KEFI Minerals plc Quarterly Operational Update (8780J)

TIDMKEFI

RNS Number : 8780J

KEFI Minerals plc

05 April 2018

5 April 2018

KEFI Minerals plc

("KEFI" or the "Company")

Quarterly Operational Update

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 provide an operational update for the period from 1 January 2018 to 31 March 2018.

This quarterly operational update encompasses the activities of KEFI Minerals (Ethiopia) Ltd ("KME") and Tulu Kapi Gold Mines Share Company Limited ("TKGM") in Ethiopia and Gold & Minerals Ltd ("G&M") in Saudi Arabia.

Ethiopian Government

 
      --   The new Prime Minister Dr. Abiy Ahmed was 
            appointed on 2 April 2018 and is also Chairman 
            of the ruling federal coalition party and 
            of the party representing Oromia, in which 
            Tulu Kapi is located. Dr Abiy Ahmed was 
            formerly Vice President Oromia Regional 
            Government. 
      --   KEFI expects that the Government will maintain 
            its determination for Ethiopia to remain 
            within the world's top 10 growth countries, 
            where it has been ranked for a remarkable 
            15 years in a row. The Company also expects 
            that the strong support for our project 
            will now be further reinforced. 
      --   Throughout the recent Government transition, 
            KEFI and joint Government-KEFI company 
            TKGM have been maintaining communications 
            with the Ministries and Government agencies 
            at federal, regional, zonal and local levels 
            and we can now re-intensify the collaboration. 
 

Financing

 
      --   Good progress continues with a full consortium 
            having been assembled which is focused 
            on raising all development funding at the 
            project-level. We now plan a $150 million 
            bond issue for the debt side (compared 
            to $140 million previously) to include 
            some extra cash reserves. This is in addition 
            to c. $40 million of project-level equity, 
            which includes the Government's $20 million 
            commitment. These figures exclude the already-invested 
            project equity of $60 million. 
      --   The planned project consortium now includes 
            the project contractors Lycopodium and 
            Ausdrill, KEFI partner the Government of 
            Ethiopia and, under Non-Disclosure Agreements, 
            the Bond Arranger and one or more of the 
            several potential project equity investors 
            discussing terms. 
      --   The proposed project financing structure 
            has the following main elements: 
                     o KEFI Minerals plc to remain operating 
                      partner in: 
 
                                    *    G&M in Saudi Arabia alongside ARTAR, and 
 
 
                                    *    KEFI Ethiopia alongside a new shareholder in KEFI 
                                         Ethiopia. 
                      o KEFI Ethiopia to remain majority shareholder 
                       of TKGM in which the Government is co-shareholder 
                      o Both KEFI Ethiopia and G&M to trigger 
                       exploration programs later this year on 
                       a recently expanded land package targeting 
                       both gold and copper on "Tulu Kapi-style" 
                       gold mineralisation as well as large Volcanic 
                       Massive Sulphide systems ("VMS"). These 
                       exploration programs are to be launched 
                       when the new regulations pass in Saudi 
                       Arabia and when Tulu Kapi's development 
                       has been triggered in Ethiopia. 
 

Timetable for Tulu Kapi financing and development

 
      --   Various project "pre-works" are underway: 
                      o the Ethiopian Roads Authority ("ERA") 
                       has widened and sealed the arterial road 
                       to within 12 km of Tulu Kapi as a prelude 
                       to upgrading the side roads to the project 
                       site as part of the Government's project-equity 
                       earn-in. ERA has committed to complete 
                       the upgrade by late 2019 to support the 
                       project's operational requirements. Construction 
                       does not need any new roads; 
                      o the Ethiopian Electric Power Company 
                       ("EEPCO") has confirmed it is planning 
                       to install the power connection from the 
                       main transmission line by late 2019, to 
                       meet operational requirements; and 
                      o the Oromia Regional Government and TKGM 
                       have agreed the joint preparation of the 
                       new host lands for the community and await 
                       clearance to proceed under new Government 
                       teams. 
      --   Various other pre-works have been completed 
            and are planned to serve schedule-efficiency 
            as from the end of the wet season in Ethiopia 
            in June-September, when major works can 
            commence. 
      --   Subject to continuing satisfactory progress, 
            project finance drawdown is targeted to 
            match the commencement of major works. 
            In the meantime, due diligence, documentation 
            and formalities continue and appropriate 
            updates will be provided. 
      --   Project commissioning is expected to commence 
            by the end of 2019. 
 

Exploration

 
      --   An aggressive exploration program is scheduled 
            to begin in H2-18 to tackle a recently 
            expanded exploration land-package now approximating 
            3,000 sq km. This is the aggregate of our 
            existing and applied-for position in Ethiopia 
            (100%-owned) and Saudi Arabia (40%-owned). 
            The commencement of the program relies 
            on the Governments in both country's formalising 
            certain licences as scheduled. 
      --   The targets comprise satellite gold deposits 
            under or within trucking distance of Tulu 
            Kapi along with a set of VMS copper and 
            gold targets in Ethiopia (near Tulu Kapi) 
            and in the Wadi Bida Mineral Belt ("WBMB") 
            along strike of Hawiah. 
      --   One area applied for contains significant 
            historic drill intercepts such as 19m at 
            9.21 g/t Au and 21.8m at 6.1 g/t Au, trench 
            results of 28.3m at 8.7 g/t Au. Based on 
            KEFI's database, Saudi Arabia's WBMB contains 
            many large gossans with recorded mineralisation 
            along with evidence of base metals at depth 
            and has a surface expression twice the 
            size of the Bisha Belt in Eritrea. 
      --   It is notable that, notwithstanding that 
            few international explorer-developers have 
            yet to enter the Arabian Nubian Shield 
            ("ANS"), the ANS region has more than doubled 
            its gold production in the last 5 years 
            from c. 50 tonnes of gold in 2013 to more 
            than 100 tonnes in 2017. 
      --              The goals for KEFI's exploration program 
                       are: 
                       o to support and expand Tulu Kapi production 
                       from the initial 140,000 oz pa; 
                       o to justify and support the start-up of 
                       Jibal Qutman in Saudi Arabia, to generate 
                       cash flow for self-funding a large exploration 
                       program; and 
                       o to capitalise on the Company's pole position 
                       in the fast-expanding minerals sector of 
                       the ANS in both gold and copper 
 

Financial Models and Projections

 
 --   The financial models in the data rooms 
       are consistent with recent Company guidance, 
       with the Base Case (assuming $1,300/oz) 
       indicating a payback of approximately 
       3 years, an EBITDA of over $77M pa and 
       a post-debt NPV of $109M at construction 
       start and $179M at production start (100% 
       of project at a discount rate of 8% after 
       tax). The proposed project finance has 
       a tenure of 9 years. 
 --   Projected Production Costs are $712/oz, 
       All-in Sustaining Costs $803/oz and Total 
       Costs Including Depreciation and Amortisation 
       $984/oz. 
 --   The upside leverage is indicated by 10% 
       increase in gold price from the Base Case 
       of $1,300/oz increasing NPV by 51%. 
 

Investor Event & Webinar

 
 --   The Company will host a live webinar at 
       4pm BST on Wednesday 11 April 2018 which 
       can be accessed via: www.brrmedia.co.uk 
 --   Listeners are encouraged to submit questions 
       by emailing: [e-mail]. 
       The webinar will subsequently be available 
       on the Company's website at http://www.kefi-minerals.com/news/webcasts. 
 

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)                             [phone] 
 John Leach (Finance Director)          [phone] 
 
 SP Angel Corporate Finance 
  LLP (Nominated Adviser)               [phone] 
 Ewan Leggat, Jeff Keating, 
  Soltan Tagiev 
 
 Brandon Hill Capital Ltd (Joint 
  Broker)                               [phone] 
 Oliver Stansfield, Jonathan 
  Evans 
 
 RFC Ambrian Ltd (Joint Broker)         [phone] 
 Jonathan Williams 
 
 IFC Advisory Ltd (Financial 
  PR and IR)                            [phone] 
 Tim Metcalfe, Heather Armstrong 
 

Further information can be viewed at www.kefi-minerals.com

NOTES TO EDITOR

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.

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 1,100 square kilometres adjacent to Tulu Kapi has been reserved for exploration by KEFI upon commencement of development, with a view to adding satellite deposits to development and production plans.

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 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, 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 announced 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.

This information is provided by RNS

The company news service from the London Stock Exchange

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April 05, 2018 02:00 ET (06:00 GMT)