KEFI Minerals plc – Interim Results

KEFI Minerals plc – Interim Results

KEFI Minerals (AIM: KEFI), the gold exploration and development company with projects in the Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, is pleased to announce its unaudited interim results for the six months ended 30 June 2019.

 

The statement below encompasses the activities of the Company's subsidiary, KEFI Minerals (Ethiopia) Limited ("KME"), in Ethiopia, and its joint venture, Gold & Minerals Limited ("G&M"), in the Kingdom of Saudi Arabia.

 

Overview

 

Period Highlights

 

·    During the period, the Tulu Kapi Gold Project in Ethiopia (the "Project") remained the primary focus of KEFI's activities.

·    Project development planning remained focussed on achieving production start-up in mid-2021.

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

·    Exploration re-activated at the Hawiah Exploration Licence in Saudi Arabia.

 

Post Period Highlights

 

·    During September 2019, following meetings in Perth and in Addis Ababa with the Company's partners in Tulu Kapi Gold Mines Share Company ("TKGM"), with the senior regulatory bodies and with the principal project contractors, all parties resolved to proceed with triggering the development of the Project in October 2019.

·    TKGM's finance plan remains for full Project funding to be provided at the TKGM level.

·    The Project plan remains subject to compliance with all participants compliance and governance processes.

·    The Project plan is for TKGM to trigger its development schedule with Project equity funding in October 2019, full finance closing in March 2020 and full production in October 2021.

·    The key steps for starting Project development in October 2019 are as follows:

Execution and closing of updated shareholder agreements and share subscription documents, which are in hand and include normal undertakings by the three shareholders of TKGM, as well as by TKGM itself as regards normal operational undertakings and insurances; and

Satisfactory independent assessments of security, which has been received, and of the readiness of the Government administration and of the community, which is in hand.

 

 

Tulu Kapi Gold Project, Ethiopia

 

·    KEFI will own 80% of the exploration and holding company for Ethiopia, KME, which in turn will own 56% of TKGM, thus bestowing KEFI a 45% beneficial interest in the Project.

·    KEFI is the operating partner of the operating joint venture  company, TKGM.  The other 55% beneficial interest is to be owned by the Company's long-standing partner, the Ethiopian Government and its more recently committed Ethiopian partner ANS Mining. 

·    Total TKGM subscribed equity is planned to be c. US$130 million including the past investment of c. US$60 million up to 31 December 2018 and the committed planned investment subsequent to that.  Equity-funding will cover the initial phase of Project development and KEFI's partners have committed US$58 million (Ethiopian Birr equivalent) between them. 

·    Non-equity funding plans remain as previously reported.  Debt-based finance of US$110 million for infrastructure, plus cash reserves, together with minor working capital facilities are planned.  In addition, there are planned conventional construction and mine services contracts with the selected contractors.

·    At a gold price of US1,400/oz the following are the estimates for the Project open pit only:

Project export revenues are projected at c. US$200 million per annum, which would likely make it Ethiopia's largest single-enterprise export generator;

TKGM NPV, at a discount rate of 8%, on start of production in 2021 is estimated at £196 million (US$249 million).  From KEFI's viewpoint, the Company's planned 45% beneficial interest in the Project NPV at start of production would be £88 million (US$112 million); and

Project free cash flow is estimated at £31 million per annum (US$40 million), of which KEFI's beneficial interest would be c. £14 million per annum (US$18 million).

 

Gold & Minerals Limited Joint Venture (G&M), Saudi Arabia

 

·    KEFI is the operating partner of G&M, the joint venture company in which the Company's shareholding is 40%.  The other 60% is owned by the Company's long-standing partner, Saudi conglomerate ARTAR. 

·    Following the resumption of exploration at Hawaih after approximately three years, following the resolution of local access issues, regulatory overhauls and subsequent licence renewal, as announced on 21 June 2019, drilling is expected to commence this week at the Hawiah Exploration Licence. G&M's licence renewal at Hawiah was the first issued under new Saudi Arabian regulations.

 

Corporate and Financial

 

·    £1.9 million was raised during the period through the issue of 57,000,000 shares in February 2019 at a price of 1.7p per share, 14,864,533 shares issued in April 2019 at a price range of 1.7p to 2p per share and 37,200,000 shares issued in June 2019 at a price of 2p per share.

·    At the Company's AGM on 28 June 2019, shareholders approved that the nominal value of the Company's ordinary shares be 0.1p per ordinary share.

·    On 29 April 2019 the Company was very sad to report the sudden passing of its Chairman, Mr Mark Wellesley-Wood.  The Company's Managing Director, Harry Anagnostaras-Adams, resumed the role of Executive Chairman, which he held prior to Mr. Wellesley-Wood's appointment.

 

Post Period

 

·    Since the period end, the Company has restructured its working capital convertible loan facilities with the result that security on the existing convertible loan facility has been released and a new additional unsecured facility has been arranged.

·    The new two-year unsecured convertible loan facility, initially of £1.5 million (arranged in August 2019) was subsequently increased to £2.25 million in September 2019,  Under the terms of the facility, funds can be drawn down in multiples of £250,000, drawn not less than two weeks apart.

 

Commenting, Mr Harry Anagnostaras-Adams, Executive Chairman of KEFI, said, "During the first half and subsequently, the Company has advanced to a most propitious stage.  We have reached a very significant and exciting moment for all stakeholders in our Company and our projects.

 

"The value-enhancing milestones ahead augur well for the Company's prospects and we seem fortunate that this coincides with a rising gold price and aggressively pro-development Government initiatives in our host countries, Ethiopia and Saudi Arabia.  The remainder of 2019 is expected to be a very exciting period for the Company and we look forward to providing regular updates as matters progress."

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