KEFI Minerals: Unearthing ancient treasures in Saudi Arabia

When you see what looks like the backbone of a stegosaurus sticking out of the desert soil and running for miles…and you chip a few rock samples from that skeletal backbone and find gold, then you think you might be on to something.  

When you look further and discover crumbling villages abandoned for centuries overlooking ancient mine workings and old heaps of mining waste which – when you test them – prove to contain higher grade gold than most modern mines are producing, then you know you are.

That’s how it is in the Arabian Shield, a prolifically mineralised and incredibly diverse geological structure which makes up almost half of the Kingdom of Saudi Arabia.

So how did it get there?

An island arc is a string of volcanic islands in an arc shaped formation, generated by intense magmatic activity at the convergence of two oceanic plates, where one plate is forcing its way down underneath its neighbour. 

Island arcs are a major feature of the so-called ring of fire, and can be clearly seen today in archipelagos like the Japanese islands, the Kuril Islands, and the Aleutians.

Now imagine several successive island arcs, generated over a period of some 250 million years, way back in Neoproterozoic times, each with their own distinct geological characteristics and located in close proximity to each other. 

Further visualise major geological events like the PanAfrican orogeny forcing these different terranes hard up against each other and squeezing out any intervening ocean to form a single landmass, before opening them up a little, creating major extensional faults.

That’s how the Arabian-Nubian Shield was born. It was a long gestation period, which at one point involved it submerging once again beneath the ocean, evidence provided by the sandstones and carbonates which, in places, overlay the more ancient rocks. 

And throughout this period of crustal thickening and thinning, various mineralising events drove up the volcanic massive sulphide intrusions, epithermal systems and quartz vein swarms we see today. 

When Kefi Minerals (LON:KEFI) entered the Saudi Arabian kingdom in 2008, it had all of these target deposit styles in view. 

Armed with a kingdom-wide prospecting licence, a mass of data from a range of different sources, and a powerful local partner, the company’s geologists took to the land and – in the best traditional sense of the word – began to explore. 

Now, many highly prospective localities have been identified, and exclusive exploration licences applied for over twenty of them – the first of which was awarded in June this year.  

It’s been a long drawn out process. Kefi is one of the very earliest non-Saudi exploration companies to enter the Shield, and has a distinct first-mover advantage.

But that brings its own burden – as the recently-introduced  KSA system of licence approval could almost be described as still being in beta testing! There are twelve government departments involved in the process, which also involves meetings with regional authorities, local stake-holders and communities, and each step is being carefully assessed and tested by the Deputy Ministry of Mineral Resources (DMMR) as it takes place.  

Kefi’s local JV partner - the Saudi construction conglomerate known as ARTAR - has been hugely valuable in this process, providing communication channels with the “right” people to aid in speeding the licences through the system where that’s possible. 

“It’s a completely different culture,” says MD Jeff Rayner. “You need to have exactly the right people on the ground, with experience of local conditions, who are able to identify and use the correct approach to the correct person in the correct department whenever there is a difficulty. 

“We could not have done this alone – and the support ARTAR give us in this justifies every percentage point they own of our 40-60% JV!”

Right now, of the 18 licence applications still in process, two more have already been approved by all relevant departments, and only now need final sign-off by the Supreme Committee for Concessions in Riyadh. 

A further three have come successfully through their IMARA (local authority) meetings and await final processing at the Ministry.  

Rayner is confident that ultimately, the G&M JV company will be awarded most – if not all - of the licences that have been applied for.  

“And while it does take a long time,” he explained, “It means that when we come to upgrade our exploration licences to full mining licences, that process is a lot quicker because of the huge amount of permitting work that’s already been done. 

“All we have to do to secure our mining licences is undertake and present final economic, environmental and financial assessments, so it happens a lot faster.”

Rayner’s equally confident about the outcome. “Of these nineteen or so licence areas, based on the data we already have from previous exploration and our own early-pass exploration work, we expect at least three to have a reasonable chance of becoming operational mines,” he said.  

So what of the first licence area, Selib North? Will this become the first of the G&M JV’s operational mines?  

The Al Amar Belt, already host to a modern mine operated by Ma’aden at Al Amar itself, is a 200km long series of gold and base metal deposits hosted in ophiolitic rocks lying along the major Jabal Idsas-Al Amar Fault zone on the eastern side of the Shield. 

Running cleanly almost north-south, this fault forms the junction (or suture) of an island arc, forced up against its neighbour in the Neoproterozoic, and is the division between two distinctly different geological provinces. 

Many different mineralising events have occurred at this fault during the period 700-500 million years BC, and the region offers multiple styles of mineralisation, including volcanic “melts”, porphyry intrusions and epithermal systems, all of which are present in the region of Selib North. Host rocks comprise mainly serpentinite and listwaenite, metabasalt and diorite. 

The general locality, incorporating the contiguous mining areas at Farawah, Selib North and Selib, was partially surveyed and explored in the 1980s by the BGRM – who found evidence of ancient operating mines and mine dumps all along the trend. Sampling at eluvial mining areas at the Selib prospect tested the ancient dumps and found they contained up to 17.8g/t Au. 

As Rayner put it: “The ancients only took the gold they could see. The rest they left behind…”  

Limited drilling and sampling at Selib by the BGRM came up with a best grade of 8.4g/t. To the North, at Farawah, exploration in the 1980s carried out trenching and limited drilling, and found gold hosted in quartz lodes in altered gabbro, diorite, serpentinite, and carbonate rocks. 

Channel sampling and percussion drilling gave best results of 8.3g/t and 6.78 g/t Au respectively.

At Selib North, which sits squarely upon a 10km section of the Jabal Idsas-Al Amar Fault, right between and adjacent to Farawah and Selib (both under application by other explorers) large dumps of crushed quartz and altered rock lie at the base of ridges along the fault, the product of both eluvial and alluvial workings. 

“When you walk into these areas,” said Rayner “it’s like winding back time. You look around you and see the ruins of the huts the ancient miners lived in, the artefacts – like grindstones - they left behind them, and in some cases you can even see the gold they were mining. You can almost imagine you’re still amongst these people who were working away two or three thousand years ago…”

There is strong indication at Selib North that one option open for the future is a low-grade, bulk tonnage mining operation. 

Alteration and mineralised zones within the licence area have returned up to 2g/t from chip sampling of quartz-carbonate vein systems, containing fine-grained gold completely overlooked by the ancients, who prospected only with their eyes. 

But there is also clear evidence that the regional mineralised structures that traverse both the Selib and Farawah prospects continue uninterrupted through the Selib North licence area, and so further assessment of the style and potential of the mineralisation at Selib North will have to await the completion of Kefi’s advanced exploration programme - comprising interpretation of aeromagnetic data followed by detailed geological mapping and geochemical sampling of selected targets.

In the meantime, some limited provisional data has been released for the two licences most likely to be awarded next. 

They are located within 45km of a major +2.5Moz Au resource and within 7 km of a +300,000oz Au resource, both held by Ma’aden, the 50% Government owned mining company. Major northwest trending shear zones are located in both ELA’s, along with historic gold workings. 

Plenty there for the exploration team to get its teeth into – and now that the initial licence has been awarded, and the G&M JV’s credentials are firmly in place at the DMMR, it is likely that further awards will follow without the lengthy delays which held up the first licence. It will be a busy year for Kefi…

So what of Turkey? Having disposed of Derinin Tepe, Muratdag and Yatik West to Ariana recently for a nominal fee in cash and Ariana shares and a 2% NSR, and now actively working mainly in Saudi Arabia, Kefi are content to let Turkey develop at its own pace. 

Centerra recently withdrew from their earn-ins at Bakir Tepe and the Artvin project, as they are unlikely to produce deposits large enough to satisfy the needs of a major miner, but nonetheless, both have excellent potential and new partners will be sought to carry them forward.

Elsewhere, the company has embarked upon a 5-month program to assess the potential of the Tiouit gold mine in Morocco. 

Mined for almost twenty years until 1995, Tiouit has amassed a significant tonnage of tailings, in three separate dams, which previous testing has assessed at almost half a million tonnes grading 3-4g/t Au. 

Amenable to processing via carbon in leach or carbon in pulp with 86% recovery, these tailings could swiftly be brought into to production to generate regular cashflow.

Kefi – under an exclusivity agreement with owners Roche Investments – will carry out a feasibility study on the tailings, and will also investigate the possibility of re-opening the underground mine, which still hosts flat-lying, high-grade vein systems ranging from 0.5 to 6m in width that have not yet been exploited. 

These investigations, if successful, could be the prelude to an exploration and development JV and alliance with Roche throughout the region.

Financially the company is well enough provided to meet ongoing working budgets. In KSA, their partnership with ARTAR is on a contributory basis, and it is not likely that further exploration funding will be required before the end of this year. 

“Once we start drilling in Saudi, of course,” says Rayner, “we will need an injection of capital, but it will take 6 months or so to reach that status, and we have enough funding to take us to that point without having to come back to the market in the immediate future.”

Like most junior explorers listed on AIM, the price of Kefi shares has taken a battering during recent market uncertainty.  

But since we last reported, twelve months ago, when the price was under one penny, there has been a significant uplift as the Saudi projects have drawn closer to realisation. 

The shares are currently trading within a range of 4.5-5p, and the market capitalisation of £16.5 million – while a vast improvement on a year ago – still does not look over-demanding when future  potential – including the possibility of near-term gold production in Morocco -  is taken into account.