KEFI Gold and Copper Plc
Annual Report 2016

Plain-text annual report

    Table of Contents Overview ................................................................................................................................................................. 2  Executive Chairman’s Report ................................................................................................................................. 3  Development‐Ready Gold Mine ‐ Tulu Kapi ....................................................................................................... 3  Oxide Gold Project ‐ Jibal Qutman ..................................................................................................................... 4  Changes to Board of Directors ............................................................................................................................ 4  Outlook ............................................................................................................................................................... 5  Finance Director’s Report ....................................................................................................................................... 6  Equity Funding .................................................................................................................................................... 6  Partnering the Government in Ethiopia and ARTAR in Saudi Arabia ................................................................. 6  Tulu Kapi Development Funding ........................................................................................................................ 6  Chief Operating Officer’s Report ............................................................................................................................ 8  Project and Construction Management ............................................................................................................. 8  EPC Contractor .................................................................................................................................................... 8  Mining Contractor .............................................................................................................................................. 8  Community ......................................................................................................................................................... 9  Operations .......................................................................................................................................................... 9  Outlook ............................................................................................................................................................... 9  Organic Growth in Arabian-Nubian Shield ............................................................................................................ 10  Ethiopia ................................................................................................................................................................. 11  Tulu Kapi ‐ Background .....................................................................................................................................11  Tulu Kapi – Permits and Mining Agreement .....................................................................................................12  Tulu Kapi ‐ Geology ...........................................................................................................................................12  Tulu Kapi – Resources and Reserves ................................................................................................................13  Tulu Kapi ‐ Definitive Feasibility Study and Subsequent Optimisation ............................................................13  Tulu Kapi ‐ Development ..................................................................................................................................14  Tulu Kapi – Potential for Underground Mine ...................................................................................................15  Tulu Kapi – Regional Exploration Potential ......................................................................................................16  Saudi Arabia ......................................................................................................................................................... 17  Saudi Arabia ‐ Jibal Qutman .............................................................................................................................18  Saudi Arabia ‐ Hawiah .......................................................................................................................................20  Saudi Arabia ‐ Exploration Licence Applications ..............................................................................................22  Glossary and Abbreviations .................................................................................................................................. 23  Competent Person Statement .............................................................................................................................. 24  Directors, Secretary and Advisers ........................................................................................................................ 25  Consolidated Financial Statements ...................................................................................................................... 26  KEFI Minerals Plc ANNUAL REPORT 2016 Page 1     Overview  Focussed on gold and copper projects in the highly prospective Arabian‐Nubian Shield (“ANS”).   During  2016,  KEFI  concentrated  Tulu  Kapi,  Ethiopia’s  first  modern  mine  and  upgrading  the  exploration  portfolio.   Conventional project finance proposals stalled in late 2016 with the Ethiopian State of Emergency.   Nevertheless, operational activities continued uninterrupted and Ethiopia quickly lifted most restrictions.   KEFI now has three financing proposals associated with contractors experienced in African mining.   Targeting to commence the development of Tulu Kapi in 2017 and open‐pit gold production 2019.   Pipeline of ANS growth projects to complement the Tulu Kapi Gold Mine in Ethiopia, includes:  o Underground gold mine below the initial Tulu Kapi open pit;  o Satellite deposits around Tulu Kapi mine;  o Oxide gold mine at Jibal Qutman in Saudi Arabia;  o Large VHMS base metal target at Hawiah in Saudi Arabia; and  o Exploration prospects in ANS.   KEFI Minerals is the operator and has strong partners in both Ethiopia and Saudi Arabia.   Saudi Arabia is likely to deregulate the minerals exploration sector in 2017, which should benefit KEFI.  The robust economics of KEFI Minerals’ two development projects are clear from the following table:  Project Stage  Gold Production  Ounces per annum  All‐in Sustaining Costs (“AISC”)  Operating Margin   US$/oz  US$/oz  Net Operating Cash Flow  US$ million per annum  Operating Margin  Initial Life‐of‐Mine Production  Initial Capital Payback  Initial Capital  Notes:   %  Ounces  Years  US$ million  Tulu Kapi Jibal Qutman  Funding  115,000  777  473  55  38%  PEA  30,000  600  650  19  52%  980,000  139,000  3  160  2  30  The above parameters are based on a gold price of US$1,250/oz.   o o AISC  is  per  the  World  Gold  Council  Standard.  The  AISC  includes  each  project’s  operating  costs,  Government  royalties  and  o o sustaining capital but excludes financing costs and income taxes.  Tulu Kapi’s gold production and net operating cash flow are for the first eight years of gold production.  Tulu Kapi’s initial capital cost is based on the 2017 DFS Update, total of US$161 million reduced for contractually deferred  payments and increased for non‐Tulu Kapi costs during construction.  The above metrics demonstrate that:   The AISC/oz place both projects in the bottom cost quartile of existing gold producers;   Strong operating margins above AISC provide substantial annual cash flows;   Both projects can comfortably debt‐fund the majority of the development capital required; and   Both projects rapidly repay the development capital.  Both of Tulu Kapi and Jibal Qutman are surrounded by significant potential for growth through exploration.  KEFI Minerals Plc ANNUAL REPORT 2016 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.   KEFI  Minerals  made  substantial  progress  during  2016  towards  becoming  a  gold  producer  in  one  of  the  world’s  great  under‐developed  minerals  provinces – the Arabian‐Nubian Shield (“ANS”).  Our  Tulu  Kapi  Gold  Project  in  Ethiopia  remains  the  primary focus of KEFI’s activities. We have continued  to  work  with  the  Government  of  Ethiopia,  industry  experts and project contractors over the past year in  order to ensure that construction can commence as  soon as funding is in place.  Initial  open‐pit  gold  production  from  Tulu  Kapi  is  projected at 115,000 ounces per annum at a low All‐ in  Sustaining  Cost  (“AISC”)  of  less  than  US$800/oz.  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,  the  Mining  Licence  Application  for  the  planned  heap‐leach  operation  has  been  lodged  with  the  Saudi  Government  for  continuing  discussion  and  review.  Development‐Ready Gold Mine ‐ Tulu Kapi  This  high‐value,  low‐capex  asset  is  now  poised  for  development when the funding package is finalised.   Location of KEFI's projects in ANS  Whilst our finance team has been preparing the funding package, our project development team has continued to work  with our selected contractors in order to further optimise Tulu Kapi’s detailed development and operating plans.  Feedback  on  the  2015  Definitive  Feasibility  Study  (“2015  DFS”)  from  project  contractors,  financiers  and  partners  was  incorporated into an improved plan in early 2016. All refinements to the 2015 DFS were, in May 2017, incorporated into  the 2017 DFS Update in preparation for financing. This reflects, among other things, the fixed price, lump‐sum processing  plant construction contract with Lycopodium and a warranted ore processing rate of 1.5‐1.7 million tonnes per annum.   KEFI bases the finance structure on the numbers and schedules in the 2017 DFS Update which includes only the planned  open pit. However, we will target a quicker construction schedule and 10% higher annual throughput compared with the  contractually warranted estimates used for debt‐structuring. KEFI’’s financial targets for the open‐pit project include:   Gold production of 120,000 ounces per annum for eight of the initially planned ten years;   At a flat average gold price of US$1,200‐1400/oz for all ten years of gold production (2019‐2028):  o All‐in Sustaining Costs of less than US$800/oz (ignoring financing charges);  o After‐tax, unleveraged IRR of 25%‐36%;   o After‐tax, unleveraged NPV (8% discount rate) of US$98‐184 million at start of construction;   o After‐tax, unleveraged NPV (8% discount rate) of US$272‐375 million at start of production in 2019;   o Annual net operating cash flows of US$56‐78 million p.a. for the first eight years of production, and  o Payback of 3 years.  As  a  result  of  KEFI’s  overhaul  of  all  aspects  of  the  project  due  diligence  and  planning,  the  project  has  soundly‐based,  robust  economics  and  significant  growth  potential  beyond  the  existing  open‐pit  Ore  Reserve  estimate  of  15.4  million  tonnes at 2.12g/t gold, containing 1.05 million ounces.  The projected open‐pit cash flows indicate that the net cash build‐up (after financing costs) in the first three production  years is US$65 million to US$265 million for a  gold price range of US$1,100/oz to US$1,900/oz. Significant value is also  expected from the contemplated underground mine.   KEFI Minerals Plc ANNUAL REPORT 2016 Page 3     Strong Support from Ethiopian Government for Tulu Kapi Development  The Tulu Kapi Gold Project ranks high as a national priority within Ethiopia’s Growth and Transformation Plan and we are  delighted to have the strong support of the community in addition to the support from the Government at all levels.  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 governance and quality standards.  The restrictions imposed by the State of Emergency declared by the Ethiopian Government in October 2016 have now  mostly  been  lifted.  KEFI  Minerals’  operational  activities  have  continued  as  normal  during  this  time  and  appropriate  security precautions have been built into project planning.  After consultations with KEFI, the Government of Ethiopia has triggered the community resettlement programmes which  began with property surveys and host land preparations and also incorporate livelihood restoration programmes.   Notably  in  May  2017,  the  Government  of  Ethiopia  further  demonstrated  its  strong  support  by  executing  the  detailed  formal  documentation  for  its  committed  equity  capital  contribution  of  approximately  US$20  million  to  Tulu  Kapi’s  development.  This  investment  will  increase  the  Government’s  share  of  the  project  from  a  5%  free‐carried  interest  to  circa 25%, depending on the final financing structure.  Further Potential at Tulu Kapi  In  parallel  with  working  towards  open‐pit gold  production,  KEFI  has  already  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. The orebody remains open and further potential will be added.  The Government has encouraged KEFI to plan an ambitious exploration programme in the district around Tulu Kapi and  elsewhere  in  Ethiopia.  Targets  have  been  identified  for  both  satellite  gold  deposits  and  stand‐alone  development  projects. Tulu Kapi is intended to become a central ore processing centre for additional deposits to be developed in the  district.  Oxide Gold Project ‐ Jibal Qutman  In Saudi Arabia, the first priority for our G&M Joint Venture (“G&M”) is to develop an open‐pit, heap‐leach (“HL”) gold  operation, using a staged development approach predicated on a low‐capex start‐up to be expanded in modular stages  as  additional  mineralisation  is  delineated.  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.  Following on‐site meetings with regulators in March 2017, the Mining Licence Application for the Jibal Qutman HL gold  development was lodged with the Saudi Government for continuing discussion and review.  At  Hawiah,  G&M  has  identified  a  huge  target  for  precious  and  base  metals  based  on  the  surface‐sampling  of  a  six‐ kilometre long gossan (oxidised mineralisation exposed on the surface) and the results of the geophysical surveys of the  ground beneath the gossan.   Our Saudi venture is a strategic long‐term priority and the Company is confident of having established an early‐entrant  position in what will emerge as a world‐class minerals province. During the past year, G&M overhauled its portfolio of  licence applications by discarding some and adding others. The next key step is for G&M to review the new Saudi mining  industry regulations and policies which are expected to be published soon. We will then proceed with Jibal Qutman soon  after the planned Tulu Kapi development and also expand exploration activities as results warrant.   Changes to Board of Directors   As KEFI Minerals prepares to develop Tulu Kapi, two key additions were made to the Board of Directors during 2016:   Mr John Leach as Finance Director; and   Mr Mark Wellesley‐Wood, experienced African mining operator as a Non‐Executive Director.  In early 2017, Mr Mark Wellesley‐Wood took on the role of Deputy Chairman and Senior Independent Director.  KEFI Minerals Plc ANNUAL REPORT 2016 Page 4       As  part  of  these  changes,  Mr.  Jeff  Rayner  stepped  down  from  the  Board  but  continues  to  advise  the  Company  on  exploration  and  acquisition  strategy.  His  acumen  in  identifying  under‐valued  gold  and  copper  projects  has  been  instrumental in KEFI becoming an early entrant in emerging mining districts in the ANS.  Outlook  Our initiatives on both sides of the Red Sea reflect our conviction that the ANS has world‐class prospectivity overseen by  governments that have put a strategic priority on the mining sector. KEFI is very fortunate to have a +1,000 km2 portfolio  of exploration properties at various stages within the highly prospective ANS. And this portfolio will grow.  We have established a solid platform with world‐class partners in each jurisdiction and with industry‐leading contractors  have developed a counter‐cyclical opportunity to establish successful mining operations in the region.   Our approach has been to place our development strategy into the hands of a team of seasoned operators with a proven  record of start‐up successes in Africa. This team has transformed Tulu Kapi from an uneconomic project into one which is  now being evaluated by financiers as a robust, fully permitted project with significant upside potential for shareholders.  The calm and improving situation in Ethiopia, combined with the range of financing scenarios being considered by the  Company, make the Board confident that the Tulu Kapi Gold Project can proceed to development in 2017.   The Board is confident of our strategy and asset base. We have the appropriate mix of industry‐experienced technical  and  financial  expertise  to  prudently  progress  our  projects  into  profitable  gold  mines.  And  we  have  an  organisational  development plan which will see requisite human resources added with recruitment as we progress.   We appreciate the strong support of our shareholders, contractors, communities and other stakeholders. The Company  now  has  two  cornerstone  shareholders  in  Odey  Asset  Management  and  Lanstead  Capital  that  support  rapid  growth  companies. Project contractors Ausdrill and Lycopodium are also shareholders as is the Board of Directors.  KEFI Minerals is positioned to become the operator of two gold development projects in the highly prospective ANS. We  have achieved this progress with a small team around whom we will build the full operating team in conjunction with the  project contractors, both of whom have over 20 years of mine building experience in Africa. We are well supported by a  number of high calibre, quality specialist advisers also selected for their pre‐eminence in start‐ups of this nature.  I look forward to seeing some of you at the Annual General Meeting on 29 June 2017 in London.  Harry Anagnostaras‐Adams, Executive Chairman  KEFI Minerals plc Board of Directors meeting in Nicosia Cyprus Head Office. From left, Laki Catsamas (Financial Controller  and Acting Company Secretary), Harry Anagnostaras‐Adams (Executive Chairman), Wayne Nicoletto (Chief Operating  Officer), Mark Wellesley‐Wood (Deputy Chairman), John Leach (Finance Director), and Ian Plimer (Non‐Executive  Director). Non‐Executive Director Norman Ling is not in this photo.  KEFI Minerals Plc ANNUAL REPORT 2016 Page 5         Finance Director’s Report KEFI’s strategy is to maximize shareholder value through the development of a focused portfolio of mining 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  introduce  partners  and  contractors  in  certain circumstances to minimise risk and broaden the human and financial resources available.   KEFI minimises expenses while maintaining momentum towards becoming a gold producer. In order to help reduce cash  outflows, some employees, Directors and consultants agreed to take KEFI shares in lieu of a significant portion of their  salary or fees during 2016. Some Company officers also invested significant amounts into KEFI share placings.  Equity Funding  KEFI Minerals has to date financed its activities through periodic capital raisings and contributions by partners.  The Company completed several equity placings during 2016, raising a total of £5.6 million (before expenses).   In March 2017, shareholders approved a £5.62 million fundraising comprised of:  o £0.60 million placing of equity by Brandon Hill Capital;  o £0.40 million subscription by certain of the Directors, employees and Lycopodium; and  o £4.62 million subscription by Lanstead Capital.  Following the completion of the March 2017 fundraising and associated consolidation of the Company’s capital on a 17‐ for‐1 basis, KEFI had a total of 332.7 million Ordinary Shares on issue.  A key aspect of the March 2017 fundraising is that £3.93 million of the £4.62 million subscription by Lanstead is subject  to a Sharing Agreement which allows KEFI to benefit financially from positive share price performance, whilst limiting the  financial downside risk from a negative share price performance.   The number of Ordinary Shares issued to Lanstead under the Sharing Agreement is fixed at 82.4 million Ordinary Shares.  However, the amount from Lanstead due to KEFI under the Sharing Agreement is adjustable upwards or downwards at  each of the 18 monthly settlements that commenced in May 2017.  The Lanstead Sharing Agreement underpins the Company's expenditure for 2017 and is focused on an increasing share  price being beneficial to both Lanstead and KEFI shareholders.  The  Notice  of  General  Meeting  includes  a  proposed  shareholder  resolution  to  provide  the  Directors  with  sufficient  authority to implement equity raisings to allow the preferred project funding proposal to proceed for Tulu Kapi.  Partnering the Government in Ethiopia and ARTAR in Saudi Arabia  In  May  2017,  KEFI  Minerals  (Ethiopia)  Limited  ("KME")  and  the  Federal  Democratic  Republic  of  Ethiopia  signed  the  Shareholders' Agreement and other foundation documentation for the incorporation, ownership and operation of Tulu  Kapi Gold Mines Share Company Limited (“TKM”), which will result in TKM owning 100% of Tulu Kapi. The exploration  projects outside the Tulu Kapi Mining Lease area are not part of TKM and remain 100% owned by KEFI.  In the Kingdom of Saudi Arabia KEFI conducts all its activities through Gold and Minerals Co. Limited (“G&M”), our joint  venture company with Abdul Rahman Saad Al Rashid and Sons Limited (“ARTAR”). KEFI is operator with a 40% interest  and ARTAR has 60%. KEFI’s is fortunate to have such a strong Saudi group as a partner and G&M has assembled a large  and  prospective  portfolio  of  exploration  licences  and  applications.  Having  made  a discovery  at  Jibal  Qutman,  the joint  venture looks forward to development and expansion in the minerals sector which the Saudi Government has made a  national strategic priority.  Tulu Kapi Development Funding  The Tulu Kapi funding process is ongoing with several potential financiers who are comfortable investing in Ethiopia.  The foundations of risk management for funding Tulu Kapi include that all short term (up to five years) debt servicing  commitments  are  met  even  if  the  price  of  gold  drops  to  and  stays  at  c.  US$900/oz  whilst  longer  term  (5‐10  years)  KEFI Minerals Plc ANNUAL REPORT 2016 Page 6     commitments are acceptable as long as they are covered by a flat price of c. US$1,000/oz. It is notable that the lowest  gold price in the past seven years is c. US$1,100/oz and the highest c. US$1,900/oz.  Since  acquiring  the project, KEFI  has  continually  refined and  reduced  project  capital  requirements  and  rendered more  reliable production plans. Before adding financing charges and costs of other KEFI activities, the current estimate of total  KEFI  Group  requirement  for Tulu  Kapi development capital  is  c.  US$160  million,  which  has  been approximately halved  from the previous owner’s estimate.  KEFI’s  progress  on  project  financing  was  delayed  during  2016  as  a  result  of  the  tightening  of  the  mining  debt‐finance  sector generally and the declaration of the Ethiopian State of Emergency, which had the effect of depressing the interest  of financiers unfamiliar with Ethiopia. The Company responded by elevating its focus onto alternative financiers familiar  with Africa and especially Ethiopia and, in particular, to design financing proposals with African‐experienced gold project  contractors. We now have three financing proposals built around alternative project contracting syndicates, and we have  prioritised  the  funding  structure  designed  around  the  preferred  contractors  selected  in  2016  ‐  Ausdrill  for  mining  and  Lycopodium for processing.    As  a  result  of  recent  progress,  along  with  potential  financiers,  the  Government  and  contractors,  KEFI  has  intensified  preparations  for  development  to  commence  this  year.  The  syndication  brings  with  it  the  complexities  of  multiple  jurisdictions  and  some  “paving  the  way”  in  Ethiopia  for  which  this  is  the  first  internationally  financed  major  mining  project  finance  transaction.  Nevertheless,  all  syndicate  members  are  working  to  the  common  objective  of  starting  production in 2019.  Statutory Accounts and Reporting  KEFI’s financial statements for 2016 are attached and report financial results based, inter alia, on the write‐off of most  historical pre‐development expenditure at Tulu Kapi and the write‐off of all exploration expenditure.   In May 2017, KEFI reported progress of closing out any potential exposure to a damages claim brought in 2014 by third  parties  in  Ethiopia  relating  to  events  which  took  place  between  1998  and  2006.  The  claim  has  been  reduced  from  approximately US$12 million to approximately US$600,000 which KEFI is appealing to a higher court.  John Leach, Finance Director  Resettlement property survey teams planning their day.  KEFI Minerals Plc ANNUAL REPORT 2016 Page 7           Chief Operating Officer’s Report  During 2016, we continued to work towards triggering the development of Tulu Kapi. This entailed working with selected  contractors and the Government of Ethiopia, as well as assisting potential financiers with their due diligence.  Project and Construction Management  KEFI’s  project  management  team  has  extensive  gold  development  experience,  mainly  in  Western  Australia  and  Africa.  This team managed the rounds of bidding for the Engineering, Procurement and Construction (“EPC”) contract and for  the  Mining  Contract.  Our  project  management  team  has  been  based  in  Perth  so  as  to  work  closely  with  Ausdrill  and  Lycopodium head offices.  Upon  commencement  of  development,  KEFI’s  project  management  team,  myself  included,  and  those  of  the  principal  contractors will move to Tulu Kapi in remote western Ethiopia where we have an exploration camp and will build a larger  accommodation village.  EPC Contractor   In June 2016, KEFI appointed Lycopodium as the EPC Contractor with a scope of work including:   Detailed equipment specification and procurement;   Construction of the processing plant to occur under a fixed‐price, lump‐sum contract;    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;  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.   KEFI has recently approved the formal Front End Engineering and Design (“FEED”) proposal for US$68 million under the  proposed fixed‐price EPC contract. This is the largest component of the initial capital expenditure to develop Tulu Kapi.   The FEED proposal is to build a 1.5‐1.7 Mtpa (range of nameplate capacity dependent on ore type) processing plant and  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 which have been incorporated into the recently published 2017 DFS Update. KEFI targets 10%  higher‐than‐nameplate capacity from production year 2 onwards, which would bring forward processing of some of the  lower‐grade ore that is assumed to be stockpiled in the 2017 DFS Update.  Mining Contractor   KEFI  has  appointed  African  Mining  Services  (“AMS”),  a  wholly‐owned  subsidiary  of  Ausdrill  Limited  as  the  mining  contractor. AMS has a strong track record in African operations and has become a significant (c. 5%) KEFI shareholder.  The principal terms and consequences of this appointment are set out below, all of which have been documented:  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 have agreed a detailed operating plan for mining the Tulu Kapi open pit. AMS has confirmed mining fleet  specifications  and  detailed  contract  specifications.  The  mining  method  and  equipment  specification  are  considered  straightforward  and  technically  sound  by  the  lenders’  independent  technical  expert.  Under  the  mining  contract  specifications, only c. 21% of the ore tonnage and 5% of the total material movement is categorised as “selective” ore  and  waste  mining,  indicating  standardised  mining  methods  for  most  material.  The  selective  mining  aspects  for  the  KEFI Minerals Plc ANNUAL REPORT 2016 Page 8     peripheral  ore  zones  have  been  carefully  planned  in  detail  with  appropriate  specialists  to  optimise  mine  dilution  and  operating costs.  Community  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 2015 Tulu Kapi Mining Agreement 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.  Our  social  licence  team  is  based  at  Tulu  Kapi  and  our  processes  involve  continual  consultation  with  the  community,  federal, regional and local authorities and other local institutions before and during implementation of the RAP.   KEFI and the Government continue to ensure transparent and compliant procedures for the resettlement of displaced  farmers at Tulu Kapi. KEFI is playing a supporting role to the Government’s efforts and is committed to assist where it can  to ensure Tulu Kapi remains an exemplary example of due process and social licence management.   Ethiopian  Government  experts  and  our  advisers  are  ensuring  that  compensation  and  plans  comply  with  Ethiopian  law  and IFC (World Bank) principles.  Operations  KEFI’s project management team will be replaced during the start‐up phase with its Operations Team, which will include  new appointees some of whom have already been selected. The Company has set out organisational plans for the three  main  sets  of  personnel:  mining  (Ausdrill),  processing  (initially  Lycopodium)  and  KEFI  general  management,  planning,  monitoring and control teams for safety, security, environmental, compliance, operations, administration and finance.  Outlook  All the post‐2015 DFS refinements have been incorporated into the 2017 DFS Update completed in May 2017. The 2017  DFS  Update  reflects  the  costings  and  schedules  built  into  detailed  draft  contractual  documentation  with  the  project  contractors – a schedule of rates mining contract and a fixed‐price, lump‐sum process plant construction contract.  The KEFI team, the Tulu Kapi community and the Ethiopian Government are all looking forward to mine development  commencing as soon as practical.   KEFI’s collaborative approach with contractors, community and other stakeholders during the planning phase should put  us in good stead to work through the inevitable challenges as the project progresses.  It remains an exciting time to be developing a new gold mine and many quality people have expressed interest in joining  the KEFI team as the Company enters the development phase.  Wayne Nicoletto  Chief Operating Officer  Managing Director, KEFI Minerals Ethiopia KEFI Minerals Plc ANNUAL REPORT 2016 Page 9         Organic Growth in Arabian-Nubian Shield 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.   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.  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 Exploration Licence Applications (“ELAs”) in both countries.  We are continually adding to our knowledge of the ANS and systematically building our database for project generation  and  optimisation.  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  pole position in a very prospective region.  For example, the Hawiah Exploration Licence (“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.   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.  KEFI Minerals’ Non‐Executive Director Ian Plimer and former Exploration Director Jeffrey Rayner  at Hawiah, Saudi Arabia.  KEFI Minerals Plc ANNUAL REPORT 2016 Page 10         Ethiopia Following  completion  of  the  DFS  in  2015,  Tulu  Kapi  has  continued  to  be  progressed  towards  development  with  the  appointment of contractors and subsequent work to 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. All‐in Sustaining Cost is less than US$800/ounce, much lower than the industry  average.   All  aspects  of the  Tulu  Kapi  (open  pit)  gold  project  have  been  reported  in  compliance  with  the  JORC  Code  (2012)  and  subjected  to  reviews  by  appropriate  independent  experts.  These  plans  now  also  reflect  the  agreed  construction  and  operating terms with project contractors.  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.  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 2014‐15.  The  altitude  of  the  project  area  is  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  project  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 2016 Page 11     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.   Geologists working in Tulu Kapi core shed.  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).  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 2016 Page 12       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.  KEFI geologists have steadily increased their understanding of the Tulu Kapi orebody and utilising this knowledge as part  of the systematic search for nearby gold deposits.  Tulu Kapi – Resources and Reserves  The Tulu Kapi Mineral Resources total 20.2 million tonnes at 2.65g/t gold, containing 1.72 million ounces. As summarised  in the table below, c. 94% of the Mineral Resources are in the Indicated category.  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, respectively.  The  Tulu  Kapi  Ore  Reserves  were  based  on  the  Indicated  Resource  above  1,400m  RL  and  total  15.4  million  tonnes  at  2.12g/t gold, containing 1.05 million ounces. As detailed in the table below, 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.  This split shows that 78% of the ore tonnes and 93% of the contained gold is contained in the higher‐grade zones of the  Ore  Reserve  which  are  processed  preferentially  in  the  first  eight  production  years.  Lower‐grade  ore  is  stockpiled  for  processing subsequently.  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  Note: Mineral Resources are inclusive of Ore Reserves.   Gold  (g/t)  2.52  0.73  2.12  Contained Gold  (million ounces)  0.98  0.08  1.05  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  The DFS completed in December 2012 by Nyota Minerals evaluated construction of a 2.0Mtpa CIL processing plant and  estimated  initial  capital  expenditure  of  US$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 Minerals Plc ANNUAL REPORT 2016 Page 13       Following KEFI completing the 2015 Definitive Feasibility Study (“2015 DFS”) in June 2015, the cost estimates and mine  plan were refined further and summarised in the 2017 DFS Update of May 2017. These refinements are the product of:    collaboration between the KEFI project management team, its specialist advisers and the project contractors ‐  Ausdrill/African Mining Services and Lycopodium; and  reviews by the Independent Technical Consultants for the project financiers.  It is planned to preferentially process higher‐grade ore (mined above cut‐off grade of 0.9g/t gold) and to stockpile ore  mined at grade 0.5‐0.9g/t gold.   KEFI targets to run the plant at slightly higher (c. 10%) than nameplate processing rate from year 2 and further reduce  the build‐up of ore stockpiles.  This work has delivered even more robust gold project than in KEFI’s 2015 DFS as shown in the table below.  Waste:ore ratio  Processing rate warranted  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 91.5% Annual steady‐state gold production  Total LOM gold production  95,000 ounces 961,000 ounces Initial construction capital   All‐in Sustaining Costs  Average net operating cash flow  Payback Notes:   US$176M US$724/oz US$50M p.a. 3.5 years 2017 DFS Update   10‐year LOM  (contract mining)  7.4:1.0  1.5‐1.7Mtpa  15.4Mt  2.1g/t gold  93.3%  115,000 ounces  980,000 ounces  US$145M  US$777/oz  US$55M p.a.  3 years   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.   Gold production and net operating cash flow are for the first eight years of gold production.   The Initial construction capital under the 2017 DFS Update is reduced from US$161 million to US$145 million due to contractually  deferred  payments.  Planned  funding  requirements  of  US$160  million  include  non‐Tulu  Kapi  costs  and  finance  charges  incurred  during construction.  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 dedicated power line relatively close to the country’s major hydro  power‐generation source. 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.   Following the international tenders, KEFI appointed Ausdrill (via subsidiary African Mining Services) as mining contractor  and Lycopodium as process plant construction contractor.   Tulu Kapi is permitted for development and operation. The work currently being undertaken should ensure construction  can proceed quickly and efficiently once funding is in place. Minor licences and permits are expected to be dealt with  expeditiously  as  development  progresses.  The  Government  has  established  a  Prime  Ministerial  Steering  Committee  to  fast‐track Tulu Kapi. KEFI Minerals works closely with the members of that committee, who head the various ministries  and government organisations involved with the project.  KEFI Minerals Plc ANNUAL REPORT 2016 Page 14                 Tulu Kapi – Potential for Underground Mine  The  Tulu  Kapi  orebody  is  amenable  to  underground  mining  as  ground  conditions  are  good,  Ore  Reserve  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  current  underground  mining  inventory  of  1.3  million  tonnes  at  5.2g/t  gold  potentially adds gold production of c. 50,000 ounces p.a. for four years.  The PEA considered the gold mineralisation below the base of planned open pit at a cut‐off grade of greater than 2.5g/t  gold, 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 150,000 ounces p.a.;   The underground mine adds an estimated US$28 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 is targeted to commence in the first half 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. 1 million ounces.   Inaugural Directors of Tulu Kapi Gold Mines Share Company Limited , newly created to assume the role of KEFI Minerals  (Ethiopia) Limited: Harry Anagnostaras‐Adams (Chairman) Wayne Nicoletto (Managing Director) and Dr Kebede Belete  (Director and Manager Government Relations), Muluken Kassa (Director and Finance Manager) plus Derartu Legesse  (Office Manager) and Meseret Ayalew Kassaye (Financial Accountant)  KEFI Minerals Plc ANNUAL REPORT 2016 Page 15         Tulu Kapi – Regional Exploration Potential  Regional  exploration  is  at  an  early  stage  but  significant  potential  has  already  been  identified  for  further  gold  orebodies  to  be  discovered near Tulu Kapi.   During  2016,  KEFI  worked  on  improving  geological  and  structural  understanding of the district. Drilling is planned to commence once  Tulu Kapi is in development.   Geochemical  and  geophysical  surveys  have  identified  strong  gold  anomalies along three major shear zones parallel to the shear zone  containing the Tulu Kapi gold deposit.   One of these shear zones lies only a few kilometres to the west of  Tulu  Kapi  where  shallow  gold  mineralisation  has  been  identified  over +9km along the Guji‐Komto Belt. Trenching and drilling results  already indicate the potential for oxide gold mineralisation totalling  300‐500,000 ounces at c.1.5g/t gold in a series of shallow open pits  (c.40m depth).  Once proven up by further drilling, this gold mineralisation may be  treated  by  either  trucking  to  the  Tulu  Kapi  processing  plant  or  as  stand‐alone  heap‐leach  operations.  Preliminary  work  indicates  initial heap‐leach operations could produce c.50,000 ounces of gold  p.a.  with  low  stripping  ratios  and  high  gold  recoveries.  This  approach  is  likely  to  result  in  low  operating  and  capital  costs  as  most  infrastructure  would  be  provided  by  the  planned  Tulu  Kapi  mine.  Guji‐Komto Belt: best trench and drill hole gold results KEFI Minerals Plc ANNUAL REPORT 2016 Page 16           Saudi Arabia Our priorities in cost effectively discovering economic gold and copper in Saudi Arabia remain:  1. Jibal  Qutman  –  increase  oxide  gold  resources  on  the  granted  Exploration  Licence  (“EL”)  and  surrounding  Exploration Licence Applications (“ELAs”);  2. Hawiah – determine if a copper‐gold‐zinc VHMS deposit lies beneath the 6km‐long, gold‐bearing surface gossan;  KEFI  has  a  40%  beneficial  interest  in  a  large  portfolio  of  ELAs  and  two  granted  ELs  in  Saudi  Arabia  via  G&M,  our  joint  venture company with ARTAR.   Location of G&M ELs and ELAs in Saudi Arabia, including the main gold and VHMS copper deposits in the ANS.  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.   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.  During 2016, the Saudi Government created the Energy, Industry and Mineral Resources Ministry. This new ministry is  now preparing new mining policies in consultation with local mining industry participants. KEFI and ARTAR regard this as  a  positive  sign  and  look  forward  to  the  new  mining  policy  being  released.  KEFI  has  upgraded  its  portfolio  of  licence  applications in preparation for the deregulation of the sector which should expedite mining development in the country.  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.   KEFI Minerals Plc ANNUAL REPORT 2016 Page 17       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.   Exploration Manager Fabio Granitzio assisting authorities on a site inspection.  Saudi Arabia ‐ Jibal Qutman  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.  The Jibal Qutman EL is located in the central southern region of the Arabian Shield and covers an area of 99km2. 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 by G&M 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.  G&M  envisages  initially  developing  a  small  heap‐leach  operation  to  self‐fund  G&M’s  exploration  activities  in  Saudi  Arabia.  KEFI Minerals Plc ANNUAL REPORT 2016 Page 18           Mineral Resource Estimates for Jibal Qutman  The current Mineral Resource estimate for Jibal Qutman totals 28.4 million tonnes at 0.80g/t gold, containing 733,045  ounces. As summarised in the table below, the majority of the Mineral Resource is 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.  The  oxide  gold  mineralisation  contained  in  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  (“HL”)  processing.  Accordingly,  the  Company  is  focusing  on  initially  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.  Key outcomes from a Preliminary Economic Assessment for Jibal Qutman completed in May 2015 were:  1.5Mtpa HL 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 for under US$3 million in equity or other forms of finance.  Following  on‐site  meetings  with  regulators,  the  Mining Licence Application  for  the  Jibal  Qutman  HL  gold  development  was lodged with the Saudi Government in March 2017.  Jibal Qutman Outlook  Jibal Qutman’s business objectives over the coming year are to:     Follow‐up the Mining Licence Application with the regulatory authorities;  Explore the surrounding ELAs after their grant, which have high prospectivity for additional near‐surface oxide  gold resources; and  Prepare applications for construction and operating licences.    KEFI Minerals Plc ANNUAL REPORT 2016 Page 19       This  strategy  envisages  Jibal  Qutman  becoming  G&M’s  foundation  for  a  strong,  sustainable  mining  company  in  Saudi  Arabia.  Drilling South Zone at Jibal Qutman.  Saudi Arabia ‐ Hawiah  Following the grant of the 95km2 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.   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 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 VHMS occurrences and historic workings for copper and gold.   Hawiah Geology and Exploration  The planned exploration programme at Hawiah aims to:   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.  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,  which identified its gold‐bearing potential.   KEFI Minerals Plc ANNUAL REPORT 2016 Page 20       In February 2015, KEFI completed a first‐pass, wide‐spaced trenching programme 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.   Self‐potential (“SP”) geophysical surveys were completed over the 6 km‐long gossanous horizon during 2015 and 2016.  Two strong anomalies were identified:   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 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.  Following resolution of some community requests, further exploration activities are planned to commence at Hawiah in  the second half of 2017. G&M continues to ensure that 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 Regional Prospectivity  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 seven other ELAs 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.    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.  KEFI Minerals Plc ANNUAL REPORT 2016 Page 21     Saudi Arabia ‐ Exploration Licence Applications  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. 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.   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.  Exploration Manager Fabio Granitzio and geologist Luca Purpura mapping a new area.  KEFI Minerals Plc ANNUAL REPORT 2016 Page 22           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  c.  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  Circa   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  Mining Agreement Mining Licence Million tonnes Million tonnes per annum Troy ounce of gold KEFI Minerals Plc ANNUAL REPORT 2016 Page 23     PEA  PFS  Precambrian  RC drilling  RL  SP  VHMS deposits  Preliminary Economic Assessment 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.   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 former Exploration Director  of KEFI Minerals and a Member of the  Australian  Institute  of  Geoscientists  (“AIG”).  Mr  Rayner  is  a  geologist  with  sufficient  relevant  experience  for  Group  reporting to qualify as a Competent Person as defined in the JORC Code 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 2016 Page 24             Directors, Secretary and Advisers 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 Share 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. 48 Gracechurch Street London EC3V 0EJ United Kingdom www.luther.co.uk Directors Harry Anagnostaras-Adams, Executive Chairman Mark Wellesley-Wood, Non-Executive Deputy Chairman John Leach, Finance Director Norman Ling, Non-Executive Ian Plimer, 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 RFC Ambrian Limited Level 5, Condor House 10 St Paul’s Churchyard London EC4M 8AL United Kingdom www.rfcambrian.com Joint Broker Beaufort Securities Ltd 131 Finsbury Pavement London EC2A 1NT United Kingdom www.beaufortsecurities.com KEFI Minerals Plc ANNUAL REPORT 2016 Page 25                    KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Consolidated Financial Statements Year ended 31 December 2016 CONTENTS Group 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 27-31 32-38 39 40-41 42 43 44 45 46 47 48-75 KEFI Minerals Plc ANNUAL REPORT 2016 Page 26                                                             KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Group Strategic Report For the year ended 31 December 2016 KEFI Minerals PLC Company number: 05976748 The directors present their Group Strategic Report for the year ended 31 December 2016. Incorporation and principal activity  KEFI Minerals PLC (‘KEFI” or the “Company”) or together with its subsidiaries (“the Group”) was incorporated on 24 October 2006 and was admitted to AIM in December 2006 with an initial market capitalisation of £2.7 million at the placing price. The principal activities of 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 made solid progress during 2016 towards becoming a gold production company. The calm and pro-development situation in Ethiopia, combined with the financing proposals being considered by KEFI, makes the Board confident that the Tulu Kapi Gold Project (“Tulu Kapi”) should start development in 2017. KEFI Minerals in Ethiopia KEFI owns 100% of the Tulu Kapi Gold Project in Ethiopia. The Government of Ethiopia is entitled to a 5% free carried-interest and a 7% royalty on gold production. Tulu Kapi has been overhauled and enhanced by the Company as follows:       Successfully overhauled the project’s development and operating plans; Completed several independent cycles of due diligence on the optimised plans; Subsequent refinements and the terms of appointment of the project contractors in October 2015 reduced the previous owner’s estimated capital requirement of c. US$300 million to KEFI’s estimate of c. US$160 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. 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. Received the Mining Licence which fully permits the development and operation pf the project; Signed a bilateral Mining Agreement with the Government of Ethiopia setting out the fiscal regime for life of mine. As part of preparations during 2016 for the development phase, Mr. John Leach joined the senior executive team as Finance Director and Mr. Mark Wellesley-Wood, an experienced African mining operator, joined the Board as a Non-Executive Director. The equity requirement for KEFI is targeted at c. US$20 million, after taking all components into account, including mezzanine finance. But there can be no assurance of the final composition until closure. KEFI is also assembling project funding proposals from alternative sources to examine all reasonable choices for triggering development on a suitably risk managed basis whilst minimising equity dilution. During 2016, the Company fully repaid the inherited VAT liability and became entitled to an ETB 73,497,020 VAT refund (approximately £2.5 million). The Company received GBP 1 million post year end. KEFI Minerals in the Kingdom of Saudi Arabia In Saudi Arabia, KEFI’s gold discovery at Jibal Qutman appears to be quite robust based on preliminary economic assessment, with a low-capex requirement and the potential to generate the net cash flows for financing an ambitious Saudi exploration programme by the Gold and Minerals (“G&M”) joint venture, of which KEFI is 40% owner and operator. The Mining Licence Application for the Jibal Qutman gold development was lodged with the Saudi Government in March 2017. Plans are to explore the sizeable portfolio of licences and applications in Saudi Arabia, starting with the large target for precious and base metals at Hawiah, where G&M has identified a huge target for precious and base metals based on the surface-sampling of a six-kilometre long gossan and the results of the geophysical surveys of the ground beneath the gossan. KEFI Minerals Plc ANNUAL REPORT 2016 Page 27   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Group Strategic Report (continued) For the year ended 31 December 2016 Funding  The Company successfully completed a number of equity placings in 2016. Overall the Company raised £5.6 million (before expenses) through the placing of 1,261,281,530 new Ordinary Shares at an average price of 0.44p per share during the year. The funds raised were allocated to:  Discharge of the KEFI Minerals Ethiopia Limited VAT obligations to the Ethiopian government in 2015. In August 2016, the Company fully settled this obligation;  Tulu Kapi community resettlement, livelihood restoration and community activities which remain ongoing.  Completion of the Front End Engineering and Design (“FEED”) proposal from Lycopodium under its proposed fixed price Engineering Procurement and Design (“EPC”) contract for Tulu Kapi.  KEFI’s ongoing corporate costs including the arrangement of project finance facilities for the planned gold mine developments. Key Performance Indicators  Key Performance Indicators for the Group for the year ended 31 December 2016 are those relevant to the exploration, acquisition, project evaluation and early-stage finance phases of its activities. Key Performance Indicators include:  Progress in FY 2016: o Mining Licence Application for Jibal Qutman gold project in Saudi Arabia; o Complete the FEED for Tulu Kapi; o Trigger preparations for community resettlement in Ethiopia;  Focus for FY 2017: o Formalisation of development funding for Tulu Kapi; o Execution and regulatory clearance of project debt finance and contract documentation; o Raising the equity required to complete the finance and trigger loan drawdown; o Resettle the community; and o Start construction. The Group considers that its primary projects in Ethiopia and Saudi Arabia continue to progress satisfactorily and careful monitoring and control has been carried out in respect of cash management. 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. 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. KEFI Minerals Plc ANNUAL REPORT 2016 Page 28   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Group Strategic Report (continued) For the year ended 31 December 2016 Results  As at 31 December 2016, the Group had net working capital of £1,495,000 (2015: (£ (983,000)) and the Company’s market capitalisation was £12.43 million (2015: £8.39 million). At the year end the Group had equity of £15,547,000 (2015: £10,943,000). During 2016, the Group has incurred exploration expenditure of £125,000 (2015: £4,000) from operations and an operating loss of £974,000 (2015: £2,837,000). The Company made several successful placements during the year raising £5.5 million (before expenses) as follows: Issued March 2016 at 0.35p July 2016 at 0.50p Funds raised before expenses Less costs deducted from share premium and equity £’000 1,746 3,810 5,556 (364) 5,192 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. 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. Operating Expenses Exploration expenditure Administrative expenses Vat refund 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 42. Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 (125) (2,190) 2,512 (164) (281) (726) (123) (136) (1,233) (4) (1,720) - (163) (215) (735) (50) (319) (3,206) KEFI Minerals Plc ANNUAL REPORT 2016 Page 29                     KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Group Strategic Report (continued) For the year ended 31 December 2016 Organisation overview  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. 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. 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 mineralisation until production is possible, during which time the economic feasibility of production may change. Substantial expenditure is required to establish Ore Reserves through drilling, to determine metallurgical processes to extract minerals from ore and to construct mining and ore 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, and 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. KEFI Minerals Plc ANNUAL REPORT 2016 Page 30     KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Group Strategic Report (continued) For the year ended 31 December 2016 Principal risks and uncertainties continued  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, appropriation 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. The Group enjoys a good working relationship with the relevant authorities in Ethiopia and Kingdom of Saudi Arabia and has a permanent management team in these countries to monitor developments. Financial risks:  Commodity risk: A potential fall in commodity prices which could lead to it becoming uneconomic for the Group to mine its assets. The Group’s principal interest is gold. The Group will consider the use of appropriate hedging products to mitigate this risk as it approaches production. The Group’s other financial 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 Finance 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 4 June 2017 KEFI Minerals Plc ANNUAL REPORT 2016 Page 31   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Report of the board of directors For the year ended 31 December 2016 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 2016. 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 2016 and at the date of this report are shown on page 25. 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. He 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. Mark Wellesley‐Wood  Deputy Chairman and Lead Independent Director  Mr Mark Wellesley-Wood is a mining engineer, with over 40 years’ experience in both the mining industry and investment banking. He has been closely involved in mining activities in Africa, having started his career on the Zambian copper-belt. Mark is a former Executive Chairman and CEO of South African gold miner, DRDGold Limited, and a former director of Investec Investment Banking and Securities in London. He is currently Chairman of AIM-quoted Tri-Star Resources plc. John Edward Leach  Finance Director   Mr Leach was appointed non-executive director and part-time Finance Director in December 2006 with responsibility for oversight of the Company’s finance and accounting functions. In August 2016, he assumed a full-time role as Finance Director as part of the Company’s transition towards gold production. 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 is non-executive Chairman of ASX listed Pan Continental Oil & Gas NL and 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). KEFI Minerals Plc ANNUAL REPORT 2016 Page 32   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Report of the board of directors (continued) For the year ended 31 December 2016 Norman Ling  Non‐Executive Independent Director  Mr Norman Ling holds a BA (Hons) German and Economic History and has previously served as a non-executive director of Nyota Minerals Limited. 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. Ian Rutherford Plimer  Non‐Executive Director   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 represents Hancock Prospecting on the Lakes Oil NL board (ASX:LKO). Directors’ indemnities  The Group maintains directors’ and officers’ liability insurance providing appropriate cover for any legal action brought against its Directors.  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 date of report are as follows: Director H Anagnostaras-Adams I Plimer J Leach N Ling Number of existing ordinary shares % of issued share capital 5,794,809 822,816 1,715,742 296,265 1.74% 0.25% 0.52% 0.09% On the 2 March 2017 the Company consolidated 17 Existing Ordinary Shares into one New Ordinary Share. The Directors to whom options over Ordinary shares have been granted after the share consolidation at the date of this document and the number of ordinary shares subject to such options are as follows: KEFI Minerals Plc ANNUAL REPORT 2016 Page 33     KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Report of the board of directors (continued) For the year ended 31 December 2016 Grant Date Expiration Date Exercise Price H. Anagnostaras- Adams I. Plimer J. Rayner J. Leach N Ling 22-Mar-17 21-Mar-23 7.5 3,442,184 441,176 674,083 M.Wessley- Wood 882,353 05-Aug-16 04-Aug-22 6.8 - - - 882,353 - 588,235 19-Jan-16 18-Jan-22 7.14 943,412 314,471 943,412 314,471 314,471 20-Mar-15 19-Mar-21 22.44 382,353 58,824 382,353 58,824 117,647 12-Sep-14 11-Sep-20 29.92 - - - - 132,353 27-Mar-14 26-Mar-20 39.1 382,353 259,824 519,588 132,353 13-Sep-12 12-Sep-18 68 176,471 147,059 294,118 88,235 - - - - - - - 5,326,773 1,221,354 2,139,471 2,150,319 564,471 1,470,588 Directors’ emoluments  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 2016 is set out below: 31 December 2016 Executive J Rayner-Retired¹ H. Anagnostaras-Adams J. Leach-Appointed¹ Non-Executive I. Plimer N. Ling M Wellesley-Wood¹ Salary and fees Other compensation ²Share based benefit incentive options ³Deferred incentive bonus 2016 Total 96 211 87 25 71 10 500 21 18 10 - - - 49 47 46 31 14 16 13 167 - - - - - - - 164 275 128 39 87 23 716 31 December 2015 Salary and fees Other compensation Share based benefit incentive options ³Deferred bonus incentive 2015 Total Executive J. Rayner H. Anagnostaras-Adams Non-Executive I. Plimer J. Leach N. Ling 147 198 25 25 76 471 26 25 - - - 51 55 46 19 12 14 146 - 50 - - - 50 228 319 44 37 90 718 ¹Appointments and Retirement as Director: In August 2016 Mr. Wellesley-Wood was appointed as Non-Executive director and Mr Leach assumed the role of Finance Director. Mr. Rayner stepped down from the Board in August 2016 but continues to serve as Adviser – Exploration and Corporate Development. 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 2016 Page 34   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Report of the board of directors (continued) For the year ended 31 December 2016 Corporate governance statement  The Board is committed to maintaining high standards of corporate governance. The Directors recognise 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 necessary. 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 Finance Director), and three Non-Executive Directors. Two of the Non-Executive Directors, Mark Wellesley-Wood 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. Mark Wellesley- Wood was appointed as lead independent director in March 2017. 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 Mark Wellesley-Wood (Lead Independent Director), 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. The Finance Director 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 three Non-Executive Directors: Mark Wellesley-Wood (Chairman), Ian Plimer and Norman Ling. 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 takes into consideration the terms that may be required to attract equivalent experienced executives to join the Board from other companies. KEFI Minerals Plc ANNUAL REPORT 2016 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 2016 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 51 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 2016 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 2016 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 Nomura Custody Nominees Limited Securities Services Nominees Limited Barclayshare Nominees Limited BNY (OCS) Nominees Limited Ausdrill International Pty Ltd Jim Nominees Limited Beaufort Nominees Limited Registered holdings per TR-1 disclosures were: Lanstead Capital LP Odey Asset Management LLP Ausdrill International Pty Ltd Events after the reporting date  Consolidation of Ordinary Shares  Percentage Number of Shares 21.9% 8.7% 7.1% 5.9% 5.4% 5.0% 4.6% 3.0% 26.0% 18.9% 5.0% 73,035,872 28,823,529 23,823,530 19,661,765 18,090,000 16,559,487 15,366,334 9,877,598 86,470,588 62,764,330 16,559,487 At the close of business, 1 March 2017, shareholders received one New Ordinary Share of nominal value 1.7 pence each for every 17 Existing Ordinary Shares of nominal value 0.1 pence each. Immediately following the Consolidation (and prior to the issue of the Fundraising Shares) the number of New Ordinary Shares in issue and admitted to trading on AIM was 228,407,085. Placing and the Lanstead Subscription  The Company conditionally raised £5,620,000 before expenses on 1 March 2017 through a placing of 104,295,888 ordinary shares of 1.7p each at a price of 5.61p per share. After the placing and the 17:1 consolidation approved on 1 March 2017 there are 332,702,973 shares on issue. The Lanstead Subscription involves the issuance of 82,352,941 shares and is governed according to a ‘sharing agreement’ and structured relative to a benchmark price, which has been set at 7.48p/share (0.44p/share pre-consolidation), such that KEFI may receive more than £4,620,000 if the share price exceeds this level and vice versa if it does not. To this end, £693,000 was contributed in March 2017 by Lanstead, with the balance being paid in equal instalments of £218,000 per month (subject to adjustment upwards or downwards) for 18 months commencing in April 2017. Other  On 22 March 2017, 6,829,613 options were issued to persons who discharge director and managerial responsibilities ("PDMRs") and a further 2,705,509 options have been granted to other non-board members of the senior management team. The options have an exercise price of 7.5p, expire after 6 years, and vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve-month period. KEFI Minerals Plc ANNUAL REPORT 2016 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 2016 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  Company Secretary Cargil Management Services Limited 27/28 Eastcastle Street London United Kingdom 4 June 2017 KEFI Minerals Plc ANNUAL REPORT 2016 Page 38     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 hence 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 2016 Page 39   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 2016 which are set out on pages 42 to 75. 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 39, 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 2016 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 2016 Page 40   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, based on the work undertaken in the course of the audit:   the information given in the Strategic Report and the Directors’ Report for the financial year for which the group financial statements are prepared is consistent with the group financial statements; and the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception  In the light of the knowledge and understanding of the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. 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. Stephen Corrall, Senior Statutory Auditor For and on behalf of Moore Stephens LLP, Statutory Auditor 150 Aldersgate Street London EC1A 4AB 5 June 2017 KEFI Minerals Plc ANNUAL REPORT 2016 Page 41   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 Vat refund 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 Other comprehensive income: Exchange differences on translating foreign operations Total comprehensive loss for the year Notes Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 17 19 6 8 9 - (125) (125) (2,190) 2,512 (445) (726) (974) (123) (136) (1,233) - (1,233) - (4) (4) (1,720) - (378) (735) (2,837) (50) (319) (3,206) - (3,206) 200 56 (1,033) (3,150) Basic and fully diluted loss per share (pence) 10 (0.037) (0.203) The notes on pages 48 to 75 are an integral part of these consolidated financial statements. KEFI Minerals Plc ANNUAL REPORT 2016 Page 42   The Company 2016 The Group 2015 The Company 2015 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 Total equity and liabilities The Group 2016 61 13,992 - - 14,053 95 3,056 410 3,561 6 3,939 4,598 181 8,724 - 8,069 400 8,469 17,614 17,193 3,883 12,436 16,279 1,474 170 (18,695) 15,547 2,067 2,067 2,067 17,614 3,883 12,436 16,279 1,474 - (18,496) 15,576 1,617 1,617 1,617 17,193 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 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 12,938 13,971 The notes on pages 48 to 75 are an integral part of these consolidated financial statements. The Company has taken advantage of the exemption conferred by section 408 of Companies Act 2006 from presenting its own statement of comprehensive income. Loss after taxation amounting to £3.1 million (2015: £2.5 million) has been included in the financial statements of the parent company. On the 4 June 2017, the Board of Directors of KEFI Minerals PLC authorised these financial statements for issue. Harry Anagnostaras-Adams Executive Director- Chairman Company Number: 05976748 KEFI Minerals Plc ANNUAL REPORT 2016 Page 43   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Consolidated statement of changes in equity Year ended 31 December 2016 Attributable to the owners of the Company Share Share options capital reserve Share premium Deferred shares Foreign exchange reserve Accumulat ed losses Total At 1 January 2015 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 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 At 31 December 2016 12,352 - - - - - 2,707 (12,436) - 2,623 - - - - - - - - - - - 12,436 - 12,436 - - - - 8,433 - - - - - 4,293 - 848 - - - 378 (14) - - (86) - 56 56 - - - - (14,389) (3,206) - (3,206) - 14 - - 7,158 (3,206) 56 (3,150) 378 - 7,000 - (379) 12,347 - 1,212 - (30) (64) (17,645) (443) 10,943 - - - - - - - 445 (183) - - 1,474 - 200 200 - - - - 170 (1,233) - (1,233) - 183 - - (18,695) (1,233) 200 (1,033) 445 - 5,556 (364) 15,547 - 1,260 - 3,883 - - - 12,436 - 4,296 (364) 16,279 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 ordinary 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 48 to 75 are an integral part of these consolidated financial statements. KEFI Minerals Plc ANNUAL REPORT 2016 Page 44   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Company statement of changes in equity Year ended 31 December 2016 Share capital Deferred shares Share premium Share options reserve Accumulated losses At 1 January 2015 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 Comprehensive loss for the year Recognition of share based payments Cancellation of options Issue of share capital Share issue costs At 31 December 2016 12,352 - - - (12,436) 2,707 - 2,623 - - - 1,260 - 3,883 - - - - 12,436 - - 12,436 - - - - - 12,436 8,433 - - - - 4,293 (379) 12,347 - - - 4,296 (364) 16,279 848 - 378 (14) - - - 1,212 - 445 (183) - - 1,474 (13,117) (2,456) - 14 - - (64) (15,623) (3,056) - 183 - - (18,496) Total 8,516 (2,456) 378 - - 7,000 (443) 12,995 (3,056) 445 - 5,556 (364) 15,576 The following describes the nature and purpose of each reserve within owner’s equity: Reserve Description and purpose Share capital amount subscribed for ordinary 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 48 to 75 are an integral part of these consolidated financial statements. KEFI Minerals Plc ANNUAL REPORT 2016 Page 45       KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Consolidated statement of cash flows Year ended 31 December 2016 CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Depreciation of property, plant and equipment Share based payments Impairment of intangible asset Issue of warrants Share of loss 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 FLOWS FROM INVESTING ACTIVITIES Deferred exploration costs Project evaluation costs Acquisition of property plant and equipment Advances to jointly controlled entity Proceeds from disposal of available for sale asset 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 31.12.16 £’000 Year Ended 31.12.15 £’000 (1,233) 55 281 266 164 726 44 303 (2,701) 51 (2,347) (1,189) (1,224) (35) (566) 16 (2,998) 5,556 (364) 5,192 (153) 1 562 410 11 18 12 17 19 17 17 16 16 (3,206) 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 The notes on pages 48 to 75 are an integral part of these consolidated financial statements. KEFI Minerals Plc ANNUAL REPORT 2016 Page 46       KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Company statement of cash flows Year ended 31 December 2016 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 Proceeds from disposal of available for sale asset 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 incease/(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 31.12.16 £’000 31.12.15 £’000 (3,056) (2,456) 18 17 17 17 16 16 281 164 64 494 1 (2,052) 37 641 (1,374) (3) (2,861) (566) 16 (397) (3,811) 5,556 (364) 5,192 7 393 400 215 163 28 720 74 (1,256) 45 20 (1,191) (1) (587) (790) - (4,125) (5,503) 6,923 (443) 6,480 (214) 607 393 The notes on pages 48 to 75 are an integral part of these consolidated financial statements. KEFI Minerals Plc ANNUAL REPORT 2016 Page 47   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements Year ended 31 December 2016 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. The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its individual statement of comprehensive income and related notes that form a part of these financial statements. 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 both periods presented in these financial statements unless otherwise stated. Basis of preparation and consolidation The Company and the consolidated financial statements have been prepared in accordance with 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 2016. 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). KEFI Minerals Plc ANNUAL REPORT 2016 Page 48   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 2. Accounting policies (continued) 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 2016 (2015: £Nil). Property plant and equipment Property plant and equipment are stated at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition less depreciation. Depreciation is calculated using the straight-line method to write off the cost of each asset to their residual values over their estimated useful life. The annual depreciation rates used are as follows: 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. KEFI Minerals Plc ANNUAL REPORT 2016 Page 49   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 2. Accounting policies (continued) 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. 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. KEFI Minerals Plc ANNUAL REPORT 2016 Page 50   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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. 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: Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group does not consider this risk to be significant. KEFI Minerals Plc ANNUAL REPORT 2016 Page 51   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 3. Financial risk management (continued) Market risk - Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s operating cash flows are substantially independent of changes in market interest rates as the 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 2016 410 2015 562 Sensitivity analysis An increase of 100 basis points in interest rates at 31 December 2016 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 2016 Profit or Loss 2016 Equity Profit or Loss 2015 2015 4 (1) 4 (1) 6 (1) 6 (1) 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 2016 Assets 2016 Liabilities 2015 Assets 2015 215 205 1 1,025 187 - 2 40 318 2,943 24 276 1 663 779 - 2 40 266 354 KEFI Minerals Plc ANNUAL REPORT 2016 Page 52   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 3. Financial risk management (continued) Sensitivity analysis A 10% strengthening of the British Pound against the following currencies at 31 December 2016 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 2016 Profit or Loss 2016 Equity Profit or Loss 2015 2015 22 20 (4) 58 (276) 22 20 (4) 58 (276) 3 27 (4) 40 42 3 27 (4) 40 42 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 reverse VAT over a period of three years (principal and interest). The VAT amount was settled during 2016 and has given rise to a VAT refund. 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 £410,000 (2015: £562,000) and equity attributable to equity of the parent, comprising issued capital and deferred shares of £16,319,000 (2015: £15,059,000), other reserves of £17,923,000, (2015: £13,529,000) and accumulated losses of £18,695,000 (2015: £17,645,000). 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 2015 2016 Fair Values 2016 2015 410 95 3,056 562 92 358 410 95 3,056 562 92 358 2,067 1,995 2,066 1,995 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 2016 Page 53   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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. Capitalisation of exploration and evaluation costs Under the Group’s accounting policy, exploration and evaluation expenditure is not capitalised until the point is reached at which there is a high degree of confidence in the project’s viability and it is considered probable that future economic benefits will flow to the Group. Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a project does not prove viable, all irrecoverable costs associated with the project net of any related impairment provisions are written off. Contingent liabilities A contingent liability arises where a past event has taken place for which the outcome will be confirmed only by the occurrence or non- occurrence of one or more uncertain events outside of the control of the Group, or a present obligation exists but is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A provision is made when a loss to the Group is likely to crystallise. The assessment of the existence of a contingency and its likely outcome, particularly if it is considered that a provision might be necessary, involves significant judgment taking all relevant factors into account. KEFI Minerals Plc ANNUAL REPORT 2016 Page 54   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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 Consolidated 2016 Operating (loss)/profit (2,467) (34) (3) Material non-recurring item 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 Impairment of intangible assets (482) (193) (136) (3,278) 4,520 1,617 1 - - 70 - 36 42 2 - - (255) 2,994 - - - - - (3) 2,739 4 4 - - 13,049 443 54 266 (2,759) 2,512 (123) (136) (506) (726) (1,232) - (1,232) 17,615 2,066 55 266 Cyprus Turkey Bulgaria Ethiopia Consolidated 2015 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 (1,552) 13 (179) (33) (26) - (1,718) (59) 1,695 976 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 KEFI Minerals Plc ANNUAL REPORT 2016 Page 55   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 6. Expenses by nature Exploration costs Depreciation of property, plant and equipment (Note 11) Material non-recurring item- vat refund (Note 15 and Note 20) Impaired intangible assets (Note 12) Warrants issue costs (Note 17) Share based benefits to employees (Note 17) Share of losses from jointly controlled entity (Note 5 and Note 19) Directors’ fees and other benefits (Note 21.1) Consultants’ costs Auditors’ remuneration - audit current year Auditors’ remuneration - associated firm Other expenses Operating loss Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 125 55 (2,512) 266 164 77 726 716 439 62 7 849 974 4 90 - - 163 69 735 718 246 51 - 761 2,837 The Group’s stages of operations in Saudi Arabia as at the year-end and as at the date of approval of these financial statements have not yet met the criteria for capitalization of exploration costs. The Company only capitalises direct development costs for the Tulu Kapi gold project in Ethiopia. 7. Staff costs Salaries Accumulated Leave Provision Termination Package Social insurance costs and other funds Average number of employees Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 550 49 126 32 757 45 474 - - 39 513 46 Excludes Directors’ remuneration and fees which are disclosed in note 21.1. These staff costs are capitalised in development exploration costs. 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 2016 2015 - 136 136 140 179 319 2016 2015 (1,233) (3,206) (382) 248 341 (207) - - - (515) 308 280 (92) 19 - - The Company is resident in Cyprus for tax purposes. A deferred tax asset of £1,242,770 (2015: £1,336,989) has not been accounted for due to the uncertainty over future recoverability. KEFI Minerals Plc ANNUAL REPORT 2016 Page 56   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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 2016, the balance of tax losses which is available for offset against future taxable profits amounts to £ 9,942,163 (2015: £ 7,795,644). 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 2016, the balance of tax losses which is available for offset against future taxable profits amounts to £25,476 (2015: £34,035). 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 2016, the balance of exploration costs that is available for offset against future income from mining operations amount to £ 811,471 (2015: £948,764). 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 31.12.16 £’000 Year Ended 31.12.15 £’000 Net loss attributable to equity shareholders Average number of ordinary shares for the purposes of basic loss per share (000’s) (1,233) 3,313,626 (3,206) 1,577,708 Loss per share: Basic and fully diluted loss per share (pence) (0.037) (0.203) The effect of share options and warrants on losses per share is anti-dilutive. KEFI Minerals Plc ANNUAL REPORT 2016 Page 57   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 11. Property, plant and equipment  The Group Cost At 1 January 2015 Additions Disposals At 31 December 2015 Additions At 31 December 2016 Accumulated Depreciation At 1 January 2015 Charge for the year Disposals At 31 December 2015 Charge for the year At 31 December 2016 Net Book Value at 31 December 2016 Net Book Value at 31 December 2015 Motor Vehicles Plant and equipment Furniture, fixtures and office equipment Total 60 - (17) 43 32 75 39 5 (17) 27 6 33 42 16 198 7 (70) 135 - 135 73 67 (70) 70 46 116 19 65 61 4 (6) 59 3 62 47 18 (6) 59 3 62 - - 319 11 (93) 237 35 272 159 90 (93) 156 55 211 61 81 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 2016 Page 58   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 12. Intangible assets The Group Cost   At 1 January 2015    Additions   At 31 December 2015   Additions   At 31 December 2016  Accumulated Amortization and Impairment At 1 January 2015   Charge for the year    At 31 December 2015  Impairment Charge for the year   At 31 December 2016    Net Book Value at 31 December 2016    Net Book Value at 31 December 2015  The Company Cost   At 1 January 2015    Additions   Transfer from subsidiary   At 31 December 2015   Additions   Transfer to subsidiary   At 31 December 2016  Accumulated Amortization and Impairment At 1 January 2015   Charge for the year    At 31 December 2015     Charge for the year    At 31 December 2016    Net Book Value at 31 December 2016   Net Book Value at 31 December 2015 Project evaluation costs Deferred exploration costs 976 1,739 2,715 1,224 3,939 - - - - - 8,163 967 9,130 1,189 10,319 - - - 266 266 Total 9,139 2,706 11,845 2,413 14,258 - - - 266 266 3,939 2,715 10,053 9,130 13,992 11,845 Project evaluation costs 976 587 (485) 1,078 1,225 1,636 3,939 - - - - - 3,939 1,078 Total 976 587 (485) 1,078 1,225 1,636 3,939 - - - - - 3,939 1,078 KEFI Minerals Plc ANNUAL REPORT 2016 Page 59                   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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. Once the Board decides on the development of a project, development expenditure will be capitalized as incurred and amortised 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. As at 31 December 2016 management performed an impairment review for deferred exploration costs, which relate to the Tulu Kapi licence area, at 31 December 2016.The Net Present Value of the Tulu Kapi asset exceeded the net book value 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 capitalised 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. Feedback on the 2015 Definitive Feasibility Study (“2015 DFS”) from project contractors, financiers and partners was incorporated into an improved plan in early 2016. All refinements to the 2015 DFS were, in May 2017, incorporated into the 2017 DFS Update in preparation for financing. This reflects, among other things, the fixed price, lump-sum processing plant construction contract with Lycopodium and a warranted ore processing rate of 1.5-1.7 million tonnes per annum. The Tulu Kapi Mining Agreement between the Ethiopian Government and the Company was formalised 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 late- 2017. The Government of Ethiopia confirmed its intention to invest equity capital of US$20 million. KEFI Minerals Ethiopia also has no other mining exploration licences in Ethiopia. All development costs relating to Yubdo and Billa Guilisso exploration licenses capitalised in previous years was impaired in the current year. KEFI Minerals Plc ANNUAL REPORT 2016 Page 60     KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 13. Investments 13.1 Fixed asset investments The Company Cost At 1 January Acquisitions At 31 December Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 4,598 - 4,598 4,598 - 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 Subsidiary companies The following companies have the address of: Mediterranean Minerals (Bulgaria) EOOD 10 Tsar Osvoboditel Blvd., 3rd floor, Sredets Region, 1000 Sofia, the Republic of Bulgaria. Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket Zeytinalani Mah. 4183 SK. Kapı No:6 Daire:2 UrlaA Izmir KEFI Minerals Ethiopia Limited KEFI Minerals Marketing and Sales Cyprus Limited 27/28 Eastcastle Street, London, United Kingdom w1w 8DH 23 Esekia Papaioannou Floor 2, Flat 21 1075, Nicosia Cyprus 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 2016 and 2015. 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 2016 Page 61   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 13.2 Investment in jointly controlled entity The Company At 1 January/31 December Jointly controlled entity Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’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 The company owns 40% of G&M more information in note 19.2. 14. Available for sale financial assets The Group At 1 January Change in value of available-for-sale financial assets On 31 December The Company At 1 January Disposal of Investment Profit on Sale Change in value of available-for-sale financial assets At 31 December Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 92 3 95 Year Ended 31.12.16 £’000 8 (16) 8 - - 86 6 92 Year Ended 31.12.15 £’000 8 - - - 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 2016 Page 62   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 15. Trade and other receivables The Group Other receivables Placing funds Amount receivable from Saudi Arabia Jointly controlled entity (Note 21.3) VAT Refund Deposits and prepayments Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 38 198 6 2,809 5 3,056 45 207 6 95 5 358 The Company fully discharged the inherited VAT liability during August 2016 and is entitled to a £2.7 million (Birr 73,5000,000) VAT refund. The directors are of the opinion that the results of recent discussion with the VAT office that the reverse VAT refund is been processed by the relevant VAT branch office for settlement. Post Balance sheet during April 2017, the company received c.£1 million of the £2.7 million VAT refund. The Company has come to an agreement with Ethiopian Revenues and Customs Authority to receive the remainder of the funds by mid-2017. The Company Deposits Placing Funds KEFI Minerals Marketing and Sales Cyprus Limited (Note 21.3) Advance to KEFI Minerals Ethiopia Limited (Note 21.3) Amount receivable from Saudi Arabia Jointly controlled entity (Note 21.3) Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 8 198 3 7,815 45 8,069 3 207 3 7,417 80 7,710 Amounts owed by group companies total £7,818,000 (2015: £7,420,000). Balances of £1,256,000 have been fully provided for all projects except for Ethiopia due to the uncertainty over the timing of future recoverability. 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. 16. Cash and cash equivalents The Group Cash at bank and in hand The Company Cash at bank and in hand Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 410 400 562 393 KEFI Minerals Plc ANNUAL REPORT 2016 Page 63     KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 17. Share capital Number of shares ’000 Share Capital Deferred Shares Share premium Issued and fully paid At 1 January 2015 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 Issued 22 March 2016 at 0.35p Issued 29 July 2016 at 0.5p Share issue costs At 31 December 2016 1,235,337 80,000 66,611 - 362,500 877,191 - 2,621.639 499,360 761,922 - 3,882,921 12,352 800 667 (12,436) 363 877 - 2,623 499 761 - 3,883 - - - 12,436 - - - 12,436 - - - 12,436 8,433 - - - 2,538 1,755 (379) 12.347 1,248 3,048 (364) 16,279 Total 20,785 800 667 - 2,901 2,632 (379) 27,406 1,747 3,809 (364) 32,598 Share issue costs of £Nil (2015: £64,000) 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. Authorized capital That the articles of association of the Company were amended in 2010 and the liability of the members of the Company is limited. 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. 2016 On 22 March 2016, 499,359,791 shares of 0.1p were issued at a price of 0.35p per share. On issue of the shares, an amount of £1,248,299 was credited to the Company’s share premium reserve. On 29 July 2016, 761,921,739 shares of 0.1p were issued at a price of 0.5p per share. On issue of the shares, an amount of £3,047,687 was credited to the Company’s share premium reserve. 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 2016 Page 64   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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. 2016 On 22 March 2016, the Company issued 24,967,989 warrants to subscribe for new ordinary shares of 0.1p each at 0.35p per share. On 29 June 2016, the Company issued 38,096,087 warrants to subscribe for new ordinary shares of 0.1p each at 0.5p per share. During the period 1 January 2016 to 31 December 2016, 22,780,000 warrants were cancelled or expired. Details of warrants outstanding as at 31 December 2016: Grant date Expiry date Exercise price Expected Life Years 20-Feb-12 04-Jul-13 16-Oct-13 02-Dec-14 16-Dec-14 18-Mar-15 11-May-15 15-Jun-15 11-Dec-15 22-Mar-16 29-Jul-16 19-Feb-17 03-Jul-18 15-Oct-18 01-Dec-17 15-Dec-17 17-Mar-18 10-May-18 14-Jun-18 10-Dec-18 21-Mar-19 28-Jul-19 3.00p 2.10p 2.25p 1.00p 1.00p 1.00p 1.00p 0.80p 0.30p 0.35p 0.50p 5 years 5 years 5 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years 000's 2,917 1,310 1,111 4,000 5,500 4,000 1,680 14,500 43,860 24,968 38,096 141,942 KEFI Minerals Plc ANNUAL REPORT 2016 Page 65     KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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 2016 - granted - cancelled/forfeited/expired Outstanding warrants at 31 December 2016 Number of warrants 000’s 101,658 63,064 (22,780) 141,942 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 dividend yield Estimated fair value 29 July 2016 22 March 2016 11 Dec 2015 15 June 2015 11 May 2015 18 Mar 2015 0.56p 0.50p 87.3% 3yrs 0.31% Nil 0.32p 0.36p 0.35p 80.3% 3yrs 0.31% Nil 0.17p 0.32p 0.3p 79.10% 3yrs 0.39% Nil 0.17p 0.90p 0.8p 61.10% 3yrs 0.98% Nil 0.40p 0.88p 1.00p 60.90% 3yrs 0.98% Nil 0.33p 1.33p 1.00p 59% 3yrs 0.98% Nil 0.64p Expected volatility was estimated based on the historical underlying volatility in the price of the Company’s shares. For 2016, the impact of issuing warrants is a net charge to income of £164,000 (2015: £163,000). At 31 December 2016, the equity reserve recognized for share based payments, including warrants, amounted to £1,474,000 (2015: £1,212,000). Opening amount Warrants issued costs (Note 6) Share options issued to employees (Note 6) Share options issued to directors and key management (Note 6) Cancelled options Closing amount Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 1,212 164 77 204 (183) 1,474 848 163 69 146 (14) 1,212 KEFI Minerals Plc ANNUAL REPORT 2016 Page 66     KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 18. Share options reserve Details of share options outstanding as at 31 December 2016: Grant date Expiry date Exercise price 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 19-Jan-16 23-Feb-16 05-Aug-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 18-Jan-22 22-Feb-22 05-Aug-22 4.00p 2.915p 2.94p 2.27p 1.88p 1.99p 1.89p 2.30p 1.83p 1.76p 1.32p 1.32p 0.42p 0.74p 0.60p Number of shares 000’s 14,150 1,000 1,000 350 400 100 100 27,125 100 2,250 27,000 6,500 80,190 3,000 35,000 198,265 Outstanding options at 1 January 2016 - granted - cancelled/forfeited/expired Outstanding options at 31 December 2016 Weighted average ex. Price 0.48p 3.94p Number of shares 000’s 81,275 118,190 (1,200) 198,265 The Company has issued share options to directors, employees and advisers to the Group. 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 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 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. KEFI Minerals Plc ANNUAL REPORT 2016 Page 67   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 18. Share options reserve (continued) 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. On 19 January 2016, 80,190,000 options were issued which expire six years after grant date and vest in normal circumstances, vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve-month period. On 23 February 2016, 3,000,000 options were issued which expire six years after grant date and vest immediately. On 5 August 2016, 35,000,000 options were issued which expire six years after grant date and vest in normal circumstances, vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve-month period. The 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 05-Aug-16 23-Feb-16 19-Jan-16 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 13-Sep-12 Closing share price at issue date Exercise price Expected volatility Expected life Risk free rate Expected dividend yield Discount factor Estimated fair value 0.56p 0.33p 0.34p 0.83p 1.20p 1.43p 1.83p 1.85p 1.90p 1.83p 1.85p 2.69p 2.76p 2.19p 3.63p 0.60p 87.20% 0.74p 82.65% 0.42p 83.18% 1.32p 61.11% 1.32p 59.04% 1.76p 43.40% 1.83p 59.60% 2.30p 59.60% 1.89p 59.60% 1.99p 59.60% 1.88p 59.60% 2.27p 63.83% 2.94p 63.63% 2.92p 59.80% 4.00p 56.90% 6yrs 6yrs 6yrs 6yrs 6yrs 6yrs 6yrs 6yrs 6yrs 6yrs 6yrs 5yrs 5yrs 6yrs 6yrs 0.75% 0.90% 0.90% 1.53% 1.53% 1.09% 2.17% 2.17% 2.17% 2.17% 2.17% 1.70% 1.70% 5.00% 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% 0% 0% 0% 50% 50% 0% 0% 0.40p 0.11p 0.22p 0.38p 0.64p 0.52p 0.94p 0.94p 0.94p 0.94p 0.94p 0.80p 0.75p 1.18p 2.05p Expected volatility was estimated based on the historical underlying volatility in the price of the Company’s shares. KEFI Minerals Plc ANNUAL REPORT 2016 Page 68   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 18. Share options reserve (continued) For 2016, the impact of share option-based payments is a net charge to income of £281,000 (2015: £215,000). At 31 December 2016, the equity reserve recognized for share option-based payments, including warrants, amounted to £1,474,000 (2015: £1,212,000). 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% Gold & Minerals Co. Limited has the following registered address: Olaya District. 659, King Fahad Road, Riyadh, Kingdom of Saudi Arabia. Amounts relating to the Jointly Controlled Entity Year Ended 31.12.16 Year Ended 31.12.15 Year Ended 31.12.16 Year Ended 31.12.15 SAR’000 GBP’000 Non-current assets Current assets Non-current liabilities Current liabilities 223 685 908 60,594 667 61,261 493 1,473 1,966 54,974 1,048 56,022 Net liabilities (60,353) (54,056) Share capital Accumulated losses Exchange rates SAR to GBP Closing rate 2,500 2,500 (62,853) (60,353) (56,556) (54,056) 19 59 78 5,246 58 5,304 (5,226) 217 (5,443) (5,226) 36 106 142 3,971 76 4,047 (3,905) 181 (4,086) (3,905) 0.2165 0.1806 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 2016 amounting to SAR62.6 million (2015: SAR56.6 million) have been adjusted to bring the figures in line with the Group’s accounting policies. KEFI Minerals Plc ANNUAL REPORT 2016 Page 69   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 19. Jointly controlled entities (continued) 19.2 Jointly controlled entity with Gold and Minerals (continued) A loss of £726,000 was recognized by the Group for the year ended 31 December 2016 (2015: £ 735,000) representing the Group’s share of losses in the year. As at 31 December 2016 KEFI owed ARTAR an amount of £170,000 (2015: receivable £90,000) - Note 21.5. As at 31 December 2016, G&M owed KEFI an amount of £6,000 (2015: £6,000) – Note 21.4. 20. Trade and other payables The Group Accruals and other payables Other loans Payable to shareholders (Note 21.2) Payable to jointly controlled entity (Note 21.4) VAT Liability Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 1,640 257 - 170 - 2,067 1,011 236 8 90 650 1,995 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. . The balance of the liability plus interest accruing on the unpaid principal amount was paid within the three year payment period. Other loans are unsecured, interest free and repayable on demand. The Company Accruals and other payables Payable to jointly controlled entity (Note 21.4) Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 1,447 170 1,617 886 90 976 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 2016 Page 70   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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' consultancy fees * Directors’ other consultancy 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 (Note 17) Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 500 49 - 167 323 - 37 1,076 471 51 50 146 204 37 11 970 * Part of the salary of the Exploration Director was paid directly by the jointly-controlled entity G&M. * Directors’ fees paid to the Executive Director Chairman and Finance Director are paid to consultancy companies of which they are beneficiaries. 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 and vest in normal circumstances, vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve month period. 21.2 Payable to shareholders Name Atalaya Mining PLC (previously EMED) Finance Nature of transactions Relationship Shareholder Name Nature of transactions Relationship 2016 - 2015 8 Atalaya Mining PLC (previously EMED) Provision of management and Shareholder other professional services 18 8 21.3 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 2016 2015 6 6 6 6 2016 2015 45 3 80 3 7,815 7,863 7,417 7,500 KEFI Minerals Plc ANNUAL REPORT 2016 Page 71   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 21. Related party transactions (continued) 21.4 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”) 22. Contingent liabilities 22.1 Geological database Nature of transactions Finance Relationship Jointly controlled entity Nature of transactions Finance Relationship Jointly controlled entity 2016 2015 170 170 90 90 2016 2015 170 170 90 90 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 £61,400 (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 £246,000. 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 13 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 2016, the balance in the deposit accounts was £20,000. 22.3 Legal Allegations A claim for damages of £9,000,000 (approximately ETB249 million) had been lodged against the Company in 2014. The claim was based on the impact of exploration field activities conducted between 1998 and 2006, a period which pre-dated the Company’s involvement in the Tulu Kapi project. These exploration activities comprised the construction of drill pads and access tracks. No objections had been made until 2014 when certain parties from outside the Tulu Kapi district raised this matter and initiated court action. Those parties have since been removed by the Court rulings from the list of plaintiffs. The Oromia Regional Supreme Court in April 2017 rejected 95% of these claims as having no basis in fact or law and reduced KEFI’s potential liability to c.£435,000 (ETB12,762,721). Moreover, the Company has appealed to the Federal Supreme Court with regards to the remaining ETB12,762,721 on the basis that it remains firmly of the belief, on legal advice and as previously reported, that it has no contingent or actual liability, having already settled any obligations when the matter was originally closed by both the regulators and the land occupiers. The Federal Supreme Court last week officially admitted the Company’s appeal after due review, and the case is expected to be heard within the next two years. KEFI Minerals Plc ANNUAL REPORT 2016 Page 72   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 23. Capital commitments The Group has the following capital or other commitments as at 31 December 2016 Nil (2015 0.03 Million), Year Ended 31.12.16 £’000 Year Ended 31.12.15 £’000 - - - - 27 27 Exploration programme commitments Property, plant and equipment 24. Events after the reporting date Consolidation of Ordinary Shares  At the close of business, 1 March 2017, shareholders received one New Ordinary Share of nominal value 1.7 pence each for every 17 Existing Ordinary Shares of nominal value 0.1 pence each. Immediately following the Consolidation (and prior to the issue of the Fundraising Shares) the number of New Ordinary Shares in issue and admitted to trading on AIM was 228,407,085. Placing and the Lanstead Subscription  The Company conditionally raised £5,620,000 million before expenses on 1 March 2017 through a placing of 104,295,888 ordinary shares of 1.7p each at a price of 5.61p per share. After the placing and the 17:1 consolidation approved on 1 March 2017 there are 332,702,973 shares on issue. The Lanstead Subscription involves the issuance of 82,352,941 shares and is governed according to a ‘sharing agreement’ and structured relative to a benchmark price, which has been set at 7.48p/share (0.44p/share pre-consolidation), such that KEFI may receive more than £4,620,000 if the share price exceeds this level and vice versa if it does not. To this end, £693,000 was contributed in March 2017 by Lanstead, with the balance being paid in equal instalments of £218,000 per month (subject to adjustment upwards or downwards) for 18 months commencing in April 2017. Other  On 22 March 2017, 6,829,613 options were issued to persons who discharge director and managerial responsibilities ("PDMRs") and a further 2,705,509 options have been granted to other non-board members of the senior management team. The options have an exercise price of 7.5p, expire after 6 years, and vest in two equal annual instalments, the first upon the achievement of practical completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity for a twelve-month period. KEFI Minerals Plc ANNUAL REPORT 2016 Page 73                 KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 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) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2016. This adoption did not have a material effect on the accounting policies of the Group. Up to the date of approval of the consolidated financial statements, certain new standards, interpretations and amendments to existing standards have been published that are not yet effective for the current reporting period and which the Group has not early adopted, as follows: Issued by the IASB and adopted by the European Union New standards   IFRS 9 ‘’Financial Instruments’’ (effective for annual periods beginning on or after 1 January 2018). IFRS 15 ‘’Revenue from Contracts with Customers’’ (effective for annual periods beginning on or after 1 January 2018). 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 with 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 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. KEFI Minerals Plc ANNUAL REPORT 2016 Page 74   KEFI MINERALS PLC (All amounts in GBP thousands unless otherwise stated)  Notes to the consolidated financial statements (continued) Year ended 31 December 2016 25. Adoption of new and revised International Financial Reporting Standards (IFRSs) (continued) Amendments New IFRICs  Amendments to IFRS2: Classification and Measurement of Share-based Payment Transactions (effective for annual periods beginning on or after 1 January 2018).  Clarifications to IFRS 15 ‘’Revenue from Contracts with Customers’’ (effective for annual periods beginning on     or after 1 January 2018). IAS 7 (Amendments) ‘’Disclosure Initiative’’ (effective for annual periods beginning on or after 1 January 2017) IAS 12 (Amendments) ‘’Recognition of Deferred Tax Assets for Unrealised Losses’’ (effective for annual periods beginning on or after 1 January 2017). Annual Improvements to IFRSs 2014–2016 Cycle (issued on 8 December 2016) (effective for annual periods beginning on or after 1 January 2017). Annual Improvements to IFRSs 2014–2016 Cycle (issued on 8 December 2016) (effective for annual periods beginning on or after 1 January 2018).  IFRIC Interpretation 22 ‘’Foreign Currency Transactions and Advance Consideration’’ (effective for annual periods beginning on or after 1 January 2018). The Group is currently evaluating the effect of these standards or interpretations on its consolidated financial statements KEFI Minerals is listed on AIM (Code: KEFI) www.kefi-minerals.com KEFI Minerals Plc ANNUAL REPORT 2016 Page 75   

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