Tulu Kapi Resource Update

RNS Number : 9939D

Kefi Minerals plc

04 February 2015

 

               4 February 2015

KEFI Minerals plc

("KEFI" or the "Company")

INDEPENDENTLY VERIFIED jorc COMPLIanT INDICATED resource

reporting on TULU KAPI GOLD DEPOSIT in ETHIOPIA

KEFI Minerals plc (AIM: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Democratic Republic of Ethiopia, is pleased to announce an independently verified updated Indicated Resource of 18.8 Mt at 2.67 g/t Au for 1.62 Moz Au, reported in accordance with the JORC Code (2012), at its Tulu Kapi project in Ethiopia. This compares with the previous Indicated Resource estimate in August 2014 of 18.4 Mt at 2.57 g/t for 1.52 Moz Au.

The updated Indicated Resource is part of the refined Definitive Feasibility Study ("DFS") for financing, which is undergoing completion. The updated resource was derived from "wireframing" the mineralised structures to create orebody solids as a cross-check against the previous "indicator model", and will now be used as a base for further refined pit design, mine scheduling and Ore Reserve estimation. The project remains on schedule for construction to commence in Q4 2015.

KEFI is the manager and operator of the project under the Company's wholly-owned KEFI Minerals (Ethiopia) Limited ("KME"). The Competent Persons for the Resources are Simon Cleghorn, Resource Manager of KEFI, and Lynn Olssen, General Manager Geosciences and Senior Principal Consultant of Snowden Mining Industry Consultants Pty Ltd ("Snowden"). The estimate of Inferred Resource will also be updated (expected to occur within the next couple of months), but it does not form part of mine planning.

HIGHLIGHTS

·     The new Indicated Mineral Resource of 1.62 Moz Au (18.8 Mt at 2.67 g/t Au), is reported in accordance with the JORC Code (2012) and provides an update to previous estimates reflecting further interpretation, refinement and validation procedures conducted by KEFI management and its independent advisers. This compares closely with KEFI's previous estimate in August 2014 reporting 18.4 Mt at 2.57 g/t Au for 1.52 Moz Au and compares favourably with that of the project vendor's most recent reporting in October 2012 of 14.6 Mt at 2.36 g/t Au for 1.11 Moz Au.

·     The new wireframed resource will provide the basis for a new reserve estimate and re-affirms the integrity of KEFI's interpretations and resource estimation models published since the acquisition of Tulu Kapi in December 2013.

·     Total Indicated Resource above 1,400m relative level ("RL") and in the potential open pit area is 17.7 Mt at 2.49 g/t Au for 1.42 Moz Au (August 2014 estimate was 17.3 Mt at 2.37 g/t Au for 1.31 Moz Au) and high grade mineralisation of 1.08 Mt at 5.63 g/t Au for 0.20 Moz Au (August 2014 estimate was 1.07 Mt at 5.88 g/t Au for 0.20 Moz Au) in underground potential, immediately below the planned open pit.

·     KEFI will now further optimise and update mine design, mining plans and consequential updated Independent Ore Reserves. Studies being updated as part of this process include geotechnical, mine dilution, mine planning and the verification of local input costs.

·     KEFI has adopted a reiterative approach to reporting of Mineral Resources and Ore Reserves as a part of its systematic overhaul of the Tulu Kapi project. The Company is driving hard to ensure robust and financeable economics in the context of current gold prices and capital markets. As part of this, KEFI has recently opened discussions with selected candidates for contract mining and with the vendors of process plants that are suitable for relocation and refurbishment.

Resource Category	Reporting elevation	Tonnes (Mt)	Au (g/t)	Ounces (Moz)
	Open Pittable
at Cut-Off Grade 0.45 g/t
Indicated	above 1,400m RL	17.7	2.49	1.42
Underground Mining
at Cut-Off Grade 2.5 g/t
Indicated	below 1,400m RL	1.08	5.63	0.20
Total Indicated	Total Indicated Resources	18.8	2.67	1.62

Notes:

·     All figures are reported to three significant figures. This may result in discrepancies in the table due to rounding.

·     KEFI currently owns 100% of KEFI Minerals (Ethiopia) Ltd, which owns 100% of the Tulu Kapi gold project, and is planning to reduce to 95% by granting a 5% free-carried interest to the Government of Ethiopia.

Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals, commented:

"We are pleased to report an improved Indicated Resource at our Tulu Kapi project in Ethiopia, which has been independently reviewed and is in accordance with the JORC Code (2012). It further validates the opportunity that the KEFI team, led by Exploration Director Jeff Rayner, identified and our belief that we have an attractive open pit project and underground mining potential.

"Over the next few months we will finalise our development plans, taking into consideration contract mining submissions and existing process plants for sale. We are also on track for obtaining the requisite licencing, community resettlement, team building and financing. All this gives the Board confidence that development will commence in 2015 leading to commissioning at the end of 2016 for production in 2017."

 

Enquiries

KEFI Minerals plc
Harry Anagnostaras-Adams (Executive Chairman)	[phone]
Jeff Rayner (Exploration Director)	[phone]
SP Angel Corporate Finance LLP (Nominated Adviser)
Ewan Leggat, Katy Birkin	[phone]
Brandon Hill Capital Ltd (Joint Broker)
Oliver Stansfield, Jonathan Evans	[phone]
finnCap Ltd (Joint Broker)
Joanna Weaving, Christopher Raggett	[phone]
Luther Pendragon (Financial PR)
Harry Chathli, Claire Norbury	[phone]

COMPETENT PERSONS' STATEMENTS

The information in this report that relates to input data used for the Mineral Resources is based on, and fairly represents, information and supporting documentation - the compilation of which was overseen by Simon Cleghorn, Resource Manager and a full-time employee of KEFI and a Member of The Australasian Institute of Mining and Metallurgy. Simon Cleghorn has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Simon Cleghornconsents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

The information in this report that relates to the interpretation, estimation, classification and reporting of the Mineral Resources is based on, and fairly represents, information and supporting documentation - the compilation of which was reviewed by Lynn Olssen who is a Member of The Australasian Institute of Mining and Metallurgy and a full-time employee of Snowden Mining Industry Consultants Pty Ltd. Lynn Olssen has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Lynn Olssen consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

Further information on KEFI Minerals is available at www.kefi-minerals.com 

 

BACKGROUND TO THE RESOURCE ESTIMATE

·     A number of resource estimates have been carried out at Tulu Kapi since 2009 by various consultants with an expanding database. There has been over 120 kilometres of drilling at Tulu Kapi and over $50 million spent on drilling, project due diligence and planning by previous owners.

·     The 2012 Definitive Feasibility Study resource estimate was published by the previous owner of KME (the owner of Tulu Kapi) in October 2012. It was carried out using a semi-constrained block model in Datamine using the dynamic anisotropy methodology. The Indicated Resource estimate was reported above a cut-off grade of 0.3 g/t Au and totalled 14.6 Mt at 2.36 g/t Au for 1.11 Moz Au in the Indicated Resource.

·     After acquiring 75% of KME in late December 2013, KEFI updated the existing database in January 2014 to incorporate 71 drillholes, totalling over 16,000m of drilling that were drilled by the previous controller, post the cut-off date of the October 2012 resource estimate.

·     KEFI published its first resource update on 12 March 2014. KEFI used the same October 2012 resource estimation methodology after including more structural data, a corrected database and mining block estimates with the following dimensions: 5.0m(X) by 5.0m(Y) by 1.0m(Z), with 1.0m composited samples in drillholes. KEFI's March 2014 Mineral Resource was reported in accordance with JORC Code (2012) above a 0.3 g/t Au cut-off with an upgrade to 21.2 Mt Au at 2.73 g/t Au for 1.86 Moz in Indicated Resource. The March Mineral Resource was independently reviewed by AMC Consultants Pty Ltd, Australia and all aspects were taken into account in the subsequent August 2014 and February 2015 Mineral Resources.

·     KEFI continually refined the resource estimate using additional structural data based on surface mapping and trenching plus a small programme of additional Reverse Circulation (RC) targeted at infill drilling and maximising structural interpretation. This work was performed during March to June 2014.

·     KEFI's resources update published today incorporates geostatistical parameters agreed with Snowden, after rigorous peer review of various aspects including variography, top-cuts and block sizing.

·     The block model was created within the interpreted wireframes with block sizes: 10.0m(X) by 10.0m(Y) by 1.0m(Z), and grade estimation was carried out using 1.0m composited samples in drillholes.

TECHNICAL NOTES ON THE RESOURCE ESTIMATE

·    The Tulu Kapi gold deposit is an orogenic gold deposit located in an area consisting of rocks ranging from Pre-Cambrian to Tertiary in age. The gold mineralisation at Tulu Kapi is hosted by an Upper Proterozoic age intrusive, which comprises a coarse grained syenite pluton. These rocks have been intruded into a volcano-sedimentary sequence that was subsequently metamorphosed to mafic and sericitic schists. Primary mineralisation is hosted in mafic syenite.

·     The input data for the estimate comprised 722 drillholes totalling 118,738.3m including 298 diamond drillholes (NQ, HQ and PQ diameter) for 72,032.9m, 342 RC drillholes for 45,611m and 82 trenches for 1,094.4m. All drilling and sampling was carried out using industry standard methods. Diamond drilling was sampled using half core while RC samples were riffle split prior to crushing and grinding. Analysis was by fire assay using a 50 g charge and AAS finish.

·     Industry standard QAQC sampling and analysis was carried out which indicates that there are acceptable levels of precision and accuracy.

·     Mineralisation domains were interpreted and wireframed as a series of lodes following a general gold grade indicator of 0.3 g/t with appropriate adjustments to maintain continuity of grade and structure. The lodes typically strike to the north, dipping around 30 degrees to the west.

·     1m composites were coded within the mineralised domain and by major fault block ("Central Zone" and "UNDP Zone"). Given the shallow oxidation profile, no separation was carried out by oxidation domain.

·     The data distributions are highly skewed and typically have a high (>1.5) coefficient of variation (CV - ratio of standard deviation to the mean). As a result, top cuts were applied to prevent overestimation and smearing of the comparatively high values into surrounding blocks. Top cuts were 70 g/t Au for the Central and UNDP domains and impact on less than 1% of the grade population.

·     Grade estimation was carried out in CAE Studio 3 (Datamine) using ordinary kriging (OK) with dynamic anisotropy to align the estimation with the local dip and strike of the mineralisation trends, into 10mE by 10mN by 1.0mRL parent cells. Block discretisation was set to 4 by 4 by 2.

·     A kriging neighbourhood analysis (KNA) was carried out to determine optimal block size and estimation parameters. The estimation was performed on the mineralised and non-mineralised material defined within each domain (Central and UNDP).

·     Estimation was run in a three pass kriging plan, the second and third passes using progressively larger search radii to enable the estimation of blocks un-estimated on the previous pass. The search parameters were derived from the variogram analysis, with the first search distances corresponding to the distance at half of the variogram sill value and the second search distance approximating up to the variogram range.

·     Blocks were estimated using a minimum of 8 with a maximum of 24 samples (6 minimum and 24 maximum for pass 2) and a maximum of 4 composites allowed per drillhole.

·     The maximum distance of extrapolation points within the method was 80m.

·     A global (dry) density value of 1.5 t/m³ was used for all saprolite material. A global (dry) density value of 2.74 t/m³ was used for all fresh material.

·     For the Central Zone, search radii used during grade estimation were used together with a wireframe encompassing high confidence mineralisation to define classification. Consistent areas of blocks estimated in the first and second searches (within the variogram range) were classified as Indicated Resources and blocks consistently estimated in the third search pass with less confidence in the geological continuity were classified as Inferred Resources. The areas of Indicated Resources are typically drilled out on a 40m by 40m grid with areas of 20m by 20m.

·     The majority of Mineral Resources contained within the north fault block (UNDP) are classified as Inferred Resources, except for a portion representing more closely spaced drilling (approximately 40m by 40m), which was mainly estimated in the first and second search passes.

·     The Mineral Resource has been reported as mineable by open pit methods above 1,400mRL, which is the bottom out elevation for the pit optimisation shells generated as part of the definitive feasibility study. Below 1,400mRL the Mineral Resource is reported as potentially mineable by underground methods.

·     The updated Indicated Resources have been reported at a cut-off grade of 0.45 g/t Au above the 1,400mRL to represent open pittable resources and at a cut-off grade of 2.50 g/t Au below the 1,400mRL to represent potential underground mineable resources (tabulated above). Average surface RL in the planned pit is 1,750mRL. These cut-off grades were based on appropriate computerised optimisation techniques after taking into account the final determination of internal dilution of the Mineral Resources, which were completed as part of the Definitive Feasibility Study carried out during 2012.

·     Snowden has independently validated the estimate and checked each stage of the estimation process including review of all parameters, macros and classification criteria. Snowden considers that there are no material issues with the estimate.

NOTES TO EDITOR

KEFI Minerals plc

KEFI is the operator of two advanced gold development projects within the highly prospective Arabian-Nubian Shield, with an attributable 1.6 Moz (95% of Tulu Kapi's 1.9 Moz and 40% of Jibal Qutman's 0.5 Moz) Au Mineral Resources (JORC 2012) plus significant resource growth potential. KEFI is targeting for production at these projects to generate cash flows for further exploration and expansion as warranted, recoupment of development costs and, when appropriate, dividends to shareholders.

Expected milestones for the remainder of 2015 at Tulu Kapi include:

·     Independent verification of refined mine plan

·     Independent verification of refined estimates for capex, opex and closure

·     Independent verification of updated Ore Reserves

·     Assembly of bank syndicate and agreement of indicative terms sheet for project finance

·     Receipt of Mining Licence in Q1 2015 (application suspended mid-2013 by previous owner of the asset)

In addition, during 2015 KEFI anticipates submitting a Mining Licence Application for Jibal Qutman in Saudi Arabia through its joint venture company, Gold & Minerals Ltd ("G&M").

KEFI in Ethiopia

KEFI has 100% ownership of the Tulu Kapi licence in western Ethiopia and is at an advanced stage in refining the development plan for the project, aimed at reducing the previously planned capital and operating expenditure. Detailed research has yielded encouraging results and has been summarised in recent Company announcements.

At the end of 2013, the Ethiopian Government improved the fiscal regime applying to the gold sector, and Tulu Kapi in particular. This included lowering the income tax rate for mining (to 25% from 35%); settling of repayment schedule for inherited VAT liability (over three years rather than up-front); the removal of VAT on future exploration drilling expenditure; lowering royalty on gold mining (to 7% from 8%); accelerating the depreciation of historical and future capital expenditure (over four years); and clarifying the workings of the Government's 5% free-carried interest so that it does not impede conventional project financing terms.

KEFI in the Kingdom of Saudi Arabia

In 2009, KEFI formed G&M in Saudi Arabia with local Saudi partner Abdul Rahman Saad Al-Rashid & Sons Company Limited ("ARTAR"), to explore for gold and associated metals in the Arabian Shield. KEFI has a 40% interest in the G&M and is the operating partner. To date, the G&M has conducted preliminary regional reconnaissance and has had five Exploration Licences ("EL") granted, including Jibal Qutman and the recently granted "Hawiah EL" that contains over 5km of outcropping gossans developed on VMS altered and mineralised rocks.

G&M holds 23 Exploration Licence Applications that cover an area of approximately 1,484km². ELs are renewable for up to three years and bestow the exclusive right to explore and to obtain a 30-year exploitation (mining) lease within the area.

The Kingdom of Saudi Arabia has instituted policies to encourage minerals exploration and development, and KEFI Minerals supports this priority by serving as the technical partner within G&M. ARTAR also serves this government policy as the major partner in G&M, which is one of the early movers in the modern resurgence of the Kingdom's minerals sector. 

DEFINITIONS OF EXPLORATION RESULTS, RESOURCES & RESERVES

EXTRACTED FROM THE JORC CODE: (December 2012) (www.jorc.org)

A 'Mineral Resource' is a concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.

An 'Inferred Mineral Resource' is that part of a Mineral Resource for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade (or quality) continuity. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to an Ore Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

 An 'Indicated Mineral Resource' is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to assume geological and grade (or quality) continuity between points of observation where data and samples are gathered. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Ore Reserve.

A 'Measured Mineral Resource' is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to confirm geological and grade (or quality) continuity between points of observation where data and samples are gathered. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proved Ore Reserve or under certain circumstances to a Probable Ore Reserve.

An 'Ore Reserve' is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported.

-Ends-

 

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