TIDMKEFI
RNS Number : 5805J
KEFI Minerals plc
29 June 2017
29 June 2017
KEFI Minerals plc
("KEFI" or the "Company")
AGM Statement
KEFI Minerals (AIM: KEFI), the gold exploration and development
company with projects in the Kingdom of Saudi Arabia and the
Democratic Republic of Ethiopia, announces that at today's Annual
General Meeting (the "AGM") Harry Anagnostaras-Adams, Chairman,
will make the following statement. In addition, Mr
Anagnostaras-Adams, will give a presentation on the progress of the
Company. The presentation contains no material new information and
will be made available on the Company's website
(www.kefi-minerals.com) from later today.
"In this year gone, KEFI has moved its flagship project in
Ethiopia from the theoretical to the actual. The prospect of KEFI
becoming a junior gold producer is now a reality and that is
largely thanks to a large number of people within the Company and
outside.
"Let me first speak about Tulu Kapi and the great strides we
have taken with this project in 2016 and then I will also address
the progress made in our other projects in Saudi Arabia.
Tulu Kapi Gold Project
"The Tulu Kapi Gold Project in Ethiopia remains the principal
focus of KEFI's activities as we target triggering development in
2017 and open-pit production in 2019. We have continued to work
with the Government of Ethiopia, industry experts and project
contractors over the past year to ensure that construction can
commence as soon as funding is in place.
"Meanwhile, we have refined the 2015 Definitive Feasibility
Study ("2015 DFS") further based on feedback from project
contractors, financiers and partners and integrated these into the
2017 DFS Update in preparation for financing. The update reflects,
among other things, a fixed price, lump-sum processing plant
construction contract with Lycopodium and a warranted ore
processing rate of 1.5-1.7 million tonnes per annum.
"KEFI also overhauled all aspects of the project through due
diligence and planning, the result of which is a high-value,
low-cost project with robust economics and significant growth
potential beyond the existing open-pit Ore Reserve estimate of 15.4
million tonnes at 2.12g/t gold, containing 1.05 million ounces.
"The DFS Update shows initial open-pit gold production from Tulu
Kapi is projected at 115,000 ounces per annum at a low All-in
Sustaining Cost ("AISC") of less than US$800/oz, which would make
us one of the lowest cost gold producers in the sector. While we
cautiously base our projections on the third party contractually
warranted 2017 DFS Update for financing and contractual commitment
purposes, the business plan is to accelerate construction and
increase throughput by 10%. This would increase production to
120,000 ounces per annum. KEFI's financial targets for the open-pit
project, using gold prices between US$1,200/oz. and $US1,400/oz,
include:
-- net cash build-up (pre-financing costs) in the first three
production years of between US$174 million and US$229 million;
-- annual operating cash flows of between US$55 million and
US$78 million for the first eight years of production;
-- an after-tax unleveraged IRR of between 25% and 37%;
-- an after-tax unleveraged NPV of US$100 to US$187 million at
the start of construction using a discount rate of 8%; and
-- a payback of 2.0 to 2.5 years.
Underground Potential at Tulu Kapi
"In parallel with the open-pit gold production, KEFI has
evaluated mining the underground deposit underneath the planned
Tulu Kapi open pit. A preliminary economic assessment ("PEA")
demonstrated robust economics. Based on 2014 Mineral Resources, the
addition of the underground mine would lift gold production to
150,000 ounces per annum. The orebody remains open and further
potential will be added.
"The Government has encouraged KEFI to plan an ambitious
exploration programme in the district around Tulu Kapi and
elsewhere in Ethiopia. Targets have been prioritised based on
KEFI's review of past exploration results for both satellite gold
deposits and stand-alone development projects. Tulu Kapi is
intended to become a central ore processing centre for the Tulu
Kapi district of gold deposits.
Support of Ethiopian Government
"We continue to receive the strong support of the Ethiopian
Government. The Tulu Kapi Gold Project ranks high as a national
priority within Ethiopia's Growth and Transformation Plan as well
as having strong support from the local community.
"Responsible mine development is a high priority for KEFI and
the Ethiopian Government. We welcome the Government's constructive
attitude which encourages us to bring Tulu Kapi into production as
rapidly as we prudently can whilst ensuring compliance with all
relevant governance and quality standards.
"The restrictions imposed by the State of Emergency declared by
the Ethiopian Government in October 2016 were mostly lifted within
weeks. KEFI Minerals' operational activities have continued as
normal during this time and appropriate security precautions have
been built into project planning.
"After consultations with KEFI, the Government of Ethiopia
triggered the community resettlement programmes which began with
property surveys, host land preparations and incorporate livelihood
restoration programmes. Our social licence team is based at Tulu
Kapi and our processes involve continual consultation with the
community, federal, regional and local authorities and other local
institutions before and during implementation of the Resettlement
Action Plan ("RAP").
"KEFI and the Government continue to ensure transparent and
compliant procedures for the resettlement of displaced farmers at
Tulu Kapi. KEFI is playing a supporting role to the Government's
efforts and is committed to assist where it can to ensure Tulu Kapi
remains an exemplary model of due process and social licence
management. Current activities at Tulu Kapi include multiple survey
teams including Government, Community and Company personnel, all
jointly preparing the resettlement of affected households.
"Notably in May 2017, the Government of Ethiopia further
demonstrated its strong support by executing the detailed formal
documentation for its committed equity capital contribution of
approximately US$20 million to Tulu Kapi's development. This
investment will increase the Government's share of the project from
a 5% free-carried interest to circa 25%, depending on the final
financing structure.
"Now, I will move on to our other projects in the Arabian-Nubian
Shield ("ANS") in the Kingdom of Saudi Arabia.
Saudi Arabia
"In Saudi Arabia, the priority for our G&M Joint Venture
("G&M") is to develop an open-pit, heap-leach ("HL") oxide gold
operation, using a staged development approach predicated on a
low-capex start-up to be expanded in modular stages as additional
mineralisation is delineated.
"Following on-site meetings with regulators in March 2017, the
Mining Licence Application for the Jibal Qutman HL gold development
was lodged with the Saudi Government for continuing discussion and
review.
"The potential cash flow from HL oxide gold production is an
opportunity to fund:
-- construction of a carbon-in-leach ("CIL") plant to process
the deeper sulphide gold ore profitably; and
-- exploration in Saudi Arabia to create a strong Saudi mining company for the long term.
"At Hawiah, G&M has identified a large target for precious
and base metals based on the surface sampling of a six-kilometre
long gossan (oxidised mineralisation exposed on the surface) and
the results of the geophysical surveys of the ground beneath the
gossan.
"Our Saudi venture is a strategic long-term priority and the
Company is confident of having established an early-entrant
position in what will emerge as a world-class minerals
province.
"During the past year, G&M overhauled its portfolio of
licence applications by discarding some and adding others. The next
key step is for G&M to review the new Saudi mining industry
regulations and policies once published. We then plan to proceed
with Jibal Qutman soon after the planned Tulu Kapi development and
expand exploration activities as results warrant.
Finance
"KEFI's strategy is to maximize shareholder value through the
development of a focused portfolio of mining operations and
projects at various stages, while at the same time managing the
significant risks faced by companies in the exploration and
development stage.
"Our risk management approach places a clear focus on
discovering and exploiting mineral wealth through multiple
ventures, thus increasing the odds of success. We introduce
partners and contractors in certain circumstances to minimise risk
and broaden the human and financial resources available.
"KEFI minimises expenses while maintaining momentum towards
becoming a gold producer. To help reduce cash outflows, some
employees, Directors and consultants agreed to take KEFI shares in
lieu of a significant portion of their salary or fees during 2016.
Some Company officers also invested significant amounts into KEFI
share placings.
"KEFI has continued to finance its activities through periodic
capital raisings and contributions by partners and the Company
completed several equity placings during 2016, raising a total of
GBP5.6 million (before expenses).
"In March 2017, shareholders approved a GBP5.62 million
including a GBP4.62 million subscription by Lanstead Capital. A key
aspect of the March 2017 fundraising is that GBP3.93 million of the
GBP4.62 million subscription by Lanstead is subject to a Sharing
Agreement which allows KEFI to benefit financially from positive
share price performance, whilst limiting the financial downside
risk from a negative share price performance.
"Following the completion of the March 2017 fundraising and
associated consolidation of the Company's capital on a 17-for-1
basis, KEFI has a total of 332.7 million Ordinary Shares on
issue.
"KEFI has since then also been receiving the scheduled
instalments of its VAT refund of GBP2.5 million (c. US$3.2 million)
from the Ethiopian Government and its monthly settlements under the
Sharing Agreement with major shareholder Lanstead Capital.
"The Notice of General Meeting includes a proposed shareholder
resolution to provide the Directors with sufficient authority to
implement equity raisings to allow the preferred project funding
proposal to proceed for Tulu Kapi.
"The Tulu Kapi project funding process is ongoing with several
potential financiers who are comfortable investing in Ethiopia.
"The foundations of risk management for funding Tulu Kapi
include that all short term (up to five years) debt servicing
commitments are met even if the price of gold drops to and stays at
c. US$900/oz whilst longer term (5-10 years) commitments are
acceptable as long as they are covered by a flat price of c.
US$1,000/oz. It is notable that the lowest gold price in the past
seven years is c. US$1,100/oz and the highest c. US$1,900/oz.
"KEFI's progress on project financing was delayed during 2016 as
a result of the tightening of the mining debt-finance sector
generally and the declaration of the Ethiopian State of Emergency,
which had the effect of depressing the interest of financiers
unfamiliar with Ethiopia. The Company responded by elevating its
focus onto alternative financiers familiar with Africa and
especially Ethiopia and, in particular, to design financing
proposals with African-experienced gold project contractors. We now
have three financing proposals built around alternative project
contracting syndicates, and we have prioritised the funding
structure designed around the preferred contractors selected in
2016 - Ausdrill for mining and Lycopodium for processing.
Changes to the Board of Directors
"As KEFI Minerals prepares to develop Tulu Kapi, two key
additions were made to the Board of Directors since our last
AGM:
-- Mr John Leach became executive as Finance Director; and
-- Mr Mark Wellesley-Wood, experienced African mining operator, as a Non-Executive Director.
"In early 2017, Mr Mark Wellesley-Wood took on the role of
Deputy Chairman and Senior Independent Director.
"As part of these changes, Mr. Jeff Rayner stepped down from the
Board but, we are very pleased to say, continues to advise the
Company on exploration and acquisition strategy. His acumen in
identifying under-valued gold and copper projects has been
instrumental in KEFI becoming an early entrant in emerging mining
districts in the ANS.
Outlook
"Our initiatives on both sides of the Red Sea reflect our
conviction that the ANS has world-class prospectivity overseen by
governments that have put a strategic priority on the mining
sector. KEFI is very fortunate to have over 1,000 km(2) portfolio
of exploration properties at various stages within the highly
prospective ANS. And this portfolio will grow.
"We have established a solid platform with world-class partners
in each jurisdiction and with industry-leading contractors have
developed a counter-cyclical opportunity to establish successful
mining operations in the region.
"Our approach has been to place our development strategy into
the hands of a team of seasoned operators with a proven record of
start-up successes in Africa. This team has transformed Tulu Kapi
from an uneconomic project into one which is now being evaluated by
financiers as a robust, fully permitted project with significant
upside potential for shareholders.
"The calm and improving situation in Ethiopia, combined with the
range of financing scenarios being considered by the Company, make
the Board confident that the Tulu Kapi Gold Project can proceed to
development in 2017.
"The Board is confident of our strategy and asset base. We have
the appropriate mix of industry-experienced technical and financial
expertise to prudently progress our projects into profitable gold
mines. And we have an organisational development plan which will
see requisite human resources added with recruitment as we
progress.
"We appreciate the strong support of our shareholders,
contractors, communities and other stakeholders. The Company now
has two cornerstone shareholders in Odey Asset Management and
Lanstead Capital that support rapid growth companies. Project
contractors Ausdrill and Lycopodium are also shareholders as is the
Board of Directors.
"KEFI Minerals is positioned to become the operator of two gold
development projects in the highly prospective ANS. We have
achieved this progress with a small team around whom we will build
the full operating team in conjunction with the project
contractors, both of whom have over 20 years of mine building
experience in Africa. We are also well supported by a number of
high calibre, quality specialist advisers selected for their
pre-eminence in start-ups of this nature.
"We thank all of these parties and people for their support and
particularly the support of our shareholders."
ENQUIRIES
KEFI Minerals plc
Harry Anagnostaras-Adams (Executive
Chairman) +357 99457843
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
Beaufort Securities Ltd (Joint
Broker)
Elliot Hance +44 20 7382 8300
Luther Pendragon Ltd (Financial
PR)
Harry Chathli, Claire Norbury,
Ana Ribeiro +44 20 7618 9100
Further information can be viewed on KEFI's website at
www.kefi-minerals.com
COMPETENT PERSON STATEMENT
KEFI Minerals reports in accordance with the 2012 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (the "JORC Code 2012").
The information in this announcement that relates to exploration
results, Mineral Resources and Ore Reserves is based on information
compiled by Mr Jeffrey Rayner. He is the former Exploration
Director of KEFI Minerals and a Member of the Australian Institute
of Geoscientists ("AIG"). Mr Rayner is a geologist with sufficient
relevant experience for Group reporting to qualify as a Competent
Person as defined in the JORC Code 2012. Mr Rayner consents to the
inclusion in this report of the matters based on this information
in the form and context in which it appears.
KEFI confirms that it is not aware of any new information or
data that materially affects the information in the above releases
and that all material assumptions and technical parameters,
underpinning the estimates continue to apply and have not
materially changed. KEFI confirms that the form and context in
which the Competent Person's findings are presented have not been
materially modified from the original market announcements.
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.
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 for annual
gold production are c. 120,000oz pa and All-in Sustaining Costs
(including operating, sustaining capital and closure but not
including financing charges) of <US$800/oz. Tulu Kapi's Ore
Reserve estimate totals 15.4Mt at 2.12g/t gold, containing
1.05Moz.
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.
The projected cash flows indicate that the net cash build-up
(after servicing financing) in the first three production years is
US$65 million to US$265 million for the gold price range of
US$1,100/oz to US$1,900/oz which prevailed during the past seven
years.
KEFI Minerals in the Kingdom of Saudi Arabia
In 2009, KEFI formed G&M in Saudi Arabia with local Saudi
partner, Abdul Rahman Saad AlRashid & 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 a large portfolio of 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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