FROM THE BROKING DESK
Amani Gold†† has announced its September 2017 Quarterly Activities and Cashflow reports. Much of the Activities Report summarises previously-announced plans for further exploration around its DRC-based Giro Gold Project, including up to 30,000m of RC and diamond drilling at Kebigada, 6,345m of RC drilling at Douze Match, and additional drill programmes planned for newly-defined target areas. With progress in place, management has now announced that the first 3,645m of drilling at Douze Match is to be completed in the December 2017 quarter. First results of that programme had been expected by the end of October, but management has reiterated that it still intends to publish a maiden resource on Douze Match in 1Q18, indicating that it is still on track to meet this milestone.
Drilling at Kebigada is still expected to be completed in 1H18, though it has yet to commence. This will start once Amani has complete access to the area of drilling. The company is currently working with the Governor of the Haut Uele Province to relocate illegal, artisanal miners, as well as the illegally-established Giro village set up to support artisanal mining in the area. The initial stages of the relocation are expected to be completed within two months, at which point the infill drilling can commence. Amani expects to progress its drilling programmes at Adoku and in the immediate area surrounding Kebigada in the current quarter.
Amani had previously paid US$250,000 for the exclusive right to negotiate an interest in the Tendao Project, which borders its Giro Gold Project. The company has now ceased due diligence activity while a DRC state-owned mining company and the present licence holder resolve contractual issues. Amani may reengage if clear commercial and legal structures can be established.
Amani’s Cashflow Report shows the receipt of A$15m as part of the previously-announced Luck Winner transaction. It also shows spending of A$4m on exploration, with a balance of A$11m at the end of the September 2017 quarter. Management has budgeted for A$5m of additional exploration in the December 2017 quarter. Still outstanding is Stage 2 of the Luck Winner transaction, under which, subject to shareholder approval, Amani will receive A$10m in exchange for 200m shares and 250m options exercisable at A$0.07/share for two years.
COMPANIES
KEFI MINERALS
LON:KEFI, | 4.5p | US$20m | Buy | TP : Under Review
Projections for Expanded Production
KEFI Minerals has announced projections for expanded production from its Tulu Kapi Gold Project in Ethiopia. This follows an announcement on 6 October in which the company said that it is now planning to build a plant with a capacity of 1.9-2.1Mtpa, 25% larger than previously envisaged. The additional capex required for the plant and infrastructure associated with this is estimated at US$12m, although the company noted that this has been offset by expected capex savings related to a move from a fixed-price, lump sum project construction to an open book, cost-based arrangement with incentivisation based on target costs and schedule. The company also stated that it will be further offset by Oryx offering to expand its facility from US$135m to US$140m. The larger throughput enhances the project’s flexibility to switch between bulk mining and selective mining as appropriate.
Oryx Management is continuing to work towards closing the funding package this year and has submitted a draft financing agreement to the Ethiopian authorities for approval. Oryx expects to raise US$140m towards the project’s financing requirement and the government has agreed to fund offsite infrastructure to a maximum of US$20m, for a total of US$160m. With respect to the residual capital requirement, KEFI has previously stated that it is considering offering third parties a stake in the project. It commented that it is in discussions with a number of potential project-level investors and that it will now bring these discussions to a head.
COMMENT: As a result of the increased throughput, gold production during the project’s first three years of operation is planned to increase from 115,000oz pa to 144,000oz. Forecast all-in sustaining costs (AISC) are planned to be slightly lower than previous estimates at US$773/oz. The announcement stated that the post-tax NP
V8 of the project, assuming a gold price of US$1,250/oz, decreased by 24% compared to the updated DFS of May 2017 (US$97m to US$74m).
We expect to update our valuation and target price as a result of this announcement and will provide a more complete commentary later. Our previous target price of 9.0p was based on a risked SoTP NAV for the company and assumed a gold price of US$1,250/oz and a 0.75x P/NAV8 multiple for the Tulu Kapi Project. It also reflected allowances for the underground potential at Tulu Kapi, other exploration assets and G&A costs. To view our previous report on the company, please click here.