REG - Kefi Gold and Copper - Results for the year ended 31 December 2023
17/06/2024 07:15
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RNS Number : 5979S Kefi Gold and Copper PLC 17 June 2024
17 June 2024
KEFI Gold and Copper plc
("KEFI" or the "Company")
Results for the year ended 31 December 2023
KEFI (AIM: KEFI), a gold and copper exploration and development company
focused on the Arabian-Nubian Shield with a pipeline of projects in the
Federal Democratic Republic of Ethiopia, and the Kingdom of Saudi Arabia, is
pleased to announce its audited financial results for the year ended 31
December 2023.
AGM and Annual Report
The notice convening the Company's Annual General Meeting ("AGM"), which is
currently expected to be held on 22 July 2024 in Ethiopia, will be sent out in
the week commencing 17 June 2024 and will be available for download on the
Company's website: https://www.kefi-goldandcopper.com
(https://www.kefi-goldandcopper.com) . A further announcement will be made
when the Notice of AGM is published. The timing of the AGM coincides with
meetings of Tulu Kapi project partners and financiers in Addis Ababa,
including also the general meetings for KEFI subsidiaries being organised to
facilitate development financing plans.
Mark Tyler, a non-executive director of the Company, has stated his intention
to retire from the Company at the conclusion of the AGM after 6 years of
greatly appreciated support, especially in respect of African project debt
financing, as one of the continent's long-standing leaders in the field. The
Company plans to continue to add to the range of skills and appropriate board
expertise in preparation for the substantial changes as KEFI moves into its
exciting next stage with the development of its projects.
The Annual Report and Accounts for the year ended 31 December 2023 is also
available on KEFI's website at https://www.kefi-goldandcopper.com
(https://www.kefi-goldandcopper.com)
Highlights
· In Ethiopia, with our partners and banks:
o our focus is now on successfully completing the Early Works at Tulu Kapi
so that we can close the $320 million project finance package and launch Major
Works in October 2024. Gold production would then commence in mid-2026;
o Tulu Kapi's projected net cash flow to KEFI's planned 80% beneficial
interest is estimated at approximately £80 million per annum. At the current
gold spot price of $2,346/ounce, KEFI's planned beneficial interest in the
cash flow is estimated to be approximately £100 million per annum; and
o The end result will be the launch of Ethiopia's first industrial-scale
mining project and its largest single export generator and, in so far as
environmental, social and governance aspects are concerned, the project is
designed to be in compliance with World Bank IFC Performance Standards,
creating direct and indirect employment for 5,000 to 10,000 people.
· In Saudi Arabia, with our partner and bank:
o Jibal Qutman and Hawiah are enjoying very positive regulatory support as
we assess the choices of development plans. Substantial drilling programmes at
both projects over the past year have better defined the known Mineral
Resources as well as discovering nearby deposits; and
o Given the expected expansion in resources, the ongoing development
feasibility studies are focused on establishing the optimal start-up
strategies and ultimate potential scale.
· As regards the KEFI group's funding:
o Financial markets, and the AIM Market in particular, have recently shown
some volatility and weakness flowing from global and UK political events. This
continues to reinforce KEFI's strategy of sourcing predominantly project-level
and subsidiary-level project financing to develop our projects; and
o Successful implementation of our plans will result in KEFI being a leader
in the Arabian-Nubian Shield with holdings in three production assets coming
on stream in sequence from 2026.
Note: All $ figures in this report are US$
Competent Person's Statement
KEFI reports in accordance with the 2012 Edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves (the
"JORC Code").
The information in this announcement that relates to exploration results,
Mineral Resources and Ore Reserves is based on information compiled by Mr
Jeffrey Rayner and has been previously announced by the Company. He is
exploration adviser to KEFI, the Company's former Managing Director and a
Member of the Australian Institute of Geoscientists ("AIG"). Mr Rayner is a
geologist with sufficient relevant experience for Group reporting to qualify
as a Competent Person as defined in the JORC Code. Mr Rayner consents to the
inclusion in this report of the matters based on this information in the form
and context in which it appears.
Market Abuse Regulation (MAR) Disclosure
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
Enquiries
KEFI Gold and Copper plc
Harry Anagnostaras-Adams (Executive Chairman) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance LLP (Nominated Adviser) +44 (0) 20 3470 0470
Jeff Keating, Adam Cowl
Tavira Financial Limited (Lead Broker) +44 (0) 20 7100 5100
Oliver Stansfield, Jonathan Evans
IFC Advisory Ltd (Financial PR and IR) +44 (0) 20 3934 6630
Tim Metcalfe, Florence Chandler
3PPB LLC (Institutional IR)
Patrick Chidley +1 (917) 991 7701
Paul Durham +1-203-940-2538
EXECUTIVE CHAIRMAN'S REPORT
KEFI continued to build on its early-mover position in the Arabian-Nubian
Shield during 2023. Over the past year, our host countries have turned
markedly better for the minerals sector and for KEFI. We have launched Early
Works for the Tulu Kapi Gold Project in Ethiopia to commission production
mid-2026. Whilst this involves no commitments to the capital expenditure
programme, it involves important preliminary field and other preparatory tasks
which need completing before the development commitment can be triggered. Our
Saudi joint venture invests heavily in advancing development studies on the
Jibal Qutman Gold Project and the Hawiah Copper-Gold Project. I am pleased to
report that the Company has drawn together first-tier partnerships, banking
relationships and contractors into project-finance alliances to develop our
planned mines in both Ethiopia and Saudi Arabia. The finalisation of the
project launch in Ethiopia relies on the successful completion of the Early
Works along with the formal approvals of all parties in the syndicate, to
ensure a complete funding package.
A structural aspect being addressed is to consider the costs and benefits of
seeking a dual-listing of the parent or appropriate other group company in a
larger international stock market for mining or in one of the new and more
buoyant stock markets in our region. The issue arises because, since KEFI's
IPO in 2006, the number of AIM companies has roughly halved to the end of
2023. This was against a backdrop of the market capitalisation of our sector
globally dropping 77% to the end of 2023 since it peaked in 2011 (as measured
by the Junior Gold Index GDXJ for +$100 million market capitalisation gold
companies). These patterns have barely changed during the first half of 2024.
We are considering some alternatives and will select the route that provides
the best long-term backing and alignment with key stakeholders for our
mission.
In Ethiopia, our focus is now on successfully completing the Early Works at
Tulu Kapi so that we can close the US$320 million project finance package and
launch Major Works in October 2024. Gold production would then commence in
mid-2026.
Our launch timing is fortuitously coinciding with the improved conditions in
Ethiopia and the gold price reaching all-time highs and the S&P Global
average analysts' long-term forecast now sitting at approximately $2,100/ounce
on 30 May 2024. With a forecast All-in Sustaining Cost ("AISC") of
approximately $900/ounce at that same gold price), Tulu Kapi's projected net
cash flow to KEFI's planned 80% beneficial interest is estimated at
approximately £80 million per annum. At current spot of $2,346/ounce, KEFI's
planned beneficial interest in the cash flow is estimated to be approximately
£100 million.
Tulu Kapi will provide great benefits to the country by becoming Ethiopia's
largest single export generator and provide a significant economic engine
locally and regionally.
On the other side of the Red Sea, our GMCO joint venture is now
well-established as a leading explorer/developer in the fast-emerging Saudi
mining sector and its growth has coincided with the Saudi Government's widely
publicised recent initiatives to welcome international expertise.
Jibal Qutman and Hawiah are enjoying very positive regulatory support as we
assess the choices of development plans. Substantial drilling programmes at
both projects over the past year have better defined the known Mineral
Resources as well as discovering nearby deposits. Given the expected expansion
in resources, the ongoing development feasibility studies are focused on
establishing the optimal start-up strategies and ultimate potential scale. We
look forward to reporting our assessments and decisions.
Financial markets, and the AIM Market in particular, have recently shown some
volatility and weakness flowing from global and UK political events. This
continues to reinforce KEFI's strategy of sourcing predominantly project-level
and subsidiary-level project financing to develop our projects.
Successful implementation of our plans will result in KEFI being a leader in
the Arabian-Nubian Shield with holdings in three production assets coming on
stream in sequence from 2026.
Ethiopia - Tulu Kapi (KEFI beneficial interest targeted at circa 80%)
Ethiopia is demonstrating a clear determination to expedite its economic
recovery after the self-inflicted damage of the internal conflicts of
2010-2021 and, once again, be among the world's top 10 growth countries, as it
was for nearly 20 years up to 2017. A key part of the Ethiopian Government's
strategy to achieve this strong growth is for the mining sector to increase
from 1% of GDP today to 10% of GDP ten years from now.
Tulu Kapi will be the country's first large-scale mining project for some 30
years and is designed to the highest international standards. Tulu Kapi is
likely to become Ethiopia's largest single export generator and a significant
economic engine for local and regional benefits. Another similar project has
also recently been launched in Ethiopia by Canadian company Allied Gold and
local conglomerate MIDRC has two less advanced similar-scale projects. The
sector is coming alive.
There is significant potential to increase Tulu Kapi's current Ore Reserves of
1.05 million ounces of gold and Mineral Resources of 1.7 million ounces.
Economic projections for the Tulu Kapi open pit indicate the following returns
assuming a gold price of $2100/ounce:
· Average EBITDA of $219 million per annum (KEFI's now planned c. 80% interest
being c. $176million);
· All-in Sustaining Costs ("AISC") of $870/ounce (note that royalty costs vary
with the gold price); and
· All-in Costs ("AIC") of $1,070/ounce.
The assumptions underlying these projections are detailed in the footnotes to
the table on page 8 of this Annual Report.
Saudi Arabia - Hawiah (25% KEFI Current beneficial interest)
GMCO first focused on the Wadi Bidah Minerals District ("WBMD") and Hawiah in
particular, shortly after launching our exploration programmes a decade ago.
The recent regulatory overhauls allowed us to start drilling and announcing
three VMS discoveries since 2019, Hawiah plus its satellite discoveries Al
Godeyer and Abu Salal. We consider it likely that a cluster of VMS deposits
will be identified as we progress. The district has also recently attracted
extensive pegging by the exploration joint venture of Government-controlled
Ma'aden and Ivanhoe Electric.
GMCO drilling confirmed the Hawiah deposit in 2019 and it now ranks in the:
· top three base metal projects in Saudi Arabia; and
· top 15% VMS projects worldwide.
Our drilling since 2019 has so far delineated a Mineral Resource Estimate
("MRE") of 29.0 million tonnes at 0.89% copper, 0.94% zinc, 0.67g/t gold and
10.1g/t silver. As a scale-comparison with Tulu Kapi, Hawiah's in-situ metal
content is now estimated to be in the order of 2.48 million gold-equivalent
ounces versus Tulu Kapi's current 1.72 million ounces of gold.
Recent exploration has discovered two potential satellite orebodies near the
proposed Hawiah processing plant. The nearby Al Godeyer deposit was discovered
in 2022 and an initial MRE was estimated in 2023. Drilling at Abu Salal,
approximately 50km south of Hawiah, intercepted sulphide mineralisation
containing copper, gold, zinc and silver in multiple horizons in early 2024.
Over the coming year, Hawiah development studies will be progressed in
conjunction with drilling programmes to upgrade and expand the GMCO's
copper-gold Mineral Resources in this major VMS district.
Saudi Arabia - Jibal Qutman (25% KEFI Current beneficial interest)
Jibal Qutman is a large low-grade orogenic gold deposit and GMCO's first
discovery in Saudi Arabia. In 2015 we announced a Preliminary Economic
Assessment ("PEA") for a stage 1 development of a Heap Leach operation to
expedite cash flow generation. As a result of the recent regulatory
overhauls, we were allowed to re-start drilling in October 2022, after its
suspension for approximately 8 years. The field work since has increased our
assessment of potential scale. And the metallurgical and other studies
carried out in the past two years have spawned a number of scenarios for
staged development, including Carbon-In-Leach ("CIL") processing or a
combination of processing techniques.
Systematic exploration is ongoing across the three contiguous Jibal Qutman
Exploration Licences ("EL's") to confirm structural controls on recently
identified higher-grade gold mineralisation and identify further resource
potential. Previous exploration primarily focused on an 8km long section of
the original Jibal Qutman EL. The full 35km mineralised strike length is now
being tested.
Regional Prospecting
Our advanced projects Hawiah and Jibal Qutman were early discoveries after our
establishment of GMCO in 2008. They now comprise a combined 3.1
gold-equivalent ounces on just two of our Exploration Licences in Saudi
Arabia, with significant potential for resource expansion nearby. By applying
a simple industry rule of thumb of US$80 per ounce resource, our exploration
work to date has generated intrinsic value of approximately US$250 million.
The Group has 15 Exploration Licences in Saudi Arabia plus a number of
applications in both Saudi Arabia and Ethiopia. Other proposals are regularly
assessed. Our focus will remain on value-adding to our advanced projects,
reinforcing our positions in each country and maintaining a healthy pipeline
of early-to-late-stage projects.
Simultaneous with the triggering of full development at Tulu Kapi, we intend
to re-commence exploration programmes in Ethiopia and intensify our
exploration program in Saudi Arabia. In Ethiopia, the initial focus will be
below the planned open pit where we already have established an initial
resource for underground mining at an average grade of 5.7g/t gold. We also
intend to follow-up drilling which indicated good potential for nearby
satellite gold deposits in the Tulu Kapi District. In Saudi Arabia, further
drilling is being undertaken during 2024, in particular for satellite deposits
near Hawiah and Jibal Qutman.
Summary and Conclusion
After many demanding years in highly prospective, but extremely challenging
jurisdictions, KEFI's projects can now move forward and our focus is on
exactly that, on optimising the projects, the financings thereof and KEFI's
beneficial ownership therein.
Our progress was historically impeded by the political reforms and ensuing
conflicts in Ethiopia as well as the suspension of granting EL's for some
years pending Saudi Arabia's sweeping deregulation. However, that is now
history and our operating environment has indeed turned for the better in both
countries and we can now progress on all fronts.
Our reported Mineral Resources provide a solid starting position for growth.
Since mid-2020, KEFI's beneficial interest in the in-situ metal content of our
three projects has grown from 1.2 million gold-equivalent ounces to
approximately 2.1 million gold-equivalent ounces. KEFI's current market
capitalisation of c.£40 ($50) million equates to only $24 per gold-equivalent
ounce and a fraction of the equity valuation applied in the past year at the
operating-company levels in our local partnerships' transactions. The
shareholders' agreements for both TKGM and GMCO apply equity earn-in and
dilution formulas that imply c.$200 million for KEFI's beneficial interest
therein.
KEFI's targeted beneficial interest in Tulu Kapi has an NPV of £449 million
(US$571 million) (NPV and the other preliminary value indicators defined in
footnote on page 8). This valuation indicator is approximately 11 times KEFI's
current share market capitalisation of c. £40 million (US$50 million). The
Directors consider this a conventional industry measure of potential value
once the projects have been successively de-risked.
Going forward, one would normally expect that as milestones are achieved, the
Company's share price should naturally narrow the gap between the Company's
market capitalisation and what we believe to be the significantly higher
fundamental valuations of the Company's projects using conventional measures
such as NPV for the more advanced projects and, for the less advanced, say
$1,500 per ounce projected annual production or $80/ounce of resource.
We are indeed at an opportune moment, made possible by our team's hard work,
your support and patience as shareholders and now the strengthening of metal
prices. As we launch our projects, we are also benefitting from improved
political and regulatory environments. Together with my fellow Directors, I am
committed to generating returns on investment. Management's personal alignment
with shareholders is illustrated by my having formed and initially funded
Atalaya Mining and its then subsidiary KEFI during 2003-2005 and, since
assuming executive duties at KEFI in 2014, taking much of my remuneration in
shares.
By emphasizing joint ventures and project-level development financing, we have
reduced the pressure on KEFI shareholders to provide funding. In fact, at Tulu
Kapi, the development capital is planned at the project or subsidiary level
from newly introduced regional investors, bankers, contractors, and other
syndicate parties.
KEFI's directors are deeply appreciative of our personnel's tenacity, as well
as the support the Company receives from our shareholders, in-country
partners, lenders, contractors, host communities and other stakeholders. It is
certainly overdue for all stakeholders to share the success that the Company
has worked for.
Recent developments marked the beginning of the next chapter in our
organisational growth. Several key appointments have been made to the senior
management team in both Ethiopia and Saudi Arabia, in particular the
appointment of Mr Eddy Solbrandt as Group Chief Operating Officer.
Additionally the Board of Directors will also adjust its composition to handle
approaching retirements. Mr Mark Tyler is retiring as a Non-Executive Director
after 6 years of greatly appreciated support especially in respect of African
project debt financing, as one of the continent's long-standing leaders in the
field. Thank you Mark. We plan to continue to add to the range of skills and
appropriate board expertise in preparation for the substantial changes as KEFI
moves into its exciting next stage with the development of our projects.
Harry Anagnostaras-Adams
Executive Chairman
14 June 2024
FINANCE DIRECTOR'S REPORT
Our principal focus over the past year has been on progressing the funding
package to develop Tulu Kapi and to cultivate development and funding
scenarios for GMCO in Saudi Arabia.
Remarkably, both the Ethiopia and Saudi Arabia Governments have initiated
changes that have expanded our financing choices in each country. The
Ethiopian Government has removed various obstacles to financing by providing
key approvals and required policy changes, whilst the Saudi Government has
successfully prompted the sector into action and made local policy changes
that have drawn significant capital investment appetite from within the
country and region.
We have launched Early Works at Tulu Kapi for production commissioning
mid-2026. Our funding syndicate is comprised of leading banks, contractors
of process plants and mining and other specialists, all of whom are now at
advanced stages of their respective approval processes.
KEFI has deliberately assembled its development funding at the subsidiary
level in both Ethiopia and Saudi Arabia in a manner which maximises local
stakeholder alignment. Of course, we need to honour our duty to partners and
shareholders by converting this into value by closing appropriate project
financings, launching Major Works, de-risking the projects and getting them
into production. KEFI is also examining dual-listings in those countries'
fledgling stock exchanges because of the strong local demand for investments
in the mining sector.
Alliancing Strategy
A notable reason for our solid position in the region is our alliancing
strategy. Our operating alliances are with the following strong organisations:
· Partners:
o in Ethiopia:
§ Federal Government of the Democratic Republic of Ethiopia
§ Oromia Regional Government
o in Saudi Arabia: Abdul Rahman Saad Al Rashid and Sons Company Ltd ("ARTAR")
· Principal contractors:
o for process plants in both Ethiopia and Saudi Arabia: Lycopodium
o for mining in Ethiopia: PW Mining
· Senior project finance lenders:
o For Tulu Kapi:
§ East and Southern African Trade and Development Bank Ltd ("TDB")
§ African Finance Corporation Limited ("AFC")
o For Saudi Arabia:
§ Saudi Industrial Development Fund
Financing Tulu Kapi Project Development
TKGM is structured as a public-private partnership with Ethiopia's Federal and
Regional Governments.
The current cost (including finance costs and working capital) to develop Tulu
Kapi is estimated to be c.$320 million, which was last updated in late 2022.
Whilst cost-inflation appears to have abated within the international gold
industry, pricing will be updated again at the last minute to lock-in
fixed-price lump sum contracts as at launch of Major Works and final finance
arrangements within the syndicate will be refined accordingly. The various
funding offers and commitments are conditional on finalisation at signing of
detailed definitive documentation and launch of Major Works.
The $320 million funding package (exclusive of the historical equity
investment of c.US$100 million) is now expected to be sourced from:
· $190 million from debt;
· $90-110 million from Equity Risk Notes ("ERN"); and
· $20-40 million from share subscriptions to KEFI subsidiaries.
In October 2023, the National Bank of Ethiopia (the central bank) approved
essential exemptions from exchange and capital controls. Among the many
Ethiopian regulatory changes we have successfully negotiated include
exemptions from certain foreign exchange and capital controls, the increase in
the maximum permissible ratio of debt to equity from 50:50 to 80:20, the right
to pay market-based finance charges, the right to hedge gold prices and the
deeming as foreign direct investment the re-investment of the local currency
(Ethiopian BIRR) retained earnings of multi-national corporations into new
business sectors, such as gold production.
On 20 May 2024 we launched Early Works and the steps now underway to progress
Tulu Kapi funding package are:
· Preparation of the community for resettlement;
· Satisfaction of residual, mainly administrative, conditions precedent such as
readiness of security, insurances, title confirmations, perfection of banks'
security and similar formal documentary requirements; and
· Completion of detailed definitive documentation which will require all
syndicate parties to approve counterparty rights and obligations, among other
things.
After approval by all syndicate members, we can then proceed to trigger Major
Works by:
· Signing the Definitive Documentation between the respective syndicate
counterparties;
· Placing insurances and complete other administrative tasks;
· Drawing down first capital, starting with project equity and then debt months
later;
· Commencing staged resettlement of approximately 350 households near Tulu Kapi;
and
· Beginning procurement and tendering local sub-contractors.
The end result will be the launch of Ethiopia's first industrial-scale mining
project and its largest single export generator and, in so far as
environmental, social and governance aspects are concerned, the project is
designed to be in compliance with World Bank IFC Performance Standards,
creating direct and indirect employment for 5,000 to 10,000 people.
Ownership Value and Ownership Dilution
Tulu Kapi's NPV is US$571 million for KEFI's projected net beneficial
interest, assuming a gold price of US$2,100/ounce, being the S&P Global
published average for equity analysts' long-term forecasts on 30 May 2024 and
discounting at 5% the net estimated after tax cash flows for equity, the
industry standard approach, so as to allow market comparisons of listed
developers. At the US$2,346/oz spot price on 30 May 2024, the NPV is $715
million for KEFI's projected net beneficial interest.
From an ownership value perspective and measuring the Company's underlying
assets on bases outlined herein, this approach has already contributed to the
indicative value of KEFI's share of its three main assets having more or less
quadrupled from $153 million in June 2020 to c.$657 million in May 2024. The
basis for these estimates is KEFI's estimated beneficial interest,
post-financing, of the NPV of Tulu Kapi cash flows as derived using consensus
forecast metal prices plus ascribing US$1,500/oz annual estimated
gold-equivalent production of the Saudi assets, and other explanations
provided in the footnotes below.
We have conditionally assembled all the development finance, mostly at the
project level from the work of our strong but small, efficient and economical
corporate office in Nicosia, Cyprus. Other than our Nicosia-based group
management and financial control/corporate governance team, all operational
staff, including the Executive Chairman and Chief Operating Officer, are
usually based at the sites for project work. This hands-on culture increases
efficiency at a lower cost, particularly for corporate overhead - critical at
this early stage.
Funding of GMCO
KEFI's GMCO joint venture partner, ARTAR, is currently funding the ongoing
programme to ensure that swift progress is maintained while we jointly
optimise our collective plans for GMCO and KEFI triggers project launch in
Ethiopia at the high-grade Tulu Kapi Gold Project. KEFI's interest in the
joint venture has reduced from its original 40% interest to 24.75%. While
ARTAR has the right to buy-out KEFI at fair market value as things stand, and
while KEFI has the right to seek acquirers of its GMCO shareholding, we are
examining a number of scenarios to optimise the future GMCO ownership
structure for mutual benefit and to reciprocate to ARTAR its support of the
joint venture relationship. This much-appreciated support from ARTAR reflects
the strong partnership relationship and the combined priority given to
production start-up in both countries
Financing Working Capital for KEFI's Activities to Date
KEFI has funded all activities to date with approximately £82 million equity
capital raised at then prevailing share market prices. This avoided
superimposing debt-repayment risk onto exploration, permitting and other risks
that always exist during the early phases of project exploration and
development, especially in frontier markets for mining. We do however avail
ourselves of short-term unsecured advances from time to time as arranged by
our Corporate Broker to provide working capital pending the achievement of
short-term business objectives.
The risks of managing working capital in the context of such high-growth and
high-risk exploration ventures is a matter which is highlighted by the
Directors in the Going Concern Note of the Financial Statements which
shareholders should refer to.
Material Accounting Policy
KEFI expenses all investment in GMCO in Saudi Arabia as part of its
conservative accounting approach, but we will review this upon Definitive
Feasibility Studies being approved by the GMCO Board. KEFI's carrying value of
the investment in KEFI Minerals (Ethiopia) Limited ("KME"), which holds the
Company's share of Tulu Kapi is only £15.6 million as at 31 December 2023. It
is important to note KEFI's planned c.80% beneficial interest in the
underlying valuation of Tulu Kapi is c.£449 ($571) million based on project
NPV at a gold price of $2,100/ounce and including the underground mine.
John Leach
Finance Director
14 June 2024
Footnotes:
§ NPV calculations are based on DFS financial model for Tulu Kapi open pit
updated for refinements in consultation with lenders, contractors and input
pricing updates generally plus PEA financial model for Tulu Kapi underground
mine. Added a notional $1,500 per projected annual gold-equivalent ounce of
projected production for Jibal Qutman and Hawiah;
§ Spot gold price as at 30 May 2024 of $2,346/ounce;
§ KEFI's beneficial interest in each project NPV calculation was assumed to be
80% in TKGM and 25% in Jibal Qutman & Hawiah;
§ Long-term analysts' consensus gold prices per S&P Global which averaged
$2,346/ounce; and
§ £/$ exchange rate = 1.27, discount rate of 5% applied against net cash flow
to equity, after debt service and after tax.
Cash Payment Bonus Plan
The Remuneration Committee and the Board have approved a performance-based
short-term incentive plan ("STI") aimed at aligning with the Company's
objectives and appropriately recognising and rewarding employee contributions
as the Company and its projects develop. This plan supersedes any previously
communicated incentives. These incentives are subject to the achievement of
specified milestones and are contingent upon the successful progression of the
Company's projects.
Outlined below are the details of the STI plan:
STI Bonuses:
Directors and Key Management Personnel STI 1 STI 2 STI 3 Retention
£'000 £'000 £'000 £'000
Executive Chairman 400 400 400 185
Finance Director 400 200 200 100
Chief Operating Officer 250 400 400 50
STI Bonus 1: This bonus is awarded upon the granting of credit approvals by
the lenders to the Tulu Kapi Gold Project¹.
STI Bonus 2: Upon project finance lenders having permitted debt disbursement
to commence for Tulu Kapi and not earlier than 12 months after STI Bonus 1 was
earned¹.
STI Bonus 3: Upon Tulu Kapi having commenced production and not earlier than
12 months after STI Bonus 2 was earned¹.
¹The recipient can elect to take the STI Bonus in shares or in cash. If in
shares, the issue price will be the VWAP for the month following the
achievement of the relevant Key Milestone. If in cash, the timing of the cash
payment will be subject to cash availability as determined by the Board but in
any event no later than 6 months after the achievement of the relevant Key
Milestone.
Retention Bonus: A Retention Bonus has been approved by the Board. The
disbursement of this bonus will be at the Board's discretion, with the latest
trigger being upon the grant of final credit approvals by the lenders to the
TKGM project and when sufficient Tulu Kapi development proceeds (either debt
or equity) become available.
The agreements for the Executive Chairman and Finance Director relating to the
STI cash bonuses and retention bonus are considered related-party transactions
for the purposes of Rule 13 of the AIM Rules for Companies. The Directors
independent of the STI bonus and retention bonus consider, having consulted
with SP Angel Corporate Finance LLP, the Company's nominated adviser, that the
STI bonus and retention bonus are fair and reasonable in so far as KEFI's
shareholders are concerned.
Consolidated statement of comprehensive income
Year ended 31 December 2023
Notes Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
Revenue - -
Exploration costs - -
Administrative expenses 6 (3,441) (2,400)
Finance transaction costs 8.2 (115) (368)
Share-based payments and warrants-equity settled 17 (159) (366)
Share of loss from jointly controlled entity 19 (4,963) (2,792)
Reversal of Impairment/(Impairment) of jointly controlled entity 19 453 (109)
Operating loss 6 (8,225) (6,035)
Other income/(loss) - -
Gain on Dilution of Joint Venture 19 1,156 286
Foreign exchange gain/(loss) 173 (79)
Finance costs 8.1 (1,000) (527)
Loss before tax (7,896) (6,355)
Tax 9 - -
Loss for the year (7,896) (6,355)
Loss attributable to:
-Owners of the parent (7,896) (6,355)
Loss for the period (7,896) (6,355)
Other comprehensive expense:
Exchange differences on translating foreign operations - -
Total comprehensive expense for the year (7,896) (6,355)
Total Comprehensive expense to:
-Owners of the parent (7,896) (6,355)
Basic and diluted loss per share (pence) 10 (0.175) (0.180)
The notes are an integral part of these consolidated financial statements.
Statements of financial position
31 December 2023
The Group The The The
Company Group Company
Notes 2023 2023 2022 2022
£'000 £'000 £'000 £'000
ASSETS
Non‑current assets
Property, plant and equipment 11 100 3 125 3
Intangible assets 12 34,716 - 31,356 -
Investment in subsidiaries 13.1 - 16,253 - 15,557
Investments in jointly controlled entities 13.2 - - - -
Receivables from subsidiaries 14.2 - 11,500 - 9,998
34,816 27,756 31,481 25,558
Current assets
Trade and other receivables 14.1 528 72 463 71
Cash and cash equivalents 15 192 114 220 45
720 186 683 116
Total assets 35,536 27,942 32,164 25,674
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 16 4,965 4,965 3,939 3,939
Deferred Shares 16 23,328 23,328 23,328 23,328
Share premium 16 48,922 48,922 43,187 43,187
Share options reserve 17 3,675 3,675 3,747 3,747
Accumulated losses (56,483) (61,564) (48,781) (52,929)
Attributable to Owners of parent 24,407 19,326 25,420 21,272
Non-Controlling Interest 18 1,709 - 1,562 -
Total equity 26,116 19,326 26,982 21,272
Current liabilities
Trade and other payables 20 7,307 6,503 4,002 3,222
Loans and borrowings 22 2,113 2,113 1,180 1,180
Total liabilities 9,420 8,616 5,182 4,402
Total equity and liabilities 35,536 27,942 32,164 25,674
The notes are an integral part of these consolidated financial statements.
The Company has taken advantage of the exemption conferred by section 408 of
Companies Act 2006 from presenting its own statement of comprehensive income.
Loss after taxation amounting to £9 million (2022: £6.1 million) has been
included in the financial statements of the parent company.
On the 14 June 2024, the Board of Directors of KEFI Gold and Copper PLC
authorised these financial statements for issue.
Harry John Edward Leach
Anagnostaras-Adams
Executive Director- Finance Director
Chairman
Consolidated statement of changes in equity
Year ended 31 December 2023
Attributable to the owners of the Company
Share Deferred Share premium Share Foreign Accum. Owners NCI Total
capital
shares options reserve exch losses Equity
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 2,567 23,328 35,884 1,891 - (42,731) 20,939 1,379 22,318
Loss for the year - - - - - (6,355) (6,355) - (6,355)
Total Comprehensive Expenses - - - - - (6,355) (6,355) - (6,355)
Recognition of share-based payments - - - 366 - - 366 - 366
Expired warrants - - - (488) - 488 - - -
Issue of share capital and warrants 1,372 - 7,747 1,978 - - 11,097 - 11,097
Share issue costs - - (444) - - - (444) - (444)
Non-controlling interest - - - - (183) (183) 183 -
At 31 December 2022 3,939 23,328 43,187 3,747 - (48,781) 25,420 1,562 26,982
Loss for the year - - - - - (7,896) (7,896) - (7,896)
Other comprehensive expense - - - - - - - - -
Total Comprehensive expense - - - - - (7,896) (7,896) - (7,896)
Recognition of share-based payments - - - 269 - - 269 - 269
Expired warrants - - - (341) - 341 - - -
Issue of share capital and warrants 1,026 - 6,156 - - - 7,182 - 7,182
Share issue costs - - (421) - - - (421) - (421)
Non-controlling interest - - - - - (147) (147) 147 -
At 31 December 2023 4,965 23,328 48,922 3,675 - (56,483) 24,407 1,709 26,116
The following describes the nature and purpose of each reserve within owner's
equity:
Reserve Description and purpose
Share capital: (Note 16) Amount subscribed for ordinary share capital at nominal value
Deferred shares: (Note 16) Under the terms of the restructuring of share capital, ordinary shares were
sub-divided into deferred shares
Share premium: (Note 16) Amount subscribed for share capital in excess of nominal value, net of issue
costs
Share options reserve (Note 17) Reserve for share options and warrants granted but not exercised or lapsed
Foreign exchange reserve Cumulative foreign exchange net gains and losses recognized on consolidation
Accumulated losses Cumulative net gains and losses recognized in the statement of comprehensive
income,
excluding foreign exchange gains within other comprehensive income
NCI (Non-controlling interest): (Note 18) The portion of equity ownership in a subsidiary not attributable to the parent
company
The notes are an integral part of these consolidated financial statements.
Company statement of changes in equity
Year ended 31 December 2023
Share Deferred shares Share premium Share Accumulated losses Total
capital
options reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 2,567 23,328 35,884 1,891 (47,310) 16,360
Loss for the year - - - - (6,107) (6,107)
Recognition of share-based payments - - - 366 - 366
Forfeited options - - - - - -
Expired warrants - - - (488) 488 -
Issue of share capital and warrants 1,372 - 7,747 1,978 - 11,097
Share issue costs - - (444) - - (444)
At 31 December 2022 3,939 23,328 43,187 3,747 (52,929) 21,272
Loss for the year - - - - (8,976) (8,976)
Recognition of share-based payments - - - 269 - 269
Forfeited options - - - - - -
Expired warrants - - - (341) 341 -
Issue of share capital and warrants 1,026 - 6,156 - - 7,182
Share issue costs - - (421) - - (421)
At 31 December 2023 4,965 23,328 48,922 3,675 (61,564) 19,326
The following describes the nature and purpose of each reserve within owner's
equity:
Reserve Description and purpose
Share capital (Note 16) Amount subscribed for ordinary share capital at nominal value
Deferred shares: (Note 16) Under the terms of the restructuring of share capital, ordinary shares were
sub-divided into deferred shares
Share premium: (Note 16) Amount subscribed for share capital in excess of nominal value, net of issue
costs
Share options reserve: (Note 17) Reserve for share options and warrants granted but not exercised or lapsed
Accumulated losses Cumulative net gains and losses recognized in the statement of comprehensive
income
The notes are an integral part of these consolidated financial statements.
Consolidated statement of cash flows
Year ended 31 December 2023
Notes Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (7,896) (6,355)
Adjustments for:
Depreciation of property, plant and equipment 11 29 24
Share based payments 17 159 366
Gain on Dilution of Joint Venture 19.1 (1,156) (286)
Share of loss from jointly controlled entity 19 4,963 2,792
(Reversal of Impairment) /Impairment on jointly controlled entity 19 (453) 109
Exchange difference (173) (53)
Finance costs 8.1 1,030 486
(3,497) (2,917)
Changes in working capital:
Increase in Trade and other receivables (66) (172)
Increase/(Decrease) in Trade and other payables 1,769 (72)
Cash used in operations (1,794) (3,161)
Interest paid 22.1.2 (67) -
Net cash used in operating activities (1,861) (3,161)
CASH FLOWS FROM INVESTING ACTIVITIES
Project exploration and evaluation costs 12 (2,458) (3,477)
Acquisition of property plant and equipment 11 (4) (86)
Advances to jointly controlled entity 13.2 (795) (1,682)
Net cash used in investing activities (3,257) (5,245)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 16 2,861 6,849
Issue costs 16 (311) (444)
Proceeds from bridge loans 22.1.2 2,640 1,830
Repayment of convertible notes and bridge loans 22.1.2 (100) (3)
Net cash from financing activities 5,090 8,232
Net decrease in cash and cash equivalents (28) (174)
Cash and cash equivalents:
At beginning of the year 15 220 394
At end of the year 15 192 220
Cash and cash equivalents in the Consolidated Statement of Financial Position
includes restricted cash of £nil (2022: £nil).
The notes on are an integral part of these consolidated financial statements.
Company statement of cash flows
Year ended 31 December 2023
Notes Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax (8,976) (6,107)
Adjustments for:
Depreciation of property plant equipment - 2
Share based payments 17 159 366
Gain on Dilution of Joint Venture 19.1 (1,156) (286)
Share of loss from jointly controlled entity 19 4,963 2,792
(Reversal of Impairment) /Impairment on jointly controlled entity 19 (453) 109
Exchange difference 1,122 (255)
Expected credit loss 70 113
Finance costs 1,030 486
(3,241) (2,780)
Changes in working capital:
Increase in Trade and other receivables (1) (47)
Increase in Trade and other payables 2,472 17
Cash used in operations (770) (2,810)
Interest Paid 22.1.2 (67) -
Net cash used in operating activities (837) (2,810)
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property plant and equipment - (4)
Investment in subsidiary 13.1 (696) (1,225)
Advances to jointly controlled entity 13.2 (795) (1,682)
Loan to subsidiary 14 (2,693) (2,615)
Net cash used in investing activities (4,184) (5,526)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 16 2,861 6,849
Issue costs 16 (311) (444)
Proceeds from bridge loans 22.1.2 2,640 1,830
Repayment of convertible notes and bridge loans 22.1.2 (100) (3)
Net cash from financing activities 5,090 8,232
Net increase/(decrease) in cash and cash equivalents 69 (104)
Cash and cash equivalents:
At beginning of the year 15 45 149
At end of the year 15 114 45
Cash and cash equivalents in the Company Statement of Financial Position
includes restricted cash of £nil (2022:nil).
The notes are an integral part of these consolidated financial statements.
Notes to the consolidated financial statements
Year ended 31 December 2023
1. Incorporation and principal activities
Country of incorporation
KEFI Gold and Copper PLC (the "Company") was incorporated in United Kingdom as
a public limited company on 24 October 2006. Its registered office is at
27/28, Eastcastle Street, London W1W 8DH.The principal place of business is
Cyprus.
Principal activities
The principal activities of the Group for the year were:
· Exploration for mineral deposits of precious and base metals and other
minerals that appear capable of commercial exploitation, including
topographical, geological, geochemical, and geophysical studies and
exploratory drilling.
· Evaluation of mineral deposits determining the technical feasibility and
commercial viability of development, including the determination of the volume
and grade of the deposit, examination of extraction methods, infrastructure
requirements and market and finance studies.
· Development of mineral deposits and marketing of the metals produced.
2. Material accounting policies
The principal material accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been consistently
applied throughout both periods presented in these financial statements unless
otherwise stated.
Basis of preparation and consolidation
The Company and the consolidated financial statements have been prepared in
accordance with UK adopted international accounting standards in conformity
with the requirements of the Companies Act 2006. They comprise the accounts of
KEFI Gold and Copper PLC and all its subsidiaries made up to 31 December 2023.
The Company and the consolidated financial statements have been prepared under
the historical cost convention, except for the revaluation of certain
financial instruments.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements
of subsidiaries have been included in the consolidated financial statements
from the date that control commences until the date that control ceases.
An investor controls an investee if and only if the investor has all the
following:
An investor controls an investee when it is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee.
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the
investee; and
(c) the ability to use its power over the investee to affect the amount of the
investor's returns.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any income and expenses arising
from intra-group transactions, are eliminated in preparing the consolidated
financial statements.
Going concern
The Company is a holding entity and as such their going concern is dependent
on the Group therefore the going concern assessment for the Company was
performed as part of the Group's assessment.
The assessment of the Group's ability to continue as a going concern involves
judgment regarding future funding available for the development of the Tulu
Kapi Gold project, advancement of the Saudi Arabia exploration properties and
for working capital requirements.
As part of this assessment, the Directors have considered funds on hand,
current liabilities and planned expenditures covering a period of at least 12
months from the date of approval of these financial statements.
The Group recognises that within the going concern consideration period, it
will need funding for normal running costs in addition to other committed
costs which will include its share of the construction and development costs
of the Tulu Kapi mine (Further details on project financing plan are
summarised on page 6 of the Finance Director's Report). The Group's current
liabilities, including existing short term debt funding, exceed the Group's
cash balance. Therefore, the Group is currently actively managing its existing
liabilities, and the group will need further funding in a short period of time
in order to settle its current liabilities and short term debt.
The Group's ability to achieve the requisite level of funding will rely
predominately upon securing sufficient project financing and the remaining
regulatory approvals for its flagship Tulu Kapi project. Significant progress
has been made over the past year in this regard, including the receipt of key
central bank exemptions from certain exchange and capital controls thus
allowing the establishment of a suitable framework for offshore project
funding and capital management. Definitive agreements for project financing
are nearing completion with contractors, equity investors, and government
entities. Also arrangements with project lenders AFC and TDB for the $190
million project loan are proceeding through the credit approval process with
the credit committee for lead lender TDB having already approved and AFC's
nearing completion. It should be noted that these approvals are subject to
standard conditions precedent, including KEFI raising additional equity. For
more details, refer to page 50, "Financing Risk" of the Principal Risks and
uncertainties Report. Efforts to formalize these arrangements and prepare
definitive agreements are continuing.
In 2024, the Company successfully raised an additional £6.9 million in equity
capital, using the funds to repay some existing debt and normalise creditors
and for general working capital. Based on the current amount of cash and
existing liabilities, the available funds are insufficient to meet the Group's
obligations during the 12 month period from the date of approval of these
financial statements. This shortfall may be exacerbated by a lack of normal
available financing due to ongoing uncertainty in mineral exploration markets.
To address its financing needs, the Group will pursue various options,
including, but not limited to, the sale of part of a project, debt financing,
strategic alliances, and equity financing.
Accordingly, and as set out above, the Group and Company are reliant on
additional funding being acquired, which is not guaranteed, and as a result
this indicates the existence of a material uncertainty which may cast
significant doubt over Group and Company's ability to continue as a going
concern and, therefore, they may be unable to realise their assets and
discharge their liabilities in the normal course of business. Based on
historical experience and current ongoing proactive discussions with
stakeholders, the Directors have a reasonable expectation that definitive
binding agreements will be signed. Accordingly, the Directors have a
reasonable expectation that the Group and Company will be able to continue to
raise funds to meet its objectives and obligations.
The financial statements therefore do not include the adjustments that would
result if the Group and Company were unable to continue as a going concern.
Functional and presentation currency
The individual financial statements of each Group entity are measured and
presented in the currency of the primary economic environment in which the
entity operates. The consolidated financial statements of the Group and the
statement of financial position and equity of the Company are in British
Pounds ("GBP") which is the functional currency of the Company and the
presentation currency for the consolidated financial statements. Functional
currency is also determined for each of the Company's subsidiaries, and items
included in the financial statements of the subsidiary are measured using that
functional currency. GBP is the functional currency of all subsidiaries.
(1) Foreign currency translation
Foreign currency transactions are translated into the presentational currency
using the exchange rates prevailing at the date of the transactions. Gains and
losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign
currencies are recognized in profit or loss in the statement of comprehensive
income.
(2) Foreign operations
On consolidation, the assets and liabilities of the consolidated entity's
foreign operations are translated at exchange rates prevailing at the
reporting date. Income and expense items are translated at the average
exchange rates for the period unless exchange rates fluctuate significantly in
which case they are recorded at the actual rate. Exchange differences arising,
if any, are recognized in the foreign currency translation reserve and as a
component of other comprehensive income and recognized in profit or loss on
disposal of the foreign operation.
Revenue recognition
The Group had no sales or revenue during the year ended 31 December 2023
(2022: Nil).
Property plant and equipment
Property plant and equipment are stated at their cost of acquisition at the
date of acquisition, being the fair value of the consideration provided plus
incidental costs directly attributable to the acquisition less depreciation.
Depreciation is calculated using the straight-line method to write off the
cost of each asset to their residual values over their estimated useful life.
The annual depreciation rates used are as follows:
25%
Furniture, fixtures and office equipment
Motor vehicles 25%
Plant and equipment 25%
Intangible Assets
Cost of licenses to mines are capitalised as intangible assets which relate to
projects that are at the pre-development stage. No amortisation charge is
recognised in respect of these intangible assets. Once the Group starts
production these intangible assets relating to license to mine will be
depreciated over life of mine.
Interest in jointly controlled entities
The group is a party to a joint arrangement when there is a contractual
arrangement that confers joint control over the relevant activities of the
arrangement to the group and at least one other party. Joint control exists
where unanimous consent is required over relevant decisions.
The group classifies its interests in joint arrangements as either:
- Joint ventures: where the group has rights to only the net assets of the joint
arrangement.
- Joint operations: where the group has both the rights to assets and
obligations for the liabilities of the joint arrangement.
- In assessing the classification of interests in joint arrangements, the Group
considers:
- The structure of the joint arrangement.
- The legal form of joint arrangements structured through a separate vehicle.
- The contractual terms of the joint arrangement agreement.
- Any other facts and circumstances (including any other contractual
arrangements).
The Group accounts for its interests in joint ventures using the equity
method. The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, and expenses in accordance with
its contractually conferred rights and obligations.
Finance costs
Interest expense and other borrowing costs are charged to the statement of
comprehensive income as incurred and is recognised using the effective
interest method.
Tax
The tax payable is based on taxable profit for the period. Taxable profit
differs from net profit as reported in the statement of comprehensive income
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. Tax is payable in the relevant jurisdiction at the rates described
in note 9.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are generally recognized for all
taxable differences and deferred tax assets are recognized to the extent that
taxable profits will be available against which deductible temporary
differences can be utilized. The amount of deferred tax is based on the
expected manner of realisation or settlement of the carrying amounts of assets
and liabilities, using tax rates that have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off deferred tax assets against deferred tax
liabilities and when the deferred taxes relate to the same fiscal authority.
Investments
Investments in subsidiary companies are stated at cost less provision for
impairment in value, which is recognized as an expense in the period in which
the impairment is identified, in the Company accounts.
Exploration costs
The Group has adopted the provisions of IFRS 6 "Exploration for and Evaluation
of Mineral Resources". The company still applies IFRS 6 until the project
financing is secured. Once financing is secured the project moves to the
development stage.
Exploration and evaluation expenditure, including acquisition costs of
licences, in respect of each identifiable area of interest is expensed to the
statement of comprehensive income as incurred, until the point at which
development of a mineral deposit is considered economically viable and the
formal definitive feasibility study is completed. At this point costs incurred
are capitalised under IFRS 6 because these costs are necessary to bring the
resource to commercial production.
Exploration expenditures typically include costs associated with prospecting,
sampling, mapping, diamond drilling and other work involved in searching for
ore. Evaluation expenditures are the costs incurred to establish the technical
and commercial viability of developing mineral deposits identified through
exploration activities. Evaluation expenditures include the cost of directly
attributable employee costs and economic evaluations to determine whether
development of the mineralized material is commercially justified, including
definitive feasibility and final feasibility studies.
Impairment reviews for deferred exploration and evaluation expenditure are
carried out on a project-by-project basis, with each project representing a
potential single cash generating unit. An impairment review is undertaken when
indicators of impairment arise such as: (i) unexpected geological occurrences
that render the resource uneconomic; (ii) title to the asset is compromised;
(iii) variations in mineral prices that render the project uneconomic; (iv)
substantive expenditure on further exploration and evaluation of mineral
resources is neither budgeted nor planned; and (v) the period for which the
Group has the right to explore has expired and is not expected to be renewed.
On commencement of development, Exploration and evaluation expenditure are
reclassified to development assets, following assessment for any impairment.
Development expenditure
Once the Board decides that it intends to develop a project, development
expenditure is capitalized as incurred, but only where it meets criteria for
recognition as an intangible under IAS 38 or a tangible asset under IAS 16 and
then amortized over the estimated useful life of the area according to the
rate of depletion of the economically recoverable reserves or over the
estimated useful life of the mine, if shorter.
Share based compensation benefits
IFRS 2 "Share based Payment" requires the recognition of equity settled
share-based payments at fair value at the date of grant and the recognition of
liabilities for cash settled share based payments at the current fair value at
each statement of financial position date. The total amount expensed is
recognized over the vesting period, which is the period over which performance
conditions are to be satisfied. The fair value is measured using the Black
Scholes pricing model. The inputs used in the model are based on
management's best estimate, including consideration of the effects of
non-transferability, exercise restrictions and behavioural considerations.
Where the Group issues equity instruments to persons other than employees, the
statement of comprehensive income is charged with the fair value of goods and
services received.
Warrants
Warrants issued are recognised at fair value at the date of grant. The charge
is expensed on a straight-line basis over the vesting period. The fair value
is measured using the Trinomial Model. Where warrants are considered to
represent a transaction cost attributable to a share placement, the fair value
is recorded in the warrant reserve and deducted from the share premium.
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are
originated. All other financial assets are recognised initially on the trade
date, which is the date that the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially all the risks
and rewards of ownership of the financial asset are transferred. Any
interest in such transferred financial assets that is created or retained by
the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset, and the net amount presented in
the statement of financial position when, and only when, the Group has a legal
right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
Non-derivative financial assets
The Group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired.
Amortised cost: These are financial assets where the objective is to hold
these assets in order to collect contractual cash flows and the contractual
cash flows are solely payments of principal and interest. They are initially
recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for impairment. Trade
and other receivables, as well as cash are classified as amortised cost.
Financial asset at fair value through other comprehensive income: Financial
assets (debt) which are held with the objective as above but which maybe
intended to be sold before maturity and also includes strategic equity
investments (that are not subsidiaries, joint ventures or associates) which
would be normally held at fair value through profit or loss, could on
irrevocable election be measured with fair value changes flow through OCI. On
disposal, the gain or loss will not be recycled to P&L.
Financial asset at fair value through profit and loss: Financial assets not
meeting the criteria above and derivatives.
Impairment of financial assets: Financial assets at amortised cost consist of
trade receivables, loans, cash and cash equivalents and debt instruments.
Impairment losses are assessed using the forward-looking Expected Credit Loss
(ECL) approach. Trade receivable loss allowances are measured at an amount
equal to lifetime ECL's. Loss allowances are deducted from the gross carrying
amount of the assets
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, and call deposits with
maturities of three months or less from the acquisition date that are subject
to an insignificant risk of changes in their fair value and are used by the
Group in the management of its short-term commitments.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated
liabilities on the date that they are originated. All other financial
liabilities are recognised initially on the trade date, which is the date that
the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations
are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities as other financial
liabilities. Such financial liabilities are recognised initially at fair
value less any directly attributable transaction costs. After initial
recognition, these financial liabilities are measured at amortised cost using
the effective interest method.
Other financial liabilities comprise trade and other payables and borrowings.
Financial assets and liabilities at fair value through the profit or loss
Financial assets and liabilities at fair value through the profit or loss
comprise derivative financial instruments. After initial recognition,
financial assets at fair value through the profit or loss are stated at fair
value. Movements in fair values are recognised in profit or loss unless they
relate to derivatives designated and effective as hedging instrument, in which
event the timing of the recognition in the profit or loss depends on the
nature of the hedging relationship. The Group does not currently have any such
hedging instruments.
New standards and interpretations applied
The following new standards and interpretations became effective on 1 January
2023 and have been adopted by the Group.
Effective period commencing on or after
IFRS 17 Insurance Contracts 01 January 2023
Amendments to IAS 8 Amendments to IAS 8: Definition of accounting estimates 01 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of accounting 01 January 2023
policies
Amendments to IAS 12 Amendments to IAS 12: Deferred tax related to assets and liabilities arising 01 January 2023
from a Single transaction
Amendments to IAS 12 IAS 12 Income taxes: International Tax Reform - Pillar Two Model Rules. 01 January 2023
Amendments to IFRS 16 ¹ Amendments to IFRS 16: Liability in a Sale and Leaseback 01 January 2024
Amendments IAS 1 ¹ Amendments to IAS 1: Classification of liabilities as current or noncurrent 01 January 2024
Amendments IAS 1 ¹ Amendments to IAS 1: Non-current Liabilities with Covenants 01 January 2024
Amendments to IAS 7 ¹ Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments 01 January 2024
Disclosure - Supplier Finance Arrangements (Amendments)
Amendments to IAS 21 ¹ IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of 01 January 2025
Exchangeability (Amendments)
¹Not yet endorsed.
These amendments had no impact on the interim condensed consolidated financial
statements of the Group. The Group intends to use the practical expedients in
future periods if they become applicable.
New standards, amendments and interpretations that are not yet effective and
have not been early adopted.
· Revisions to the Conceptual Framework for Financial Reporting.
The principal material accounting policies adopted are set out above.
There are several standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early.
The Group is currently assessing the impact of these new accounting standards
and amendments.
The Group does not expect any other standards issued by the IASB, but not yet
effective, to have a material impact on the group.
3. Financial risk management
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents
comprise cash at bank and in hand with an original maturity date of less than
three months. To mitigate our inherent exposure to credit risk we maintain
policies to limit the concentration of credit risk and ensure liquidity of
available funds. We also invest our cash and equivalents in rated financial
institutions, primarily within the United Kingdom and other investment grade
countries, which are countries rated BBB- or higher by S&P the Group does
not have a significant concentration of credit risk arising from its bank
holdings of cash and cash equivalents.
Financial risk factors
The Group is exposed to market risk (interest rate risk and currency risk),
liquidity risk and capital risk management arising from the financial
instruments it holds. The risk management policies employed by the Group to
manage these risks are discussed below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group does not consider this risk to be significant.
The Company has borrowings outstanding from its subsidiaries, the ultimate
realisation of which depends on the successful exploration and realization of
the Group's intangible exploration assets. This in turn is subject to the
availability of financing to maintain the ongoing operations of the business.
The Group manages its financial risk to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably.
Market risk - Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Group's operating cash
flows are substantially independent of changes in market interest rates as the
interest rates on cash balances are very low at this time. Borrowings issued
at variable rates expose the Group to cash flow interest rate risk. Borrowings
issued at fixed rates expose the Group to fair value interest rate risk. The
Group's management monitors the interest rate fluctuations on a continuous
basis and acts accordingly.
At the reporting date the interest rate profile of interest-bearing financial
instruments was:
2023 2022
£'000 £'000
Variable rate instruments
Financial assets 192 220
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 December 2023 would
have increased equity and profit or loss by the amounts shown below. This
analysis assumes that all other variables, in particular foreign currency
rates, remain constant. Given current interest rate levels, a decrease of 25
basis points has been considered, with the impact on profit and equity shown
below.
Equity Profit or Loss Equity Profit or Loss
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Variable rate instruments
Financial assets - increase of 100 basis points 2 2 2 2
Financial assets - decrease of 25 basis points (0.5) (0.5) (0.5) (0.5)
Currency risk
Currency risk is the risk that the value of financial instruments will
fluctuate due to changes in foreign exchange rates. Currency risk arises when
future commercial transactions and recognized assets and liabilities are
denominated in a currency that is not the functional currency of the entity.
The Group is exposed to foreign exchange risk arising from various currency
exposures primarily with respect to the Australian Dollar, Euro, Turkish Lira,
US Dollar, CHF, Ethiopian Birr and Saudi Arabian Riyal. Since 1986 the Saudi
Arabian Riyal has been pegged to the US Dollar, it is fixed at USD/SAR 3.75.
The Group's management monitors the exchange rate fluctuations on a continuous
basis and acts accordingly.
The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows; with the
Saudi Arabian Riyal exposure being included in the USD amounts.
Liabilities Assets Liabilities Assets
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Australian Dollar 6 - 188 0
Euro 367 18 215 29
US Dollar 3,784 34 2,014 26
Ethiopian Birr 710 524 779 537
Sensitivity analysis continued
A 10% strengthening of the British Pound against the following currencies at
31 December 2023 would have increased/(decreased) equity and profit or loss by
the amounts shown in the table below. This analysis assumes that all other
variables, in particular interest rates, remain constant. For a 10% weakening
of the British Pound against the relevant currency, there would be an equal
and opposite impact on the loss and equity.
Equity Profit or Loss Equity Profit or Loss
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Australian Dollar 1 1 19 19
Euro 35 35 19 19
US Dollar 375 375 199 199
Ethiopia ETB 19 19 24 24
Liquidity risk
The Group and Companies raise funds as required based on projected expenditure
for the next 6 months, depending on prevailing factors. Funds are generally
raised on AIM from eligible investors and also from short term providers in
the form of bridging finance. The success or otherwise of such capital
raisings is dependent upon a variety of factors including general equities and
metals mark sentiment, macro-economic outlook and other factors. When funds
are sought, the Group balances the costs and benefits of equity and other
financing options. Funds are provided to projects based on the projected
expenditure.
The carrying amount in the liquidity table below is below the contractual cash
flow because these short-term loans include interest payable until the
repayment date. If the loan is not repaid on the repayment date, an additional
interest of 2.5% per week will be incurred.
Carrying Amount Contractual Cash flows Less than 1 year Between 1-5 year More than 5 years
£'000 £'000 £'000 £'000 £'000
The Group
31-Dec-23
Trade and other payables 7,307 7,307 7,307 - -
Loans & Borrowings and Interest 2,113 2,438 2,438 - -
9,420 9,745 9,745 - -
31-Dec-22
Trade and other payables 4,002 4,002 4,002 - -
Loans & Borrowings and Interest 1,180 1,180 1,180 - -
5,182 5,182 5,182 - -
The Company
31-Dec-23
Trade and other payables 6,503 6,503 6,503 - -
Loans & Borrowings and Interest 2,113 2,438 2,438 - -
8,616 8,941 8,941 - -
31-Dec-22
Trade and other payables 3,222 3,222 3,222 - -
Loans & Borrowings and Interest 1,180 1,180 1,180 - -
4,402 4,402 4,402 - -
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefit for other stakeholders and to maintain an optimal
capital structure to reduce the costs of capital. This is done through the
close monitoring of cash flows.
The capital structure of the Group consists of cash and cash equivalents of
£192,000 (2022: £220,000) and equity attributable to equity of the parent,
comprising issued capital and deferred shares of £28,293,000 (2022:
£27,267,000), other reserves of £52,597,000, (2022: £46,943,000) and
accumulated losses of £56,483,000 (2022: £48,781,000). The Group has no
long-term debt facilities.
.
Fair value estimation
The Group has certain financial assets and liabilities that are held at fair
value. The fair value hierarchy establishes three levels to classify the
inputs to valuation techniques to measure fair value:
Classification of financial assets and liabilities
Level 1 - quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 - inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs)
The fair value of trade and other receivables is estimated as the present
value of future cash flows discounted at the market rate of interest at the
reporting date. For receivables and payables with a remaining life of less
than one year, the notional amount is deemed to reflect fair value. All other
receivables and payables are, where material, discounted to determine the fair
value.
Differences arising between the carrying and fair value are considered not
significant and no-adjustment is made in these accounts. The carrying and fair
values of intercompany balances are the same as if they are repayable on
demand. So the amortised cost is approximate to the fair value.
The fair values of the Group's loans and other borrowings are considered equal
to the book value as the effect of discounting on these financial instruments
is not considered to be material.
As at each of December 31, 2023, and December 31, 2022, the levels in the fair
value hierarchy into which the Group's financial assets and liabilities
measured and recognized in the statement of financial position at fair value
are categorized are as follows:
Carrying Amounts Fair Values
2023 2022 2023 2022
Financial assets £'000 £'000 £'000 £'000
Cash and cash equivalents (Note 15) - Level 1 192 220 192 220
Trade and other receivables (Note 14) 528 463 528 463
Financial liabilities
Trade and other payables (Note 20) 7,307 4,002 7,307 4,002
Loans and borrowings (Note 22) 2,113 1,180 2,113 1,180
4.Use and revision of accounting estimates and judgements
The preparation of the financial report requires the making of estimations and
assumptions that affect the recognized amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent liabilities. The
estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgments
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
Accounting Judgement:
Going concern
The going concern presumption depends principally on securing funding to
develop the Tulu Kapi gold mining project as an economically viable mineral
deposit, and the availability of subsequent funding to extract the resource,
or alternatively the availability of funding to extend the Company's and
Group's exploration activities (Note 2).
Capitalisation of exploration and evaluation costs
The directors consider that the project in its Licence areas in Saudi Arabia
has not yet met the criteria for capitalization. These criteria include, among
other things, the development of feasibility studies to provide confidence
that mineral deposits identified are economically viable. Capitalized
Exploration & Evaluation costs for the Group's project in Ethiopia have
been recognized on acquisition, and have continued to be capitalised since
that date, in accordance with IFRS 6. The technical feasibility of the project
has been confirmed, and once the financing is secure the related assets will
be reclassified as development costs in line with above.
Shareholding in GMCO
Post 31 December 2023, Company further diluted its proportionate share in GMCO
by 2.05% and reduced to 24.75% which resulted in corresponding increase in
ARTAR shareholding to 75.25%. There is a clause in JV agreement which states
that, if at any time the shareholding interest falls below 25% due to
dilution, transfer or for any reason, it will trigger a right of the other
shareholder to issue written notice requiring the retiring shareholder to
transfer its entire shareholding interest to the continuing shareholder at
fair value. The Company evaluated and concluded that the clause does not
automatically imply the loss of significant influence. The sale can only take
place at date expert is appointed. KEFI's influence remains based on its
current ownership percentage until such time that the notice is issued, and an
expert appointed to determine fair price. Referring to the potential voting
rights mentioned in IAS 28, the notice issue isn't currently actionable. This
eventuality remains pending until a future date. As of December 31, 2023 and
at the date of this report KEFI is still a party to Joint Venture based on
ownership interest of 24.75%.
Estimates:
Share based payments.
Equity-settled share awards are recognized as an expense based on their fair
value at date of grant. The fair value of equity settled share options is
estimated using option valuation models, which require inputs such as the
risk-free interest rate, expected dividends, expected volatility and the
expected option life, and is expensed over the vesting period. Some of the
inputs used are not market observable and are based on estimates derived from
available data.
The models utilized are intended to value options traded in active markets.
The share options issued by the Group, however, have several features that
make them incomparable to such traded options. The variables used to measure
the fair value of share-based payments could have a significant impact on that
valuation, and the determination of these variables require a significant
amount of professional judgement.
A minor change in a variable which requires professional judgement, such as
volatility or expected life of an instrument, could have a quantitatively
material impact on the fair value of the share-based payments granted, and
therefore will also result in the recognition of a higher or lower expense in
the Consolidated Statement of Comprehensive Income. Judgement is also
exercised in assessing the number of options subject to non-market vesting
conditions that will vest. These judgments are reflected in note 17.
Impairment review of asset carrying values (Note 12)
Determining whether intangible exploration and evaluation assets are impaired
requires an assessment of whether there are any indicators of impairment, by
reference to specific impairment indicators prescribed in IFRS 6 (Note 2).
This requires judgement. This includes the assessment, on a project-by-project
basis, of the likely recovery of the cost of the Group's Intangible
exploration assets in the light of future production opportunities based upon
ongoing geological studies. This also involves the assessment of the period
for which the entity has the right to explore in the specific area, or if it
has expired during the period or will expire soon, if it is not expected to be
renewed. Management has a continued plan to explore. In the Tulu Kapi Gold
Project Information Memorandum dated March 2024 there were no indicators of
impairment. TKGM license developments are reflected in Note 12.
5.Operating segments
The Group has two operating segments, being that of mineral exploration and
corporate activities. The Group's exploration activities are in the Kingdom
of Saudi Arabia (through the jointly controlled entity) and Ethiopia. Its
corporate costs which include administration and management are based in
Cyprus.
Corporate Ethiopia Saudi Arabia Adjustments Consolidated
£'000 £'000 £'000 £'000 £'000
2023
Corporate costs (3,335) (265) - - (3,600)
Foreign exchange gain/(loss) (1,100) 1,273 - 173
Gain on Dilution of Joint Venture - - 1,156 - 1,156
Net Finance costs (1,115) - - - (1,115)
(Loss)/gain before jointly controlled entity (5,550) 1,008 1,156 - (3,386)
Share of loss from jointly controlled entity - - (4,963) - (4,963)
Reversal of Impairment of jointly controlled entity - - 453 - 453
Loss before tax (5,550) 1,008 (3,354) - (7,896)
Tax - - - - -
Loss for the year (5,550) 1,008 (3,354) - (7,896)
-
Total assets 24,069 23,680 - (12,213) 35,536
Total liabilities 8,839 12,794 - (12,213) 9,420
Corporate Ethiopia Saudi Arabia Adjustments Consolidated
£'000 £'000 £'000 £'000 £'000
2022
Corporate costs (2,653) (112) - - (2,765)
Foreign exchange gain/(loss) 172 (251) - (79)
Gain on Dilution of Joint Venture - - 285 - 285
Net Finance costs (895) - - - (895)
(Loss)/gain before jointly controlled entity (3,376) (363) 285 - (3,454)
Share of loss from jointly controlled entity - - (2,792) - (2,792)
Impairment of jointly controlled entity - - (109) - (109)
Loss before tax (3,376) (363) (2,616) - (6,355)
Tax - - - - -
Loss for the year (3,376) (363) (2,616) - (6,355)
Total assets 21,089 21,074 - (9,999) 32,164
Total liabilities 3,988 11,194 - (9,999) 5,183
6. Expenses by nature 2023 2022
£'000 £'000
Depreciation of property, plant and equipment (Note 11) 29 24
Directors' fees and other benefits (Note 21.1) 568 582
Consultants' costs 282 205
Auditors' remuneration - audit current year 170 97
Legal Costs 822 283
Ongoing Listing Costs 253 174
Other expenses 589 322
Financial Project Advisory Costs 150 161
Shareholder Communications 295 299
Travelling Costs 283 253
Total Administrative Expenses 3,441 2,400
Share of losses from jointly controlled entity (Note 5 and Note 19) 4,963 2,792
Impairment/ (reversal of impairment) of jointly controlled entity (Note 19) (453) 109
Share based option benefits to directors (Note 17) 69 192
Share based benefits to employees (Note 17) 42 74
Share based benefits to key management (Note 17) 12 100
Share based benefits to suppliers 36 -
Cost for long term project finance (Note 8) 115 368
Operating loss 8,225 6,035
The Group's stages of operations in Saudi Arabia as at the year-end and as at
the date of approval of these financial statements have not yet met the
criteria for capitalization of exploration costs. The Company only capitalises
direct evaluation and exploration costs for the Tulu Kapi gold project in
Ethiopia.
7. Staff costs 2023 2022
£'000 £'000
Salaries 1,317 1,299
Social insurance costs and other funds 159 281
Costs capitalised as exploration (1,361) (1,516)
Net Staff Costs 115 64
Average number of employees 60 51
Excludes Directors' remuneration and fees which are disclosed in note 21.1. TK
project direct staff costs of 1,361,000 are capitalised in evaluation and
exploration costs and all remaining salary costs are expensed. Most of the
group employees are involved in Tulu Kapi Project in Ethiopia
8. Finance costs and other transaction costs 2023 2022
£'000 £'000
8.1 Total finance costs
Interest on short term loan 1,000 527
Total finance costs 1,000 527
8.2 Total other transaction costs
Cost for long term project finance 115 368
Total other transaction costs 115 368
The above costs for long term project finance relate to pre-investigation
activities required to fund TK Gold project.
9. Tax
2023 2022
£'000 £'000
Loss before tax (7,896) (6,355)
Tax calculated at the applicable tax rates at 12.5% (987) (794)
Tax effect of non-deductible expenses 948 556
Tax effect of tax losses 72 270
Tax effect of items not subject to tax (33) (32)
Charge for the year - -
9. Tax
2023
2022
£'000
£'000
Loss before tax
(7,896)
(6,355)
Tax calculated at the applicable tax rates at 12.5%
(987)
(794)
Tax effect of non-deductible expenses
948
556
Tax effect of tax losses
72
270
Tax effect of items not subject to tax
(33)
(32)
Charge for the year
-
-
The Company is resident in Cyprus for tax purposes. A deferred tax asset of
£1,817k (2022: £1,491k) has not been accounted for due to the uncertainty
over future recoverability.
Cyprus
The corporation tax rate is 12.5%. Under certain conditions interest income
may be subject to defence contribution at the rate of 17%. In such cases this
interest will be exempt from corporation tax. In certain cases, dividends
received from abroad may be subject to defence contribution at the rate of
17%. Due to tax losses sustained in the year, no tax liability arises on the
Company. Under current legislation, tax losses may be carried forward and be
set off against taxable income of the five succeeding years. As at 31 December
2023, the balance of tax loss which is available for offset against future
taxable profits amounts to £ 14,535k (2022: £ 11, 931k). Generally, loss of
one source of income can be set off against income from other sources in the
same year. Any loss remaining after the set off is carried forward for relief
over the next 5 year period.
Tax Year 2019 2020 2021 2022 2023 Total
£'000 £'000 £'000 £'000 £'000 £'000
Losses carried forward (2,092) (3,758) (2,381) (4,650) (1,654) (14,535)
Ethiopia
KEFI Minerals (Ethiopia) Limited is subject to other direct and indirect taxes
in Ethiopia through its foreign operations. The mining industry in Ethiopia is
relatively undeveloped. As a result, tax regulations relating to mining
enterprises are evolving. There are transactions and calculations undertaken
during the ordinary course of business for which the ultimate tax
determination is uncertain. The Group recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the current and
deferred tax provisions in the period in which such determination is made.
The government of Ethiopia cut the corporate income tax rate for miners to 25%
more than three years ago from 35% and has lowered the precious metals royalty
rate to 7% from 8%. According to the Proclamation, holders of a mining licence
are required to pay royalty on the sales price of the commercial transaction
of the minerals produced. Development expenditure of a licensee or contractor
shall be treated as a business intangible with a useful life of four years. If
a licensee or contractor incurs development expenditure before the
commencement of commercial production shall apply on the basis that the
expenditure was incurred at the time of commencement of commercial production.
The mining license stipulates that every mining company should allocate 5%
free equity shares to the Government of Ethiopia.
United Kingdom
KEFI Minerals (Ethiopia) Limited is resident in United Kingdom for tax
purposes. The corporation tax rate is 19%. In December 2016, KEFI Minerals
(Ethiopia) Limited elected under CTA 2009 section 18A to make exemption
adjustments in respect of the Company's foreign permanent establishment's
amounts in arriving at the Company's taxable total profits for each relevant
accounting period. This is an exemption for UK corporation tax in respect of
the profits of the Ethiopian branch.
10. Loss per share
The calculation of the basic and fully diluted loss per share attributable to
the ordinary equity holders of the parent is based on the following data:
Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
Net loss attributable to equity shareholders (7,896) (6,355)
Net loss for basic and diluted loss attributable to equity shareholders (7,896) (6,355)
Weighted average number of ordinary shares for basic loss per share (000's) 4,508,178 3,537,301
Weighted average number of ordinary shares for diluted loss per share (000's) 5,625,409 4,632,172
Loss per share:
Basic loss per share (pence) (0.175) (0.180)
There was no impact on the weighted average number of shares outstanding
during 2023 as all Share Options and Warrants were excluded from the weighted
average dilutive share calculation because their effect would be anti-dilutive
and therefore both basic and diluted earnings per share are the same in 2023.
11. Property, plant and equipment
Motor Vehicles Plant and equipment Furniture, fixtures and office equipment Total
£'000
£'000 £'000
£'000
The Group
Cost
At 1 January 2022 71 114 119 304
Additions 42 11 33 86
Write-offs - - (15) (15)
At 31 December 2022 113 125 137 375
Additions - - 4 4
Write-offs - - - -
At 31 December 2023 113 125 141 379
Accumulated Depreciation
At 1 January 2022 71 82 88 241
Charge for the year 2 11 11 24
Write offs - - (15) (15)
At 31 December 2022 73 93 84 250
Charge for the year 3 10 16 29
Write offs - -
At 31 December 2023 76 103 100 279
Net Book Value at 31 December 2023 37 22 41 100
Net Book Value at 31 December 2022 40 32 53 125
The above property, plant and equipment is in Ethiopia.
12. Intangible assets
Total exploration and project evaluation cost
£'000
The Group
Cost
At 1 January 2022 28,627
Additions 2,995
At 31 December 2022 31,622
Additions 3,360
At 31 December 2023 34,982
Accumulated Amortization and Impairment
At 1 January 2022 266
At 31 December 2022 266
Impairment Charge for the year -
At 31 December 2023 266
Net Book Value at 31 December 2023 34,716
Net Book Value at 31 December 2022 31,356
Costs can only be capitalised after the entity has obtained legal rights to
explore in a specific area but before extraction has been demonstrated to be
both technically feasible and commercially viable.
The addition of £3.4 million is directly associated with the TKGM gold
exploration project expenditure and is capitalized as intangible exploration
and evaluation cost. Such exploration and evaluation expenditure include
directly attributable internal costs incurred in Ethiopia and services
rendered by external consultants to ensure technical feasibility and
commercial viability of the TKGM project.
The Company TKGM mining licence is in good standing to 2035 subject to normal
compliance of Ethiopian mining regulations. At the moment final approvals are
subject to the conditions precedent in the hands of Government in respect of
administrative matters and security.
13. Investments
13.1 Investment in subsidiaries
The Company Year Ended Year Ended 31.12.22
31.12.23 £'000
£'000
Cost
At 1 January 15,557 14,331
Additions 696 1,226
Dissolutions - -
At 31 December 16,253 15,557
The Company carrying value of KEFI Minerals Ethiopia which holds the
investment in the Tulu Kapi Gold project currently under development is
£16,253,000 as at the 31 December 2023.
During the year management reviewed the value of its investments in the
Company accounts to the project estimated NPV value. The result of the review
shows that the NPV value is higher than the cost recorded in the company
accounts.
As guidance to the shareholder further details are available in the front
section of this report in the Finance Director's Report on page 6 under the
Tulu Kapi project section.
Date of acquisition/ Effective
incorporation Country of incorporation proportion of
Subsidiary companies shares held
Mediterranean Minerals (Bulgaria) EOOD 08/11/2006 Bulgaria 100%-Direct
KEFI Minerals (Ethiopia) Limited 30/12/2013 United Kingdom 100%-Direct
KEFI Minerals Marketing and Sales Cyprus Limited 30/12/2014 Cyprus 100%-Direct
Tulu Kapi Gold Mine Share Company 31/04/2017 Ethiopia 95%-Indirect
Subsidiary companies The following companies have the address of:
Mediterranean Minerals (Bulgaria) EOOD 10 Tsar Osvoboditel Blvd., 3rd floor, Sredets Region, 1000 Sofia, the Republic
of Bulgaria.
KEFI Minerals (Ethiopia) Limited 27/28 Eastcastle Street, London, United Kingdom W1W 8DH.
KEFI Minerals Marketing and Sales Cyprus Limited 2 Kadmou, Wisdom Tower, 1(st) Floor, 1105 Nicosia, Cyprus.
Tulu Kapi Gold Mine Share Company 1(st) Floor, DAMINAROF Building, Bole Sub-City, Kebele 12/13, H.No, New.
The Company owns 100% of Kefi Minerals (Ethiopia) Limited ("KME")
On 8 November 2006, the Company entered into an agreement to acquire from
Atalaya Mining PLC (previously EMED) the whole of the issued share capital of
Mediterranean Minerals (Bulgaria) EOOD, a company incorporated in Bulgaria, in
consideration for the issue of 29,999,998 ordinary shares in the Company.
Mediterranean Minerals (Bulgaria) EOOD owned 100% of the share capital of
Doğu Akdeniz Mineralleri ("Dogu"), a private limited liability Company
incorporated in Turkey, engaging in activities for exploration and developing
of natural resources. Dogu was liquidated in 2020.
KME owns 95% of Tulu Kapi Gold Mine Share Company ("TKGM"), a company
incorporated in Ethiopia which operates the Tulu Kapi project. The Tulu Kapi
Gold Project mining license has been transferred to TKGM. The Government of
Ethiopia is entitled to a 5% free-carried interest ("FCI") in TKGM. This
entitlement is enshrined in the Ethiopian Mining Law and the Ethiopian Mining
Agreement between the Ethiopian Government and KME, as well as the
constitution of the project company and is granted at no cost. The 5% FCI
refers to the equity interest granted by the company holding the mining
license. The Ethiopian Government has also undertaken to invest a further
USD$20,000,000 (Ethiopian Birr Equivalent) in associated project
infrastructure in return for the issue of additional equity on normal
commercial terms ranking pari passu with the shareholding of KME. Such
additional equity is not entitled to a free carry. Upon completion of each
element of the infrastructure and approval by the Company, related additional
equity will be issued. At the date of this report no equity was issued.
The Company owns 100% of KEFI Minerals Marketing and Sales Cyprus ("KMMSC"), a
Company incorporated in Cyprus. The KMMSC was dormant for the year ended 31
December 2023 and 2022. KEFI Minerals Marketing and Sales Cyprus holds the
right to market gold produced from the Tulu Kapi Gold Project. It holds no
other assets. It is planned that KMMSC will act as agent and off-taker for the
onward sale of gold and other products in international markets.
13.2 Investment in jointly controlled entity
Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
The Group
At 1 January - -
Increase in investment 3,354 2,564
Gain on Dilution 1,156 286
Exchange Difference - 51
Share of loss for the year (4,963) (2,792)
(Impairment)/Reversal of impairment 453 (109)
On 31 December - -
The Company
At 1 January - -
Increase in investment 3,354 2,564
Gain on Dilution 1,156 286
Exchange Difference - 51
Impairment Charge for the year (4,510) (2,901)
On 31 December - -
Date of acquisition/ Country of incorporation Effective proportion of shares held
incorporation
Jointly controlled entity
Gold and Minerals Co. Limited (GMCO) 04/08/2010 Saudi Arabia 26.8%-Direct
The Company owns 26.8% of GMCO as of 31 December 2023. More information is
given in note 19.1. During the year the Company diluted its holding in GMCO
from 30% to 26.8% and this resulted in a gain of £1,156,000.
14. Trade and other receivables
14.1 Current Trade and other receivables
Year Ended 31.12.23 Year Ended
£'000 31.12.22
£'000
The Group
Prepayments & other receivables 124 122
VAT receivable 404 341
528 463
Year Ended 31.12.23 Year Ended
£'000 31.12.22
£'000
The Company
Other Debtors - 7
Prepayments 72 64
72 71
14.2 Receivables from subsidiaries
Year Ended 31.12.23 Year Ended
£'000 31.12.22
£'000
The Company
Advance to KEFI Minerals (Ethiopia) Limited (Note 21.2) ² 5,107 3,253
Advance to Tulu Kaki Gold Mine Share Company (Note 21.2) ¹ 6,879 7,162
Expected credit loss (486) (417)
11,500 9,998
Amounts owed by subsidiary companies total £12,213,000 (2022: £10,642,000).
A write-off of £69,000 (2022: £227,000) has been made against the amount due
from the non-Ethiopian subsidiaries because these amounts are considered
irrecoverable.
The Company has borrowings outstanding from its Ethiopian subsidiaries, the
ultimate realisation of which depends on the successful exploration and
realisation of the Group's intangible exploration assets. Management is of the
view that if the Company disposed of the Tulu Kapi asset, the consideration
received would exceed the borrowings outstanding. Nonetheless, Management has
made an assessment of the borrowings as at 31 December 2023 and determined
that any expected credit losses would be £486,000 (2022: £417,000) for which
a provision has been recorded. The advances to KEFI Minerals (Ethiopia)
Limited and TKGM are unsecured, interest free and repayable on demand.
Settlement is subject to the parent company's operating liquidity needs. At
the reporting date, no receivables were past their due date.
¹The Company advanced £2,693,000 (2022: £2,619,000) to the subsidiary Tulu
Kapi gold Mine Share Company during 2023. The Company had a foreign exchange
translation loss of £805,000 (2022: Gain £113,000) the current year loss was
because of devaluation of the Ethiopian Birr. During the year, £2,171,000 of
the Tulu Kapi gold Mine Share Company loan underwent conversion into equity
within Kefi Minerals (Ethiopia) Limited , resulting in the partial transfer of
£2,171,000 from TKGM to KME.
²Kefi Minerals (Ethiopia) Limited: during 2023, the Company advanced £Nil
(2022: £Nil) to the subsidiary. The Company had a foreign exchange
translation loss of £317,000 (2022: Gain £87,000) the current year gain
was because of devaluation of the Ethiopian Birr. As stated in the previous
paragraph, within the reporting period, £2,171,000 of the loan from Tulu Kapi
Gold Mine Share Company was converted into equity within Kefi Minerals
(Ethiopia) Limited.
The TKGM and KME loans are denominated Birr. The Company bears the foreign
exchange risk on these loans and any movements in the Ethiopian Birr are
recorded in the income statement of the Company.
15. Cash and cash equivalents
Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
The Group
Cash at bank and in hand unrestricted 192 220
Cash at bank restricted - -
192 220
The Company
Cash at bank and in hand unrestricted 114 45
Cash at bank restricted - -
114 45
16. Share capital
Issued Capital
The articles of association of the Company were amended in 2010 and the
liability of the members of the Company is limited.
Issued and fully paid
Number of shares '000 Share Capital Deferred Share premium Total
Shares
At 1 January 2023 3,939,123 3,939 23,328 43,187 70,454
Share Equity Placement 5 June 2023 785,714 786 - 4,714 5,500
Conditional Share Equity Placement 30 June 2023 98,325 98 - 590 688
Conditional Share Equity Placement 30 June 2023 34,820 35 - 209 244
Conditional Share Equity Placement 3 July 2023 107,143 107 - 643 750
Share issue costs - - - (311) (311)
Broker warrants: issue costs (110) (110)
At 31 December 2023 4,965,125 4,965 23,328 48,922 77,215
Number of shares '000 Share Capital Deferred Share premium Total
Shares
At 1 January 2022 2,567,305 2,567 23,328 35,884 61,779
Share Equity Placement 13 Jan 2022 371,818 372 - 2,725 3,097
Share Equity Placement 25 April 2022 550,000 550 - 3,850 4,400
Share Equity Placement 18 May 2022 450,000 450 - 3,150 3,600
Share issue costs - - - (444) (444)
Warrants: fair value split of warrants issued to shareholders. - - - (1,663) (1,663)
Broker warrants: issue costs (315) (315)
At 31 December 2022 3,939,123 3,939 23,328 43,187 70,454
Number of Deferred Shares'000 £'000 £'000
Deferred Shares 1.6p 2023 2022 2023 2022
At 1 January 680,768 680,768 10,892 10,892
Subdivision of ordinary shares to deferred shares - - - -
At 31 December 680,768 680,768 10.892 10.892
Deferred Shares 0.9p 2023 2022 2023 20221
At 1 January 1,381,947 1,381,947 12,436 12,436
Subdivision of ordinary shares to deferred shares - - - -
At 31 December 1,381,947 1,381,947 12,436 12,436
The deferred shares have no value or voting rights.
2023
On the 5 June 2023 the Company admitted 785,714,285 new ordinary shares of the
Company at a placing price of 0.7 pence per Ordinary Share.
At the AGM on the 30 June 2023, shareholders approved the issue 133,145,208
new ordinary shares of 0.1p each at a price of 0.7p per share. 34,820,080 of
these shares were placed with retail investors and the balance were issued to
new and/or existing investors.
Furthermore, following the AGM approval, the company also issued 107,142,857
new ordinary shares on July 3, 2023. These shares of 0.1p each, were placed at
a price of 0.7p per share.
2022
On the 13 January 2022 the Company admitted 358,867,797 new ordinary shares of
the Company at a placing price of 0.8 pence per Ordinary Share and 12,950,147
new ordinary shares of the Company at a placing price of 1.74 pence per
Ordinary Share
The Company raised £8.0 million through the issue of 1,000,000,000 new
Ordinary Shares at a placing price of 0.8 pence per Ordinary Share. These new
Ordinary Shares were admitted in two tranches, 550,000,000 on 25 April 2022
and 450,000,000 on 18 May 2022, following shareholder approval of the
conditional placement at a General Meeting of the Company.
Restructuring of share capital into deferred shares
On the 28 June 2019 at the AGM, shareholders approved that each of the
currently issued ordinary shares of 1.7p ("Old Ordinary Shares") in the
capital of the Company be sub-divided into one new ordinary share of 0.1p
("Existing Ordinary Shares") and one deferred share of 1.6p ("Deferred
Shares"). With effect from 8 July 2019 at 8.00am, each ordinary share in the
Company has a nominal value of 0.1p per share.
The Deferred Shares have no value or voting rights and were not admitted to
trading on the AIM market of the London Stock Exchange plc. No share
certificates were issued in respect of the Deferred Shares.
17. Share Based payments
17.1 Warrants
2023
During July 2023, the Company issued 39,285,714 broker warrants to subscribe
for new ordinary shares of 0.1p each at 0.7p per share to Tavira Securities
Limited pursuant to the Placing Agreement. The warrants expire within three
years of the date of Second Admission.
2022
The Company issued 393,096,865 short-term shareholder warrants to subscribe
for new ordinary shares of 0.1p each at 1.6p per share in accordance with the
January 2022 share placement and as approved by shareholders. The shareholder
warrants will become exercisable if, during a two-year period following the
date of Second Admission, the Warrant Trigger Event occurs. If the Warrant
Trigger Event occurs, then (i) the holders of the shareholder warrants must
exercise the shareholder warrants within 30 days from the occurrence of the
Warrant Trigger Event; and (ii) the shareholder warrants will expire following
the end of the 30-day period referenced above if not exercised. The
shareholder warrants shall lapse two years following the date of Second
Admission and will no longer be capable of being exercised.
In April and May of 2022, the Company authorized the issuance of 500,000,000
shareholder warrants. These shareholder warrants entitle the holders to
subscribe for new ordinary shares of 0.1p each at a price of 1.6p per share.
Shareholders approved the issuance of these shareholder warrants on May 17th,
2022. The Company allocated one warrant for every two Placing Shares, with an
exercise price of 1.6 pence per share. The shareholder warrants will be
exercisable for a period of two years from the date of Admission of the
Placing Shares. The Company has elected that the shareholder warrants become
exercisable if, within two years of the date of Admission of the Placing
Shares, the on-market share closing price of the ordinary shares reaches or
exceeds 2.4 pence for five consecutive days. This would be a 50% premium on
the shareholder warrants exercise price and is known as the "Warrant Trigger
Event." If the Warrant Trigger Event occurs, holders of the shareholder
warrants must exercise them within 30 days, and the shareholder warrants will
expire if not exercised by the end of this period.
The Shareholder warrants will lapse two years following the date of Second
Admission and will no longer be capable of being exercised.
The Company performed a fair value split by fair valuing the shareholder
warrants using Dilutive Variation of Trinomial Pricing Model. and assumed
that this value is the residual share amount. The model also takes into
account the dilution effect described above and as such is an appropriate
model for pricing warrants.
During May 2022, the Company issued 75,000,000 broker warrants to subscribe
for new ordinary shares of 0.1p each at 0.8p per share to Tavira Securities
Limited pursuant to the Placing Agreement. The warrants expire within three
years of the date of Second Admission.
Details of warrants outstanding as at 31 December 2023:
Grant date Expiry date Exercise price Expected Life Years Number of warrants
000's
13 Jan 2022 13 Jan 2024 1.60p 2 years 393,097
18 May 2022 17 May 2024 1.60p 2 years 500,000
18 May 2022 17 May 2025 0.80p 3 years 75,000
03 Jul 2023 02 Jul 2026 0.70p 3 years 39,286
1,007,383
Weighted average ex. Price Number of warrants 000's
Outstanding warrants at 1 January 2023 1.54p 986,272
- granted 0.70p 39,286
- cancelled/expired/forfeited 1.44p (18,175)
- exercised
Outstanding warrants at 31 December 2023 1.51p 1,007,383
The estimated fair values of the warrants were calculated using the Black
Scholes option pricing model and Trinomial Model when deemed more appropriate.
The inputs into the model and the results for warrants and options granted
during the year are as follows:
Warrants Options
13-Jan-22 18-May-22 18-May-22 03-Jul-23 01-Feb-18 17-Mar-21 12-Sep-23
Closing share price at issue date 0.77p 0.71p 0.71p
0.58p 3.69p 2.05p 0.58p
Exercise price 1.60p 1.60p 0.80p 0.70p 4.5p 2.55p 0.60p
Expected volatility 89.37% 81.079% 99.72% 76.76% 68.30% 89% 86.34%
Expected life 2yrs 2yrs 3yrs 3yrs 6yrs 4yrs 7yrs
Risk free rate 0.835% 1.459% 1.475% 5.11% 1.09% 0.028% 4.41%
Expected dividend yield Nil Nil Nil Nil Nil Nil Nil
Estimated fair value 0.22p 0.16p 0.42p 0.28p 2.11p 1.21p 0.45p
Expected volatility was estimated based on the historical underlying
volatility in the price of the Company's shares.
Share options reserve table Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
Opening amount 3,747 1,891
Warrants issued costs 110 1,978
Share options charges relating to employees (Note 6) 42 74
Share options issued to directors and key management (Note 6) 81 292
Share options issued to advisor (Note 6) 36 -
Forfeited options - -
Exercised warrants - -
Expired warrants (178) (147)
Expired options (163) (341)
Closing amount 3,675 3,747
17.2 Share options reserve
Details of share options outstanding as at 31 December 2023:
Grant date Expiry date Exercise price Number of shares 000's
01-Feb-18 31-Jan-24 4.50p 9,600
17-Mar-21 16-May-25 2.55p 92,249
12-Sep-23 11-Sep-30 0.60p 8,000
109,849
Weighted average ex. Price Number of shares 000's
Outstanding options at 1 January 2023 3.03p 108,599
- granted 0.60p 8,000
- forfeited - -
- cancelled/ expired 7.50p (6,750)
Outstanding options at 31 December 2023 2.58p 109,849
The Company has issued share options to directors, employees and advisers to
the Group.
On 1 February 2018, 9,600,000 options were issued to persons who discharge
director and managerial responsibilities ("PDMRs") and a further 3,000,000
options have been granted to other non-board members of the senior management
team. The options have an exercise price of 4.5p, expire after 6 years, and
vest in two equal annual instalments, the first upon the achievement of
practical completion of the planned processing plant at the Tulu Kapi Gold
Project and the second upon the achievement of nameplate capacity for a
twelve-month period.
On 17 March 2021, 85,813,848 options were issued to persons who discharge
director and managerial responsibilities ("PDMRs") and a further 18,225,153
options have been granted to other non-board members of the senior management
team. The options have an exercise price of 2.55p, expire after4 years, and
vest in three equal instalments, the first after one year, the second after
two years and the third after three years from the date of grant. Although the
directors approved and announced the issue of 119,747,339 options on the 17
March 2021 to certain directors and senior managers only 104,039,001 options
were eventually issued.
The option agreements contain provisions adjusting the exercise price in
certain circumstances including the allotment of fully paid Ordinary shares by
way of a capitalisation of the Company's reserves, a subdivision or
consolidation of the Ordinary shares, a reduction of share capital and offers
or invitations (whether by way of rights issue or otherwise) to the holders of
Ordinary shares. The estimated fair values of the options were calculated
using the Black Scholes option pricing model. Expected volatility was
estimated based on the historical underlying volatility in the price of the
Company's shares.
For 2023, the impact of share option-based payments is a net charge to income
of £159,000 (2022: £366,000). At 31 December 2023, the equity reserve
recognized for share option-based payments, including warrants, amounted to
£3,675,000 (2022: £3,747,000).
17.3 Share Payments for services rendered and obligations settled.
2023 Year
The Company has settled certain remuneration, bonus, and fee obligations
through the issuance of Ordinary shares during the year. As of June 30, 2023
after shareholder approval, the Company allotted 107,142,857 new ordinary
shares of 0.1 pence each in the capital of the Company at a Placing Price of
0.7 pence per Ordinary Share amounting to £750,000. Additionally, 98,325,128
Ordinary shares were issued to settle amounts owed in fees amounting to
£688,000. In total during the year, the Company settled share-based payment
obligations totalling £1,438,000 through the issuance of 205,467,986 Ordinary
shares.
In May 2023, certain lenders entered into agreements to irrevocably discharge
and fully satisfy the outstanding amounts owed by the company through set-off
arrangements. These lenders participated in the share placement by subscribing
to the company's shares. As a result, the company issued 367,239,714 Ordinary
shares to settle advances amounting to £2,570,000.
2022 Year
During the year the company granted the issuance of 515,796,693 new Ordinary
shares which were distributed across the following placements:
January 2022 Share Placement of 371,817,944
After the General Meeting held on 13 January 2022, the Company authorized the
issuance of 371,817,944 new Ordinary shares to fulfil financial obligations
totalling £3.1 million. In January 2022, a portion of these shares,
specifically 358,867,797 new ordinary shares, were issued at a price of 0.8
pence per Ordinary Share, with the purpose of settling an amount of £2.87
million. The remaining shares issued during January 2022, amounting to
12,950,147 new Ordinary Shares, were priced at VWAP of 1.74 pence per Ordinary
Share and were used to settle services and obligations amounting to £0.23.
million
April 2022 and May 2022 Share Placement of 143,978,749
During April 2022, the Company resolved its liabilities and other obligations
amounting to £0.63 million by issuing 79,188,312 new Ordinary Shares at a
placing price of 0.8 pence per Ordinary Share.
In May 2022, with the approval of shareholders at a General Meeting, the
Company settled liabilities and other obligations of £0.52 million by issuing
64,790,437 Ordinary Shares at the Placing Price of 0.8 pence per Ordinary
Share.
The total shares set off during 2023 and 2022 for services and obligations was
as follows:
2023 2022
Name Number of Remuneration and Settlement Shares Amount Number of Remuneration and Settlement Shares Amount
'000 £'000 '000 £'000
For services rendered and obligations settled 26,428 22,500
H Anagnostaras-Adams
185 180
J Leach 14,286 100 12,500 100
Mark Tyler - - 3,125 25
Richard Lewin Robinson - - 6,250 50
Other employees and PDMRs 137,044 959 173,530 1,510
Amount to settle other Bonus Obligations 27,710 194 - -
Amount to settle other Obligations 44,430 313 1,925 15
Total share-based payments 249,898 219,830
1,751 1,880
Amount to settle loans
Unsecured working capital bridging finance 367,340 295,967
2,570 2,368
617,238 515,797
4,321 4,248
The parties above agreed that the amounts subscribed in the share placements
during the year be set-off against the amount due by the Company at the date
of the share placement.
18. Non-Controlling Interest ("NCI")
Year Ended
£'000
As at 1 January 2022 1,379
Acquisitions of NCI -
Impact of 5% free carry on additions to assets during the year 183
Result for the year -
As at 1 January 2023 1,562
Acquisitions of NCI -
Impact of 5% free carry on additions to assets during the year 147
As at 31 December 2023 1,709
During 2018, the Government of Ethiopia received its 5% free carried interest
acquired in the Tulu Kapi Gold Project. The group recognized an increase in
non-controlling interest in the current year of £147,000 and a decrease in
equity attributable to owners of the parent of £147,000.
The NCI of £1,709,000 (2022: £1,562,000) represents the 5% share of the
Group's assets of the TKGM project which are attributable to the Government of
Ethiopia
The Mining Proclamation entitles the Government of Ethiopia (GOE) to 5% free
carried interest in TKGM. The 5% NCI reflects the government interest in the
TKGM gold project. The GOE is not required to pay for the 5% free carry
interest. The GOE can acquire additional interest in the share capital of the
project at market price. The GOE has committed US $20,000,000 to install the
off-site infrastructure in exchange for earning equity in Tulu Kapi Gold Mine
Share Company. The shareholder agreement signed with the GOE in April 2017
states that once the infrastructure elements are properly constructed and
approved by Company the relevant shares will be issued to Ministry of Finance
and Economic Cooperation (MOFEC)
The financial information for Tulu Kapi Gold Mine Project as at 31 December
2023:
Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
Amounts attributable to all shareholders
Exploration and evaluation assets 34,461 31,477
Current assets
446 381
Cash and Cash equivalents
78 175
34,985 32,033
Equity
34,176 31,254
Current liabilities
809 779
34,985 32,033
Result for the year - -
19. Jointly controlled entities
19.1 Joint controlled entity with Artar
Country of incorporation Effective proportion of shares held at 31 December
Company name Date of incorporation
Gold & Minerals Co. Limited 3 August 2010 Saudi Arabia 26.8%
Gold & Minerals Co. Limited has the following registered address: Olaya
District. 659, King Fahad Road, Riyadh, Kingdom of Saudi Arabia.
The summarised financial information below represents amounts shown in Gold
& Minerals Co Limited financial statements prepared in accordance with
IFRS and assuming they followed the group policy of expensing exploration
costs.
SAR'000 SAR'000 £'000 £'000
Amounts relating to the Jointly Controlled Entity Year Ended Year Ended Year Ended Year Ended
31.12.23 31.12.22 31.12.23 31.12.22
100% 100% 100% 100%
Non-current assets 5,175 2,889 1,084 637
Cash and Cash Equivalents 4,508 9,470 944 2,090
Current assets 3,167 625 663 138
Total Assets 12,850 12,984 2,691 2,865
Current liabilities (7,043) (4,106) (1,475) (906)
Total Liabilities (7,043) (4,106) (1,475) (906)
Net Assets 5,807 8,878 1,216 1,959
Share capital 165,220 121,424 34,597 26,810
Capital contributions partners 80,467 43,800 16,850 9,671
Accumulated losses (239,880) (156,346) (50,231) (34,522)
5,807 8,878 1,216 1,959
Exchange rates SAR to GBP
Closing rate 0.2094 0.2208
Income statement SAR'000 SAR'000 £'000 £'000
Loss from continuing operations (83,534) (42,995) (15,709) (9,493)
Other comprehensive expense - - - -
Translation FX Gain from SAR/GBP - - - -
Total comprehensive expense (83,534) (42,995) (15,709) (9,493)
Included in the amount above
Group
Group Share 26.80% (2022: 30.00%) of loss from continuing operations (4,963) (2,792)
Joint venture investment £'000 £'000
Opening Balance - -
Loss for the year (4,963) (2,792)
FX Gain/(Loss) - 51
Additional Investment 3,354 2,564
Profit on Dilution 1,156 286
Reversal/(Impairment) 453 (109)
Closing Balance - -
In May 2009, KEFI announced the formation of a new minerals' exploration
jointly controlled entity, Gold & Minerals Co. Limited ("GMCO"), a limited
liability company in Saudi Arabia, with leading Saudi construction and
investment group Abdul Rahman Saad Al-Rashid & Sons Company Limited
("ARTAR"). KEFI is the operating partner with a current 26.80% shareholding in
GMCO with ARTAR holding the other 73.2%.
KEFI provides GMCO with technical advice and assistance, including personnel
to manage and supervise all exploration and technical studies. ARTAR provides
administrative advice and assistance to ensure that GMCO remains in compliance
with all governmental and other procedures. GMCO has five Directors, of whom
two are nominated by KEFI. GMCO is treated as a jointly controlled entity and
has been equity accounted. KEFI has reconciled its share in GMCO's losses.
During the current year, all relevant activities of GMCO required the
unanimous consent of its five directors. Under terms of the original GMCO
shareholders agreement, if a shareholder's ownership stake falls below 25%,
the remaining shareholder has the right, but not the obligation, to acquire
the interest at fair value. "Fair value" is determined as an estimate of the
price the transferring party would have received if it had sold all its shares
in GMCO in an arm's length exchange, driven by typical business
considerations.
Amendments to the shareholders' agreement provide flexibility in the event a
shareholder stake falls below the 25% threshold These amendments included
adjustments to the composition of GMCO's board based on shareholding
percentages and amendment to the process for nominating and appointing the
Managing Director/Chief Executive Officer. In addition, indemnification and
reimbursement clauses were added for parties undertaking sole risk projects,
with guidelines for compensating GMCO for costs incurred in such endeavours,
as well as a framework for continuing projects independently.
During 2023 the Company diluted its interest in the Saudi joint-venture
company Gold and Minerals Limited ("GMCO") from 30% to 26.80% by not
contributing its pro rata share of expenses to GMCO. GMCO is still treated as
a jointly controlled entity and has been equity accounted. This resulted in a
gain of £1,155,915 (2022: £285,900) in the Company accounts. The material
accounting policy for exploration costs recorded in the GMCO audited financial
statements is to capitalise qualifying expenditure in contrast to the relating
to exploration costs which is to expense costs through profit and loss until
the project reaches development stage (Note 2). Consequently, any dilution in
the Company's interest in GMCO results in the recovery of pro rata share of
expenses to GMCO.
A loss of £4,963,000 was recognized by the Group for the year ended 31
December 2023 (2022: £2,792,000) representing the Group's share of losses in
the year.
As at 31 December 2023 KEFI owed ARTAR an amount of £3,728,000 (2022:
£1,169,000) - Note 20.1.
Post year-end, the Company's interest dropped below 25% to 24.75%. Management
conducted a review in accordance with International Financial Reporting
Standards to determine whether it still retained significant influence over
GMCO and concluded that this remained the case. GMCO is still a jointly
controlled entity of KEFI, supported by factors including KEFI's continued
significant shareholding, representation on the Board of Directors, active
involvement in policy-making processes, and other relevant considerations.
20. Trade and other payables
20.1 Trade and other payables
The Group Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
Accruals and other payables 2,877 2,427
Other loans 100 109
Payable to jointly controlled entity partner (Note 19.1) 3,728 1,169
Payable to Key Management and Shareholder (Note 21.3) 602 297
7,307 4,002
Other loans are unsecured, interest free and repayable on demand.
The Company Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
Accruals and other payables 2,173 1,756
Payable to jointly controlled entity partner (Note 19.1) 3,728 1,169
Payable to Key Management and Shareholder (Note 21.4) 602 297
6,503 3,222
The fair values of trade and other payables due within one year approximate to
their carrying amounts as presented above.
21. Related party transactions
The following transactions were carried out with related parties:
21.1 Compensation of key management personnel
The total remuneration of key management personnel was as follows:
Year Ended Year Ended
31.12.23 31.12.22
£'000 £'000
Short term employee benefits:
¹Directors' consultancy fees 532 533
Directors' other consultancy benefits 36 49
²Short term employee benefits: Key management fees 579 597
Short term employee benefits: Key management other benefits - -
1,147 1,179
Share based payments:
Share based payment: Director's bonus - -
¹Share based payment: Directors' consultancy fees - -
Share option-based benefits to directors (Note 17) 69 192
²Share based payments short term employee benefits: Key management fees - -
Share option-based benefits other key management personnel (Note 17) 12 100
Share Based Payment: Key management bonus - -
81 292
1,228 1,471
¹Directors' fees paid to the Executive Director Chairman and Finance Director
are paid to consultancy companies of which they are beneficiaries. Further
details on Directors' consultancy and other benefits are available on page 58.
²Key Management comprises Chief Operating Officer and the Managing Director
Ethiopia.
Share-based benefits
The Company issued 85,813,848 share options to directors and key management
during March 2021. These Options have an exercise price of 2.55p per Ordinary
Share and expire after 4 years and, in normal circumstances, vest in three
equal instalments, the first after one year, the second after two years and
the third after three years from the date of grant.
Previously all options, except those noted in Note 17, expire six years after
grant date and vest in two equal annual instalments, the first upon the
achievement of practical completion of the planned processing plant at the
Tulu Kapi Gold Project and the second upon the achievement of nameplate
capacity for a twelve-month period.
The Company
Name Nature of transactions Relationship 2023 2022
£'000 £'000
KEFI Minerals Marketing and Sales Cyprus Limited Finance Subsidiary - -
Tulu Kapi Gold Mine Share Company¹ Receivable Subsidiary 5,107 7,162
Kefi Minerals (Ethiopia) Limited² Receivable Subsidiary 6,879 3,253
Expected credit loss (486) (417)
11,500 9,998
¹The TKGM and KME loans are denominated Birr. The Company bears the foreign
exchange risk on these loans and any movements in the Ethiopian Birr are
recorded in the income statement of the Company. Further details on the
movement of these loans are available in Note 14.
Management has made an assessment of the borrowings as at 31 December 2023 and
determined that any expected credit losses would be £486,000 (2022:417,000).
The above balances bear no interest and are repayable on demand.
21.3 Payable to related parties
The Group 2023 2022
£'000 £'000
Name Nature of transactions Relationship
Directors & PDMR Fees for services Key Management and Shareholder 602 297
602 297
22.4 Payable to related parties
The Company 2023 2022
£'000 £'000
Name Nature of transactions Relationship
Directors & PDMR Fees for services Key Management and Shareholder 602 297
602 297
22. Loans and Borrowings
22.1.1 Short-Term Working Capital Bridging Finance
Currency Interest Maturity Repayment
Unsecured working capital bridging finance GBP See table On Demand See table below
2023
Unsecured working capital bridging finance Balance 1 Jan 2023 Drawdown Amount Transaction Costs Interest Repayment Repayment Year Ended
Shares Cash 31 Dec 2023
£'000 £'000 £'000
£'000 £'000 £'000 £'000
Repayable in cash in less than a year 1,180 2,640 - 1,030 (2,570) (167) 2,113
1,180 2,640 - 1,030 (2,570) (167) 2,113
2022
Unsecured working capital bridging finance Balance 1 Jan 2022 Drawdown Amount Transaction Costs Interest Repayment Repayment Year Ended
Shares/Netting Cash 31 Dec 2022
£'000 £'000 £'000 £'000
£'000 £'000 £'000
Repayable in cash in less than a year 1,235 1,830 - 486 (2,368) (3) 1,180
1,235 1,830 - 486 (2,368) (3) 1,180
The short-term working capital finance is unsecured and ranks below other
loans. Although there was no binding agreement to convert the loans into
shares, the lenders agreed to convert the debt into shares and the loan
balance of £2,570,000(2022: £2,368,000) was fully repaid in 2023 during the
relevant share placements.
22.1.2 Reconciliation of liabilities arising from financing activities
2023 Reconciliation Cash Flows
Balance 1 Jan 2023 Inflow (Outflow) Fair Value Movement Finance Costs Shares Balance 31 Dec 2023
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Unsecured working capital bridging finance
Short term loans 1,180 2,640 (167) - 1,030 (2,570) 2,113
1,180 2,640 (167) - 1,030 (2,570) 2,113
2022 Reconciliation
Balance 1 Jan 2022 Inflow (Outflow) Fair Value Movement Finance Costs Shares/Netting Balance 31 Dec 2022
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Unsecured working capital bridging finance
Short term loans 1,235 (2,368) 1,180
1,830
(3)
-
486
1,235 (2,368) 1,180
1,830
(3)
-
486
23. Contingent liabilities
Directors and Key Management Personnel are eligible for a performance-based
short-term incentive plan (STI), which is contingent upon securing credit
approvals from lenders. A detailed explanation is given under remuneration
report.
24. Legal Allegations
There is a pending legal case against the Company for an amount of GBP 5.1
million from a claimant, Demissie Asafa Demissie (the "Claimant"). The Company
believes the claim for successful provision of financial advisory services is
spurious and without merit. Nonetheless, the amount claimed can only be
payable on successful closing of the Tulu Kapi Project finance, which has yet
to occur. The Company is making a counter claim and vigorously defending its
position. The Company has engaged legal counsel to represent its interests.
The company received a Notice of Trial date for the 5(th) of December 2024
with a trial window set to 5 days. The Company will disclose any material
developments related to this case as and when required by applicable laws and
regulations.
Having sought legal advice on this matter, the Group is of the opinion that
the allegations have no merit and that it is not appropriate to recognise any
contingent liability.
25. Capital commitments
The Group has the following capital or other commitments as at 31 December
2023 £5,889,000 (2022: £4,238,000),
31 Dec 2023 31 Dec 2022
£'000 £'000
Contracted for: Tulu Kapi Project costs 776 461
Not contracted for: Saudi Arabia Exploration costs committed to field work 5,113 3,777
done
Notes to the consolidated financial statements (continued)
Year ended 31 December 2023
Notes to the consolidated financial statements (continued)
Year ended 31 December 2023
26. Events after the reporting date
Dilution in Gold and Minerals
During 2024 the Company diluted its interest in the Saudi joint-venture
company Gold and Minerals Limited ("GMCO") from 26.8% to 24.75% because of not
fully meeting its pro rata share of expenses (Further details disclosed in
Note 19.1).
Share Placement March 2024
During March 2024, the Company concluded a placement, issuing 915,986,055 new
ordinary shares at a price of 0.6 pence per share, generating £5.5 million in
proceeds.
Name Number of Subscription Shares Amount
'000 £'000
Cash Placement 454,861 2,729
Current liabilities
For services rendered 83,333 500
Brokerage fees 47,250 284
Loans and borrowings
Unsecured working capital bridging finance 330,542 1,983
915,986 5,496
The parties above agreed that the amounts subscribed in the share placements
be set-off against the amount due by the Company at the date of the share
placement.
Issue of Shares to Advisers May 2024
On 21 May 2024 the Company issued 177,981,851 new ordinary shares of 0.1 pence
each. These shares, priced at 0.763 pence per share were valued at £1,358,002
and were issued to key advisers in consideration for their services in support
of various value-adding initiatives following the launch of early works at the
Tulu Kapi Gold Project in Ethiopia.
Glossary and Abbreviations
AIC All-in Costs
AISC All-in Sustaining Costs
Arabian-Nubian Shield or ANS The Arabian-Nubian Shield is a large area of Precambrian rocks in various
countries surrounding the Red Sea
ARTAR Abdul Rahman Saad Al Rashid & Sons Company Limited
BRGM Bureau de Recherches Géologiques et Minières - the Geological Survey of
France
c. Circa
CIL Carbon in Leach
DFS Definitive Feasibility Study
EL Exploration Licence
ELA Exploration Licence Application
Epithermal Hydrothermal mineral deposit formed within about 1 km of the Earth's surface
and in the temperature range of 50 to 200 degrees Celsius, occurring mainly as
veins
GMCO Gold and Minerals Co. Limited
g/t Grams per tonne
Gossan An iron-bearing weathered product overlying a sulphide deposit
Hawiah Hawiah Copper-Gold Project
IFC International Finance Corporation
IPO Initial Public Offering
Jibal Qutman Jibal Qutman Gold Project
JORC Joint Ore Reserves Committee
JORC Code 2012 Edition of the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves
KEFI KEFI Gold and Copper PLC
KME KEFI Minerals (Ethiopia) Limited
LOM Life of mine
m Metres
Massive sulphide Rock comprised of more than 40% sulphide minerals
MA Mining Agreement
ML Mining Licence
MRE Mineral Resource Estimate
Mt Million tonnes
Mtpa Million tonnes per annum
NSR Net Smelter Return
oz Troy ounce of gold
PEA Preliminary Economic Assessment
PFS Pre-Feasibility Study
Precambrian Era of geological time before the Cambrian, from approximately 4,600 to 542
million years ago
Project Tulu Kapi Gold Project
RC drilling Reverse Circulation drilling. Percussion drilling method. Reverse circulation
is achieved by blowing air down the rods, the differential pressure creating
air lift of the water and cuttings up the "inner tube", which is inside each
rod.
RL Relative Level
Tulu Kapi Tulu Kapi Gold Project
TKGM Tulu Kapi Gold Mines Share Company Limited
VMS deposits Volcanogenic massive sulphides; refers to massive sulphide deposits formed in
a volcanic environment with varying base metals (copper, lead and zinc) often
with significant additional gold and silver
VWAP Volume weighted average price
WBMD Wadi Bidah Mineral District
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