KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
E M E R G I N G G O L D M I N E R
ANNUAL REPORT 2015
ANNUAL REPORT 2015
View of Tulu Kapi Hill, Ethiopia
KEFI Minerals Plc ANNUAL REPORT 2015
Page 1
Table of Contents
Highlights of 2015 ................................................................................................................................................... 2
Executive Chairman’s Report ................................................................................................................................. 3
Robust Gold Project - Tulu Kapi ..........................................................................................................................3
Oxide Gold Project - Jibal Qutman .....................................................................................................................5
Outlook ...............................................................................................................................................................5
Exploration Director’s Report .................................................................................................................................. 6
Ethiopia – Further Potential at Tulu Kapi ...........................................................................................................6
Saudi Arabia – Adding to Project Pipeline at Jibal Qutman and Hawiah ............................................................6
Focus on Arabian-Nubian Shield.........................................................................................................................7
Chief Operating Officer’s Report ............................................................................................................................ 8
Sustainability Activities for the Tulu Kapi Project..................................................................................................10
Ethiopia .................................................................................................................................................................12
Tulu Kapi - Background .................................................................................................................................... 12
Tulu Kapi – Permits and Mining Agreement .................................................................................................... 13
Tulu Kapi - Geology .......................................................................................................................................... 13
Tulu Kapi – Resources and Reserves ............................................................................................................... 14
Tulu Kapi - Definitive Feasibility Study and Subsequent Optimisation ........................................................... 14
Tulu Kapi - Development ................................................................................................................................. 15
Tulu Kapi – Potential for Underground Mine .................................................................................................. 16
Tulu Kapi – Regional Exploration Potential ..................................................................................................... 17
Saudi Arabia .........................................................................................................................................................18
Saudi Arabia - Jibal Qutman ............................................................................................................................ 19
Saudi Arabia - Hawiah ...................................................................................................................................... 22
Saudi Arabia - Exploration Licence Applications ............................................................................................. 25
Glossary and Abbreviations ..................................................................................................................................26
Competent Person Statement ..............................................................................................................................27
Strategic Report, Directors’ Report and Consolidated Financial Statements .......................................................29
KEFI Minerals Plc ANNUAL REPORT 2015
Page 1
Highlights of 2015
(Includes post-period highlights in early 2016)
Ethiopia – Progressing Tulu Kapi into development
February 2015 – Updated Mineral Resource of 20.2Mt at 2.65g/t gold, containing 1.72 million ounces.
April 2015 – Mining Agreement signed and Mining Licence granted.
April 2015 – Updated Probable Ore Reserve of 15.4Mt at 2.12g/t gold, containing 1.05 million ounces.
June 2015 – Definitive Feasibility Study completed.
October 2015 – Appointed mining contractor and process plant construction contractor.
December 2015 – Preferred finance syndicate selected
Ethiopia – Optimising Tulu Kapi open-pit production
December 2015 – Feedback from project contractors, financiers and partners was incorporated into an
improved project development plan:
Projected net operating cash flow has increased to US$58 million per annum at US$1,250/oz
After-tax NPV (8% discount rate) of US$153 million (c. £96 million) at commencement of construction.
Increased forecast production to 115,000 ounces per year at All-in Sustaining Costs of US$746/oz
Ethiopia – Defining further value
March 2016 - Completed preliminary economic assessment (“PEA”) of Tulu Kapi’s underground mining
potential:
Based on the 2014 Mineral Resource, the underground mining inventory of 1.3Mt at 5.17g/t gold adds
c. 50,000 ounces p.a. over four years.
Identified exploration potential for tripling the current 330,000 ounce underground Mineral Resource to
c. 1 million ounces.
Saudi Arabia
April 2015 – Geophysics delineated strongly conductive zones below 6-km long gossan at Hawiah.
May 2015 – PEA confirmed sufficient oxide gold resource for heap leach development at Jibal Qutman.
Corporate
May 2016 – KEFI received formal confirmation from the Government of Ethiopia of its commitment to invest
equity capital of US$20 million in Tulu Kapi.
June 2016 – Tulu Kapi funding requirement reduced to an estimated US$130 million.
June 2016 – Finance plan now based on project equity of US$20 million from the Government of Ethiopia,
project debt of US$95 million and residual US$15 million to be optimised in Q3-16.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 2
Executive Chairman’s Report
Our assets provide a healthy platform to deliver shareholder value by developing profitable mines in Ethiopia and Saudi
Arabia.
During 2015, KEFI Minerals made substantial progress towards becoming a gold producer and continued to make
discoveries in one of the world’s great under-developed minerals provinces – the Arabian-Nubian Shield (“ANS”).
We work closely with a first-tier syndicate for Tulu Kapi’s construction, mining and financing. Accordingly, our Tulu Kapi
Gold Project remains on track for construction commencement in late 2016 and to start production commissioning towards
the end of 2017. Initial open-pit gold production is projected at 115,000 ounces per annum. Tulu Kapi’s Ore Reserves of
1.0 million ounces and Mineral Resources of 1.7 million ounces have significant upside potential.
At our Jibal Qutman Gold Project in Saudi Arabia, we are at the stage of submitting the Mining Licence Application for the
planned heap-leach operation.
The robust economics of KEFI Minerals’ two development projects are clear from the following table:
Project Stage
Gold Production
All-in Sustaining Costs (“AISC”)
Operating Margin
Operating Margin
Operating Margin
All-in Costs (“AIC”)
Project Margin
Initial Life-of-Mine Production
Ounces per annum
US$/oz
US$/oz
US$ million per annum
%
US$/oz
US$/oz
Ounces
Tulu Kapi
Funding
115,000
746
504
58
40%
869
381
Jibal Qutman
PEA
30,000
600
650
19
52%
815
435
980,000
139,000
Project Margin – Life of Mine
US$ million
Project Margin
Initial Capital Payback
%
Years
373
30%
<3
59
35%
<2
Note: the above parameters are based on a gold price of US$1,250/oz. AISC and AIC are per the World Gold Council Standard. The AIC
includes each project’s initial capital and excludes financing costs and income taxes.
The above metrics demonstrate that:
The AISC/oz place both projects in the bottom cost quartile of existing gold producers;
Strong margins provide substantial annual cash flows;
Both projects can comfortably debt-fund the majority of the initial capital required; and
Both projects rapidly repay the initial capital.
Both of these development projects are surrounded by exciting potential for further growth through exploration.
Robust Gold Project - Tulu Kapi
Great strides have been made over the past year to optimise Tulu Kapi and progress this project towards development.
Our team has significantly reduced the anticipated capital expenditure, increased the head grade of gold-bearing ore and
improved estimated project returns.
Progress over the past year includes:
An updated Ore Reserve which included a high-grade portion of 12.0 million tonnes at 2.52g/t gold, containing
0.98 million ounces;
Completion of the 2015 Definitive Feasibility Study (“2015 DFS”) in mid-2015;
Independent technical experts reviewing the DFS on behalf of potential financiers;
Mining contractor and processing plant construction contractor selection; and
Refinement of the 2015 DFS costs and mine plan.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 3
Feedback on the 2015 DFS from project contractors, financiers and partners was incorporated into an improved project
development plan. This further work has delivered an even more robust gold project:
Gold production of 115,000 ounces per annum for eight of the initially planned ten years;
All-in Sustaining Costs of approximately US$746/oz;
At a gold price of US$1,250/oz:
Initial capital costs of US$108million (US135 million, after adding transaction costs and cost-overrun facility);
o After-tax NPV (8% discount rate) of US$153 million (leveraged) and US$172 million (unleveraged);
o After-tax IRR of 45%; and
o Payback of 2.5 years.
This high-value, low-capex asset is now poised for development as the required funding package is close to being finalised.
Ethiopian Government and Project Funding
Responsible mine development is a high priority for KEFI and the Ethiopian Government. We welcome the Government’s
constructive attitude which encourages us to bring Tulu Kapi into production as rapidly as we prudently can whilst ensuring
compliance with all relevant quality standards.
In April 2015, the Tulu Kapi Mining Agreement (“MA”) between the Ethiopian Government and KEFI was formalised. Under
the MA, the Company has been granted a Mining Licence, which is valid for a period of 20 years, along with all major
permits required for the development and operation of the Tulu Kapi mine.
In November 2015, the Government of Ethiopia further demonstrated its strong support by confirming its intention to
invest equity capital of approximately US$20 million to increase its share of the project from 5% to 25-30%, depending on
the final financing structure.
Tulu Kapi’s initial capital estimate has been methodically reduced from US$289 million at the time of the project’s
acquisition by KEFI in December 2013. Our target now stands at c. US$108 million (including working capital), c. US$120
million after adding transaction, financing and insurance costs and US$135 million inclusive of overrun facilities. After
taking current spending programmes into account, total funding requirements at financial completion later in 2016 are
estimated at US$130 million. KEFI’s cost-reduction, combined with the recent firming of the gold price, has provided the
flexibility in structuring the required funding.
The major component of the project finance is the debt package of US$95 million, including the cost-overrun facility. A
gold-price hedging facility is also planned for up to 10% of gold reserves, as a further risk-mitigant. Notably, the debt-
finance structuring has been designed to ensure that all commitments are met on schedule even if the gold price drops to
US$850/oz.
Of the remaining required funding of US$40 million, some US$5 million will have been spent by the time of planned
“financial close” during H2-16 of the funding syndication and, combined with the Government of Ethiopia’s planned equity
investment of US$20 million into the project subsidiary, the residual requirement has been reduced to US$15 million. The
final mix of how best to finance this residual amount will be made at the end of Q3-16 in light of the then prevailing gold
price and offers on the table, which include further equity investment by project contractors and a subordinated
convertible note.
This carefully staged approach to risk-mitigation and financing is judged to provide the best cost of capital for the Company,
risk-management for the project and simplicity for structuring the syndicate. This staged approach has also allowed the
Company to react to changing gold prices and financial market conditions since the acquisition of Tulu Kapi on 30 December
2013.
Lastly, on the matter of the funding approach, the Directors are sensitive to the need to minimise equity dilution, within
the bounds of conservative financial leverage for Tulu Kapi. Our approach has, over a two-year period, transformed an
uneconomic project into one which is now robust, fully permitted, supported by a first-tier syndicate of partners,
contractors and financiers and has significant upside potential for shareholders from the forecasts used for financing that
include gold production from only the current open-pit reserves.
Further Potential at Tulu Kapi
In parallel with working towards open-pit gold production, KEFI has also evaluated the potential for developing an
underground mine underneath the Tulu Kapi open pit. A preliminary economic assessment (“PEA”) completed in early
2016 indicated robust economics for an underground mine. Based on 2014 Mineral Resources, the addition of an
underground mine has the potential to increase total (open pit + underground) gold production to more than 150,000
ounces per annum over four years.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 4
Oxide Gold Project - Jibal Qutman
Drilling at Jibal Qutman during 2015 has continued to extend knowledge of gold mineralisation and discover further oxide
gold deposits. Our team has continued to work towards developing an open-pit, heap-leach (“HL”) gold operation. The
approach being taken is for a low-capex start-up which can be expanded in modular stages as additional mineralisation is
delineated.
A staged development approach is likely for Jibal Qutman. The potential cash flow from HL oxide gold production is an
opportunity to fund:
construction of a carbon-in-leach (“CIL”) plant to process the deeper sulphide ore profitably; and
exploration in Saudi Arabia to create a strong Saudi mining company for the long term.
Studies to date have provided the information required for a Mining Licence Application which is currently being discussed
with the Saudi regulators.
Outlook
KEFI Minerals is positioned to become the operator of two gold development projects in the highly prospective ANS. We
have achieved this progress with only a few highly-experienced, full-time professional-level staff around whom we will
build the full operating team. We are well supported by a number of high calibre, quality specialist companies who work
with us in creating value.
The gold price drifted down during 2015 and hit a five-year low of US$1,050/oz in December 2015. Lack of interest in the
gold sector and low share prices made raising equity very difficult for gold companies. KEFI minimised expenses while
maintaining momentum towards becoming a gold producer. In order to help reduce cash outflows, some employees
agreed to take KEFI shares in lieu of a significant portion of their salary. Some employees also invested significant amounts
into KEFI share placings.
The gold price has rebounded to US$1,200-1,300/oz in the first half of 2016. Investor interest has returned to the sector
and KEFI’s share price has doubled since the all-time low share price in late 2015. The current global gold price has already
provided a significant boost to the Tulu Kapi’s NPV, which at the price of US$1,250/oz and using a discount rate of 8%
stands at US$153 million post tax and financing.
Furthermore, on current estimates, for every US$100/oz increase in the gold price, there is an increase of US$37 million
to the project valuation – highlighting the significant upside still available to shareholders given a current market
capitalisation of approximately £18 million (US$26 million). The NPV is projected to be much higher again upon
commencement of production, providing higher target Company share valuations as at 2018.
Our lower risk, higher return approach to developing Tulu Kapi and Jibal Qutman remains even more appropriate than it
was last year. Capital markets now demand business strategies and performance which emphasise profitability and
dividend generation as well as growth through cost-effective exploration. In the past year, KEFI has reinforced its focus on
both.
Low share prices have placed many strains and challenges on companies throughout the gold sector. We deeply appreciate
the strong support of our shareholders, communities and other key stakeholders in supporting KEFI, particularly as we are
an early entrant in emerging mining districts. I also highlight the Board’s deep appreciation for the dedication and
professionalism of our hard-driving teams of personnel, professional advisers and service providers along with the families
that support us.
The Board is confident of our strategy and asset base. We have the appropriate mix of technical and financial expertise to
prudently progress our projects into profitable gold mines with the aim of maximising and returning value to shareholders
via share price appreciation and ultimately dividends. The team will be built further as we move towards production.
I look forward to seeing some of you at the Annual General Meeting on 30 June 2016 in London.
Harry Anagnostaras-Adams
Executive Chairman
KEFI Minerals Plc ANNUAL REPORT 2015
Page 5
Exploration Director’s Report
Strategically, the Company’s focus is clearly placed on opportunities in the Arabian-Nubian Shield (“ANS”).
KEFI is very fortunate with potential exposure to a +1,000 km2 portfolio of targets at various stages within the highly
prospective ANS. The value-adding potential for shareholders of this portfolio surpasses that of the Tulu Kapi mine
development.
Our priorities in cost effectively discovering economic gold and copper in Ethiopia and Saudi Arabia remain:
1. Tulu Kapi - increase our understanding of the ore body and systematically search for nearby ore bodies;
2.
Jibal Qutman – increase oxide gold resources on the granted Exploration Licence (“EL”) and surrounding
Exploration Licence Applications (“ELAs”);
3. Hawiah – determine if a copper-gold-zinc VHMS deposit lies beneath the 6km-long, gold-bearing surface gossan;
and
4. Evaluate further opportunities in the ANS, particularly within KEFI’s current pipeline of ELA’s in both countries.
Our ability to achieve these objectives flows from having experienced teams which are all based at our sites in the region.
Ethiopia – Further Potential at Tulu Kapi
The Tulu Kapi gold deposit and nearby area has multi-million ounce potential with our prospects near Tulu Kapi at an early
stage of being explored.
In February 2015, further data and better delineation of individual ore lodes provided the basis for Tulu Kapi’s Indicated
Resource increasing to 18.8 million tonnes at 2.67g/t gold, containing 1.62 million ounces.
There is significant potential to expand Tulu Kapi’s Mineral Resource as it remains open along strike, down plunge and at
depth. The economic potential is also enhanced by the gold grades increasing with depth as well as the ore lenses
thickening, making underground mining very attractive.
A number of prospects have been identified within trucking distance of Tulu Kapi. Proposed exploration activity will be
significantly expanded with this focus, as these prospects have the scope and potential to add substantial value by
providing additional ore to the Tulu Kapi processing facility.
Saudi Arabia – Adding to Project Pipeline at Jibal Qutman and Hawiah
KEFI has a 40% beneficial interest in a large portfolio of ELAs and two granted ELs in Saudi Arabia via Gold and Minerals Co.
Limited (“G&M”), our joint venture company with Abdul Rahman Saad Al Rashid and Sons Limited (“ARTAR”). This portfolio
is continually being reviewed to manage our pipeline of longer term opportunities. Some ELAs contain highly prospective
targets that were quickly identified by surface sampling and reconnaissance by KEFI Minerals, as well as historical mine
workings in all the application areas.
Since the Jibal Qutman EL was granted in July 2012, KEFI Minerals rapidly advanced this project from grassroots exploration
to assessing the best way to bring to account the gold mineralisation discovered to date.
Drilling expanded several zones of gold mineralisation during 2015 and infill drilling increased confidence in Mineral
Resources. The main exploration focus during 2015 has been along strike from the Red Hill prospect where drilling has now
intercepted gold mineralisation along a corridor at least 2 km long.
Jibal Qutman’s exploration focus during 2016 is to further increase near-surface oxide gold resources and provide the
critical mass to trigger gold production via a low-capex, heap-leach operation.
Following the grant of the Hawiah EL in December 2014, KEFI commenced exploration of an unusually large 6km-long
gossan for gold at the surface and a volcanic-hosted massive sulphide (“VHMS”) copper-gold-zinc sulphide orebody at
depth. The Hawiah EL was one of KEFI’s higher priority ELAs as the geological setting is analogous to large VHMS deposits
in the ANS that also have well-preserved, mature oxidised zones enriched in gold at surface.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 6
Initial surface exploration has confirmed that the gossans are enriched in gold and the mineralisation has good continuity
along strike, as well as containing abundant secondary copper showings. Our initial geophysical survey indicates it is
underlain by a large metal-bearing body. Further exploration activities at the prospect are pending the outcome of
negotiations with local stakeholders to ensure robust long-term access to this and other prospective ground in the region.
The Hawiah EL is the sort of prospect that makes us excited to be exploring the ANS as it has all the hallmarks of a copper-
gold-zinc VHMS deposit, which are typically quite valuable.
Focus on Arabian-Nubian Shield
While our focus and expenditure is on adding
resources for our two development projects, KEFI
continues to work towards creating shareholder
value by assessing other prospects in the under-
explored ANS, particularly on the pipeline of ELA’s
in both countries.
Precambrian rocks host many of the major gold
and base metal deposits globally, for example in
Australia, Canada and South Africa. It is notable
that the ANS is much larger than these other
Precambrian terranes.
Even though a number of significant gold and base
metal deposits are being mined in the ANS, very
little modern exploration has been carried out
over much of the area.
We are continually adding to our knowledge of the
ANS and systematically building our database for
project generation and optimisation.
Our aim has always been to deliver shareholder
value by developing into profitable mines the
gold and base metal deposits that the Company
discovers or acquires in a cost-effective manner.
Location of KEFI's projects in ANS
Since being formed in December 2006, KEFI Minerals has evaluated scores of acquisition opportunities and exploration
targets in various countries around the Mediterranean, Middle East and Africa. The overall cost to assemble and progress
towards development our current resources totalling 1.9 million ounces is about US$20/oz. The highly prospective Arabian-
Nubian Shield is one of the largest under-explored mineral provinces in the world. The ANS has been the Company’s
primary focus since 2008 when it commenced exploration activities in the Kingdom of Saudi Arabia. The intellectual
property of the information and experience gained over this period reinforces the value-creating potential of the
Company’s assets. We are indeed excited by the opportunity provided, in the Company’s poll position in a very prospective
region.
I look forward to updating shareholders and our communities on our progress towards these goals.
Jeffrey Rayner
Exploration Director
KEFI Minerals Plc ANNUAL REPORT 2015
Page 7
Chief Operating Officer’s Report
Jeff Rayner (Technical Director) and Wayne Nicoletto (Chief Operating Officer) discuss plans for Tulu Kapi.
In early 2015, I was delighted to join KEFI Minerals Plc as Chief Operating Officer and also Managing Director of KEFI
Minerals Ethiopia Limited. My experience includes building and operating mines in Australia, Africa and Asia. This is the
second time I have lived in Ethiopia, having previously done so in 2001 when supporting the privatisation and operational
modernisation of Lege Dembi - Ethiopia’s only other major gold mine. KEFI is now entering an exciting chapter of its
development, both for the Company and for the Ethiopian mining sector, as we continue to advance towards construction
of the processing plant in Q4-16 and production commission from Q4-17.
Independent Consultants
During the past twelve months we made extensive use of internationally respected specialist consultants to attest to the
quality of KEFI’s overhaul of the Tulu Kapi project. This was important for establishing the “bankability” of a project which
had stumbled under a previous owner’s development plan. The independent consultants used for the 2015 DFS included
Snowden Mining Industry Consultants Pty Ltd and Cube Consulting on geology and mine engineering, SENET Engineering
for processing, Epoch for tailings management and Golder Africa Associates for environmental and social.
Our Project Finance advisers, Endeavour Financial, appointed Micon International Limited (“Micon”) as Independent
Engineer on behalf of the lenders. Similarly, Environ Corporation (“Environ”) has been appointed as Independent
Environmental & Social Consultant. Both independent consultants have prepared due diligence reviews on behalf of the
future lending syndicate based upon the 2015 DFS, capital cost estimates and forecasts, and other documents including
the Environmental and Social Impact Assessment. Subsequent amendments to the 2015 DFS following engagement of the
preferred contractors has also been reviewed by Micon who prepared an addendum to their initial due diligence review.
Environ will also prepare an addendum to their initial report in due course based on the finalised resettlement programme.
Construction and Operational Management
In November, KEFI engaged a “bolt-on” Owners Project Management Team from Increva in Perth. Increva will sit above
the EPC contractor and report to me. The Increva team have integrated into the KEFI culture over the past twelve months
as it was Increva that managed the rounds of bidding for the Engineering, Procurement, and Construction Management
(“EPCM”) and then Engineering, Procurement, and Construction (“EPC”) contract, under the supervision of the KEFI senior
executive team.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 8
Plant Construction and Start-Up Contractor
KEFI has had very strong competition for this role from industry leaders and, during the finance syndication process, the
Company appointed Lycopodium Ltd as the Plant Construction and Start-Up Contractor to replace Sedgman. Lycopodium
is based in Australia with a successful track record of over 20 years in African operations. The principal terms of this
appointment are the same as had applied with Sedgman and are set out below, which are subject to full detailed
documentation.
Scope of work under the proposed contractual arrangements covers:
Detailed equipment specification and procurement, with a Front End Engineering Design (“FEED”) stage;
Construction to occur under a fixed-price lump sum contract (Engineering, Procurement and Construction);
Start-up management support (for up to two years of operation) including installation of plant operating policies
and procedures, personnel training and systems, with handover upon satisfaction of performance;
Estimated cost of c. US$60 million for a 1.5-1.7 Mtpa (range dependent on ore type) processing plant;
Performance guarantees:
o
o
to remain in place until the end the first year of production; and
to ensure successful start-up before the final contractual retention sums are paid by KEFI.
This compares favourably with the previous estimate in the 2015 DFS of a total cost of US$61 million for a 1.2 Mtpa
processing plant. The 2015 DFS also did not anticipate a fixed-price lump sum contract for construction with performance
guarantees.
Mining Contractor
KEFI has appointed African Mining Services (“AMS”), a wholly-owned subsidiary of Ausdrill Limited as Contractor for Mine
Establishment and Operation. AMS has strong African operations and a successful track record and has become a
significant KEFI shareholder.
The principal terms and consequences of this appointment are set out below, all of which are subject to full detailed
documentation:
Scope covers certain pre-mining earthworks as well as the life-of-open-pit mining operation.
Contractual payment rate to be based on per cubic metre delivered.
Direct purchases by KEFI of certain key input costs such as explosives and fuel.
KEFI and AMS are now jointly optimising the detailed operating plan for the benefit of the project and preparing
matching detailed contractual documentation.
AMS will report to Increva initially during construction and, in due course, to the Mine Manager.
Next Scheduled Appointments
KEFI has appointed Brian Hosking to the Senior Executive Team as Human Resources (“HR”) Overseer, to advise and support
organisation design, HR policies, procedures and recruitment. Brian is principal of Meyer Hosking a mining industry
specialist HR firm.
KEFI has selected an experienced Operations Manager who will oversee development of operating systems with the
principal project contractors and will oversee, with the Executive Chairman and myself, recruitment in 2016-2017 of the
Operations Management Team including Mine Manager, Plant Manager, Environmental Manager, HR Manager, and
Finance Manager.
Wayne Nicoletto
Chief Operating Officer
Managing Director, KEFI Ethiopia
KEFI Minerals Plc ANNUAL REPORT 2015
Page 9
Sustainability Activities for the Tulu Kapi Project
Responsible mine development is the core requirement for KEFI and the Ethiopian Government. We welcome the
Government’s constructive attitude which encourages us to bring Tulu Kapi into production as rapidly as we prudently can
whilst ensuring compliance with all relevant quality standards.
The Tulu Kapi Mining Agreement (“MA”) between the Ethiopian Government and KEFI incorporated several key documents
including an Environmental and Social Impact Assessment (“ESIA”) and the Community Resettlement Action Plan (“RAP”).
The ESIA is fully integrated with the design contemplated in the 2015 DFS and compliant with International Finance
Corporation Performance Standards and Equator Principles.
Community consultation meeting at Tulu Kapi
The MA is a landmark achievement that provides the foundation to unlock the value of Tulu Kapi for all stakeholders and
particularly the significant economic and social benefits that the project can bring to Ethiopia.
Our social licence team is based at Tulu Kapi, comprising locally experienced Ethiopian professionals led by internationally
experienced managers and supported by internationally experienced specialist advisers. Our management processes
involve continual consultation with the community, federal, regional and local authorities and other local institutions
before and during implementation of the RAP.
Our firm commitment is the full compliance with international, national and provincial regulations and also to consult
relevant communities, scientific bodies and non-governmental organisations. We take every reasonable effort to be the
highest-quality neighbour within our communities but do not expect to be able to satisfy every request on every occasion.
We are confident that this policy of compliance and consultation will enable our stakeholders to realise the benefits from
and to take advantage of the exploration and mining activities undertaken by us.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 10
Some examples of KEFI’s initiatives to minimise social disruption whilst maximising social benefits include:
Sculpting the Mining Licence area to reduce the number of affected households from approximately 460 to 260;
Facilitating the inspection of more than fifteen locations, before the community selected its preferred new host
lands;
Introducing and maximising our Ethiopian team of specialists in livelihood restoration to commence programmes
of consultation and planning, well before resettlement commences; and
Introducing “source locally” policies from the outset for the project supply chain, subject to normal standards of
quality and price.
During 2015, KEFI’s expanded Social Performance Team has refined the plans for livelihood restoration of community
members to be resettled and for the community development foundation. Planning includes schooling, health facilities,
access roads, water as well as improved housing and livelihood restoration. KEFI supports these efforts as appropriate
under international standards. KEFI is also maximising local content in procurement and manning.
KEFI Social Performance Team meeting with villagers near Tulu Kapi, second from right is Rodger Barnes, KEFI Team
Leader
We are confident that, with sincere and determined work by all parties, all matters of concern which arise can be dealt
with properly in order to maximise the benefits to local communities in employment, services and long-term development.
We have selected project contractors with proven records in local training and employment in Africa for over 20 years and,
with them, we ensure that project planning includes compliance with relevant local and international standards. We will
make every reasonable effort to train and then promote the local Oromo recruits into positions of responsibility with a
special emphasis on female empowerment, as agreed formally within the Mining Agreement signed in 2015.
We seek to achieve development that provides enormous benefits today, without compromising the ability of future
generations to meet their own needs both economically and environmentally.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 11
Ethiopia
Tulu Kapi was progressed towards development during 2015 with the completion of the DFS and subsequent work to
reduce risk and further improve project economics.
Annual average gold production is currently estimated to be approximately 115,000 ounces per annum for the eight core
years of production from the open pit. Overall, at All-in Costs (including operating, capital and closure costs) are estimated
at circa US$869 per ounce including the initial investment and US$746/ounce excluding the initial investment, much lower
than industry averages.
Exploration has been focussed on Tulu Kapi and district, to support the project development plans.
Tulu Kapi - Background
is
Tulu Kapi
located approximately
360km due west of Ethiopia’s capital,
Addis Ababa. A main road to Addis Ababa
is within 12km of Tulu Kapi and was
sealed with asphalt during 2014.
is
The altitude of the project area
between 1,600m and 1,765m above sea
level. The climate is temperate with
annual rainfall averaging about 150cm.
The surface topography around Tulu Kapi
is hilly with deeply dissected river valleys.
Subsistence
farmers primarily grow
coffee and fruit in the river valleys.
The Tulu Kapi gold deposit was
discovered and mined on a small scale by
an Italian consortium in the 1930’s.
Nyota Minerals Limited acquired the
licences in 2009 and then undertook
extensive exploration and drilling which
culminated in an initial DFS in December 2012.
Location of Tulu Kapi in Ethiopia.
In December 2013, KEFI Minerals acquired 75% of Tulu Kapi for £4.5 million. This acquisition cost equates to only US$10
per reserve ounce and provided information collected from historical expenditure of more than US$50 million.
In September 2014, KEFI acquired Nyota Minerals’ remaining 25% interest in Tulu Kapi for £1.5 million The Ethiopian
government became entitled to a 5% free-carry interest in Tulu Kapi upon granting of the Mining Licence in April 2015.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 12
Tulu Kapi – Permits and Mining Agreement
The Tulu Kapi Mining Agreement (“MA”) between the Ethiopian Government and KEFI was formalised in April 2015. The
terms of the MA include:
Renewable 20-year Mining Licence covering an area of 7km2, with full permits for the development and operation
of the Tulu Kapi gold project.
Fiscal arrangements:
o 5% Government free-carried interest;
o Royalty of 7%;
o
o Historical and future capital expenditure is tax deductible over four years; and
o
Stabilisation of fiscal arrangement to protect KEFI in case of future legislative changes.
Income tax rate for mining of 25%;
Government undertaking to facilitate international financing arrangements.
Attachments to the MA include the Environmental and Social Impact Assessment, the Development and Production Work
Programme and the Community Resettlement Action Plan.
Tulu Kapi - Geology
The Tulu Kapi region has typical Precambrian type geology which is characterised by prominent hills of intrusive rocks and
deeply incised valleys containing metasediments and metavolcanic rocks.
Gold at the Tulu Kapi deposit is hosted in quartz-albite alteration zones as stacked sub-horizontal lenses in a syenite pluton
into which a swarm of dolerite dykes and sills have been intruded. Gold mineralisation extends over a 1,500m by 500m
zone and is open at depth (+550m).
Schematic long section of the Tulu Kapi Gold Deposit.
The mineralisation is characterised by a simple mineralogy comprising gold, silver, pyrite and minor sphalerite and galena.
The gold is free milling with metallurgical recoveries averaging 93% for oxide and sulphide ore in the planned open pit.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 13
At depth beneath the main body of mineralised syenite there is a zone adjacent to the Bedele shear that is characterised
by significantly higher gold grades, with occasional coarse visible gold, more base metal sulphides and a shallower apparent
dip than the main body above it.
Tulu Kapi – Resources and Reserves
In February 2015, KEFI released an independently verified increased Indicated Resource estimate totalling 18.8 million
tonnes at 2.67g/t gold, containing 1.62 million ounces.
Resource
Category
Indicated
Inferred
Sub-Total
Indicated
Inferred
Sub-Total
Indicated
Inferred
Total
Area
Tonnes
(millions)
Above
1,400m RL
Below
1,400m RL
Overall
17.7
1.3
19.0
1.1
0.1
1.2
18.8
1.4
20.2
Gold
(g/t)
2.49
2.05
2.46
5.63
6.25
5.69
2.67
2.40
2.65
Contained Gold
(million ounces)
1.42
0.08
1.50
0.20
0.02
0.22
1.62
0.10
1.72
Note: Resources were estimated using cut-off grades of 0.45g/t gold above 1,400m RL and 2.50g/t gold below
1,400m RL. For further information, see KEFI announcement dated 4 February 2015.
The Mineral Resources were split above and below the 1,400m RL to reasonably reflect the portions of the resource that
may be mined via open pit and underground mining methods.
Based on the Indicated Resource above 1,400m RL, the following Ore Reserve was estimated in April 2015.
Reserve
Category
Cut-off
(g/t gold)
Tonnes
(millions)
Probable - High grade
0.90
Probable - Low grade
0.50 - 0.90
Total
12.0
3.3
15.4
Gold
(g/t)
2.52
0.73
2.12
Contained Gold
(million ounces)
0.98
0.08
1.05
Note: Mineral Resources are inclusive of Ore Reserves. All numbers are reported to three significant figures. Small
discrepancies may occur due to the effects of rounding.
The high-grade portion of the Ore Reserve contains nearly all the contained ounces and totals 12.0 million tonnes at 2.52g/t
gold, containing 0.98 million ounces.
The above Mineral Resources and Ore Reserves were estimated using the guidelines of the JORC Code (2012).
Tulu Kapi - Definitive Feasibility Study and Subsequent Optimisation
A DFS was completed in December 2012 by Nyota Minerals that evaluated construction of a 2.0Mtpa CIL processing plant
and estimated initial capital expenditure of $289 million, including an allocation for working capital.
KEFI is pursuing an alternative approach for Tulu Kapi that has significantly reduced the anticipated aggregate capital and
operating expenditure, which provides less start-up risk and a higher overall return.
KEFI’s 2015 Definitive Feasibility Study (“2015 DFS”) was completed in June 2015. Independent specialist advisers to the
2015 DFS included Senet (assembly of DFS and ore processing), Snowden (Mineral Resources and Ore Reserves), Epoch
KEFI Minerals Plc ANNUAL REPORT 2015
Page 14
(tailings management), Cube Consulting (grade control and mine optimisation), Golder (environmental and social impact)
and Endeavour Financial (project finance advisor and arranger).
Following completion of the 2015 DFS, the cost estimates and mine plan have been refined further. These refinements are
the product of:
collaboration between the KEFI project management team and the project contractors - Ausdrill/African Mining
Services and Lycopodium (who replaced Sedgman in June 2016); and
reviews by the Independent Technical Consultants for the project financiers - Micon (development and operating)
and Environ (Social and Environmental).
This work has delivered even more robust gold project than the 2015 DFS as shown in the table below.
Waste:ore ratio
Processing rate
Total ore processed
Average head grade
Gold recoveries
2015 DFS
13-year LOM
(owner mining)
7.4:1.0
1.2Mtpa
15.4Mt
2.1g/t gold
93%
Annual steady-state gold production
Total LOM gold production
95,000 ounces
961,000 ounces
Initial construction capital
Total funding requirement
All-in Sustaining Costs
All-in Costs (including initial capital
expenditure)
US$176M
US$168 M
US$724/oz
US$888/oz
Refined Mine Plan
10-year LOM
(contract mining)
7.4:1.0
1.5Mtpa
15.4Mt
2.1g/t gold
93%
115,000 ounces
980,000 ounces
US$108M
US$132M
US$746/oz
US$869/oz
Average annual operating cash flow
US$50M p.a.
Net Cash after Debt Service & Tax
N.A
US$58M p.a.
US$326M
After-tax NPV (8%)
US$118M (ungeared)
US$153M (geared)
IRR
Payback
22% (ungeared)
3.5 years
45% (geared)
2.5 years
Note: The above metrics assume a gold price of US$1,250/oz. Life of Mine (“LOM”) is the time to mine the planned open pit only.
Tulu Kapi’s initial construction capital is currently estimated at c. US$108 million, c. US$120 million after adding transaction,
financing and insurance costs and US$135 million after adding cost overrun facilities.
Tulu Kapi - Development
Tulu Kapi will be a conventional open-pit mining operation with a CIL processing plant. The mine will be connected to
Ethiopia’s electricity grid via a new 47km long, 132 kV power line. An emergency diesel power plant will also be installed
to provide emergency backup power to critical process equipment in the event of a grid power failure.
The construction project management team is led by Mr Wayne Nicoletto, who was appointed Head of Operations of KEFI
and Managing Director of KEFI Minerals Ethiopia Limited in February 2015. His development and operational expertise
complements the local expertise of Dr Kebede Belete, Country Manager for KEFI.
Following the international tenders, in October 2015 KEFI appointed Ausdrill Limited (via subsidiary African Mining
Services) as mining contractor and Lycopodium as process plant construction contractor (replacing Sedgman).
KEFI Minerals Plc ANNUAL REPORT 2015
Page 15
At Ausdrill facility in Perth - from left to right, Sergio DiGiovanna (Project Value Engineering), Guy Ware (Processing),
Geoff Davidson (Mining), Harry Anagnostaras-Adams (Executive Chairman)
Tulu Kapi is fully-permitted and the work currently being undertaken should ensure construction can proceed quickly and
efficiently once funding is in place.
Tulu Kapi – Potential for Underground Mine
The Tulu Kapi orebody is very amenable to underground mining as ground conditions are good, gold grades increase and
ore lenses thicken with depth. Gold mineralisation remains open along strike, down plunge and at depth. Notably, the
most northerly hole drilled into the deepest portion of the deposit intersected 90m at 3g/t gold and demonstrates that
the deposit remains open down plunge.
A preliminary economic assessment (“PEA”) of Tulu Kapi’s underground mining potential was completed in March 2016.
Based on the 2014 Mineral Resources, the underground mining inventory of 1.3Mt at 5.2g/t gold adds gold production of
c. 50,000 ozs p.a. over four years.
The PEA considered the gold mineralisation greater than a cut-off of 2.5g/t gold below the base of planned open pit, which
is c. 1,450m RL (i.e. 50m higher than the 1400m RL division for the 2015 Mineral Resource Statement). It also considered
economic lenses above 1,450m RL but outside of the planned open pit.
The key outcomes of the PEA were that:
Underground mine development is economically justified based on the 2014 Mineral Resources;
Combined gold production from the open pit and underground mine approximates 150,000oz p.a.;
The underground mine adds an estimated US$44 million to the Project’s after-tax NPV (8%) at a gold price of
US$1,250/oz; and
Subject to the results of a full DFS, underground mine development to commence after repayment of
development finance – targeting the third year of open-pit operations.
As the deposit remains open, KEFI has identified exploration potential for tripling the current 330,000oz underground
Mineral Resource to c. 1Moz.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 16
Tulu Kapi – Regional Exploration Potential
The Tulu Kapi district exploration priorities are now being overhauled in light of Tulu Kapi’s planned development. This
process will place revised emphasis on certain historical discoveries of gold mineralisation. There is significant potential
for further gold orebodies to be discovered within trucking distance of the Tulu Kapi processing plant.
Ethiopia, regional exploration - centre left Amha Hailejesus (senior exploration geologist) and
centre right Fabio Granitzio (exploration manager)
KEFI Minerals Plc ANNUAL REPORT 2015
Page 17
Saudi Arabia
The Kingdom of Saudi Arabia is a country with a long history of gold and copper mining that dates back over 3,000 years.
As part of a broader strategy to diversify the country’s revenues away from oil, Saudi Arabia is looking to expand and
develop its mineral sector.
Key commercial advantages for KEFI in Saudi Arabia are:
A country under-explored for minerals with only a few companies exploring for gold and copper;
The Precambrian ANS rocks are very prospective for gold and copper;
Exploration, development and operating costs are low by industry standards, benefitting from low energy and
labour costs;
Saudi Industrial Development Fund provides loans for up to 75% of the capital cost of mine development at
attractive interest rates;
A modern mining code; and
A strong local joint venture relationship.
KEFI remains well placed to advance and develop our projects with the assistance of our partner ARTAR, a leading local
industrial group owned by Sheikh Al Rashid and his family. As a 40% shareholder and manager of G&M, KEFI Minerals has
established a strong foothold from which to build on the momentum achieved to date.
The Kingdom of Saudi Arabia has instituted policies to encourage minerals exploration and development. A resurgence of
the Kingdom’s minerals sector could generate significant employment and assist with development of infrastructure in
remote areas of the country. G&M is aligned with these policies, with KEFI as the technical partner and operator, and
ARTAR as the majority shareholder. Combined with KEFI’s technical excellence, ARTAR’s local presence and financial
strength has been instrumental in establishing G&M as a respected explorer in Saudi Arabia.
The Directors of KEFI are increasingly confident that, given the Company’s approach of strong local ownership from the
outset for its operations in Saudi Arabia, it is well placed to establish a secure long term position in the country. KEFI is fully
committed to consolidate G&M’s presence in Saudi Arabia as the exploration results achieved since commencing
exploration demonstrate the substantial opportunity to discover and develop mines in the country.
Location of G&M ELs and ELAs in Saudi Arabia, including the main gold and VHMS copper deposits in the ANS.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 18
Saudi Arabia - Jibal Qutman
The Jibal Qutman EL is located in the central southern region of the Arabian-Nubian Shield and covers an area of 99.9km2.
The EL covers an important part of the prospective Nabitah-Tathlith Fault Zone, a 300km-long structure with over 40 gold
occurrences and ancient gold mines.
Drilling undertaken since the EL grant in July 2012 has identified gold resources in six areas - Main Zone, West Zone, South
Zone, 3K Hill, 4K Hill and Red Hill. Given the established regional prospectivity for shallow oxide gold deposits, ELAs have
been submitted for four additional areas near Jibal Qutman.
Drilling has identified oxide gold mineralisation that is amenable to heap leach (“HL”) processing. Accordingly, the Company
is focusing on producing gold via an open cut, HL operation. The HL approach has the advantages of speeding up the
potential development timetable and lowering capital requirements to potentially as little as US$3 million for KEFI’s equity
contribution to initial development costs.
Jibal Qutman Exploration
During 2015, an infill programme was carried out over the established deposits - Main Zone, West Zone, South Zone, 3K
Hill and 4K Hill. The programme comprised 89 reverse circulation (RC) holes for a total of 5,489m. This led to an improved
resource model for the oxide mineralisation and to increased oxide resources.
Geologist team briefing at Jibal Qutman. From Left, Tomos Bryan (senior geologist), Fabio Granitzio (exploration
manager), Zsolt Molnar (senior resource geologist), Timothy Eatwell (exploration geologist) and Luca Purpura
(exploration geologist).
The main exploration focus during 2015 has been on the Red Hill corridor. An initial Mineral Resource has been defined at
the main Red Hill prospect. Gold mineralisation was discovered at the RH2 and RH3 prospects along strike to the north and
south, respectively. Red Hill now sits at the centre of a corridor of mineralisation at least 2 km long and contains a
previously unrecognised mineralisation style at Jibal Qutman - listwaenite hosted gold.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 19
Location of Jibal Qutman prospects.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 20
Mineral Resource Estimates for Jibal Qutman
In May 2015, KEFI released an updated Mineral Resource estimate of 28.4 million tonnes at 0.80g/t gold, containing
733,045 ounces for Jibal Qutman.
As summarised in the table below, the majority of the Mineral Resource is now in the Indicated category.
Category
Indicated
Inferred
Sub-Total
Indicated
Inferred
Sub-Total
Indicated
Inferred
Grand Total
Tonnes
(millions)
8.3
2.8
11.1
9.7
7.6
17.3
18.0
10.4
28.4
Gold
(g/t)
0.86
0.64
0.80
0.86
0.72
0.80
0.86
0.70
0.80
Contained Gold
('000 ounces)
229
58
287
269
176
446
498
235
733
Oxide
Sulfide
Oxide
+
Sulfide
Note: For further information, see KEFI Minerals announcement dated 6 May 2015. Small discrepancies may occur due to
the effects of rounding.
The oxide gold mineralisation contained with the above Mineral Resource is estimated to total 11.1 million tonnes at
0.80g/t gold, containing 287,000 ounces.
Preliminary Economic Assessment for Jibal Qutman
Metallurgical test work has confirmed that Jibal Qutman oxide mineralisation is amenable to heap leach processing. The
key outcomes from a Preliminary Economic Assessment for Jibal Qutman completed in May 2015 were:
1.5Mtpa heap leach operation;
Gold production 139,000 ounces over an initial mine life of 4.5 years;
Oxide open-pit optimisation studies show a potential mineable resource of 6.6 million tonnes at 0.95g/t gold, for
201,600 contained ounces;
Waste:ore ratio of 2.2:1.0;
Average gold recovery of 73%;
Cash operating cost of US$597/ounce; and
Capital expenditure of US$30 million.
Combined with the potential for development loans for up to 75% of capex requirements, it may be possible for KEFI to
fund its share of the equity portion with under US$3 million in equity or other forms of finance.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 21
Saudi regulatory officials reviewing sampling procedures.
Jibal Qutman Outlook
Jibal Qutman’s business objectives over the coming year are to:
Complete the current review of the Preliminary Feasibility Study with the regulatory authorities;
Submit the MLA after completion of these regulatory reviews;
Commence the DFS;
Explore the surrounding ELAs after their grant, which have high prospectivity for additional resources; and
Prepare applications for construction and operating licences.
This strategy envisages Jibal Qutman becoming G&M’s foundation for a strong, sustainable mining company in Saudi
Arabia.
Reverse circulation drilling at Jibal Qutman.
Saudi Arabia - Hawiah
In December 2014, the 95km2 Hawiah EL was granted to ARTAR on behalf of G&M. The Hawiah prospect is located within
the Wadi Bidah Mineral District (“WBMD”) in the southwest of the Arabian Shield. The WBMD is a 120km long belt which
hosts over 24 volcanically hosted massive sulphide (“VHMS”) occurrences and historic workings for copper and gold.
The initial focus at Hawiah is on gold enrichment in surface gossans and a large VHMS copper-gold-zinc sulphide target at
depth, associated with a 6km-long, north-south exposure of a highly silicified and variably gossanous horizon. Initial surface
KEFI Minerals Plc ANNUAL REPORT 2015
Page 22
exploration has confirmed that the gossans are enriched in gold and the mineralisation has good continuity along strike,
as well as containing abundant secondary copper showings.
The planned exploration programme at Hawiah aims to:
Quickly define a near-surface, economic gold resource in the gossan via trenching and RC drilling; and
Simultaneously search for a major copper-gold-zinc sulphide ore body along strike and/or at depth.
Further exploration activities in Hawiah are on hold pending the outcome of ongoing community negotiations. It is very
important that all the correct steps are taken with local stakeholders to ensure our licence to operate is robust both on
the Hawiah EL and for other ELAs in the WBMD.
Hawiah Geology and Exploration
The Hawiah EL covers a predominantly bimodal mafic and felsic volcaniclastic succession in a broad anticline, with an
unusually large expression of surface mineralisation outcropping on the eastern limb. Hawiah’s silicified and gossanous
horizon was mapped and trenched by France’s Bureau De Recherches Geologiques et Minieres (“BRGM”) in the 1980s,
who identified its gold-bearing potential and the gold potential of the WBMD.
In February 2015, KEFI completed a first-pass, wide-spaced trenching programme. A total of 53 trenches, for a total length
of 1,620m, was excavated over the 6km-long gossanous horizon. KEFI’s trenches repeated all of the BRGM’s trenches, as
well as extending the known (4km) exposure to the south and to the north.
Almost all of KEFI’s trenches contained anomalous gold, including 6m at 2.2g/t gold, 2m at 8.7g/t gold, 6m at 1.9g/t gold,
3m at 5.8g/t gold, 2m at 7.5g/t gold and 8m at 3.0g/t gold.
The BRGM and KEFI results both confirm that gold grades occur with good continuity along the strike length of this 6km-
long gossanous horizon.
In order to test the deeper VHMS potential, KEFI is using geophysics and
geochemistry to define drill targets.
KEFI undertook a self-potential (“SP”) geophysical survey to provide a
geophysical orientation over the most prospective southern-half of the
6 km-long gossanous horizon. This survey comprised 38 east-west
trending survey lines at 100m line spacing, for a total along strike
coverage of 3.8 km.
Two anomalies have been identified on the SP survey results:
An intense north-south trending SP anomaly with a continuous
maxima of 350 millivolts, located between 125m and 300m
below surface with an 800m strike length. The intensity of this
anomaly is consistent with the presence of a massive sulphide
source, or to a high and contiguous concentration of
disseminated sulphides at depth; and
A parallel SP anomaly with a similar but less continuous
SP survey instruments at Hawiah
intensity located 600m to the east.
The targets generated by the SP survey are planned to be followed-up with a more detailed induced polarisation (“IP”)
geophysical survey. The IP survey is designed to test for electrical conductors (i.e. massive sulphides) down to vertical
depth of 600m below surface. The IP anomalies will provide targets with vertical depths that are planned to be tested by
diamond drilling.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 23
The BRGM undertook similar SP surveys in the 1980s over other gossans to the south of Hawiah in the WBMD, with limited
follow-up drilling intersecting up to 10m at 2% copper.
Hawiah Regional Prospectivity
Gossan outcrop at Hawiah
The WBMD is a 120km-long, north-south trending belt which hosts 36 prospects of three main types:
VHMS deposits;
Volcano-sedimentary deposits associated with disseminated to sub-massive sulphides; and
Shear zone & quartz vein hosted deposits.
KEFI has nine other exploration licence applications pending within the WBMD covering other existing targets and highly
prospective ground.
The BRGM assessed the gold potential of gossans in the entire WBMD in the 1980s. The BRGM estimated a total of 400,000
ounces of gold to be contained in the gossans that were assessed in the WBMD, with the average grades of some deposits
ranging from 5g/t gold to 7g/t gold. The BRGM also carried out some geophysical surveys over the gossans and carried out
limited drilling to test the anomalies generated. Some massive copper-zinc sulphides were intersected, but the drill core
was not systematically assayed for base metal content, nor followed up by further drilling.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 24
VHMS deposits are major sources of copper-lead-zinc-gold-silver ore bodies. Examples of large VHMS deposits in the ANS
include:
Eritrea - Bisha (Nevsun) and Asmara (Sunridge) deposits;
Sudan - Hassaii (Ariab) deposits; and
Saudi Arabia - Jabal Sayid (Barrick and Ma’aden) and Al Masane (Arabian American) deposits.
The Hawiah EL and surrounding under-explored WBMD are considered to be very prospective for gold and VHMS deposits.
Saudi Arabia - Exploration Licence Applications
EL’s are renewable for up to three years and bestow the exclusive right to explore and to obtain a 30-year exploitation
(mining) lease within the area. ELAs are initially applied for and granted to ARTAR and granted ELAs will be transferred into
G&M in due course.
Since first applying for exploration title in 2009, five ELs have been granted:
2011 - Selib North EL;
2012 - Hikyrin EL, Hikyrin South EL and Jibal Qutman EL; and
2014 - Hawiah EL.
Following rapid assessment, the Selib North, Hikyrin and Hikyrin South ELs have been relinquished.
As detailed in previous Annual Reports, the granting of ELs in Saudi Arabia involves extensive community and regulatory
consultation. The involvement of more than a dozen government departments and committees at the application stage
helps to facilitate the potential development phase.
A representative of each stakeholder must attend a joint field investigation on an appointed day, this is called an "Imara
Committee" meeting. There are many other steps in the EL procedure and this often results in a lengthy assessment time
(3-4 years) before the EL is granted. The benefit of the process is, that once granted, the title holder can perform all
exploration works, including the feasibility stage. This process also brings the advantage that it engages the community
from the outset.
G&M currently holds a large portfolio of ELAs that are at various stages of being processed by the DMMR, cover an area of
more than 1,000km2.
These ELAs are expected to provide a long-term stream of exploration projects containing ancient gold and copper
occurrences to be evaluated using modern exploration methods. Surface sample results and some historical drilling from
these ELAs suggests that they are highly prospective for gold and, or copper mineralisation.
Some of our applications are at advanced stages and we are also discussing with the authorities the appropriateness of
prioritising applications in the vicinity of Jibal Qutman. The regional programme warrants long-term dedication.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 25
Glossary and Abbreviations
AIC
AISC
All-in Costs
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
BRGM
CIL
DFS
DMMR
EL
ELA
Epithermal
ESIA
G&M
g/t
Gossan
HL
IP
JORC
Abdul Rahman Saad Al Rashid & Sons Company Limited
Bureau de Recherches Géologiques et Minières – the Geological Survey of France
Carbon in Leach
Definitive Feasibility Study
Deputy Ministry for Mineral Resources – Kingdom of Saudi Arabia
Exploration Licence
Exploration Licence Application
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
Environmental and Social Impact Assessment
Gold and Minerals Co. Limited
Grams per tonne
An iron-bearing weathered product overlying a sulphide deposit
Heap leach
Induced polarisation - a ground-based geophysical survey technique measuring
the intensity of an induced electric current, used to identify disseminated
sulphide deposits
Joint Ore Reserves Committee
JORC Code 2012
Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves
LOM
Life of mine
Massive sulphide
Rock comprised of more than 40% sulphide minerals
MA
ML
Mt
Mtpa
oz
PEA
Mining Agreement
Mining Licence
Million tonnes
Million tonnes per annum
Troy ounce of gold
Preliminary Economic Assessment
KEFI Minerals Plc ANNUAL REPORT 2015
Page 26
PFS
Precambrian
RC drilling
RL
SP
VHMS deposits
Pre-Feasibility Study
Era of geological time before the Cambrian, from approximately 4,600 to 542
million years ago
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. The drill
cuttings travel around the inside of the cyclone until they fall through an opening
at the bottom and are collected in a sample bag
Relative Level
Self potential - a ground-based geophysical survey technique measuring the
potential difference between any two points on the ground produced by the
small, naturally produced currents that occur beneath the Earth's surface
Volcanic-hosted 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
WBMD
Wadi Bidah Mineral District
Competent Person Statement
KEFI Minerals reports in accordance with the 2012 Edition of the Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (the "JORC Code 2012").
The information in this annual report that relates to exploration results, Mineral Resources and Ore Reserves is based on
information compiled by Mr Jeffrey Rayner. He is the Exploration Director of KEFI Minerals and a Member of the
Australasian Institute of Mining and Metallurgy (“AusIMM”). Mr Rayner is a geologist with sufficient relevant experience
for Group reporting to qualify as a Competent Person as defined in the JORC Code 2012. 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.
The Mineral Resources and Ore Reserves in this report have been previously released as follows:
Date of Release
Project
Subject
Competent Persons
22 April 2015
Tulu Kapi
Probable Ore Reserves
4 February 2015
Tulu Kapi
Mineral Resource
Frank Blanchfield
Sergio Di Giovanni
Simon Cleghorn
Lynn Olssen
6 May 2015
Jibal Qutman
Mineral Resource
Jeffrey Rayner
KEFI confirms that it is not aware of any new information or data that materially affects the information in the above
releases and that all material assumptions and technical parameters, underpinning the estimates continue to apply and
have not materially changed. KEFI confirms that the form and context in which the Competent Person’s findings are
presented have not been materially modified from the original market announcements.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 27
Directors, Secretary and Advisers
Directors
Harry Anagnostaras-Adams, Executive Chairman
Ian Plimer, Non-Executive Deputy Chairman
Norman Ling, Non-Executive
Jeff Rayner, Exploration Director
John Leach, Non-Executive
Company Secretary
Cargil Management Services Limited
27/28 Eastcastle Street
London W1W 8DH
United Kingdom
Nominated Adviser
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP
United Kingdom
www.spangel.co.uk
Joint Broker
Brandon Hill Capital Ltd
1 Tudor Street
London EC4Y 0AH
United Kingdom
www.brandonhillcapital.com
Joint Broker
Beaufort Securities Ltd
131 Finsbury Pavement
London EC2A 1NT
United Kingdom
www.beaufortsecurities.com
Legal Advisors
Fieldfisher LLP London
Riverbank House
2 Swan Lane
London EC4R 3TT
United Kingdom
www.fieldfisher.com
Auditors
Moore Stephens LLP
150 Aldersgate Street
London EC1A 4AB
United Kingdom
www.moorestephens.co.uk
KEFI Minerals Registered Office
27/28 Eastcastle Street
London W1W 8DH
United Kingdom
Registrar
Share Registrars Limited
Suite E,1st Floor
9 Lion & Lamb Yard, Farnham
Surrey GU9 7LL
United Kingdom
www.shareregistrars.com
Financial Public Relations Adviser
Luther Pendragon Ltd.
3 Priory Court
Pilgrim Street
London EC4V 6DE
United Kingdom
www.luther.co.uk
KEFI Minerals Plc ANNUAL REPORT 2015
Page 28
Strategic Report, Directors’ Report and Consolidated Financial
Statements
Year ended 31 December 2015
CONTENTS
Strategic report
Report of the board of directors
Statement of directors’ responsibilities
Independent auditor’s report
Consolidated statement of comprehensive income
Statements of financial position
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the consolidated financial statements
PAGE
30-34
35-41
42
43-44
45
46
47
48
49
50
51-76
KEFI Minerals Plc ANNUAL REPORT 2015
Page 29
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Strategic Report
For the year ended 31 December 2015
KEFI Minerals PLC Company number: 05976748
The directors present their Group Strategic Report for the year ended 31 December 2015.
Incorporation and principal activity
KEFI Minerals PLC (‘KEFI”) was incorporated on 24 October 2006 and was admitted to AIM in December 2006 with a market capitalisation
of £2.7 million at the placing price.
The principal activities of KEFI Minerals PLC (“the Company”) are:
To explore for mineral deposits of precious and base metals and other minerals that show potential for commercial exploitation;
To evaluate mineral deposits determining the viability of commercial development; and
To develop those mineral deposits and market the metals produced.
Review of operations
KEFI is the operator of two advanced gold development projects within the highly prospective Arabian Nubian Shield, with an attributable
1.93Moz (95% of Tulu Kapi’s 1.72Moz and 40% of Jibal Qutman’s 0.73Moz) gold Mineral Resources (JORC 2012) plus significant resource
growth potential. KEFI Minerals objective is that production at these projects generate cash flows for further exploration and expansion as
warranted, recoupment of development costs and, when appropriate, dividends to shareholders.
KEFI Minerals in Ethiopia
KEFI owns 100% of the Tulu Kapi Gold Project (“Tulu Kapi ) in Ethiopia. The Government of Ethiopia is entitled to a 5% free carried-interest
and a 7% royalty on gold production. The Tulu Kapi project has been overhauled and enhanced by the Company as follows:
Expanded the Indicated Resource;
Successfully overhauled the entire development and operating plan;
Completed several independent cycles of due diligence on the optimised plans;
Received full permission for development and operation;
Signed a bilateral agreement with the Government of Ethiopia setting out the fiscal regime for life of mine; and
Installed the project construction management team, project contractors and the lead bank.
In August 2015, KEFI Minerals published the 2015 Definitive Feasibility Study (“DFS”) setting out capital requirements at US$176 million
on an owner-operated basis, reduced from US$289 million estimate of the previous owner.
Subsequent refinements and the terms of appointment of the project contractors in October 2015 reduced this to a funding requirement of
approximately US$135 million, which has since been the focus of the financing syndicate with a view to striking an appropriate balance
between risk-mitigation and equity dilution.
Tulu Kapi’s annual gold production and All-in Sustaining Costs are estimated at approximately 115,000oz pa and approximately US$724/oz
to US$752/oz at a gold price range of US$1,000/oz to US$1,400/oz,
The project now has soundly-based robust economics and significant growth potential beyond the existing Ore Reserves estimate of 15.4Mt
at 2.12g/t gold, containing 1.05Moz.
KEFI is in the midst of assembling the development financing for Tulu Kapi and has published the findings of a Preliminary Economic
Assessment (“PEA”) on potentially developing an underground mine underneath the Tulu Kapi open pit, which would increase total production
(an aggregate of the open pit and underground mine) to over 150,000oz pa.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 30
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Strategic Report (continued)
For the year ended 31 December 2015
KEFI Minerals in Ethiopia (Continued)
The Company is focused on certain key targets for 2016:
Complete the Front-End Engineering and Design in the first half of 2016 by the Engineering, Procurement and Construction
contractor (via a fixed-price, lump-sum arrangement).
Trigger resettlement of the community during quarter three.
To complete financing in mid-2016, by assembling an international financing syndicate.
Commence production at the end of 2017
KEFI Minerals in the Kingdom of Saudi Arabia
In 2009, KEFI formed Gold and Minerals (“G&M”) in Saudi Arabia with local Saudi partner Abdul Rahman Saad Al-Rashid & Sons Company
Limited (“ARTAR”), to explore for gold and associated metals in the Arabian-Nubian Shield. KEFI has a 40% interest in G&M and is the
operating partner. To date, G&M has conducted preliminary regional reconnaissance and has had five exploration licences (“ELs”) granted,
including Jibal Qutman and the more recently granted Hawiah EL that contains over 6km strike length of outcropping gossans developed on
altered and mineralised rocks with all the hallmarks of a copper-gold-zinc VHMS deposit.
At Jibal Qutman, G&M’s flagship project, Mineral Resources are estimated to total 28.4Mt at 0.80g/t gold for 733,045 contained ounces. The
shallow oxide portion of this resource is being evaluated as a low capital expenditure heap-leach mine development.
ARTAR, on behalf of G&M, holds a large portfolio of EL applications that cover an area of more than 1,000km2. ELs are renewable for up to
three years and bestow the exclusive right to explore and to obtain a 30-year exploitation (mining) lease within the area.
The Kingdom of Saudi Arabia has instituted policies to encourage minerals exploration and development, and KEFI supports this priority by
serving as the technical partner within G&M. ARTAR also serves this government policy as the major partner in G&M, which is one of the
early movers in the modern resurgence of the Kingdom’s minerals sector.
Funding
The Company successfully completed a number of equity placings in 2015 as detailed below. In particular, the Company raised £7.0 million
(before expenses) through the placing of 1,386,302,022 new Ordinary Shares at an average price of 0.5p per share. The £7.0 million raised
(before expenses) was allocated to:
Pit optimisation studies applied to the oxide resources at Jibal Qutman;
Approximately 75% of the infill drilling programme at Jibal Qutman (RC and diamond drilling) totalling 5,415m had been completed:
Completed at Hawiah an initial 53-trench surface sampling programme over a 6 km-long gossanous horizon and a geophysical
survey over the southern half of the gossanous horizon;
Ensuring there are sufficient funds available to meet KEFI’ share of the KEFI Minerals Ethiopia Limited VAT obligations to the
Ethiopian government in 2015;
2015 Definitive Feasibility Study which was signed off and completed and reviewed by the Independent Technical Consultants for
the project financiers; and
Contribution towards KEFI’s ongoing corporate costs including the arrangement of project finance facilities for the planned gold
mine developments.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 31
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Strategic Report (continued)
For the year ended 31 December 2015
Key performance indicators
Key Performance Indicators for the Group for the year ended 31 December 2015 are those relevant to the exploration, acquisition, project
evaluation and early-stage finance phases of its activities. The Group considers that its primary projects in Ethiopia and Saudi Arabia
continue to meet expectations. Careful monitoring and control has been carried out in respect of cash management.
Key Performance Indicators for 2016 include:
o
Formal appointment of development funding syndicate for Tulu Kapi gold project;
o Shareholder approval of finance plan for Tulu Kapi gold project;
o Start construction of the Tulu Kapi gold project;
o Mining Licence Application for Jibal Qutman gold project in Saudi Arabia.
This includes the periodic review of the Group’s results through management accounts, appraisal of technical reports, monitoring of the
marketplace and the Group’s physical presence in the Kingdom of Saudi Arabia and the Democratic Republic of Ethiopia, including
attendance at regular board meetings of subsidiary companies. Based on the results, the Board have concluded that no changes are required
to the current strategy.
Management ensure that the Group’s projects are in compliance with relevant environmental and employment legislation in the applicable
jurisdiction.
Results
As at 31 December 2015, the Group had a net negative working capital of £983,000 (2014: £ 2,141,000) and the Company’s market
capitalisation was £8.39 million (2014: £13.28million). At the year end the Group had equity of £10,943,000 (2014: £7,158,000). During
2015, the Group has incurred exploration expenditure of £4,000 (2014: £100,000) from operations and an operating loss of £2,837,000 (2014:
£3,500,000).
The Company made several successful placements during the year raising £7.0 million (before expenses) as follows:
Issued
March 2015 at 1p
May 2015 at 1p
June 2015 at 0.8p
December 2015 at 0.3p
Funds raised before expenses
Less costs deducted from share premium and equity
£’000
800
667
2,901
2,632
7,000
(443)
6,557
KEFI Minerals Plc ANNUAL REPORT 2015
Page 32
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Strategic Report (continued)
For the year ended 31 December 2015
All exploration expenditure incurred at the Group’s projects in the Kingdom of Saudi Arabia is written off when incurred in accordance with
IFRS 6, pending the Directors’ decision to commence project development. This policy is one of the factors in the Group recording a net loss
for the year of £3,206,000 (2014: £ 3,963,000). Since the acquisition of KEFI Minerals Ethiopia Limited the administrative expenditure
increased because of the greater focus on permitting, financing and staffing in preparation for exploitation of the Tulu Kapi asset. Direct
development expenditure for the Group’s project at Tulu Kapi in Ethiopia is capitalised, as this is intended to be developed for production.
The Ethiopian Government is entitled to a 7% royalty on the gold mining revenue and a 5% free carried interest in the project.
Exploration expenditure
Administrative expenses
Warrants issued costs
Share based payments
Share of loss from jointly controlled entity
Foreign exchange loss
Interest cost
Loss for the year
The Group's results for the year are set out on page 45.
Organisation overview
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
(4)
(1,720)
(163)
(215)
(735)
(50)
(319)
(3,206)
(100)
(2,083)
(66)
(269)
(982)
(50)
(413)
(3,963)
The Corporate Head Office of the Group is located in Nicosia, Cyprus, and provides corporate and support services to the overseas
operations. An administration office is maintained in Izmir, Turkey. East African operations are managed out of Addis Ababa, Ethiopia. The
Saudi Arabia Exploration is managed through the office on Riyadh. Field and base facilities are also maintained as required.
Strategic approach
The Board’s strategic intent is to maximize shareholder value through the development of a focused portfolio of operations and projects at
various stages, while at the same time managing the significant risks faced by companies in the exploration and development stage.
Our risk management approach places a clear focus on discovering and exploiting mineral wealth through multiple ventures within a focused
framework, thus increasing the odds of success. We continuously monitor and review our investment strategies and are quick to relinquish
licences which we believe will be uneconomic. We introduce partners in certain circumstances to minimise risk and broaden the human and
financial resources available.
The Group has to date financed its activities through periodic capital raisings and contributions by partners.
Business model
The following business model sets out how the Group will deliver on its strategic aims:
Define additional reserves and resources in Saudi Arabia and Ethiopia;
Develop metals production;
Maintain good community relationships; and
Employ good environmental governance practices.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 33
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Strategic Report (continued)
For the year ended 31 December 2015
Principal risks and uncertainties
The Group’s operations are exposed to a variety of risks, many of which are outside of the Group’s control. The Group has put in place
controls to minimise these risks where possible.
Exploration industry risks:
Mineral exploration is speculative in nature, involves many risks and is typically unsuccessful in any one target. Following any discovery, it
can take a number of years from the initial phases of drilling and identification of mineralization until production is possible, during which time
the economic feasibility of production may change.
Substantial expenditures are required to establish mineral reserves through drilling, to determine metallurgical processes to extract minerals
from rock and other natural resources and to construct mining and processing facilities.
As a result of these uncertainties, no assurance can be given that the exploration programmes undertaken by the Group will result in any
new commercial mining operations being brought into operation.
Government activity, which could include non-renewal of licences, may result in any income receivable by the Group being adversely affected.
In particular, changes in the application or interpretation of mining and exploration laws and/or taxation provisions in the countries in which
the Group operates could adversely affect the value of its interests.
Political risks:
All of the Group’s operations are located in foreign jurisdictions. As a result, the Group is subject to political, economic and other uncertainties,
including but not limited to changes in policies or the personnel administering them, terrorism, nationalisation, appropriati on of property
without fair compensation, cancellation or modification of contract rights, foreign exchange restrictions, currency fluctuations, export quotas,
royalty and tax increases and other risks arising out of foreign governmental sovereignty over the areas in which these operations are
conducted, as well as risks of loss due to civil strife, acts of war, guerrilla activities and insurrection.
Financial risks:
The Group’s risks and use of financial instruments are described in Note 3 to the consolidated financial statements. Other risks are described
in the Chairman’s and Exploration Director’s Reports.
Future developments
The Group will continue to focus efforts in Ethiopia and Kingdom of Saudi Arabia with the objective of identifying mineral prospects for further
exploration and development.
By Order of the Board
Cargil Management Services Limited
27/28 Eastcastle Street
London
United Kingdom
Company Secretary
3 June 2016
KEFI Minerals Plc ANNUAL REPORT 2015
Page 34
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the board of directors
For the year ended 31 December 2015
The Board of Directors presents its report for KEFI Minerals PLC and its subsidiaries (the “Group”) together with the financial statements of
the Group for the year ended 31 December 2015.
General information
The following information is set out in the Group Strategic Report and includes: Incorporation and Principal Activity, Review of Operations,
Funding, Key Performance Indicators, Results, Organisation Overview, Strategic Approach, Business Model, Principal risks and
uncertainties, and Future Developments.
Board of directors
The members of the Board of Directors of the Company as at 31 December 2015 and at the date of this report are shown on page 28. All
directors served throughout the year. In accordance with the Company's Articles of Association, one third of the board of directors must
resign each year. The remaining directors, presently members of the Board, will continue in office.
The Board comprises five Directors.
Harry Anagnostaras-Adams
Executive Director – Chairman
Mr Anagnostaras-Adams (B.Comm, MBA) has been Executive Chairman since 2014 and was previously a Non- Executive Chairman. Mr
Anagnostaras-Adams is Chairman of the Physical Risks Committee. Mr Anagnostaras-Adams holds a Bachelor of Commerce (Finance and
Systems) from the University of New South Wales, Australia and a Master of Business Administration from the Australian Graduate School
of Management. He qualified as a Chartered Accountant while working with PricewaterhouseCoopers and has a Master of Business
Administration from the Australian Graduate School of Management where he was awarded the John Story Memorial Prize as outstanding
graduate.
Mr Anagnostaras-Adams founded AIM and TSX - listed Atalaya Mining PLC (previously EMED Mining Public Ltd). Mr Anagnostaras-Adams
has previously served as the Managing Director of Atalaya Mining PLC, ASX and AIM-listed, Devex Limited (later Gympie Gold Limited),
Executive Director of investment company Pilatus Capital Ltd., General Manager of resources investment group Clayton Robard Limited
Group, Senior Investment Manager of Citicorp Capital Investors Australia Ltd. and serves (or has served) as a non-executive Director of
many other public and private companies across a range of industries. He has overseen many successful start-ups.
Ian Rutherford Plimer
Non-Executive Director – Deputy Chairman
Professor Ian Plimer BSc (Hons), PhD, FTSE, FGS, FAIMM was appointed Non-Executive Deputy Chairman in December 2006 and is
Chairman of the Group’s Audit Committee. He is Emeritus Professor at The University of Melbourne where he was Professor and Head
(1991-2005). He was Professor of Geology (University of Newcastle 1985-1991) and Professor of Mining Geology (University of Adelaide
2005-2012). He has been awarded the prestigious Leopold von Buch Medal for Science, the Centenary Medal and the Eureka Prize
(twice). Professor Plimer has published more than 130 scientific papers and is author of multiple best-selling books for the general
public. Professor Plimer’s main geological interests are in mineral resources. He serves on the boards of Silver City Minerals (ASX:SCI) and
Niuminco Group Ltd (ASX:NIU), unlisted Hancock Prospecting Pty Ltd companies (Roy Hill Holdings, Hope Downs, Queensland Coal
Investments) and represent Hancock Prospecting on the Lakes Oil NL board (ASX:LKO) and Sun Resources NL boards (ASX:SUR).
KEFI Minerals Plc ANNUAL REPORT 2015
Page 35
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the board of directors (continued)
For the year ended 31 December 2015
Jeffrey Guy Rayner
Executive Director - Exploration Director
Mr Rayner was appointed Managing Director of KEFI in November 2006 and assumed the role of Exploration Director in September 2014.
Mr Rayner is a geologist (BSc Hons) with over 29 years’ experience in gold exploration and mining in Australia, Europe and Asia. Mr Rayner
started his career in Australia with BHP Gold and later Newcrest Mining Limited. He was involved in the early exploration discovery of the
Cracow and Gosowong epithermal deposits and the Cadia Hill deposit, presently operating mines. In 1998 he joined Gold Mines of Sardinia
PLC as exploration manager, responsible for exploration and mining in Sardinia and project generation in Europe. As part of his time at Gold
Mines of Sardinia PLC he led the exploration discovery of the Monte Ollasteddu gold deposit in Sardinia. Mr Rayner joined EMED Mining
Public Ltd (now Atalaya Mining PLC) in 2006 and managed its Eastern European projects, resulting in the early drill discovery of the Biely
Vrch gold deposit in Central Slovakia
John Edward Leach
Non-Executive Director
Mr Leach was appointed Finance Director in December 2006 on a consulting basis in accordance with the terms of the Services Agreement
dated 7 November 2006 and subsequently became a non-executive director with responsibility for oversight of the Company’s finance and
accounting functions.
Mr Leach is a Canadian and Australian citizen. Mr Leach holds a Bachelor of Arts (Economics) and a Masters of Business Administration.
Mr Leach is a member of the Institute of Chartered Accountants (Australia), the Canadian Institute of Chartered Accountants and a Fellow of
the Australian Institute of Directors. He has over 30 years’ experience in senior financial and executive director positions within the mining
industry internationally. Mr Leach has served on the Board of AIM and TSX listed Atalaya Mining PLC (2007 to 2014), and is a former member
of the boards of Resource Mining Corporation Limited (2006 to 2007) and Gympie Gold Limited (1995 to 2003).
Norman Ling
Non-Executive Director
Mr Norman Ling holds a BA (Hons) German and Economic History and has previously served as a non-executive director of Nyota. He has
held a series of appointments at the UK Foreign and Commonwealth Office in a career spanning more than 30 years. Mr Ling's last post was
as British Ambassador to Ethiopia, Djibouti and the African Union from 2008 to 2011, when he retired from government service.
Directors’ interests
The interests of the Directors and their immediate families (all of which are beneficial unless otherwise stated) and of persons connected with
them in the existing ordinary shares as at 31 December 2015 are as follows:
Director
H Anagnostaras-Adams
I Plimer
J Rayner
J Leach
N Ling
Number of existing
ordinary shares
% of issued
share capital
90,508,334
6,450,001
21,342,750
11,364,583
2,864,583
3.45%
0.25%
0.81%
0.43%
0.11%
KEFI Minerals Plc ANNUAL REPORT 2015
Page 36
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the board of directors (continued)
For the year ended 31 December 2015
The Directors to whom options over Ordinary shares have been granted at the date of this document and the number of ordinary shares
subject to such options are as follows:
Grant Date
19-Jan-2016
20-Mar-2015
12-Sep-2014
27-Mar-2014
13-Sep-2012
Expiration
Date
18-Jan-2022
19-Mar-2021
11-Sep-2020
26-Mar-2020
12-Sep-2018
Directors’ emoluments
Exercise
Price
H.
Anagnostaras-
Adams
0.42p
1.32p
1.76p
2.30p
4.00p
16,038,000
6,500,000
-
6,500,000
3,000,000
32,038,000
I. Plimer
J. Rayner
J. Leach
N Ling
5,346,000 16,038,000
6,500,000
1,000,000
-
-
8,833,000
4,417,000
5,000,000
2,500,000
5,346,000 5,346,000
1,000,000 2,000,000
- 2,250,000
-
-
13,263,000 36,371,000 10,096,000 9,596,000
2,250,000
1,500,000
In compliance with the disclosure requirements of the listing requirements of AIM, the aggregate remuneration paid to the directors of KEFI
for the year ended 31 December 2015 is set out below:
31 December 2015
Executive
J. Rayner
H. Anagnostaras-Adams
Non-Executive
I. Plimer
J. Leach
N. Ling
Salary
and fees
¹Other
compensation
²Share based
benefit
incentive options
³Deferred
incentive
bonus
147
198
25
25
76
471
26
25
-
-
-
51
55
46
19
12
14
146
-
50
-
-
-
50
31 December 2014
Salary
and fees
Other
compensation
Share based
benefit
incentive options
Deferred
bonus
incentive
Executive
J. Rayner
H. Anagnostaras-Adams
Non-Executive
I. Plimer
J. Leach
N. Ling
160
182
25
25
52
444
164
-
-
-
-
164
81
55
40
22
2
200
47
60
-
-
-
107
2015
Total
228
319
44
37
90
718
2014
Total
452
297
65
47
54
915
¹Other Compensation: in 2014 includes leave accrual of £113,000 for leave not taken in the current year and previous years.
² Share based benefit incentive options: These represent the proportion of the fair value of the options at the grant date that vested in
the current year, and are not a cash payment.
³Deferred incentive bonus: Bonus payable once finance is secured or approved by board. The deferred incentive bonus in 2015 was
paid in KEFI shares.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 37
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the board of directors (continued)
For the year ended 31 December 2015
Corporate governance statement
The Board is committed to maintaining high standards of corporate governance. The Directors recognize the importance of sound corporate
governance and intend to observe the requirements of the UK Corporate Governance Code, as published by the Financial Reporting Council,
and the Corporate Governance Code for Small and Mid-Sized Quoted Companies 2013, as published by the Quoted Companies Alliance,
to the extent they consider appropriate in light of the Company’s size, stage of development and resources. However, it should not be
considered that the Company has complied with the UK Corporate Governance Code or the Corporate Governance Code for Small and Mid-
Sized Quoted Companies 2013.
Board of Directors
The Company supports the concept of an effective Board leading and controlling the Company. The Board is responsible for approving
Company policies and strategies. It meets at least every three months and is supplied with appropriate and timely information and the
Directors are free to seek any further information they consider necessary. All Directors have access to advice from the Company Secretary
and independent professionals at the Company's expense. Training is available for new Directors and other Directors as neces sary. The
Group's key strategic and operational decisions are reserved exclusively for the decision of the Board.
The Board consists of two full time Executive Directors who hold key operational positions in the Company (the Executive Chairman and
Exploration Director), and three Non-Executive Directors. Two of the Non-Executive Directors, Ian Plimer and Norman Ling, are considered
to be independent of management and any business or other relationship which could interfere with the exercise of their independent
judgment, bring a breadth of experience and knowledge to the Company. Ian Plimer has been the lead independent director. The Board
regularly reviews key business risks, including the financial risks facing the Group in the operations of its business. The Directors are of the
opinion that the Board composition contains a suitable balance. The Board maintains regular contact with its advisers and public relations
consultants in order to ensure that the Board develops an understanding of the views of shareholders about the Company.
Board meetings
The Board meets regularly throughout the year. The Board is responsible for formulating, reviewing and approving the Company's strategy,
financial activities and operating performance. Day to day management is devolved to the Executive Directors who are charged with
consulting the Board on all significant financial and operational matters. All Directors have access to the advice of the Company’s solicitors.
Necessary information is supplied to the Directors on a timely basis to enable them to discharge their duties effectively, and all Directors
have access to independent professional advice, at the Company’s expense, as and when required.
Board committees
The Board has established the following committees, each of which has its own terms of reference:
Audit Committee
The Audit Committee considers the Company’s financial reporting (including accounting policies) and internal financial controls. The Audit
Committee comprises two Non-Executive Directors: Ian Plimer (Chairman) and Norman Ling, and is responsible for ensuring that the financial
performance of the Company is properly monitored and reported on and in this capacity interacts as needed with the Company’s External
Auditors. Mr. John Leach is invited and attends the audit committee meetings to provide his skills and knowledge in audit committee matters.
Remuneration Committee
The Remuneration Committee is responsible for making recommendations to the Board on the remuneration of the Directors and senior
executives. It comprises two Non-Executive Directors: Norman Ling (Chairman) and Ian Plimer. Non-Executive Directors’ remuneration and
conditions are considered and agreed by the Board.
Financial packages for Executive Directors are established by reference to those prevailing in the employment market for executives of
equivalent status both in terms of level of responsibility of the position and their achievement of recognized job qualifications and skills. The
Committee also gives regard to the terms that may be required to attract equivalent experienced executives to join the Board from other
companies.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 38
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the board of directors (continued)
For the year ended 31 December 2015
Internal controls
The Directors acknowledge their responsibility for the Company’s systems of internal controls and for reviewing their effectiveness. These
internal controls are designed to safeguard the assets of the Company and to ensure the reliability of financial information for both internal
use and external publication. Whilst the Directors are aware that no system can provide absolute assurance against material misstatement
or loss, regular reviews of internal controls are undertaken to ensure that they are adequate and effective.
Risk management
The Board considers risk assessment important in achieving its strategic objectives. There is a process of evaluation of performance targets
through regular reviews by senior management who compare actual progress to forecasts. Project milestones and timelines are regularly
reviewed.
Risks and uncertainties
Risk assessment and evaluation is an essential part of the Company’s planning and an important aspect of the Company’s internal control
system. The principal risks facing the Company are set out in the Strategic Report.
Risk management and treasury policy
The Board considers risk assessment as an integral activity in achieving its strategic objectives, with the Board regularly reviewing its projects
and activities in this regard. The Company finances its operations through equity and holds its cash as a liquid resource to fund the obligations
of the Company. Decisions regarding the management of these assets are approved by the Board. Please refer to page 54 of the financial
statements.
Securities trading
The Directors intend to comply with Rules 21 and 31 of the AIM Rules relating to Directors’ dealings and will take all reasonable steps to
ensure compliance by the Group’s applicable employees as well. The Board has adopted a Share Dealing Code that is appropriate for an
AIM quoted company and this applies to Directors, senior management and any employees who are in possession of “unpublished price
sensitive information”. All such persons are prohibited from trading in the Company’s securities if they are in possession of “unpublished
price sensitive information”. Subject to this condition and trading prohibitions applying to certain periods, trading can occur provided the
relevant individual has received the appropriate prescribed clearance.
Relations with shareholders
The Board is committed to providing effective communication with the shareholders of the Company. Significant developments are
disseminated through stock exchange announcements and regular updates of the Company’s website. The Board views the AGM as a forum
for communication between the Company and its shareholders and encourages their participation in its agenda.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 39
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the board of directors (continued)
For the year ended 31 December 2015
Shareholders holding more than 3% of share capital
The Shareholders holding more than 3% of the share capital of the Company as at the date of this report and as far as the Directors’ are
aware:
Name
The Bank Of New York (Nominees) Limited *(Odey Asset Management LLP 19.54%)
Hargreaves Lansdown (Nominees) Limited
Jim Nominees Limited
Ausdrill International Pty Ltd
Barclayshare Nominees Limited
J.P. Morgan Securities Plc *(Odey Asset Management LLP 6.52%)
TD Direct Investing Nominees (Europe) Limited
HSDL Nominees Limited
% of
issued
share
capital
19.95%
10.18%
7.65%
7.31%
6.61%
6.60%
6.50%
4.74%
Number of existing
shares
622,679,103
317,568,650
238,691,469
228,279,349
206,242,508
206,000,000
202,878,122
147,868,946
* Beneficial holding Odey Asset Management LLP
Events after the reporting date
On 19 January 2016, 48,114,000 options were issued to the Directors and a further 31,886,000 options have been granted to other non-
board members of the senior management team. The options have an exercise price of 0.42p, expire after 6 years, and vest in two equal
annual instalments.
The Company raised GBP1,747,759 before expenses on 22 March 2016 through a placing of 499,359,791 ordinary shares of 0.1p each at
a price of 0.35p per share. On this date, the Company also granted warrants to subscribe for 24,967,989 ordinary shares of 0.1p each at a
price on 0.35p per share.
In May 2016 the Company received formal confirmation from the Government of Ethiopia of its commitment to invest equity capital of US$20
million in Tulu Kapi.
During June 2016 the funding requirement reduced from US$145 million to estimated US$130 million, after accounting for further anticipated
savings and project spending prior to project finance completion in 2016.
In June 2016 the finance plan is based on Project Equity of US$20 million from the Government of Ethiopia, Project Debt of US$95 million
which leaves a residual US$15 million to be optimised for financial completion in the second half of 2016. KEFI has received expressions of
interest for equity investment from project contractors and mezzanine-style financiers.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 40
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the board of directors (continued)
For the year ended 31 December 2015
Auditors
The auditors, Moore Stephens LLP, have expressed their willingness to continue in office and a resolution giving authority to the Board of
Directors to fix their remuneration will be proposed at the Annual General Meeting.
Directors’ confirmation
Each of the persons who are a director at the date of approval of this annual report confirms that:
there is no relevant audit information of which the Company’s auditors are unaware; and
each Director has taken all the steps that ought to have been taken as a Director, in order to be aware of any relevant audit information
and to establish that the Company’s auditors are aware of that information.
By Order of the Board
Cargil Management Services Limited
27/28 Eastcastle Street
London
United Kingdom
Company Secretary
3 June 2016
KEFI Minerals Plc ANNUAL REPORT 2015
Page 41
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Statement of directors’ responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors prepare the
consolidated financial statements in accordance with IFRS as adopted by the European Union and applicable law. The financial statements
must, in accordance with IFRS as adopted by the European Union, present fairly the financial position and performance of the Company;
such references in the UK Companies Act 2006 to such financial statements giving a true and fair view are references to their achieving a
fair presentation. Under company law Directors must not approve the financial statements unless they are satisfied that they give a true and
fair view. The Directors are also required to prepare the financial statements in accordance with the rules of the London Stock Exchange for
companies trading on AIM.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether the consolidated financial statements have been prepared in accordance with IFRS as adopted by the European
Union; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and henc e for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other
jurisdictions.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 42
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Independent auditor’s report
To the shareholders of KEFI Minerals PLC
We have audited the financial statements of KEFI Minerals PLC for the year ended 31 December 2015 which are set out on pages 45 to 76.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 42, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of Financial Statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and the parent company’s affairs as at 31 December
2015 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter – Going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in Note
2 to the financial statements concerning the Company and Group’s ability to continue as a going concern. The going concern presumption
may not be appropriate because its validity depends principally on securing funding to develop the Tulu Kapi mine 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. These conditions indicate the existence of a material uncertainty which may cast significant
doubt about the Company and Group’s ability to continue as a going concern. The financial statements do not include the adjustments that
would result if the Company and Group were unable to continue as a going concern.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 43
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Independent auditor’s report (continued)
To the shareholders of KEFI Minerals PLC (continued)
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Michael Simms, Senior Statutory Auditor
For and on behalf of Moore Stephens LLP, Statutory Auditor
150 Aldersgate Street
London
EC1A 4AB
6 June 2016
KEFI Minerals Plc ANNUAL REPORT 2015
Page 44
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Consolidated statement of comprehensive income
Year ended 31 December
Revenue
Exploration costs
Gross loss
Administrative expenses
Share-based payments
Share of loss from jointly controlled entity
Operating loss
Foreign exchange loss
Finance costs
Loss before tax
Tax
Loss for the year
Loss attributable to:
-Owners of the parent
-Non-controlling interest
Loss for the period
Other comprehensive income:
Exchange differences on translating foreign operations
Total comprehensive loss for the year
Total Comprehensive Income attributable to:
-Owners of the parent
-Non-controlling interest
Notes
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
17
19
6
8
9
-
(4)
(4)
(1,720)
(378)
(735)
(2,837)
(50)
(319)
(3,206)
-
(3,206)
(3,206)
-
(3,206)
56
(3,150)
(3,150)
-
(3,150)
-
(100)
(100)
(2,083)
(335)
(982)
(3,500)
(50)
(413)
(3,963)
-
(3,963)
(3,848)
(115)
(3,963)
70
(3,893)
(3,778)
(115)
(3,893)
Basic and fully diluted loss per share (pence)
10
(0.20)
(0.40)
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 £2.4 million (2014: £3.2 million) has been included in the financial statements of
the parent company.
The notes on pages 51 to 76 are an integral part of these consolidated financial statements.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 45
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Statements of financial position
31 December
Notes
11
12
13.1
13.2
14
15
16
17
17
17
17
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Fixed asset investments
Investments in jointly controlled
entities
Current assets
Available for sale financial assets
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners of
the Company
Share capital
Deferred Shares
Share premium
Share options reserve
Foreign exchange reserve
Accumulated losses
Total equity
Current liabilities
Trade and other payables
20
Total liabilities
The
Group
2015
81
11,845
-
-
11,926
92
358
562
1,012
12,938
2,623
12,436
12,347
1,212
(30)
(17,645)
10,943
1,995
1,995
1,995
The
Company
2015
3
1,078
4,598
181
5,860
8
7,710
393
8,111
13,971
2,623
12,436
12,347
1,212
-
(15,623)
12,995
976
976
976
The
Group
2014
160
9,139
-
-
9,299
86
335
640
1,061
10,360
12,352
-
8,433
848
(86)
(14,389)
7,158
3,202
3,202
3,202
The
Company
2014
2
976
4,598
181
5,757
8
3,076
607
3,691
9,448
12,352
-
8,433
848
-
(13,117)
8,516
932
932
932
Total equity and liabilities
12,938
13,971
10,360
9,448
The notes on pages 51 to 76 are an integral part of these consolidated financial statements.
On 3 June 2016, the Board of Directors of KEFI Minerals PLC authorised these financial statements for issue.
Harry Anagnostaras-Adams
Executive Director
Company number: 05976748
KEFI Minerals Plc ANNUAL REPORT 2015
Page 46
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Consolidated statement of changes in equity
Year ended 31 December 2015
Share
capital
Deferred
shares
Attributable to the owners of the Company
Foreign
exchange
reserve
Share
options
reserve
Share
premium
Accumulated
losses
Non-
controlling
interest
Total
At 1 January 2014
Loss for the year
Other comprehensive
income
Total Comprehensive
Income
Recognition of share
based payments
Cancellation of options
Issue of share capital
Share issue costs
Transactions with owners
of the Company
Acquisition of non-
controlling interest
At 31 December 2014
Loss for the year
Other comprehensive
income
Total Comprehensive
Income
Recognition of share
based payments
Cancellation of options
Issue of share capital
Restructuring of share
capital
Share issue costs
At 31 December 2015
8,535
-
-
-
-
-
3,817
-
12,352
-
12,352
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,707
(12,436)
-
2,623
-
-
12,436
-
12,436
7,660
-
-
-
-
-
958
(185)
8,433
794
-
-
-
335
(281)
-
-
848
-
-
(156)
-
70
70
-
-
-
-
(86)
-
(10,062)
(3,848)
-
1,032
(115)
-
7,803
(3,963)
70
(3,848)
(115)
(3,893)
-
-
335
281
-
(177)
(13,806)
-
-
-
917
-
4,775
(362)
8,658
(583)
(917)
(1,500)
8,433
848
(86)
(14,389)
-
-
-
-
-
4,293
-
-
-
-
378
(14)
-
-
-
56
56
-
-
-
-
(3,206)
-
(3,206)
-
14
-
-
(379)
12,347
-
1,212
-
(30)
(64)
(17,645)
-
-
-
-
-
-
-
-
7,158
(3,206)
56
(3,150)
378
-
7,000
-
-
(443)
- 10,943
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve
Share capital
Deferred shares
Description and purpose
amount subscribed for share capital at nominal value
on 16 June 2015, under the restructuring of share capital, ordinary shares of 1p each in the
capital of the Company were sub-divided into one new ordinary share of 0.1p and one
deferred share of 0.9p
Share premium
amount subscribed for share capital in excess of nominal value, net of issue costs
Share options reserve
reserve for share options 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
Non-controlling interest (NCI)
the portion of equity ownership in a subsidiary not attributable to the parent company
The notes on pages 51 to 76 are an integral part of these consolidated financial statements.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 47
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Company statement of changes in equity
Year ended 31 December 2015
Deferred
Share
shares
capital
Share
premium
Share
options
reserve
Accumulated
losses
At 1 January 2014
Comprehensive loss for the year
Recognition of share based payments
Cancellation of options
Issue of share capital
Share issue costs
At 31 December 2014
Comprehensive loss for the year
Recognition of share based payments
Cancellation of options
Restructuring of share capital
Issue of share capital
Share issue costs
At 31 December 2015
8,535
-
-
-
3,817
-
12,352
-
-
-
(12,436)
2,707
-
2,623
-
-
-
-
-
-
-
-
-
-
12,436
-
-
12,436
7,660
-
-
-
958
(185)
8,433
-
-
-
-
4,293
(379)
12,347
794
-
335
(281)
-
-
848
-
378
(14)
-
-
-
1,212
(10,006)
(3,215)
-
281
-
(177)
(13,117)
(2,456)
-
14
-
-
(64)
(15,623)
Total
6,983
(3,215)
335
-
4,775
(362)
8,516
(2,456)
378
-
-
7,000
(443)
12,995
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve
Description and purpose
Share capital
amount subscribed for share capital at nominal value
Deferred shares
on 16 June 2015, under the restructuring of share capital, ordinary shares of 1p each in the capital of
the Company were sub-divided into one new ordinary share of 0.1p and one deferred share of 0.9p
Share premium
amount subscribed for share capital in excess of nominal value, net of issue costs
Share options reserve
reserve for share options granted but not exercised or lapsed
Accumulated losses
cumulative net gains and losses recognized in the statement of comprehensive income
The notes on pages 51 to 76 are an integral part of these consolidated financial statements.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 48
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Consolidated statement of cash flows
Year ended 31 December 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax
Adjustments for:
Depreciation of property, plant and equipment
Share based payments
Issue of warrants
Share of loss from jointly controlled entity
Exchange differences on borrowings
Exchange difference
Changes in working capital:
Trade and other receivables
Trade and other payables
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of non-controlling interest
Deferred exploration costs
Project evaluation costs
Acquisition of property plant and equipment
Advances to jointly controlled entity
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital
Issue costs
Net cash from financing activities
Net decrease in cash and cash equivalents
Effect of cash held in foreign currencies
Cash and cash equivalents:
At beginning of the year
At end of the year
Notes Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
(3,206)
(3,963)
11
18
17
19
90
215
163
735
-
37
(1,966)
29
(1,111)
(3,048)
-
(967)
(1,739)
(11)
(790)
(3,507)
6,923
(443)
6,480
(75)
(3)
640
562
17
17
16
16
118
269
66
982
-
(4)
(2,532)
320
(207)
(2,419)
(750)
(1,263)
(976)
(26)
(868)
(3,883)
4,025
(362)
3,663
(2,639)
-
3,279
640
The notes on pages 51 to 76 are an integral part of these consolidated financial statements.
Non-cash transactions
On 5 September 2014, the Company issued 50,000,000 shares at £0.01 at a price of £0.015 per share as part of the consideration
to acquire the 25% minority in its subsidiary KEFI Minerals (Ethiopia) Limited.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 49
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Company statement of cash flows
Year ended 31 December 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax
Adjustments for:
Share based payments
Issue of warrants
Impairment of loan to subsidiary
Impairment of amount receivable from jointly controlled entity
Exchange difference
Changes in working capital:
Trade and other receivables
Trade and other payables
Net cash used in operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property plant and equipment
Project evaluation costs
Advances to jointly controlled entity
Acquisition of minority interest
Loan to subsidiary
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital
Issue costs
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents:
At beginning of the year
At end of the year
Notes
Year Ended
Year Ended
31.12.15
£’000
31.12.14
£’000
(2,456)
(3,215)
18
17
17
17
16
16
215
163
28
720
74
(1,256)
45
20
(1,191)
(1)
(587)
(790)
-
(4,125)
(5,503)
6,923
(443)
6,480
(214)
607
393
269
66
45
1,020
(148)
(1,963)
510
614
(839)
(2)
(976)
(868)
(750)
(2,852)
(5,448)
4,025
(362)
3663
(2,624)
3,231
607
The notes on pages 51 to 76 are an integral part of these consolidated financial statements.
Non-cash transactions
See Consolidated Statement of Cash Flows.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 50
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements
Year ended 31 December 2015
1. Incorporation and principal activities
Country of incorporation
KEFI Minerals 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.
Principal activities
The principal activities of the Group for the year were:
To explore 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.
To evaluate 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.
To develop mineral deposits and market the metals produced.
2. Accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have
been consistently applied throughout the period 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 International Financial Reporting
Standards (IFRSs) as adopted by the European Union. They comprise the accounts of KEFI Minerals PLC and all its subsidiaries
made up to 31 December 2015. The Company and the consolidated financial statements have been prepared under the historical
cost convention, except for the revaluation of certain financial instruments.
Going concern
The Directors have formed a judgment at the time of approving the financial statements that there is a reasonable expectation
that the Company and Group will be able to secure adequate resources to continue in operational existence for the foreseeable
future.
The financial information has been prepared on the going concern basis, the validity of which depends principally on securing
funding to develop the Tulu Kapi mine 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.
These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company and Group’s
ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company
and Group were unable to continue as a going concern.
Functional and presentational currency
Items included in the Group’s financial statements are measured using the currency of the primary economic environment in which
the entity operates (“the functional currency”) which for the Company is British Pounds (GBP). The financial statements are
presented in British Pounds (GBP).
Foreign currency translation
(1) Foreign currency translation
Foreign currency transactions are translated into the functional 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 2015 (2014: £Nil).
KEFI Minerals Plc ANNUAL REPORT 2015
Page 51
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
2. Accounting policies (continued)
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:
Furniture, fixtures and office equipment
Motor vehicles
Plant and equipment
25%
25%
25%
Acquisitions and goodwill
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree. Any costs directly attributable to the business combination are written
off to the statement of comprehensive income. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 are recognized at their fair values at the acquisition date. Where the Group acquires a
subsidiary for less than the fair value of its assets and liabilities, this results in negative goodwill which is recognized in profit and
loss.
Purchased goodwill is capitalized and classified as an asset on the statement of financial position. Goodwill arising on acquisition
is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized.
Goodwill is reviewed for impairment on an annual basis. When the directors consider the initial value of the acquisition to be
negligible, the goodwill is written off to the statement of comprehensive income immediately. Trading results of acquired subsidiary
undertakings are included from the date of acquisition.
Goodwill is deemed to be impaired when the present value of the future cash flows expected to be derived is lower than the
carrying value. Any impairment is charged to the statement of comprehensive income immediately.
Interest in jointly controlled entities
Joint venture arrangements that involve the establishment of a separate entity in which each venturer has joint control are referred
to as jointly controlled entities. The results and assets and liabilities of jointly controlled entities are included in these financial
statements for the period using the equity method of accounting.
Finance costs
Interest expense and other borrowing costs are charged to the statement of comprehensive income as incurred.
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.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 52
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
2. Accounting policies (continued)
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. These investments are consolidated in the Group
accounts.
Exploration costs
The Group has adopted the provisions of IFRS 6 “Exploration for and Evaluation of Mineral Resources”.
Exploration, evaluation and development 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.
Once the Board decides on the development of a project, development expenditure will be capitalized as incurred and 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.
The directors consider that the stage of development of its Licence areas in Saudi Arabia has not yet met its criteria for
capitalization. Capitalized development costs for the Group’s project in Ethiopia have been recognized on acquisition, and will
continue to be capitalised since this date, in accordance with IFRS 6.
A regular review will be undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs
in relation to that area of interest. Accumulated capitalized costs in relation to an abandoned area of interest will be written off in
full against profit in the year in which the decision to abandon the area is made. Capitalized development expenditure will be
amortized from the date at which production commences on a unit of production basis over the lifetime of the ore reserves for the
area to which the costs relate.
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.
Financial instruments
Financial assets at amortized cost
Loans and receivables are recognized when the Group becomes party to the contractual provisions of the financial instrument.
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market
are classified as ‘loans and receivables’. Loans and receivables are measured at amortized cost using the effective interest
method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term
receivables when the recognition of interest would be immaterial.
Financial assets at fair value through profit or loss
Subsequent to initial recognition, when a financial asset is designated as such on initial recognition, it is classified as held at fair
value through profit or loss. Assets other than held for trading are designated at fair value through profit and loss when the Group
manages the holdings and makes purchase and sale decisions based on fair value assessments and documented risk
management and investment strategies. Attributable transaction costs and changes in fair value are recognized in profit or loss.
Financial liabilities - equity
Financial liabilities are recognized when the Group becomes party to the loan. Financial liabilities represent trade payables and
are initially measured at fair value and subsequently at amortized cost.
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the
contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue
costs.
The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 53
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
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.
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:
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
income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant
interest-bearing assets. 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:
Variable rate instruments
Financial assets
2015
562
2014
640
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 December 2015 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.
Variable rate instruments
Financial assets – increase of 100 basis points
Financial assets – decrease of 25 basis points
Equity
2015
Profit or Loss
2015
Equity Profit or Loss
2014
2014
6
(1)
6
(1)
6
(2)
6
(2)
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 Euro, Turkish
Lira, US Dollar, Ethiopia ETB and Saudi Arabian Riyal. Since 1986 the Saudi Arabian Riyal is 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: The Saudi Arabian Riyal exposure is included in the USD amounts.
Australian Dollar
Euro
Turkish Lira
US Dollar
Ethiopia ETB
Liabilities
2015
Assets
2015
Liabilities
2014
Assets
2014
24
276
1
663
779
-
2
40
266
354
-
16
1
156
2,023
-
4
49
240
204
KEFI Minerals Plc ANNUAL REPORT 2015
Page 54
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
3. Financial risk management (continued)
Sensitivity analysis
A 10% strengthening of the British Pound against the following currencies at 31 December 2015 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.
AUD Dollar
Euro
Turkish Lira
US Dollar
Ethiopia ETB
Equity
2015
Profit or Loss
2015
Equity
2014
Profit or Loss
2014
3
27
(4)
40
42
3
27
(4)
40
42
-
1
(5)
(9)
182
-
1
(5)
(9)
182
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially
enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of minimising such
losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of
committed credit facilities.
The Group’s contractual cash flows for its financial liabilities are all due within 3 months or less. In January 2014 agreement was
made with the Ethiopian tax authorities to pay the VAT over a period of three years (principal and interest).
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to
shareholders through the optimization of the debt and equity balance. This is done through the close monitoring of cash flows.
The capital structure of the Group consists of cash and cash equivalents of £ 562,000 (2014: £640,000) and equity attributable to
equity holders of the parent, comprising issued capital and deferred shares of £15,059,000 (2014: £12,352,000), reserves of
£13,529,000, (2014: £9,195,000) and accumulated losses of £17,645,000 (2014: £14,389,000). The Group does not use
derivative financial instruments and has no long term debt facilities.
Fair value estimation
The fair values of the Group’s financial assets and liabilities approximate their carrying amounts at the reporting date.
Financial assets
Cash and cash equivalents (Note 16)
Available for sale financial assets (Note 14)
Trade and other receivables (Note 15)
Financial liabilities
Trade payables (Note 20)
Carrying Amounts
2014
2015
Fair Values
2015
2014
562
92
358
640
86
335
562
92
358
640
86
335
1,995
3,202
1,995
3,202
Available for sale financial assets are classified as Level 1 within the fair value hierarchy, except for Ethiopian Government bonds,
which are classified as Level 2. Level 1 items are derived from quoted prices (unadjusted) in active markets for identical assets
or liabilities. Level 2 items are derived from inputs other than quoted prices included within Level 1 that are observable for the
assets either directly or indirectly.
Other financial assets and liabilities are short term and their carrying value is considered to approximate to their fair value.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 55
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
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.
Significant judgements include:
Going concern
The going concern presumption depends principally on securing funding to develop the Tulu Kapi mine 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.
Significant estimates include:
Fair value of acquisitions
The 'acquisition method', which generally requires assets acquired and liabilities assumed to be measured at their fair values at
the acquisition date. Fair value estimates are required. In calculating the fair value estimates of net identifiable net assets on
acquisition significant judgements and estimates are required.
Share based payments
In calculating the fair value at the grant date, the Black Scholes model requires us to estimate the inputs to this model, in particular
in respect of volatility. This assessment is based on historical share price movements assuming these will continue into the future.
Impairment review of asset carrying values
Events or changes in circumstances can give rise to significant impairment charges or reversals of impairment in a particular year.
Where the recoverable amounts of Group cash generating units are assessed by analyses of discounted cash flows, the resulting
valuations are particularly sensitive to changes in estimates of long term commodity prices, exchange rates, operating costs, the
grouping of assets within cash-generating units and discount rates.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 56
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
5. Operating segments
The Group has only one distinct operating segment, being that of mineral exploration. The Group’s exploration activities are
located in the Kingdom of Saudi Arabia (through the jointly controlled entity), Ethiopia and its administration and management is
based in Cyprus.
Cyprus
Turkey
Bulgaria
Ethiopia
Total
2015
Operating (loss)/profit
Foreign exchange profit/(loss)
from
jointly
Interest
Share of
loss
controlled entity
Loss before tax
Tax
Loss for the year
Total assets
Total liabilities
Depreciation of property, plant
and equipment
(1,552)
13
(179)
(1,718)
1,695
976
-
(33)
(26)
-
(59)
42
2
-
8
-
-
8
4
4
-
(525)
(37)
(140)
(702)
11,197
1,013
90
(2,102)
(50)
(319)
(2,471)
(735)
(3,206)
-
(3,206)
12,938
1,995
90
Cyprus
Turkey
Bulgaria
Ethiopia
Total
2014
Operating loss
Foreign exchange profit/(loss)
Interest
Share of loss from jointly controlled
entity
Loss before tax
Tax
Loss for the year
Total assets
Total liabilities
Depreciation of property, plant and
equipment
(2,347)
152
-
(2,195)
1,784
933
-
(51)
(11)
-
(62)
48
1
-
(4)
(30)
-
(34)
(116)
(161)
(413)
(690)
4
16
-
8,524
2,252
118
(2,518)
(50)
(413)
(2,981)
(982)
(3,963))
- -
(3,963)
10,360
3,202
118-
KEFI Minerals Plc ANNUAL REPORT 2015
Page 57
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
6. Expenses by nature
Acquisition costs
Exploration costs
Staff costs (Note 7)
Depreciation of property, plant and equipment (Note 11)
Warrants issue costs (Note 17)
Share based benefits to employees (Note 17)
Share of losses from jointly controlled entity (Note 5)
Directors’ fees and other benefits (Note 21.1)
Consultants’ costs
Auditors’ remuneration - audit current year
Other expenses
Operating loss
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
-
4
513
90
163
69
735
718
246
51
248
2,837
102
100
367
118
66
69
982
915
584
56
141
3,500
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. Direct development costs have been capitalized for the
operations in Ethiopia.
7. Staff costs
Salaries
Social insurance costs and other funds
Average number of employees
Directors’ remuneration is disclosed in note 21.1
8. Finance costs
Interest paid to Ethiopian Revenue and Customs Authority (“ERCA”) – Note 20
Other finance costs
9. Tax
Loss before tax
Tax calculated at the applicable tax rates
Tax effect of non-deductible expenses
Tax effect of tax losses
Tax effect of items not subject to tax
Tax effect of capital allowances
Tax effect of other timing differences
Charge for the year
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
474
39
513
46
337
30
367
44
2015
2014
140
179
319
413
-
413
2015
2014
(3,206)
(3,963)
(515)
308
280
(92)
19
-
-
(633)
404
325
(122)
17
9
-
The Company is resident in Cyprus for tax purposes.
A deferred tax asset of £1,336,989 (2014: £1,056,460) has not been accounted for due to the uncertainty over future recoverability.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 58
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
9. Tax (continued)
Cyprus
The corporation tax rate is 12.5%. Under certain conditions interest income may be subject to defence contribution at the rate of
15%. 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 20% for the tax year 2013 and 17% for 2014 and thereafter. 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 2015, the balance of tax losses which is available
for offset against future taxable profits amounts to £ 7,795,644 (2014: £ 7,203,371).
Bulgaria
Mediterranean Minerals (Bulgaria) EOOD, the 100% subsidiary of the Company, is resident in Bulgaria for tax purposes. The
corporation tax rate is 10%. Due to tax losses sustained in the period, no tax liability arises on the Mediterranean Minerals
(Bulgaria) EOOD. Under current legislation, tax losses may be carried forward and be set off against taxable income of the
following five years. As at 31 December 2015, the balance of tax losses which is available for offset against future taxable profits
amounts to £34,035 (2014: £171,146). The reduction in tax losses from the prior year is due to losses passing the five year
threshold for their utilization.
Turkey
Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket (Doğu Akdeniz Mineralleri), the 100% subsidiary of Mediterranean
Minerals (Bulgaria) EOOD, and ultimately 100% subsidiary of the Company, is resident in Turkey for tax purposes. The
corporation tax rate is 20%. Under local tax legislation, exploration costs are can only be set off against income from mining
operations. Tax losses may be carried forward and be set off against taxable income of the five succeeding years. As at 31
December 2015, the balance of exploration costs that is available for offset against future income from mining operations amount
to £ 948,764 (2014: £908,198).
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.
During 2013, the House of People's Representatives passed an amendment to the Mining Income Tax Proclamation, reducing
income tax from 35% to 25% and had received an initial draft of proposed amendments to the Mining Proclamation, which includes
a reduction in royalty on gold production from 8% to 7%.
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
31.12.15
£’000
Year Ended
31.12.14
£’000
Net loss attributable to equity shareholders
Average number of ordinary shares for the purposes of basic loss per share (000’s)
(3,206)
1,577,708
(3,848)
952,420
Loss per share:
Basic and fully diluted loss per share (pence)
(0.20)
(0.40)
The effect of share options and warrants on losses per share is anti-dilutive.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 59
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
11. Property, plant and equipment
The Group
Cost
At 1 January 2014
Additions
At 31 December 2014 / 1 January 2015
Additions
Disposals
At 31 December 2015
Accumulated Depreciation
At 1 January 2014
Charge for the year
At 31 December 2014 / 1 January 2015
Charge for the year
Disposals
At 31 December 2015
Net Book Value at 31 December 2015
Net Book Value at 31 December 2014
Motor
Vehicles
Plant and
equipment
Furniture,
fixtures and
office
equipment
Total
60
-
60
-
(17)
43
31
8
39
5
(17)
27
16
21
180
18
198
7
(70)
135
-
73
73
67
(70)
70
65
125
53
8
61
4
(6)
59
10
37
47
18
(6)
59
-
14
293
26
319
11
(93)
237
41
118
159
90
(93)
156
81
160
The above property, plant and equipment is located in Turkey and Ethiopia.
The Company has no significant property, plant and equipment.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 60
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
12. Intangible assets
The Group
Cost
At 1 January 2014
Additions
At 31 December 2014 / 1 January 2015
Additions
At 31 December 2015
Accumulated Amortization and Impairment
At 1 January 2014
Charge for the year
At 31 December 2014 / 1 January 2015
Charge for the year
At 31 December 2015
Net Book Value at 31 December 2015
Net Book Value at 31 December 2014
The Company
Cost
At 1 January 2014
Additions on acquisition
At 31 December 2014 / 1 January 2015
Additions
Transfer to subsidiary
At 31 December 2015
Accumulated Amortization and Impairment
At 1 January 2014
Charge for the year
At 31 December 2014 / 1 January 2015
Charge for the year
At 31 December 2015
Net Book Value at 31 December 2015
Net Book Value at 31 December 2014
Project
evaluation
costs
Deferred
exploration
costs
-
976
976
1,739
2,715
-
-
-
-
-
6,900
1,263
8,163
967
9,130
-
-
-
-
-
Total
6,900
2,239
9,139
2,706
11.845
-
-
-
-
-
2,715
976
9,130
8,163
11,845
9,139
Project
evaluation
costs
Deferred
exploration
costs
-
976
976
587
(485)
1,078
-
-
-
-
-
1,078
976
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
-
976
976
587
(485)
1,078
-
-
-
-
-
1,078
976
KEFI Minerals Plc ANNUAL REPORT 2015
Page 61
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
12. Intangible assets
Deferred exploration costs are associated with the Tulu Kapi mine in Ethiopia. The group recognized deferred exploration costs
with a fair value of US$ 6,900,000 on acquisition of the project in December 2013. Further costs incurred by the Group since the
acquisition have been capitalized.
Management performed an impairment review for deferred exploration costs, which relate to the Tulu Kapi license area, at 31
December 2015.The Net Present Value of the Tulu Kapi asset exceeded the net book value at 31 December 2015 significantly.
The impairment review compared the recoverable amount of assets to the carrying value. The recoverable amount of an asset is
assessed by reference to the higher of value in use (“VIU”), being the net present value (“NPV”) of future cash flows expected to
be generated by the assets, and fair value less costs to dispose (“FVLCD”). The FVLCD is based on an estimate of the amount
that the Company may obtain in a sale transaction on an arm’s length basis.
Project evaluation costs relating to work performed in assessing the economic feasibility and the independent technical review of
the Tulu Kapi project have been capitalized by the Company. In August 2015, the Company published the Tulu Kapi Definitive
Feasibility Study (“DFS”) evaluating a conventional open-pit mining operation and carbon-in leach (“CIL”) processing plant.
Following completion of the DFS, the Company continued to improve project economics. Based on feedback from project
contractors, financiers and independent technical consultants, the company in January 2016 increased planned production at
Tulu Kapi to circa 115,000 ounces per annum at an estimated average AISC of US$742/ounce over nine year. This increase is a
result of a planned increase in process plant capacity from 1.2Mtpa to 1.5-1.7Mtpa which has strengthened the financial and
technical feasibility of the project.
The Tulu Kapi Mining Agreement between the Ethiopian Government and the Company was formalized in April 2015. The terms
include a 20-year Mining License, full permits for the development and operation of the Tulu Kapi gold project and a 5%
Government free-carried interest. The Company is working towards funding the development of the Tulu Kapi project.
The schedule remains on track for project finance syndicate documentation and inter-creditor arrangements to be assembled and
approved by syndicate and National Bank of Ethiopia for full drawdown by mid- 2016. Preferred banks selected and their mandates
are being finalized and processed for formal approval. The Government of Ethiopia confirmed its intention to invest equity capital
of US$20 million.
KEFI Minerals Ethiopia also has other mining exploration licenses in Ethiopia. The other licenses are Yubdo exploration license,
and the Ankore exploration license. None of these licenses is considered core to the Group’s operations in Ethiopia.
-
The Yubdo exploration license 7th year extension period expired on June 28th 2014. The Ministry of Mines has verbally
stated that they intend to extend the license period. KEFI has lodged the application for extension of this license during
2016.
-
The Billa Gulisso exploration license expired in December 2015, and KEFI received notification during 2016 that this
license has been terminated.
-
Ankore exploration license: this area was included in the Tulu-Kapi mine infrastructure area during 2015.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 62
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
13. Investments
13.1 Fixed asset investments
The Company
Cost
At 1 January
Acquisitions
At 31 December
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
4,598
-
4,598
3,097
1,501
4,598
Subsidiary companies
Mediterranean Minerals (Bulgaria) EOOD
Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket
KEFI Minerals Ethiopia Limited
KEFI Minerals Marketing and Sales Cyprus Limited
Date of
acquisition/
incorporation
08/11/2006
08/11/2006
30/12/2013
30/12/2014
Country of
incorporation
Bulgaria
Turkey
United Kingdom
Cyprus
Effective
proportion of
shares held
100%-Direct
100%-Indirect
100%-Direct
100%-Direct
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 owns 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.
The Company owns 100% of Kefi Minerals Ethiopia, which operates the Tulu Kapi project in Ethiopia. The Government of Ethiopia
is entitled to a 5% free-carried interest in the Tulu Kapi Gold Project. This entitlement is enshrined in the Ethiopian Mining Law
and the Ethiopian Mining Agreement between the Ethiopian Government and KEFI Minerals Ethiopia. The implementation of this
entitlement is intended to issue 5% of the shareholding of KEFI Minerals Ethiopia at the time of the final completion of the full
project finance of the Tulu Kapi Gold Project. Once all the relevant documents are executed the intended arrangement would add
5% to the shareholding paid by the Ethiopian Government.
The company owns 100% of KEFI Minerals Marketing and Sales Cyprus, a company incorporated in Cyprus. The company was
dormant for the year end 31 December 2015 and 2014. KEFI Minerals Marketing and Sales Cyprus had no assets or liabilities at
the date of acquisition. No additional disclosure is considered necessary, as the entity is not significant to the financial statements.
KEFI Minerals Marketing and Sales Cyprus will provide sales and marketing services for the Group once production commences.
It is planned that this company will act as agent and off-taker for the onward sale of gold and other products in international
markets.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 63
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
13.2 Investment in jointly controlled entity
The Company
At 1 January/31 December
Jointly controlled entity
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
181
181
Date of acquisition/
incorporation
Country of
incorporation
Effective proportion of
shares held
Gold and Minerals Co. Limited (G&M)
04/08/2010
Saudi Arabia
40%-Direct
14. Available for sale financial assets
The Group
On 1 January
Change in value of available-for-sale financial assets
On 31 December
The Company
On 1 January
Change in value of available-for-sale financial assets
On 31 December
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
86
6
92
80
6
86
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
8
-
8
12
(4)
8
The Company successfully divested four Licences in Turkey in July 2011 to AIM listed Ariana Resources (AIM:AAU) for a nominal
cash payment of 10,000 Turkish Lira, 910,747 new ordinary shares in Ariana and a Net Smelter Royalty (“NSR”) of 2%. The
NSR is payable by Ariana’s wholly owned Turkish subsidiary Galata Madencilik San. ve Tic. Ltd. (“Galata”) to KEFI Mineral’s
Turkish Subsidiary, Dogu, on commercial production of any mineral from the licences. No value has been attributed in these
financial statements for the NSRs, due to uncertainty regarding when income from the NSRs will commence.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 64
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
15. Trade and other receivables
The Group
Other receivables
Placing funds
Loan to Director (Note 21.2)
Amount receivable from Saudi Arabia Jointly controlled entity (Note 21.4)
VAT
Deposits and prepayments
The Company
Deposits
Placing Funds
Loan to Director (Note 21.2)
KEFI Minerals Marketing and Sales Cyprus Limited (Note 21.4)
Advance to KEFI Minerals Ethiopia Limited (Note 21.4)
Amount receivable from Saudi Arabia Jointly controlled entity (Note 21.4)
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
45
207
-
6
95
5
358
43
130
20
32
96
14
335
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
3
207
-
3
7,417
80
7,710
13
130
20
-
2,807
106
3,076
Amounts owed by group companies total £7,420,000 (£: £2,807,000). Balances of £748,000 have been fully provided for all
projects except for Ethiopia due to the uncertainty over the timing of future recoverability. The loans issued to the director and the
advance issued to KEFI Minerals Ethiopia Limited are unsecured interest free and repayable on demand. At the reporting date,
no receivables were past their due date.
The Company raised £2,623,000 on 11 December 2015, of which an amount of £207,000 was received after 31 December 2015.
16. Cash and cash equivalents
The Group
Cash at bank and in hand
The Company
Cash at bank and in hand
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
562
393
640
607
KEFI Minerals Plc ANNUAL REPORT 2015
Page 65
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
17. Share capital
Number of
shares ’000
Share
Capital
Deferred
Shares
Share
premium
Issued and fully paid
At 1 January 2014
Issued 16 June 2014 at 1.5p
Issued 5 September 2014 at 1.5p
Issued 2 December 2014 at 1p
Issued 16 December 2014 at 1p
Share issue costs
At 31 December 2014
Issued 20 March 2015 at 1p
Issued 16 May 2015 at 1p
Sub-division of shares 16 June 2015 0.1p
Issued 16 June 2015 at 0.8p
Issued 11 December 2015 at 0.3p
Share issue costs
At 31 December 2015
853,670
141,667
50,000
80,000
110,000
-
1,235,337
80,000
66,611
-
362,500
877,191
-
2,621,639
8,535
1,417
500
800
1,100
-
12,352
800
667
(12,436)
363
877
-
2,623
-
-
-
-
-
-
-
-
-
12,436
-
-
-
12,436
7,660
708
250
-
-
(185)
8,433
-
-
-
2,538
1,755
(379)
12,347
Total
16,195
2,125
750
800
1,100
(185)
20,785
800
667
-
2,901
2,632
(379)
27,406
Share issue costs of £64,000 (2014: £177,000) relating to the 146,610,600 shares issued at par value during 2015 have been
charged to equity. The remainder of share issue costs are charged against share premium arising on issue.
Issued capital
2015
On 20 March 2015, 80,000,000 shares of 1p were issued at a price of 1p per share.
On 16 May 2015, 66,610,600 shares of 1p were issued at a price of 1p per share.
On 16 June 2015, 362,500,000 shares of 0.1p were issued at a price of 0.8p per share. On issue of the shares, an amount of
£2,537,500 was credited to the Company’s share premium reserve.
On 11 December 2015, 877,191,422 shares of 0.1p were issued at a price of 0.3 p per share. On issue of the shares, an amount
of £1,754,500 was credited to the Company’s share premium reserve.
2014
On 16 June 2014, 141,666,668 shares of 1p were issued at a price of 1.5p per share. On issue of the shares, an amount of
£708,333 was credited to the Company’s share premium reserve.
On 5 September 2014, 50,000,000 shares of 1p were issued at a price of 1.5p per share. On issue of the shares, an amount of
£250,000 was credited to the Company’s share premium reserve.
On 2 December 2014, 80,000,000 shares of 1p were issued at a price of 1p per share.
On 16 December 2014, 110,000,000 shares of 1p were issued at a price of 1p per share.
Restructuring of share capital into deferred shares
On 16 June 2015 the Company’s issued ordinary shares of 1p each in the capital of the Company were sub-divided into one new
ordinary share of 0.1p and one deferred share of 0.9p. The deferred shares have no value or voting rights. After the share capital
reorganization there were the same number of New Ordinary Shares in issue as there are existing Ordinary Shares. The New
Ordinary Shares have the same rights as those currently accruing to the existing Ordinary Shares in issue under the Company’s
articles of association, including those relating to voting and entitlement to dividends.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 66
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
17. Share capital (continued)
Warrants
2015
On 18 March 2015, the Company issued 4,000,000 warrants to subscribe for new ordinary shares of 1p each at 1p per share.
On 11 May 2015, the Company issued 1,680,530 warrants to subscribe for new ordinary shares of 1p each at 1p per share.
On 15 June 2015, the Company issued 14,500,000 warrants to subscribe for new ordinary shares of 0.1p each at 0.8p per share.
On 11 December 2015, the Company issued 43,859,571 warrants to subscribe for new ordinary shares of 0.1p each at 0.3p per
share.
No warrants were cancelled/expired or exercised in the period from 1 January 2015 to 31 December 2015.
2014
On 16 June 2014, the Company issued 8,500,000 warrants to subscribe for new ordinary shares of 1p each at 1.5p per share.
On 2 December 2014, the Company issued 4,000,000 warrants to subscribe for new ordinary shares of 1p each at 1p per share.
On 16 December 2014, the Company issued 5,500,000 warrants to subscribe for new ordinary shares of 1p each at 1p per share.
Details of warrants outstanding as at 31 December 2015:
Grant date
Expiry date
Exercise price
Expected Life Years
22 February 2011
20 February 2012
4 July 2013
16 October 2013
27 December 2013
16 June 2014
2 December 2014
16 December 2014
18 March 2015
11 May 2015
15 June 2015
11 December 2015
21 February 2016
19 February 2017
3 July 2018
15 October 2018
26 December 2016
15 June 2016
1 December 2017
15 December 2017
17 March 2018
10 May 2018
14 June 2018
10 December 2018
5.00p
3.00p
2.10p
2.25p
2.00p
1.50p
1.00p
1.00p
1.00p
1.00p
0.80p
0.30p
5 years
5 years
5 years
5 years
3 years
2 years
3 years
3 years
3 years
3 years
3 years
3 years
Number of warrants
000’s
780
2,917
1,310
1,111
13,500
8,500
4,000
5,500
4,000
1,680
14,500
43,860
101,658
KEFI Minerals Plc ANNUAL REPORT 2015
Page 67
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
17. Share capital (continued)
Warrants (continued)
The Company has issued warrants to advisers to the Group. All warrants, as noted above expire between two to five years after
grant date and are exercisable at the exercise price.
Outstanding warrants at 1 January 2015
- granted
Outstanding warrants at 31 December 2015
Number of warrants
000’s
37,618
64,040
101,658
The estimated fair values of the warrants were calculated using the Black Scholes option pricing model.
The inputs into the model and the results for warrants granted during the year are as follows:
Closing share price at
issue date
Exercise price
Expected volatility
Expected life
Risk free rate
Expected
yield
Estimated fair value
dividend
11 Dec
2015
15 June
2015
11 May
2015
18 Mar
2015
16 Dec
2014
2 Dec
2014
16 Jun
2014
0.32p
0.90p
0.88p
1.33p
1.08p
1.08p
1.58p
0.3p
79.1%
3yrs
0.39%
Nil
0.8p
61.1%
3yrs
0.98%
Nil
1.00p
60.9%
3yrs
0.98%
Nil
1.00p
59%
3yrs
0.98%
Nil
1.00p
48%
3yrs
0.59%
Nil
1.00p
48%
3yrs
0.59%
Nil
1.50p
50.3%
2yrs
0.87%
Nil
0.17p
0.40p
0.33p
0.64p
0.32p
0.32p
0.43p
Expected volatility was estimated based on the historical underlying volatility in the price of the Company’s shares.
For 2015, the impact of issuing warrants is a net charge to income of £163,000 (2014: £66,000). At 31 December 2015, the equity
reserve recognized for share based payments, including warrants, amounted to £1,212,000 (2014: £848,000).
Opening amount
Warrants issued costs (Note 6)
Share options issued to employees (Note 6)
Share options issued to directors (Note 6)
Cancelled options
Closing amount
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
848
163
69
146
(14)
1,212
794
66
69
200
(281)
848
KEFI Minerals Plc ANNUAL REPORT 2015
Page 68
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
18. Share options reserve
Details of share options outstanding as at 31 December 2015:
Grant date
Expiry date
Exercise price
28-Feb-11
29-Sep-11
13-Sep-12
24-May-13
03-Sep-13
08-Oct-13
08-Jan-14
16-Jan-14
01-Feb-14
27-Mar-14
04-Apr-14
12-Sep-14
20-Mar-15
16-Jun-15
27-Feb-16
28-Sep-16
12-Sep-18
23-May-19
02-Sep-18
07-Oct-18
07-Jan-20
15-Jan-20
31-Jan-20
26-Mar-20
03-Apr-20
11-Sep-20
19-Mar-21
15-Jun-21
7.10p
3.78p
4.00p
2.915p
2.94p
2.27p
1.88p
1.99p
1.89p
2.30p
1.83p
1.76p
1.32p
1.32p
Number of
shares
000’s
100
1,000
14,150
1,000
1,000
350
400
100
100
27,225
100
2,250
27,000
6,500
81,275
Outstanding options at 1 January 2015
- granted
- cancelled/forfeited
Outstanding options at 31 December 2015
Weighted average ex.
Price
1.32p
3.92p
Number of shares 000’s
48,350
33,500
(575)
81,275
The Company has issued share options to directors, employees and advisers to the Group.
On 28 February 2011, 550,000 options were issued which expire five years after the grant date, and are exercisable at any time
within that period. On 29 September 2011, 2,000,000 options were issued which expire five years after the grant date, and are
exercisable at the exercise price in whole or in part no more than one half after one year from the grant date and one half two
years from the grant date.
On 13 September 2012, 15,500,000 options were issued which expire six years after the grant date, and are exercisable at the
exercise price in whole or in part no more than one half after one year from the grant date and one half two years from the grant
date.
On 27 March 2013, 100,000 options were issued which expire six years after the grant date, and are exercisable at any time
within that period. On 24 May 2013 1,000,000 options were issued which expire six years after the grant date and are exercisable
in part no more than one half after one year from the grant date and one half two years from the grant date. On 3 September 2013
1,000,000 options were issued and on 8 October 2013, 350,000 options were issued both which expire five after the grant date
and are exercisable in part no more than one half after one year from the grant date and one half two years from the grant date
KEFI Minerals Plc ANNUAL REPORT 2015
Page 69
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
18. Share options reserve (continued)
During January 2014 and February 2014 600,000 options were issued which expire six years after the grant date and are
exercisable in part no more than one half after one year from the grant date and one half two years from the grant date.
On 27 March 2014, 22,000,000 options were issued to the Directors and a further 5,400,000 options have been granted to other
non-board members of the senior management team. Of the options issued, previously granted options over 22,100,000 Ordinary
shares which were due to expire during 2014 have all been cancelled and the new grants of options have been made, in
accordance with the terms of the Scheme the options vest in equal annual instalments over a period of 2 years and expire after
6 years.
On 4 April 2014, 100,000 options were issued which expire six years after the grant date and are exercisable in part no more than
one half after one year from the grant date and one half two years from the grant date.
On 12 September 2014, 2,250,000 options were issued which expire six years after grant date and vest in equal annual
instalments over a period of two years.
On 20 March 2015, 27,000,000 options were issued which expire six years after grant date and vest in equal annual instalments
over a period of two years.
On 16 June 2015, 6,500,000 options were issued which expire six years after grant date and vest in equal annual instalments
over a period of two years.
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 sub division 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. The inputs into the model
and the results are as follows:
Date
16-Jun-15
20-Mar-15
12-Sep-14
04-Apr-14
27-Mar-14
01-Feb-14
16-Jan-14
08-Jan-14
08-Oct-13
03-Sep-13
24-May-13
27-Mar-13
13-Sep-12
29-Sep-11
28-Feb-11
Closing share
price at issue
date
Exercise
price
Expected
volatility
Expected
life
Risk
free
rate
Expected
dividend
yield
Discount
factor
Estimated
fair value
0.83p
1.20p
1.43p
1.83p
1.85p
1.90p
1.83p
1.85p
2.69p
2.76p
2.19p
3.43p
3.63p
3.78p
6.40p
1.32p
1.32p
1.76p
1.83p
2.30p
1.89p
1.99p
1.88p
2.27p
2.94p
2.92p
3.43p
4.00p
3.78p
7.10p
61.11%
59.04%
43.40%
59.60%
59.60%
59.60%
59.60%
59.60%
63.83%
63.63%
59.80%
52.36%
6yrs
1.53%
6yrs
1.53%
6yrs
1.09%
6yrs
2.17%
6yrs
2.17%
6yrs
2.17%
6yrs
2.17%
6yrs
2.17%
5yrs
1.70%
5yrs
1.70%
6yrs
6yrs
5.00%
5.00%
56.90%
6yrs
5.00%
105.51%
162.00%
5yrs
5.00%
5yrs
5.00%
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
0%
0%
0%
0%
0%
0%
0%
0%
50%
50%
0%
0%
0%
0%
0%
0.38p
0.64p
0.52p
0.94p
0.94p
0.94p
0.94p
0.94p
0.80p
0.75p
1.18p
1.90p
2.05p
2.99p
5.98p
Expected volatility was estimated based on the historical underlying volatility in the price of the Company’s shares.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 70
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
18. Share options reserve (continued)
For 2015, the impact of share option-based payments is a net charge to income of £215,000 (2014: £269,000). At 31 December
2015, the equity reserve recognized for share option-based payments, including warrants, amounted to £1,212,000 (2014:
£848,000).
19. Jointly controlled entities
19.1 Jointly controlled entity with Centerra Gold (KB) Inc.
On 22 October 2008, the Company entered into a Joint Venture Agreement in respect of its 100%-owned Artvin Project with
Centerra Gold (KB) Inc (“Centerra KB”), a wholly-owned subsidiary of Centerra Gold Inc. In August 2011, KEFI Mineral’s
subsidiary holding these licences, was sold in return for a cash payment of US$100,000 and a 1% Net Smelter Royalty on all
future mineral production from the Artvin licences.
19.2 Joint controlled entity with Gold and Minerals
Company name
Date of incorporation
Country of
incorporation
Effective proportion of
shares held at 31 December
Gold & Minerals Co. Limited
3 August 2010
Saudi Arabia
40%
Amounts relating to the Jointly Controlled Entity
SAR’000
GBP’000
Year Ended
31.12.15
Year Ended
31.12.14
Year Ended
31.12.15
Year Ended
31.12.14
Non-current assets
Current assets
Non-current liabilities
Current liabilities
493
1,473
1,966
54,974
1,048
56,022
768
1,885
2,653
45,095
916
46,011
Net liabilities
(54,056)
(43,358)
Share capital
Accumulated losses
Exchange rates SAR to GBP
Closing rate
2,500
(56,556)
(54,056)
2,500
(45,858)
(43,358)
36
106
142
3,971
76
4,047
(3,905)
181
(4,086)
(3,905)
53
129
182
3,092
63
3,155
(2,973)
171
(3,144)
(2,973)
0.1806
0.1714
In May 2009, KEFI announced the formation of a new minerals exploration jointly controlled entity, Gold & Minerals Co. Limited
(“G&M”), 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 40% shareholding in G&M with ARTAR
holding the other 60%. KEFI provides G&M 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 G&M remains in
compliance with all governmental and other procedures. G&M is treated as a jointly controlled entity and has been equity
accounted and has reconciled its share in G&M’s losses.
The above figures reported represent cumulative exploration activity incurred by G&M since its incorporation in 2009. The
accounting policy for exploration costs recorded in the G&M audited financial statements is to capitalise qualifying expenditure
and review for impairment, if applicable. This is in contrast to the Group’s accounting policy relating to exploration costs which is
to expense costs through profit and loss until the Board decides on the development of a project (Note 2). Consequently,
exploration costs of G&M at 31 December 2015 amounting to SAR56.6 million (2014: SAR45.8 million) have been adjusted to
bring the figures in line with the Group’s accounting policies.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 71
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
19. Jointly controlled entities (continued)
19.2 Jointly controlled entity with Gold and Minerals (continued)
A loss of £735,000 was recognized by the Group for the year ended 31 December 2015 (2014: £ 982,000) representing the
Group’s share of losses in the year.
As at 31 December 2015 KEFI owed ARTAR an amount of £90,000 (2014: receivable £186,000) - Note 21.5.
As at 31 December 2015, G&M owed KEFI an amount of £6,000 (2014: £32,000) – Note 21.4.
20. Trade and other payables
The Group
Accruals and other payables
Other loans
Payable to shareholders (Note 21.3)
Payable to jointly controlled entity (Note 21.5)
VAT Liability
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
1,011
236
8
90
650
1,995
825
229
8
186
1,954
3,202
In January 2014 an agreement was made with Ethiopian Revenue and Customs Authority (“ERCA”) to repay the balance of the
VAT liability plus interest accruing on the unpaid principal amount over a three-year payment plan in accordance with the relevant
tax proclamation, 25% of the assessed outstanding amount is payable immediately and the balance under an agreed payment
schedule. This initial payment, of ETB 27,111,509 (approximately £848,590), equivalent to 25% of the assessed tax amount
outstanding, was made in January 2014. The balance of the liability plus interest accruing on the unpaid principal amount will be
paid subject to a three-year payment plan formally agreed with ERCA. During the year an amount of ETB 45,100,000
(approximately £1,441,815), was paid. The amount to be paid over the next year is ETB 20,063,350 (approximately £ 647,832).
Other loans are unsecured, interest free and repayable on demand.
The Company
Accruals and other payables
Payable to jointly controlled entity (Note 21.5)
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
886
90
976
746
186
932
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 72
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
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:
Directors' fees *
Directors’ other benefits
Directors’ bonus
Share option-based benefits to directors (Note 17)
Other key management personnel fees and other benefits
Other key management personnel bonus
Share option-based benefits other key management personnel
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
471
51
50
146
204
37
11
970
444
164
107
200
-
-
-
915
* Part of the salary of the Exploration Director is paid directly by the jointly-controlled entity G&M.
Share-based benefits
The Company has issued share options to directors and key management. All options, except those noted in Note 18, expire six
years after grant date and are exercisable at the exercise price in whole or in part no more than one third from the grant date, two
thirds after two years from the grant date and the balance after three years from the grant date.
21.2 Receivable from director
Name
Ian Rutherford Plimer
Nature of transactions
Loan to Director
Relationship
Non-Executive
Director
No interest is payable by the director and the loan was repaid in full in 2015.
21.3 Payable to shareholders
Name
Atalaya Mining PLC (previously EMED) Finance
Nature of transactions
Relationship
Shareholder
21.4 Receivable from related parties
The Group
Name
Gold & Minerals Co. Limited
Nature of transactions
Finance
Relationship
Jointly controlled
entity
The Company
Name
Gold & Minerals Co. Limited
KEFI Minerals Marketing and Sales
Cyprus Limited
Kefi Minerals Ethiopia Limited
Nature of transactions
Finance
Finance
Relationship
Jointly controlled entity
Subsidiary
Advance
Subsidiary
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
-
20
2015
8
2014
8
2015
2014
6
6
32
32
2015
2014
80
3
106
-
7,417
7,500
2,807
2,913
KEFI Minerals Plc ANNUAL REPORT 2015
Page 73
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
21. Related party transactions (continued)
21.5 Payable to related parties
The Group
Name
Abdul Rahman Saad Al-Rashid & Sons
Company Limited (“ARTAR”)
The Company
Name
Abdul Rahman Saad Al-Rashid & Sons
Company Limited (“ARTAR”)
Nature of transactions
Finance
Relationship
Jointly controlled entity
Nature of transactions
Finance
Relationship
Jointly controlled entity
2015
2014
90
186
90
186
2015
2014
90
186
90
186
Name
Nature of transactions
Relationship
2015
2014
Atalaya Mining PLC (previously EMED) Provision of management and
Shareholder
8
8
other professional services
22. Contingent liabilities
22.1 Geological database
In 2006, Atalaya Mining PLC (previously EMED) acquired a proprietary geological database that covers extensive parts of Turkey
and Greece and transferred to the Company that part of the geological database that relates to areas in Turkey.
Under the agreement, the Company has undertaken to make a payment of approximately £52,000 (AUD 105,000) for each
tenement it is subsequently awarded in Turkey and which was identified from the database. The maximum number of such
payments required under the agreement is four, resulting in a contingent liability of up to £210,000. These payments are to be
settled by issuing shares in the Company. To date, only one tranche of shares have been issued under this agreement in June
2007 for £43,750 (AUD 105,000).
22.2 Charge issued
On 13th August 2015, the Company created a fixed charge in favour of AIB Group (UK) Plc over amounts held in the Company’s
deposit accounts with the bank. The charge is in regard to time credit banking facilities provided by AIB Group (UK) Plc. At 31
December 2015, the balance in the deposit accounts was £20,000.
22.3 Legal Allegations
Allegations were made against a subsidiary of the Company in 2015 by 39 persons in the Oromiya Regional State of Ethiopia, that
exploration drilling between 1998 and 2006 had caused damage to land occupied (but not owned) by them, despite rehabilitation
having been completed, reported and accepted by the regulatory authorities at that time. They allege damage of ETB 249,589,430
(approximately £8 million). The allegations were dismissed in March 2014 but the plaintiffs have directed the allegations to another
arm of the judiciary. The Group’s lawyers believe that the allegations are spurious and that the chances of the judiciary holding
that there exists a bona fide damages case to be heard are low.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 74
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
23. Capital commitments
The Group has the following capital or other commitments as at 31 December 2015 0.03 Million (2014 0.8 Million),
Exploration programme commitments
Property, plant and equipment
24. Events after the reporting date
Year Ended
31.12.15
£’000
Year Ended
31.12.14
£’000
-
27
27
727
-
727
On 19 January 2016, 48,114,000 options were issued to the Directors and a further 31,886,000 options have been granted to
other non-board members of the senior management team. The options have an exercise price of 0.42p, expire after 6 years, and
vest in two equal annual instalments.
The Company raised GBP1,747,759 before expenses on 22 March 2016 through a placing of 499,359,791 ordinary shares of
0.1p each at a price of 0.35p per share. On this date, the Company also granted warrants to subscribe for 24,967,989 ordinary
shares of 0.1p each at a price on 0.35p per share.
In May 2016 the Company received formal confirmation from the Government of Ethiopia of its commitment to invest equity capital
of US$20 million in Tulu Kapi.
During June 2016 the funding requirement reduced from US$145 million to estimated US$130 million, after accounting for further
anticipated savings and project spending prior to project finance completion in 2016.
In June 2016 the finance plan is based on Project Equity of US$20 million from the Government of Ethiopia, Project Debt of US$95
million which leaves a residual US$15 million to be optimised for financial completion in the second half of 2016. KEFI has received
expressions of interest for equity investment from project contractors and mezzanine-style financiers.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 75
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2015
25. Adoption of new and revised International Financial Reporting Standards (IFRSs)
During the current year the Group adopted all the new and revised International Financial Reporting Standards (IFRS) as adopted
by EU that are relevant to its operations and are effective for accounting periods beginning on 1 January 2015. This adoption did
not have a material effect on the accounting policies of the Group. At the date of approval of these financial statements, standards
and interpretations were issued by the International Accounting Standards Board which were not yet effective. Some, but not all
of these were adopted by the European Union. The Board of Directors expects that the adoption of these accounting standards
in future periods will not have an impact on the financial statements of the Group other than the following:
(i) Standards and Interpretations not adopted by the EU
New standards
IFRS 9 “Financial Instruments”
IFRS 9 makes substantial changes to the measurement of financial assets and financial liabilities. There will only be three
categories of financial assets at either fair value through profit and loss, fair value through comprehensive income or measured
at amortized cost. On adoption of the standard the Group will have to re-determine the classification of its financial assets based
on the business model for each financial asset. This is not considered likely to give rise to any significant adjustments, other than
the re-classification.
The principal change to the measurement of financial assets measured at amortized cost or fair value through other
comprehensive income is that impairments will be recognized on an expected loss basis, compared the current incurred loss
approach. As such, where there are expected to be credit losses, these are recognized in profit or loss. For financial assets
measured at amortized cost, the carrying amount is reduced for the loss allowance. For financial assets measured at fair value
through other comprehensive income, the loss allowance is recognized in other comprehensive income and does not reduce the
carrying amount of the financial assets.
Financial liabilities of the Group are expected to continue to be recognized at amortized cost.
IFRS 9 has not been adopted by the European Union, and consequently there is no effective date.
IFRS 15 ”Revenue from Contracts with Customers”
The standard has been developed to provide a comprehensive set of principles in presenting the nature, amount, timing and
uncertainty of revenue and cash flows arising from a contract with a customer. The standard is based around five steps in
recognizing revenue:
Identify the contract with the customer;
Identify the performance obligations in the contract;
1.
2.
3. Determine the transaction price;
4. Allocate the transaction price; and
5. Recognize revenue when a performance obligation is satisfied.
The Group is not currently generating income from gold sales revenue, hence there is not considered to be any significant impact
at the Group’s current stage of development. Management are currently evaluating the impact of the standard on the financial
statements.
IFRS 15 has not been adopted by the European Union, and consequently there is no effective date.
KEFI Minerals Plc ANNUAL REPORT 2015
Page 76
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
KEFI Minerals is listed on AIM (Code: KEFI)
www.kefi-minerals.com
KEFI Minerals Plc ANNUAL REPORT 2015