TIDMKEFI
RNS Number : 7636R
Kefi Minerals plc
01 July 2015
1 July 2015
KEFI Minerals plc
("KEFI" or the "Company")
SECOND Quarter 2015 Operational UPDATE
KEFI Minerals (AIM: KEFI), the gold exploration and development
company with projects in the Kingdom of Saudi Arabia and the
Democratic Republic of Ethiopia, is pleased to provide its
quarterly operational update for the period 1 April to 30 June
2015. The update encompasses the activities of KEFI Minerals
(Ethiopia) Limited ("KME") in Ethiopia and Gold & Minerals Llc
Limited ("G&M") in Saudi Arabia.
HIGHLIGHTS
Tulu Kapi gold project, Ethiopia
(Wholly-owned by KEFI; Government entitled to 5% free carried
interest)
-- Mining Agreement ("MA") signed by the Company and Ethiopian
Government, granting the 20-year Mining Licence and permitting
development and operation
-- Updated Ore Reserve estimate to 15.4Mt at 2.12g/t Au, containing 1.05Moz
-- Completed 2015 Definitive Feasibility Study ("2015 DFS"):
o Gold production remains at 960,000oz over 13 years with an
average of 95,000oz p.a. during the steady-state 10 years
o All-in Sustaining Costs remain at c. US$780/oz, ranking in the
lowest cost quartile globally for gold producers
-- Initial funding requirement remains at c. US$120 million,
based on planned use of contract-mining and all-new processing
plant. This represents a significant decrease compared with the
2012 DFS prepared by the previous owner of the Tulu Kapi asset
-- Conducting scheduled discussions with short-listed
contractors, debt-style financiers and equity investors at both
project level and parent company level to optimise development
funding on schedule in Q3 2015
-- The independent technical experts for the short-listed
financiers completed site due diligence to facilitate activation of
formal credit processes in accordance with funding timetable
-- All households to be resettled this year have selected their
new host lands and preparations are underway for their move after
their current crops have been harvested, within KEFI's start-up
timetable
Gold & Minerals Ltd Joint Venture ("G&M"), Saudi
Arabia
(40%-owned by the Company with KEFI as operator)
Jibal Qutman
-- Updated Mineral Resource estimate to 28.4Mt at 0.80g/t Au, containing 733,045oz
-- Completed preliminary economic assessment evaluating a
potential heap leach operation on a potential open cut mineable
resource of 6.6Mt at 0.95g/t Au, containing 201,600oz
-- Internal preliminary assessment suggests an operating cash
cost of US$600/oz on a 1.5Mt per annum heap leach mine
Hawiah
-- Completed an initial 53-trench surface sampling programme
over a 6 km-long gossanous horizon and a geophysical survey over
the southern half of the gossanous horizon
-- Exploration highlighted a large drilling target of 2,000m
lateral and 300m vertical extent thought to overlie volcanically
hosted massive sulphide (copper-gold-zinc) style mineralisation
-- KEFI intends to conduct initial drilling of this target during H2 2015
Corporate
-- Completed GBP2.9 million placing at 0.8p per share as
scheduled, to fund all activities pending full development funding
for Tulu Kapi
Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals,
commented:
"This has been a very successful quarter where, at our key Tulu
Kapi project, we have been granted full development permitting from
the Government of Ethiopia and tabled the 2015 DFS for financier
review on schedule and on specification. At our projects in Saudi
Arabia, our continued exploration has yielded encouraging results
and we remain excited about our prospects. In addition, to support
our activities, we completed our scheduled equity placing to raise
approximately GBP3 million.
"We are now focusing on finalising full development funding for
Tulu Kapi this quarter with a view to commencing construction by
year end, commissioning late 2016 and gold production in 2017."
OPERATIONAL REVIEW
Tulu Kapi gold project, Western Ethiopia
Fundamental milestones for Tulu Kapi were achieved during the
quarter, primarily with the grant of the Mining Licence as part of
the MA with the Ethiopian Government as well as the completion of
the 2015 DFS.
The MA between the Ethiopian Government and KEFI was formalised
in April 2015. The terms of the MA include a 20-year Mining Licence
covering an area of 7km(2) , full permits for the development and
operation of the Tulu Kapi gold project and a 5% Government
free-carried interest.
The 2015 DFS is based on a conventional open-pit mining
operation and a 1.2Mtpa carbon-in-leach ("CIL") processing plant,
with gold recoveries averaging 91.5%. Gold production remains at
960,000oz over 13 years with an average of 95,000oz per
steady-state year (i.e. excluding the start-up year and the
processing of low-grade stocks after open pit mining).
Utilising semi-selective mining techniques, it is planned to
process ore mined above 0.9g/t Au and stockpile ore mined between
0.5g/t Au and 0.9g/t Au. Based on this mining approach, the
following key mining and financial parameters for Tulu Kapi were
estimated in the 2015 DFS:
Initial 10 Years 13-year LOM
(excluding low-grade (including low-grade
stock) stock)
---------------------- ---------------------- ----------------------
Waste:ore ratio 9.9:1.0 7.4:1.0
---------------------- ---------------------- ----------------------
Total ore processed 12.0Mt 15.4Mt
---------------------- ---------------------- ----------------------
Average head grade 2.5g/t Au 2.1g/t Au
---------------------- ---------------------- ----------------------
Total gold production 888,000oz 961,000oz
---------------------- ---------------------- ----------------------
Cash Operating Costs US$653/oz US$661/oz
---------------------- ---------------------- ----------------------
All-in Sustaining US$774/oz US$780/oz
Costs
---------------------- ---------------------- ----------------------
All-in Costs US$911/oz US$906/oz
(including initial
capex)
---------------------- ---------------------- ----------------------
All-in Sustaining Costs at c. US$780/oz ranks the project in the
lowest cost quartile globally for gold producers. This includes all
operating costs, royalties, sustaining capital and closure, but
excludes initial capital investment.
The table below provides the key components of the estimated
peak funding requirement for the start-up based on contract mining
and building an all-new processing plant, and excluding historical
costs of approximately US$65 million and post-start-up capital
investment to be funded by net operating cash flows to sustain
production:
US$ million
------------------------------------- ------------
Processing 65.6
------------------------------------- ------------
Infrastructure 19.7
------------------------------------- ------------
Tailings (TSF) 7.5
------------------------------------- ------------
Indirect (EPCM, etc) 14.3
------------------------------------- ------------
Owners Cost 8.9
------------------------------------- ------------
Subtotal 113.0
------------------------------------- ------------
Pre-Production Funding 2.4
------------------------------------- ------------
Working Capital 6.2
------------------------------------- ------------
Total Initial Capital for Start-up,
after contractor funding 121.6
------------------------------------- ------------
Contingency provisions aggregate to approximately 10%.
Discussions are being conducted with debt-style financiers
(commercial banks, development banks and product-linked lenders),
contractors, the Government of Ethiopia and existing shareholders
so as to finalise full development funding during Q3 2015. In
addition, the independent technical experts for the short-listed
financiers completed site due diligence to facilitate the
activation of formal credit processes in accordance with the
financing timetable.
Potential Mining Contractors and Engineering, Procurement and
Construction Management (EPCM) Contractors have been short-listed
and final bidding will now proceed followed by procurement once
development funding is arranged.
The base--case financial metrics tabulated below are stated on
an after tax basis:
Unleveraged Leveraged
--------------------------- ------------ ------------
IRR 28% 52%
--------------------------- ------------ ------------
NPV (0%, ie undiscounted) US$263M US$187M
--------------------------- ------------ ------------
NPV at start construction US$125M US$106M
2015 (8% real
discount rate)
--------------------------- ------------ ------------
NPV at start production US$256M US$156M
2017
(8% real discount
rate)
--------------------------- ------------ ------------
Payback 2.5 years 4.5 years
--------------------------- ------------ ------------
Average Operating US$47M p.a. US$47M p.a.
cash flow before
depreciation,
financing charges
and tax (first
ten years)
--------------------------- ------------ ------------
The above scenarios are at a US$1,250/oz gold price and the
leveraged scenario is based on the targeted US$100 million of
secured debt-based finance. This would result in a greater project
IRR and higher NPV for current shareholders than if KEFI funded the
project entirely through equity finance.
An updated Tulu Kapi Ore Reserve estimate totalling 15.4Mt at
2.12g/t Au, containing 1.05Moz was released in April 2015:
JORC (2012) Reserve category Cut-off Tonnes Gold Ounces
(g/t Au) (million) (g/t) (million)
------------------------------ ------------ ----------- ------- -----------
Probable - High grade 0.90 12.0 2.52 0.98
------------------------------ ------------ ----------- ------- -----------
Probable - Low grade 0.50 - 0.90 3.3 0.73 0.08
------------------------------ ------------ ----------- ------- -----------
Total 15.4 2.12 1.05
------------------------------ ------------ ----------- ------- -----------
Note: Mineral Resources are inclusive of Ore Reserves. All
numbers are reported to three significant figures. Small
discrepancies may occur due to the effects of rounding.
This Ore Reserve estimate is based on the Indicated Resource
above 1,400m RL and reflects KEFI's envisaged semi-selective mining
strategy that will utilise an elevated cut-off grade. Ore at a
cut-off of between 0.50g/t and 0.90g/t Au is planned to be
stockpiled and then processed in the final three years of the
project, resulting in a project life of 13 years for the 2015
DFS.
In addition, all households that are to be resettled this year
have selected their new host lands and preparations are underway
for their move after their current crops have been harvested, which
is within KEFI's start-up timetable.
Jibal Qutman project, Western Saudi Arabia
The following Mineral Resource estimate totalling 28.4Mt at
0.80g/t Au, containing 733,045oz was released in May 2015:
INDICATED INFERRED
Tonnes Au Ounces Tonnes Au Ounces
(g/t) (g/t)
OXIDE 833,6176 0.86 229,165 OXIDE 2,806,468 0.64 58,164
SULPHIDE 9,706,111 0.86 269,323 SULPHIDE 7,606,335 0.72 176,392
TOTAL 18,042,287 0.86 498,488 TOTAL 10,412,803 0.7 234,556
Note: Numbers may not add up due to rounding.
Pit optimisation studies have been applied to the oxide
resources at Jibal Qutman. Initial results show a potential
mineable resource in a series of shallow open pits of 6.6Mt at
0.95g/t Au for an in-situ 201,600oz.
Positive metallurgical heap leach test work results were
received during the quarter from coarse crush cyanide leach on four
of the main oxide deposits, averaging 69% gold recovery over a
five-day leach time.
The following parameters were applied to the preliminary,
internal economic assessment, some of which were derived from
G&M's 2014 technical study of the potential CIL operation at
Jibal Qutman and also from case examples of similar currently
operating heap leach mines: mining cost US$1.60/t; heap leach
processing cost US$5.50/t; general and administration US$2.00/t;
average gold recovery 69%; mining dilution 10% and Au price
US$1,250/oz.
The Company's preliminary economic assessment indicates gold
production of 139,000oz over an initial 4.5 years life of mine, at
an average grade of 0.95g/t Au, gold recoveries averaging 69% and a
strip ratio of 2.18. Operating costs would be approximately
US$600/oz.
KEFI anticipates that such a development, if validated by
independent studies, approved by the authorities and committed by
G&M, would involve an investment of US$30 million, potentially
with 75% funding by local finance institutions with KEFI's 40%
share of equity funding being US$3 million.
The Company expects to continue to define additional oxide
resources in the licence area and on adjoining licence application
areas. Cash flow from the heap leach could fund the addition of a
CIL circuit for mining and processing of the sulphide
mineralisation.
Looking further ahead, this development could be a source of
funding for G&M's regional exploration programs and its timing
could potentially involve completing the technical studies and
permitting in 2016/17 and development thereafter.
Hawiah project, Western Saudi Arabia
Following the granting of the Hawiah Exploration Licence in
December 2014, an initial 53-trench surface sampling programme was
completed over a 6 km-long gossanous horizon thought to overlie
volcanically hosted massive sulphide (copper-gold-zinc) style
mineralisation.
A self-potential ("SP") geophysical survey was completed during
the quarter over the southern half of the 6km-long gold mineralised
system exposed at the surface (outcropping gossan structure). The
aim of the SP survey was to delineate metal-rich bodies directly
beneath the gold bearing system at surface.
The results have identified:
-- an intense SP anomaly with a continuous maxima of 350
millivolts, located between 125m and 300m below surface with an
800m strike length; and
-- a parallel SP anomaly approximately 600m further east,
showing similar but less continuous intensity
The results support the interpretation of a large metal-rich
body directly beneath the gold-bearing gossan at surface. KEFI
intends to conduct initial drilling of this target during H2
2015.
Corporate
In June 2015, the Company raised GBP2.9 million (before
expenses) through the issue of 362,500,000 new Ordinary Shares at a
price of 0.8p per share with existing shareholders and certain
Directors. Following this placing, KEFI has 1,744,447,480 Ordinary
Shares in issue.
Webinar
Mr Anagnostaras-Adams, KEFI's Executive Chairman, will be
hosting a live webinar at 3pm BST today, which can be viewed via
http://webcasting.brrmedia.co.uk/broadcast/139177. Listeners are
encouraged to submit questions by clicking on the link at the foot
of the page or by emailing uk@brrmedia.com. The webinar will
subsequently be available on the Company's website at
http://www.kefi-minerals.com/news/videos.
ENQUIRIES
KEFI Minerals plc
Harry Anagnostaras-Adams (Executive
Chairman) +357 9945 7843
Jeff Rayner (Exploration Director) +905 3 3928 1913
SP Angel Corporate Finance
LLP (Nominated Adviser)
Ewan Leggat, Katy Birkin +44 203 470 0470
Brandon Hill Capital Ltd (Joint
Broker)
Oliver Stansfield, Alex Walker,
Jonathan Evans +44 207 936 5200
Beaufort Securities Ltd (Joint
Broker)
Elliot Hance +44 207 382 8300
Luther Pendragon Ltd (Financial
PR)
Harry Chathli, Claire Norbury,
Oliver Hibberd +44 207 618 9100
COMPETENT PERSON'S STATEMENT
The information in this release that relates to exploration
results, Mineral Resources and Ore Reserves is based on information
compiled by Mr Jeffrey Rayner. He is the Exploration Director of
KEFI Minerals and a Member of the Australasian Institute of Mining
and Metallurgy (AusIMM). Mr Rayner is a geologist with sufficient
relevant experience for Group reporting to qualify as a Competent
Person as defined in the 2012 Edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves ("2012 JORC Code"). Mr Rayner consents to the inclusion in
this announcement of the matters based on this information in the
form and context in which it appears.
The exploration results, Mineral Resources and Ore Reserves
disclosed in this document have been previously released as
follows:
Date of Project Subject Competent
Release Persons
----------- ------------- ---------------------- ------------------
22 April Tulu Kapi Probable Ore Reserves Frank Blanchfield
2015 Sergio Di
Giovanni
----------- ------------- ---------------------- ------------------
4 February Tulu Kapi Mineral Resource Simon Cleghorn
2015 Lynn Olssen
----------- ------------- ---------------------- ------------------
6 May 2015 Jibal Qutman Mineral Resource Jeffrey Rayner
----------- ------------- ---------------------- ------------------
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 announcement.
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) Au Mineral Resources (JORC 2012) plus significant
resource growth potential. KEFI targets that production at these
projects generate cash flows for further exploration and expansion
as warranted, recoupment of development costs and, when
appropriate, dividends to shareholders.
Expected milestones for the remainder of 2015 at Tulu Kapi
include:
-- Formalisation of senior secured financing, agreement of final terms for project finance; and
-- Full development funding and commencement of construction.
In addition, during 2015 KEFI anticipates triggering a
Preliminary Feasibility Study to underpin the submission of a
Mining Licence Application for Jibal Qutman in Saudi Arabia through
its joint venture company, Gold & Minerals Ltd ("G&M"). The
development of Jibal Qutman is targeted to follow the start-up of
Tulu Kapi.
KEFI Minerals in Ethiopia
The Tulu Kapi gold project in Western Ethiopia is being rapidly
progressed towards development. In October 2014, KEFI Minerals
reactivated the Mining Licence Application and assembled indicative
project finance terms. The Mining Licence was granted in April 2015
and the secured lenders' independent technical consultants have now
commenced their due diligence.
The 2015 Definitive Feasibility Study focused on construction of
a 1.2Mtpa processing plant with estimated annual steady-state gold
production 95,000oz and All-in Sustaining Costs (including
operating, sustaining capital and closure) averaging US$780/oz
(excluding initial investment).
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
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 ("EL")
granted, including Jibal Qutman and the recently granted Hawiah
exploration licence that contains over 6km strike length of
outcropping gossans developed on VMS altered and mineralised
rocks.
At Jibal Qutman, G&M's flagship project, the total Indicated
and Inferred category Mineral Resources, JORC (2012) compliant, are
now estimated at 28.4Mt at 0.80g/t Au for 733,045 contained gold
ounces compared with 22.0Mt at 0.90g/t Au for 633,461 contained
gold ounces previously estimated in March 2014, both at a cut-off
grade of 0.2g/t Au.
ARTAR, on behalf of G&M, holds 24 exploration licence
applications that cover an area of approximately 1,484km(2) . 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 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.
-Ends-
This information is provided by RNS
The company news service from the London Stock Exchange
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