# KEFI Minerals plc Q3 2019 Operational Update

- Link: https://www.directorstalkinterviews.com/kefi-minerals-plc-q3-2019-operational-update/412796616
- Published: 2019-10-30T07:22:01+00:00
- Author: Giles Arbor

**KEFI Minerals** ([LON: KEFI](https://www.directorstalkinterviews.com/company/kefi-gold-and-copper/kefi.l)),
the gold exploration and development company with projects in the Federal Democratic
Republic of Ethiopia and the Kingdom of Saudi Arabia, has provided its quarterly
operational update.

This update encompasses the activities of KEFI Minerals (Ethiopia) Ltd and Tulu 
Kapi Gold Mines Share Company in Ethiopia, and Gold & Minerals Ltd in Saudi Arabia
for the period from 1st July 2019 to 30th September 2019, together with more recent
developments where appropriate.

Any material events have been reported in separate announcements, which are referred
to below along with appropriate updates.

**Tulu Kapi Gold Project in Ethiopia**

_Overall Status_

As announced on 29 October 2019:

· KEFI confirms the receipt by TKGM of all the Government permits and independent
consultants reports required for closing the Project equity financing and triggering
the development of the Project. The only outstanding matter now is for the Ethiopian
Government to resolve certain internal administrative matters.

· KEFI has also received re-confirmation from its partners, and TKGM from its contractors,
of their respective commitments to proceed as soon as the Government has resolved
its internal administrative arrangements in a manner which does not impede other
shareholders’ protections.

· The Company understands that meetings are taking place daily within the Ethiopian
Government to resolve these internal matters which pertain to how it manages its
shareholding in TKGM – a high-profile public-private partnership in a new industrial
sector for the country. As previously reported by the Company, the budget for the
Project investment has already been approved by the Ethiopian Parliament and the
associated infrastructure work for which it pays has already commenced. TKGM has
the potential to be the largest single export-generator for Ethiopia.

· The Minister for Mines and Petroleum of the Federal Democratic Republic of Ethiopia,
Dr Samuel Urkato, has confirmed to KEFI that the Government is keen to proceed with
the Project and has authorised the Company to report to its shareholders that: “
The Tulu Kapi project remains of the highest priority for the Government at all 
levels and that there is just one outstanding administrative matter, internal to
the Government, which will be resolved shortly, so that the development may commence.”

Government

· Since the Prime Ministerial go-ahead for the Project, as announced on 5 March 
2019, the final Federal policy consent was received from the Ethiopian central bank,
as announced on 6 June 2019.

· All local Government approvals have been received for starting development.

Project Financing Activities:

· The finance plan is clear and its execution is subject to the compliance procedures
for each party in the relevant jurisdiction.

· As reported in the 2018 Annual Report, published in June 2019, the overall US$
242 million funding plan for Tulu Kapi is summarised in the tables below, which 
excludes the past investment of c. US$60 million to the end of 2018 and also excludes
the c. US$50 million of mining equipment to be supplied by the mining contractor,

| Funding Requirements | US$
millions | 
| On-site Infrastructure | 106.3 | 
| Mining | 28.6 | 
| Off-site Infrastructure | 20.0 | 
| Owner’s Costs (community, working capital, management, spares, contingency, | 54.5 | 
| Interest during grace and other finance effects | 32.8 | 
| Aggregate Funding Requirements | 242.2 |

| Sources of Funds | US$
millions | 
| TKGM Project Equity |   | 
|   – Government | 20.0 | 
|   – ANS Mining | 38.0 | 
|   –  KEFI (excluding pre-2019 investment US$60 million) | 10.0 | 
| Sub-Total | 68.0 | 
| Working Capital Facility | 14.2 | 
| Infrastructure Finance | 160.0 | 
| Aggregate of Funding Sources | 242.2 |

· As reported on 29 October 2019 KEFI has also received re-confirmation from its
partners, and TKGM from its contractors, of their respective commitments to proceed
as soon as the Government has resolved its internal administrative arrangements 
in a manner which does not impede other shareholders’ protections.

· The mandated US$160 million bond financing awaits the triggering by TKGM of the
balance of its compliance procedures and their associated costs, with full Project
finance to close after initial development work has been funded with Project equity.
This remains the plan and bank project finance interest has returned to Ethiopia
and to the Project after the country’s transformational improvements since early
2018, serving to further mitigate project financing risk for TKGM.

Tulu Kapi Project development preparations:

· Project development planning remains focused on production start-up in mid-2021.

· Several recent security incidents were reported on 28 June 2019, including some
elsewhere in the country and also a minor robbery and fire at Tulu Kapi which led
to the theft of some exploration equipment and damaged some drill core. Whilst the
Tulu Kapi incident caused minor financial loss and no loss of data, it necessitated
the activation of strong security measures at site and surrounding district before
commencement of resettlement activities. These security measures have been carried
out and more recent regional unrest had no effect on the site and district.

**Saudi Arabia**

· Field work commenced during Q3 at the Hawiah Exploration Licence, within the Wadi
Bidah Mineral District, by the KEFI-operated joint venture, G&M, as announced on
21 June 2019.

· As announced on 23 October 2019, the first drill hole followed geophysical and
other surveys from the surface and intercepted a 15.8 metre interval (true width
estimated at 8 metres) of massive sulphide at a vertical depth of 125 metres. Assay
results are pending for this hole and will be reported in due course.

· The massive sulphide interval dominantly contained pyrite and chalcopyrite (a 
principal ore for copper), and minor bornite, with associated alteration and lithology
consistent with that of a Volcanic Massive Sulphide (“VMS”) system.

· This initial intersection confirms that VMS mineralisation is the source of the
previously reported 5.5km long geophysical anomaly and that the mineralisation is
copper bearing.

· The ongoing 2,500 metre diamond-drilling programme is designed to test this geological
model and the geometry of both the near surface oxide gold mineralisation and massive
sulphide copper target at depth.

**Corporate**

New Non-Executive Director

· As announced on 22 August 2019, Mr Richard Robinson has been appointed as a Non-
Executive Director of the Company. Mr Robinson has been involved for over 40 years
in the international gold, platinum, base metal and coal industries. He spent over
20 years at Gold Fields of South Africa Ltd (“GFSA”) where he had executive responsibility
for gold operations, gold exploration, international operations, the base metals
and coal operations, and all the group commercial activities.

Restructuring of Working Capital Convertible Loan Facility:

· As announced on 5 August 2019, the Company’s working capital loan facility was
restructured (the “New Loan Facility”) to provide greater flexibility to the Company
by removing the existing security charges over assets and extending the loan maturity
dates.

· As at 28 October 2019 a total of:

o £1.75 million has been drawn under the New Loan Facility with £0.5 million remaining
to be drawn in the facility and £1.6 million remaining to be drawn under the previous
Loan Facility; and

o £1.19 million of the New Loan Facility has been repaid by issuing 156,400,505 
KEFI shares and no amounts are owed under the previous Loan Facility.

Unsecured Working Capital Advances:

· The Company has a long-standing arrangement with certain shareholders (unrelated
parties) to provide unsecured advances from time to time and this has only been 
utilised as to minor amounts.

Ongoing Corporate Costs:

Once TKGM can stand on its own financially, KEFI-borne direct costs are expected
to contract back to c. £1 million per annum, excluding exploration.

Tulu Kapi Project Economics:

· The Project economics have improved as a result of the higher gold price outlook:

o Financing refinements:

§ The latest Project finance plans provide for equity-funding of the first six of
a twenty-four-month programme. The important consequence of this is that cash can
build up before the first lease-payment: and

§ Likewise, gold in ore stockpiles can also build up further, providing further “
margin of safety”.

o TKGM projected economic statistics have improved markedly with the increased gold
price, as announced on 8 April 2019:

§ TKGM’s NPV at today’s gold price of approximately $1,500/oz and applying an 8%
discount rate, is £167 million (US$212 million) at start of construction and £239
million (US$303 million) at start of production;

§ The NPV of KEFI’s planned 45% beneficial interest ranges between a low of £41 
million (US$52 million) at US$1,300/oz at start of construction this year and a 
high of £108 million (US$137 million) at US$1,500/oz at start of production in 2021
i.e. within the range of 6 to 17 times the current market capitalisation of the 
Company of c.£6 million (US$8 million); and

§ These figures ignore the underground deposit and exploration assets.

**Major Milestones Targeted for 2019**

The Tulu Kapi Gold Project, Ethiopia:

· Project equity closing of the first instalment US$11.4 million (Ethiopian Birr
equivalent);

· Community resettlement triggered;

· Tenders awarded for construction of off-site infrastructure for roads and power,
financed by project equity;

· Start to update front end engineering and design for on-site infrastructure and
commence procurement long-lead items;

· Start compliance procedures for Project infrastructure finance implementation 
phase; and

· Short-listing of contractors for bulk earthworks (part of on-site infrastructure),
to be financed by Project equity.

Hawiah Exploration Project, Saudi Arabia:

· Complete scout drilling of a large copper-gold target.

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