REG - Kefi Gold and Copper - Q3 2023 Quarterly Operational Update

KEFI Gold and CopperAnnouncement

31/10/2023 07:00

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RNS Number : 7744R  Kefi Gold and Copper PLC  31 October 2023

31 October 2023

KEFI Gold and Copper plc

("KEFI" or the "Company")

Q3 2023 Quarterly Operational Update

Ethiopia - Tulu Kapi Progressing Towards Launch; Saudi Arabia - Exploration
Results Show Potential for Resource Expansion at Jibal Qutman and Hawiah,
Whilst Development Studies Progress

KEFI (AIM: KEFI), the gold and copper exploration and development company, has
focused on the Arabian-Nubian Shield since 2008, assembling a pipeline of
projects in the Kingdom of Saudi Arabia and in the Federal Democratic Republic
of Ethiopia, with the most advanced being the shovel-ready, high-grade Tulu
Kapi Gold Project ("Tulu Kapi") in Ethiopia which is being prepared for its
launch.

We are pleased to provide this Q3 2023 operational update covering the three
months to 30 September 2023 and more recent developments. This update
encompasses the activities of the Company, as well as wholly owned KEFI
Minerals (Ethiopia) Ltd ("KME"), majority-owned Tulu Kapi Gold Mines Share
Company ("TKGM") in Ethiopia, and minority-owned Gold & Minerals Ltd
("GMCO") in Saudi Arabia.

Executive Chairman, Harry Anagnostaras-Adams commented: "KEFI's third quarter
was one of our having our heads down clearing many conditions precedent for
the launch of Tulu Kapi Gold Project in Ethiopia and, likewise in Saudi
Arabia, our team has continued clearing the checklist for shaping the
development plans for the Jibal Qutman Gold Project and the Hawiah Gold-Copper
Project.

"Conditions in both of our host countries continue to improve for our industry
and, whilst one should never discount the challenges in frontier markets, our
teams are doing an excellent job, our partners, contractors and financiers are
working with us closely and supportively and we are driving hard to hit our
next big milestone which is to trigger before the end of this year the first
stage of the  Tulu Kapi Gold Project launch.

"A sign of our confidence is that we are lifting our exploration ambitions in
both Saudi Arabia and Ethiopia, where similar geology presents similar
opportunity which we have come to understand since entering the Arabian Nubian
Shield fifteen years ago. Our proprietary database has already helped yield
our discoveries and we will continue to tackle our exploration pipeline during
development of our production projects.

"We have successfully assembled strong alliances with partners, banks and
contractors in both countries which, in due course, will demonstrate their
importance for KEFI's growth in terms of both local standing and local
financial capacity."

 

ETHIOPIA

Tulu Kapi Gold Project

Progress on all fronts maintains the plan to launch the high-grade Tulu Kapi
Gold Project (2.1g/t gold open-pit Ore Reserve plus 5.6g/t gold underground
Mineral Resource) before the end of 2023, and to scale up activities to full
construction over the following months in line with the continued upgrade of
security protections and preparations of the community. We will go as fast as
the conditions on the ground warrant, to ensure rapid ongoing progress.

The planned US$320 million project financing and launch sequence is being
executed as follows:

o Final credit committee approvals by the mandated development banks are now
being processed after the finalised details of exemptions from exchange and
capital controls were received from the Ethiopia Central Bank earlier this
month.

o Upon receipt of final lender approvals, the relevant field, legal, plant and
mining teams will mobilise to concurrently complete:

§ Community resettlement agreements with households, all of which has been
planned in detail with the authorities and international specialist experts;

§ Final procurement agreements for the fixed price process plant and the
mining fleet, for which the contractors and fabricators are on standby;

§ Detailed definitive documentation between all syndicate members, all of
which has been drafted; and then

§ Final Board approvals by the equity-capital providers, including the
development banks themselves, regional investors subscribing to equity risk
notes and the Federal and Regional Governments subscribing to share capital at
the Ethiopian subsidiary-level.

The finance plan is summarised as follows:

o   US$320 million: development capital excluding the mining fleet provided
by the mining contractor including:

§ US$190 million: secured debt (senior and mezzanine) from project lenders;

§ US130 million: equity-risk capital (in US$ and Ethiopian Birr as required
by the project), comprising:

·    US$40 million: from the Ethiopian Federal and Regional Government;

·    US$90 million: from KEFI subsidiaries, in turn sourced from
Equity-Risk Notes ("ERN's") subscribed by the project lenders and large
regional investors, with up to half of the ERN's being convertible into shares
of KEFI (at KEFI's election) to be prohibited until Year 4 onwards at then
prevailing market share prices.

§ We are also arranging our subsidiary-level funding capacity to cover
potential last-minute capital budgeting refinements such as pricing
adjustments for the fixed-price lump-sum plant components last priced at end
2022.

SAUDI ARABIA

Jibal Qutman DFS

The Jibal Qutman Definitive Feasibility Study ("DFS") is evaluating the
economic and technical feasibility for building a set of adjacent open-pit
mines and a centrally sited Carbon-in-Leach ("CIL") processing plant, to
recover more than 500,000 ounces of gold, rather than the 169,000 ounces of
gold originally envisaged in the 2015 Preliminary Economic Assessment ("PEA").
The 2015 PEA focused on a small heap-leach approach as a starter-project when,
at that time, planning was based on a gold price of c.US$1,200/ounce. GMCO
also continues to explore for additional resources on the same and similar
structural belts at this project area.

Key DFS workstreams which have now been completed include:

·    metallurgical and geotechnical drilling;

·    infill drilling to upgrade the resource classification; and

·    metallurgical tests, indicating gold recoveries of c.90% for oxidised
ore and 69-74% for fresh ore.

Workstreams progressed during Q3 2023 included:

·    finalisation of geological models to update the Mineral Resource
Estimate ("MRE");

·    mine planning in more detail;

·    finalisation of processing plant design;

·    analysis of data from a ground magnetics survey and 23 trenches
completed during the quarter, to better define drill targets and also to
finalise the location for site infrastructure; and

·    completion of the initial accommodation and works compound at site.

Whilst the results of in-fill drilling and detailed mine planning are
assembled for an update to the current MRE, exploration results build our
expectation of significant further growth.

Jibal Qutman MRE and Exploration

Resource Consolidation

Since January 2021, the JQ GMCO team has been working on Resource
consolidation ahead of the DFS, completing 23,500 metres of diamond drilling
which has been predominantly used on infill, metallurgical and geotechnical
programmes.

The 2023 MRE is nearing completion and will be finalised this quarter. The
work surrounding this MRE has focused predominantly on resource classification
upgrade and firming up grade distributions rather than resource expansion.
Once finalised it will be used to drive the mine design and the subsequent Ore
Reserve definition.

Resource Expansion

Following the completion of the resource upgrade and support works, drilling
is now focused on the more then 12 other known mineralised targets within the
previously defined mining licence area as well as the now much larger
cumulative 270Km(2) exploration licence area. This larger exploration area
hosts the north and south extensions of the known mineralised structures.

Generative programmes have commenced this quarter to develop targets away from
these defined JQ Resource areas. This exploration has included a ground
magnetic survey, airborne magnetic survey, geological mapping and trenching.
The generative work, whilst still in its infancy, has already allowed for
numerous targets to be defined across the 270Km(2) area.

Two of the near mine targets are currently undergoing drill testing with
encouraging preliminary results.

1)   The Red Hill 2 prospect.  Located 1 kilometre along strike to the
north of the main Red Hill resource this target has intersected the
continuation of the main Red Hill thrust package, and identified gold zones
extending for more than 185m along strike.

This structurally complex area is still being evaluated so true widths cannot
be estimated at this time however, the best trenches within this zone include:

-     JQT_403 intersected 39m at 1.74 g/t Au

-     JQT_404 intersected 27.3m at 2.1g/t Au

Drilling to follow up on these results is underway with early holes JQD161
intersecting 10.23m at 1.0g/t Au and JQD222 intersecting 8.46m at 2.7g/t Au.

2)    At the Asfinga target, which is located around 1km north of the 3K
Hill Resource, four trenches have been opened to evaluate a shear hosted
quartz vein. Early assays from trenching indicate mineralisation over a 150m
strike length.

The best trenches within this zone include:

-     JQT_414 intersected 16m at 2.31 g/t Au and 7.5m at 1.8g/t au,

-     JQT_417 intersected 25.7m at 0.71g/t Au and 18.5m at 1.35g/t Au and,

-     JQT_418 intersected 7.95m at 3.8g/t Au

Four diamond drill holes have been completed to follow up on these results
with assays pending.

Jibal Qutman Development Planning

The above work is designed to consider the alternatives for scaling the annual
production capacity and then finalise the DFS, to optimise the project
development plan, for approval by GMCO and our project finance lenders in
Saudi Arabia. Based on encouragement from regulators and development
financiers, we would then expect that upon GMCO resolving its commitment to
develop, there will be minimal delay in obtaining a mining licence, closing
project finance within Saudi Arabia and starting development in 2024, with the
exact timing depending upon these reviews and regulatory processes.

Hawiah Copper-Gold Project

Hawiah DFS

Hawiah sits at the northern end of the 120Km(2) long Wadi Bidah Metallogenic
Belt (WBMB), in which GMCO has five additional Exploration Licences.

Since the discovery of Hawiah in 2019 GMCO has drilled a total of 80,000
metres of diamond core (DD) and 5,500m of Reverse Circulation (RC) drilling
and has established a Mineral Resource Estimate ("MRE") of 29.0 million tonnes
("Mt") at 0.89% copper, 0.94% zinc, 0.67g/t gold and 10.1g/t silver (see KEFI
announcement dated 9 January 2023). This 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.

Whilst GMCO believes that the current Mineral Resource has further expansion
potential, it already ranks amongst the top three base metal projects in Saudi
Arabia and in the top 15% of VMS ("Volcanogenic Massive Sulphide") deposits
globally by tonnage.

During Q2 2023, KEFI announced the following was achieved by GMCO:

·    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 (see the
Company's announcement on 3 April 2023); and

·    Hawiah Pre-Feasibility Study ("PFS") outcomes on the open-pit and
associated studies on the underground mine (see the Company's announcement on
28 June 2023).

·    Commencement of the 50,000m drilling programme for resource category
upgrade and expansion.

The full mine development concept is still being finalised, but it is
envisaged that initial open pit mining will be followed by, and complemented
by, an underground operation. Mining 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.

Metallurgical test results, based on limited samples to date, indicate that a
conventional processing flowsheet provides good recovery to a c.25% copper
concentrate and a c.50% zinc concentrate along with gold doré. However, other
processing flowsheets remain under consideration.

Whilst the primary focus of the PFS was limited to the relatively near surface
portion of the MRE within the Indicated Resource category, complementary
studies on the deeper Inferred portions of the Mineral Resource have allowed a
positive internal preliminary assessment to be made of Hawiah's economic
potential.

Hawiah Exploration and resource development

In addition to the 50,000m Hawiah infill and expansion programme, GMCO have
also focused on upgrading and expanding the existing Al Godeyer resource (12km
west of Hawiah) through diamond drilling, whilst simultaneously conducting
earlier stage exploration at Abu Salal (50km south of Hawiah) and mapping
within the wider WBMB project area.

Al Godeyer

The first phase of the 2023 Al Godeyer drilling programme, which was completed
in August, aimed at upgrading the maiden MRE and brings the project total
meters to 4,230m of DD and 1,700m of RC drilling. A follow up phase of
drilling is planned to commence following receipt and interpretation of
pending assays with the target continuing to be the upgrade and expansion of
the 1.35Mt Inferred Mineral Resource to an c.2Mt Mineral Resource at an
Indicated classification. This would allow the defined Resources to support
the planned Hawiah DFS, as a satellite open-pit.

Abu Salal

At Abu Salal, a total of 30 trenches have been excavated across the gossanous
horizons which outcrop discontinuously over a 5km strike. Thicknesses of the
logged gossans have ranged from 12-13 metres down to 0.5 meters, with multiple
horizons intersected in several trenches. Assay results have been received for
17 of the trenches which indicates consistent gold mineralisation within the
gossans. Gold grades reached up to a maximum of 3.01 g/t over a five-meter
interval in AST_002, with an average of 0.6 g/t across all gossan intervals.
Copper and zinc have been noted on the flanks of the gossan with grades of up
to 5% copper noted in AST_017, indicating the presence of base metals at
depth.

The culmination of the geological mapping, self-potential (SP) geophysics and
the logging and these new trench results have clearly demonstrated the
potential for massive sulphide mineralisation within a westward dipping
sequence in meta-volcanics, with a similar presentation to that of Hawiah and
Al Godeyer.

An initial 2,000m scout drilling programme at Abu Salal commenced in late
September to test key areas of the outcropping gossans at depth for thickness
and grade. The historic mineral occurrence at Abu Salal has never been
subjected to systematic exploration or subjected to any form of drilling.

KEFI GROUP

Group Development Plan

·    The planned KEFI Group project development sequencing remains as
follows:

o 2023 trigger of staged launch of Tulu Kapi open-pit development in Ethiopia
for build-up to full construction over the following few months, commissioning
production end-2025 based on 2023 reserves and resources;

o 2024 launch Jibal Qutman open-pit development in Saudi Arabia based on
2023/24 reserves and resources and targeting first production 2026;

o 2025-26 launch of the Hawiah open-pit in Saudi Arabia for first production
to follow that in Tulu Kapi and Jibal Qutman; and

o 2026 and thereafter launch of underground mine development at Tulu Kapi and
at Hawiah for first production two years later.

Group Metrics

Aggregate Mineral Resources across all three projects are 4.7 million ounces
of gold-equivalent in-situ, of which KEFI's beneficial interest is 2.0 million
ounces.

Aggregate annual production from the three advanced projects is currently
projected at 326,000 ounces of gold-equivalent, of which 148,000 ounces is
KEFI's beneficial interest, over an initial seven-year period.

The Tulu Kapi open pit is already bankable with a 1 million ounce Ore Reserve.
Combined with the first preliminary planned 250,000 ounce minable resource
contribution from the underground mine.  Tulu Kapi is planned to produce
c.144,000 ounces gold per annum at start-up throughput rate. By lifting
process-plant throughput by 20% to 2.4Mtpa, production would be c. 165,000
gold per annum at an All-In-Sustaining Costs of c.US$900 per ounce, assuming a
gold price of US$1,600-2,000 per ounce. At those same prices, this provides
Net Operating Cash Flow of US$112-156 million per annum (100% basis) for the
first seven full years of production (2026-2032).

Group Working Capital

KEFI has working capital in place to underpin its planned runway to the
intended launch of the Tulu Kapi Project finance in the coming months.

This follows the Company's repayment of all debts in June 2023 upon completing
an equity placing that raised gross proceeds of £7.2 million via a £5.5
million Firm Placing, £0.7 million Conditional Subscription, £0.24 million
Retail Offer and £0.75 million Issue of Remuneration Shares in lieu of cash
to senior executives. The issue of the Conditional Subscription, Retail Offer
and Remuneration Shares were approved at the Company's Annual General Meeting
on 30 June 2023 and these shares have subsequently been issued.

Group Exploration Project Pipeline

Ethiopia Project Pipeline

We have registered a number of applications for new exploration licences. In
addition, we have commenced administrative proceedings in respect of our
long-standing proximal Exploration Licenses ("ELs") surrounding the Tulu Kapi
Project Mining Licence area, in order to continue exploration programmes and
community development which have always complemented the Tulu Kapi project.
During an overhaul of the title-regulatory system in 2022, these ELs were
over-pegged by a Hong Kong shell company owned by a British Virgin Islands
shell company.  We are confident that this situation can be resolved
satisfactorily.

Saudi Project Pipeline

Following the expansion of GMCO's exploration portfolio to 15 ELs covering
four project areas of more than 1,000km(2), regional exploration teams have
mobilised to the new ELs. As was the case at Jibal Qutman and Hawiah, many of
these ELs have abundant evidence of historical workings and surface expression
of mineralisation.

GMCO has begun comprehensive mapping and sampling campaigns over the newly
awarded licences. The outcomes of this fieldwork will be to ground-truth
historical data, assess the surface mineralisation and describe the structural
framework controlling mineralisation. These programmes are expected to build
into progressively advanced exploration works, including geophysics and
trenching.

During the quarter, regional sampling of the Umm Al Khabath EL (located at the
southern end of the Wadi Bidah Mineral Belt) returned anomalous gold and base
metals. These results strongly support the interpretation that the Umm Al
Khabath EL contains VMS style mineralisation, commonly found in the Wadi
Bidah.

INVESTOR WEBINAR

The next open-forum investor webinar will be held in early December 2023 to
coincide with the planned Ethiopian Government's MineExpo and will focus on
Tulu Kapi Project Syndicate activities and announcements. Details of these two
events will be announced in due course.

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)  +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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