REG - Kefi Gold and Copper - Quarterly Operational Update

KEFI Gold and CopperAnnouncement

22/03/2023 07:15

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RNS Number : 7682T  Kefi Gold and Copper PLC  22 March 2023

22 March 2023

KEFI Gold and Copper plc

("KEFI" or the "Company")

Quarterly Operational Update - Progress On All Fronts

KEFI (AIM: KEFI), the gold and copper exploration and development company with
a focus on the Arabian Nubian Shield and with projects in the Kingdom of Saudi
Arabia since 2008 and the Federal Democratic Republic of Ethiopia since 2014,
is pleased to provide its Q1 2023 Quarterly Operational Update.

Highlights

·    Tulu Kapi Gold finance package of US$390 million agreed in principle

·    Working intensely with Government on few remaining security and
administrative arrangements

·    Significant progress in Saudi Arabia

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 ("GMCO") in Saudi Arabia, since release of the Q4 2022 Quarterly
Update on 2 February 2023 and is being announced ahead of the end of the
quarter to facilitate discussions at various events in Ethiopia and the Middle
East in the coming days.

The Tulu Kapi Gold Project ("Tulu Kapi" or the "Project") is under TKGM (now
planned to be 70-80% owned by KEFI). The Jibal Qutman Gold Project ("Jibal
Qutman"), the Hawiah Copper-Gold Project ("Hawiah") and the other Saudi
projects are under GMCO (now planned to be 25-30% owned by KEFI), depending on
refinements to final financing refinements.

ETHIOPIA

As first mover for modern industrial-scale metal mining in Ethiopia, it has
been our privilege to be consulted in respect of regulatory systems for mining
and international financing. This has taken some years as has our need to
traverse the widely-publicised security challenges in the country, which
thankfully subsided last year. Having borne the costs and delays involved over
the recent years, it is especially pleasing that we are now preparing to
trigger full project development at KEFI's first development project, with few
loose ends now expected to be imminently resolved with the Government.

We also await Government permission to follow up our other exploration
discoveries in the Tulu Kapi district and, to that end, based on discussions
with the Government have recently re-assembled our Ethiopian prospecting team
for that and other initiatives.

Tulu Kapi Gold Project

This is KEFI's most advanced project. The Definitive Feasibility Study has
been updated for contracted terms and pricing as well as for the outcome of a
series of internal and independent reviews. The Project is at the project
financing and construction stage and is launch-ready upon Government
regulatory clearances and security installation.

Since release of the last Operational Update on 2 February 2023, the Tulu Kapi
Gold Project financing has advanced as follows:

·    The project finance banks have, as of last week, both been formally
provided certain specific protections and benefits from the Government of
Ethiopia, which had become conditions precedent for financing.

·    The total Project finance package of US$390 million (mining fleet
US$70 million provided by the mining contractor and US$320 million provided by
debt and equity financiers) is now conditionally in place within the
syndicate.

·    Drafting of the numerous definitive agreements is either complete or
advancing well and all parties have indicated that they intend to proceed to
seek formal final approvals on satisfaction of the conditions precedent in the
hands of Government in respect of administrative matters and security.

·    TKGM now has the intense attention of the Ethiopian Ministry of
Mines, National Bank of Ethiopia and the other Ministries and agencies and
expects to resolve all outstanding issues in the coming weeks, so that the
syndicate can then proceed to seek all-party formal approvals including KEFI
shareholder approval. Upon all approvals being formally confirmed, we can then
proceed with drawdowns and Project launch so as to be in full production by
mid-2025.

SAUDI ARABIA

Despite making two significant discoveries in Saudi Arabia since entering the
country in 2008, our progress has only progressed rapidly in the past 18
months as a result of Saudi Arabian Government regulatory overhauls. The
country's prospectivity for further discovery is widely recognised and the
international industry is mobilising at the invitation of the Government.

The Jibal Qutman Gold Project

·    We applied for a mining licence in 2015 on the basis of an assumed
gold price of US$1,200/oz, and the heap leach processing oxide ore containing
c.200,000 oz within a 733,000 oz gold Resource. This was seen as a starter
project pending the proving-up of a larger scale project warranting the higher
capital investment for Carbon-in-Leach ("CIL") process

·    As the current consensus long-term gold price of US$1,650/oz is now
significantly higher, the focus of the Jibal Qutman feasibility study has
moved to the larger CIL-based project.

·    Current activities on and around site are focused on the work
required to complete a Definitive Feasibility Study ("DFS") to the standard
required by our project finance lenders in Saudi Arabia. This work includes:

o a 13,000 metre drilling programme (to be completed in April 2023) which is
aimed at upgrading and expanding the current 733,000 oz Resource;

o metallurgical, geotechnical and hydrological drilling programmes;

o detailed mine plans;

o metallurgical testwork;

o finalising environmental and social responsibility plans and permitting;

o a trenching programme over the planned locations for the processing plant
and other infrastructure to ensure these areas do not contain mineralisation;

o water source optimisation; and

o detailed costings of capex and opex.

·    We target to complete the DFS this year and, based on encouragement
from regulators and development financiers, we expect minimal delay in closing
finance within Saudi Arabia and starting development so that we can be in
production around mid-2025.

The current 13,000 metre drilling programme focuses particularly on the South
Zone, 3K Hill, 4K Hill and Red Hill areas shown on the plan in the appendix,
which can be accessed via:
http://www.rns-pdf.londonstockexchange.com/rns/7682T_1-2023-3-21.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7682T_1-2023-3-21.pdf) .

The Red Hill deposit and nearby areas have particularly good potential to
provide additional ounces from the current drilling programme.

Hawiah Copper-Gold Project

This deposit is a 2019 discovery of KEFI and we have so far declared a
Resource of 29.0 million tonnes ("Mt") at 0.89% copper, 0.94% zinc, 0.67 g/t
gold and 10.1 g/t silver, after 54,439 metres of drilling.  We expect this
Resource to increase as well as defining additional Resources at nearby
prospects including Al Godeyer where we have already completed 4,176 metres of
drilling and expect to report its Maiden Resource Estimate and detailed assay
results in April.

We have already identified an apparently economic starter project in 11.1Mt of
open pittable Resource at 0.9% copper, 0.75% zinc, 0.81g/t gold and 10.3 g/t
silver for contained metals of: 100kt copper, 83Kt zinc, 288Koz gold and
3,685Koz silver.

Current activities include the following:

·    completing over the next 18 months the recently launched 56,000 metre
drilling programme to establish Ore Reserves for mining by both open pit and
underground techniques;

·    optimising design of the process plant to maximise metallurgical
recovery and perhaps produce copper cathode (finished copper product), water
source optimisation and detailed costings of capex and opex; and

·    the Pre-Feasibility Study is nearing completion for internal review.
We target to secure finance and launch shortly after the start-ups at Tulu
Kapi and Jibal Qutman.

Exploration Projects

During the past 15 months we have been granted 14 new exploration licences,
about three times what we were granted in the previous 13 years, including
five new licences in January 2023. This demonstrates the seriousness of the
country's commitment to the development of the minerals sector.

We have formed regional exploration teams which have mobilised onto all
projects for initial prospecting of what we now see as 4 project areas spread
over the new licences. As was the case at Jibal Qutman and Hawiah, many of
these licenses have abundant evidence of historical workings and surface
expression of mineralisation.

CORPORATE

Over 90% of development capital for all three advanced projects has already
been conditionally arranged at the project or subsidiary level, subject to the
final feasibility studies in Saudi Arabia confirming our expectations and to
the various conditions precedent applicable to funds drawdown on all projects.

At today's gold price and assuming an ownership level in TKGM of say 77%, the
NPV to KEFI of just our Ethiopian project is estimated at US$251 million or
£207 million. Comparing this potential value indicator with current market
capitalisation of c. £30 million highlights the enormous opportunity to add
value for shareholders as we de-risk the Project.

KEFI's beneficial interest in our Saudi projects, at various commodity price
levels, presents an aggregate (preliminary estimate of) NPV similar to that of
the Ethiopian project, serving to reinforce the scale of the value-adding
opportunity.

Whilst the process of de-risking the projects in both countries has involved
very time-consuming security and regulatory challenges, both countries have
recently turned the corner and we make steady progress.

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

"The Company's working environment has improved significantly in both Ethiopia
and Saudi Arabia. Our teams are working intensely with the host governments to
launch the first two of our three development projects. We start first with
Tulu Kapi Gold in Ethiopia, then Jibal Qutman Gold in Saudi Arabia. KEFI's
beneficial interest in their aggregate gold production from 2025 is estimated
to be in the order of 140,000 oz.

"At the current gold price of c. US$2,000/oz, KEFI's beneficial interest in
the estimated Net Operating Cash Flow from Tulu Kapi alone is estimated to be
c. £75 million average per annum and in the NPV is estimated at £207 million
, or respectively 1.8 pence and 5 pence per current KEFI share in issue.

"At Tulu Kapi in Ethiopia, the project finance is conditionally in place and,
with the Government, we are ensuring that all security and administrative
arrangements are also in place.

"At Jibal Qutman in Saudi Arabia, whilst we had originally defined a starter
project at then-lower gold prices, we are completing a feasibility study on a
larger project at today's higher gold prices."

 

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
 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

Mission

 

The mission of KEFI is to discover and acquire economic gold and copper
mineralisation and follow through with cost-effective responsible exploration,
mine development and production in compliance with local laws and
international best practice.

 

Our geological region of focus is the Arabian-Nubian Shield, due to its
outstanding prospectivity, especially for gold and copper.

 

Our activities provide a strong project pipeline covering the spectrum from
our Tulu Kapi Gold Project at the funding stage in Ethiopia, to our Jibal
Qutman Gold and Hawiah Copper-Gold Projects at the feasibility study stage in
Saudi Arabia, and to walk-up drill targets in both countries.

 

Since incorporation 17 years ago, KEFI has invested some £80 million in these
activities and today the Company sits with advanced projects that have project
NPV's that are many multiples of the amount invested. KEFI has a leading
position in the two countries that contain the majority of the Arabian-Nubian
Shield. We now have three advanced projects in these now strongly
pro-development countries and are focused on a sequential mine development
path to build a mid-tier mining company over the next few years.

 

Our mission now takes us to the stage of de-risking our development project to
close the gap between our stock market capitalisation and the underlying
intrinsic values.

 

Approach

 

KEFI was launched in 2006 as a £2.5 million initial public offering ("IPO")
on the AIM Market of the London Stock Exchange and was then led by exploration
specialists.

 

The 2014 acquisition of the Tulu Kapi Gold Project triggered the appointment
of management with track records in developing and operating mines in Africa.

 

KEFI partners with appropriate local organisations, such as Abdul Rahman Saad
Al Rashid and Sons Limited ("ARTAR") in the Kingdom of Saudi Arabia in our
Gold and Minerals Limited ("GMCO") joint venture and with the Federal
Government and the Oromia Regional Government in Ethiopia for our TKGM joint
venture.

 

Our community plans are in accordance with the International Finance
Corporation (World Bank) Performance Standards and Equator Principles.
Operationally, we align with industry specialists such as Lycopodium Limited
("Lycopodium") - our principal process plant contractors in both Ethiopia and
Saudi Arabia.

 

Timing

 

KEFI's objective is to have its two most advanced projects in production by
2025 and the third in 2027.

 

The next few years will be focused on multi-pronged development and concurrent
aggressive exploration.

 

During this period our cash flow production should commence and escalate.

 

This period coincides with the likely take-off in the minerals sector of both
of our host countries.

 

Notes

Explanatory Comments on the Use of NPV (Net Present Value) and the Basis of
Calculations

KEFI's advanced projects report NPV's as at today based on:

·    recoverable JORC Resources as reported up to the end of 2021;

·    net cash flows after debt service and after taxes, i.e. net cash
available for shareholders;

·    8% discount rate; and

·    nil value for potential expansion of project resources or any other
discovery.

For our most advanced project, Tulu Kapi's planned open pit mine, the
modelling was built independently for use by the project syndicate and is
based on the DFS (Definitive Feasibility Study) as updated for refinements in
consultation with lenders, contractors and input pricing updates generally.
KEFI management use this modelling as the basis for analyses from equity
investors' viewpoint.

The other KEFI projects are less advanced and are at various stages of
feasibility study. Accordingly, any statistics are based on Preliminary
Economic Assessments based on models derived with the input of our specialist
advisers and consultants. We highlight that the integration of the preliminary
plans for the Tulu Kapi underground mine into a combined profile with the open
pit mine will be revised to DFS-stage during construction of the open pit
mine.

 

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