KEFI Minerals shares slide as it issues quarterly update

Gold exploration and development company KEFI Minerals updated the market on its operations in both Ethiopia and Saudi Arabia on Friday, as part of its quarterly operational update.

The AIM-traded firm said that at the Tulu Kapi Gold Project in Ethiopia, it achieved the start of the off-site development programme in late 2019 and closing with its public sector equity partner during the fourth quarter.

It said the next steps were to launch the on-site development and community resettlement, execute all documentation - which was “well-advanced” - for its private sector equity partner ANS Mining Share Company, and complete scheduled preparations and finance milestones leading to major works starting in the local dry season from October.

KEFI approved a new project infrastructure debt-finance proposal during the three month period ended 31 December, being a bank-loan based proposal received from two unnamed African banks as underwriters and co-lenders.

A term sheet was signed, which remained subject to credit approval, and which provided better economics for Tulu Kapi, the board said.

The gold price had firmed “significantly” since the third quarter of 2019, the company said, explaining that using the proposed bank loan infrastructure financing at the current gold price of around $1,650 per ounce, it estimated net cash flow of the open pit mine to be $502m.

It also estimated that the definitive feasibility study-based net present value of the open pit of $333m, added to that of the PEA-based net present value of the underground mine of $103m, totalled to the aggregate project net present value of $436m.

KEFI said net present values were based on after-tax cash net cash flows, and on that basis and after taking into account that KEFI had already invested nearly all of its contribution to the project equity, its 45% beneficial interest was $196m, or around seven times the current market capitalisation of the company.

At the Hawiah copper-gold-zinc-silver exploration project in Saudi Arabia, KEFI noted that it had discovered a polymetallic deposit in the licence area.

The first 45 drill holes identified three distinct massive sulphide lodes, which varied in thickness from three metres up to a maximum of 19 metres.

All of the massive sulphide assays received to date had encouraging grades of copper, gold, zinc and silver, it said.

The system remained open at depth,. and for the purposes of indicating the potential importance for KEFI shareholders, at an assumed 2% copper-equivalent which initial assay results suggested was reasonable.

It said the in-situ metal content of the indicated 12 million tonnes at current metal prices would approximate the analogous in-situ metal content of the one million ounce reserve in the open-pit at the Tulu Kapi Gold Project, but the system was open at depth.

The next step was to complete the current stage two drilling programme, with a view to reporting in mid-2020 a maiden resource in compliance with the JORC code.

At 0955 GMT, shares in KEFI Minerals were down 17.23% at 1.14p.