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KEFI Minerals firing on all cylinders as it makes significant progress in Ethiopia and Saudi Arabia

Last updated: 21:44 15 Dec 2014 AEDT, First published: 22:44 15 Dec 2014 AEDT

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Toronto-listed Alexander Nubia (CVE:AAN) posted further positive results from the gold oxide cap at the Hamama project in Egypt, which, it said, showed continuity of gold and silver

The past year has been one of significant progress for KEFI Minerals (LON:KEFI) and its flagship Tulu Kapi gold property in Ethiopia.

Not that this has translated into a significant increase in the value of the company, which also owns two earlier stage, but highly prospective projects in Saudi Arabia.

Quite the reverse, the share price has gone down, mirroring the prolonged sell off in the junior mining space. However, this weakness will be seen by savvy investors as an opportunity.

And, indeed, this is how Perth Global Funds viewed KEFI (as a contrarian investment) when it arrived as the firm’s third major investor as part of last month’s £4.9mln share sale.

The other two big funds on the KEFI shareholder register are Odey Asset Management, run by the hedge fund billionaire Crispin Odey, and Standard Life.

And their interest reveals there is institutional appetite for gold diggers and mine developers with the right assets and management.

“They are three quality institutional investors quite well versed in taking a contrarian point of view and seeing the cycle as we do,” said KEFI chairman Harry Anagnostaras-Adams.

KEFI, since it took a majority stake in Tulu Kapi a year ago, has gone about ‘crafting and sculpting’ the project to make it a cheaper, but economically more enticing proposition.

Now, the investment required to get it into production will be US$120-150mln, or roughly half the figure proposed by its former owner.

Okay, output will be lower than first projected (around 10% lower at an annual 92,000 ounces ignoring the start-up and close-down years), but the mine will be one of the cheapest gold producers in the world.

The plan is to start mine development in the final quarter of next year, with first gold set to be poured in 2016.

In October KEFI reactivated the mining licence application put on hold by former owner Nyota Minerals and hopes to have the sign-off by January or February next year.

Anagnostaras-Adams said the development thus far has been hitch-free – which contrasts with the struggle he had re-starting the historic Rio Tinto copper mine in Spain for former employer EMED.  

“It feels refreshing to be able to run a project like Tulu Kapi here in Ethiopia,” the KEFI chairman told Proactive Investors.

“The emotion of setting up shop in Europe almost a decade ago has been one of frustration.

“Ethiopia has been exceptional. Within the company we have around a century of experience of dealing with governments.

“For us, Ethiopia has the most progressive, constructive and pragmatic administration we have come across. They are a pleasure to deal with.”

If anything, KEFI is slightly ahead of the curve with Tulu Kapi. This, Anagnostaras-Adams said, will allow management to “squeeze down the capex and optimise the development plan”.

KEFI is talking to the “natural funders” for projects of this type, with those negotiations expected to notch up a gear when it receives the mining licence.

By the middle of next year prospective lenders should be ready to go to their credit committees, while the development plan should also have been finalised, Anagnostaras-Adams revealed.

Of course there is the issue of finding equity funding for the project; but there are options at “project or parent company level”, said Anagnostaras-Adams.

And as the KEFI team has shown, it is adept at getting the job done. Meanwhile, the last cash call also revealed management can find the money and the investors when they are needed.

“It had been falsely assumed by people setting the [share] price at the margin we would struggle to assemble the finance we need as most of the sector has struggled,” said Anagnostaras-Adams.

“But the fact we have brought on board three strong shareholders who are there to invest more money shows we are not struggling at all.”

In other words it has been a mug’s game so far betting against KEFI.

The plan is broader brush than simply setting up shop in Ethiopia. 

KEFI also has plans to develop and exploit its significant position in Saudi Arabia, where it is exploring the Jibal Qutman area licence.

Earlier on Monday it announced a 30% resource upgrade to an indicated and inferred 633,461 ounces.

The company also revealed that a good proportion of the material uncovered to date would be amenable to the heap leach method of extracting the precious metal.

This, KEFI said, would likely result in saving on the initial investment requires to get Jibal Qutman up and running, while speeding up development.

The potential to build the operation in a modular fashion from an initial open-pit has prompted the company to apply for four more licences nearby.

Meanwhile last week it and its local partner were awarded a 95-square kilometre Hawiah area in Saudi, which is prospective for volcanogenic hosted massive sulphide systems (VHMS).

“Our vision by 2017 is to be producing gold in Ethiopia and not far after starting a smaller operation in Saudi Arabia,” said Anagnostaras-Adams.

“The Saudi cash flow will underwrite an aggressive exploration programme there. It is a world class prospecting district and we have world class positioning and team.” 


£5.5mln fundraise sees KEFI Minerals fully funded for Tulu Kapi construction

Harry Adams, executive chairman of KEFI Minerals plc (LON:KEFI), tells Proactive's Andrew Scott they've raised £5.5mln through a placing and subscription to pay the costs of closing the financing deals at the project level for the construction of their Tulu Kapi Gold Project in...

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