8) of US$301 million and post-tax IRR of 75%, based on
mining current Indicated and Inferred Resources, Life of Mine ("LOM") revenue
of US$2.7 billion, operating cashflow of US$1.1 billion and pre-production
capital expenditure of US$295 million. These estimates are based on spot gold
prices as at 30 April 2023 and an assumed mining rate starting at 2 million
tonnes per annum ("Mtpa") and peaking at 3 Mtpa over 10 years;

·    It is envisaged that initial open pit mining will be followed by, and
complemented by, underground mining. Metallurgical test results, based on
limited samples to date, indicate that a conventional processing flowsheet
provides high metal recoveries to a c.25% copper concentrate and a c.50% zinc
concentrate and gold doré; and

·    Optimisation studies will in due course consider a range of scenarios
including various aggregate production rates and the ideal timing for
starting-up the underground operation. For the time being, unit costs of
production have been based on an assumed production rate of 2 Mtpa and the
sequential mining of underground after an open cut phase.

KEFI Executive Chairman, Harry Anagnostaras-Adams, commented:

"The PFS demonstrates an attractive project at Hawiah.

"To date we have only tested a small part of the Hawiah district and we
already have a project that can be optimised for development.

"Following the recent capital-raise, work is already underway on the +50,000
metre drilling programme which will complement the Hawiah PFS and associated
studies. We look forward to reporting exploration results as we establish a
globally significant VMS project at Hawiah. We are also wrapping up a 13,000
metre programme at Jibal Qutman Gold and assessing initial results from
reconnaissance over the fourteen exploration licences granted in the past
eighteen months to our operating joint venture company. This is a truly
exciting rate of progress in what today is perhaps the world's most exciting
jurisdiction for minerals exploration.

"KEFI has now established its leadership position in the Arabian-Nubian Shield
and has assembled development finance at the subsidiary and project levels for
all three advanced projects which have combined c.5 million ounces
gold-equivalent resources which remain open for extensional drilling.

"The aggregate NPV of our three advanced projects is approximately £318
million or about ten times the Company's current market capitalisation,
providing a preliminary indicator of the upside value potential as we de-risk
the projects and add more value through exploration and development."

Summary

KEFI Gold and Copper (AIM: KEFI), the gold and copper exploration and
development company with a leadership position in the high-growth Arabian
Nubian Shield, is pleased to announce the positive assessment of the PFS for
Hawiah, the largest discovery to date by KEFI's 27%-owned Saudi Arabian
joint-venture Gold and Minerals Company Limited ("GMCO").

Hawiah is a part of a larger mineralised system and the January 2023 Mineral
Resource Estimate ("MRE") contains a total of 258,000 tonnes (569 million lbs)
of copper, 272,000 tonnes (600 million lbs) of zinc, 620,000 ounces of gold
and 9.4 million ounces of silver. Hawiah already ranks amongst the top three
base metal projects in Saudi Arabia and the largest 15% VMS ("Volcanogenic
Massive Sulphide") systems globally.

KEFI also announced a maiden MRE for the nearby (12km from Hawiah) Al Godeyer
deposit of 1.35Mt at 0.6% copper, 0.54% zinc, 1.4g/t gold and 6.6g/t silver on
3 April 2023.

GMCO drilling totalling 58,194 metres ("m") since discovery in 2019 has
established the 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 (see Company announcement on 9
January 2023). Whilst the primary focus of the PFS was the relatively
close-to-surface portion of the MRE in the Indicated Resource category,
complementary studies on the Inferred Resource reported for the deeper part of
the orebody (the near-vertical tabular structure drill-intercepted over more
than four kilometres strike length) have allowed a clear positive assessment
to be made of Hawiah's economic merits without taking into account expected
further Resource growth.

The Definitive Feasibility Study ("DFS") will in due course refine and
optimise the entire Hawiah Complex.

Project Metrics

In order to summarise the key overall project metrics, KEFI has combined
independent PFS-level estimates for the open pit and its own scoping-level
estimates for the underground mine based on the current Hawiah MRE. These
resources total 30.35Mt, of which Inferred Resources comprising 17.85Mt relate
to the tabular orebody to be mined by underground methods.

Set out below are the current estimates of recoverable tonnes before
infill-drilling is completed within current resources, project design-concept
finalisation, value-engineering and project optimisation. It is also likely
that the current Mineral Resources will be increased at both Hawiah and the
satellite deposit at nearby Al Godeyer.

Please note that there is a lower level of geological confidence associated
with Inferred Resources and there is no certainty that further drilling will
result in conversion to Measured or Indicated Resources or the ore tonnes
mined in the Life-of-Mine ("LOM") plan summarised below.

 

 

Project Physicals -LOM Totals

                                         Total / Average
 Open Pits - Oxide Ore                   1.8Mt
 Open Pits - Transitional and Fresh Ore  9.5Mt
 Underground - Fresh Ore                 15.3Mt
 Total Ore Tonnes Mined                  26.5Mt

 Copper Concentrate Grade                25%
 Zinc Concentrate Grade                  50%

 Copper-Equivalent Production            290,000 t
 Gold-Equivalent Production              1.36 Moz

 

Components of Project Operating Costs - LOM Average

 US$ / Tonne of Ore Processed                        Open Pit Ore  Underground Ore
 Mining and Rehandling                               $21.5         $21.0
 Processing                                          $20.6         $20.6
 G&A                                                 $2.5          $2.5
 Cash Operating Cost                                 $44.6         $45.5
 Sustaining Capex (excl. disposal value on closure)  $0.6          $19.0
 All-in Sustaining Cost (opex and capex)             $45.2         $64.5

This table is based on processing 2Mt per annum of ore, which intentionally
errs on the side of conservatism for estimation of unit costs.

All-in Sustaining Costs ("AISC") associated with mining, processing and
general & administrative ("G&A") at Hawiah are currently estimated to
be US$45/tonne for Phase 1 (open pits) and US$64.5/tonne for Phase 2
(underground mine).

The open-pit mining cost averages US$2.21/tonne and the average waste to ore
ratio is 8.2.

Indicative Components of Project Revenue

 US$                               Copper    Zinc       Gold       Silver
 Spot Prices as at 30 April 2023*  $8,554/t  $2,6466/t  $1,989/oz  $25/oz
 RoM Grade                         0.73%     0.75%      0.60g/t    8.2g/t
 Overall Recoveries                92%       71%        77%        83%
 Concentrate Payable Metal         96.4%     84%        90%        90%
 % of Total Revenue                56%       9%         29%        5%

At the metal prices detailed in the table above, the average Net Smelter
Return ("NSR") is US$97/tonne processed. This table is based on processing
2Mtpa of ore.

Payable metal percentages are for copper concentrate except zinc in the zinc
concentrate. Revenue is net of freight charges and typical treatment and
refining charges.

Summary of Project Economics - LOM Totals (Metal prices as at 30 April 2023)

 US$                                                               Total
 Revenue - at Spot Prices as at 30 April 2023 *                    $2,696M
 Operating Costs - **                                              $1,149M
 Sustaining CapEx - mostly underground mine development            $339M
 Operating Cash Flow                                               $1,208M

 Total Net Free Cash Flow After Royalties and Tax *** (pre-debt)   $689M
 Total Net Free Cash Flow After Royalties and Tax *** (post-debt)  $579M
 After-tax NPV (8% discount rate)****                              $301M
 After-tax IRR (assuming 75% project debt against capex and DFS)   75%
 Pre-production Capital Expenditure                                $295M

* Metal Prices: for consistency with KEFI's recent 2022 Annual Report
published 9 June 2023, these tabulations are based on spot prices as at 30
April 2023 of US$1,989/ounce for gold, US$3.88/pound for copper, US$1.20/pound
for zinc and US$25/ounce for silver.

**Operating Costs: production costs estimated as set out in the foregoing
tables. Closure costs offset by disposal value at end of LOM based on current
MRE, assumed at 10% of original capex. Considered conservative for a fully
equipped licenced site in an under-explored VMS district.

*** Income tax rate in Saudi Arabia is 20% and applicable royalties are 2.0%
for zinc and 1.5% for copper, gold and silver.

**** approximately 10-year LOM has been assumed, by compressing the
approximately 14-year of LOM of the PFS, reflecting annual output building up
to 3Mtpa rather than 2Mtpa, by concurrently mining, rather than sequentially
mining, the open pit and underground. This and other planning assumptions will
be finalised upon completion of the DFS.

 

The next study phase is optimisation on several key levels.

Portfolio Economics for KEFI

The following is an overview of the high-level economic metrics (Net Present
Values are at 8% discount rate on net after tax cash flows to equity - NPV(8))
for the group's three advanced projects, ignoring any contribution by the
exploration pipeline. This aggregates all projects, based on the most recent
published resource estimates and KEFI's currently targeted ownership of each
project.

 Tulu Kapi NPV (KEFI c.74% share)                      US$243M
 Jibal Qutman's (KEFI c.27% share)                     US$73M
 Hawiah's NPV (KEFI c.27% share)                       US$81M
 Aggregate NPV (KEFI share in USD)                     US$397M
 Aggregate NPV (KEFI share in GBP at US$1.25:GBP1.00)  £318M

 

The above aggregate NPV of £318 million is c. 10 times KEFI's current market
capitalisation and is based on:

·    2023 PFS on Hawiah open pit aggregated with scoping-level analyses on
the underground mine, as summarised herein.

And, as presented in the recently published 2022 KEFI Annual Report:

·    2023 Mine Plan for Tulu Kapi, for which the open pit is considered
bankable and contributes c.980,000 oz of aggregate production and the
underground mine contributes c.220,000 oz of aggregate production and is
considered at Preliminary Economic Assessment ("PEA") status;

·    2022 PEA-level modelling for Jibal Qutman. Alternative development
scenarios are currently being assessed prior to finalising the direction of
the DFS aimed at fast-tracking development.

KEFI Group Development Funding Strategy

·    KEFI's policy is that development capital requirements be, in so far
as is reasonable, met at the subsidiary or project level through a combination
of project debt finance and subsidiary-level equity funding. This has been
overwhelmingly successful at Tulu Kapi.

·    The same policy applies in Saudi Arabia, where good progress is being
made:

o  GMCO is already liaising with the Ministry of Industry and Mines ("MIM")
and other Saudi Government regulators as regards development permitting on
completion of the DFS, and also with the Saudi Industrial development Fund
("SIDF") regarding project financing. SIDF provides up to 75% of aggregate DFS
and construction costs.

o  The licences for the two advanced projects are now in the process of
transfer from ARTAR into GMCO and its project companies in preparation for
project financing. This is standard project financing procedure, as was done
in Ethiopia as a precursor to development financing at the level of the
project subsidiary company.

·    KEFI plans minimal reliance, if any, on the public equity stock
markets for development finance.

Market Abuse Regulation (MAR) Disclosure

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

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 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)
 Tim Metcalfe, Florence Chandler                                      +44 (0) 20 3934 6630

Notes to Editor

KEFI Gold and Copper plc

KEFI is focused primarily on the development of the Tulu Kapi Gold Project in
Ethiopia and its pipeline of highly prospective exploration and development
projects in the Kingdom of Saudi Arabia, also in the Arabian-Nubian Shield.
KEFI targets that Tulu Kapi Gold, along with its two most advanced Saudi
projects Jibal Qutman Gold and Hawiah Copper-Gold will come into production
over the period 2025-2027 and will generate cash flows for capital repayments,
further exploration and dividends to shareholders.

 

Background on the Hawiah Project and the PFS

In order to expedite the PFS, the timetable required that most of the detailed
work was based on the January 2022 Hawiah MRE. Given that the Mineral
Resources have increased significantly since that MRE, the outcomes presented
herein are based on:

·    PFS level operating and capital cost estimates for the open pit ore
and processing plant;

·    Scoping Study level operating and capital cost estimates for the
underground mine; and

·    Scoping Study level mining schedules derived from the current 29.0Mt
Hawiah resource plus the maiden Al Godeyer 1.35Mt resource.

There remains considerable potential to increase both of these resources as
well as discovering further satellite orebodies.

The Project area is located approximately 30 km east-south-east of the
regional town of Turbah and can be accessed via a high-quality tarred road
(Highway 273) which passes within 20km of the licence area. Access to site is
via graded tracks suitable for two-wheel drive vehicles.

The small, semi-abandoned village of "Khumrah" is c. 6 km from the project
site. This village is the closest permanent settlement to the project area and
serves as a base for GMCO's contractors. Amenities including grid power and
water pumped from local wells for both local needs and exploration activities.

Located at an elevation of approximately 1,150m above sea level, the climate
is relatively mild by Saudi Arabian standards with daytime temperatures
ranging from a minimum of 7 degrees Celsius in the winter to in excess of 40
degrees Celsius in mid-summer. This region is inhabited by the local Bedouin
who are nomadic herders and as such they move across the region on a regular
basis.

Hawiah is located within the Wadi Bidah Mineral District ("WBMD") in the
southwest of the Arabian Shield. The WBMD is a 120-kilometre-long belt which
hosts over 20 Volcanic Massive Sulphide ("VMS") known occurrences and historic
workings for copper and gold.

GMCO commenced drilling the Hawiah deposit in September 2019 and quickly
confirmed a large-scale VMS style of deposit underlying the outcropping 4.5km
long gossanous ridge.

Whilst mineralisation is continuous across the 4.5Km strike length, three
distinct massive sulphide 'lodes' have been delineated, representing areas of
greater sulphide thickness. The polymetallic massive sulphide mineralisation
comprises copper, gold, zinc and silver with intercepts of up to 5% copper
equivalent.

Diamond drilling has shown that the unweathered subsurface extension of the
ridgeline is comprised of massive sulphide hosted within a greenschist altered
volcanic package. This package near surface has been subject to variable
supergene alteration as a result of rock-groundwater interactions. This has
resulted in three weathering/alteration domains across the length of the
ridgeline:

·    Oxide (0-35m depth) - preferentially enriched in gold

·    Transitional (35-70m depth) - preferentially enriched in copper

·    Fresh (>70m depth) - representing ~88% of the known deposit

 

Since the commencement of major exploration works at Hawiah in early 2019,
KEFI announced a maiden MRE in August 2020 which formed the basis for the mine
plan in the 2020 PEA.

An updated MRE of 24.9Mt at a 0.90% copper, 0.85% zinc, 0.62 g/t gold and 9.8
g/t silver was finalised in December 2021 which formed the basis for the mine
planning in this PFS for the open pit and the scoping-level work for the
underground.

Diamond and reverse circulation ("RC") drilling have since continued, bringing
the Project total to 58,194m of drilling by the end of 2022. Drilling during
2022 had three main objectives:

·    Improve the level of geological control in the upper portion of
sparsely explored Central Zone and northern portion of the Camp Lode;

·    Explore the Crossroads Extension Lode and further define the deeper
portion of the orebody; and

·    Better define the upper oxide and transition zones and increase the
known gold resource.

 

These objectives were achieved and with the deposit remaining open at depth,
the Hawiah orebody has additional potential for further expansion.

Following the conclusion of the 2022 drilling programme, an updated Hawiah
Mineral Resource was estimated to total 29.0 million tonnes at 0.89% copper,
0.94% zinc, 0.67 g/t gold and 10.1 g/t silver.

This MRE is reported in accordance with the JORC Code and is classified as:

·    Indicated - Open Pit - 9.2 Mt at 0.88% copper, 0.70% zinc, 0.84 g/t
gold and 9.9 g/t silver

·    Indicated - Underground - 3.2 Mt at 0.82% copper, 1.07% zinc, 0.59
g/t gold and 9.5 g/t silver

·    Inferred - Open Pit - 1.8 Mt at 0.99% copper, 1.02% zinc, 0.67 g/t
gold and 12.4 g/t silver

·    Inferred - Underground - 14.7 Mt at 0.90% copper, 1.05% zinc, 0.58
g/t gold and 10.1 g/t silver

 

This Hawiah MRE contains a total of 258,000 tonnes (569 million lbs) of
copper, 272,000 tonnes (600 million lbs) of zinc, 620,000 ounces of gold and
9.4 million ounces of silver.

Total Indicated and Inferred Resources reporting to the Open-Pit Scenario have
increased to 11.1Mt (up 32% from 8.4Mt).

Further information on this MRE is detailed in KEFI's announcement "Hawiah
Mineral Resource increased by 16% to 29 million tonnes" dated 9 January 2023.

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.

Hawiah's Exploration Potential

The Hawiah massive sulphide deposit remains open along strike and down-plunge,
with the deepest mineralised intercept of 590 metres below surface.

The massive sulphides at Hawiah show evidence of being mechanically
transported from the source vent structures. Breccia clasts of sulphides,
sedimentary structures and the lack of hydrothermal alteration in the
immediate footwall rocks under the sulphides indicates that the areas of the
deposit drilled to date likely formed on the flank of a laterally extensive,
linear rift. Massive sulphides are interpreted to have accumulated in
extensional rifts parallel to these rift sites, with evidence of secondary
mineralising enrichment post deposition.

VMS deposits are well understood to form in clusters, and Hawiah is no
exception. A number of gossans have been identified in the areas immediately
surrounding the Hawiah deposit.

Exploration commenced the nearby Al Godeyer Project in early 2022 and drilling
under gossan quickly confirmed similar copper-gold mineralisation to the
Hawiah VMS deposit. A maiden MRE for Al Godeyer was announced in April 2023 of
1.35Mt at 0.6% copper, 0.54% zinc, 1.4g/t gold and 6.6g/t silver. Further
information on the Al Godeyer MRE is in the announcement "Maiden Al Godeyer
Resource to contribute to the Hawiah Project Open Pittable Resources" dated 3
April 2023.

Located only 12km from the proposed Hawiah processing plant, there is
excellent potential for Al Godeyer to provide additional ore. The Al Godeyer
deposit has only been drill tested to a vertical depth of 200 metres below the
surface and it remains open at depth and along strike to the southeast.

Exploration activities at Abu Salal South, 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.

Al Godeyer and Abu Salal are both high-priority exploration projects as
potential satellite ore sources for the Hawiah processing plant.

 

Appendix A - Glossary of Technical Terms

 Ag                            Silver
 AAS                           Atomic Absorption Spectroscopy
 AIC                           All-in Costs
 Arabian-Nubian Shield or ANS  The Arabian-Nubian Shield is a large area of Precambrian rocks in various
                               countries surrounding the Red Sea
 ARTAR                         Abdul Rahman Saad Al Rashid & Sons Company Limited
 Au                            Gold
 Cu                            Copper
 DFS                           Definitive Feasibility Study
 g/t                           Grams per tonne
 Gossan                        An iron-bearing weathered product overlying a sulphide deposit
 ICP-AES                       Inductively Coupled Plasma-Atomic Emission Spectroscopy
 IDW                           Inverse Distance Weighted
 IP                            Induced polarisation - a ground-based geophysical survey technique measuring
                               the intensity of an induced electric current, used to identify disseminated
                               sulphide deposits
 JORC                          Joint Ore Reserves Committee
 JORC Code 2012                Australasian Code for Reporting of Exploration Results, Mineral Resources and
                               Ore Reserves
 m                             Metres
 Massive sulphide              Rock comprised of more than 40% sulphide minerals
 Mt                            Million tonnes
 Mtpa                          Million tonnes per annum
 MRE                           Mineral Resource Estimate
 NSR                           Net Smelter Return
 oz                            Troy ounce of gold
 PCT                           Percent
 PEA                           Preliminary Economic Assessment
 PFS                           Pre-Feasibility Study
 PPM                           Parts per million
 Precambrian                   Era of geological time before the Cambrian, from approximately 4,600 to 542
                               million years ago
 VMS deposits                  Volcanogenic massive sulphides; refers to massive sulphide deposits formed in
                               a volcanic environment with varying base metals (copper, lead and zinc) often
                               with significant additional gold and silver
 Zn                            Zinc

 

 

 

Appendix B - Diagrams - to access Appendix B click
here http://www.rns-pdf.londonstockexchange.com/rns/1140E_1-2023-6-27.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1140E_1-2023-6-27.pdf)

 

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