KEFI Minerals plc Conditional Fundraising to Raise £5.62 Million

KEFI Minerals

CONDITIONAL FUNDRAISING TO RAISE £5.62 MILLION

Highlights

· Fundraising of £5.62 million (gross) by way of a:

o placing by Brandon Hill Capital as the Company’s agent raising £600,000 (gross)

o subscription by certain of the Directors, employees and Lycopodium raising £400,000 (gross)

o subscription by Lanstead Capital LP, an institutional investor, raising £4,620,000 (gross)

· Issue Price under the Fundraising of 5.61 pence per New Ordinary Share, being the equivalent of 0.33 pence per Existing Ordinary Share

· Proceeds to be used to fund the Company’s expenditure for 2017, including finalisation of financing arrangements and the triggering of development at the Company’s flagship Tulu Kapi project, as well as additional exploration work in Ethiopia and Saudi Arabia

· General meeting to approve Fundraising and consolidation of the Company’s ordinary shares on a 17-for-1 basis

Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals Plc, commented: “The Directors and our major shareholders welcome Lanstead as a cornerstone shareholder in KEFI. We have continued to advance the Tulu Kapi gold project in Ethiopia and are now at a pivotal stage of the Company’s development. The proceeds of the Fundraising will underpin the activities for the whole of 2017 as we look to start development of this quality project during the year.

“I would also like to take the opportunity to thank my fellow Directors, managers and contractors for their continued support. Their confidence in the project is underpinned by the potential upside of Tulu Kapi and I look forward to updating shareholders on the development of Tulu Kapi throughout the year.”

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, is pleased to announce that it has conditionally raised approximately £5.62 million (approximately US$7.03 million), before expenses, pursuant to the Fundraising by way of:

· a placing of 10,695,182 Placing Shares to both existing and new shareholders at the Issue Price to raise £600,000 (before expenses) (the “Placing”);
· a subscription by certain Directors, employees and a supplier of the Company for 7,130,118 Company Subscription Shares at the Issue Price to raise £400,000 (before expenses) (the “Company Subscription”); and
· a subscription of 82,352,941 Lanstead Subscription Shares by Lanstead at the Issue Price to raise £4,620,000 (before expenses) (the “Lanstead Subscription”).

As the existing authorities of the Directors to issue Ordinary Shares for cash on a non-pre-emptive basis are insufficient to permit the issue of all Ordinary Shares pursuant to the Fundraising, the Placing, the Company Subscription and the Lanstead Subscription are each conditional on, amongst other things, the passing of the Resolutions at the General Meeting.

The Placing has been carried out by Brandon Hill Capital Limited as agent of the Company pursuant to the terms of a Placing Agreement. Under the Placing 10,695,182 New Ordinary Shares will be issued at the Issue Price. Pursuant to the Company Subscription, certain Directors and Lycopodium have conditionally subscribed for 7,130,118 New Ordinary Shares at the Issue Price direct with the Company.

In total 82,352,941 New Ordinary Shares have been conditionally subscribed for by Lanstead at the Issue Price. The Issue Price payable by Lanstead pursuant to the Lanstead Subscription is equivalent to the Issue Price pursuant to the Placing and the Company Subscription.

Of the gross proceeds of the Lanstead Subscription, £693,000 (being 15%) will be retained by the Company and the balance of £3,927,000 will be pledged by the Company pursuant to the Sharing Agreement. The Sharing Agreement entitles the Company to receive back those proceeds on a pro rata monthly basis over a period of 18 months, subject to adjustment upwards or downwards each month depending on the Company’s share price at the time, as explained in more detail below. The Sharing Agreement provides the opportunity for the Company to benefit from positive future share price performance.

Readers of this announcement should note that the Fundraising will close following completion of the Consolidation, further details of which are set out below. The Issue Price of 5.61 pence per Fundraising Share is the equivalent to an issue price of 0.33 pence per Existing Ordinary Share.

Further details of the Fundraising and the Consolidation as well as defined terms used throughout this announcement are set out below.

Operational update

The capital markets for minerals exploration and development projects remain challenging. This is especially so for projects in new and upcoming regions for mining such as the Federal Republic of Ethiopia and the Kingdom of Saudi Arabia. However, both countries have put a strategic priority on the mining sector. In addition, they are within a geological region, the Arabian Nubian Shield, which has major potential for minerals discovery and in which the company is well positioned, having discovered and acquired mineral interests. KEFI feels confident that for these reasons, and because of its careful establishment and appreciation of local alliances, it has successfully developed a counter-cyclical opportunity to effectively establish successful operations in the region.

The Tulu Kapi Gold Project in Ethiopia remains the primary focus of the company’s activities and its development funding remains the Company’s main objective so that development can be triggered. The declaration of a six-month State of Emergency by the Ethiopian Government on 8 October 2016 had no effect on operations and activities continued as normal. During November 2016, the Government implemented a wide-ranging overhaul of its governance structures to address public concerns. This demonstrable determination by the Government to maintain responsible development for the long term is very positive for KEFI and international investors generally in Ethiopia. With KEFI in particular, its well established collaborative approach with the Government and project contractors augers well for its development prospects at Tulu Kapi.

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This 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 has set itself many milestones ahead for the remainder of 2017.

KEFI works closely with the Ethiopian Government which has reconfirmed its commitment to a project/equity investment of $20 million in exchange for an additional non-carried 20% interest at the project level above its original 5% carried interest. This implies a valuation of $75 million to the remaining 75% of Tulu Kapi held by Kefi Minerals. Further support is provided by the Development Bank of Ethiopia through its provision of attractive additional long-term development loans. In addition, KEFI is also actively working with several private sector parties considering project-level participation in equity and/or debt alongside the Government and the Company.

KEFI is actively working on the implementation of a non-equity financing proposal alongside the project contractors and the Ethiopian Government. Whilst this proposal offers a potentially attractive development funding package, it remains on a non-exclusive basis pending the close-out of various conditions precedent. This allows KEFI to preserve its options and maintain its discussions with alternative financiers. KEFI expects to update the market further on this in the current quarter.

Whilst the Board has been tightly managing the Company’s cash flows and risk-management generally, it has also moved discretely to target some opportunities to add to the upside potential. In the Kingdom of Saudi Arabia the Company has overhauled and upgraded the portfolio of applications and in Ethiopia the Board has initiated an effort to expand tenure over additional prospective ground. It is worth noting that in Saudi Arabia, the Government has, during the past months, announced a revision of the mining sector with a view to accelerating growth. Accordingly, some of the proceeds from the Fundraising will be directed to advancing the Company’s position in Saudi Arabia.

These initiatives, on both sides of the Red Sea, reflect the Board’s conviction that the Arabian Nubian Shield has world-class prospectivity. KEFI has established a solid platform with strong partners in each jurisdiction, and it is an opportune time to press its advantage and expand the Company’s exploration ground.

The Board’s confidence and commitment is illustrated by the current Directors’ re-investment of nearly all (98%) of their non-share-based remuneration into the Company’s shares during the two reported financial years (2014 and 2015) following the acquisition of the Tulu Kapi Gold Project. This approach also prevailed during the latest quarter.

As announced on 13 July 2016, the role of Deputy Chairman and Senior Independent Director will pass from Professor Ian Plimer to Mr Mark Wellesley-Wood with effect from the closing of the General Meeting.

Further information concerning the Company’s operations can be viewed on its website at www.kefi-minerals.com.

General Meeting

The Company has today published a circular to Shareholders to convene a general meeting to be held at the offices of Fieldfisher LLP, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3TT, United Kingdom on 1 March 2017 at 11.00 a.m. to consider and, if thought appropriate, pass Resolutions to approve the Consolidation and to grant the Directors authority to allot the Fundraising Shares. Copies of the circular will be available free of charge from the Company’s registered office during normal business hours on each day (excluding Saturdays, Sundays and public holidays) from today’s date until the date of the General Meeting. Copies will also be available from the Company’s website at www.kefi-minerals.com.

Admission of the Fundraising Shares and Total Voting Rights

Application will be made to London Stock Exchange for Admission of the Fundraising Shares to trading on AIM and it is expected that Admission will become effective and that dealings in the Fundraising Shares will commence at 8.00 a.m. on 2 March 2017. Following Admission of the Fundraising Shares, the total issued share capital of the Company will consist of 332,702,973 New Ordinary Shares each with voting rights. The Company does not hold any Ordinary Shares in treasury. Therefore, the total number of voting rights in the Company will be 332,702,973 and this figure may be used by Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA’s Disclosure and Transparency Rules.

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