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KEFI Kefi Gold And Copper Plc

0.596
0.024 (4.20%)
Last Updated: 08:39:38
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Kefi Gold And Copper Plc LSE:KEFI London Ordinary Share GB00BD8GP619 ORD 0.1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.024 4.20% 0.596 0.566 0.57 0.596 0.596 0.596 5,523,736 08:39:38
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Metal Mining Services 0 -6.36M -0.0013 -4.62 29.79M

KEFI Minerals plc Projections for Expanded Production (0145V)

31/10/2017 7:00am

UK Regulatory


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TIDMKEFI

RNS Number : 0145V

KEFI Minerals plc

31 October 2017

31 October 2017

KEFI Minerals plc

("KEFI" or the "Company")

Tulu Kapi Gold Project - PROJECTIONS FOR EXPANDED PRODUCTION

Incorporating refinements since the 2017 Update Definitive Feasibility Study

KEFI Minerals (AIM: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Federal Democratic Republic of Ethiopia, is pleased to announce updated financial projections reflecting the recently announced plans to expand production. In the meantime, we continue to prepare for finance closing with mandated financier Oryx Management Limited ("Oryx") and the other consortium members the Government of Ethiopia, Ausdrill and Lycopodium.

Production plans have been re-cast and the average annual gold production in years 1-3 is estimated to expand from c. 115,000 ounces to c. 145,000 ounces per annum. At a flat $1,250/oz gold price, the payback period is about 3 years. This forecast is derived by management in consultation with its advisers and will continue to be refined as we approach start-up, during the 2018 operational readiness phase along with detailed engineering and procurement.

Set out below are comparisons with the key outputs of the 2015 Definitive Feasibility Study ("DFS") and the 2017 DFS Update which were on an unleveraged basis. The latest estimates build in the impact of the planned finance structure and its leverage, reflecting the specifics of the Oryx detailed Heads of Terms (see announcement 17 July 2017). The latest estimates also reflect the strategy agreed with Oryx to install greater processing capacity from the outset with a view to achieving:

 
      a)   quicker cash flow from the open pit and capacity to process 
            additional ore from targeted satellite deposits, and 
      b)   greater protection against downside risks by facilitating 
            faster processing of lower grade ore from the open pit. 
 

Key planning assumptions which have been introduced since the 2017 DFS Update include:

 
      --   Plant expanded from 1.5-1.7Mtpa to 1.9-2.1Mtpa, depending 
            on the hardness of the ore. 
      --   Refining the Engineering, Procurement and Construction ("EPC") 
            contract into a hybrid of EPC and an Engineering, Procurement 
            and Construction Management ("EPCM") contract whereby the 
            client has the protection of certain performance guarantees, 
            along with the transparency of open-book access to all costs 
            along with tighter alignment with owner-management via incentivised 
            target schedule and cost for the contractor (Lycopodium). 
            This style is also preferred by Oryx's Finance SPV, which 
            will own the plant and lease it to KEFI's project company. 
      --   The additional c. $12 million funding required for plant 
            and infrastructure expansion has been offset by expected 
            savings of capital expenditure and by Oryx offering to expand 
            its facility from US$135 million to US$140 million. 
      --   Mine plans re-cast to allow faster mining, intensified grade-control 
            drilling and enhanced flexibility to switch between bulk 
            mining and selective mining as most appropriate. 
 

KEFI's Executive Chairman, Mr Harry Anagnostaras-Adams, said:

"The Tulu Kapi Gold Project consortium is implementing its finance closing procedures and the refined financial projections announced today reflect recently resolved expansion plans.

"Projected annual gold production has been expanded from approximately 115,000 ounces to 144,000 ounces per annum for the first three years. Measures of return have improved accordingly and indicate significant targeted value up-lift for shareholders under any modelled scenario."

Key Points of the Tulu Kapi Expansion Plan (100% of Tulu Kapi Gold Project - Open Pit only)

 
                                  2017 2Mt         2017         2015 DFS 
                                  Expansion     DFS Update 
                                  Leveraged     Unleveraged    Unleveraged 
------------------------------  ------------  -------------  ------------- 
 Average head grade                2.1g/t         2.1g/t         2.1g/t 
                                     gold          gold           gold 
------------------------------  ------------  -------------  ------------- 
 Total gold production             980K oz         980K         961K oz 
                                                    oz 
------------------------------  ------------  -------------  ------------- 
 Ore processing rate             1.9-2.1Mtpa   1.5-1.7Mtpa      1.2Mtpa 
------------------------------  ------------  -------------  ------------- 
 Annual gold production (1st       144K oz         115K          98K oz 
  3 years)                            pa           oz pa           pa 
------------------------------  ------------  -------------  ------------- 
 
 Cash Operating Costs             US$685/oz     US$684/oz      US$661/oz 
------------------------------  ------------  -------------  ------------- 
 All-in Sustaining Costs          US$773/oz     US$777/oz      US$780/oz 
  (excluding initial capex 
  & debt service) 
------------------------------  ------------  -------------  ------------- 
 All-in Costs (excluding          US$948/oz     US$933/oz      US$906/oz 
  debt service) 
------------------------------  ------------  -------------  ------------- 
 All-in Costs (including         US$1,051/oz       N.A            N.A 
  debt service) 
------------------------------  ------------  -------------  ------------- 
 IRR                                 60%           22%            28% 
------------------------------  ------------  -------------  ------------- 
 NPV at start of construction      US$74M         US$97M        US$125M 
  (8% real after tax discount 
  rate) 
------------------------------  ------------  -------------  ------------- 
 NPV at start of production        US$131M       US$272M        US$256M 
  (8% real after tax discount 
  rate) 
------------------------------  ------------  -------------  ------------- 
 Payback                           3 years       3 years       2.5 years 
------------------------------  ------------  -------------  ------------- 
 Net Operating Cash Flow           US$74M         US$62M         US$50M 
  (same as EBITDA)                   p.a.          p.a.           p.a. 
  (average for first 3 years) 
------------------------------  ------------  -------------  ------------- 
 

The economic metrics tabulated above are for contract mining of the open pit only, based on a gold price of US$1,250/ounce flat over life-of-mine and are on an after-tax basis.

 
 --                               Summary: since assuming control of the Project 
                                   in 2014, KEFI has continually improved its 
                                   outlook based on plans developed with leading 
                                   industry specialists. The improvements announced 
                                   today have the effect of reducing operational 
                                   and financial risks as well as increasing 
                                   potential returns. 
 --                               All-in Sustaining Costs: estimates remain 
                                   relatively unchanged at c. US$800/oz despite 
                                   the faster-track mining and processing, 
                                   because of an assumption (pending more detailed 
                                   work during the operational readiness phase 
                                   in 2018) of higher unit costs for mining 
                                   (increased grade-control drilling). All-in 
                                   sustaining costs includes all operating 
                                   costs, royalties, sustaining capital and 
                                   closure costs, but excludes initial capital, 
                                   financing costs and income taxes. This ranks 
                                   Tulu Kapi in the best (lowest) quartile 
                                   of gold producers globally. 
 --                               All-in costs (excluding debt service): estimates 
                                   remain relatively unchanged at c. US$930/oz 
                                   for the reasons set out above as regards 
                                   All-in Sustaining Costs. All-in costs also 
                                   includes all initial capital expenditure. 
                                   This measure also ranks Tulu Kapi in the 
                                   best (lowest) quartile of gold producers 
                                   globally. 
 --                               Net operating cash flow for first 3 years: 
                                   increased to US$74M p.a., from US$62M p.a. 
                                   in the 2017 DFS Update. 
 --                               Project IRR: IRR has increased materially 
                                   from 22% (unleveraged) to 60% (leveraged). 
 --                               Project NPV (leveraged after tax): the Open 
                                   Pit NPV estimates c. $74 million at start 
                                   of construction and of c. US$131 million 
                                   at start of production indicate material 
                                   value up-lift for current and new equity 
                                   investors. If one adds a risk-adjusted 50% 
                                   of the NPV for the underground project (based 
                                   on Preliminary Economic Assessment), it 
                                   adds in the order of US$20 million to the 
                                   NPV i.e. US$94 million at start of construction 
                                   and US$151 million at start of production. 
 --                               Project funding requirements: KEFI's planned 
                                   project structure involves the following 
                                   funding components for all but a residual 
                                   amount which remains in the order of US$20 
                                   million: 
            o                       funding of mining equipment by Ausdrill 
                                     as part of the proposed mine services 
                                     agreement whereby they receive payment 
                                     per tonne of material mined. 
            o                       off-site infrastructure funded by the 
                                     Government of Ethiopia, for project 
                                     level equity 
            o                       funding of on-site infrastructure by 
                                     Oryx (for debt-style returns along with 
                                     a potential gold-linked extra interest 
                                     that has the potential to elevate its 
                                     returns from the coupon of c. 8% to 
                                     a potential 15% at a gold price of US$1,700/oz 
                                     throughout the repayment term). Yield 
                                     to maturity would be c. 10% if gold 
                                     does not exceed US$1,100/oz and it rises 
                                     proportionately up to c. 15% at a gold 
                                     price of US$1,700/oz. 
 --                               Residual funding requirement: consistent 
                                   with KEFI's recent guidance, the residual 
                                   requirement is c. US$20M to be raised preferably 
                                   at project level (Tulu Kapi Gold Mines Share 
                                   Company Limited, "TKGM") or intermediate 
                                   company level (KEFI Minerals (Ethiopia) 
                                   Limited, "KME"). The financial forecasts 
                                   reported herein also reaffirm that the transaction 
                                   is expected to be materially value-enhancing 
                                   for current and new equity investors regardless 
                                   of how the equity investment is structured. 
 --                               Financial sensitivity testing: has been 
                                   conducted, the principal conclusions being 
                                   that: 
            o                       On the upside, as a small indicator 
                                     of the leverage being targeted by KEFI: 
                        --            A gold price of US1,400/oz or a throughput 
                                       lift of 10% pa lift Project IRR rises 
                                       to c. 80% and the potential value-lift 
                                       for existing and new equity investors 
                                       is lifted commensurately. 
            o                       On the downside, as a stress test: 
                        --            all financial commitments are well 
                                       covered even: 
                             --         at a flat gold price of US$1,100/oz 
                                         for the next 10 years, or 
                             --         if bulk mining is utilised exclusively 
                                         without any reliance on the planned 
                                         application of targeted limited 
                                         selective mining. This would result 
                                         in the head grade being only 1.7g/t 
                                         instead of 2.1g/t gold 
                        --            NPV and other valuation measures 
                                       show value-lift for current and new 
                                       equity investors even under these 
                                       downside cases. 
 
 

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

 
 ENQUIRIES 
  KEFI Minerals plc 
 Harry Anagnostaras-Adams (Executive 
  Chairman)                             +357 99457843 
 John Leach (Finance Director)          +357 99208130 
 SP Angel Corporate Finance 
  LLP (Nominated Adviser) 
 Ewan Leggat, Jeff Keating              +44 20 3470 0470 
 
 Brandon Hill Capital Ltd (Joint 
  Broker) 
 Oliver Stansfield, Alex Walker, 
  Jonathan Evans                        +44 20 7936 5200 
 
 RFC Ambrian Ltd (Joint Broker) 
  Jonathan Williams                     +44 20 3440 6817 
  Beaufort Securities Ltd (Joint 
   Broker) 
   Elliot Hance                          +44 20 7382 8300 
 
 IFC Advisory Ltd (Financial 
  PR and IR) 
 Tim Metcalfe, Heather Armstrong        +44 20 3053 8671 
 

NOTES TO EDITORS

KEFI Minerals plc

KEFI is the operator of two advanced gold development projects within the highly prospective Arabian-Nubian Shield, with an attributable 1.93Moz (100% of Tulu Kapi's 1.72Moz and 40% of Jibal Qutman's 0.73Moz) gold Mineral Resources (JORC 2012) plus significant resource growth potential. KEFI targets that production at these projects generates cash flows for further exploration and expansion as warranted, recoupment of development costs and, when appropriate, dividends to shareholders.

KEFI Minerals in Ethiopia

The Tulu Kapi gold project in western Ethiopia is being progressed towards development, following a grant of a Mining Licence in April 2015.

Following completion of KEFI's Definitive Feasibility Study for Tulu Kapi, the Company is now refining contractual terms for project construction and operation. Latest estimates are that gold production may be brought forward by increasing processing capacity, as compared with the DFS estimates of c. 100,000oz pa for a 10-year period. All-in Sustaining Cost estimates (including operating, sustaining capital and closure but not including leasing and other financing charges) remain <US$800/oz. Tulu Kapi's Ore Reserve estimate totals 15.4Mt at 2.1g/t gold, containing 1.1Moz. Ongoing refinements will be reported as they get finalised.

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. These plans now also reflect the agreed construction and operating terms with project contractors, and have been independently reviewed by experts appointed for the project finance syndicate.

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.

KEFI Minerals in the Kingdom of Saudi Arabia

In 2009, KEFI formed G&M in Saudi Arabia with local Saudi partner, Abdul Rahman Saad Al Rashid & Sons Company Limited ("ARTAR"), to explore for gold and associated metals in the Arabian-Nubian Shield. KEFI has a 40% interest in G&M and is the operating partner. To date, G&M has conducted preliminary regional reconnaissance and has had five exploration licences ("ELs") granted, including Jibal Qutman and the more recently granted Hawiah EL that contains over 6km strike length of outcropping gossans developed on altered and mineralised rocks with all the hallmarks of a copper-gold-zinc VHMS deposit.

At Jibal Qutman, G&M's flagship project, Mineral Resources are estimated to total 28.4Mt at 0.80g/t gold for 733,045 contained ounces. The shallow oxide portion of this resource is being evaluated as a low capital expenditure heap-leach mine development.

ARTAR, on behalf of G&M, holds over 20 EL applications. ELs are renewable for up to three years and bestow the exclusive right to explore and to obtain a 30-year exploitation (mining) lease within the area. The Kingdom of Saudi Arabia has instituted, and is further overhauling, policies to encourage minerals exploration and development, and KEFI Minerals supports this priority by serving as the technical partner within G&M. ARTAR also serves this government policy as the major partner in G&M, which is one of the early movers in the modern resurgence of the Kingdom's minerals sector.

-end-

This information is provided by RNS

The company news service from the London Stock Exchange

END

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