TIDMKEFI
RNS Number : 7157U
KEFI Minerals plc
11 April 2016
11 April 2016
KEFI Minerals plc
("KEFI" or the "Company")
FIRST QUARTER 2016 OPERATIONAL UPDATE
KEFI Minerals (AIM: KEFI), the gold exploration and development
company with projects in the Kingdom of Saudi Arabia and the
Federal Democratic Republic of Ethiopia, is pleased to provide its
quarterly operational update for the period from 1 January to 31
March 2016. The update encompasses the activities of KEFI Minerals
(Ethiopia) Ltd ("KME") in Ethiopia and Gold & Minerals Ltd
("G&M") in Saudi Arabia.
Tulu Kapi Gold Project ("Project"), Ethiopia
(Wholly-owned by KEFI; Government entitled to 5% free carried
interest)
Financing:
Since acquiring Tulu Kapi in December 2013, KEFI has reduced the
planned capital expenditure (including working capital) from c.
US$289 million to US$120 million by expanding the resource base and
introducing semi-selective mine plans via contract mining. Over the
same period, KEFI's estimate of total capital requirement has
remained at c. US$145 million, after adding financing costs and
cost-overrun facilities to the capital expenditure. Highlights of
the quarter include:
-- Project finance syndication continues towards formal approval
from the finance syndicate and shareholders being obtained in
Q2-16. This will be followed by financial settlement in Q3-16,
subject to the satisfaction of typical conditions precedent
including full inter-creditor arrangements being approved by the
National Bank of Ethiopia.
-- Procurement and detailed engineering conducted with the EPC
contractor has kept the project on track for construction of the
process plant to start in Q4-16. Mine contractor mobilisation is
not required until 2017 as there is negligible waste pre-stripping
required to start mining ore. Production commissioning remains
scheduled for H2-17.
-- All syndicate members are progressing their respective
internal processes along the following lines:
o US$65 million aggregate of senior secured debt from two banks
and an export credit agency, with average tenor of 6 years;
o US$15 million cost-overrun facilities and 100,000oz hedge
facility (from Ore Reserves of 1 million oz) from a specialist
metals financier; and
o US$40 million product-linked gold finance from specialist gold
financier.
-- Approximately US$25 million of the equity investment
component is planned to have been invested prior to financial
settlement of the project finance syndicate at the end of Q3-16
(comprising US$5 million by KEFI of funds already raised and US$20
million by the Government of Ethiopia), in addition to the US$50
million invested prior to 2016.
-- The Directors of KEFI aim to present the syndicate-approved
financing plan to shareholders for their approval at the Company's
Annual General Meeting, which is expected to be held in June 2016.
The Board of Directors will seek the delegated authority to refine
final details of the syndicated financing in light of finalised
project procurement and the gold price prevailing at financial
settlement.
Project:
-- Project front end engineering and design ("FEED") was
delivered in February 2016, which KEFI has been refining with the
contractor. Detailed engineering and procurement has commenced.
-- KEFI's expanded Social Performance Team is focusing on the
implementation of livelihood restoration plans for the community
members to be resettled.
-- Project and financial metrics are currently estimated to be:
o Annual gold production of c. 115,000oz pa for the core eight
years of open pit production
o All-in Sustaining Costs of approximately US$742/oz
o Project after tax NPV (8%) of US$155 million at a gold price
US$1,250/oz (US$127 million geared), which has significantly
improved since KEFI's acquisition of the project
Expansion potential - underground mining:
-- During the quarter, KEFI completed a Preliminary Economic
Assessment ("PEA") of Tulu Kapi's underground mining potential,
below the currently planned open pit, which indicates that:
o Underground mine development is economically justified based
on the current underground Mineral Resources which remain open in
several directions.
o Combined production from the open pit and underground mine
would approximate 150,000oz pa.
o The underground mine adds an estimated US$44 million to the
Project's after-tax NPV (8%) at a gold price of US$1,250/oz,
increasing combined NPV to c. US$200 million (GBP140 million) for
100% of the Project
o Underground mine development would normally be expected to
commence after repayment of development finance is well advanced
during the first three years of open-pit operations.
-- Further gold production increases are targeted through
significant expansion of proposed exploration activity in the
vicinity of the planned Tulu Kapi ore processing facility.
Gold & Minerals Ltd Joint Venture, Saudi Arabia
(40%-owned by the Company with KEFI as operator)
Jibal Qutman
-- Following completion of the infill drilling program in late
2015, work focuses on updating the Mineral Resources and revising
the Preliminary Economic Assessment.
-- The Mining Licence Application is being discussed with
regulators. Subject to full feasibility studies and regulatory
approvals, the Company intends to start a heap leach operation that
can be expanded in a modular fashion if anticipated exploration
success is achieved. The equity capital requirements for the heap
leach operation will be less than US$5 million for KEFI's 40%
share, based on a capital expenditure of under US$40 million and
approximately 75% being provided by project finance.
Hawiah
-- Drilling of large copper-gold-zinc targets will commence
after local community engagement has confirmed that G&M has
secured long-term access to Hawiah and other prospective ground in
the region on agreed terms.
Corporate
-- During the quarter, KEFI raised GBP1.75 million (c. US$2.5
million) through the placing of new ordinary shares at 0.35p per
share (the "Placing") to provide working capital pending initial
drawdown of Tulu Kapi project finance.
-- Participation in the Placing by institutional and industry
shareholders reinforces their support for the Tulu Kapi development
plan.
-- Shareholdings of Odey Asset Management (UK investment group),
Ausdrill (Australian/African mining contractor) and KEFI's Board of
Directors aggregate to c. 40% ownership of KEFI on a fully-diluted
basis following the Placing.
-- At a gold price of US$1,250/oz, the projected cash flows
indicate a cash build-up in the first three production years at
Tulu Kapi of US$135 million, which would be sufficient to repay all
project debts and commence the payment of dividends to shareholders
as well as to fund the development of the underground mine at Tulu
Kapi, the start-up of the initial heap leach operation at Jibal
Qutman and the exploration programs within the Arabian-Nubian
Shield.
Webinar
Mr Anagnostaras-Adams, KEFI's Executive Chairman, will be
hosting a live webinar at 10am BST on Thursday 14 April 2016, via
http://webcasting.brrmedia.co.uk/broadcast/5707bb9dc95e0de72337ff40.
Listeners are encouraged to submit questions by clicking on the
link at the foot of the page or by emailing
questions@brrmedia.co.uk. The webinar will subsequently be
available on the Company's website at
http://www.kefi-minerals.com/news/videos.
Harry Anagnostaras-Adams, Executive Chairman of KEFI,
commented:
"We are pleased to announce another quarter of solid progress
made by the Company, in particular with the Tulu Kapi project where
we have made significant advances towards becoming a gold producer.
Despite the tough mining capital markets, we successfully completed
a placing with continued support from our key shareholders.
Projected cash flows are robust, with the first three years of open
pit production targeted to repay all debts, commence the payment of
dividends and fund growth in the highly prospective Arabian-Nubian
Shield. We look forward to soon finalising the Project's integrated
syndication package and proceeding with development."
ENQUIRIES
KEFI Minerals plc
Harry Anagnostaras-Adams (Executive
Chairman) +357 99457843
John Leach (Finance Director) +357 99208130
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, Oliver
Hibberd +44 20 7618 9100
Further information can be viewed on KEFI's website at
www.kefi-minerals.com
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.
Milestones planned for H1-2016 include:
-- Formal appointment of development funding syndicate for Tulu Kapi gold project
-- Shareholder approval of finance plan for Tulu Kapi gold project
-- Mining Licence Application for Jibal Qutman gold project in Saudi Arabia
KEFI Minerals in Ethiopia
The Tulu Kapi gold project in Western Ethiopia is being rapidly
progressed towards development, with the Mining Licence granted in
April 2015.
(MORE TO FOLLOW) Dow Jones Newswires
April 11, 2016 02:00 ET (06:00 GMT)
KEFI's Definitive Feasibility Study was then completed and the
Company is now refining contractual terms for project construction
and operation. Latest estimates for annual gold production are c.
100,000oz pa for a 10-year period and All-in Sustaining Costs
(including operating, sustaining capital and closure) of
approximately US$724/oz to US$752/oz respectively at a gold price
range of US$1,000/oz to US$1,400/oz. Tulu Kapi's Ore Reserve
estimate totals 15.4Mt at 2.12g/t gold, containing 1.05Moz. The
eight core production years of the open pit are estimated to yield
an average of 115,000oz pa.
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.
At a gold price of US$1,250/oz, the projected cash flows
indicate a cash build-up in the first three production years of
US$135 million, which would be sufficient to repay all project
debts, fund the development of the underground mine and commence
paying dividends to shareholders.
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-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 24 EL 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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