Game on for KEFI Gold and Copper, as Ethiopia and Saudi Arabia come good
Sometimes you wait a while for a mining project to come along, and then two come along at once.
Such is the case with KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF), which for some time has been on an enforced go-slow in both its main areas of operation – Ethiopia and Saudi Arabia.
In the case of Ethiopia, political instability put the kybosh temporarily on investment in the Tulu Kapi gold project, for which a syndicate had already been arranged. The syndicate held its nerve and held together, but until things settled, didn’t feel able to give the green light.
And in the case of Saudi Arabia, where KEFI is something of a trailblazer, a bureaucracy that’s completely new to mining had slowed exploration and development work on a huge landholding down to a snail’s pace, until suddenly, earlier this year the logjams began to clear.
So, peace and stability is breaking out in Ethiopia, and it looks as though the financing for the two million ounce Tulu Kapi gold project is back on. And permits and licences are coming through in Saudi Arabia, where it’s just possible KEFI might be on the cusp of opening up a new gold province.
From relative inactivity on the ground a few months ago, chief executive Harry Anagnostaras-Adams now finds himself a very busy man.
Not that he’s been sitting on his hands this past year.
Keeping the assets together and making sure people kept safe in Ethiopia has been a key concern of his, and accordingly he spent much of 2021 in-country. Not for him the ivory-towered exile of some mining company chiefs who sit far away from their assets ensconced in the world’s financial centres.
Anagnostaras-Adams is more of a hands-on kind of a guy, which probably explains why with the winds suddenly shifting in KEFI’s favour, he was immediately ready to go.
“Ethiopia and Saudi Arabia have been tough places to get things done,” he says.
“But both jurisdictions have pivoted. We now have three bankable projects in two jurisdictions. It’s game on.”
Tulu Kapi is the most advanced of those. The other two are Jibal Qutman and Hawiah in Saudi.
At Tulu Kapi the plan is to build a project that will initially produce 140,000 ounces of gold per year at all-in sustaining costs of between US$800 and US$900 per ounce, depending on exactly how the gold price affects outgoing royalty payments. The initial open pit life is set at eight years, but it seems likely that there will be a substantial underground operation, the precise nature of which has yet to be properly modelled.
If that sounds a bit vague, then an insight can at least be gleaned from one of the most recent underground drill hits. This measured ninety metres at three grams per tonne, which ought to be enough to keep the serious punters interested.
“Plus,” says Anagnostaras-Adams, “we’ve got ground around the deposit. And usually these things do come in clusters.”
So, once again we are presented with a project with a clear development timetable and plenty of exploration upside. All things being equal, construction will get underway in the middle of this year, with build time slated for 24 months.
Over in Saudi, meanwhile, drilling at Hawiah is ongoing. Here, the aim is to boost an already sizeable resource. As at the last count, this amounted to 24mln tonnes grading 0.9% copper, 0.85% zinc and just over 0.6 grams per tonne gold.
That’s a good foundation block for any project, and on those numbers alone it’s estimated that the project could produce US$70mln in net operating cash flow per year over an initial ten year period. These are some big numbers, and it’s interesting to see how they plug into the various modelled variations that are going round.
As at the end of last year, the combined net present value of KEFI’s interest in the three projects - Tulu Kapi, Hawiah and Jibal Qutman - rang in at £348mln, which compares enticingly to KEFI’s market capitalisation of just £20mln.
True, KEFI doesn’t own any of its properties outright, but it does own significant positions in these large assets which it operates and brings the essential know-how that will make them happen. In that sense, it holds its destiny entirely in its own hands. The key question is: will the respective jurisdictions in which it operates continue to be benign?
Once the market gets comfortable with the idea that they will, then a significant re-rating seems likely.