E M E R G I N G G O L D M I N E R
Focused on the Arabian-Nubian Shield
2017 ANNUAL REPORT
Table of Contents
Mission and Plan .................................................................................................................................................... 2
Executive Chairman’s Report ................................................................................................................................. 3
Development-Ready Gold Mine - Tulu Kapi .......................................................................................................3
Exploration Opportunities ..................................................................................................................................4
Capital Management ..........................................................................................................................................4
KEFI Being Prepared for Development and Operations .....................................................................................5
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 ........................................................................................................................7
Organic Growth in Arabian-Nubian Shield .............................................................................................................. 9
Ethiopia .................................................................................................................................................................10
Tulu Kapi - Background .................................................................................................................................... 10
Tulu Kapi – Permits and Mining Agreement .................................................................................................... 11
Tulu Kapi - Geology .......................................................................................................................................... 11
Tulu Kapi – Resources and Reserves ............................................................................................................... 11
Tulu Kapi - Definitive Feasibility Study and Subsequent Optimisation ........................................................... 12
Tulu Kapi - Development ................................................................................................................................. 13
Tulu Kapi – Potential for Underground Mine .................................................................................................. 13
Tulu Kapi –Exploration Licence Applications ................................................................................................... 14
Saudi Arabia .........................................................................................................................................................16
Saudi Arabia - Jibal Qutman ............................................................................................................................ 17
Saudi Arabia - Hawiah ...................................................................................................................................... 18
Glossary and Abbreviations ..................................................................................................................................20
Competent Person Statement ..............................................................................................................................21
Directors, Secretary and Advisers ........................................................................................................................22
Consolidated Financial Statements ......................................................................................................................23
Note: All $’s in this report are US$’s.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 1
Mission and Plan
KEFI’s mission is to cost-effectively discover or acquire economic mineralisation and to follow through with responsible
mine development and production in compliance with local laws and international best practice.
The geological region of focus is the Arabian-Nubian Shield, due to its world-class prospectivity combined with our
expertise both locally and in the prolific goldfields of Western Australia which share the same geological features.
KEFI’s structural approach is to partner appropriate organisations of standing, such as ARTAR in the Kingdom of Saudi
Arabia or the Government of Ethiopia and to align with industry specialists such as Lycopodium Limited and Ausdrill
Limited, for operational support. KEFI’s management team oversees the overall system.
Our specific purpose at the Tulu Kapi Gold Project is encapsulated in the Tulu Kapi Mining Agreement between the
Ethiopian Government and KEFI, which incorporates several key documents including development and operating plans,
an Environmental and Social Impact Assessment and the Community Resettlement Action Plan and Development Plan
which comply with International Finance Corporation Performance Standards and Equator Principles.
Upon triggering Tulu Kapi’s development, and subject to all regulatory approvals, KEFI intends to judiciously launch
exploration programs in the district surrounding Tulu Kapi, as well as in Saudi Arabia in the district around our gold
discovery at Jibal Qutman. In the recently applied-for Wadi Bidah Mineral District, which contains large-scale VMS targets
for gold-copper, the KEFI-ARTAR joint venture will also pursue the potential of the set of world-class targets in an
appropriate manner.
We are confident in our mission, our consortium, our plan and our team. We look forward to an exciting next chapter.
Community consultation meeting at Tulu Kapi
KEFI Minerals Plc ANNUAL REPORT 2017
Page 2
Executive Chairman’s Report
It has been a challenging year and we now stand with assets, relationships and people
that provide a great platform to deliver shareholder value by developing profitable
mines in Ethiopia and Saudi Arabia. KEFI Minerals is at the forefront of the minerals
sector in one of the world’s great under-developed minerals provinces – the Arabian-
Nubian Shield (“ANS”). KEFI has, in the past year, begun the process of transforming its
structure in preparation for the task ahead. We now have responsibilities wider than
when we focused on exploration and we have been entrusted by the consortium of
parties now assembled around KEFI for the development of the Tulu Kapi Gold Project
(“Tulu Kapi”) in Ethiopia.
Tulu Kapi remains our primary focus and KEFI has assembled the proposed full project
funding consortium including contractors, equity and non-equity capital. For Tulu Kapi
to proceed, all stakeholders now rely on closing out the remaining Government
processes and approvals, along with completion of due diligence and formal documentation. We work hard with the
community of Tulu Kapi, the Regional Government of Oromia, project contractors Lycopodium and Ausdrill, the
infrastructure financier and our Ethiopian investment partners - the Government of Ethiopia and also a syndicate of private
sector investors.
Over the past 18 months, political changes in Ethiopia caused some delays and it is today pleasing to see a rapid and
smooth transition to new national leadership with widespread support in Ethiopia and what appears to be a progressive
attitude to reform on various fronts. Throughout these recent political changes KEFI and our consortium for Tulu Kapi
remained steadfast and took the opportunity to improve project plans.
We improved project economics by bringing forward planned operating cash flows to increase annual gold production
from 115,000 to 140,000 ounces for the first seven years. We also took the opportunity with our financial advisers to
significantly lower financing costs from an indicative 14% to an indicative 7% by simplifying the financial structure. Current
indications are subject to market conditions and to completion of due diligence.
Economic estimates for 100% of Tulu Kapi at US$1,300/oz are for average net cash flow (after debt repayments and all
other planned commitments) of $32 million per annum. All-in Sustaining Costs (“AISC”) remain c. US$800/oz and All-in
Costs (“AIC”) c. $1,000/oz. Tulu Kapi’s Ore Reserves of 1.0 million ounces and Mineral Resources of 1.7 million ounces have
significant upside potential.
In both Ethiopia and Saudi Arabia, we have applied for regulatory permission for exploration concurrently with the
development of Tulu Kapi.
Development-Ready Gold Mine - Tulu Kapi
As part of the process of arranging funding, the project consortium refined Tulu Kapi’s detailed development and operating
plans, all incorporated into the 2018 Plan and KEFI’s financial targets for the open-pit project now include:
(cid:120) Gold production of 140,000 ounces per annum for seven years;
(cid:120) At a flat average gold price of $1,300/oz for all eight years of gold production:
o All-in Sustaining Costs of less than $800/oz (ignoring financing charges);
o After-tax, leveraged IRR of 51%;
o After-tax, leveraged NPV (8% discount rate) of $115 million at start of construction;
o After-tax, leveraged NPV (8% discount rate) of $192 million at start of production; and
o Payback of 3 years.
(cid:120) A 50% increase in NPV results from either a 10% increase in gold price or a 10% increase in plant throughput.
The 2018 Plan reflects, among other things, a fixed price, lump-sum processing plant design and supply contract with
Lycopodium and a warranted ore processing rate of 1.9-2.1 million tonnes per annum. The plant assembly aspect of the
development is planned as a reimbursable cost-based arrangement with incentives and penalties for performance.
KEFI bases the finance structure on the numbers and schedules in the 2018 Plan which is for the open pit only. We have
also run a range of sensitivity analyses to ensure robust debt-service coverage under a range of scenarios. The plans and
numbers have also been reviewed in detail by the Independent Technical Expert for the bond investors.
Significant value is also expected to be added from the contemplated underground mine.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 3
Strong Support from Ethiopian Government for Tulu Kapi Development
Responsible mine development is the overriding priority for KEFI and our partner the Ethiopian Government. We target to
bring Tulu Kapi into production as rapidly as we prudently can whilst ensuring compliance with all relevant governance and
quality standards.
Notably in May 2017, the Government further demonstrated its support by executing the formal documentation for its
equity capital contribution of $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 a little over 20%, depending on the final financing structure.
Unfortunately, Ethiopia has been experiencing the strains of being one of the highest growth countries in the world.
This has resulted in two separate States of Emergency being declared in the past 18 months, both of which have since been
lifted. KEFI Minerals’ operational activities have continued and appropriate security precautions instituted as required
although Government administrative procedures have suffered delays.
The Government has welcomed KEFI’s plans to explore the district around Tulu Kapi so as target a longer life to this planned
development. In October 2017, KEFI received confirmation from the Ethiopian Government that the area proposed to be
explored by KEFI has been set aside with the intention of being granted to KEFI upon commencement of development of
Tulu Kapi. This Exploration Licence Application (“ELA”) covers an area in excess of 1,000 km2 with known gold prospects
within c. 50km of Tulu Kapi, which is considered an economic trucking distance to the planned processing plant.
Exploration Opportunities
The ANS has been the Company’s primary focus since 2008 when it was invited to be the operator of an exploration joint
venture in the Kingdom of Saudi Arabia. Our experience since then has reinforced our excitement by the opportunity
provided and we have worked hard to establish our pole position in the region.
KEFI is fortunate to have c. 3,000 km2 portfolio of exploration properties at various stages within the highly prospective
ANS. We are aiming to commence an aggressive exploration program later this year in each country, to advance in parallel
with the development at Tulu Kapi.
We demonstrated the prospectivity of our tenements by discovering gold at Jibal Qutman in Saudi Arabia and quickly
delineating Mineral Resources totalling 733,000 ounces of gold. Further drilling has a very good chance of increasing oxide
gold resources on the granted Exploration Licence (“EL”) and surrounding ELAs.
KEFI also has a set of volcanogenic massive sulphide (“VMS”) copper-gold prospects near Tulu Kapi in Ethiopia and in the
Wadi Bidah Mineral District (“WBMD”) near the Hawiah prospect in Saudi Arabia. As usual since our entry into Saudi Arabia
in 2008, the tenement applications are made by ARTAR on behalf of our joint venture company Gold & Minerals Limited
(“G&M”), which is 40% KEFI and 60% ARTAR). This has proved efficient for a number of reasons and KEFI has the right to
instruct that the tenements be transferred to G&M.
At Hawiah, a huge VMS copper-gold target has been identified based on the surface-sampling of a six-kilometre long gossan
(oxidised mineralisation exposed on the surface) and the strong geophysical anomalies beneath the gossan.
In Ethiopia, we are also keen to test VMS prospects on our application areas under KEFI subsidiary KEFI Minerals (Ethiopia)
Limited (“KME”) in which past explorers found high-grade copper and gold more than 40 years ago but have not been
followed up since then.
Capital Management
The business model of the Company has always been to raise equity capital to fund the next stage of exploration and
development. At the same time, KEFI has worked hard to minimise Tulu Kapi’s development funding requirements through
engineering, contracting and project finance, which have been designed holistically to provide an economically robust
project and a befitting financing plan. Nearly all capital requirements are planned to be met at the project level.
KEFI unfortunately has also had to issue equity at the parent company level at disappointingly low share prices. Having said
that, the Company’s projections and those of the research analysts that follow us closely show significant value generating
upside to shareholders from Tulu Kapi alone, let alone from the pipeline of less mature projects which we expect will yield
more value-adding opportunities.
On 15 June 2018 KEFI announced a capital-raising for £5.5 million ($7.4 million) to fund finance closing costs and early
project works in preparation for full finance drawdown and development activities targeted for implementation after the
end of the Ethiopian wet season in September 2018.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 4
Our Annual General Meeting will be at 11h00 on 12 July 2018 and we will introduce some of our new senior management
team, all of whom are shareholders and take much of their remuneration in shares.
KEFI Being Prepared for Development and Operations
As KEFI Minerals prepares to develop Tulu Kapi, the Company’s senior management team was expanded in early 2018 with
the appointments of:
(cid:120) David Munro as Head of Operations – he is a mining engineer who previously was Managing Director of Billiton
(cid:120)
BV and President Strategy and Development of BHP Billiton;
Eddy Solbrandt as Head of Systems – he is the founder of GPR Dehler, an independent, international management
consultancy which specialises productivity improvement for mining companies worldwide; and
(cid:120) Brian Hosking as Head of Human Resources and Technical Planning – originally a geologist, he has focussed on
human resources for the mining industry and has provided remuneration advice, management assessment and
executive search to a wide range of clients.
This expands the senior executive team with individuals providing the senior operational leadership required for the
Company to support the operating teams on the ground.
It remains an exciting time to be developing a new gold mine and many quality people have been earmarked to join our
project as the Company enters the development phase. A recent appointment was the senior site services manager to
oversee the Company’s social performance team for community programs as part of the role.
Outlook
KEFI’s vision is to capitalise on its pole position in both Ethiopia and Saudi Arabia and, in the long term, to become a
successful dividend-paying explorer and developer in the ANS which, first and foremost, honours all its obligations and
then proceeds to provide benefits to today’s generation within the community in a manner which enhances opportunities
for future generations.
KEFI Minerals is the operator of two potentially high-growth joint-ventures, well positioned to pursue prudent project
development whilst continuing to add value through targeted exploration.
Pre-works for Tulu Kapi have already commenced and our base case schedule for first gold production from Tulu Kapi is 24
months from drawdown of the full project funding package, with incentives to start up earlier.
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. Both Ethiopia and Saudi Arabia have this year installed
younger national leaders who are demonstrably pro-development.
The KEFI team is 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.
We have achieved this progress with a very 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 also well
supported by a number of high calibre, quality specialist advisers also selected for their pre-eminence in start-ups of this
nature. The finance plan remains subject to completion of all Government approvals and processes, due diligence and
documentation.
You will perhaps have noticed that, whilst this Annual Report has been issued before the end of June 2018 as required, we
delayed its release so that it could capture and duly report material recent events. On behalf of the Directors, I thank all
staff, shareholders and other stakeholders for your patience and support and I look forward to providing a further update
on our progress at the Annual General Meeting in London.
Harry Anagnostaras-Adams
Executive Chairman.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 5
Finance Director’s Report
KEFI’s strategy is to maximise shareholder value through the development of a focused
portfolio of mining operations and projects at various stages, while at the same time
managing the 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.
We run our corporate office in Nicosia at a fraction of what the cost would be in London.
Other than our financial controller, all staff are based at the sites for project or finance
works. In order to help reduce cash outflows and align interests, some employees, Directors
and consultants have taken, and continue to take, KEFI shares in lieu of a significant portion
of salary or fees.
Equity Funding
KEFI Minerals has to date financed its activities through periodic equity capital raisings and contributions by partners.
In March 2017, shareholders approved a fundraising comprised of:
o £0.6 million placing of equity by Brandon Hill Capital;
o £0.4 million subscription by certain of the Directors, employees and Lycopodium; and
o £1.9 million received from Lanstead Capital during 2017.
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 was that the subscription by Lanstead was subject to a Sharing Agreement
which allowed KEFI to potentially benefit financially from positive share price performance, whilst limiting the financial
downside risk from a negative share price performance. The actual funds to be received during 2017 and 2018 were
therefore variable with respect to average share market price in each month.
The number of Ordinary Shares issued to Lanstead under the Sharing Agreement was fixed up-front at 82.4 million Ordinary
Shares. Whilst the share price underperformed, the Lanstead Sharing Agreement underpinned the Company's expenditure
for 2017 and KEFI received a total of £1.9 million from Lanstead during 2017. The sharing agreement will expire in July
2018.
The Company also received VAT refunds of c. £2.5 million from the Government of Ethiopia during 2017.
On 15 June 2018 the company closed a share placing of £5.5 million, which consisted of £3million in cash and £2.5 million
for the reduction of creditors and other outstanding amounts. The placing is in two tranches. The first tranche of £1.5
million was completed immediately (for cash) and the second tranche of £4.0 million (for cash and creditor reduction) is
subject to approval of shareholders at the General Meeting on 2 July 2018.
In addition, the company previously announced on 11 June 2018, that it had reached agreement in principle with an
Ethiopian investment syndicate for a proposed acquisition of a 30% ownership interest in KEFI’s wholly-owned subsidiary
KEFI Minerals (Ethiopia) Limited (“KME”) and holder of the Company’s interest in the Tulu Kapi Gold Mines Share Company
Limited (“TKGM”). Under the proposed terms, which remain subject to final documentation and government approval, the
syndicate will invest US$30 million in local currency (Birr) equivalent of which US$9 million will be invested in August 2018
and the balance upon closing of long term project finance.
Partnering the Government in Ethiopia and ARTAR in Saudi Arabia
In 2017, KME and the Government of Ethiopia formed Tulu Kapi Gold Mines Share Company Limited (“TKGM”) as the
project company for developing Tulu Kapi. The exploration projects outside the Tulu Kapi Mining Lease area are not part
of TKGM and remain 100% owned by KME.
Based on current estimates of capital spending and capital contributions, KEFI will be majority owner of KME. Upon closing
KEFI Minerals Plc ANNUAL REPORT 2017
Page 6
of project finance, the ownership of the Tulu Kapi Gold Project via TKGM would be circa 23% by the Ethiopian Government
and 77% by KME. KME would be owned 70% by KEFI (equivalent of 54% of TKGM) and 30% by the Ethiopian investment
syndicate (equivalent of 23% of TKGM).
In February 2018, the Ethiopian Ministry of Mines, Petroleum and Natural Gas formally transferred the Mining Licence
from KME to TKGM. The TKGM Board has approved the business plan for the mine development to commence as soon as
financing is implemented. A key feature of the TKGM business plan is for local people to be trained as the operators, with
over 1,000 jobs being created through the region around Tulu Kapi during construction.
In the Kingdom of Saudi Arabia KEFI conducts all its activities through 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, help by ARTAR on G&M’s behalf. 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 Gold Project consortium now includes KME, the Government of Ethiopia, the project contractors Lycopodium
Limited and Ausdrill Limited, a syndicate of Ethiopian equity investors and the infrastructure financier.
In May 2018, KEFI announced that it formally mandated the bond arranger for the placement of $160 million of Listed
Infrastructure Bonds (the “Bonds”), after having worked together for some twelve months.
Upon successful completion of due diligence, documentation and private placement of the Bond issue, the planned
Luxembourg-listed Bonds will fund ownership by KEFI’s Luxembourg-regulated Finance SPV of the gold processing plant
and ancillary infrastructure at the Tulu Kapi Gold Project for lease to TKGM.
Conditions of the funding package include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
equity into the project of $20 million from the Government of Ethiopia (as already formally committed);
further equity into the project of $20-30 million (KEFI has agreed in principle for $30 million with a local investment
syndicate);
completion of Government approvals and processes, including the financing agreements and security arrangements
and the registration by the relevant Ethiopian authorities of the equity capital that has already been invested by KME
of c. $60 million; and
that KEFI remain controlling shareholder of TKGM and that its senior executive team oversee the planning and
controls at TKGM.
Drawdown of the infrastructure finance will be timed to accommodate project construction activities.
The infrastructure finance Bonds are planned to have a 9-year tenor with a 2.5-year grace period. The overall amount of
the funding package provides a safety buffer for contingencies and the Bonds can be prepaid at any time.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 7
Annual debt-service costs during production is c. $27 million per annum versus base case EBITDA of c. $73 million at a
gold price of US$1,300/ounce. Net cash flow after debt repayments and all other commitments is estimated at an
average of $32 million which will be available for debt prepayments, cash reserves, exploration, development and
dividends.
Proposed Finance Structure
The plant and ancillary infrastructure will be built and its performance guaranteed by Lycopodium Limited, which is one of
the leading gold plant specialist engineering groups and has an exemplary track-record in Africa, where it has built many
such plants for over 20 years.
The open pit mine will be built and operated by Ausdrill Limited, through its wholly-owned subsidiary, African Mining
Services Limited, which has been a leading African mining contractor for over 25 years.
The off-site infrastructure will be built and operated by the Ethiopian Roads Authority and the Ethiopian Electric Power
Corporation, both Ethiopian Government entities.
The Ethiopian Finance Ministry and Central Bank has approved tax treatments and capital ratios and we await the
remaining approvals.
Statutory Accounts and Reporting
KEFI’s financial statements for 2017 are attached and report financial results based, among other things, on the write-off
of most historical pre-development expenditure at Tulu Kapi and the write-off of all exploration expenditure. This is not
intended to imply Directors’ view of the inherent value of Company assets, but merely reflects conservative accounting
policy.
In November 2017, KEFI reported that a court ruling by the Federal Supreme Court of Ethiopia eliminated KEFI’s potential
liability regarding a $12 million damages claim brought in 2014 by third parties in Ethiopia relating to events which took
place between 1998 and 2006. In January 2018 KEFI reported a mutual deed of release and settlement with Oryx which
ended its involvement with the Tulu Kapi project financing.
John Leach
Finance Director
KEFI Minerals Plc ANNUAL REPORT 2017
Page 8
Organic Growth in Arabian-Nubian Shield
The highly prospective Arabian-Nubian Shield is one of the largest under-explored mineral provinces in the world.
Ethiopia and Saudi Arabia are the two largest countries in the Arabian-Nubian Shield, by land mass. Both countries opened
to modern mining during the past decade and both have recently installed young pro-development leadership.
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.
The ANS is believed to be the next major exploration frontier in Africa, with some likening its potential to that of the recent
West African mineral exploration boom. Some significant orebodies in the ANS are:
Sukari gold deposit in Egypt – Centamin
(cid:120)
(cid:120) Bisha gold-copper deposit in Eritrea – Nevsun Resources
(cid:120) Hassai gold deposit in Northern Sudan – La Mancha Resources
(cid:120)
Jabal Sayed copper-gold in Saudi Arabia – Barrick Gold
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, Hawiah 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 VMS deposit, which are typically quite valuable. And we recently overhauled the G&M portfolio of
applications in Saudi Arabia to cover most of the Wadi Bidah Mineral District.
An aggressive exploration program is scheduled to begin in H2-18 to tackle a recently expanded exploration application
package now approximating 3,000 km2. This is the aggregate of our applied-for positions in Ethiopia (100%-owned) and
Saudi Arabia (40%-owned). The commencement of the program relies on both Governments formalising licences as
scheduled.
The goals for KEFI’s exploration program are:
(cid:120)
(cid:120)
(cid:120)
to support and expand Tulu Kapi production from the initial 140,000 ounces per annum;
to justify and support the start-up of Jibal Qutman in Saudi Arabia, to generate cash flow for self-funding a large
exploration program; and
to capitalise on the Company’s pole position in the fast-expanding ANS minerals sector in gold and copper.
Our long term aim is 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 Plc ANNUAL REPORT 2017
Page 9
Ethiopia
Following completion of the DFS in 2015, Tulu Kapi has continued to progress towards development with the appointment
of contractors and subsequent work to further improve project economics.
Gold production is currently estimated to average 140,000 ounces per annum over the seven years of mining the open pit.
Estimated All-in Sustaining Cost is in the order of 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 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 potentially 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
has now been sealed to within 12km of
Tulu Kapi.
is
The altitude of the project area
between 1,600m and 1,765m above sea
level. The climate is temperate with
annual rainfall averaging about 150cm.
The surface topography around Tulu Kapi
is hilly with deeply dissected river valleys.
farmers primarily grow
Subsistence
coffee, crops and fruit.
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 $10 per
reserve ounce and provided information collected from historical expenditure of more than $50 million. Nyota’s
shareholders became KEFI shareholders.
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 2017
Page 10
Tulu Kapi – Permits and Mining Agreement
The Tulu Kapi Mining Agreement (“MA”) between the Ethiopian Government and KEFI was also formalised in April 2015.
The terms of the MA include:
(cid:120) 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:
(cid:120)
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%;
(cid:120) Government undertaking to facilitate international financing arrangements for this new project in this new sector.
Attachments to the MA include the Environmental and Social Impact Assessment, the Development and Production Work
Programme and the Community Resettlement Action Plan.
Some key approvals are now on the critical path for the project financing to close according to schedule.
Tulu Kapi - Geology
The Tulu Kapi region has typical Precambrian 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.
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.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 11
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
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 were the product of
collaboration between the KEFI project management team, its specialist advisers and the project contractors -
Ausdrill/African Mining Services and Lycopodium.
The 2015 DFS and 2017 DFS Update 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.
In May 2018, KEFI released the 2018 Plan which incorporated further refinements by the project funding consortium.
Whilst resources and reserves and the mine plan remain essentially unchanged, the planned processing plant has been
expanded to a nameplate of 1.9-2.1Mtpa, in order to expand early cash flows by reducing stockpiles.
The 2018 Plan is supported by the:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
draft mining services agreement with Ausdrill;
draft plant design, supply and construction contracts with Lycopodium;
confirmations of commitment and schedule for roads and power from Ethiopian Roads Authority and Ethiopian
Electricity & Power Corporation;
draft operational arrangements with the explosives, fuel, laboratory services, refiners and other ancillary support
services; and
the draft report by the independent technical experts for the lenders.
The implementation plans have been agreed on a base schedule of 24 months from drawdown of project finance to first
gold pour. Incentivised arrangements are proposed for faster start-up.
This work has delivered even more robust gold project than in KEFI’s 2015 DFS as shown in the table below.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 12
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
95,000 ounces
Total LOM gold production
961,000 ounces
All-in Sustaining Costs
$724/oz
All-in Costs (incl. initial capex)
Average net operating cash flow
Payback
Notes:
$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
$801/oz
$937/oz
$60M p.a.
3 years
2018 Plan
8-year LOM
(contract mining)
7.4:1.0
1.9-2.1Mtpa
15.4Mt
2.1g/t gold
93.3%
140,000 ounces
980,000 ounces
$793/oz
$973/oz
$73M p.a.
3 years
(cid:120) The above metrics assume a gold price of $1,250/oz for the 2015 DFS and $1,300/oz for the 2017 DFS Update and 2018 Plan.
(cid:120) Life of Mine (“LOM”) is the time to mine the planned open pit only.
(cid:120) Gold production and net operating cash flow are for the first eight years of gold production.
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.
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. Ancillary licences and permits are expected to be dealt with
expeditiously as development progresses. KEFI Minerals works closely with the various ministries and government
organisations involved with the project.
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.
An internal 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.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 13
The key outcomes of the PEA were that:
(cid:120) Underground mine development is economically justified based on the 2014 Mineral Resources;
(cid:120)
(cid:120)
Combined gold production from the open pit and underground mine approaches 200,000 ounces p.a.;
The underground mine adds an estimated $28 million to the project’s after-tax NPV (8%) at a gold price of
$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.
(cid:120)
As the deposit remains open, KEFI has identified as yet untested exploration potential for tripling the current 330,000
ounce underground Mineral Resource to c. 1 million ounces.
Tulu Kapi –Exploration Licence Applications
Regional exploration is at an early stage but significant potential has already been identified for further gold orebodies to
be discovered near Tulu Kapi as well as potential for VMS copper-gold orebodies.
In October 2017, KEFI received confirmation from the Ethiopian Government that the area proposed to be explored by
KEFI has been set aside with the intention of being granted to the KEFI group upon commencement of development of
Tulu Kapi. This ELA covers c. 1,000 km2 covering known prospects within 50km of Tulu Kapi, which is considered an
economic trucking distance to the planned processing plant.
Location of ELA surrounding Tulu Kapi ML
The area covered by this ELA covers a VMS copper-gold prospect named Kata.
United Nations drilled six diamond holes at Kata in the 1970’s along a 600m strike. Mineralisation is open along strike and
at depth, and soil geochemistry defines a >2km copper anomaly (gold not assayed). This drilling intercepted high-grade
copper with the best results of 14m at 3.2% copper and 53m of 0.7% copper.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 14
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 in a series of shallow open pits (c.40m depth).
If proven up as economic by further drilling, this gold
mineralisation may potentially be treated at the Tulu Kapi
processing plant or, if scale and mineralogy warrant, say as
stand-alone heap-leach operations which is supported by
preliminary metallurgical testwork.
Guji-Komto Belt: best trench and drill hole gold results
KEFI Minerals Plc ANNUAL REPORT 2017
Page 15
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;
3. Wadi Bidah VMS Belt.
KEFI has a 40% beneficial interest in a large portfolio of ELAs and ELs in Saudi Arabia via G&M, our joint venture company
with ARTAR, which is the official applicant on behalf of G&M.
Location of G&M ELs and ELAs in Saudi Arabia, including the main gold and VMS 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 and international investment 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 has
now prepared new mining policies in consultation with local mining industry participants. G&M has upgraded its portfolio
of licence applications in preparation for the deregulation of the sector which should expedite mining development in the
country. We await clarification of the new regulatory regime.
Key commercial advantages for KEFI in Saudi Arabia are:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
The G&M relationship between ARTAR and KEFI;
The KEFI exploration team that was born out of the experience of discovery in similar geological terrane in
Western Australia;
Saudi Arabia is 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; and
(cid:120) An about-to-be promulgated modern mining code.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 16
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. Subject to
the new regulatory regime, 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.
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. These applications have been in process for a prolonged period due to the
overhaul of regulations and also the review by the Defence Ministry of activities in that area. G&M remains hopeful that
its close collaboration with the authorities will allow work to proceed soon after new regulations are passed.
G&M will initially focus on testing the feasibility of developing a small heap-leach operation to self-fund G&M’s exploration
activities in Saudi Arabia.
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.
Internal 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.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 17
Key outcomes from an internal Preliminary Economic Assessment for Jibal Qutman in May 2015 were:
1.5Mtpa HL operation;
(cid:120)
(cid:120) Gold production c. 140,000 ounces over an initial mine life of 4-5 years;
(cid:120) Oxide open-pit optimisation studies show a potential mineable resource of 6.6 million tonnes at 0.95g/t gold, for
c. 200,000 contained ounces;
(cid:120) Waste:ore ratio of c. 2:1;
(cid:120) Average gold recovery of c. 70%;
(cid:120)
(cid:120)
Cash operating cost of c. US$600/ounce; and
Capital expenditure of c. 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$5 million in equity.
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:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Follow-up the Mining Licence Application with the regulatory authorities;
Commence full feasibility studies upon grant of the ML;
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, if warranted.
This strategy aims for Jibal Qutman becoming G&M’s foundation for a self-funding exploration program in Saudi Arabia.
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 volcanogenic massive sulphide (“VMS”) copper-gold-zinc sulphide orebody at
depth. Field activities were suspended during the initial term of the EL for local security and community relations issues.
Once risks had been managed in close collaboration with local authorities and community leaders, and once community
relations were satisfactorily established for long term stable operations, the field work was re-activated for a short period
before the EL came up to its expiry date.
The Hawiah EL (renewal pending) was one of KEFI’s higher priority ELAs as the geological setting is analogous to large VMS
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 VMS occurrences and historic workings for copper and gold. ARTAR,
on behalf of G&M, has applied for most of the prospective ground in the WBMD.
Hawiah Geology and Exploration
The planned exploration programme at Hawiah aims to:
(cid:120) Define a near-surface, economic gold resource in the gossan via trenching and RC drilling; and
KEFI Minerals Plc ANNUAL REPORT 2017
Page 18
(cid:120)
Simultaneously search for a major copper-gold-zinc sulphide ore body along strike and/or at depth.
The Hawiah EL (renewal pending) 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.
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:
(cid:120) 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
(cid:120) 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.
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 and WBMD Regional Prospectivity
The WBMD is a 120km-long, north-south trending belt which hosts 36 prospects of three main types:
(cid:120) VMS deposits;
(cid:120) Volcano-sedimentary deposits associated with disseminated to sub-massive sulphides; and
(cid:120)
Shear zone & quartz vein hosted deposits.
KEFI has several 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.
VMS deposits are major sources of copper-lead-zinc-gold-silver ore bodies. Examples of large VMS deposits in the ANS
include:
(cid:120)
(cid:120)
(cid:120)
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 VMS deposits.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 19
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
KME
LOM
KEFI Minerals (Ethiopia) Limited
Life of mine
Massive sulphide
Rock comprised of more than 40% sulphide minerals
MA
ML
Mt
Mtpa
Mining Agreement
Mining Licence
Million tonnes
Million tonnes per annum
KEFI Minerals Plc ANNUAL REPORT 2017
Page 20
oz
PEA
PFS
Precambrian
RC drilling
RL
SP
TKGM
VMS deposits
Troy ounce of gold
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
Tulu Kapi Gold Mines Share Company Limited
Volcanogenic massive sulphides; refers to massive sulphide deposits formed in a
volcanic environment with varying base metals (copper, lead and zinc) often with
significant additional gold and silver
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 2017
Page 21
Directors, Secretary and Advisers
Directors
Harry Anagnostaras-Adams, Executive Chairman
Mark Wellesley-Wood, Non-Executive Deputy Chairman
John Leach, Finance Director
Norman Ling, 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
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
Public Relations Adviser
IFC Advisory
15 Bishopsgate
London EC2N 3AR
United Kingdom
www.investor-focus.co.uk
KEFI Minerals Plc ANNUAL REPORT 2017
Page 22
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Consolidated Financial Statements
Year ended 31 December 2017
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
24-29
30-35
36
37-40
41
42
43
44
45
46
47-74
KEFI Minerals Plc ANNUAL REPORT 2017
Page 23
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Group Strategic Report
For the year ended 31 December 2017
KEFI Minerals PLC Company number: 05976748
The directors present their Group Strategic Report for the year ended 31 December 2017.
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:
(cid:120)
(cid:120)
(cid:120)
To explore for mineral deposits of precious and base metals and other minerals that show potential for commercial exploitation;
To evaluate mineral deposits and determine their viability for commercial development; and
To develop those mineral deposits and market the metals produced.
Review of operations
KEFI has continued to make progress on both the financing and development fronts. Management has adjusted the base case pricing
to $1,300 per oz following the recent and anticipated gold price strength and remain confident of the economics of the Tulu Kapi Gold
Project. The project continues to receive strong support from the Ethiopian government.
KEFI continue to prepare and finalise the project financing and the development of the Tulu Kapi project with the government,
contractors and preferred project financiers.
On 1 February 2018, KEFI announced the appointment of David Munro, former MD of Billiton, and his two partners at International
Mining Performance, to the senior management team as a prelude to triggering development and operations.
KEFI Minerals in Ethiopia
KEFI owns 95% 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. The Government proposes to fund all off-site infrastructure up to a limit of US$20 million which will
increase its shareholding in the project company.
KEFI is now refining the application of funds required to develop Tulu Kapi. Draft finance documentation has been lodged with the
Ethiopian government for approval so that issuance of the listed bonds can proceed. The placing of the proposed listed bonds is
subject to final documentation and completion of due diligence. Debt commitment would come first, then followed by equity
commitment for the residual funding requirement. The placing of the listed bonds to finance Tulu Kapi will commence once
documentation has been approved by Ethiopia’s central bank, with drawdown expected about three months later, around the end of
Q3 2018. The drawdown timetable is timed to coincide with community and contractor preparations but cannot start until the central
bank approves it.
The Finance SPV, which will be incorporated in a major financial centre, will own the on-site infrastructure, control gold proceeds and
lease the on-site infrastructure to the project company Tulu Kapi Gold Mine Share Company (“TKGM”). The finance is expected to
have a 9-year tenor and 2.5-year non repayment grace period. The SPV will have Independent Directors and Independent Monitoring
Engineers.
The Group has agreed a base case 2-year construction schedule, with incentivised targets for quicker schedule.
KEFI Minerals in the Kingdom of Saudi Arabia
To date, Gold and Minerals (“G&M”) joint venture, of which KEFI is operator and 40% owner has conducted preliminary regional
reconnaissance and has been granted five Exploration Licences (“ELs”), including Jibal Qutman and the Hawiah EL that contains
over 6km strike length of outcropping gossans developed on altered and mineralised rocks with all the hallmarks of a copper-gold-
zinc VHMS deposit.
At Jibal Qutman, Mineral Resources are estimated to total 28.4Mt at 0.80g/t gold for 733,045 contained ounces. The shallow oxide
portion of this resource is being evaluated as a low capital expenditure heap-leach mine development.
Abdul Rahman Saad Al Rashid & Sons Co. (“ARTAR”), on behalf of G&M, holds the EL applications. ELs are renewable for up to
three years and bestow the exclusive right to explore and to obtain a (mining) lease within the area.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 24
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Group Strategic Report (continued)
For the year ended 31 December 2017
The Kingdom of Saudi Arabia has announced policies to encourage minerals exploration and development, and KEFI Minerals
supports this priority by serving as the technical partner within G&M. ARTAR also serves this government policy as the major partner
in G&M, which is one of the early movers in the modern resurgence of the Kingdom’s minerals sector
Funding
In summary, KEFI raised during 2017 £2.8 million (actual cash received after expenses) via the issue of 100 million shares at an
issue price of 5.6p, including £1.9 million from Lanstead Capital L.P. (“Lanstead”) which was subject to a sharing agreement under
which the cash received reduced or increased depending on monthly share prices This sharing agreement expires in July 2018. The
vast majority of the funds raised were expended on the development of Tulu Kapi over the following 12 months, with the remainder
being directed towards exploration and corporate costs.
KEFI raised approximately GBP2.9million (actual cash received before expenses), , by way of:
(cid:120)
(cid:120)
(cid:120)
a placing of 10,695,182 Placing Shares to both existing and new shareholders at the Issue Price to raise GBP600,000
(before expenses);
a subscription by certain Directors, employees and a supplier of the Company for 7,130,118 Company Subscription Shares
at the Issue Price to raise GBP400,000 (before expenses); and
a subscription of 82,352,941 Lanstead Subscription Shares by Lanstead at the Issue Price which raised raise GBP1.9
million during 2017 and the balance during 2018 (before expenses).
(cid:120) Of the gross proceeds from the Lanstead Subscription, GBP693,000 (being 15%) was retained by the Company and a
balance of GBP3,927,000 was pledged by the Company pursuant to the Sharing Agreement. The Sharing Agreement
entitled the Company to receive back those proceeds on a pro rata monthly basis over a period of 18 months, subject to
adjustment upwards or downwards each month depending on the Company's share price at the time, as explained in more
detail below. The Sharing Agreement provided the opportunity for the Company to benefit from positive future share price
performance. However, the KEFI share price was well below the benchmark price of 7.48p. During the year to 31 December
2017, the Company received GBP 1,239,196 in credit support instalments from Lanstead, net of Sharing Agreement
settlements pursuant to the Subscription Agreements. The amount of 407,853 remains invested in the Sharing Agreements
as at 31 December 2017.
Key Performance Indicators
Key Performance Indicators for the Group for the year ended 31 December 2017 are those relevant to the exploration, acquisition,
project evaluation and early-stage finance phases of its activities.
Key Performance finance and non-financial Indicators include:
(cid:120) Cash Flow Forecasts: Regular cash flow monitoring to ensure project development targets are met and that working capital
is maintained.
(cid:120) Operational Success: Advancing projects through cost-effective exploration into development and production
(cid:120)
Environmental, Health & Safety: Ensuring that all efforts are made to reduce adverse personal, corporate and environmental
outcomes, through best practice training and implementation.
The following progress was achieved in FY 2017:
(cid:120)
(cid:120)
Signed the Project Company (TKGM) Shareholders Agreement;
Increased projected in ore processing capacity from 1.5-1.7Mtpa to 1.9- 2.1Mtpa (depending on ore hardness), funded by
an expansion of the proposed financing facility, from US$135m to US$160m;
(cid:120) Mining Licence transferred to the newly incorporated TKGM;
(cid:120)
(cid:120)
(cid:120)
The Roads and Power Authorities have committed to construct and operate off-site infrastructure;
The community resettlement plans and compensation were agreed, and ready for implementation upon drawdown;
Company exercised the highest possible standard of care for their health and safety and no incidents were
recorded during the year;
Finance Ministry and Central Bank are reviewing the documentation for US$160 million infrastructure finance Contractors;
and
KEFI received all of its VAT refund in accordance with the agreement entered with the Government of Ethiopia
(cid:120)
(cid:120)
KEFI Minerals Plc ANNUAL REPORT 2017
Page 25
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Group Strategic Report (continued)
For the year ended 31 December 2017
Focus for FY 2018:
(cid:120)
Formalising the development funding for Tulu Kapi and obtaining regulatory clearance of project debt finance and contract
documentation;
(cid:120) Raising the residual equity required to complete the finance and trigger loan drawdown;
(cid:120) Resettling the community; and
(cid:120)
Starting construction of the Tulu Kapi gold project.
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 Federal 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 comply with relevant environmental and employment legislation in the applicable
jurisdiction.
Results
Operating Expenses
Exploration expenditure
Administrative expenses, mainly on project development preparations
VAT refund
Investigatory, pre-decisional project finance transaction costs
Warrants issued costs
Share based payments
Share of loss from jointly controlled entity
Loss on revaluation of financial Asset- Receivable from Lanstead Sharing Agreement
Foreign exchange gain/(loss)
Interest cost
Loss for the year
The Group's results for the year are set out on page 41.
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
(146)
(2,535)
-
(865)
-
(93)
(286)
(2,280)
14
(75)
(6,266)
(125)
(2,190)
2,512
-
(164)
(281)
(726)
-
(123)
(136)
(1,233)
As at 31 December 2017, the Group market capitalisation was £9.32 million (2016: £12.43 million). At the year end the Group had
equity of £14,470,000 (2016: £15,547,000). During 2017, the Group has incurred exploration expenditure of £146,000 (2016:
£125,000) from operations and an operating loss of £3,925,000 (2016: £974,000).
Lanstead financing offered the Company financial support and flexibility, but poor share price performance meant that the expected
amounts receivable under the Equity Swap Agreements had fallen significantly which resulted in a loss of £2,280,000 on the
revaluation of financial asset.
The focus during the year has been the preparation of project funding and development of the Tulu Kapi Gold Project in Ethiopia
(“Tulu Kapi” or the “Tulu Kapi project”) with our partner the Government of Ethiopia, contractors Lycopodium and Ausdrill/Afr ican
Mining Services and preferred project financiers. The increased activity levels resulted in higher administrative expenditure and
project transaction expenses in comparison to the previous year.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 26
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Group Strategic Report (continued)
For the year ended 31 December 2017
In October 2017, Ethiopia’s central bank devalued the Ethiopian Birr by 15% to boost exports. The devaluation had an impact on the
KEFI company accounts performance. In the KEFI company accounts a translated monetary currency loss of £1,900,000 was
reported in 2017 which was attributable to the currency translation of the intercompany loan. The impact on the group accounts was,
however, not material.
All exploration expenditure incurred in 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.
The Company made placement during the year raising £2.8 million (actual cash received) as follows:
Issued
Share Equity March 2017 at 5.61p (Pre consolidation 0.33p)
Lanstead Share Equity
Lanstead Value Payment shares
Funds raised before expenses
Less Share Issue Costs
Less Transfer realised loss of derivative
Less Sharing Agreement that relates to 2018 year
£’000
1,000
4,620
231
5,851
(356)
(1,340)
(1,347)
2,808
On 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 issued and admitted to trading on AIM was 228,407,085.
Organisation overview
The Corporate Head Office of the Group is located in Nicosia, Cyprus, and provides corporate and support services to the overseas
operations. East African operations are managed out of Addis Ababa, Ethiopia. The Saudi Arabia exploration is managed through
the ARTAR office in Riyadh. Field 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 evaluation, 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 mainly through periodic equity capital raisings and in 2017 signed a sharing agreement
with Lanstead.
Business model
The following business model sets out how the Group will deliver on its strategic aims:
Secure funding;
(cid:120) Define additional reserves and resources in Saudi Arabia and Ethiopia;
(cid:120)
(cid:120) Develop metals production;
(cid:120) Maintain good community relationships; and
(cid:120)
Employ good environmental governance practices.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 27
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Group Strategic Report (continued)
For the year ended 31 December 2017
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 the 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.
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.
KEFI’s activities have been unaffected with regards to its daily interface with the various government agencies and with the
community at Tulu Kapi. Everyone that the Group deals with appears to regard the Prime Minister’s resignation and the new
appointment as a sincere step towards the facilitation of broader democratic representation in Government. The concurrently
announced State of Emergency appears generally regarded as a preventative measure to ensure peace and order during the
leadership transition
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.
Community relations
Mutual support between the Groups’ operations and the communities around them is vital to the success of our activities and for
maintaining our social licence to operate. KEFI regards its host communities as one of the most important of its primary stakeholders
and contributing to these groups in a meaningful, sustainable and long-term manner is therefore central to its strategy. Our community
development will be focused on: sustainable job creation; skills transfer (education and training); and infrastructure development.
Retention of key personnel
The successful achievement of the strategies, business plans and objectives depend upon its ability to attract and retain certain key
personnel. Achievement of its objectives help to propagate a positive Company culture, in which employees feel they can directly
contribute to the Company’s success. The Group’s employment policies and terms are designed to attract, incentivise and retain
individuals of the right caliber.
Partner risk
Any joint venture arrangement contains an element of counterparty risk. The Company maintains good working relationships with its
Joint Venture partners in Saudi and monitors performance on a regular basis.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 28
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Group Strategic Report (continued)
For the year ended 31 December 2017
Principal risks and uncertainties(continued)
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 in gold. The Group will consider the use of appropriate hedging products to mitigate this risk as it
approaches production.
Foreign currency risk: The Group’s results are sensitive to foreign currency movements and in particular with its exposure to the
Ethiopian Birr, arising from the Group’s primary operations being in Ethiopia. The Group finances its overseas operations
by transferring Pounds Sterling from the UK to meet local operating costs which are generally either denominated in Ethiopian Birr
or US Dollars. The Group maintains the majority of its cash in Pounds Sterling and monitors relevant currency movements and takes
action where needed.
Funding risk: To date the Group has relied upon shareholder funding of its activities. Future exploration and development activities
may be dependent upon the Group’s ability to obtain further financing through equity financing or other means. Although the Group
has been successful in the past in obtaining equity finance there can be no assurance that the Group will be able to obtain adequate
financing in the future or that the terms of the financing will be favorable.
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
John Edward Leach
Finance Director
Cargil Management Services Limited
27/28 Eastcastle Street
London
United Kingdom
Company Secretary
18 June 2018
KEFI Minerals Plc ANNUAL REPORT 2017
Page 29
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the Board of Directors
For the year ended 31 December 2017
The Board of Directors presents its report for KEFI Minerals PLC and its subsidiaries together with the financial statements of the
Group for the year ended 31 December 2017.
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, Issued, 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 2017 and at the date of this report are shown on page
22. 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 four 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 the 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 where he was awarded the John Story Memorial Prize as outstanding graduate. He qualified as a Chartered
Accountant while working with PricewaterhouseCoopers .
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 the 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 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 Pan Continental Oil & Gas NL (2017) Resource Mining Corporation Limited (2006 to 2007) and Gympie Gold Limited
(1995 to 2003).
KEFI Minerals Plc ANNUAL REPORT 2017
Page 30
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the Board of Directors (continued)
For the year ended 31 December 2017
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 the British Ambassador to Ethiopia, Djibouti and the African Union from 2008 to 2011, when he
retired from government service.
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 this report are as follows:
Director
H Anagnostaras-Adams
J Leach
N Ling
Number of existing
ordinary shares
% of issued
share capital
5,794,809
1,715,742
296,265
1.75%
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:
Grant
Date
Expiration
Date
Exercise
Price
Pence
H.
Anagnostaras-
Adams
I. Plimer
J. Leach
N Ling
01-Feb-18
31-Jan-24
22-Mar-17
21-Mar-23
4.50
7.50
1,200,000
-
1,200,000
1,200,000
3,442,184
441,176
674,083
M.
Wessley-
Wood
-
882,353
05-Aug-16
04-Aug-22
10.20
-
-
882,353
-
588,235
19-Jan-16
18-Jan-22
7.14
943,412
314,471
314,471
314,471
20-Mar-15
19-Mar-21
22.44
382,353
58,824
58,824
117,647
12-Sep-14
11-Sep-20
29.92
-
-
-
132,353
27-Mar-14
26-Mar-20
39.10
382,353
259,824
132,353
13-Sep-12
12-Sep-18
68.00
176,471
147,059
88,235
-
-
-
-
-
-
-
6,526,773
1,221,354
3,350,319
1,764,471
1,470,588
KEFI Minerals Plc ANNUAL REPORT 2017
Page 31
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Report of the Board of Directors (continued)
For the year ended 31 December 2017
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 2017 is set out below:
31 December 2017
Executive
H. Anagnostaras-Adams
J. Leach
Non-Executive
I. Plimer-Retired¹
N. Ling
M Wellesley-Wood¹
31 December 2016
Executive
J Rayner-Retired¹
H. Anagnostaras-Adams
J. Leach-Appointed¹
Non-Executive
I. Plimer
N. Ling
M Wellesley-Wood¹Appointed
Salary
and fees
£’000
Other
compensation
£’000
²Share based
benefit
incentive options
£’000
240
176
23
67
41
547
³80
14
-
-
-
94
32
19
-
3
13
67
Salary
and fees
£’000
Other
compensation
£’000
²Share based
benefit
incentive options
£’000
96
211
87
25
71
10
500
21
18
10
-
-
-
49
47
46
31
14
16
13
167
2017
Total
£’000
352
209
23
70
54
708
2016
Total
£’000
164
275
128
39
87
23
716
¹Appointments and Retirement as Director: During 2017 Mr. Plimer resigned as director in November 2017. 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: The figure is based on the valuation at the date of grant. The figure recorded relates to the amount relating to the current
year as a proportion of the vesting period. Vesting is subject to a number of vesting conditions which may or may not be achieved. This figure is not a cash
payment.
³Other compensation includes, life insurance and accident insurance premiums for 2014,2016 and 2017.
KEFI Minerals Plc ANNUAL REPORT 2017
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 2017
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 that is considered 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 Group supports the concept of an effective Board leading and controlling the Group. The Board is responsible for approving
Group 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 Group
Secretary and independent professionals at the Group'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 two Non-Executive Directors. The Non-Executive Directors, Mark Wellesley-Wood and Norman Ling bring
a breadth of experience and knowledge to the Company. They are considered to be independent of management and any other
business relationships do not interfere with the exercise of their independent judgment. Mark Wellesley-Wood was appointed as lead
senior 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: Mark Wellesley-Wood (Chairman) and Norman Ling , and is responsible
for ensuring that the financial performance of the Company is properly monitored and reported on and in this capacity interacts as
needed with the Company’s External Auditors. 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 two Non-Executive Directors: Mark Wellesley-Wood (Chairman), 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 2017
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 2017
Internal controls
The Directors acknowledge their responsibility for the Group’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 Group 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 its obligations of the Company. Decisions regarding the management of these assets are approved by the Board. Please
refer to page 50 of the financial statements.
Securities trading
The Directors 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.
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
Hargreaves Lansdown (Nominees) Limited
Interactive Investor Services Nominees Limited
Hsdl Nominees Limited
Ausdrill International Pty Ltd
Jim Nominees Limited
Barclays Direct Investing Nominees Limited
Beaufort Nominees Limited
Registered holdings per TR-1 disclosures were:
Lanstead Capital LP
Odey Asset Management LLP
Ausdrill International Pty Ltd
Percentage
Number of Shares
27.70%
13.20%
9.20%
5.70%
5.00%
4.30%
4.30%
2.90%
14.90%
13.30%
5.00%
92,191,030
43,893,263
30,627,242
18,807,063
16,559,487
14,434,762
14,315,448
9,546,585
49,545,012
44,220,213
16,559,487
KEFI Minerals Plc ANNUAL REPORT 2017
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 2017
Events after the reporting date
On 1 February 2018, 9,600,000 options were issued to persons who discharge director and managerial responsibilities ("PDMRs")
and a further 3,000,000 options have been granted to other non-board members of the senior management team. The options have
an exercise price of 4.5p, expire after 6 years, and vest in two equal annual instalments, the first upon the achievement of practical
completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity
for a twelve-month period.
In June 2018 Company reached agreement with an Ethiopian investment syndicate for the proposed acquisition of a 30% ownership
interest in wholly-owned subsidiary KEFI Minerals (Ethiopia) Limited (“KME”) and holder of the Company’s interest in the Tulu Kapi
Gold Mines Share Company Limited (“TKGM”). Under the proposed terms, which remain subject to final documentation and
government approval, the syndicate will invest US$30,000,000 in Ethiopian Birr of which US$9,000,000 will be invested in August
2018 and the balance upon closing of project finance.
On 15 June 2018 the Company announced a capital-raising for £5,500,000 (US$ 7,310,000) to fund finance closing costs and early
project works in preparation for full finance drawdown and development activities targeted for implementation after the end of the
Ethiopian wet season in September 2018.
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
(cid:120)
(cid:120) 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
John Edward Leach
Finance Director
Company Secretary
Cargil Management Services Limited
27/28 Eastcastle Street
London
United Kingdom
18 June 2018
KEFI Minerals Plc ANNUAL REPORT 2017
Page 35
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:
(cid:120)
select suitable accounting policies and then apply them consistently;
(cid:120) make judgements and accounting estimates that are reasonable and prudent;
(cid:120)
state whether the consolidated financial statements have been prepared in accordance with IFRS as adopted by the
European Union; and
(cid:120) 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 2017
Page 36
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Independent Auditor’s Report to the Members of KEFI Minerals PLC
Financial statements subject to audit
We have audited the financial statements for the year ended 31 December 2017 which comprise:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the consolidated statement of comprehensive income;
the consolidated and company statements of financial position;
the consolidated and company statements of changes in equity;
the consolidated and company cash flow statements; and
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the preparation of the consolidated and parent company financial
statements is applicable law and International Financial Reporting Standards as adopted by the European Union, and in the case of
the parent company as applied in accordance with the Companies Act 2006.
Our opinion
In our opinion, Kefi Minerals PLC’s (“the company” or “the parent company”) financial statements (“the financial statements”):
(cid:120)
(cid:120)
(cid:120)
give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2017 and of the
group’s loss for the year then ended;
have been properly prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the
European Union and, in respect of the parent company as applied in accordance with the provisions of the Companies Act
2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report below. We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Material uncertainty relating to going concern
We draw attention to note 2 in the financial statements, which indicates that the going concern presumption may not be appropriate
because its validity depends principally on securing funding, as a minimum to cover the Company’s and Group’s ongoing operating
expenses and 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.
As stated in note 2, these events or conditions indicate that a material uncertainty exists that may cast significant doubt o n the
Company’s and Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
An overview of the scope of our audit
The group operates through one main trading subsidiary undertaking which was considered to be a significant component for the
purposes of the group financial statements, as well as one joint venture company. The financial statements consolidate these entities
together with a number of non-trading subsidiary undertakings as set out in note 13.1. In establishing our overall approach to the
group audit, we determined the type of work that needed to be performed in respect of each subsidiary. This consisted of us carrying
out a full review of the component auditors’ working papers of the significant component within the group, which were subject to a
full scope audit. We also performed analytical procedures in respect of the joint venture company, which is also subject to a full scope
audit.
As part of the audit the component auditors documented the systems and performed walk-through tests on the key areas, and then
used largely substantive techniques to the extent considered necessary to provide appropriate audit evidence to draw their
conclusions.
Our detailed review of these procedures gave us the evidence that we need for our opinion on the financial statements as a whole
and, in particular, helped mitigate the risks of material misstatements mentioned below.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 37
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Independent Auditor’s Report to the Members of KEFI Minerals PLC-Continued
Our assessment of key risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit
and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Intangible asset
The group has capitalised certain pre-production
mining expenditure. There
the
expenditure could be materially overstated to reduce
costs expensed in statement of comprehensive
income assets in the statement of financial position.
is a risk
that
We have reviewed a sample of costs capitalised to ensure
they are allowed under accounting standards and
vouched
third party supporting
to
documentation.
these costs
We have also reviewed the JORC compliant resource
statement, prepared by an independent valuer, and
agreed this to the Definitive Feasibility Study, prepared by
another independent party, to support the carrying value
of the intangible asset.
The above procedures have been completed with no
issues being identified
Going Concern is a key audit matter and has been addressed within the material uncertainty relating to going concern
section of our report. The company has highlighted the uncertainty within its financial statements.
Our application of materiality
We set certain thresholds for materiality. These help us to establish transactions and misstatements that are significant to the financial
statements as a whole, to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements,
both individually on balances and on the financial statements as a whole.
In establishing the audit strategy, it was determined that the level of uncorrected misstatements judged to be material for the financial
statements as a whole would be £347,000 approximately 2% of gross assets.
This is the threshold above which missing or incorrect information in financial statements is considered to have an impact on the
decision makers of users. The parent company was audited to a materiality of £211,000 based on 2% of the gross assets.
We agreed to report to the Audit and Risk Committee all potential adjustments in excess of £17,250 being 5% of the consolidat ed
financial statements materiality as a whole, in addition to other identified misstatements that warranted reporting on qualitative
grounds.
We calculated a component materiality for the Ethiopian entity to ensure it was audited at an appropriate percentage of the overall
materiality and applied this in our risk assessments and determining relevant audit procedures. Our materiality for the significant
component was £196,500 and was based on 1.5% of gross assets.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 38
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Independent Auditor’s Report to the Members of KEFI Minerals PLC-Continued
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we
are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
(cid:120)
(cid:120)
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; 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 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 in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion
(cid:120)
(cid:120)
(cid:120)
(cid:120)
adequate accounting records have not been kept, or returns adequate for our audit have not been received from
branches not visited by us; or
the 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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, set out on page xx, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 39
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Independent Auditor’s Report to the Members of KEFI Minerals PLC-Continued
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs(UK) will always detect a mater ial
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financi al
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
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.
Stephen Corrall, Senior Statutory Auditor
For and on behalf of Moore Stephens LLP,
Chartered Accountants and Statutory Auditor
150 Aldersgate Street
London
EC1A 4AB
18 June 2018
KEFI Minerals Plc ANNUAL REPORT 2017
Page 40
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
Investigatory, pre-decisional project finance transaction costs
VAT refund
Share-based payments
Share of loss from jointly controlled entity
Operating loss
Change in value of financial assets at fair value through profit and loss
Foreign exchange gain/(loss)
Finance costs
Finance income
Loss before tax
Tax
Loss for the year
Other comprehensive (loss)/income:
Exchange differences on translating foreign operations
Total comprehensive loss for the year
Notes
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
18
20
6
15
8
14
9
-
(146)
(146)
(2,535)
(865)
-
(93)
(286)
(3,925)
(2,280)
14
(85)
10
(6,266)
-
(6,266)
-
(125)
(125)
(2,190)
-
2,512
(445)
(726)
(974)
-
(123)
(136)
-
(1,233)
-
(1,233)
(398)
200
(6,664)
(1,033)
Basic and fully diluted loss per share (pence)
10
(1.987)
(0.628)
The notes on pages 47 to 74 are an integral part of these consolidated financial statements.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 41
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
18
18
18
18
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
Derivative financial asset at fair value
through profit or loss
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
21
Total liabilities
The
Group
2017
43
16,232
-
-
16,275
79
408
94
466
1,047
17,322
5,656
12,436
18,661
1,325
(228)
(23,380)
14,470
2,852
2,852
2,852
The
Company
2017
The
Group
2016
The
Company
2016
6
5,191
4,598
181
9,976
-
408
5,079
121
5,608
15,584
5,656
12,436
18,661
1,325
-
(25,072)
13,006
2,578
2,578
2,578
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
3,883
12,436
16,279
1,474
-
(18,695)
(18,496)
15,547
15,576
2,067
2,067
2,067
1,617
1,617
1,617
Total equity and liabilities
17,322
15,584
17,614
17,193
The notes on pages 47 to 74 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 £8.2 million (2016: £3.1 million) has been included in the
financial statements of the parent company.
On the 18 June 2018, the Board of Directors of KEFI Minerals PLC authorised these financial statements for issue.
Harry Anagnostaras-Adams
Executive Director- Chairman
Company Number: 05976748
John Edward Leach
Finance Director
KEFI Minerals Plc ANNUAL REPORT 2017
Page 42
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Consolidated statement of changes in equity
Year ended 31 December 2017
Attributable to the owners of the Company
Share
Share
options
capital
reserve
Deferred
shares
Share
premium
Foreign
exchange
reserve
Accumulated
losses
Total
At 1 January 2016
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
Loss for the year
Other comprehensive income
Total Comprehensive Income
Transfer realised loss of
derivative financial asset (Note
15)
Recognition of share based
payments
Forfeited options
Cancellation of options
Issue of share capital
Share issue costs
At 31 December 2017
2,623
-
-
-
12,436
-
-
-
12,347
-
-
-
1,212
-
-
-
-
-
-
445
-
1,260
-
3,883
-
-
-
12,436
-
-
-
-
-
-
-
-
-
-
1,773
-
5,656
-
-
-
-
12,436
-
4,296
(364)
16,279
-
-
-
(1,340)
-
-
-
4,078
(356)
18,661
(183)
-
-
1,474
-
-
-
-
122
(30)
(241)
-
-
1,325
(30)
-
200
200
-
-
-
-
170
-
(398)
(398)
-
-
-
-
-
-
(228)
(17,645)
(1,233)
-
(1,233)
10,943
(1,233)
200
(1,033)
-
445
183
-
-
(18,695)
(6,266)
-
(6,266)
1,340
-
5,556
(364)
15,547
(6,266)
(398)
(6,664)
-
-
122
-
241
-
-
(23,380)
(30)
-
5,851
(356)
14,470
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
The notes on pages 47 to 74 are an integral part of these consolidated financial statements.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 43
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Company statement of changes in equity
Year ended 31 December 2017
Share
capital
Deferred
shares
Share
premium
Share
options
reserve
Accumulated
losses
At 1 January 2016
Comprehensive loss for the year
Recognition of share based
payments
Cancellation of options
Issue of share capital
Share issue costs
At 31 December 2016
Comprehensive loss for the year
Transfer realised loss of
derivative financial asset (Note
15)
Recognition of share based
payments
Forfeited options
Cancellation of options
Issue of share capital
Share issue costs
At 31 December 2017
2,623
-
-
-
1,260
-
3,883
-
-
-
-
-
1,773
-
5,656
12,436
-
-
-
-
-
12,436
-
-
12,347
-
-
-
4,296
(364)
16,279
-
(1,340)
1,212
-
445
(183)
-
-
1,474
-
-
(15,623)
(3,056)
-
183
-
-
(18,496)
(8,157)
1,340
Total
12,995
(3,056)
445
-
5,556
(364)
15,576
(8,157)
-
-
-
122
-
122
-
-
-
-
12,436
-
-
4,078
(356)
18,661
(30)
(241)
-
-
1,325
-
241
-
-
(25,072)
(30)
-
5,851
(356)
13,006
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 47 to 74 are an integral part of these consolidated financial statements.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 44
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Consolidated statement of cash flows
Year ended 31 December 2017
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
Fair value loss to derivative financial asset
Fair value loss to available for sale
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 increase/(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
31.12.17
£’000
Year Ended
31.12.16
£’000
(6,266)
(1,233)
11
19
12
18
15
20
18
18
17
17
24
93
-
-
2,280
26
286
13
(3,544)
2,569
849
(126)
(988)
(1,252)
(6)
(379)
-
(2,625)
3,163
(356)
2,807
56
-
410
466
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
The notes on pages 47 to 74 are an integral part of these consolidated financial statements.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 45
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Company statement of cash flows
Year ended 31 December 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax
Adjustments for:
Share based payments
Issue of warrants
Fair value loss to derivative financial asset
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
31.12.17
£’000
31.12.16
£’000
(8,157)
(3,056)
19
18
15
18
18
17
17
93
-
2,280
39
379
3
(5,363)
2,990
961
(1,412)
(4)
(1,252)
(379)
0
(39)
(1,674)
3,163
(356)
2,807
(279)
400
121
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
The notes on pages 47 to 74 are an integral part of these consolidated financial statements.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 46
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements
Year ended 31 December 2017
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 principal place of business is Cyprus.
Principal activities
The principal activities of the Group for the year were:
(cid:120)
(cid:120)
(cid:120)
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 2017. 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,
as a minimum to cover its ongoing operating expenses and 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 Grou p’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 presentation 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 2017
Page 47
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
2. Accounting policies (continued)
Foreign currency translation
(1) Foreign currency translation
Foreign currency transactions are translated into the presentational currency using the exchange rates prevailing at the date of the
transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies are recognized in profit or loss in the statement of comprehensive income.
(2) Foreign operations
On consolidation, the assets and liabilities of the consolidated entity’s foreign operations are translated at exchange rates prevailing
at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates
fluctuate significantly in which case they are recorded at the actual rate. Exchange differences arising, if any, are recognized in the
foreign currency translation reserve and as a component of other comprehensive income, and recognized in profit or loss on disposal
of the foreign operation.
Revenue recognition
The Group had no sales or revenue during the year ended 31 December 2017 (2016: £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.
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 2017
Page 48
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
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. In the consolidated accounts 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. In the Company account the cost method
of accounting is used.
Finance costs
Interest expense and other borrowing costs are charged to the statement of comprehensive income as incurred and is recognised
using the effective interest method.
Tax
The tax payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the statement of
comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. Tax is payable in the relevant jurisdiction at the rates described in note 9.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax liabilities are generally recognized for all taxable differences and deferred
tax assets are recognized to the extent that taxable profits will be available against which deductible temporary differences can be
utilized. The amount of deferred tax is based on the expected manner of realisation or settlement of the carrying amounts of assets
and liabilities, using tax rates that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off deferred tax assets against deferred
tax liabilities and when the deferred taxes relate to the same fiscal authority.
Investments
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognized as an expense in
the period in which the impairment is identified, in the Company accounts. 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 b e
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 estimated lifetime of the commercial ore reserves
for the area to which the costs relate.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 49
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
2. Accounting policies (continued)
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 ar e
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 those 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.
Available for sale financial assets
Available for sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for
inclusion in any of the other categories of financial assets. Shares in unlisted companies are recorded at cost. Any other financial
assets within this category are measured subsequently at fair value, with changes in value recognised in equity, through other
comprehensive income.
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.
The Company has borrowings outstanding from its subsidiaries, the ultimate realisation of which depends on the successful
exploration and realization of the Group’s intangible exploration assets. This in turn is subject to the availability of financing to maintain
the ongoing operations of the business. The Group manages its financial risk to ensure sufficient liquidity is available to meet
foreseeable needs and to invest cash assets safely and profitably.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 50
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
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
2017
466
2016
410
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 December 2017 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
2017
Profit or Loss
2017
Equity Profit or Loss
2016
2016
5
(1)
5
(1)
4
(1)
4
(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 Australian Dollar,
Euro, Turkish Lira, US Dollar, Ethiopia ETB and Saudi Arabian Riyal. Since 1986 the Saudi Arabian Riyal has been pegged to the
US Dollar, it is fixed at USD/SAR 3.75. The Group’s management monitors the exchange rate fluctuations on a continuous basis and
acts accordingly.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date
are as follows; with the Saudi Arabian Riyal exposure being included in the USD amounts.
Australian Dollar
Euro
Turkish Lira
US Dollar
Ethiopia ETB
Liabilities
2017
Assets
2017
Liabilities
2016
Assets
2016
103
180
2
1,251
70
-
2
40
45
549
215
205
1
1,025
187
-
2
40
318
2,943
KEFI Minerals Plc ANNUAL REPORT 2017
Page 51
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
3. Financial risk management (continued)
Sensitivity analysis
A 10% strengthening of the British Pound against the following currencies at 31 December 2017 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
2017
Profit or Loss
2017
Equity
2016
Profit or Loss
2016
10
18
(4)
120
(48)
10
18
(4)
120
(48)
22
20
(4)
58
(276)
22
20
(4)
58
(276)
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position pote ntially
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.
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 £466,000 (2016: £410,000) and equity attributable to
equity of the parent, comprising issued capital and deferred shares of £18,092,000 (2016: £16,319,000), other reserves of
£19,759,000, (2016: ££17,923,000) and accumulated losses of £23,380,000 (2016: £18,695,000). The Group has no long term debt
facilities.
Fair value estimation
The Group has certain financial assets and liabilities that are held at fair value. The fair value hierarchy establishes three levels to
classify the inputs to valuation techniques to measure fair value:
Classification of financial assets and liabilities
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The fair value of trade and other receivables is estimated as the present value of future cash flows discounted at the market rate of
interest at the reporting date. For receivables and payables with a remaining life of less than one year, the notional amount is deemed
to reflect fair value. All other receivables and payables are, where material, discounted to determine the fair value.
Differences arising between the carrying and fair value are considered not significant to adjust for in these accounts. The carrying
and fair value of intercompany balances are the same as if they are repayable on demand.
As at each of December 31, 2017 and December 31, 2016, the levels in the fair value hierarchy into which the Group’s financial
assets and liabilities measured and recognized in the statement of financial position at fair value are categorized are as follows:
KEFI Minerals Plc ANNUAL REPORT 2017
Page 52
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
3. Financial risk management (continued)
Financial assets
Cash and cash equivalents (Note 17) – Level 1
Available for sale financial assets (Note 14) - Level 2
Derivative financial asset (Note 15) - Level 2
Trade and other receivables (Note 16)
Financial liabilities
Trade payables (Note 21)
Carrying Amounts
2016
2017
Fair Values
2017
2016
466
79
408
94
410
95
-
3,056
466
79
408
94
410
95
-
3,056
2,852
2,067
2,852
2,066
4. Use and revision of accounting estimates and judgements
The preparation of the financial report requires the making of estimations and assumptions that affect the recognized amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of
which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
Accounting Judgement:
Going concern
The going concern presumption depends principally on securing funding to develop the Tulu Kapi 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.
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
Estimates:
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.
.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 53
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
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
2017
Operating (loss)/profit
Material non-recurring item
Foreign exchange profit/(loss)
Net Finance costs
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
£’000
£’000
£’000
£’000
(3,600)
(2,280)
-
(75)
(5,955)
5,652
2,578
3
-
(23)
(3)
(13)
-
14
-
(9)
41
3
-
-
-
-
-
-
-
-
(3)
(13)
4
5
-
-
11,625
266
21
-
£’000
(3,639)
(2,280)
14
(75)
(5,980)
(286)
(6,266)
-
(6,266)
17,322
2,852
24
-
Cyprus
Turkey Bulgaria
Ethiopia
Consolidated
2016
£’000
£’000
£’000
Operating (loss)/profit
(2,467)
(34)
(3)
Material non-recurring item
Foreign exchange profit/(loss)
Finance costs
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
-
-
£’000
(255)
2,994
-
-
-
-
-
(3)
2,739
4
4
-
-
13,049
443
54
266
£’000
(2,759)
2,512
(123)
(136)
(506)
(726)
(1,232)
-
(1,232)
17,615
2,066
55
266
KEFI Minerals Plc ANNUAL REPORT 2017
Page 54
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
6. Expenses by nature
Exploration costs
Depreciation of property, plant and equipment (Note 11)
Material non-recurring item- VAT refund (Note 16 and Note 21)
Impaired intangible assets (Note 12)
Investigatory, pre-decisional -decisional project finance transaction costs
Warrants issue costs (Note 18)
Share based benefits to employees (Note 18)
Share of losses from jointly controlled entity (Note 5 and Note 20)
Directors’ fees and other benefits (Note 22.1)
Consultants’ costs
Auditors’ remuneration - audit current year
Auditors’ remuneration -secondary firm
Auditors’ remuneration - associated firm
Legal Costs
Ongoing Listing Costs
Other expenses
Operating loss
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
146
24
-
-
865
-
23
286
708
356
47
23
10
516
217
704
3,925
125
55
(2,512)
266
-
164
77
726
716
439
39
23
7
201
174
474
974
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
31.12.17
£’000
Year Ended
31.12.16
£’000
408
10
2
27
447
44
550
49
126
32
757
45
Excludes Directors’ remuneration and fees which are disclosed in note 22.1. These staff costs are capitalised in development
exploration costs.
8. Finance costs
Other finance costs
.
2017
£’000
85
85
2016
£’000
136
136
KEFI Minerals Plc ANNUAL REPORT 2017
Page 55
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
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
Charge for the year
2017
2016
(6,266)
(1,233)
(786)
731
55
-
-
(382)
248
341
(207)
-
The Company is resident in Cyprus for tax purposes. A deferred tax asset of £1,271,982 (2016: £1,242,770) has not been
accounted for due to the uncertainty over future recoverability
Cyprus
The corporation tax rate is 12.5%. Under certain conditions interest income may be subject to defence contribution at the rate of
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 2017, the balance of tax losses which is available for offset against
future taxable profits amounts to £ 10,175,859 (2016: £ 9,942,163).
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 2017, the balance of tax losses which is available for offset against future taxable profits amounts to £29,867
(2016: £25,476). 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 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 2017, the balance of
exploration costs that is available for offset against future income from mining operations amount to £ 143,375 (2016: £811,471).
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%.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 56
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
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:
Net loss attributable to equity shareholders
Average number of ordinary shares for the purposes of basic loss per share (000’s)
Loss per share:
Basic and fully diluted loss per share (pence)
Year Ended
31.12.17
£’000
(6,266)
315,273
Year Ended
31.12.16
£’000
(1,233))
*196,471
(1.987)
*(0.628)
The effect of share options and warrants on losses per share is anti-dilutive.
*The comparative figures have been restated to reflect the 17 for 1 consolidation as detailed in note 18.
11. Property, plant and equipment
Motor
Vehicles
Plant and
equipment
£’000
£’000
Furniture,
fixtures and
office
equipment
£’000
Total
£’000
The Group
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
Disposals
At 31 December 2017
Accumulated Depreciation
At 1 January 2016
Charge for the year
At 31 December 2016
Charge for the year
Disposals
At 31 December 2017
Net Book Value at 31 December 2017
Net Book Value at 31 December 2016
43
32
75
-
(4)
71
27
6
33
1
(4)
30
41
42
135
-
135
2
(71)
66
70
46
116
19
(71)
64
2
19
59
3
62
4
-
66
59
3
62
4
-
66
-
-
237
35
272
6
(75)
203
156
55
211
24
(75)
160
43
61
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 2017
Page 57
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
12. Intangible assets
The Group
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
At 31 December 2017
Accumulated Amortization and Impairment
At 1 January 2016
Impairment Charge for the year
At 31 December 2016
Impairment Charge for the year
At 31 December 2017
Net Book Value at 31 December 2017
Net Book Value at 31 December 2016
The Company
Cost
At 1 January 2016
Additions
Transfer from subsidiary
At 31 December 2016
Additions
At 31 December 2017
Accumulated Amortization and Impairment
At 1 January 2016
Charge for the year
At 31 December 2016
Charge for the year
At 31 December 2017
Net Book Value at 31 December 2017
Net Book Value at 31 December 2016
Project
evaluation
costs
£’000
Deferred
exploration
costs
£’000
2,715
1,224
3,939
1,252
5,191
-
-
-
-
-
9,130
1,189
10,319
988
11,307
-
266
266
-
266
Total
£’000
11,845
2,413
14,258
2,240
16,498
-
266
266
-
266
5,191
3,939
11,041
10,053
16,232
13,992
Project
evaluation
costs
£’000
1,078
1,225
1,636
3,939
1,252
5,191
-
-
-
-
-
5,191
3,939
Total
£’000
1,078
1,225
1,636
3,939
1,252
5,191
-
-
-
-
-
5,191
3,939
KEFI Minerals Plc ANNUAL REPORT 2017
Page 58
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
12. Intangible assets (continued)
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 2017 management performed an impairment review for deferred exploration costs, which relate to the Tulu Kapi
licence area. 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.
In May 2017, KEFI announced an update to its 2015 definitive feasibility study (DFS) in order to account for all of the initiatives
undertaken by the company in the intervening two years. According to the 2017 DFS update, the NPV at the start of construction is
US$97,000,000 at a US$1,250/oz gold price and a 8% discount rate.
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 were impaired in the previous year.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 59
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
13. Investments
13.1 Fixed asset investments
The Company
Cost
At 1 January
Acquisitions
At 31 December
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’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
Tulu Kapi Gold Mine Share Company
Date of
acquisition/
incorporation
08/11/2006
08/11/2006
30/12/2013
30/12/2014
31/04/2017
Country of
incorporation
Bulgaria
Turkey
United Kingdom
Cyprus
Ethiopia
Effective
proportion of
shares held
100%-Direct
100%-Indirect
100%-Direct
100%-Direct
95%-Indirect
Subsidiary companies
The following companies have the address of:
Mediterranean Minerals (Bulgaria) EOOD
10 Tsar Osvoboditel Blvd., 3rd floor, Sredets Region, 1000 Sofia,
the Republic of Bulgaria.
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
Tulu Kapi Gold Mine Share Company
27/28 Eastcastle Street, London, United Kingdom W1W 8DH
23 Esekia Papaioannou Floor 2, Flat 21 1075, Nicosia Cyprus
1st Floor, DAMINAROF Building,Bole Sub-City, Kebele 12/13,
H.No, New.
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.
Kefi Minerals Ethiopia owns 95% of Tulu Kapi Gold Mine Share Company (“TKGM’), a company incorporated in Ethiopia. TKGM was
dormant for the year ended 31 December 2017. The Government of Ethiopia was entitled to a 5% free-carried interest in TKGM.
During the year the Tulu Kapi Gold Project mining license was transferred to TKGM. This entitlement is enshrined in the Ethiopian
Mining Law and the Ethiopian Mining Agreement between the Ethiopian Government and KEFI Minerals Ethiopia, as well as the
constitution of the project company. The Ethiopian Government has also undertaken to invest a further 20 million dollars in the project
in return for the issue of additional equity ranking pari passu with the shareholding of KEFI Minerals Ethiopia. Such additional equity
will not be entitled to a free carry.
The company owns 100% of KEFI Minerals Marketing and Sales Cyprus, a company incorporated in Cyprus. The company was
dormant for the year ended 31 December 2017 and 2016. 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 2017
Page 60
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
13. Investments (continued)
13.2 Investment in jointly controlled entity
The Company
At 1 January/31 December
Jointly controlled entity
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’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 is given in note 20.2.
14. Available for sale financial assets
The Group
At 1 January
Change in value of available-for-sale financial assets
Foreign currency movement
Interest Received
On 31 December
The Company
At 1 January
Disposal of Investment
Profit on Sale
At 31 December
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
95
-
(26)
10
79
92
3
-
-
95
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
-
-
-
-
8
(16)
8
-
KEFI Minerals Plc ANNUAL REPORT 2017
Page 61
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
15. Derivative financial asset
In March 2017, as part of subscription to raise, in aggregate, £5.56m (before expenses) from certain new shareholders, the Company
initially issued 82,352,941 new ordinary shares of 1p each in the capital of the Company (“Ordinary Shares”) at a price of 5.61p per
share to Lanstead Capital L.P. (“Lanstead”) for £4,620,000 (before expenses). The Company simultaneously pledged with Lanstead
for 85 per cent. of these shares with a reference price of 7.48p per share (the “Reference Price”). The equity sharing agreement is
for a 18 month period. All 82,352,941 Ordinary Shares were allotted with full rights on the date of the transaction.
Accordingly, pursuant to the above arrangements, of the aggregate subscription proceeds of £4.6m received from Lanstead, £3.927m
(85 per cent.) was pledged by the Company in the equity sharing agreement with the remaining £0.69m (15 per cent.) available for
general working capital purposes.
To the extent that the Company’s volume weighted average share price is greater or lower than the Reference Price at each sharing
settlement, the Company will receive greater or lower consideration calculated on a pro-rata basis i.e. volume weighted average
share price / Reference Price multiplied by the monthly transfer amount. As the amount of the effective consideration receivable by
the Company from Lanstead under the sharing agreement will vary subject to the movement in the Company’s share price and will
be settled in the future, the receivable is treated for accounting purposes as a derivative financial asset and has been designated at
fair value through profit or loss.
The difference between the cash consideration received and the share placement price of 5.61p per share is transferred from fair
value through profit or loss to share premium account. During the current period an amount of £1,340,304 was recorded in share
premium.
The Company also issued, in aggregate, a further 4,117,647 Ordinary Shares to Lanstead as a value payment in connection with the
equity sharing agreement.
The fair value of the derivative financial assets as at 31 December 2017 has been determined by reference to the Company’s then
prevailing share price and has been estimated as follows:
Value recognised on inception (notional)
Transaction Cost“Value Payment Shares”
Share
price
0.0561
0.0561
Notional
number of
shares
Share price
outstanding
Fair value
86,470,588
4,851,000
(4,117,647)
(231,000)
82,352,941
4,620,000
Gross proceeds of the Lanstead Subscription, (being 15%)
(20,588,235)
(693,000)
Equity sharing agreement
61,764,706
3,927,000
Consideration received to 31 December 2017
0.0328
(37,745,092)
(1,239,196)
Realised loss: Difference between placement price of 5.61p
and actual consideration is processed via share premium
Unrealised Loss on derivative financial asset during the period ending 31
December 2017
Payable within the next 12 months
(1,340,304)
(939,647)
407,853
407,853
24,019,614
KEFI Minerals Plc ANNUAL REPORT 2017
Page 62
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
16. Trade and other receivables
The Group
Other receivables
Placing funds
Amount receivable from Saudi Arabia Jointly controlled entity (Note 22.3)
VAT Refund
Deposits and prepayments
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
3
-
-
91
-
94
38
198
6
2,809
5
3,056
The Company fully discharged the inherited VAT liability during August 2016 and is entitled to a £2.7 million (Birr 73,500,000) VAT
refund. During 2017 the Company received the VAT refund from Ethiopian Revenue and Customs Authority (“ERCA”) .
The Company
Deposits
Placing Funds
KEFI Minerals Marketing and Sales Cyprus Limited (Note 22.3)
Advance to KEFI Minerals Ethiopia Limited (Note 22.3)
Amount receivable from Saudi Arabia Jointly controlled entity (Note 22.3)
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
-
-
3
5,076
-
5,079
8
198
3
7,815
45
8,069
Amounts owed by group companies total £12,136,000 (2016: £15,215,000). A provision of 7,057,000 (2016: £7,355,000) has been
made against the amount due from the subsidiaries because these amounts are considered irrecoverable.. The advance issued to
KEFI Minerals Ethiopia Limited is unsecured, interest free and repayable on demand. At the reporting date, no receivables were past
their due date.
17. Cash and cash equivalents
The Group
Cash at bank and in hand
The Company
Cash at bank and in hand
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
466
121
410
400
KEFI Minerals Plc ANNUAL REPORT 2017
Page 63
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
18. Share capital
Authorized Capital
The articles of association of the Company were amended in 2010 and the liability of the members of the Company is limited.
Issued and fully paid
At 1 January 2016
Issued 22 March 2016 at 0.35p
Issued 29 July 2016 at 0.5p
Share issue costs
At 31 December 2016
Number of
shares ’000
2,621.639
499,360
761,922
-
3,882,921
Share
Capital
2,623
499
761
-
3,883
Deferred
Shares
12,436
-
-
-
12,436
Share
premium
12.347
1,248
3,048
(364)
16,279
Total
27,406
1,747
3,809
(364)
32,598
On the 1 March 2017 Shareholders received one new ordinary share for every 17 existing ordinary shares
*At 1 January 2017
Issued 2 March 2017 at GBP 0.17
Share Equity Placement
Lanstead Share Equity
Lanstead Value Placement Fee
Share issue costs
Transfer realised loss of derivative financial asset
At 31 December 2017
228,407
3,883
12,436
16,279
32,598
17,825
82,353
4,118
-
-
332,703
303
1,400
70
-
-
5,656
-
-
-
-
-
12,436
697
3,220
161
(356)
(1,340)
18,661
1,000
4,620
231
(356)
(1,340)
36,753
*Post share consolidation figures
Issued capital
2017
On 2 March 2017, 104,295,888 shares of 1.7p were issued at a price of 5.61p per share. On issue of the shares, an amount of
GBP4,077,969 was credited to the Company’s share premium reserve.
The Company issued a total of 17,825,300 shares to investors for a total consideration of GBP 1,000,000.
Company issued 82,352,941 Shares to Lanstead Capital L.P. (‘Lanstead’), for an aggregate consideration of GBP 4.620,000. In
addition, the Company has entered into Equity Sharing Agreements with Lanstead which allow the Company to retain much of the
economic interest in the Lanstead Subscription Shares. The Equity Sharing Agreements enable the Company to secure much of the
potential upside and downside risk arising from anticipated near term news flow. Further details available in note15.
The Company also agreed to make a placement fee to Lanstead of 4,117,647 Ordinary Shares.
Consolidation of ordinary shares
Following the Company’s General Meeting on 1 March 2017, at the close of business on 1 March 2017 shareholders received one
Ordinary Share of nominal value 1.7 pence each for every 17 Existing ordinary Shares of nominal value 0.1 pence each.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 64
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
18. Share capital (continued)
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.
Warrants
2016
On 22 March 2016, the Company issued 1,468,705 warrants to subscribe for new ordinary shares of 1.7p each at 5.95p per share.
On 29 June 2016, the Company issued 2,240,946 warrants to subscribe for new ordinary shares of 1.7p each at 8.50p per share.
2017
During the period 1 January 2017 to 31 December 2017, 730,392 warrants were cancelled or expired.
Details of warrants outstanding as at 31 December 2017:
Grant date
Expiry date
*Exercise price
Expected Life Years
*000's
04-Jul-13
16-Oct-13
18-Mar-15
11-May-15
15-Jun-15
11-Dec-15
22-Mar-16
29-Jul-16
03-Jul-18
15-Oct-18
17-Mar-18
10-May-18
14-Jun-18
10-Dec-18
21-Mar-19
28-Jul-19
35.70p
38.25p
17.00p
17.00p
13.60p
5.10p
5.95p
8.50p
*Post share17/1 consolidation figures
5 years
5 years
3 years
3 years
3 years
3 years
3 years
3 years
77
65
235
99
853
2,580
1,469
2,241
7,619
KEFI Minerals Plc ANNUAL REPORT 2017
Page 65
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
18. 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 2017
- granted
- cancelled/forfeited/expired
Outstanding warrants at 31 December 2017
*Post share17/1 consolidation figures
*Number of warrants
000’s
8,350
-
(731)
7,619
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
9.52p
8.5p
87.3%
3yrs
0.31%
Nil
5.44p
6.12p
5.95p
80.3%
3yrs
0.31%
Nil
2.89p
Expected volatility was estimated based on the historical underlying volatility in the price of the Company’s shares.
For 2017, the impact of issuing warrants is a net charge to income of nil (2016: £164,000). At 31 December 2017, the equity reserve
recognized for share based payments, including warrants, amounted to £1,325,000 (2016: £1,474,000).
Opening amount
Warrants issued costs (Note 6)
Share options issued to employees (Note 6)
Share options issued to directors and key management
Forfeited Options
Cancelled/Expired options
Cancelled/Expired Warrants
Closing amount
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
1,474
-
23
99
(30)
(144)
(97)
1,325
1,212
164
77
204
-
(183)
-
1,474
KEFI Minerals Plc ANNUAL REPORT 2017
Page 66
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
19. Share options reserve
Details of share options outstanding as at 31 December 2017:
Grant date
Expiry date
*Exercise price
*Number of
shares 000’s
68.00p
49.56p
49.98p
38.59p
33.83p
39.10p
29.92p
22.44p
22.44p
7.14p
12.58p
10.20p
7.50p
13-Sep-12
24-May-13
03-Sep-13
08-Oct-13
16-Jan-14
27-Mar-14
12-Sep-14
20-Mar-15
16-Jun-15
19-Jan-16
23-Feb-16
05-Aug-16
22-Mar-17
12-Sep-18
23-May-19
02-Sep-18
07-Oct-18
15-Jan-20
26-Mar-20
11-Sep-20
19-Mar-21
15-Jun-21
18-Jan-22
22-Feb-22
05-Aug-22
21-Mar-23
*Post share17/1 consolidation figures
Outstanding options at 1 January 2017
- granted
- cancelled/ expired
- forfeited
Outstanding options at 31 December 2017
582
59
59
21
6
1,309
132
1,529
382
4,088
176
1,471
8,604
18,418
*Weighted average ex.
Price
7.50p
48.62p
8.13p
*Number of shares
000’s
11,663
9,535
(631)
(2,149)
18,418
The Company has issued share options to directors, employees and advisers to the Group.
On 13 September 2012, 911,764 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 58,823 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 58,824 options were
issued and on 8 October 2013, 20,588 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 35,294 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, 1,294,118 options were issued to the Directors and a further 317,647 options have been granted to other non-
board members of the senior management team. Of the options issued, previously granted options over 1,300,000 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 2017
Page 67
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
19. Share options reserve (continued)
On 12 September 2014, 132,353 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 2015,1,588,235 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, 382,353 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, 4,717,059 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 2016,176,471 options were issued which expire six years after grant date and vest immediately.
On 5 August 2016, 2,058,824 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 22 March 2017, 9,535,122 options were issued which, expire after six 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.
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
22-Mar-17
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
4.50p
7.50p
72.20%
9.52p
10.20p
87.20%
5.61p
12.58p
82.65%
5.78p
7.14p
83.18%
14.11p
22.44p
61.11%
20.40p
22.44p
59.04%
24.31p
29.92p
43.40%
31.11p
31.11p
59.60%
31.45p
39.10p
59.60%
32.30p
32.13p
59.60%
31.11p
33.83p
59.60%
31.45p
31.96p
59.60%
45.73p
38.59p
63.83%
46.92p
49.98p
63.63%
37.23p
49.64p
59.80%
61.71p
68.00p
56.90%
6yrs
6yrs
6yrs
6yrs
6yrs
6yrs
6yrs
6yrs
6yrs
6yrs
6yrs
6yrs
5yrs
5yrs
6yrs
6yrs
0.75%
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
Nil
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
50%
50%
0%
0%
2.42p
6.80p
1.87p
3.74p
6.46p
10.88p
8.84p
15.98p
15.98p
15.98p
15.98p
15.98p
13.60p
12.75p
20.06p
34.85p
Expected volatility was estimated based on the historical underlying volatility in the price of the Company’s shares.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 68
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
19. Share options reserve (continued)
For 2017, the impact of share option-based payments is a net charge to income of £122,000 (2016: £281,000). At 31 December
2017, the equity reserve recognized for share option-based payments, including warrants, amounted to £1,325,000 (2016:
£1,474,000).
20. Jointly controlled entities
20.1 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
31.12.17
Year Ended
31.12.16
Year Ended
31.12.17
Year Ended
31.12.16
SAR’000
GBP’000
Non-current assets
Current assets
Non-current liabilities
Current liabilities
84
231
315
62,345
904
63,249
223
685
908
60,594
667
61,261
Net liabilities
(62,934)
(60,353)
Share capital
Accumulated losses
Exchange rates SAR to GBP
Closing rate
2,500
(65,434)
(62,934)
2,500
(62,853)
(60,353)
7
18
25
4,930
71
5,001
(4,976)
198
(5,174)
(4,976)
19
59
78
5,246
58
5,304
(5,226)
217
(5,443)
(5,226)
0.1977
0.2165
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 2017 amounting to SAR65.3 million (2016: SAR62.6 million) have been adjusted to bring the figures in line with the
Group’s accounting policies.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 69
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
20. Jointly controlled entities (continued)
20.1 Jointly controlled entity with Gold and Minerals (continued)
A loss of £286,000 was recognized by the Group for the year ended 31 December 2017 (2016: £ 726,000) representing the Group’s
share of losses in the year.
As at 31 December 2017 KEFI owed ARTAR an amount of £228,000 (2016: receivable £170,000) - Note 22.4.
As at 31 December 2017, G&M owed KEFI an amount of £0 (2016: £6,000) – Note 22.3.
21. Trade and other payables
The Group
Accruals and other payables
Other loans
Payable to jointly controlled entity (Note 22.4)
.
Other loans are unsecured, interest free and repayable on demand.
The Company
Accruals and other payables
Payable to jointly controlled entity (Note 22.4)
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
2,431
193
228
2,852
1,640
257
170
2,067
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
2,350
228
2,578
1,447
170
1,617
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 2017
Page 70
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
22. Related party transactions
The following transactions were carried out with related parties:
22.1 Compensation of key management personnel
The total remuneration of key management personnel was as follows:
Directors' consultancy fees *
Directors’ other consultancy benefits
Share option-based benefits to directors (Note 19)
Other key management personnel fees and other benefits
Share option-based benefits other key management personnel (Note 19)
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
547
94
67
466
20
1,194
500
49
167
323
37
1,076
* 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 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.
22.2 Payable to shareholders
Name
Lanstead Capital
Nature of transactions
Relationship
Finance -Refer to Note15
Shareholder
Name
Nature of transactions
Relationship
Atalaya Mining PLC (previously EMED) Provision of management and
Shareholder
Lanstead Capital
other professional services
Equity swap agreement:
Subscription cash proceeds
received-Refer to Note 15
Shareholder
22.3 Receivable from related parties
The Group
Name
Gold & Minerals Co. Limited
Nature of transactions
Finance
Relationship
Jointly controlled
entity
2017
2016
408
-
5
2,163
18
-
2017
2016
-
-
6
6
KEFI Minerals Plc ANNUAL REPORT 2017
Page 71
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
22. Related party transactions (continued)
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
2017
2016
-
3
45
3
5,076
5,079
7,815
7,863
Kefi Minerals Ethiopia during 2017 repaid an amount of £1,200,000, the Company advanced £430,000 to the subsidiary.
The Company had a foreign exchange translation loss of £1,969,000 because of the devaluation of the Ethiopian Birr in October
2017.
22.4 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”)
23. Contingent liabilities
23.1 Geological database
Nature of transactions
Finance
Relationship
Jointly controlled entity
Nature of transactions
Finance
Relationship
Jointly controlled entity
2017
2016
228
228
170
170
2017
2016
228
228
170
170
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).
23.2 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 2017; the balance in the deposit accounts was £20,000.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 72
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
23. Contingent liabilities-continued
23.3 Legal Allegations
The original claim for damages of US9,000,000 (approximately ETB240 million) had been lodged against KEFI in 2014. The claim
was based on the impact of exploration field activities conducted between 1998 and 2006, a period which pre-dated KEFI’s
involvement in the Tulu Kapi Gold 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 the matter and initiated court
action against KEFI. The Oromia Regional Supreme Court earlier this year rejected 95% of these claims as having no legal basis and
reduced KEFI’s potential liability to £435,000. KEFI’s appeal to the Court with regards to the remaining £435,000 has now succeeded
and the Company is no longer liable for any damages. If another appeal is raised, which remains a possibility, KEFI would defend its
position 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
24. Contingent asset
In 2011, KEFI Minerals completed the sale the Company's Artvin Project in north-eastern Turkey to a Turkish mining company. The
Artvin Project comprised 15 Exploration Licences located in the Eastern Pontide Belt in north-eastern Turkey. Kackar Madencilik
San. Tic. Ltd, 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.
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.
25. Capital commitments
The Group has the following capital or other commitments as at 31 December 2017 Nil (2016 Nil Million),
Tulu Kapi Project Costs
26. Events after the reporting date
Year Ended
31.12.17
£’000
Year Ended
31.12.16
£’000
353
-
On 1 February 2018, 9,600,000 options were issued to persons who discharge director and managerial responsibilities ("PDMRs")
and a further 3,000,000 options have been granted to other non-board members of the senior management team. The options have
an exercise price of 4.5p, expire after 6 years, and vest in two equal annual instalments, the first upon the achievement of practical
completion of the planned processing plant at the Tulu Kapi Gold Project and the second upon the achievement of nameplate capacity
for a twelve-month period.
In June 2018 Company reached agreement with an Ethiopian investment syndicate for the proposed acquisition of a 30% ownership
interest in wholly-owned subsidiary KEFI Minerals (Ethiopia) Limited (“KME”) and holder of the Company’s interest in the Tulu Kapi
Gold Mines Share Company Limited (“TKGM”). Under the proposed terms, which remain subject to final documentation and
government approval, the syndicate will invest US$30,000,000 in Ethiopian Birr of which US$9,000,000 will be invested in August
2018 and the balance upon closing of project finance.
.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 73
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
Notes to the consolidated financial statements (continued)
Year ended 31 December 2017
26. Events after the reporting date - continued
On 15 June 2018 the Company announced a capital-raising for £5,500,000 (US$ 7,310,000) to fund finance closing costs and early
project works in preparation for full finance drawdown and development activities targeted for implementation after the end of the
Ethiopian wet season in September 2018.
27. Adoption of new and revised International Financial Reporting Standards (IFRSs)
Amendments to the following International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) have
been implemented by the Group in the period ended 31 December 2017:
Amendments to IAS 1 Presentation of Financial Statements
Amendments to IFRS 7 Financial Instruments : Disclosures
Amendments to IAS 27 Separate Financial Statements
Amendments to IAS 7 Statement of Cash Flows
Standards, Amendments to published Standards and Interpretations issued but not yet effective
Certain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting
periods beginning after 1 October 2016 or later periods, but which the Group has not early adopted.
At the reporting date of these financial statements, the following were in issue but not yet effective:
Amendments to IFRS 2 Share-Based Payments
IFRS 9 Financial Instruments
IFRS 11 Joint Arrangements
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
Where relevant, the Group is evaluating the effect of these Standards, amendments to published Standards and Interpretations
issued but not yet effective, on the presentation of its financial statements. The Directors have assessed there to be no material
impact of for standards on the Group financial statements of the new standards or interpretations issued.
KEFI Minerals Plc ANNUAL REPORT 2017
Page 74
(This page has intentionally been left blank)
(This page has intentionally been left blank)
KEFI MINERALS PLC
(All amounts in GBP thousands unless otherwise stated)
KEFI Minerals is listed on AIM (Code: KEFI)
www.kefi-minerals.com
KEFI Minerals Plc ANNUAL REPORT 2017