KEFI Minerals plc (LON: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Federal Democratic Republic of Ethiopia, has today provided its quarterly operational update.
This update encompasses the activities of KEFI Minerals (Ethiopia) Ltd and Tulu Kapi Gold Mines Share Company in Ethiopia, and Gold & Minerals Ltd in Saudi Arabia for the period from 1 October 2018 to 31 December 2018, together with more recent developments where appropriate.
Since 1 October 2018, any material events have been reported in separate announcements which are referred to below, along with explanatory updates on those and other related matters.
Tulu Kapi Gold Project in Ethiopia
Government Clearance of Community Resettlement
On 8 October 2018 the Federal Government approved the finalised community resettlement, livelihood restoration and community development plans. The Regional Government asked TKGM to be prepared for community resettlement to start as early as possible in Q1 2019.
As at the date of this announcement, the Regional Government is not yet ready to trigger resettlement due to recent changes to its administration and security structure. However, it has stated that it still wants KEFI/TKGM to be ready to do so later in this current quarter.
3 January 2019 and 25 January 2019: Tulu Kapi Project Updates
The required Federal Government consents have all been received from all relevant Federal agencies other than that the project finance structure set out with the central bank is awaiting endorsement by the Prime Ministry. KEFI does not anticipate a problem with this administrative process. The Prime Ministry and Government at all levels have always been supportive of the Project as a priority for the community, the Oromia Region and Ethiopia as a whole.
Tulu Kapi Project site activities: a three-month program of land clearing and geotechnical drilling for the design of infrastructure foundations has been completed. Site preparation programs continue.
Tulu Kapi Project Development Planning: principal on-site project contractors Lycopodium and Ausdrill plan for the 24-month development schedule. Principal off-site project contractors Ethiopian Electrical Power Corporation and Ethiopian Roads Authority are preparing design and tender documents for off-site infrastructure.
KEFI/TKGM management: continues to be built up for development and operations.
Saudi Exploration Project
30 November 2018: Saudi Exploration Licence Renewed for Hawiah VMS Belt
This licence was first issued in 2014 and some exciting results were produced from initial surface and geophysical surveys of a 6km-long surface-exposed mineralised system (gossan) containing gold and copper. The authorities have recognised that because we had to stop work for over two years pending their regulatory review and until the social licence was established on normal terms, the authorities have now renewed the Hawiah licence and the exploration team is arranging to recommence field work.
In addition, we have lodged exploration licence applications over the majority of the 120-kilometre long Wadi Bidah Mineral District, which has twenty-four recorded VMS (Volcanogenic Massive Sulphide) systems of which Hawiah is one.
Corporate and Project Finance
30 October 2018: Secured Convertible Loan Facility
A longstanding shareholder agreed to provide the Company an expanded working capital facility to support preparations for TKGM development.
17 December: General Meeting of Shareholders
KEFI Shareholders approved the Secured Convertible Loan Facility.
Tulu Kapi Project Equity:
o the shareholders of Project subsidiary TKGM (KEFI and the Ethiopian Government) approved the admission of Ethiopian Project equity investor ANS Mining Share Company (“ANS”) as an additional TKGM shareholder;
o ANS confirmed its equity subscription at the maximum in the previously reported range, being the Birr-equivalent of US$38 million, upon the relevant Government consents being completely finalised and the community resettlement being finally approved.
o KEFI’s equity in TKGM is expected to be 50.1% with the balance being Ethiopian Government (via the Ministry of Finance and Economic Cooperation) and financial institutions (via ANS).
Tulu Kapi Project Bond/Lease Proposal:
o the Independent Technical Expert signed the Project due technical diligence reports;
o compliance and due diligence procedures remain to be complied with during and after drafting of full detailed documentation following all government clarifications being received
Project Economics
The current spot gold price of approximately $1,300/oz, forward market gold prices and analysts’ long-term forecasts support the Company’s base case projections of US$1,300/oz.
TKGM projected financial statistics, based only on extracting its one million ounces of ore reserves within the planned open pit section of the Project, remain in accordance with previous guidance and as supported by the project feasibility studies and updates:
o shareholders’ invested capital of c. US$120 million
o NPV after debt and after tax, at 8% discount rate of:
§ US$115 million (£87 million) for 100% and US$57 million (£44 million) for 50.1% at start of construction, and
§ US$192 million (£147 million) for 100% and US$96 million (£73 million) for 50.1%, at start of production two years later
o Estimated average TKGM EBITDA of US$73 million (£55 million) over 8 years and annual debt-service costs during production of US$27 million (£21 million) over 8 years
Regulatory and Security Environment
Ethiopia
Ethiopia is Africa’s highest growth country and has, over the past six months, instituted positive progressive and transformative reforms on many levels throughout the country.
Yesterday the Federal Ministry of Mines, Petroleum and Natural Gas announced that it had drafted a new Proclamation for regulation of the mining industry, particularly with an eye to stimulating growth. The Ministry’s statement referred to the introduction of investment incentives and the removal of obstacles.
The security situation for our Project in Ethiopia is considered better than most mining sites on the continent and KEFI/TKGM has strong government, business and community support, having earned and maintained strong social licence at Tulu Kapi.
Saudi Arabia
Saudi Arabia has announced new industry policies and has yet to release the details of the associated regulations. These changes aim to spur development of the minerals sector.
Yesterday the Saudi authorities released from a year-long detention the head of the group of companies which owns the only other major gold development-ready deposit in Ethiopia.
The security situation for our projects in Saudi Arabia, as with our sites in Ethiopia, is considered fine and also derives largely from G&M (the Project company of KEFI and partner ARTAR) ensuring and maintaining strong social licence with its local communities.
Investor Webinar
The Company will host a live webinar at 3.30pm GMT on Thursday 31 January 2019 which can be accessed via:
http://webcasting.brrmedia.co.uk/broadcast/5c4f149ea0c50933d2710da5/5c4f1a46a7461f9c6500025b and also through www.brrmedia.co.uk
Listeners are encouraged to submit questions by emailing: [email protected]
The webinar will subsequently be available on the Company’s website at http://www.kefi-minerals.com/news/webcasts.
