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KEFI Minerals Plc

KEFI Minerals plc Q3 Operational Update

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 provided an operational update for the period from 1 July 2018 to 30 September 2018.

This quarterly operational 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.

Tulu Kapi Gold Project

Project Development Funding

Project development funding has been arranged, subject to normal conditions precedent:

·     Equity capital has been committed as follows:

o  KME has already funded the pre-development costs of approximately US$60 million;

o  The Government of Ethiopia has committed US$20 million (Ethiopian Birr equivalent) to be subscribed over 2019-2020 to fund construction of off-site infrastructure; and

o  ANS Mining Share Company (“ANS”) has committed US$30-38 million (Ethiopian Birr equivalent) to be released to TKGM as follows:

— US$9 million (Ethiopian Birr equivalent) in December 2018, subject to specified Government consents and the receipt of indicative terms sheet from the providers of secured finance; and

— US$21-29 million (Ethiopian Birr equivalent) at the closure of full development funding in early 2019.

·     Secured bonds/lease capital and a separate working capital line have been proposed, subject to normal conditions precedent:

o  US$160 million issue of listed senior secured infrastructure bonds of which US$110 million is to fund construction of on-site infrastructure and the balance set aside for financing costs during the construction period and reserves.

o  Working capital line via a stockpile financing facility up to US$20 million.

Project Contractors

All principal contractors are planning Project implementation with the KEFI/TKGM team and otherwise remain on standby for finance closing and mobilisation:

· Lycopodium for process plant and associated infrastructure.

· Ausdrill (via subsidiary African Mining Services) for mining services.

· Ethiopian Roads Authority for access roads.

· Ethiopian Electric Power Corporation for power connection.

Ethiopian Government (Federal, Regional, Zonal, Local as the case may be)

The following consents or permits have been granted:

· Development, operational, environmental and social plans.

· Investment and Shareholders Agreement for jointly-owned project company TKGM.

· Capital ratios, hedging and bank account arrangements for TKGM.

· Community resettlement dates and planned actions.

The following consents or permits remain outstanding:

· Registration of equity subscriptions, most already having been endorsed by the Ministry of Mines.

· Endorsement of updated project plans, the 2015 plan already having been approved by the Ministry of Mines.

· Approvals of finance documentation and underlying security arrangements by the central bank (National Bank of Ethiopia).

Timetable and Economics for Project financing and development

· Q1 2019: Community resettlement along with detailed engineering and procurement to start 1 January 2019 and be carried out over the following three months.

· Construction is expected to start in early 2019 and commissioning of production is expected to take place during H2 2020.

· The financial model Base Case (assuming a gold price of US$1,300/oz) indicates a payback of approximately 3 years, an EBITDA of over US$73 million per annum and a post-debt NPV of US$115 million (£82 million) at construction start and US$192 million (£137 million) at production start (100% of project at a discount rate of 8% after tax). The proposed project finance has a tenure of 9 years.

· Projected gold Production Costs are c. US$700/oz, All-in Sustaining Costs are c. US$800/oz and Total Costs, including depreciation and amortisation are c. US$1,000/oz.

· The upside leverage is indicated by a 10% increase in gold price from the Base Case of U$1,300/oz, which are expected to increase the NPV by 50%.

Corporate Structure, Board and Management

KEFI Minerals plc to remain the operating partner in:

· G&M project company in Saudi Arabia alongside Saudi conglomerate Abdul Rahman Saad Al Rashid & Sons Company Limited (“ARTAR”); and

· TKGM project company in Ethiopia alongside new shareholders, the Ethiopian Government and Ethiopian financial institution via ANS.

The Boards and Management of KEFI and TKGM have been expanded recently.

Exploration

Both TKGM and G&M to trigger exploration programs on a recently expanded land package targeting both gold and copper on “Tulu Kapi-style” gold mineralisation as well as large Volcanic Massive Sulphide systems (“VMS”). These exploration programs are to be launched when the new regulations pass in Saudi Arabia and when Tulu Kapi’s development has been triggered in Ethiopia.