KEFI Gold and Copper plc (LON:KEFI), the gold exploration and development company with projects in the Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, has today announced its unaudited interim results for the six months ended 30 June 2021.
The statement below encompasses the activities of the Company’s subsidiary, KEFI Minerals (Ethiopia) Limited, in Ethiopia, and KEFI’s joint venture, Gold & Minerals Limited, in the Kingdom of Saudi Arabia.
Overview
The current climate of increased gold and copper prices means that the project economics for the Company’s Tulu Kapi gold project in Ethiopia have become even more attractive as have the potential values of our discoveries in Saudi Arabia with maiden resources now reported mainly for copper/gold at Hawiah as well as for zinc/silver and also for gold at Jibal Qutman.
During the period, the Company continued to advance its projects in the highly prospective Arabian Nubian Shield notwithstanding the logistical restrictions imposed to protect personnel and the wider community due to COVID-19.
Tulu Kapi Gold Project, Ethiopia
KEFI continued to oversee the physical preparations for full development to be triggered at financial closing, such as:
| · | Clearing of new host lands for community members to be resettled; |
| · | Overseeing the early works programme of detailed engineering and procurement, by principal construction contractor Lycopodium; |
| · | Supporting the planning and procurement programmes of mining services contractor Corica; |
| · | Overseeing the ‘new access road’ and ‘electricity connection’ works contracts; under which surveys and procurement has been completed; |
| · | Triggering compensation procedures for the first re-settlers at the Tulu Kapi electrical substation site; and |
| · | Recruitment of further key personnel for the next stage of the Project. |
Project Funding
The signing of detailed binding documentation and the launch of full Project development is expected during Q4 2021. All equity and debt funding would be committed and binding upon signing, and subject only to normal conditions for such a transaction. Debt disbursement would follow after subscription of equity-risk capital, as is normal in such projects, and the timing of receipt will be structured to meet Project requirements.
Upon financial completion and any remaining conditions precedent being satisfied, it is expected KEFI will have achieved the following:
| · | Fully-funded the development of Project company Tulu Kapi Gold Mines Share Company’s (“TKGM”) open-pit gold mine for start of production in mid-2023; |
| · | Have reserves set aside for cost-overruns for production start-up or, if not needed, available to trigger initial stages of development of Tulu Kapi underground mine from late 2023; |
| · | Retained ownership of c.70% of TKGM, versus originally estimated 45% ownership; and |
| · | Successfully minimised ownership dilution at the KEFI level by (a) maximising subsidiary-level finance, and (b) arranging for KEFI-subsidiary-level financing with conversion rights into KEFI shares to be based on the VWAP at the time of production (which the Company believes will be materially higher than at current levels), if not repaid beforehand. |
It is expected that the non-KEFI shareholding in TKGM, of c.30%, will comprise Ethiopian Government and non-Government local organisations and these relationships will strongly reinforce the Project’s very deliberate efforts to align at community and district levels and with government at all levels.
Advanced conditional approvals, which have already been received, account for c.63% of the US$356 million aggregated funding sources and the remaining c.37% (c.US$131 million) is expected to come from existing identified parties working alongside those who have already resolved their conditional approval. All parties have agreed to enter into binding documentation at the same time.
Contracts were issued and work started last year with the Ethiopian Electric Power Corporation and Ethiopian Roads Authority for Project offsite works. In respect of on-site works, the principal on-site contractors, Lycopodium Limited and Corica Mining Services Share Company, each the largest in Africa in their respective specialised contracting areas, have signed letters of intent and produced all-but agreed final forms of detailed documentation for execution at financial completion.
Gold & Minerals Limited Joint Venture (G&M), Saudi Arabia
KEFI’s operations in Saudi Arabia are conducted through its 34% owned joint-venture company, Gold & Minerals Ltd (“G&M”), where KEFI is the operating partner. G&M has finished the Phase 4 drilling programme to support the goal of reporting an expanded and upgraded Mineral Resource.
The Preliminary Feasibility Study for the potential start of development of the Hawiah deposit in 2023 continues, and other recent activities have included the following:
· Completion of the Environmental and Social Baseline Study;
· Metallurgical testing progressing with reasonable recoveries so far being indicated for all principal metals, copper, gold, zinc and silver; and
· The 30 man base camp at Hawiah is now fully operational and plans are underway to increase camp capacity.
· Geo-hydrogeological studies are also in progress and a consultancy group are performing pump testing on a number of existing boreholes ahead of targeted pump testing and groundwater modelling.
Post Period End
On 29 September 2021 the Company reported that the preparations for the launch of the development phase of the Company’s Tulu Kapi Gold project have identified a number of security concerns that have led KEFI and TKGM to temporarily delay the Project until these are satisfactorily addressed. The Ethiopian Ministry of Mines has been notified as have the other Government agencies, the Company’s financing partners and the local community. All parties respect the need to ensure the security situation is completely ready for the Project construction to proceed and all continue to prepare for launch as soon as appropriate during Q4 2021.
In the meantime, the Company’s Hawiah Copper-Gold Project (“Hawiah”) in Saudi Arabia continues its fast-track programme to produce an expanded and upgraded Mineral Resource Estimate and Preliminary Feasibility Study for development.
Commenting, Mr Harry Anagnostaras-Adams, Executive Chairman of KEFI Gold and Copper said, “During the first half of 2021 we made significant progress with both our Tulu Kapi and Hawiah projects despite the logistical restrictions imposed to protect personnel and the wider community due to COVID-19. Whilst it is disappointing that our Tulu Kapi Gold Project is temporarily paused whilst security concerns are addressed, we remain cautiously optimistic that detailed binding Project financing documentation can be signed, and Project development triggered during Q4 2021. In Saudi Arabia, our Hawiah Copper/Gold project continues its fast-track programme to produce an expanded and upgraded Mineral Resource Estimate and Preliminary Feasibility Study for development.
“KEFI has made significant advances with its projects in the highly prospective Arabian Nubian Shield during the first half of 2021 and despite recent challenges remains very well positioned to bring two significant projects into production.”
