TIDMKEFI
RNS Number : 1848W
Kefi Minerals plc
17 August 2015
17 August 2015
KEFI Minerals plc
("KEFI" or the "Company")
CONTRACTING AND FINANCING ON SCHEDULE
TULU KAPI GOLD PROJECT. ETHIOPIA
KEFI Minerals (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
progress on schedule for the appointment of the principal
contractors for the Tulu Kapi Gold Project.
Recent milestones include the following:
-- The recently overhauled Definitive Feasibility Study ("2015
DFS") has been reviewed by the Independent Technical Consultants
("ITC") to the short-listed senior secured financiers, their advice
taken into account and the report signed off by KEFI Directors.
-- Short-listed candidates for the Mining Contractor and for the
Plant Construction Engineering, Procurement and Construction
Management ("EPCM'") Contractor have submitted their bids. KEFI's
contracting team is now refining and confirming the contracting
terms and selecting the preferred contractors.
-- Based on the 2015 DFS adjusted for contract-mining (but not
yet refined for final bid terms), cash flow projections indicate
All-in Sustaining Costs of $779/oz - the lowest quartile of gold
producers globally. The Net Present Value of the project at the
start of construction is $120 million and at the start of
production in 2017 is $180 million (GBP80 million and GBP120
million respectively, assuming $1,250/oz long term gold price,
mainly debt-style funding and discounting projected after tax cash
flows at 8%).
-- The project planning team has now moved its focus onto
finalising contractor terms and also onto opportunities to further
reduce peak capital requirements from the 2015 DFS estimate of $130
million. We expect to reduce it to below $120 million depending on
final contracting terms agreed with preferred contractors, detailed
engineering, procurement of plant and the extent, if any, of
Government funding of infrastructure to be constructed within the
public domain. KEFI will keep shareholders informed as material
steps are concluded in finalising the capital requirements.
-- KEFI's project finance advisory team is now engaging with
short-listed financiers to optimise the funding mix and terms
between the financiers, the contractors and the Ethiopian
Government. To ensure robust planning in the short-term market
environment, financing scenarios are being stress-tested at gold
spot prices down to $850/oz. KEFI's confidence as regards project
economics vis a vis the future gold price is also reinforced by the
gold price outlook in Ethiopia Brr ("ETB"), which has increased
from ETB16,800/oz five years ago to 22,600/oz at present.
-- The full 2015 DFS will be uploaded to the Company's website
www.kefi-minerals.com, as will a presentation summarising KEFI's
options to finance the development of Tulu Kapi.
Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals,
commented:
"KEFI is moving forward according to the plan as agreed with the
Government of Ethiopia and as laid in the past out to our
shareholders.
"We appreciate the considered and punctual responses received
from short-listed project contractors, will soon make our
selections thereof and then move onto optimising the financing
structure with the preferred contractors, the Government of
Ethiopia and, of course, the short-listed financiers."
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%.
The review of the 2015 DFS by the Independent Technical
Consultants to the financiers resulted in relatively minor
adjustments to the numbers published in KEFI's announcement dated
24 June 2015.
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$645/oz US$653/oz
Costs
---------------------- ---------------------- ----------------------
All-in Sustaining US$755/oz US$779/oz
Costs
---------------------- ---------------------- ----------------------
All-in Costs US$892/oz US$906/oz
(including
initial capex)
---------------------- ---------------------- ----------------------
The table below provides the key components of initial capital
costs and is based on contract mining and building an all-new
processing plant. The estimated peak funding requirement is
US$129.6 million.
US$ millions
---------------------------- -------------
Mining Pre-strip 10.6
---------------------------- -------------
Processing 72.3
---------------------------- -------------
Infrastructure 17.8
---------------------------- -------------
Tailings Storage Facility
(TSF) 8.2
---------------------------- -------------
Indirects (EPCM, etc) 10.8
---------------------------- -------------
Relocation / Resettlement 7.8
---------------------------- -------------
Owners Cost 7.6
---------------------------- -------------
Sub-total Initial Capital
Costs 135.1
---------------------------- -------------
Initial 6 Months Operating
Cashflow -11.6
---------------------------- -------------
Working Capital 6.1
---------------------------- -------------
Peak Funding Requirement 129.6
---------------------------- -------------
The above the mining pre-strip costs and infrastructure
construction costs are inclusive of a targeted US$10 million
contribution from the mining contractor. Contingency provisions
aggregate to approximately 10%.
The contract-mining financial metrics tabulated below are stated
on an after-tax basis:
Unleveraged Leveraged
--------------------------- ------------ ------------
IRR 27% 37%
--------------------------- ------------ ------------
NPV (0%) US$262M US$238M
--------------------------- ------------ ------------
NPV at start construction US$125M US$120M
2015 (8% real
discount rate)
--------------------------- ------------ ------------
NPV at start production US$266M US$180M
2017
(8% real discount
rate)
--------------------------- ------------ ------------
Payback 2.5 years 4.0 years
--------------------------- ------------ ------------
Average Operating US$45M p.a. US$44M p.a.
cash flow before
depreciation,
financing charges
and tax (first
ten years)
--------------------------- ------------ ------------
The above scenarios are at a US$1,250/ounce gold price and
assume contract mining and building an all-new processing plant.
The leveraged scenario is based on the targeted US$100 million of
secured debt-based finance.
The sensitivity of the after-tax NPV (at an 8% real discount
rate) to key parameters is tabulated below:
-10% Base Case +10%
(US$M) (US$M) (US$M)
--------------------- --------- ---------- ---------
Gold Price 71 125 178
--------------------- --------- ---------- ---------
Capital Expenditure 135 125 114
--------------------- --------- ---------- ---------
Operating Costs 155 125 94
--------------------- --------- ---------- ---------
An updated Tulu Kapi Ore Reserve estimate totaling 15.4 million
tonnes at 2.12g/t gold, containing 1.05 million ounces was released
in April 2015.
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.
Further information on this Ore Reserve is available in the KEFI
announcement dated 22 April 2015.
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.
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
-- Full development funding and commencement of construction
In addition, during 2015 KEFI anticipates submitting a Mining
Licence Application for Jibal Qutman in Saudi Arabia through its
joint venture company, Gold & Minerals Ltd ("G&M").
KEFI Minerals in Ethiopia
The Tulu Kapi gold project in Western Ethiopia is being rapidly
progressed towards development with the Mining Licence being
granted in April 2015.
KEFI's Definitive Feasibility Study evaluated an open-pit mining
operation and construction of a 1.2Mtpa processing plant at Tulu
Kapi. Estimated annual gold production is 80-90,000oz per annum and
All-in Sustaining Costs (including operating, sustaining capital
and closure) are c. US$779/oz (excluding initial investment). The
Company's milestones for this year include arranging project
finance in Q3 2015 and major works to commence in Q4 2015, with a
view to commissioning at the end of 2016.
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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