REG - Kefi Gold and Copper - Q1 2022 Operational Update

KEFI Gold and CopperAnnouncement

01/04/2022 07:45

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RNS Number : 9201G  Kefi Gold and Copper PLC  01 April 2022

1 April 2022

KEFI Gold and Copper plc

("KEFI" or the "Company")

Q1 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 ("G&M") in Saudi Arabia, for the period from 1 January 2022
to 31 March 2022 ("Q1 2022").  The Tulu Kapi Gold Project ("Tulu Kapi") is
under TKGM (planned to be c. 70% owned by KEFI).  The Hawiah Copper-Gold
Project ("Hawiah") and the Jibal Qutman Gold Project ("Jibal Qutman") are
under G&M (planned to be c. 30% owned by KEFI).  Both TKGM and G&M
are operated by KEFI.

Ethiopia

 

The security situation has improved enormously in Ethiopia over the past few
months, with the end of the civil war in the country's northern regions during
December 2021, the lifting of the national state of emergency in February
2022, the agreed ceasefire in March 2022, and the focus of the security forces
having now switched to the policing of priority areas like the Tulu Kapi
district.

 

Until a few years ago, Ethiopia was one of the world's top 10 growth countries
for nearly 20 years running and now, having overcome its recent security
issues, is demonstrating a clear determination to expedite the economic
recovery and the pursuit of its economic objectives.  Tulu Kapi will be the
country's first large scale mining project for some 30 years and is designed
to the highest international standards.  It therefore is imposing many
demands on a regulatory system which the Ethiopian Government is upgrading,
under strong Ministerial leadership, determined to build a modern minerals
sector.

 

During Q1 2022 TKGM reactivated Tulu Kapi project launch preparations and has
recently formally advised the Ministry of Mines of its progress being on
schedule and that it can close project finance by mid-year if the security
situation is satisfactory and if the few remaining regulatory administrative
tasks are also completed punctually.

In collaboration with the regulatory agencies at all four levels of the
Ethiopian Government, TKGM is implementing a staged Tulu Kapi project launch,
with progress to date as follows:

·    essentially completed technical and legal due diligence, as directed
by senior lenders' independent advisers - to satisfy conditions precedent to
finance closing;

·    triggered detailed engineering - minimising procurement and
construction time;

·    recommenced widespread community engagement, which had been suspended
for some months due to previously reported security incidents;

·    restarted district works which have a quick local impact, such as
upgrading the exploration camp for the construction workforce and
re-establishing the nursery for environmental management programmes.  Some of
these programmes were scheduled for post-launch, but have been brought forward
to rebuild stakeholder "safety confidence" over several months of undisturbed
progress in the lead-up to financial close, along with the requisite
independent security assessments;

·    commenced regular independent security monitoring;

·    facilitated the completion of the few remaining regulatory
administrative tasks:

o  the Ministry of Mines has now endorsed historical costs up to 2020 of
c.US$60 million and is now addressing the remainder, incurred after that date
or by other companies on behalf of TKGM;

o  the Ministry of Mines formally requested to allow re-commencement of
exploration at satellite deposit prospects in the Tulu Kapi district;

o  the central bank now addressing permission for both development banks to
be allowed to lend on the same terms. It has already revised, at TKGM's
request, local restrictions which effectively blocked modern mining project
finance until now - such as the working rules for the London clearing account
to avoid restrictions of capital controls, the capital ratio for project debt
up to 70/30 debt/equity, the use of gold price hedging if desired, the use of
offshore leasing and the application of market-based interest rates

·    maintained the project syndicate, triggered final pricing by the
principal contractors and distributed for review an updated term sheet in
respect of the offtake-linked mezzanine facility, now to involve the senior
lenders as well as the metals trader.

 

Saudi Arabia

 

On 6 January 2022, KEFI announced an updated Mineral Resource Estimate ("MRE")
for the Hawiah volcanic massive sulphide ("VMS") deposit of 24.9 million
tonnes at 0.90% copper, 0.85% zinc, 0.62 g/t gold and 9.81 g/t silver.  This
represents a c.30% increase in resource tonnage and c.5% increase in grade
over the previous MRE.  As a scale-comparison with the Company's Tulu Kapi
Gold Project, Hawiah's recoverable metal is now estimated to be in the order
of 2.2 million gold-equivalent ounces versus Tulu Kapi's 1.2 million ounces.

 

Work at the Hawiah Copper-Gold Project during Q1 2022 has focussed on
providing data for the Hawiah Preliminary Feasibility Study ("PFS") and
included:

 

·    a 3,700m reverse-circulation ("RC") drilling programme aimed at
upgrading and expanding the oxide portion of the Hawiah MRE to an Indicated
Resource category for open-pit mine planning;

·    trenching across the Camp and Crossroad Lodes to collect bulk samples
of the oxide mineralisation;

·    further metallurgical test work on the sulphide mineralisation to
determine the preferred flowsheets to recover the copper concentrates and zinc
concentrates, as well as the gold and silver;

·    a 1,800 metre geotechnical diamond drilling programme; and

·    a 1,350 metre hydrogeological drilling and pump testing programme.

 

Two Exploration Licences ("ELs") located immediately west of the Hawiah EL
were granted in December 2021.  Initial exploration of these Al Godeyer ELs
has confirmed similar copper-gold mineralisation to the Hawiah VMS deposit and
indicated good continuity of the mineralised horizon. Exploration during the
quarter included:

·    a Self-Potential ("SP") geophysical survey that defined a continuous
anomaly 1.3km in strike and a second, shorter anomaly which correlate well
with outcropping gossans;

·    the presence of gold and copper gossans in all trenches over the main
SP anomaly and the majority of trenches over the second SP anomaly. Rock chips
taken during mapping these trenches confirmed copper-gold mineralisation with
grades of up to 1.8% copper and 7.2g/t gold; and

·    RC drilling intersected oxide and transition sulphides down to a
vertical depth of 35 metres in the first six holes - assay results are pending
for all drillholes.

The Al Godeyer's exploration focus is to deliver an initial JORC Mineral
Resource during 2022, with a diamond drilling programme set to commence in
early April.

At the Jibal Qutman Project, development planning was re-activated following
indications from the Saudi Arabian Ministry of Mineral Resources that the
Mining Licence would progress in 2022.  Jibal Qutman was KEFI's first
discovery in Saudi Arabia with a maiden MRE in excess of 700,000 oz of gold.

 

KEFI Group

 

The improvement in the local working environment in both Ethiopia (security)
and Saudi Arabia (regulatory) since late 2021 has allowed KEFI to achieve
rapid progress in both jurisdictions during Q1 2022.  Combined with the
recently reported excellent exploration results at Hawiah in Saudi Arabia,
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 (not one) advanced projects in two countries places the
Company into a much better risk position than was hitherto the case.

 

Based on metal prices current at 31 December (note 1 below), the following
high-level statistics illustrate the importance of KEFI's newly-established
position across the advanced projects and the two countries:

 

·    KEFI's beneficial interest in gold-equivalent mineral resources has
grown from 1.2 million ounces in mid-2020 to 2.1 million ounces at the end of
2021 with growth anticipated for 2022 and subsequent years;

·    KEFI's market capitalisation at 0.8 pence per share represents the
following:

•     US$18/oz-equivalent on JORC resources;

•     7% of NPV (8%) at current metal prices, 13% on Ethiopia alone and
16% on Saudi alone;

•     Estimated potential Net Operating Cash Flow (see note 2 below) is
£137 million (c. US$185 million) per annum from the combination of all three
development projects at their targeted start-up production rates.

·    NPV (see note 3 below) for KEFI of its projects has tripled since
mid-2020, at 31 December 2021 metal prices and represents 12p per share in
issue (6.5 pence per share Ethiopia and 5.3 pence per share Saudi Arabia). All
KEFI's projects have resources which remain open and there is a pipeline of
nearby additional exploration projects with walk-up drill targets.

 

Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented:

"During the first quarter of 2022 KEFI has made excellent progress on three
now-advanced projects in two now-pro-development countries.  This is in stark
contrast to our situation only months ago when our priority was simply to
preserve the Ethiopian project finance syndicate against security challenges
and to prove up sufficient resources in Saudi Arabia to warrant development.

"I believe this recent pivot means that the first quarter of 2022 represents
KEFI's watershed quarter and the most important since the IPO in 2006."

 

Investor Webinar

The Company will provide a Quarterly Update presentation via the Investor Meet
Company platform on Friday 8 April 2022 at 3pm London time.

The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet KEFI
via:

https://www.investormeetcompany.com/kefi-gold-and-copper-plc/register-investor
(https://www.investormeetcompany.com/kefi-gold-and-copper-plc/register-investor)

Investors who already follow KEFI on the Investor Meet Company platform will
automatically be invited.

The webinar will subsequently be available on the Company's website at:

http://www.kefi-minerals.com/news/webcasts
(http://www.kefi-minerals.com/news/webcasts) .

 

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

 

Notes

(1)  Metal prices:

 31 December 2021 Metal Prices:                            31 January 2021 Analyst Consensus Long Term Prices:
 Gold Price is US$1,830/oz                                                             Gold Price is US$1,607/oz                              (2)         (3)
 Copper Price is: US$9,750/t                                                           Copper Price is: US$7,590/t                            (4)         (5)
 Zinc Price is US$3,590/t                                                              Zinc Price is US$2,442/t                   (6)         (7)         (8)
 Silver Price is US$23/oz                                                              Silver Price is US$21/oz                   (9)         (10)        (11)

 

(12)               Net Operating Cash Flow: Same as Earnings
Before Interest, Taxes (taxes and royalties payable), Depreciation and
Amortisation

(13)               NPV

 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.

 

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 projects in the
Arabian-Nubian Shield. KEFI targets that production at Tulu Kapi will generate
cash flows for capital repayments, further exploration and dividends to
shareholders.

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 31.2% 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
three 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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