TIDMKEFI
RNS Number : 0220R
Kefi Minerals plc
24 June 2015
24 June 2015
KEFI Minerals plc
("KEFI" or the "Company")
completion of 2015 definitive feasibility study
AND update on DEVELOPMENT FUNDING of
TULU KAPI GOLD PROJECT, ETHIOPIA
KEFI Minerals plc (AIM: KEFI), the gold exploration and
development company with projects in the Kingdom of Saudi Arabia
and the Federal Democratic Republic of Ethiopia, is pleased to
report completion of the 2015 Definitive Feasibility Study ("2015
DFS") on time and in accordance with the Company's strategy. The
2015 DFS is now being reviewed by the Independent Technical
Consultants to the financiers who are formally considering
participation in the syndicate to agree the development funding
arrangements in Q3 2015.
In April 2015, the Tulu Kapi Mining Agreement between the
Ethiopian Government and KEFI was formally executed and included an
undertaking to the Government to target the commencement of
construction in late 2015 and an undertaking from the Government to
facilitate the planned financing. KEFI has been granted a Mining
Licence valid for a renewable period of 20 years, along with all
major permits for the development and operation of the Tulu Kapi
mine.
Highlights of 2015 DFS
-- Gold production remains at 960,000 ounces over 13 years with
an average of 95,000 ounces per steady-state year (i.e. excluding
the start-up year and the processing of low-grade stocks after open
pit mining).
-- All-in Sustaining Costs remain at c. US$780/oz, which ranks
the project in the lowest cost quartile globally for gold
producers. This includes all operating costs, royalties, sustaining
capital and closure, but excludes initial capital investment.
Development Funding Plan
-- The initial funding requirement remains at approximately
US$120 million, based on the planned use of contract-mining and an
all-new processing plant.
-- Development funding plans remain for KEFI to seek US$100
million of secured debt-based finance and US$20 million of equity
finance at the contractor-funding level, project subsidiary level
or parent company level (in that order of preference). The
projected equity investment is in addition to the US$65 million
that has been invested in the project to date.
-- The targeted level of secured debt-based finance would result
in a greater project Internal Rate of Return ("IRR") and higher Net
Present Value ("NPV") for current shareholders than if KEFI funded
the project entirely through equity finance. One particular
scenario under consideration yields an IRR of 52% compared with an
all-equity funded IRR of 28%. It also provides projected NPV at the
commencement of production in 2017 of US$156 million (c. GBP100
million), at a discount rate of 8%. Current KEFI market
capitalisation is approximately GBP14 million.
-- KEFI's objectives during Q3 2015 include the lowering of the
initial funding requirement through the tendering and procurement
process, and the refinement and agreement of the funding plan with
contractors and financiers. The objective is to preserve robust
project economics whilst minimising equity dilution.
The 2015 DFS combines the input from KEFI's independent
specialist advisers including Senet (assembly of DFS and ore
processing), Snowden (Mineral Resources and Ore Reserves), Epoch
(tailings management), Cube Consulting (grade control and mine
optimisation), Golder (environmental and social impact) and
Endeavour Financial (project finance advisor and arranger). Further
details are set out in the explanatory comments below. Some
refinements may result from the review by the Independent Technical
Experts acting for the secured financiers and from the outcome of
the tendering and procurement process.
Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals,
commented:
"This has been a very successful quarter where we have been
granted full development permitting from the Government of
Ethiopia, completed a scheduled equity placing and we have now
tabled the 2015 DFS for financier review on schedule and on
specification.
"Once production commences, this development will bring
substantial benefits to Ethiopia, including the creation of
approximately 700 jobs at the mine site over its planned initial 13
year life."
ENQUIRIES
KEFI Minerals plc
Harry Anagnostaras-Adams (Executive
Chairman) +357 99457843
SP Angel Corporate Finance
LLP (Nominated Adviser)
Ewan Leggat, Katy Birkin +44 20 3470 0470
Brandon Hill Capital Ltd (Joint
Broker)
Oliver Stansfield, Alex Walker,
Jonathan Evans +44 207 936 5200
Beaufort Securities Ltd (Joint
Broker)
Elliot Hance +44 20 7382 8300
Luther Pendragon Ltd (Financial
PR)
Harry Chathli, Claire Norbury,
Oliver Hibberd +44 207 618 9100
Further information can be viewed on KEFI's website at
www.kefi-minerals.com
EXPLANATORY COMMENTS ON 2015 DFS
The Tulu Kapi 2015 DFS is based on a conventional open-pit
mining operation and a 1.2Mtpa carbon-in-leach ("CIL") processing
plant, with gold recoveries averaging 91.5%.
Utilising semi-selective mining techniques, it is planned to
process ore mined above 0.9g/t gold and stockpile ore mined between
0.5g/t gold and 0.9g/t gold. Based on this mining approach, the
following key mining and financial parameters for Tulu Kapi were
estimated in the 2015 DFS:
Initial 10 Years 13-year LOM
(excluding low-grade (including low-grade
stock) stock)
---------------------- ---------------------- ----------------------
Waste:ore ratio 9.9:1.0 7.4:1.0
---------------------- ---------------------- ----------------------
Total ore processed 12.0Mt 15.4Mt
---------------------- ---------------------- ----------------------
Average head 2.5g/t gold 2.1g/t gold
grade
---------------------- ---------------------- ----------------------
Total gold production 888,000 ounces 961,000 ounces
---------------------- ---------------------- ----------------------
Cash Operating US$653/oz US$661/oz
Costs
---------------------- ---------------------- ----------------------
All-in Sustaining US$774/oz US$780/oz
Costs
---------------------- ---------------------- ----------------------
All-in Costs US$911/oz US$906/oz
(including
initial capex)
---------------------- ---------------------- ----------------------
Capital Expenditure
The table below provides the key components of the estimated
peak funding requirement based on contract mining and building an
all-new processing plant.
US$ millions
------------------------ -------------
Processing 65.6
------------------------ -------------
Infrastructure 19.7
------------------------ -------------
Tailings (TSF) 7.5
------------------------ -------------
Indirects (EPCM, etc) 14.3
------------------------ -------------
Owners Cost 8.9
------------------------ -------------
Subtotal 113.0
------------------------ -------------
Pre-Production Funding 2.4
------------------------ -------------
Working Capital 6.2
------------------------ -------------
Total Capital 121.6
------------------------ -------------
Contingency provisions aggregate to approximately 10%.
Potential Mining Contractors and Engineering, Procurement and
Construction Management (EPCM) Contractors have been short-listed
and final bidding will now proceed followed by procurement once
development funding is arranged.
Unit Operating Costs
The table below provides a summary of the average estimated
life--of--mine unit operating costs:
US$/ounce US$/t
-------------------- ----------- -------
Mining 441 28
-------------------- ----------- -------
Processing 133 8
-------------------- ----------- -------
G&A 86 5
-------------------- ----------- -------
Cash Operating
Costs 661 41
-------------------- ----------- -------
Royalties 87 5
-------------------- ----------- -------
Sustaining capex
and closure costs 32 2
-------------------- ----------- -------
All--in Sustaining
Costs 780 49
-------------------- ----------- -------
Key Financial Parameters
The 2015 DFS base--case economic analysis was predicated on the
capital and operating costs summarized above and the following
parameters:
-- Gold price of US$1,250 flat over life-of-mine;
-- US$/Ethiopia Birr exchange rate of 20.0926
-- Electricity cost of US$0.03 /kWh
-- Diesel cost of US$0.84/litre
The base--case financial metrics tabulated below are stated on
an after tax basis:
Unleveraged Leveraged
--------------------------- ------------ ------------
IRR 28% 52%
--------------------------- ------------ ------------
NPV (0%) US$263M US$187M
--------------------------- ------------ ------------
NPV at start construction US$125M US$106M
2015 (8% real
discount rate)
--------------------------- ------------ ------------
NPV at start production US$256M US$156M
2017
(8% real discount
rate)
--------------------------- ------------ ------------
Payback 2.5 years 4.5 years
--------------------------- ------------ ------------
Average Operating US$47M p.a. US$47M p.a.
cash flow before
depreciation,
financing charges
and tax (first
ten years)
--------------------------- ------------ ------------
The leveraged scenario is based on the targeted US$100M of
secured debt-based finance.
The sensitivity of the after-tax NPV (at an 8% real discount
rate) to key parameters is tabulated below:
-10% Base Case +10%
(US$M) (US$M) (US$M)
--------------------- --------- ---------- ---------
Gold Price 71 125 178
--------------------- --------- ---------- ---------
Capital Expenditure 134 125 116
--------------------- --------- ---------- ---------
Operating Costs 155 125 94
--------------------- --------- ---------- ---------
Mineral Resources and Ore Reserves
The current Tulu Kapi Mineral Resource estimate totals 20.2
million tonnes at 2.65g/t gold, containing 1.72 million ounces:
JORC (2012) Resource category Reporting elevation Cut-off Tonnes Gold Ounces (million)
(g/t gold) (Mt) (g/t)
------------------------------- --------------------- ------------ ------- ------- -----------------
Indicated Above 1400 RL 0.45 17.7 2.49 1.42
Inferred Above 1400 RL 0.45 1.28 2.05 0.08
Indicated and Inferred Above 1400 RL 0.45 19.0 2.46 1.50
------------------------------- --------------------- ------------ ------- ------- -----------------
Indicated Below 1400 RL 2.50 1.08 5.63 0.20
Inferred Below 1400 RL 2.50 0.12 6.25 0.02
Indicated and Inferred Below 1400 RL 2.50 1.20 5.69 0.22
------------------------------- --------------------- ------------
Total Indicated All 18.8 2.67 1.62
Total Inferred All 1.40 2.40 0.10
Total Indicated and Inferred All 20.2 2.65 1.72
------------------------------- --------------------- ------------ ------- ------- -----------------
The Mineral Resources were split above and below the 1,400m RL
to reasonably reflect the portions of the resource that may be
mined via open pit and underground mining methods.
The current Tulu Kapi Ore Reserve estimate totals 15.4 million
tonnes at 2.12g/t gold, containing 1.05 million ounces:
JORC (2012) Reserve category Cut-off Tonnes Gold Ounces
(g/t Au) (million) (g/t) (million)
------------------------------ ------------ ----------- ------- -----------
Probable - High grade 0.90 12.0 2.52 0.98
------------------------------ ------------ ----------- ------- -----------
Probable - Low grade 0.50 - 0.90 3.3 0.73 0.08
------------------------------ ------------ ----------- ------- -----------
Total 15.4 2.12 1.05
------------------------------ ------------ ----------- ------- -----------
Note: Mineral Resources are inclusive of Ore Reserves. All
numbers are reported to three significant figures. Small
discrepancies may occur due to the effects of rounding.
This Ore Reserve estimate is based on the Indicated Resource
above 1,400m RL and reflects KEFI's envisaged semi-selective mining
strategy that will utilise an elevated cut-off grade. Ore at a
cut-off of between 0.50g/t and 0.90g/t gold is planned to be
stockpiled and then processed in the final three years of the
project, resulting in a project life of 13 years for the 2015
DFS.
The high-grade portion of the Ore Reserve contains nearly all
the contained ounces and totals 12.0 million tonnes at 2.52g/t
gold, containing 0.98 million ounces.
The above Mineral Resources and Ore Reserves were estimated
using the guidelines of the JORC Code (2012).
Mining and Processing
The mining method planned for Tulu Kapi is conventional open-pit
drill and blast, load and haul on 7.5m benches, reflecting a
semi-selective mining approach using 120 tonne backhoe configured
excavators. The mine design was based on an optimized pit shell
using a gold price of US$1,250 per ounce.
Ore mined above a cut-off of 0.9g/t gold is planned to be
processed for the first ten years of the project production
schedule, with ore mined between 0.5g/t gold and 0.9g/t gold being
stockpiled for later processing.
The Tulu Kapi deposit contains three ore types with the fresh
ore becoming harder with increasing depth:
% of Total
Ore
---------------- -----------
Oxide ore 6%
---------------- -----------
Fresh ore 66%
---------------- -----------
Fresh hard ore 28%
---------------- -----------
The gold is free milling and all the processes included in the
CIL plant design are standard and common to many current gold
operations.
The processing plant is designed to treat 1.2Mtpa of ore based
on mill availability of 96%, optimum grind size of 75 microns and a
residence time of 24 hours.
The overall life-of-mine gold recoveries are estimated to be
91.5% with recoveries ranging from 85% for low-grade hard fresh
samples to 95% for high-grade oxide samples.
Location and Infrastructure
Tulu Kapi is located approximately 360km due west of Ethiopia's
capital, Addis Ababa. A main road to Addis Ababa is within 15km of
Tulu Kapi and was sealed with asphalt during 2014. The altitude of
the project area is between 1,600m and 1,765m above sea level. The
climate is temperate with annual rainfall averaging about
150cm.
The Tulu Kapi region has typical Precambrian type geology which
is characterised by prominent hills of intrusive rocks and deeply
incised valleys containing metasediments and metavolcanic rocks.
Gold at the Tulu Kapi deposit is hosted in quartz-albite alteration
zones as stacked sub-horizontal lenses in a syenite pluton into
which a swarm of dolerite dykes and sills have been intruded. Gold
mineralisation extends over a 1,500m by 500m zone and is open at
depth (+550m).
The mine will require the construction of two roads outside the
mine licence area:
-- A 15.0km access road from the town of Keley; and
-- A 4.5km bypass road around the southern sided of the licence area.
The DFS envisages that process water requirements will be
satisfied by the collection and storage of rainwater during the
rainy season, between June and September.
The mine will be connected to Ethiopia's electricity grid via a
new 47km long, 132 kV power line. A 5 MW emergency diesel power
plant will provide emergency backup power to critical process
equipment and infrastructure in the event of a grid power failure.
This will allow critical equipment to remain in operation until it
can be safely shut down or until grid power is reinstated.
The mine layout has been designed to minimise the footprint of
the operation and minimise community disruption. The number of
households to be resettled has been reduced from c. 460 to c. 260,
with a phased resettlement programme being undertaken over two
years. The process is designed to comply with Equator Principles
and IFC Standards.
The tailings storage facility will be constructed in four stages
and has been designed with the capacity to support the planned 13
year mine life.
Legal Framework
The Tulu Kapi Mining Agreement ("MA") between the Ethiopian
Government and KEFI was formalised in April 2015. The terms of the
MA include:
-- 20-year Mining Licence covering an area of 7km(2) , with full
permits for the development and operation of the Tulu Kapi gold
project.
-- Fiscal arrangements:
o 5% Government free-carried interest;
o Royalty of 7%;
o Income tax rate for mining of 25%;
o Historical and future capital expenditure is tax deductible
over four years ; and
o Stabilisation of fiscal arrangement to protect KEFI in case of
future legislative changes.
-- Government undertaking to facilitate international financing arrangements.
All project plans as submitted by KEFI have been approved and
now form legally binding attachments to the Mining Agreement:
-- Social Impact and Environmental plans for implementation, monitoring and management;
-- Development and Production Work Programme for mining, processing and sales; and
-- Community Resettlement Action Plan staged over 2015 and 2016.
Outlook
KEFI's objectives during Q3-2015 include the lowering of the
initial funding requirement through the tendering and procurement
programs and the refinement of the financing plan with contractors,
and the secured financiers.
Key expected milestones for the remainder of 2015 at Tulu Kapi
include:
-- Finalising full development funding in Q3-2015; and
-- Commencing community resettlement and major works on site in Q4-2015.
Achieving the above milestones during 2015 enables commissioning
of the processing plant to commence in Q4 2016 and gold production
to commence in 2017.
Competent Person Statement
KEFI Minerals reports in accordance with the 2012 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (the "JORC Code 2012").
The information in this announcement that relates to Mineral
Resources and Ore Reserves is based on information compiled by Mr
Jeffrey Rayner. He is the Exploration Director of KEFI Minerals and
a Member of the Australasian Institute of Mining and Metallurgy
("AusIMM"). Mr Rayner is a geologist with sufficient relevant
experience for Group reporting to qualify as a Competent Person as
defined in the JORC Code 2012. Mr Rayner consents to the inclusion
in this report of the matters based on this information in the form
and context in which it appears.
The exploration results, Mineral Resources and Ore Reserves in
this report have been previously released as follows:
Date of Project Subject Competent Persons
Release
----------- ---------- ----------------- --------------------
22 April Tulu Kapi Probable Ore Frank Blanchfield
2015 Reserves Sergio Di Giovanni
----------- ---------- ----------------- --------------------
4 February Tulu Kapi Mineral Resource Simon Cleghorn
2015 Lynn Olssen
----------- ---------- ----------------- --------------------
KEFI confirms that it is not aware of any new information or
data that materially affects the information in the above releases
and that all material assumptions and technical parameters,
underpinning the estimates continue to apply and have not
materially changed. KEFI confirms that the form and context in
which the Competent Person's findings are presented have not been
materially modified from the original market announcements.
NOTES TO EDITOR
KEFI Minerals plc
KEFI is the operator of two advanced gold development projects
within the highly prospective Arabian-Nubian Shield, with an
attributable 1.93Moz (100% of Tulu Kapi's 1.72Moz and 40% of Jibal
Qutman's 0.73Moz) Au Mineral Resources (JORC 2012) plus significant
resource growth potential. KEFI targets that production at these
projects generate cash flows for further exploration and expansion
as warranted, recoupment of development costs and, when
appropriate, dividends to shareholders.
Expected milestones for the remainder of 2015 at Tulu Kapi
include:
-- Formalisation of senior secured financing, agreement of final terms for project finance; and
-- Full development funding and commencement of construction.
In addition, during 2015 KEFI anticipates triggering a
Preliminary Feasibility Study to underpin the submission of a
Mining Licence Application for Jibal Qutman in Saudi Arabia through
its joint venture company, Gold & Minerals Ltd ("G&M"). The
potential development of Jibal Qutman is targeted to follow the
start-up of Tulu Kapi.
KEFI Minerals in Ethiopia
The Tulu Kapi gold project in Western Ethiopia is being rapidly
progressed towards development. In October 2014, KEFI Minerals
reactivated the Mining Licence Application and assembled indicative
project finance terms. The Mining Licence was granted in April 2015
and the secured lenders' independent technical consultants have now
commenced their due diligence.
The 2015 Definitive Feasibility Study focused on construction of
a 1.2Mtpa processing plant with estimated annual steady-state gold
production 95,000oz and All-in Sustaining Costs (including
operating, sustaining capital and closure) averaging US$780/oz
(excluding initial investment).
KEFI Minerals in the Kingdom of Saudi Arabia
In 2009, KEFI formed G&M in Saudi Arabia with local Saudi
partner Abdul Rahman Saad Al-Rashid & Sons Company Limited
("ARTAR"), to explore for gold and associated metals in the Arabian
Shield. KEFI has a 40% interest in G&M and is the operating
partner. To date, G&M has conducted preliminary regional
reconnaissance and has had five exploration licences ("EL")
granted, including Jibal Qutman and the recently granted Hawiah
exploration licence that contains over 6km strike length of
outcropping gossans developed on VMS altered and mineralised
rocks.
At Jibal Qutman, G&M's flagship project, the total Indicated
and Inferred category Mineral Resources, JORC (2012) compliant, are
now estimated at 28.4Mt at 0.80g/t Au for 733,045 contained gold
ounces compared with 22.0Mt at 0.90g/t Au for 633,461 contained
gold ounces previously estimated in March 2014, both at a cut-off
grade of 0.2g/t Au.
ARTAR, on behalf of G&M, holds 24 exploration licence
applications that cover an area of approximately 1,484km(2) . ELs
are renewable for up to three years and bestow the exclusive right
to explore and to obtain a 30-year exploitation (mining) lease
within the area.
The Kingdom of Saudi Arabia has instituted policies to encourage
minerals exploration and development and KEFI Minerals supports
this priority by serving as the technical partner within G&M.
ARTAR also serves this government policy as the major partner in
G&M, which is one of the early movers in the modern resurgence
of the Kingdom's minerals sector.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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