Commenting on the Interims KEFI’s Executive Chairman, Harry Anagnostaras-Adams, said: “The first six months of 2017 and subsequently has been a transformational period for KEFI. We have made significant progress at Tulu Kapi, agreeing with our partners both the execution plan to close the required financing and the Project works schedule.
“The rest of 2017 is expected to be equally busy as we work to close the Project financing and move towards development. We look forward to providing updates as further progress is made.”
KEFI Minerals (AIM: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and Democratic Republic of Ethiopia, announced its unaudited interim results for the half-year ended 30 June 2017 and provide an update on development funding.
The statement below encompasses the activities of the Company’s subsidiary, KEFI Minerals (Ethiopia) Limited, in Ethiopia and its joint venture, Gold & Minerals Limited (“G&M”), in the Kingdom of Saudi Arabia.
Tulu Kapi Gold project, Ethiopia
-- In the first six months of the year, the Tulu
Kapi Gold Project in Ethiopia (the "Project")
remained the primary focus of KEFI's activities
and we progress towards triggering development
this year and open-pit production in late
2019.
-- We continued to work with our syndicate partners
- the principal financier Oryx Management
Limited ("Oryx"), the Government of Ethiopia,
Mining contractor Ausdrill and plant construction
contractor Lycopodium, targeting a "hot start"
to construction as soon as funding is in place.
-- Post the period end, the Company announced
the signing of a mandate letter and heads
of terms for US$135 million of project funding
with Oryx to finance and operate all the on-site
infrastructure at the Project. This finance
plan de-risks the Project further with a proposal
that provides a 9-year tenor for repayment
from drawdown, including a 30-month grace
period for construction and start-up.
-- KEFI and the Government of Ethiopia have launched
a new company to hold the Project, Tulu Kapi
Gold Mines Share Company Limited ("TKGM").
o Based on current estimates of capital spending
and contributions, respective shareholdings
will be 75-80% KEFI and 20-25% Government.
o The Board of TKGM includes two representatives
from the Government and four from KEFI. Of
the KEFI appointees Harry Anagnostaras-Adams
(KEFI Executive Chairman) has been appointed
Chairman and Wayne Nicoletto (KEFI Chief Operating
Officer) has been appointed Managing Director.
-- Each of our syndicate partners will contribute
funding, supply equipment and also play a
hands-on role in construction or (parts of)
the operations. KEFI, through TKGM will retain
overall project management and control. As
a result of the Oryx proposal the Project's
remaining funding requirement for triggering
construction has now been successfully reduced
from the c.US$289 million it stood at upon
KEFI assuming control in 2014 to a residual
balance likely to be under the most recently
published estimate of US$24 million, based
on ongoing refinements to planned capital
expenditure and contingency provisions. Several
proposals are being considered.
-- The Company was also pleased to see the Government
of the Federal Democratic Republic of Ethiopia
lifting of the state of emergency implemented,
following a vote in the country's parliament
at the beginning of August.
-- TKGM is now implementing the agreed project
plan, including:
o Transferring the Project mining licence
(the minerals rights and the overarching permit
to develop and operate) from KME to TKGM.
o Ancillary licenses from local and regional
authorities for the detailed Project construction
activities such as road widening, power connections
and waste management.
o Resolving with local authorities the resettlement
site infrastructure.
o Calculating the final compensation payable
for displaced landholders in light of the
now completed updates of property surveys
and the collected independent data for landholders'
product yield and market prices.
Gold & Minerals Ltd Joint Venture, Saudi Arabia
-- In Saudi Arabia, the initial priority for
the Company's G&M Joint Venture continues
to be to develop an open-pit, heap-leach ("HL")
gold operation, using a staged development
approach predicated on a low-capex start-up
to be expanded in modular stages as additional
mineralisation is delineated.
-- The potential cash flow from HL oxide gold
production is an opportunity to fund:
o construction of a carbon-in-leach ("CIL")
plant to process the deeper sulphide ore profitably;
and
o exploration in Saudi Arabia to create a
strong Saudi mining company for the long term.
-- Meetings with regulators in March 2017 resulted
in the Mining Licence Application for the
Jibal Qutman HL gold development being lodged
with the Saudi Government.
-- At Hawiah, G&M identified a significant target
for precious and base metals based on the
surface-sampling of a six-kilometre long gossan
(oxidised mineralisation exposed on the surface)
and the results of the geophysical surveys
of the ground beneath the gossan.
-- KEFI's Saudi venture remains a strategic long-term
priority and the Company is confident of having
established an early-entrant position in what
will emerge as a world-class minerals province.
G&M continues to await the new Saudi mining
industry regulations and policies that are
expected to be published soon.
Corporate
-- Post the period end, all VAT refunds from
Ethiopian authorities have now been received
(equivalent to c. GBP2.5 million).
-- During the period KEFI consolidated 17 Existing
Ordinary Shares into 1 New Ordinary Share.
The Shareholders still hold the same proportion
of the Company's ordinary share capital as
before the Consolidation. Other than a change
in nominal value, consolidated New Ordinary
Shares will carry equivalent rights under
the Articles of Association to the previous
Ordinary Shares.
-- In March 2017, the Company raised GBP5.62
million (before expenses):
o a placing of 10,695,182 to both existing
and new shareholders at 5.61p to raise GBP0.6
million (before expenses).
o a subscription by certain Directors, employees
and a supplier of the Company for 7,130,118
Company Subscription Shares at 5.61p to raise
GBP0.4 million (before expenses); and
o a subscription of 82,352,941 Lanstead Subscription
Shares by Lanstead at the issue price of 5.61p
to raise GBP4.62 million (before expenses)
(the "Lanstead Subscription"). Of the gross
proceeds of the Lanstead Subscription, GBP0.7
million (being 15%) was retained by the Company
and the balance of GBP3.9 million was pledged
by the Company pursuant to the Sharing Agreement
(the "Sharing Agreement").
o The Sharing Agreement entitles the Company
to receive back the outstanding 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. It is the Company's
intention to use the total proceeds from the
Subscriptions and the Sharing Agreement in
the Company's continuing operations, including
for general working capital requirements.
The embedded derivative is revalued at the
reporting date based on the share price prevailing
at that date and any change in fair value
is recognised in the statement of comprehensive
income.
-- Cash balance of GBP1.6 million at 30 June
2017 (FY 2016: GBP0.4 million).
