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 announced updated financial projections reflecting the recently announced plans to expand production. In the meantime, we continue to prepare for finance closing with mandated financier Oryx Management Limited (“Oryx”) and the other consortium members the Government of Ethiopia, Ausdrill and Lycopodium.
Executive Chairman, Harry Agnanostara Adams talks to DirectorsTalk to discuss the increased gold project projections at TULU KAPI. Harry also explains how it’s relationships with the other members of the consortium developing and what the planned increased annual gold production from 116K oz per annum to 144K oz per annum means for KEFI and its shareholders.
Production plans have been re-cast and the average annual gold production in years 1-3 is estimated to expand from c. 115,000 ounces to c. 145,000 ounces per annum. At a flat $1,250/oz gold price, the payback period is about 3 years. This forecast is derived by management in consultation with its advisers and will continue to be refined as we approach start-up, during the 2018 operational readiness phase along with detailed engineering and procurement.
Set out below are comparisons with the key outputs of the 2015 Definitive Feasibility Study (“DFS”) and the 2017 DFS Update which were on an unleveraged basis. The latest estimates build in the impact of the planned finance structure and its leverage, reflecting the specifics of the Oryx detailed Heads of Terms (see announcement 17 July 2017). The latest estimates also reflect the strategy agreed with Oryx to install greater processing capacity from the outset with a view to achieving:
a) quicker cash flow from the open pit and capacity to process additional ore from targeted satellite deposits, and
b) greater protection against downside risks by facilitating faster processing of lower grade ore from the open pit.
Key planning assumptions which have been introduced since the 2017 DFS Update include:
· Plant expanded from 1.5-1.7Mtpa to 1.9-2.1Mtpa, depending on the hardness of the ore.
· Refining the Engineering, Procurement and Construction (“EPC”) contract into a hybrid of EPC and an Engineering, Procurement and Construction Management (“EPCM”) contract whereby the client has the protection of certain performance guarantees, along with the transparency of open-book access to all costs along with tighter alignment with owner-management via incentivised target schedule and cost for the contractor (Lycopodium). This style is also preferred by Oryx’s Finance SPV, which will own the plant and lease it to KEFI’s project company.
· The additional c. $12 million funding required for plant and infrastructure expansion has been offset by expected savings of capital expenditure and by Oryx offering to expand its facility from US$135 million to US$140 million.
· Mine plans re-cast to allow faster mining, intensified grade-control drilling and enhanced flexibility to switch between bulk mining and selective mining as most appropriate.
KEFI Minerals Plc Executive Chairman, Mr Harry Anagnostaras-Adams, said: “The Tulu Kapi Gold Project consortium is implementing its finance closing procedures and the refined financial projections announced today reflect recently resolved expansion plans.
“Projected annual gold production has been expanded from approximately 115,000 ounces to 144,000 ounces per annum for the first three years. Measures of return have improved accordingly and indicate significant targeted value up-lift for shareholders under any modelled scenario.”