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KEFI Minerals (LON:KEFI) Executive Chairman Harry Anagnostara-Adams caught up with DirectorsTalk for an exclusive interview to discuss the triggering of the Tulu Kapi project and the commencement of drilling at Hawiah.

Q1: Congratulations on your results today Harry, can
you talk us through the highlights?

A1: It’s really two key points I think, one is that over a multitude of meetings
in both Australia and Ethiopia with all the partners, government, contractors and
all the various others involved, we’ve all resolved formally to trigger the
development of the Tula Kapi project as of the coming month. That’s really quite
significant for us, obviously, but to have the confirmations from al the
partners and the other parties in these formal Board meetings and so on is very
important so that’s probably the most significant thing and really quite a
watershed moment for company, it can’t be really overstated how important that
is.

The second thing is that the exploration project in Saudi Arabia, that
the drilling rig has mobilised two sites and drilling is about to commence
there on a project which we’re very excited about, that we had to suspend 3
years ago for a number of reasons which we’d reported in that past but we’re
only now finally, in a position where we can see that project start moving
forward. Again, that’s a very significant thing and it happens to coincide with
this moment in time.

So, they’re the two key things.

Q2: Can you just explain for us what exactly triggering Tulu Kapi in
October entails?

A2: Well, obviously the plans are in place and the commitments are in
place so it really comprises three key things I suppose that would be most
important.

The most important one is that subscription funds in Addis Ababa would
flow from project equity partner into the Tulu Kapi gold mine’s shared company,
the project company.

Out of the community into Tulu Kapi itself, there would be the
triggering of the resettlement phase which is a formal notice provision where
you literally hand over notices to the individual households and lodge the compensation
into special bank accounts for them.

Over in Perth and Cape Town, the construction and project management
people will trigger what’s called ‘Front-End Engineering and Design’ phase.

They’re probably the three most critical things; the funds flowing, the resettlement notice and payments in Tulu Kapi and the Perth and Cape Town engineering commencement of the Front-End Engineering and Design.

Q3: Now, I also see that drilling is to start this week at Hawiah, can
you please explain for us what this is all about ?

A3: This part of the world, both sides of the Red Sea, that KEFI Minerals
is focussing on is called the Arabian-Nubian Shield, it’s really noted
geologically for two principal reasons. One is the prospectivity, given major
discoveries in similar geology in other parts of the world for the last few
decades, and secondly the fact that so little has ben explored for geopolitical
reasons, not really for geological reasons.

So, as a result of that, we’ve pegged particular types of ground where
we have particular targets in mind and Hawiah, we’ve done a lot of work
identifying a very long target zone, identified visibly on the surface from a very
long rig, and some kilometres long. We’ve sampled and had high gold and copper
returns along the whole ridge line, we’ve done geophysical surveys to identify
what’s going on beneath the surface as best one can and finally, now we can
start the drilling.

What we’re targeted is of a scale similar to some of the major
developments in this part of the world, of the few developments that have got going
in this part of the world with the little exploration that has been conducted,
there have been some world-class ones where billions of dollars’ worth of
minerals have been discovered and extraction has commenced.

So, one can only prepare and execute a drilling programme as best once
can and the results will in due course stand on the results as they are but we
are very fortunate to finally be able to get going and to break target.

I think the coincidence of getting Tulu Kapi going and starting the drilling at Hawiah is just terrific.

Q4: How is the rest of 2019 looking for KEFI Minerals?

A4: Essentially, October sees the start of a development schedule for Tulu
Kapi gold mine which has an NPV of 10 times our current market capitalisation
once the plant’s been built so it can’t get a lot more significant than that in
October. Likewise, the fact that we’re now drilling Hawiah means that we’ll
have first results, we’ll see the first evidence from the first drilling. So,
October, in many respects, unlocks or unblocks the value creation that we’ve
been building towards for so long.

What happens in November and December and onwards really flows on from
that. You’ve got a development schedule triggered in October, you’ve got a
drilling programme which hopefully yields the results that warrant the flow on
from that.

So, it’s frankly a flow on effect of implementation of the items that we’re
triggering in the coming months.

KEFI Minerals plc (LON:KEFI) Executive Chairman Harry Anagnostaras-Adams caught up with DirectorsTalk for an exclusive interview to discuss their 2018 results, the Central Bank approval for Tulu Kapi project, production targets and their other projects in Saudi Arabia.

Q1: You released your 2018 results yesterday, could you summarise for us the developments at KEFI Minerals last year and in 2019 so far?

A1: In respect of 2018, the number one development really wasn’t our doing but it was profoundly important to us and that is that the states of emergency ended in Ethiopia. Also, the appointment of a new government in the country which I suppose many would’ve seen the headlines every month or so with profoundly, progressive and positive changes in the country, that’s really so important to us, it can’t be understated.

That really unshackled our
project, those changes in the local politic environment and positive initiatives
have been possible since then, because of that. As a result of which, we have
done a number of things through the course of 2018 and up until recently.

Firstly, we fully mandated
the infrastructure finance, $160 million, that was in May last year and we then
successfully completed the due diligence on the project, contractual relationships,
risk assessments and so on would done in accordance with that.

Secondly, we secured project
partners, $58 million in Ethiopia from the government and very strong
conservative business groups in the country. We set up a working capital
facility to make sure that we can keep the ball rolling down in the project
company whilst we put together this very large project financing at the project
level.

Lastly, we also introduced a
very senior management team for development, construction, operations, people
with impeccable records for such projects.

In 2019, the most
significant thing is receipt, today, of the last government consent required
for the project finance package to flow into closing procedures. This last
Central Bank consent has been awaiting for 3 months now, it took some months
instead of days because whilst we had agreed it a long time ago, the government
decided to issue a general policy directive for the world at large, not just
for one-off transactions. So, we were under confidentiality so we knew it was
coming but we couldn’t really say so, that was the government’s business and we
respected their confidentiality.

So, that’s it, unshackling last year and then flowing in actions since then.

Q2: Now, I understand you primary focus is on Tulu Kapi gold project, what’s still required for development to start on the project?

A2: As a result of today’s Central Bank confirmation of approval, we can close our partners agreements and equity subscriptions, protocol and rigmarole that one goes through in Ethiopia but it’s in our procedural. As set out in our RNS, there are no point of contention between the partners, they’ve all cleared the debt for each other and Central Bank have cleared the debt for us as a set. So, we can proceed with those closing procedures for the project equity and likewise move onto the debt.

In terms of the development on
the ground, we are now allowed to, with the local authorities out there, to go
through the details of the resettling of the first contingent of the people, that
is a very small set of 60 households.

We’ve given ourselves several months to do that, it only takes a few weeks physically but we’ve given ourselves a few months to do that to be on the safe side because the country’s going through a lot of change and turmoil and we just want to be very careful and safe and secure for our first movers so that everything’s done nice and timely.

Q3: You’re targeting production in mid-2021, can you briefly outline the development program and what it entails in order for this to be achieved?

A3: Well, we’ve started some of the long lead steps already to 2-year development schedule and somethings are quite critical to have begun already and they have begun already, tender packages for the power installation and road installation in particular. These are critical path issues and that’s in hand with the people doing those jobs.

Between now and the end of
the Ethiopian wet season, it’s not like a tropical wet season but nevertheless,
we’ve said we’ll adjust some activities around it, for harvest cycle and the
community as well as other factors so between now.

So, over the course of the
next 4 or so months, we’re really focussing on the resettlement phase I; a
small number of households and on the detailed engineering, or front end
engineering. At the end of that phase, that equity funded phase, we then move
forward with equity closing, bulk earth work and fabrication jobs within the
fast flowing factories that provide the plant components.

We’ll then move on to
assembly next year, mining will start the middle of next year, there is very
little work to do on the mining side before one starts getting to the ore
because there’s very little overburden. We then go onto commissioning and along
the way a lot of recruitment and training are dedicated to maximum local
employment so there’s a lot of recruitment, a lot of training.

That management team we appointed last year in preparation for all of this is setting up plans and so on to take care of that job.

Q4: Outside of going into production at Tulu Kapi, what other focusses are there for KEFI Minerals?

A4: Saudi Arabia, yesterday was Eid, the end of Ramadan, it makes a moment in time where we can remobilise into the field.

We’re quite focussed sharply on very very large copper/gold target
we have in Hawiah as part of a very large belt of 24 VHMS systems. They’re all
potential company makers, some of them will be good, not all obviously, but the
first cab off the rank to drill-test within a few months is Hawiah and our
field teams will get back into the field now.

With Tulu Kapi underway on the one hand in Ethiopia and drilling a
huge VHMS system on the other hand in Saudi Arabia, you’ve got a parallel
stream there. Obviously, Tulu Kapi taking 99% of the time and money in terms of
people involvement and financial involvement but the Hawiah project is very
very significant even though it takes very few people and very little money. It
has an extremely high potential value to the project and if we’re successful in
what we’re hoping to achieve in Hawiah, it would dwarf Tulu Kapi .

So, we’ve got both of those streams ahead of us, both of them very
exciting and both of them can now start moving forward.

KEFI Minerals plc (LON:KEFI) Chairman Harry Anagnostaras-Adams caught up with DirectorsTalk for an exclusive interview to discuss their Tulu Kapi update.

Q1: You provided an update to the market in relation to the Tulu Kapi Gold Project, can you just run us through the highlights?

A1: Well, in short, we’ve received the approval of the various Federal agencies involved with this project, it’s the first major mining development in the country for decades. It’s a pretty arduous task but that’s all done now.

Secondly, the government sector partner in the project which is the Ministry of Finance, our partner, has started spending its $20 million project equity on engineering, surveys, tendering and so on for its commitment to certain jobs for the project, in our budget.

The third thing that we reported really is that our private sector partner in the project, ANS Mining, an investment vehicle for Ethiopian banking and insurance institutions, has increased its commitment to project equity injection to the maximum amount that was previously advised our shareholders of 38, we previously said 30-38. It remains the case that they’ll subscribe as soon as they release the funds, that is as soon as the community resettlement compensation payments are triggered by the local Ethiopian authorities out there at Tulu Kapi.

So, that’s the gist of it, government approvals and both partners doing everything that we expected them to do and in fact, ticking things off and stepping up further than the minimum required, so to speak.

Q2: What does this all mean for KEFI Minerals?

A2: The first thing is that the specifics of the partnership has been set out informally, we had a Board meeting yesterday with new Board members and advisory members on the Board. That means that we’ve got really the ‘A team’, if I can call it that, of business, government and military leaders on our Board in Ethiopia.

One has to recall, Ethiopia is changing extremely fast and it’s the highest growth country in Africa and one of the highest in the world, rapid change across the board. There’s just no substitute for local expertise and local expertise that has skin in the game and we at KEFI work very hard to align around the Tulu Kapi project in every sense and we’ve done that on the mining side with mining executives who are first class African-experienced mine builders, operators, contractors, likewise and now, we’ve done the same thing for local Ethiopian expertise. There is no substitute in a high growth country, in a fast changing country with social changes, community changes, political changes, critical to have people with insight on security, safety, economic development, government policy, everything and we have that now.

We’ve got what can only be described as a top-class team of directors in the Tulu Kapi gold mine subsidiary, representing government and local business and one of the top retired member of the military, one of the top military men in the country.

So, I feel very privileged, honoured and empowered personally representing KEFI here and to have such support.

Q3: Obviously, you want to get things moving as quickly as possible, what can you tell us about your plans for the next 6 months or so?

A3: In short, the next 6 months is part of our 2-year schedule to get into production and there are some things that are quite important in the next 6 months. In particular, the cycle of seasons here, the wet season being the middle of the year, so it impacts on a number of fronts the seasons cycle of Ethiopia in order to optimise our scheduling. It affects the community’s planting of their crops, setting the mine up, once its developed the wet season won’t really impede anything but whilst it’s still virgin ground and hasn’t been disturbed, it’s important to appreciate before the wet.

So, in the next 6 months, before the wet, the first phase of community resettlement and the first earthworks are required and that’s the schedule for the next 6 months. That will be equity funded at the project level and thereafter, it will be funded by the full drawdown of project finance in financial completion.

So, the starting gun for all this is when the local government triggers the resettlement, they wanted to have triggered it by now and they’ve expressed an apology that it’s taken a bit longer. All I can say is whilst it’s frustrating to our schedule and not being able to trigger when we love to trigger, at the same time we are dealing with a community, we’re dealing with partners and regulators who have to be aligned in the right way.

The government controls that particular action which is the community compensation and resettlement and we must respect that, and we do respect that. It’s the first major mine development in decades in Ethiopia, it can’t get any more important than it is in the region and through the nation and I think the people that have joined our Board and have signed up for putting in project equity as a testament to that.

So, we demonstrating as a company, both the discipline and the appropriate patience to get on with it when the government says we can, we’re on a good pathway in terms of the longer-term and the projections remain as they have been guided publicly for some time now. The gold price at current price is in fact our base case and our modelling, EBITDA of $70 million average once we’re in production remains the estimate at this gold price and the project NPV after debt repayment and servicing, at the point of starting production in 2 years’ time, remains in the order of $200 million. The past expenditure and project equity of $60 million and the planned additional of $60 million, being provided essentially by Ethiopian partners, looks a pretty good deal given the projected financial returns. Also, KEFI’s 50% of the projected $200 million of NPV when we start production is over 5 times our market cap today so ignores the underground mine and the other assets in the company.

So, where are we heading? It’s the same place we’ve been saying for some time. How are we going? Well, we’ve aligned with industry players in the first year and now we’ve aligned with local Ethiopian players in the first year and we’re just grinding through this development schedule in the first major mine development in the country, kicking off a new sector for the nation. So, that’s my perspective from here.

Q4: Now, as you’ve already mentioned you’ve welcomed some new members to the Board of Directors of TKGM and others as special advisors to yourself as Chairman. What it is that they’ll be adding to the project?

A4: If you casts one mind’s eye, if you like the expression, to being in Ethiopia, the country in the Arabian-Nubian shield, geological terrain that has the largest landmass within that shield, it’s one of the most perspective geological terrains in the world, there’s been some world-class discoveries already. KEFI Minerals are here with a pole position in the country to be first in getting this sector moving.

The government is our partner and it’s a first mining project that is elected to be partnering in and major banks and local institutions likewise have formed up ANS Mining to invest. So, it is a nationally important project and it’s now 50/50 with a majority in managers but we’re now almost 50% and supported by Ethiopia, both government and private.

So, when one looks at the Board appointment and appointment of advisors to the Chair, which is me, what people are seeing is the personification of that support and that partnership. It is important to us, I don’t think it should be understated how challenging the opportunity is. We are in a high-growth country, a fast changing country and there’s social and other changes taking place continually and there’s no substitute for local expertise who actually have a financial commitment and a real commitment in every real sense of the word, both public reputational commitment as well as financial commitment.

So, it’s very important for us, I think it’s at the very heart of risk mitigation and opportunity and maximisation and I’m thrilled that these individuals have put their name on our project and put the money of their companies into the project. So, that’s what it means to us and the names are in the announcement, probably mean nothing to people in London but if you look up their names on Google and see who we’re talking about, their record and reputation speaks for itself.

KEFI Minerals plc (LON:KEFI) Managing Director Harry Anagnostaras-Adams caught up with DirectorsTalk for an exclusive interview to discuss the Project Equity Investment Agreement with ANS.

Q1: Harry, you’ve signed a Project Equity Investment Agreement with ANS Mining Share Company, how much is this for and what does it mean for the company?

A1: It’s a binding agreement for a $30 million equity subscription to the project company for the Tulu Kapi project subsidiary in Ethiopia, it looks like it’ll go up to $38 million but it’s binding for $30 million.

What does it mean? It means that we’ve effectively raised all the project development requirements at the project level, it was a $300 million project as defined to us when we bought it at the beginning of 2014, we have effectively funded at the project level other than paying for our studies so on from the parent company.

Q2: So, can you give us a bit more detail on the agreement terms?

A2: ANS is a newly-formed, just registered, company, the people behind it we’ve known for a long time, very senior local business people, chairman of banks and so on. They formed ANS to invest in this special purpose investment vehicle, formed up its Board recently, the founders or the directors they have all committed to putting in 10% of the $30 million themselves to get the ball rolling.

They reached out to the institutions that they know so well in Ethiopia, banks and insurance companies, and the idea was to go from there to the clients of those institutions and sweep up the rest of the capital that they wanted to put into this new sector which for them is an exciting new sector in Ethiopia. So, what they have found is they don’t need to go beyond the institutions, they’ve got a full book of applications for more than the $38 million between the institutions that they’ve gone to.

It comes in two instalments, first the sum of $9 million at the local currency equivalent should be subscribed to Tulu Kapi Gold Mines (TKGM), the project company during this coming quarter. The second instalment to be set aside, also probably during this quarter but certainly within the following 3 months, in time for the full finance closing.

The price is set at a bit over $1 million a percentage point so it implies, if you like, a $60 million to $70 million valuation for our retained holding in the project.

Q3: What are your next steps in the short term for the Tula Kapi project?

A3: In so far as the financing is concerned, there are conditions precedent to the subscription, so we have to square those off, they don’t appear terrible ominous because we’re working through each month, things crossed off the list.

Probably the two most important conditions for the $9 million to come in, in the last quarter of this year, is first off, the administrative consents, particularly the government to permit the subscription for ANS because it has to waive its right to take up the share issued by TKGM, I don’t think that’s an issue. There’s not really much left on the plate for administrative consents for the onus, the $9 million to come in. The other thing is to firm up, to ANS’s satisfaction, the terms of the fully secured funding, the non-equity funding, and again that shouldn’t be an issue either. So, priority number one is to make sure that those funds come in.

On the ground, in Tula Kapi, the work season has just come to an end in Ethiopia and there are a number of things we have to do during these few months, just following the wet season and we plan to then trigger the community resettlement. The timing of the triggering is totally up to the government but we’re doing all within our power to ensure we’re ready to go as soon as the government press that trigger and we’ll set something around the end of December for triggering the resettlement.

Between now and then, there’s some roads to cut in, there’s some drilling for foundation works to do and all sorts of processes that we go through before triggering a community move. So, it’s on the ground and behind the scenes, engineering-wise, there’s a lot of implementation planning going on, our implementation team will be out at site again next week, that’s twice in a few weeks, the nitty gritty planning for kicking odd implementation of construction.

Q4: So, you’ve maintained a strong social ethos, can you tell us a bit more about the community resettlement, the training and the employment programmes that KEFI Minerals are deploying?

A4: In today’s world, we’re the ones building a mine in Australia, Canada, Scandinavia or Ethiopia, one should follow the international standards, the principals and the IFC standards under The World Bank for environmental and social and that’s the standards we set wherever we work. That means that we have to do things beyond what the local law requires and meet those standards, it’s not altruism, it’s just doing the right thing and that is certainly what to expect to move into international finance as well.

In Ethiopia, it’s particularly sensitive. We have a good name if I say in Ethiopia, the company has built a school but in particular, the last couple of years of social unrest in the country leading to a change of government leadership earlier this year, one of the soar points across the whole population was the mishandling of some communities during development. There’s huge economic development in Ethiopia, it’s one of the highest growth countries in the world, there’s roads, trains and factories, there’s all sorts of things going on in this country and some of the communities have been mishandled, that was one of the root causes of the social unrest. Throughout all of that, we maintained a very calm mutually trusting relationship with the community at Tula Kapi, we’ve never had any accusations or criticisms, but it only comes from doing the right thing and being persistently disciplined to do that.

When it comes to some specifics to answer your question, after training for the first couple of years over 95% of personnel will be from the local area. In the meantime, what will happen on the ground it’ll seem quite dramatic, everything going according to plan in about a year from now there’ll be about 1,000 people working out of the site, most of them will be local and as I said, within a few years over 95% will be local people.

We will have resettled the community, it has to be resettled, about 450 households that’ll have better homes, money in their pocket, restoration programmes, we’ll have kicked them off, mechanical cultivation of their new farmlands to kick them off, schools, health services, health facilities, staff for schools and staff to help facilities. We’ll make sure they’re all there, the community development fund, these are all part of the package.

At this moment KEFI has about 50 people in its teams full-time and most of those people are involved in community issues, obviously that’ll change but it’s always been our priority. If done properly, the community is our best defenders, ambassadors, employees, neighbours and improperly, it’s the opposite but it will be done properly.