KEFI Gold and Copper plc (LON:KEFI), the gold and copper exploration and development company with a leadership position in the high-growth Arabian Nubian Shield, has announced the positive assessment of the PFS for Hawiah, the largest discovery to date by KEFI’s 27%-owned Saudi Arabian joint-venture Gold and Minerals Company Limited.
Highlights
· The Pre-Feasibility Study on the Hawiah open-pit and associated studies on the underground mine have provided a positive foundation for the optimisation and development of Hawiah, in Saudi Arabia;
· Project NPV8 of US$301 million and post-tax IRR of 75%, based on mining current Indicated and Inferred Resources, Life of Mine revenue of US$2.7 billion, operating cashflow of US$1.1 billion and pre-production capital expenditure of US$295 million. These estimates are based on spot gold prices as at 30 April 2023 and an assumed mining rate starting at 2 million tonnes per annum (“Mtpa”) and peaking at 3 Mtpa over 10 years;
· It is envisaged that initial open pit mining will be followed by, and complemented by, underground mining. Metallurgical test results, based on limited samples to date, indicate that a conventional processing flowsheet provides high metal recoveries to a c.25% copper concentrate and a c.50% zinc concentrate and gold doré; and
· 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. For the time being, unit costs of production have been based on an assumed production rate of 2 Mtpa and the sequential mining of underground after an open cut phase.
KEFI Gold and Copper Executive Chairman, Harry Anagnostaras-Adams, commented:
“The PFS demonstrates an attractive project at Hawiah.
“To date we have only tested a small part of the Hawiah district and we already have a project that can be optimised for development.
“Following the recent capital-raise, work is already underway on the +50,000 metre drilling programme which will complement the Hawiah PFS and associated studies. We look forward to reporting exploration results as we establish a globally significant VMS project at Hawiah. We are also wrapping up a 13,000 metre programme at Jibal Qutman Gold and assessing initial results from reconnaissance over the fourteen exploration licences granted in the past eighteen months to our operating joint venture company. This is a truly exciting rate of progress in what today is perhaps the world’s most exciting jurisdiction for minerals exploration.
“KEFI has now established its leadership position in the Arabian-Nubian Shield and has assembled development finance at the subsidiary and project levels for all three advanced projects which have combined c.5 million ounces gold-equivalent resources which remain open for extensional drilling.
“The aggregate NPV of our three advanced projects is approximately £318 million or about ten times the Company’s current market capitalisation, providing a preliminary indicator of the upside value potential as we de-risk the projects and add more value through exploration and development.”
Hawiah is a part of a larger mineralised system and the January 2023 Mineral Resource Estimate (“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. Hawiah already ranks amongst the top three base metal projects in Saudi Arabia and the largest 15% VMS (“Volcanogenic Massive Sulphide”) systems globally.
KEFI also announced 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 on 3 April 2023.
GMCO drilling totalling 58,194 metres (“m”) since discovery in 2019 has established the Hawiah MRE of 29.0 million tonnes (“Mt”) at 0.89% copper, 0.94% zinc, 0.67 g/t gold and 10.1 g/t silver (see Company announcement on 9 January 2023). Whilst the primary focus of the PFS was the relatively close-to-surface portion of the MRE in the Indicated Resource category, complementary studies on the Inferred Resource reported for the deeper part of the orebody (the near-vertical tabular structure drill-intercepted over more than four kilometres strike length) have allowed a clear positive assessment to be made of Hawiah’s economic merits without taking into account expected further Resource growth.
The Definitive Feasibility Study will in due course refine and optimise the entire Hawiah Complex.
Project Metrics
In order to summarise the key overall project metrics, KEFI has combined independent PFS-level estimates for the open pit and its own scoping-level estimates for the underground mine based on the current Hawiah MRE. These resources total 30.35Mt, of which Inferred Resources comprising 17.85Mt relate to the tabular orebody to be mined by underground methods.
Set out below are the current estimates of recoverable tonnes before infill-drilling is completed within current resources, project design-concept finalisation, value-engineering and project optimisation. It is also likely that the current Mineral Resources will be increased at both Hawiah and the satellite deposit at nearby Al Godeyer.
Please note that there is a lower level of geological confidence associated with Inferred Resources and there is no certainty that further drilling will result in conversion to Measured or Indicated Resources or the ore tonnes mined in the Life-of-Mine plan summarised below.
Project Physicals -LOM Totals
| Total / Average | |
| Open Pits – Oxide Ore | 1.8Mt |
| Open Pits – Transitional and Fresh Ore | 9.5Mt |
| Underground – Fresh Ore | 15.3Mt |
| Total Ore Tonnes Mined | 26.5Mt |
| Copper Concentrate Grade | 25% |
| Zinc Concentrate Grade | 50% |
| Copper-Equivalent Production | 290,000 t |
| Gold-Equivalent Production | 1.36 Moz |
Components of Project Operating Costs – LOM Average
| US$ / Tonne of Ore Processed | Open Pit Ore | Underground Ore |
| Mining and Rehandling | $21.5 | $21.0 |
| Processing | $20.6 | $20.6 |
| G&A | $2.5 | $2.5 |
| Cash Operating Cost | $44.6 | $45.5 |
| Sustaining Capex (excl. disposal value on closure) | $0.6 | $19.0 |
| All-in Sustaining Cost (opex and capex) | $45.2 | $64.5 |
This table is based on processing 2Mt per annum of ore, which intentionally errs on the side of conservatism for estimation of unit costs.
All-in Sustaining Costs (“AISC”) associated with mining, processing and general & administrative (“G&A”) at Hawiah are currently estimated to be US$45/tonne for Phase 1 (open pits) and US$64.5/tonne for Phase 2 (underground mine).
The open-pit mining cost averages US$2.21/tonne and the average waste to ore ratio is 8.2.
Indicative Components of Project Revenue
| US$ | Copper | Zinc | Gold | Silver |
| Spot Prices as at 30 April 2023* | $8,554/t | $2,6466/t | $1,989/oz | $25/oz |
| RoM Grade | 0.73% | 0.75% | 0.60g/t | 8.2g/t |
| Overall Recoveries | 92% | 71% | 77% | 83% |
| Concentrate Payable Metal | 96.4% | 84% | 90% | 90% |
| % of Total Revenue | 56% | 9% | 29% | 5% |
At the metal prices detailed in the table above, the average Net Smelter Return (“NSR”) is US$97/tonne processed. This table is based on processing 2Mtpa of ore.
Payable metal percentages are for copper concentrate except zinc in the zinc concentrate. Revenue is net of freight charges and typical treatment and refining charges.
Summary of Project Economics – LOM Totals (Metal prices as at 30 April 2023)
| US$ | Total |
| Revenue – at Spot Prices as at 30 April 2023 * | $2,696M |
| Operating Costs – ** | $1,149M |
| Sustaining CapEx – mostly underground mine development | $339M |
| Operating Cash Flow | $1,208M |
| Total Net Free Cash Flow After Royalties and Tax *** (pre-debt) | $689M |
| Total Net Free Cash Flow After Royalties and Tax *** (post-debt) | $579M |
| After-tax NPV (8% discount rate)**** | $301M |
| After-tax IRR (assuming 75% project debt against capex and DFS) | 75% |
| Pre-production Capital Expenditure | $295M |
* Metal Prices: for consistency with KEFI’s recent 2022 Annual Report published 9 June 2023, these tabulations are based on spot prices as at 30 April 2023 of US$1,989/ounce for gold, US$3.88/pound for copper, US$1.20/pound for zinc and US$25/ounce for silver.
**Operating Costs: production costs estimated as set out in the foregoing tables. Closure costs offset by disposal value at end of LOM based on current MRE, assumed at 10% of original capex. Considered conservative for a fully equipped licenced site in an under-explored VMS district.
*** Income tax rate in Saudi Arabia is 20% and applicable royalties are 2.0% for zinc and 1.5% for copper, gold and silver.
**** approximately 10-year LOM has been assumed, by compressing the approximately 14-year of LOM of the PFS, reflecting annual output building up to 3Mtpa rather than 2Mtpa, by concurrently mining, rather than sequentially mining, the open pit and underground. This and other planning assumptions will be finalised upon completion of the DFS.
The next study phase is optimisation on several key levels.
Portfolio Economics for KEFI
The following is an overview of the high-level economic metrics (Net Present Values are at 8% discount rate on net after tax cash flows to equity – NPV8) for the group’s three advanced projects, ignoring any contribution by the exploration pipeline. This aggregates all projects, based on the most recent published resource estimates and KEFI’s currently targeted ownership of each project.
| Tulu Kapi NPV (KEFI c.74% share) | US$243M |
| Jibal Qutman’s (KEFI c.27% share) | US$73M |
| Hawiah’s NPV (KEFI c.27% share) | US$81M |
| Aggregate NPV (KEFI share in USD) | US$397M |
| Aggregate NPV (KEFI share in GBP at US$1.25:GBP1.00) | £318M |
The above aggregate NPV of £318 million is c. 10 times KEFI’s current market capitalisation and is based on:
· 2023 PFS on Hawiah open pit aggregated with scoping-level analyses on the underground mine, as summarised herein.
And, as presented in the recently published 2022 KEFI Annual Report:
· 2023 Mine Plan for Tulu Kapi, for which the open pit is considered bankable and contributes c.980,000 oz of aggregate production and the underground mine contributes c.220,000 oz of aggregate production and is considered at Preliminary Economic Assessment (“PEA”) status;
· 2022 PEA-level modelling for Jibal Qutman. Alternative development scenarios are currently being assessed prior to finalising the direction of the DFS aimed at fast-tracking development.
KEFI Group Development Funding Strategy
· KEFI’s policy is that development capital requirements be, in so far as is reasonable, met at the subsidiary or project level through a combination of project debt finance and subsidiary-level equity funding. This has been overwhelmingly successful at Tulu Kapi.
· The same policy applies in Saudi Arabia, where good progress is being made:
o GMCO is already liaising with the Ministry of Industry and Mines and other Saudi Government regulators as regards development permitting on completion of the DFS, and also with the Saudi Industrial development Fund regarding project financing. SIDF provides up to 75% of aggregate DFS and construction costs.
o The licences for the two advanced projects are now in the process of transfer from ARTAR into GMCO and its project companies in preparation for project financing. This is standard project financing procedure, as was done in Ethiopia as a precursor to development financing at the level of the project subsidiary company.
· KEFI Gold and Copper plans minimal reliance, if any, on the public equity stock markets for development finance.
