KEFI Minerals (AIM: KEFI), the gold exploration and development company with projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, is pleased to provide its latest quarterly operational update.
This update encompasses the activities of KEFI Minerals (Ethiopia) Ltd (“KME”) and Tulu Kapi Gold Mines Share Company (“TKGM”) in Ethiopia, and Gold & Minerals Ltd (“G&M”) in Saudi Arabia for the period from 1 April 2020 to 30 June 2020 (“Q2”), together with more recent developments where appropriate.
Any material events have already been reported in separate announcements, which are referred to below.
Key business targets preserved despite COVID-19 restrictions
KEFI remains focused on achieving the key targets set out in February 2020. These are to:
o allow major site activities to start for the Company’s Tulu Kapi Gold Project (the “Project” or “Tulu Kapi”) in Ethiopia from October 2020; and
o to deliver a maiden Mineral Resource for the Hawiah Project in Saudi Arabia, scheduled for August 2020.
Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented :
” We are very fortunate that the strengthening gold price continues to highlight the strong investment case for Tulu Kapi to both investors and the Ethiopian Government. The Directors and various industry experts consider the outlook for the gold price to continue to be positive, as interest rates remain near zero and COVID-19 responses increase government debt to unprecedented levels.
“Tulu Kapi is the first modern mine development in Ethiopia for decades and we could not ask for a more committed community and Government. This Project is a national priority and will be the largest single export generator for Africa’s highest growth country.
“Given the robust economics of the Project we have received significant interest to potentially provide the outstanding asset level equity and other forms of duly subordinated investment.
“Our discussions are progressing with Ethiopian investors and international specialist mining financiers, with the aim of securing the required Project equity ahead of closing the full financing package in October 2020.
“We are also encouraged by the recent approval by the Saudi Cabinet of a new mining investment law, which is a very positive development for our two other advanced projects – Hawiah (copper-gold) and Jibal Qutman (gold) projects in Saudi Arabia.
“We look forward to releasing the initial Hawiah Mineral Resource in August 2020 and thus providing further confirmation that our valuable Hawiah deposit has the scale and grades for a potential long-life, profitable mine. At current copper prices, it is notable that the in-situ value of Hawiah is already likely to be more than US$2.5 billion.”
Ethiopia – Focus on development funding for the Tulu Kapi Gold Project
TKGM remains focused on the preparations and subsequent completion of the outlined finance milestones to ensure the closing of full Project funding in October 2020 and for gold production to commence in 2022, in line with recent guidance.
As previously reported, despite COVID-19, the implementation of the Project development activities has continued as planned. This includes long-lead activities such as:
· commencement of infrastructure for connection of roads and power, with the road now being built into new host lands for Tulu Kapi residents to be resettled; and
· process plant Front-End-Engineering-and-Design (“FEED”) was completed by principal contractors Lycopodium Limited (“Lycopodium”).
Earlier in the year, capital expenditure, operating and financing requirements were updated and incorporated into the final 2020 Tulu Kapi Plan. Total Project funding requirements are now US$221 million, compared with US$242 reported in the 2018 Annual Report.
Funding sources are planned to be approximately half as senior debt (US$110 million) and half as Project level equity, which for these purposes includes any subordinated debt and offtake facilities (US$111 million).
T he 2020 Tulu Kapi Plan re-affirmed the Project’s gold production averaging 140,000 ounces per annum for 8 years from the planned open pit.
The spot gold price is currently more than US$800/oz higher than our Ore Reserves assumption of US$1,098/oz and US$600/oz higher than our base case assumption of US$1,300/oz used for financing plans.
As announced on 19 June 2010, the strong Project fundamentals are summarised below at different gold prices, based on the 2020 Tulu Kapi Plan for the open pit added to that of the PEA-based NPV of the underground project. NPV’s are based on after-debt and after-tax cash flows discounted at 8% from the viewpoint of KEFI shareholders as at today.
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