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KEFI Minerals Plc

KEFI Minerals plc Quarterly 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 October 2017 to 31 December 2017.

This quarterly operational report encompasses the activities of KEFI Minerals (Ethiopia) Ltd (“KME”) and Tulu Kapi Gold Mines Share Company Limited (“TKGM”) in Ethiopia and Gold & Minerals Ltd (“G&M”) in Saudi Arabia.

Commenting, KEFI’s Executive Chairman, Harry Anagnostaras-Adams, said:

“The focus of the quarter has been preparing project funding and development of the Tulu Kapi Gold Project in Ethiopia (“Tulu Kapi” or the “Tulu Kapi project”) with our partner the Government of Ethiopia, contractors Lycopodium and Ausdrill/African Mining Services and preferred project financiers.

“The Saudi Arabian Government’s new pro-mining policy has now been announced. KEFI looks forward to exploring its upgraded portfolio of targets with partner ARTAR, a leading Saudi conglomerate.

“The final Tulu Kapi project models were agreed within the consortium and uploaded into the formal financing data rooms. They show some improvements for shareholders, as compared with recent company guidance. During the next two years Tulu Kapi is to be built as a 140,000 oz pa gold producer and, at the current gold price of $1,300/oz combined with any of the contemplated financing scenarios, KEFI shareholders’ beneficial interest in the net free cash flow per annum (after debt service and tax) exceeds the Company’s current market capitalisation.

“Our existing project pipeline in Ethiopia and Saudi Arabia provides the opportunity to build a production base of c. 200,000 oz pa of gold during Tulu Kapi’s first three production years.”

Tulu Kapi Gold Project, Ethiopia

·     Project contactors have confirmed costings and schedule for the final project models which have been uploaded into the formal financing data rooms, for equity and for debt.

·     Updated economic outputs show some potential improvements for shareholders as compared with recent Company guidance.

·     It remains the case that additional project-level equity investment may minimise the dilution of KEFI shareholders’ beneficial interests. A project-level transaction on the same terms as with the Government would imply a project valuation of c. US$100 million (100%) and, under that financing scenario, KEFI shareholders would expect to retain a beneficial ownership interest in the order of 55% in the Project. In light of the stronger gold price, the base case is now at US$1,300/oz. Notable cash flow and NPV-style economic outputs at a gold price of US$1,300/oz are set out below:

          Updated Models

 

100%

  55%

100%

 55%

Net cash flow pa in first 3 years, after debt service & tax:

$32M

$18M

£23M

£13M

Project NPV (8%) at start of construction Q2-18: 

$109M

$60M

£79M

£44M

Project NPV (8%) once built, ie at production start Q1-2:

$175M

$96M

£128M

£71M

·     The previous guidance included the following:

o  NPV (100%) at start of construction $74M at $1,250/oz ($92M at $1,300/oz) ,and

o  NPV (100%) at start of production $131M at $1,250/oz ($152M at $1,300/oz)

·     Current market capitalisation is £10M or US$13M, at 3 pence per share

·     Ethiopia has for 15 years been in the world’s top 10 growth countries and reported significant improvements in health, education and infrastructure for its population of c. 100 million. It is now the world’s highest growth country and the consistent commitment to national development is reflected in the Government commitment to supporting development of the minerals sector and its particular support of Tulu Kapi and KEFI.

Tulu Kapi Project Financing:

·     Drawdown: target timing to be synchronised with community resettlement and the triggering of procurement and construction in Q2-18. Remains subject to completion of due diligence, regulatory approvals and execution of binding documentation.

·     Government approvals being implemented as required:

o  The Mining Licence transfer to TKGM has been cleared and execution in process as has regulatory approval of most historical investment by KME, in that 95% of the spending to 31 December 2014 has been formally approved and the balance, along with the spending since 1 January 2015, is now being dealt with.

o  The community compensation surveys, calculations and negotiations have been completed.

o  The Ethiopian Electricity Power Corporation and Ethiopian Roads Authority have confirmed their budget and schedule commitment to construct the project’s off-site infrastructure.

o  National Bank of Ethiopia (central bank) has approved most administrative requests and is engaging on the remaining issues

·     Planned funding remains unchanged but the structure has been streamlined.  Oryx and KEFI mutually agreed to terminate their relationship. The structure for the development of the Company’s Tulu Kapi project will otherwise remain the same, with the other existing consortium members still performing all the various required roles as previously outlined.

Gold & Minerals (“G&M”) Ltd, an incorporated joint venture with 60%-partner ARTAR, Saudi Arabia

·     New minerals policies announced by the Saudi Government: to facilitate growth and making it the third pillar of the Saudi economy.

·     Portfolio of Licence Applications: G&M has upgraded its portfolio and now has pegged much of a major structural VHMS belt – a structural corridor containing several systems of volcanic hosted massive sulphides. A separate RNS will be issued when the new regulatory details are clarified along with G&M’s particular tenements.