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ANNUAL REPORT
Focused on the Arabian-Nubian Shield
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Table of Contents
Mission ............................................................................................................................................................................................. 2
Mission ................................................................................................................................................................................................... 2
Approach ................................................................................................................................................................................................ 2
Timing ..................................................................................................................................................................................................... 2
Executive Chairman’s Report ......................................................................................................................................................... 3
Annual General Meeting ........................................................................................................................................................................ 4
Finance Director’s Report ............................................................................................................................................................... 5
Finance Director’s Review ..................................................................................................................................................................... 5
Ownership Dilution ................................................................................................................................................................................ 5
Financial Risk Management .................................................................................................................................................................. 6
Accounting Policy .................................................................................................................................................................................. 6
Environmental, Social and Governance......................................................................................................................................... 8
Social Licence ........................................................................................................................................................................................ 8
Reporting Standards .............................................................................................................................................................................. 9
Independent Validation ........................................................................................................................................................................ 10
Corporate Governance ........................................................................................................................................................................ 11
Board of Directors-KEFI ...................................................................................................................................................................... 12
Ethiopia and Saudi Arabia ............................................................................................................................................................ 14
Ethiopia ................................................................................................................................................................................................ 14
Ethiopia’s Mining Sector ..................................................................................................................................................................... 14
Saudi Arabia ......................................................................................................................................................................................... 15
Saudi Arabia’s Mining Sector .............................................................................................................................................................. 15
Exploration and Development ...................................................................................................................................................... 15
History .................................................................................................................................................................................................. 15
Ethiopia ................................................................................................................................................................................................ 15
Tulu Kapi - Background ....................................................................................................................................................................... 16
Tulu Kapi – Permits and Mining Agreement ....................................................................................................................................... 16
Tulu Kapi - Geology ............................................................................................................................................................................. 16
Tulu Kapi – Resources and Reserves ................................................................................................................................................. 17
Tulu Kapi - Definitive Feasibility Study and Subsequent Optimisation ............................................................................................ 18
Tulu Kapi - Development ..................................................................................................................................................................... 18
Tulu Kapi – Potential for Underground Mine ...................................................................................................................................... 19
Tulu Kapi –Exploration Licence Applications .................................................................................................................................... 20
Saudi Arabia ......................................................................................................................................................................................... 20
Saudi Arabia – Hawiah Project ............................................................................................................................................................ 22
Saudi Arabia - Jibal Qutman Project ................................................................................................................................................... 28
Glossary and Abbreviations ......................................................................................................................................................... 30
Competent Person Statement ....................................................................................................................................................... 31
Note: All $ figures in this report are US$
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 1
Mission
Mission
KEFI’s mission is to discover and acquire economic gold and copper mineralisation and follow through with cost-effective
responsible exploration, mine development and production in compliance with local laws and international best practice.
Our geological region of focus is the Arabian-Nubian Shield, due to its outstanding prospectivity for gold and copper.
Our activities provide a strong project pipeline covering the spectrum from a development-ready gold project at Tulu Kapi
in Ethiopia, to our significant copper-gold discovery at Hawiah in Saudi Arabia and to walk-up drill targets in both countries.
Because of the prospectivity of our ground, we expect to significantly expand our minerals inventory.
KEFI has a pole position in two large countries of the Arabian Nubian Shield, Ethiopia and Saudi Arabia. Both countries have
turned overtly supportive of their minerals sectors and are led by newly-appointed government leadership who quickly
attained an important position in world politics. Ethiopia is one of the world’s fastest growing countries and, as will be the
case in Saudi Arabia, the minerals sector will grow much more quickly than is normally the case in most jurisdictions.
Approach
KEFI was launched in 2006 as a GBP2.5 million initial public offering (“IPO”) on the AIM Market of the London Stock
Exchange and was then led by exploration specialists. The 2014 acquisition of Tulu Kapi Gold Project (“Tulu Kapi”) triggered
the appointment of management with track records in developing and operating mines in Africa.
KEFI partners with appropriate local organisations, such as Abdul Rahman Saad Al Rashid and Sons Limited (“ARTAR”) in
the Kingdom of Saudi Arabia in in our Gold and Minerals Limited (“G&M”) joint venture and with the Federal Government
and the Oromia Regional Government in Ethiopia for our Tulu Kapi Gold Mines S.C. (“TKGM”) joint venture.
Operationally, we align with industry specialists such as Lycopodium Limited (“Lycopodium”) and Corica Group (“Corica”)
- our principal project contractors for TKGM’s Tulu Kapi.
Our specific purpose at TKGM is set out in the 2015 Tulu Kapi Mining Agreement with the Ethiopian Government, which
incorporates several foundation documents including Development and Production Plans, an Environmental and Social
Impact Assessment and, for the Community, the Resettlement Action Plan and Community Development Plan in
accordance with the International Finance Corporation (World Bank) Performance Standards and Equator Principles. Initial
plans to commence development have necessarily been rescheduled as required around our host country’s security
disturbances and government administrative changes in the midst of what is an otherwise overwhelmingly positive
political transformation to a democratically elected broadly-based government.
Some elements of Tulu Kapi’s development were able to commence in Q4-2019 and, after experiencing some additional
delays due to the global pandemic and local security incidents in the lead up to Federal elections, most recently postponed
to 21 June 2021, full development is scheduled to commence as soon as possible after KEFI’s 2020 Annual General Meeting
on 30 June 2021.
KEFI also intends to launch field programs in exploration areas of c.1,000 sq kms of the surrounding district where we have
drill-intercepted gold mineralisation in several locations within trucking distance of the planned Tulu Kapi plant.
In the Kingdom of Saudi Arabia we recently discovered, at our Hawiah licence area, a significant copper-gold deposit (also
containing zinc and silver) and this follows our earlier Saudi gold discovery at Jibal Qutman. At Hawiah in late 2020 we
reported the Maiden Mineral Resource Estimate and then the initial Preliminary Economic Assessment and we since
triggered the Preliminary Feasibility Study for development in 2023 to potentially follow production at Tulu Kapi.
In Saudi Arabia we have have also registered applications for exploration of prospects selected from our proprietary
database, covering four major new project areas and aggregating more than 1,000 square kilometres.
Timing
In our next chapter we will strive to maximise our progress against today’s three potentially significant points of inflection:
•
•
•
gold and copper prices are near all-time highs, and with a good long term outlook;
the outlook for host country support and stability is now the strongest for many years; and
our key projects are on the starting blocks right now.
We are confident in our mission, approach and timing.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 2
Executive Chairman’s Report
The underlying value of KEFI’s assets has increased substantially over the past year.
On a Net Present Value (“NPV”) basis, the indicative value of KEFI’s share of its two main assets has increased to $465
million in May 2021, or about £339 million, more than double the comparable figure of £153 million twelve months ago.
This is due to KEFI raising its planned interest in Tulu Kapi from c. 45% to c.75-80% and having made a significant discovery
at Hawiah in Saudi Arabia in late 2020. It should be noted that these statistics are merely illustrative indicators of changes
in underlying intrinsic value and are based on prevailing high metal prices and the other explanations provided in the
Finance Director’s Report and Footnotes.
KEFI is preparing to develop the Tulu Kapi Gold Project in Ethiopia, to complete the Preliminary Feasibility Study for
potential subsequent development at the Hawiah Copper-Gold Project in Saudi Arabia and to push ahead on ambitious
exploration in Ethiopia and Saudi Arabia.
Because of the manner in which we have assembled development finance for Tulu Kapi, we can now target c. 75-80%
ownership. It is also pleasing that we have assembled a particularly strong project finance syndicate and, most importantly,
kept debt-leverage at a prudent level. The core of our financing syndicate is familiar with and supportive of Ethiopia. Upon
execution of the arrangements planned to follow our shareholder meeting on 30 June 2021, our Company will be well
positioned for our next chapter.
Our reported mineral resources provide a solid starting position for our imminent growth. JORC-compliant gold resources
at TKGM in Ethiopia are 1.7 million ounces and gold-equivalent resources in Saudi Arabia at Hawiah and Jibal Qutman are
2.2 million ounces, for a combined 3.9 million oz gold-equivalent. The Company’s beneficial interest in the in-situ metal
content of the three projects is a combined 2.1 million oz in gold equivalent terms. KEFI’s market capitalization at the time
of writing (21 May 2021) is only $29/oz gold-equivalent compared to a current gold price of approximately $1,874/oz.
KEFI’s standing in both host countries is that of an internationally-experienced team which has developed solid
relationships with strong local partners, industry-leading contractors and financiers; and we have exciting projects.
Our assets, relationships and people accordingly provide a strong platform to develop profitable mines in two of the larger
countries within the highly prospective Arabian Nubian Shield. In Ethiopia, security and administrative challenges remain
quite prominent in the current pre-election atmosphere, but we nevertheless cautiously drive the project forward. The
mining regulator is also pushing us very hard to keep to our timetable as it is determined for the sector to contribute its
significant potential.
It is fortunate that gold and copper are now among the best performing investment sectors globally. The longer-term
outlook for gold and copper markets and prices is especially strong. At the time of writing (21 May 2021), copper’s price is
at US$4.55/lb, less than 10% off the all-time high as is gold at US$1,874/oz.
We are indeed at an opportune moment, created by our team’s hard work, your support as shareholders and the
serendipity of markets strengthening as we launch our projects. The Directors are deeply appreciative of all personnel’s
tenacity and steadfast dedication and of the support the Company receives from shareholders and other stakeholders.
We also feel a deep sense of responsibility towards our host countries and the many prominent organisations which have
offered their support to our mission. Our alliances are at the core of our corporate structure and are summarised as follows:
•
•
•
Partners:
o
o
in Saudi Arabia: Abdul Rahman Saad Al Rashid and Sons Ltd (“ARTAR”)
in Ethiopia:
Oromia Regional Government
Federal Government of the Democratic Republic of Ethiopia
Principal contractors for Tulu Kapi:
For mining: Corica
For process plant: Lycopodium Ltd (“Lycopodium”)
o
o
Senior project finance lenders for Tulu Kapi:
o East African Trade and Development Bank Ltd (“TDB”)
o African Finance Corporation Limited (“AFC”)
I should explain that as the result of our re-tendering the mining services contract Corica, which has recently emerged as
Africa’s largest mining contractor, was recently selected as provider of mining services. The basis of the arrangement
remains as has always been intended, a conventional schedule of rates mining services agreement.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 3
Updated DFS-based (“Definitive Feasibility Study”), as updated in accordance with contracting) economic projections for
the Tulu Kapi open pit indicate returns as follows, based on the assumed price range of current analyst consensus long-
term prices and current spot prices (see Footnotes to Finance Director’s Report):
o Average EBITDA of $100-136 million per annum (KEFI 75-80% being c. $78-106 million);
o Net cash flow of $473-674 million over the 7 years 2023-2030 (KEFI 75-80% being c. $369-525 million);
o All-in Sustaining Costs of $826-846/oz, (note that royalty costs increase with the gold price);
o All-in Costs (“AIC”) of $1,048-1,068/oz.
These projections excluded the underground mine at Tulu Kapi and the Saudi Hawiah project. Taking all into account, KEFI
is thus planning c. 78% of TKGM’s 190,000 oz pa gold production along with 34% ownership of G&M, which we expect
could yield us a higher production interest than our larger percentage interest in TKGM.
Simultaneous with the triggering of full development at Tulu Kapi we will re-commence exploration programs in Ethiopia
and expand our exploration program in Saudi Arabia. In Saudi Arabia we focus on our recent significant copper-gold
discovery at Hawiah and we are also working towards being awarded new licences. In Ethiopia we will focus underneath
the open pit where we already have established a maiden resource for underground mining at average grade of 5.7g/t
gold and will also follow-up already-drill-intercepted potential satellite deposits in the Tulu Kapi district.
The potential of the Arabian Nubian Shield has recently been more widely recognised and the world’s two largest gold
companies, Barrick Gold and Newmont Mining, are now active in Saudi Arabia and Ethiopia respectively. And many
international explorers have entered Ethiopia in the past two years. KEFI’s chairman and deputy chairman in Ethiopia have
been elected to chair the International Progress Association for Mining in Ethiopia and Ethiopian Mining Association.
In respect of capital management, the obvious challenge for any public-listed junior explorer is how to discover and develop
such capital-intensive mining projects when the investment appetite of the public capital markets is particularly cyclical.
As a consequence, KEFI focuses mainly on funding at the project levels. In both Ethiopia and Saudi Arabia, our projects’
predecessors and partners have provided over 60% of project funding to date. And as we are demonstrating with Tulu
Kapi, going forward the development funding will remain largely at project levels.
From an ownership dilution viewpoint, this plan may best be summarised as an indicative doubling in underlying asset
values over the past 12 months from £153 million to £339 million ($185 million to $465 million).
The Company has been positioned to bring in c. $320 million of funds to fully develop Tulu Kapi and to finance exploration
in Ethiopia and Saudi Arabia, with c. $309 million already having been conditionally arranged at the project level and
preparing for financial completion as soon as possible after the Annual General Meeting on 30 June 2021. A more detailed
explanation of our financing plan is set out in the Finance Director’s Report.
The Directors expect that, as milestones are achieved, the Company’s share price will naturally narrow the gap between
the Company’s market capitalisation of £43 million or $60 million (on 21 May 2021) and what we believe to be the
significantly higher intrinsic valuations of the Company’s projects.
Local geopolitics and the COVID-19 pandemic have disturbed our past progress. At the time of writing, the outlook on both
fronts is much more promising than it was twelve months ago. The Company’s systems and capital plans have been
expanded to cater for these new realities. Plus it is notable that Ethiopia is holding a landmark democratic election on 21
June 2021 which is expected to lead to Ethiopia maintaining its pro-democratic and pro-development trajectory. And as
regards the pandemic, our prognosis is that the COVID vaccine roll-out will reduce the pandemic’s threats to our projects.
Annual General Meeting
We are grateful for the patience and support of our communities and our Governments, our principal contractors, our
hard-working small organisation of highly-experienced personnel and, of course, our 1,000’s of extremely patient
shareholders. We will certainly advance as fast as is physically possible.
Because of COVID safety protocols, we will conduct the shareholder meeting in London and with remote participation.
As regards voting, shareholders are encouraged to submit proxies to Share Registrars Limited. The Annual General Meeting
will be in London, England at 10am on 30 June 2021 at Marlin, Lower Ground Floor, 111 Westminster Bridge Road,
Waterloo, SE1 7HR, United Kingdom.
Yours faithfully,
Harry Anagnostaras-Adams
Executive Chairman.
4 June 2020
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 4
Finance Director’s Report
Finance Director’s Review
KEFI is a first-mover within a fast-changing geopolitical environment and has been financing its activities in the midst of a
global pandemic – a challenging environment indeed.
Successful implementation will see KEFI emerge in 2023 as a profitable producer of 140,000 oz pa with advanced growth
plans in Ethiopia and Saudi Arabia which already can see much higher gold equivalent production within the following few
years.
Subject to the approval of KEFI shareholders, the Company has been positioned to, as soon as possible after the Annual
General Meeting, bring in c. $320 million of funds to fully develop Tulu Kapi and to finance exploration in Ethiopia and
Saudi Arabia. The plan would leave KEFI with project ownership levels as follows:
•
•
•
75-80% of the Ethiopian mining development and production operation, via the shareholding in TKGM
100% of the Ethiopian exploration projects, via the shareholding in KME
34% of the Saudi development and exploration projects, via the shareholding in G&M
Using Net Present Valuation (NPV) methodology in respect of Tulu Kapi and Hawiah (and excluding Jibal Qutman given its
regulatory status), these levels of beneficial interest indicate combined NPV’s as follows for KEFI shareholders comparing
the results at consensus long-term prices and prevailing spot prices (refer Footnotes) is $259-465 million or £187-339
million, as at 2021 start of construction at Tulu Kapi.
These indicators provide some illustrative measure of the value to be potentially created for shareholders. KEFI’s current
market capitalisation is $60 million (£43 million).
KEFI has funded all of its past activities with equity capital raised at then prevailing share market prices. This avoided the
superimposing of debt-repayment risk onto the risks of exploration, permitting and other challenges that always exist
during the early phases of project exploration and development in frontier markets. We do however avail ourselves of
unsecured advances from time to time as arranged by our Corporate Broker, Brandon Hill Capital, to provide working
capital pending the achievement of a short-term business milestone. This is taking place now pending the finalisation of
the Tulu Kapi financing in preference to availing ourselves of several other much appreciated bridging financing facilities
on offer.
Overall, the current finance plan is shown below and caters for all planned development expenditure at TKGM in addition
to all exploration and corporate funding requirements, estimated at c. $320 million ($310-330 million, depending upon
final procurement price confirmations). It will be optimised by KEFI and the TKGM syndicate which has already conditionally
indicated the following participation as at 31 May 2021:
$ Million
70 Mining capital to be paid for on a per tonne mined basis via the mining agreement
140 Senior project debt, to be repaid out of operating cash surpluses
15 Subordinated debt linked to offtake rights. To be repaid out of operating cash surpluses
14 Mining contractor charges, convertible into KEFI shares at the price in 2 years
45 Subordinated loan in subsidiary, convertible into KEFI shares at the price in 3 years
25 Project equity issued to Government for 20% of TKGM shares; and $5 million to other local institutions
309 Total so far, with the remainder to be finalised for settlement
By 30 June 2021, the following needs to be carried out so as to proceed to earliest project finance settlement:
Final construction procurement pricing confirmed;
o
o Detailed documentation to be approved by the relevant Government agencies, including the Ministry of
Mines and the National Bank of Ethiopia, so that execution may proceed by all syndicate parties;
Finalised position for local equity investors and off-taker.
o
Ownership Value and Ownership Dilution
Upon execution of the Tulu Kapi project finance plan, KEFI will replenish its working capital, launch full development at
Tulu Kapi and also underpin at least the next 12 months of planned exploration in Ethiopia and Saudi Arabia.
From an ownership value perspective and measuring the Company’s underlying assets on a Net Present Value (“NPV”)
basis, compared with the position as at the time of the last AGM, this plan has resulted in the indicative value of KEFI’s
share of its two main assets having more than doubled from $185 million in June 2020 to $465 million in May 2021. This is
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 5
the result of KEFI raising its planned interest in Tulu Kapi from 45% to c.78% and making a significant discovery at Hawiah.
The basis for these estimates is prevailing metal prices and other explanations provided in the Footnotes below.
From an ownership dilution perspective, successful completion of the finance plan will necessarily also increase issued
capital but ownership dilution will be minimised vis a vis the quantum of development capital raised because it is intended
that the share issues by KEFI for a subset of these amounts will largely be at prices two and three years from project finance
completion.
Financial Risk Management
In designing the balance sheet gearing overall, the senior debt: equity ratio for TKGM is 58%:42% $140 million: ($140
million: $ 100 million) excluding equity funded historical pre-development costs and 33%:67% ($140 million: $210 million)
including equity funded historical pre-development costs.
And in structuring the TKGM project finance, a number of key parameters had a driving influence on Company policy:
•
The breakeven gold price after debt service is $1,107/oz (flat) for 10 years, whilst over the past 10 years the gold
price was under that price for only 2.4% of the time; and
• At analyst consensus US$1,591/oz it could be repaid within 2 years of production start.
It is important that we now proceed to financial completion in accordance with the latest plans agreed with the
Government. Indeed the Government has warned of administrative consequences if we fail to do so and our syndicate
have all made it clear that all wish to proceed to plan subject only to normal safety and compliance procedures.
We have conditionally assembled c. US$309 million of development finance at the Project level from our small, efficient
and economical corporate office in Cyprus. Other than our Nicosia-based financial control/corporate governance team, all
operational staff are based at the sites for project work. This approach increases efficiency at a lower cost.
Accounting Policy
KEFI writes off all exploration expenditure.
KEFI’s carrying value of the investment in KME, which holds the Company’s share of Tulu Kapi is £13.7 million as at 31
December 2020. It is important to note KEFI’s planned circa.75% -80% beneficial interest in the underlying valuation of
Tulu Kapi is circa £172 million based on project net present value (NPV 8% discount and @ gold price of US$1591/oz,
including underground).
In addition, the balance sheet of TKGM at full closing of all project funding will reflect all equity subscriptions which are
currently estimated to exceed £113 million or US$156 million (Ethiopian Birr equivalent).
John Leach
Finance Director
4 June 2020
Footnotes:
(1) Long term analysts’ consensus forecast is sourced from CIBC Global Mining Group Analyst Consensus Long Term Commodity
Price Forecasts 30 April 2027;
(2) current analyst consensus long-term prices are US$1,591/oz for gold, US$3.25/lb for copper, US$1.09/lb for zinc and
US$21.08/oz for silver;
(3) Spot prices for gold & silver on 31 May 2020 were $1,731/oz & $18/oz; on 21 May 2021 were $1,874/oz & $28/oz;
(4) Spot prices for copper and zinc on 21 May 2021 were $4.55/lb and $1.34/lb;
(5) NPV calculations are based on an 8% discount rate applied against net cash flow to equity, after debt service and after tax.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 6
Organisational Development
KEFI senior management is drawn from leading mining jurisdictions internationally and has confirmed its intention to
oversee KEFI’s organisational development over the next three years, from which KEFI should emerge as a leading producer
in the highly prospective Arabian Nubian Shield with significant organic growth potential.
Alongside the Australian Executive Chairman and Canadian Finance Director, the following long-standing international
specialists make up the KEFI senior management team:
• David Munro, Operations – South African - mining engineer who previously was Managing Director of Billiton BV
and President Strategy and Development of BHP Billiton;
•
Eddy Solbrandt, Systems – German - founder of GPR Dehler, an independent, international management
consultancy which specialises productivity improvement for mining companies worldwide;
• Brian Hosking, South African - Exploration and Technical Planning – originally a geologist, he founded Meyer
Hosking and has also focussed on human resources for the mining industry; and
• Norman Green, Namibian - Head of Projects – founder of Green Team International, a longstanding project
management consultancy to the extractive industries.
Wayne Nicoletto is Managing Director, Ethiopia – a metallurgical engineer who has led the start-up and operation of mines
in Africa and elsewhere over many years.
The Group Exploration Adviser is Jeff Rayner, the Company’s foundation Managing Director. The Corporate Development
Manager is Rob Williams and the Group Financial Controller Laki Catsamas.
Operations managers include Project Manager AK Roux, Senior Site Services Manager Pete Smith, Government Relations
Head Dr Kebede Belete, Chief Financial Officer Theron Brand whilst the Saudi Exploration Manager is Tomos Bryan and
Senior Geologist Timothy Eatwell.
Tulu Kapi planning session at local Government office
Tulu Kapi planning session with community
As part of organisational development plans, KEFI has completed a detailed recruitment plan and introduced a senior
executive remuneration and incentivisation plan including both short-term and long-term incentives tied to business
milestones.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 7
Environmental, Social and Governance
Social Licence
KEFI considers social licence to be the most important foundation stone of the organisation. No amount of money or any
number of personnel will allow a company to achieve its objectives unless it has earned the trust and support of its host
communities and the other key stakeholders. This is especially the case in the minerals sector and especially when a
company takes a remote project forward beyond exploration and into development and production.
It is notable that TKGM is a joint Ethiopian-KEFI company with its own long-standing community. The Company’s
exploration camp and compound have enjoyed a quiet and productive atmosphere and relationship within the Tulu Kapi
community since it was established over fifteen years ago, well before today’s ESG terminology and regulatory checklists
were launched. The Company and its predecessors have long conducted themselves as good corporate citizens and
neighbours. We have key personnel who have been central to the project’s team on the ground for that fifteen-year entire
period. Trust has been earned. And whenever incidents of civil unrest have affected our area, the local community and
authorities have protected TKGM. Tulu Kapi is our community and our community is Tulu Kapi.
An analogous approach is being taken in Saudi Arabia where an exploration camp and compound has just been constructed
at Hawiah, where we expect to operate for many years. Since recommencing field exploration at Hawiah G&M has rapidly
become recognised as a major local employer bringing new opportunities and benefits to the local community. The
Company’s presence was initially resisted by some of the local community elders who have now become active supporters
of the Company presence in the area.
Inspecting water supply provided
by TKGM
Weekly volleyball competition at
Tulu Kapi camp
Maintaining the nursery
In Ethiopia:
•
TKGM has already provided the following to the:
o Community: over 100 direct and indirect employment positions, school, roads, bridges, fresh water supply;
o District: preferential procurement from local suppliers of accommodation, food and materials;
o Region: funding for the establishment of infrastructure in new host lands for resettled households.
•
TKGM plans to provide the following once the project is fully launched and developed:
o Community: over 5,000 direct and indirect employment positions, scholarships and training;
o District: preferential procurement of supplies for an operation with expenses over $10 million per month;
o Region: new road and electrification to be brought to Tulu Kapi;
o
Federal: largest single exporter at $250 million per annum at current gold prices, largest royalty payer, taxes.
The priorities between settlement of project finance and the start of the next dry season in Q4-2021 are to complete the
community resettlement process and to have progressed plant procurement, roads and electrification construction
sufficiently to allow major site construction activities to flow smoothly from Q4-2021. In the meantime, COVID vaccination
programs should have prepared our personnel and those most vulnerable within the community.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 8
In Saudi Arabia:
• G&M has provided the following:
o Over 30 direct and indirect local employment positions in the community;
o Preferential procurement from local suppliers for accommodation, water, fuel and food;
o Graduate recruitment and skills training for 6 Saudi nationals (20% of the current workforce);
o Active engagement with the local IMARA and government authorities on matters of local and community
interest.
• G&M plans to provide the following once the Hawiah project is fully launched and developed:
o Over 1,000 direct and indirect employment positions;
o Active training and skills development for Saudi Nationals in line with the goals of the Saudi Vision 2030;
o Preferential procurement and supplier contracts for ongoing operations;
o Regional development of road, water, electrification and health care to nearby villages and development
of local regional centres around Hawiah and within the Makkah governate area.
At Hawiah the priorities over the next year include completing the ESIA base line studies as well as a full geohydrogeological
and water resource study. The findings from these studies will be incorporated into the PFS study to be completed in mid-
2022.
Reporting Standards
TKGM, like KEFI, emphasises transparency in all dealings and compliance with leading international standards for social
and environmental aspects including World Bank IFC Principles, Equator Principles and the more recent Environmental,
Social and Governance reporting guidance.
TKGM’s Environmental and Social Impact Assessment has been available on KEFI’s website since its completion in 2015,
environmental and social base line studies have been independently conducted and our Social Performance Team has
been on the ground within the communities throughout KEFI’s presence.
Once development commences, we will commence external reporting the following functions and activity sets:
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 9
Independent Validation
KEFI
GOLD + COPPER
Security
Independent Valida�on
Due Diligence
Financial
Model
Environmental
& Social
Defini�ve
Feasibility Study
Resources &
Reserves
10
Constellis:
Snowden:
Reviews of security from the level of country down to site
Independent Competent Person for reporting of Mineral Resources and Ore Reserves in
accordance with the JORC Code
Lycopodium:
Updated the DFS initially assembled by Senet, to incorporate refinements and market pricing
Golder:
SLR:
Carried out the Environmental and Social Impact Assessment and base line studies
independent monitoring of environmental and social performance, measured against the
World Bank IFC Performance Standards and Equator Principles and International Cyanide
Management Code
Endeavour Financial:
Project finance adviser and independent financial modelling
Micon International:
Independent due diligence for project financing syndicate
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 10
Corporate Governance
The Directors of the Company have elected to follow the main principles of the QCA Corporate Governance Code (the
“QCA Code”), which identifies ten principles that focus on the pursuit of medium to long-term value for shareholders
without stifling the entrepreneurial spirit which the Company has so carefully created:
1. Business Model & Strategy: the Board must be able to express a shared view of the Company’s purpose, business
model and strategy. In this regard, KEFI’s Board reviews and approves as the case may be annual reports, plans
and budgets plus monthly progress reports;
2. Understanding Shareholder Needs and Expectations: the directors must develop a good understanding of the
needs and expectations of the Company’s shareholder base. In this regard, KEFI’s Chairman regularly consults the
largest shareholders conducts a quarterly Webinar providing live Question and Answer session for all
shareholders;
3. Considering Wider Stakeholder and Social Responsibilities: The QCA Code states that long-term success relies
upon good relations with a range of different stakeholder groups both internal and external. The board needs to
identify the Company’s stakeholders and understand their needs, interests and expectations. In this regard, an
example of KEFI conduct is that operating subsidiary TKGM is member of the TKGM-Government Task Force for
oversight of Project co-ordination and progress;
4. Risk Management: The board needs to ensure that the Company’s risk management framework identifies and
addresses all relevant risks in order to execute and deliver the Company’s strategy. In this regard, KEFI’s own risk
assessments are supplemented by independent risk reviews by independent experts across a wide range of topics,
including security, environmental, social, cost-control and schedule control;
5. Well-functioning Board of Directors: The Board must be maintained as a well-functioning, balanced team led by
the Chair. The Board should have an appropriate balance between executive and non-executive directors and
have at least two independent non-executive directors. In this regard, KEFI ensures that the Board comprises a
majority of non-executive directors;
6. Appropriate Skills and Experience of the Directors: The Board must have an appropriate balance of skills and
experience and not be dominated by one person or group of people. KEFI’s Board includes individuals with
extensive experience in African business building, operations, financing and government relations;
7. Evaluating Board Performance: The QCA Code states that the Board should regularly review the effectiveness of
its performance as a unit, as well as that of its committees and individual directors. In this regard, an initiative
that emerged from such a recent review was to ensure that at least one KEFI non-executive director sits in on the
board meetings of joint venture operating companies to reinforce full transparency through to the parent from
the subsidiary structures;
8. Corporate Culture: The Board should promote a corporate culture that is based on ethical values and behaviours.
In this regard, KEFI’s Chairman and Deputy Chairman in Ethiopia have been elected the Chairmen of the
International Progress Association for Mining in Ethiopia and the Ethiopian Mining Association respectively, in our
view, reflecting the well-established standing of Tulu Kapi as a project in the country and also the recognition of
our commitment to the highest ethical values and behaviours;
9. Maintenance of Governance Structures and Processes: the Company should maintain governance structures and
processes in line with its corporate culture and appropriate to its size and complexity. In this regard, TKGM’s Social
Performance Team was recently been expanded to a full-staffing level and stationed at Tulu Kapi in order to be
able to continuously consult the community in a systematic manner as development launches, with reports being
provided through to the rest of the organisation;
10. Shareholder Communication: The QCA Code states a healthy dialogue should exist between the Board and all of
its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the
company. In this regard, it is relevant that all KEFI shareholder resolutions over the past six years have received
overwhelming approval of 95% or more at the general meetings.
Full details of the governance charters and other disclosures can be found on the Company’s website: https://www.kefi-
minerals.com/about/corporate-governance
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 11
Board of Directors-KEFI
Harry Anagnostaras-Adams – Managing Director, and Executive Chairman
Mr Anagnostaras-Adams (B. Comm, MBA) has been Executive Chairman since 2014 and was
previously 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.
John 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 Chairman of the boards of Pan
Continental Oil & Gas NL (2017) Resource Mining Corporation Limited (2006 to 2007) and
served on the Board of Gympie Gold Limited (1995 to 2003).
.
Mark Tyler – Non-Executive Independent Director. Chair of Audit and Finance Committee
and of the Remuneration Committee
Appointed to Board on 5 September 2018.
Mr Tyler holds BSc (Eng) Mineral Processing, GDE (Mineral Economics) and was previously a
mining investment banker in London and South Africa, including as co-head of Mining and
Resources Finance at Nedbank, a South African bank. He is currently a senior resources
advisor to Exotix Capital and the London representative for Auramet International, a
precious metal merchant financier
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ANNUAL REPORT 2020
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Norman Ling – Non-Executive Independent Director
Appointed to Board on 23 June 2014.
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.
Richard Robinson – Non-Executive Independent Director
Appointed to Board on 22 August 2019.
Mr. Richard Robinson holds a Master of Mineral Economics Queen’s University (Can); B.
Computer Science University of Natal (South Africa and has been involved for over 40 years
in the international gold, platinum, base metal and coal industries. He spent over 20 years
at Gold Fields of South Africa Ltd where he had executive responsibility for gold operations,
gold exploration, international operations, the base metals and coal operations, and all the
group commercial activities. His experience also includes being Managing Director of
Normandy LaSource SAS, Non-Executive Chairman of the private Swiss multinational
Metalor Technologies International SA and Non-Executive Director of Recylex SA
Adam Taylor – Non-Executive Director
Appointed to Board on 20 July 2020.
Adam Taylor holds a BSc Economics (London School of Economics) and is the founder,
Chairman and former CEO of FirstWave Group BV, Africa's leading vertically integrated
aquaculture group, which he established in 2011. He was previously Managing Director of
Oakfield Holdings, an Africa focused investment company, and prior to that a Portfolio
Manager at Liongate Capital Management, where he was responsible for commodity sector
hedge fund investments.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 13
Ethiopia and Saudi Arabia
These are the two of the larger countries within the Arabian Nubian Shield, selected by KEFI because of their prospectivity,
the opportunity to attain a pole position in modern mining and the encouragement by government. The Company has
been in Ethiopia since 2014 and in Saudi Arabia since 2008.
Ethiopia
The Federal Democratic Republic of Ethiopia, a major economic and political power within the East African region, also
hosts the headquarters for the African Union and many international political and non-government organisations.
The country has been amongst the world’s top-ten growth countries for over 15 years running and remains so in 2021. It
is however under severe external political pressures coupled with severe economic threats. Whilst the Company always
maintains a strictly apolitical stance, we remain of the strong belief that Ethiopia’s recent transformative strategies are
overwhelmingly positive and auger well for the outlook for the country, our sector and our Company.
Organized as a Parliamentary republic, Ethiopia is composed of 10 governing regions alongside two chartered cities (Addis
Ababa and Dire Dawa), which are in turn composed of 68 districts. Regional divisions are strongly associated with the
country’s 7 major ethnic groups, in particular those of the Oromia and Amhara regions which together account for more
than 60% of the country’s population. The population is approximately 110 million and has an average age of 20 years.
Political transformation is indeed occurring at a rapid pace. After toppling the socialist-military Regime in 1991, the Tigray-
based political party dominated the coalition party and thus the Federal Government, effectively leading the country until
2018. In 2018, change within the ruling coalition party led to the election of Prime Minister Dr. Abiy Ahmed, who has led
significant changes in politics and economic direction and systems.
In November 2020 the Federal Government enforced law & order by taking military and police action in Tigray to preserve
compliance with the constitution of Ethiopia. These security programs, combined with the global COVID pandemic, have
strained Ethiopia’s social cohesion and economic performance, which has had a number of negative consequences such
as the slowing of growth, straining domestic liquidity, downgrading of the country’s international credit rating and the
pausing of some foreign direct investment projects.
KEFI has accordingly elevated its precautions with official support, to protect KEFI-Government Project plan which targets
to commence full development as soon as possible after the elections in Ethiopia and KEFI’s annual general meeting, both
in June.
Joyful responses to the transformations initiated in Ethiopia in 2018
Ethiopia’s Mining Sector
Less than 1% of Ethiopia’s GDP is from the mining sector, but the Government’s 10-year target is 10%. TKGM is the first
mover of an industrial scale for some decades and, if operating today, would be the largest single export generator in
Ethiopia. And, if the top 4 gold projects are producing in 5 years, their combined exports would rival total country exports
today.
The Government is continually improving the mining regulatory framework. Recent initiatives include the digitisation of
the licence application lodgement system plus other policy precedents brought to the Government’s attention by the
private sector, such as:
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 14
•
•
•
Specialist internationally accredited contractors being allowed to operate in Ethiopia;
Bank accounts now being allowed in major international financial centres, to allow mining project finance;
Permissible capital ratios now cater for the capital-intensity and project-debt-gearing of mining.
Saudi Arabia
Saudi Arabia is the largest country in the Middle East and the Kingdom was founded in 1932, uniting the four regions into
a single state and has since effectively been an absolute monarchy governed along Islamist lines. The population is
approximately 34 million and has an average age of 32 years.
Saudi Arabia’s Mining Sector
A new stand-alone ministry has been created to intensify efforts to expand the minerals sector, which is now officially
proclaimed to become the 3rd pillar of the Saudi economy.
A mining fund has been established by the state, to provide development finance for the sector as well as support
geological survey and exploration programs.
Such initiatives auger well for ARTAR and KEFI’s G&M joint venture, because we are one of very few long-standing active
explorers and we have developed a huge database since 2008, which can be applied upon the opening of licencing
opportunities.
Exploration and Development
History
KEFI’s Mission at its IPO in December 2006 was to discover + 1Moz Au, or Au equivalent gold deposits. Rapid prospect and
regulatory assessments in several countries led KEFI to focus on the underexplored Precambrian Shields (the Arabian-
Nubian Shield, or “ANS”) in Saudi Arabia, in 2008 and Ethiopia, in 2013, and divest its interests elsewhere.
In Turkey, KEFI was successful in the discovery of epithermal gold at its Yatiktas and Derenin Tepe prospects. The former
was sold to Koza Gold with a 2.5% NSR and the latter sold to Ariana Resources with a 2% NSR. The Artvin porphyry Cu/ Cu-
Au VMS project and the Bakir Tepe Cu-Au VMS project were successfully joint ventured with Centerra Gold.
In Saudi Arabia, KEFI has demonstrated the prospectivity it was searching for and has:
•
•
built an impressive portfolio of tenements including 2the current Exploration Licence at Hawiah and 30 EL
Applications, (“ELA’s”);
discovered 0.73 Moz Au in the Jibal Qutman EL and following submittal of an initial PFS, is applying for a Mining
Licence (MLA). The 4 surrounding ELA’s have potential to make this project a multi-million ounce gold district;
discovered a large Cu-Au VMS deposit at Hawiah. A maiden Mineral Resource Estimate (“MRE”) of 19.3Mt at
0.9% Cu, 0.8% Zn, 0.6g/t Au and 10.3g/t Ag was announced in 2020. A Preliminary Economic Assessment (“PEA”)
has returned a positive outcome, drilling is continuing to augment the resource and a Preliminary Feasibility
Study (“PFS”) has commenced for potential development.
In Ethiopia, KEFI identified a +1Moz Au deposit, at Tulu Kapi that was subject to a DFS and in (MLA) by another company
(Nyota Minerals PLC) in 2012. KEFI recognised that the Project was over-capitalised and inadequately planned. This asset
was acquired 100% by KEFI in 2013-2014 for £6M. KEFI proceeded to completely overhaul the Project and brought it to
the development starting blocks.
In addition, the underground potential at Tulu Kapi could yield high grade Au of +1Moz and there are 15 known prospects
with encouraging drill intercepts in exploration ground reserved for KEFI within 50 km radius of Tulu Kapi.
Ethiopia
Gold production is currently estimated to commence at c. 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$800-900/oz, much lower than the industry average.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 15
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 duly updated construction and
operating terms with project contractors.
Ore Reserves of 1.05 million ounces and Mineral Resources of 1.7 million ounces have significant upside potential from
potential Underground Resources of +1M oz Au and from 15 satellite deposits around a 50km radius of Tulu Kapi, including
the Guji-Komto Project, which has potential for shallow open cut resources of +0.5M oz Au.
KEFI is also actively assessing other potential gold deposits in Western Ethiopia.
Tulu Kapi - Background
Tulu Kapi is 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.
The altitude of the project area is
between 1,600m and 1,765m above sea
level. The climate is temperate with
annual rainfall averaging about 150cm.
The surface topography around Tulu Kapi
is hilly with deeply dissected river
valleys. Subsistence farmers primarily
grow coffee, crops and fruit.
The Tulu Kapi gold deposit was
discovered and mined on a small scale by
an Italian consortium in the 1930s. Nyota
Minerals Limited acquired the project in
2009 and then undertook extensive
exploration and drilling which
culminated in an initial DFS in December
2012. KEFI acquired 75% of the Share
Capital of Nyota in December 2013 and
the remaining 25% in September 2014.
Location of Tulu Kapi in Ethiopia.
Tulu Kapi – Permits and Mining Agreement
The Tulu Kapi Mining Agreement (“MA”) between the Ethiopian Government and KEFI was formalised in April 2015. The
terms of the MA include:
• Renewable 20-year Mining Licence covering an area of 7km2, with full permits for the development and operation
of the Tulu Kapi gold project.
Fiscal arrangements:
•
o 5% Government free-carried interest;
o Royalty of 7%;
o
o Historical and future capital expenditure is tax deductible over four years; and
o
Stabilisation of fiscal arrangement to protect KEFI in case of future legislative changes.
Income tax rate for mining of 25%;
• Government undertaking to facilitate international financing arrangements 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.
Tulu Kapi - Geology
The Tulu Kapi region has typical Precambrian geology containing metasediments, metavolcanics and intrusive rocks.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 16
Gold at the Tulu Kapi deposit is hosted in quartz-albite alteration zones as planar stacked lenses that dip 30° to the
northwest in a syenite pluton. Gold mineralisation extends over a 1.5km by 0.5km 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 that is characterised by significantly higher gold
grades, with occasional coarse visible gold, more base metal sulphides. KEFI geologists have steadily increased their
understanding of the Tulu Kapi orebody and utilising this knowledge as part of the systematic search for nearby gold
deposits.
Tulu Kapi – Resources and Reserves
The Tulu Kapi Mineral Resources total 20.2 million tonnes at 2.65g/t gold, containing 1.72 million ounces. As summarised
in the table below, c. 94% of the Mineral Resources are in the Indicated category.
Resource
Category
Indicated
Inferred
Sub-Total
Indicated
Inferred
Sub-Total
Indicated
Inferred
Total
Area
Tonnes
(millions)
Above
1,400m RL
Below
1,400m RL
Overall
17.7
1.3
19.0
1.1
0.1
1.2
18.8
1.4
20.2
Gold
(g/t)
2.49
2.05
2.46
5.63
6.25
5.69
2.67
2.40
2.65
Contained Gold
(million ounces)
1.42
0.08
1.50
0.20
0.02
0.22
1.62
0.10
1.72
Note: Resources were estimated using cut-off grades of 0.45g/t gold above 1,400m RL and 2.50g/t gold below
1,400m RL. For further information, see KEFI announcement dated 4 February 2015.
The Mineral Resources were split above and below the 1,400m RL to reasonably reflect the portions of the resource that
may be mined via open pit and underground mining methods, respectively.
The Tulu Kapi Ore Reserves were based on the Indicated Resource above 1,400m RL and total 15.4 million tonnes at 2.12g/t
gold, containing 1.05 million ounces. As detailed in the table below, the high-grade portion of the Ore Reserve contains
nearly all the contained ounces and totals 12.0 million tonnes at 2.52g/t gold, containing 0.98 million ounces. This split
shows that 78% of the ore tonnes and 93% of the contained gold is contained in the higher-grade zones of the Ore Reserve
which are processed preferentially in the eight production years.
Reserve
Category
Cut-off
(g/t gold)
Tonnes
(millions)
Probable - High grade
0.90
Probable - Low grade
0.50 - 0.90
Total
12.0
3.3
15.4
Gold
(g/t)
2.52
0.73
2.12
Contained Gold
(million ounces)
0.98
0.08
1.05
Note: Mineral Resources are inclusive of Ore Reserves.
The above Mineral Resources and Ore Reserves were estimated using the guidelines of the JORC Code (2012).
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 17
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.
The DFS and its updates plan 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 and the planned processing plant has a nameplate of 1.9-2.1Mtpa.
The implementation plans have been agreed on a base schedule of 24 months.
A summary of the Project economics is presented below:
2015 DFS
2017 DFS Update
13-year LOM
10-year LOM
2021 Plan
8-year LOM
(owner mining)
(contract mining)
(contract mining)
Waste:ore ratio
Processing rate warranted
Total ore processed
Average head grade
Gold recoveries
7.4:1.0
1.2Mtpa
15.4Mt
2.1g/t gold
91.5%
7.4:1.0
1.5-1.7Mtpa
15.4Mt
2.1g/t gold
93.3%
Annual steady-state gold production
95,000 ounces
115,000 ounces
Total LOM gold production
961,000 ounces
980,000 ounces
All-in Sustaining Costs (“AISC”)
$724/oz
All-in Costs (incl. initial capex)
Average net operating cash flow
$50M p.a.
Payback
3.5 years
$801/oz
$937/oz
$60M p.a.
3 years
7.4:1.0
1.9-2.1Mtpa
15.4Mt
2.1g/t gold
93.3%
140,000 ounces
980,000 ounces
$826/oz
$1048/oz
$100M p.a.
3 years
Notes:
• 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 US$1,591/oz for
the 2021 Plan.
• AISC include all operating costs, maintenance capital and royalties.
• Royalties increase with the gold price and therefore so does AISC.
• Life of Mine (“LOM”) is the time to mine the planned open pit only.
• Gold production and net operating cash flow are for the first eight years of gold production.
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 in the normal manner as development progresses.
Our development plan includes a fixed price, lump-sum processing plant “design and supply contract” with Lycopodium
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 18
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.
UNDP Resource
Tulu Kapi planned open cut
TK Underground potential
Open to the north
N
Northern most drill intercept of 90m at3 g/t Au
S
View looking east, showing planned TK open cut and high grade Au drill intercepts in the TK Deeps.
The mining services agreement is a conventional schedule of rates agreement under which recently-appointed African
mining services specialist Corica provides the mining equipment, systems and operators and gets paid for performing
according to the KEFI/TKGM plans and directions. Corica was chosen in 2021 to replace our previous selection, based on
finalised bids received.
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.
The key outcomes of the PEA were that:
• Underground mine development is economically justified based on the 2014 Mineral Resources;
•
•
Combined gold production from the open pit and underground mine 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.
•
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.
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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.
KEFI has 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. These
contiguous ELA’s cover c. 1,100 km2 and host 3 major shear zones parallel to the Tulu Kapi gold deposit that contains 15
known prospects within 50km of Tulu Kapi, which is considered an economic trucking distance to the planned processing
plant.
Reconnaissance drilling within the 3 new ELA’s. includes
high grade gold intersected at the Dina Prospect- 7m at 30.3
g/t Au and at Komto trench- 7m at 7.27 g/t Au.
The Komto-Guji structure strikes over 9km and has potential
for 0.3-0.5Moz Au low grade oxides in shallow open pits that
may be processed by heap leach, or at the TK plant.
Proposed ELA’s and location of Regional Prospects
KEFI targets to concurrently develop low-cost open cuts in the ELA’s, these could potentially be brought into production
within 2 years of the commencement of mining at TK.
The Tulu Kapi gold district has enormous potential and is clearly a multi-million-ounce gold system. KEFI is also targeting
other +0.5Moz Au deposits in western Ethiopia.
Saudi Arabia
The Kingdom of Saudi Arabia is a country with a long history of gold and copper mining that dates back over 3,000 years.
Exploration for gold was deregulated for foreign investment in 2006.
KEFI has a 34% beneficial interest in a large portfolio of 30 ELAs and 2 ELs in Saudi Arabia, focusing on six main project
areas. These new ELAs are designed to explore ground and establish additional resources around our existing discoveries
and explore within four new highly prospective districts. These applications are made by ARTAR on behalf of G&M, our
joint venture company with ARTAR, a leading local industrial and international investment group owned by Sheikh Al Rashid
and his family. KEFI has the right to instruct that licences are transferred into G&M at any time and, in the meantime, our
progress in Saudi Arabia is improved by ARTAR’s supportive role.
G&M has been successful in discovering and delineating gold resources at Jibal Qutman and copper-gold-zinc-silver
resources at Hawiah.
The Jibal Qutman deposit is located on the Nabitah Fault Zone, a known geological corridor, highly prospective for gold
exploration. Jibal Qutman and the surrounding 4 ELA’s collectively have potential for a multi-million ounce gold Au
resource.
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Location of G&M ELs and ELAs in Saudi Arabia, including the main gold and VMS copper deposits in the ANS.
G&M discovered gold at Jibal Qutman in May 2009 and was granted the EL in July 2012. G&M delineated Mineral Resources
totaling 733,000 ounces of near-surface gold by May 2013. There is significant potential to increase oxide gold resources
both at Jibal Qutman and in the surrounding ELAs. However, Jibal Qutman is on hold awaiting Mining Licence tenure
confirmation.
The Hawiah deposit is located within the Wadi Bidah Mineral District, a belt proven to host upwards of 20 VMS prospects;
has documented exploration since the 1930s and historic mining sites dated as far back as A.D. 725. G&M discovered
copper-gold mineralisation at Hawiah in June 2009 as part of Kingdom wide reconnaissance work. The EL was granted in
December 2014. Various events delayed drilling commencement to September 2019 and a maiden MRE was announced
in August 2020.
Key commercial advantages for KEFI in Saudi Arabia are:
•
•
•
•
•
The G&M joint venture relationship between ARTAR and KEFI;
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
• New Mining Law implemented in 2021 which will facilitate faster Exploration licence processing times;
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Saudi Arabia – Hawiah Project
G&M commenced drilling at Hawiah in September 2019 and quickly confirmed a large-scale VMS style of mineralisation
underlying the outcropping 4.5km long gossanous ridge.
Whilst mineralisation is continuous across the 4.5Km strike length, three distinct massive sulphide ‘lodes’ have been
delineated in the north and south of the project area, representing areas of greater sulphide thickness. The polymetallic
massive sulphide mineralisation comprises copper, gold, zinc and silver with intercepts of up to 5% copper equivalent.
The maiden 2020 MRE established an initial inferred resource of 19.3Mt at 0.9% Cu, 0.8% Zn, 0.6g/t Au and 10.3g/t Ag,
with a supporting PEA based on this early resource indicating the project is viable for an underground mining operation.
The study uses typical long-hole open stope (LHOS) mining methods and a conventional floatation and CIL processing to
produce copper concentrate, zinc concentrate and a gold/silver dore.
Hawiah Geology and Geological Interpretation
The Hawiah deposit sits at the northern end of the prospective Wadi Bidah Belt. The north trending, 120km long and 20km
wide belt comprised of Precambrian Shield rocks is subdivided into three groups. These three groups represent a back-arc
volcanic progression, plunging west, from mafic volcanic to bimodal epiclastic. The numerous deposits of the Wadi Bidah
are thought to have been mined since A.D. 725 as evidenced from radio-carbon dating of charcoal recovered from the slag
dumps in the district. Ancient mining activity was directed towards gold recovery from gossans and vein deposits. These
ancient workings were not deep enough to exploit unoxidized massive sulphides.
Figure 1 - Geological sketch map of the Wadi Bidah Mineral Belt.
Modern exploration in the Wadi Bidah began in 1936 with the Saudi Arabian Mining Syndicate (SAMS) and led to the first
documented work over the Hawiah prospect in 1989 by the French state’s ”Bureau de Recherches Geoligiques et Miniere”
(BRGM).
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 22
KEFI’s reconnaissance team identified that the prominent; 4.5km long, approximately north-south trending ridgeline
represents the leached gossanous cap of a volcanogenic massive sulphide (VMS) body. The team then undertook a best
practice, sequential exploration program of; mapping, rock chip sampling, trenching and geophysics. This work led to the
first drill hole at Hawiah in 2019.
Diamond drilling has shown that the unweathered subsurface extension of the ridgeline is comprised of massive sulphide
hosted within a greenschist altered volcanic package. This package near surface has been subject to grading degrees of
supergene alteration as a result of rock-groundwater interactions. This has resulted in three weathering/alteration
domains across the length of the ridgeline:
- Oxide (0-35m depth) – preferentially enriched in gold, averaging 1.5-2g/t Au
-
-
Transitional (35-70m depth) – preferentially enriched in copper
Fresh (70m+ depth) – representing ~90% of the deposit to-date.
The siliceous gossan at Hawiah.
Background
The Hawiah EL contains bimodal mafic and felsic volcanics and volcaniclastics units with outcropping stratiform volcanic
massive sulphide (vms) mineralisation situated on the eastern limb of a broad, south-plunging regional anticline. Hawiah’s
silicified and gossanous vms horizon was originally mapped and trenched by France’s Bureau De Recherches Geologiques
et Minieres (“BRGM”) in the 1980s, which identified its near surface gold-bearing potential.
KEFI commenced exploration at Hawiah in 2014 with rockchip and trench sampling to confirm the oxide gold potential and
conducted a self-potential (SP) geophysical survey for deeper VMS copper-gold-zinc sulphide mineralisation. Following a
hiatus whilst several licence issues were resolved fieldwork resumed in 2019 with an IP/RHO geophysical survey to help
define targets for the scout drilling program.
The IP/RHO and SP surveys indicated a large, continuous anomaly consistent with a massive sulphide body, extending to
+300m depth enabling a scout drilling program to be designed.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 23
Program
SP (100m spacing)
IP/RHO (200m spacing)
Program
Program
Scout Drilling
Phase 2
Phase 3
Phase 4
KEFI Exploration History
Geophysics
Lines
38
24
Trenching
Trenches
53
Diamond Drilling
Holes
25
45
27
Ongoing
Length (km)
67
36.6
Total Meters
1,662
Total Meters
3,038
8,989
13,385
Year
2015
2019
Year
2015
Year
2019
2020
2020/21
Est 13,500
2021 (Ongoing)
Successful Hawiah Drilling Programmes
Three phases of diamond drilling have been completed on the deposit since September 2019 to April 2021. A total of 96
diamond drill holes for 25,412m over 4.5km of strike length have been drilled at 100m to 200m spaced sections. Whilst
mineralisation is continuous across the strike length, three “lode” structures have been defined:
-
-
-
The ‘Camp Lode’: 1.7km long, with an average width of 7m with the widest intersection of 20m found at a depth
of 90m. The lode has been drilled to a vertical depth of 580m where 4m true width of massive sulphide was
intersected.
The ‘Crossroads Lode’: 800m long, with an average width of 4m with the widest intersection being 8m true width.
The ‘Crossroads Extension Lode’: 1,000m long, with an average width of 5m with the widest intersection being
13m true width. This lode has been explored to a maximum vertical depth of 380m where 5.4m of massive
sulphide was intersected.
Long section showing extent of VMS mineralisation at Hawiah as currently identified and defined.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 24
Drill highlights include:
Hole ID
From (m)
To (m)
Downhole Interval (m)
Estimated true
width (m)
Cu %
Zn %
Au g/t
Ag g/t
HWD_003 38.65
HWD_005 358.58
HWD_018 73.0
HWD_033 110.0
HWD_074 504.3
HWD_079 409.0
HWD_082 407.8
HWD_084 489.7
HWD_086 552.2
HWD_092 721.4
47
371
85.65
139.0
514.6
418.7
417.8
498.4
561.5
726.8
8.79
12.42
12.65
29
10.4
9.7
10.0
8.7
9.3
5.5
6.0
9.0
8.0
20
7.5
6.0
6.2
6.4
8.4
4.0
4.40
1.27
2.77
1.00
1.61
1.49
1.8
1.14
1.8
1.6
1.50
1.12
0.14
0.39
1.41
1.29
1.56
1.56
0.6
0.5
0.65
0.66
0.83
0.48
0.47
0.54
0.5
0.64
0.36
0.33
15.60
14.13
13.62
7.39
6.29
8.26
11.78
10.14
6.69
6.94
The 13,500m Phase 4 drilling campaign started in May 2021, which is aimed to further extend the strike and depth
extensions and infill drilling to upgrade selected areas of the MRE to Indicated Resource classification to allow for mine
planning as part of the planned PFS.
Hawiah Project- Maiden Mineral Resource Estimate (“MRE”)
The maiden MRE was announced on the 19 August 2020. This estimate is based on diamond drilling completed from
September 2019 to May 2020 and is reported in accordance with the Australasian Code for the Reporting of Exploration
Targets, Mineral Resources and Ore Reserves, The JORC Code (2012). A total of 70 Diamond drillholes (12,027m) and 53
trenches (1,622m) were used for this MRE. Drillhole spacing is typically 100 – 140m.
G&M appointed SRK Consulting (UK) Ltd (“SRK”) as the independent Consultants and Competent Person for the
preparation of the MRE and to provide input for the internal PEA study for Hawiah. These studies facilitated the planning
of ongoing drilling and development studies at Hawiah.
The maiden MRE for Hawiah totals 19.3Mt at 0.9% copper, 0.8% zinc, 0.6g/t gold and 10.3g/t silver as summarised in the
table below, all reported in the Inferred category.
Mineral Resource
Classification
Inferred
Sub-Total Inferred
Mining Type
Open-Pit
Underground
Underground
Open-Pit
Underground
ALL
Material
Type
Oxide
Transition
Fresh
All
ALL
All
Tonnes
(Mt)
0.1
2.0
17.2
0.1
19.2
19.3
Grade
Cu
(%)
0.1
1.1
0.9
0.1
0.9
0.9
Zn (%)
0.03
0.8
0.8
0.03
0.8
0.8
Au
(g/t)
1.7
0.7
0.5
1.7
0.6
0.6
Ag
(g/t)
3.9
12.0
10.1
3.9
10.3
10.3
Metal Content
Cu (kt)
Zn (kt)
Au (koz)
Ag (koz)
0.1
147
0.1
168
168
0.04
21
16
297
141
0.04
157
157
7
45
7
343
349
763
5595
16
16
6358
6373
Hawiah- Mineral Resource Statement Parameters and Cut-off Grade
SRK applied basic technical and economic considerations based on similar deposit types located within Saudi Arabia and
SRK's experience to determine which portion of the block model has reasonable prospects for eventual economic
extraction (as required by JORC) by both underground and open-pit mining methods.
To achieve this, the Mineral Resource has been subject to an underground stope optimisation and open-pit optimisation
study, based on metal price forecasts (with ~30% uplift for assessing Mineral Resources) for Zn, Cu, Au and Ag, to assist
with determining the material with potential for underground and open pit mining and reporting above a suitable Resource
NSR USD/t cut-off value.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 25
Phase 3 Drilling completion
The Phase 3 drilling program was completed in mid-March 2021, totaling 27 holes for 13,385m.
This drilling has doubled the strike and down-plunge extension of the Camp Lode from the 2020 MRE area, with copper
grades generally increasing down plunge and with depth as anticipated by the geological model.
The deepest massive sulphide intersection at the Camp Lode is at a vertical depth of 590m and extends the total plunging-
strike length of mineralisation to 1.2km from surface, with mineralisation remaining open.
Drilling at the Crossroads Extension Lode at Hawiah also confirms mineralisation remains open downdip and down plunge
with the current known limits of mineralisation at a vertical depth of only 380m. This is within the thickest part of the lode
which is now defined to a vertical depth of 380m and remains open at depth.
Long section of Camp lode showing the Phase 3 drilling. The intersections shown are estimated true
widths.
Long section of Crossroads extension lode showing the Phase 3 drilling. The intersections shown are estimated true
widths
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 26
Phase 4 Drilling and PFS development
Baseline programs for the Preliminary Feasibility Study (“PFS”) have commenced with a targeted lodgment of a Mining
Licence application in mid-2022 which would allow for the start of mine development in 2023. These studies include
Environmental, Hydrological and metallurgical test-works all of which are progressing in-line with expectations.
To facilitate the PFS an additional 13,500m of diamond drilling (Phase 4) has commenced with an aim of upgrading key
areas of the resource to Indicated classifications to allow for initial mine planning and design.
Drilling will also close the distance on the wide spaced Phase 3 drilling in the deeper parts of Camp Lode to allow for an
Inferred classification to be established within these zones, as well as targeting the ‘Transition zone’ to improve
understanding of grade-variations within this copper enriched area.
An updated MRE is planned to commence with the completion of the Phase 4 drilling in late Q3/Q4.
Hawiah Project- Preliminary Economic Assessment (“PEA”)
The initial Preliminary Economic Assessment (“PEA”) for the Hawiah Project was announced in September 2020. This
Internal PEA is likely to be the first of several studies as we expand the resource and, in collaboration with our independent
consultants complete the work required for an Independent Preliminary Feasibility Study (“PFS”) to support the initial mine
development in 2023.
Highlights of the Initial PEA
The positive Internal Preliminary Economic Assessment (“PEA”) included the following outcomes:
-
-
-
Confirms that Hawiah is a high priority project, with a significant maiden MRE of 19.3Mt at 1.9% copper equivalent
in-situ (0.9% copper, 0.8% zinc, 0.6g/t gold, 10.3g/t silver), after only seven months of initial drilling.
The maiden MRE alone potentially supports a production rate of 2 million tonnes per annum for seven years for
net operating cash flow of c.$70 million p.a. at current metal prices. After initial and sustaining capital expenditure
of c.$222 million and c.$46 million respectively, this would indicate an estimated net cash surplus of over $200
million before financing costs and tax.
Clear potential for expansion of resources with further drilling below the currently drilled depth of this structurally
consistent tabular structure. An illustrative doubling of the resource with material of similar characteristics as the
maiden resource would indicate an estimated net cash surplus of over $500 million before financing costs and
tax.
- Deeper drilling targeting with the goal of seeking of significantly expanding the maiden resource during next
drilling phases.
Infill drilling to upgrade the MRE to the Indicated Resource category so as to warrant mine planning and estimation
of an Ore Reserve;
Staged studies and surveys required for completion of a PFS during 2021; and
-
-
(Refer to KEFI Press Release dated 22 September 2020, “Preliminary Economic Assessment Confirms Hawiah as a High
Priority Project”).
Hawiah’s Exploration Potential
The maiden MRE at Hawiah has been based on the first 7 months of drilling into this tabular massive sulphide deposit
which remains open along strike and down-plunge, with a deepest mineralised intersect of 590 meters below surface.
Exploration potential remains significant along strike in all areas.
The massive sulphides at Hawiah show evidence of being mechanically transported from the source vent structures.
Breccia clasts of sulphides, sedimentary structures and the lack of hydrothermal alteration in the immediate footwall rocks
under the sulphides indicates that the areas of the deposit drilled to date likely formed on the flank of a laterally extensive,
linear rift. Massive sulphides are interpreted to have accumulated in extensional rifts parallel to these rift sites, with
evidence of secondary mineralising enrichment post deposition. This indicates exploration still has not identified the core
of the system. This is significant, as increased proximity to the source of the mineralising system typically results in higher
grades and widths. Further exploration will seek to locate this core ‘vent-proximal’ portion of the deposit.
VMS deposits are well understood to form in clusters, and Hawiah is no exception. A number of gossans have been
identified by KEFI geologists in the areas immediately surrounding the Hawiah deposit. These areas have been covered
with Exploration licence applications with encouraging communications from the Saudi Arabian authorities indicating that
they should be granted in the near future. Allowing for the completion and success of initial testworks any resources
delineated in these areas would be added directly to the Hawiah Global inventory.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 27
Saudi Arabia - Jibal Qutman Project
The Jibal Qutman EL was granted in July 2012. KEFI 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 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 prepared for four
additional areas near Jibal Qutman.
These applications are pending the overhaul of mining and exploration regulations in early 2021, and also the review by
the Defence Ministry of activities in that area.
Upon proceeding at Jibal Qutman, 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.
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.
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
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 28
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.
Key outcomes from an internal Preliminary Economic Assessment for Jibal Qutman in May 2015 were:
1.5Mtpa HL operation;
•
• Gold production c. 140,000 ounces over an initial mine life of 4-5 years;
• Oxide open-pit optimisation studies show a potential mineable resource of 6.6 million tonnes at 0.95g/t gold, for
c. 200,000 contained ounces;
• Waste:ore ratio of c. 2:1;
• Average gold recovery of c. 70%;
•
•
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 less than 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
The priorities of further work at JQ will be determined once the regulatory situation is clarified.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 29
Glossary and Abbreviations
AIC
AISC
All-in Costs
All-in Sustaining Costs
ANS Mining
ANS Mining Share Company S.C
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
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
DMMR
Deputy Ministry for Mineral Resources – Kingdom of Saudi Arabia
EL
ELA
Epithermal
ESIA
G&M
g/t
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
Gossan
An iron-bearing weathered product overlying a sulphide deposit
HL
IP
Heap leach
Induced polarisation - a ground-based geophysical survey technique measuring the intensity of
an induced electric current, used to identify disseminated sulphide deposits
JORC
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
Mining Agreement
Mining Licence
Million tonnes
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 30
Mtpa
oz
PEA
PFS
Million tonnes per annum
Troy ounce of gold
Preliminary Economic Assessment
Pre-Feasibility Study
Project
Tulu Kapi Gold Project
Precambrian
Era of geological time before the Cambrian, from approximately 4,600 to 542 million years ago
RC drilling
RL
SP
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.
TKGM
Tulu Kapi Gold Mines Share Company Limited
VMS deposits
Volcanogenic massive sulphides; refers to massive sulphide deposits formed in a volcanic
environment with varying base metals (copper, lead and zinc) often with significant additional
gold and silver.
WBMD
Wadi Bidah Mineral District
Competent Person Statement
KEFI reports in accordance with the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (the "JORC Code 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 exploration adviser to KEFI, the Company’s former Managing Director
and a Member of the Australian Institute of Geoscientists (“AIG”). Mr Rayner is a geologist with sufficient relevant
experience for Group reporting to qualify as a Competent Person as defined in the JORC Code 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 Gold and Copper PLC
ANNUAL REPORT 2020
Page 31
Directors, Secretary and Advisers
Directors
Harry Anagnostaras-Adams, Executive Chairman
John Leach, Finance Director
Norman Ling, Non-Executive
Adam Taylor, Non-Executive
Mark Tyler, Non-Executive
Richard Robinson, Non-Executive
Company Secretary
Cargil Management Services Limited
27/28 Eastcastle Street
London W1W 8DH
United Kingdom
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
www.bdo.co.uk
Nominated Adviser and Joint Broker
KEFI Gold and Copper plc Registered Office
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
Lawyers
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2EG
27/28 Eastcastle Street
London W1W 8DH
United Kingdom
Share Registrar
Share Registrars Limited
The Courtyard
17 West Street
Farnham GU9 7DR
United Kingdom
www.shareregistrars.com
Public Relations Adviser
IFC Advisory
20 Birchin Court
20 Birchin Lane
London EC3V 9DU
United Kingdom
www.herbertsmithfreehills.com
www.investor-focus.co.uk
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 32
Consolidated Financial Statements
Year ended 31 December 2020
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
34-45
46-54
55
56-61
62
63
64
65
66
67
68-102
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 33
Group Strategic Report
For the year ended 31 December 2020
KEFI Gold and Copper PLC Company number: 05976748
The directors present their Group Strategic Report for the year ended 31 December 2020.
Principal Activity and Strategic Approach
KEFI Gold and Copper 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 Group are:
• 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.
• To develop those mineral deposits and market the metals produced.
The Board’s strategic focus is to maximize shareholder value through the development of a strong portfolio of minerals projects at
various stages from exploration through to development, while at the same time managing the significant risks faced by companies
in the evaluation, exploration and development of such projects.
Our risk management approach is based 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, cash advances and convertible debt.
The Corporate Head Office of the Group is located in Nicosia, Cyprus, and provides corporate and management and support services
to the overseas operations. East African operations are managed out of Addis Ababa, Ethiopia. The Saudi Arabia exploration is
managed out of Riyadh. Field facilities are also maintained as required.
The Group intends to deliver on its strategic aims using the following approach:
Secure funding for each suitable project.
• Define additional reserves and resources in Saudi Arabia and Ethiopia.
•
• Develop profitable metals production.
• Maintain strong Environmental, Social and Governance standards and practices.
Review of Operations
KEFI is focused primarily on the advanced Tulu Kapi Gold Project development project in Ethiopia, along with its pipeline of other
projects within the highly prospective Arabian Nubian Shield. Once funding is secured it is expected that production at Tulu Kapi
Gold Project will generate sufficient cash flows to fund capital repayments, further exploration and expansion as warranted and, when
appropriate, dividends to shareholders.
Ethiopia
KEFI owns 95% of Ethiopian based Tulu Kapi Gold Mines Share Company (“TKGM”), owner of the Tulu Kapi Gold Project in Ethiopia.
The Government of Ethiopia is entitled to a 5% free carried-interest and a 7% royalty on gold production. Tulu Kapi 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.
The proposed project finance structure now comprises KEFI’s Government Partners (both the Federal Government of Ethiopia and
the Regional Government of Oromia), leading African banks as Mandated Senior Project Lenders (Eastern and Southern African
Trade and Development Bank and Africa Finance Corporation), strong African specialist investors into KEFI Group companies (the
Local Investor and Mining Financier) and African-experienced principal contractors. The final shareholding will depend on the
requirements of senior lenders and syndicate allocations as the company moves towards finalising proposed funding arrangements.
Currently the finance plan is estimated capital costs of the Project at c.US$320million in total, comprising a mix of senior project debt,
subordinated debt and project equity. Further details on the TKGM project financing are available in the Finance Directors Report.
Ethiopia’s sixth federal election is occurring against the backdrop of heightened ethnic tensions and internal conflict. The company
monitors the situation on a continuing basis and takes appropriate security measures to protect staff and operations. The conflict in
Ethiopia has had no direct impact on TKGM although the political and social climate generally has resulted in a slow-down of our
original timetable. The Government of Ethiopia has re-affirmed its commitment to make the upcoming elections free, fair, and
democratic and KEFI/TKGM continues to enjoy strong government, business and community support, having earned and maintained
a strong social licence at Tulu Kapi. From a social-licence viewpoint, it is notable that TKGM is a joint Ethiopian-KEFI company with
long-standing community support and a strong commitment to maximising local participation in the workforce and supply chain.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 34
Group Strategic Report (continued)
For the year ended 31 December 2020
Saudi Arabia
In the Kingdom of Saudi Arabia, KEFI conducts all its activities through Gold and Minerals Co. Limited (“G&M”), our joint venture
company with Abdul Rahman Saad Al Rashid and Sons Limited (“Artar”). KEFI is the operator of the joint venture and Artar, itself a
large and strong Saudi company, provides very effective in-country knowledge and government liaison. . During the year the
Company reduced its holding in G&M from 40% to 34%.
G&M has assembled a large and prospective portfolio of exploration licences and applications. G&M made a gold discovery at Jibal
Qutman and in late 2019 discovered copper-gold-zinc-silver massive sulphide mineralisation at Hawiah. At Hawiah, the first 45 drill
holes identified three distinct massive sulphide lodes which vary in thickness from 3m up to a maximum of 19m. All of the massive
sulphide assays received to date had encouraging grades of copper, gold, zinc and silver. The next step will be to complete the
current Phase 4 diamond drilling program which is intended to upgrade strategic portions of the Hawiah deposit to allow for
preliminary mine planning and design as required during a Preliminary Feasibility Study (“PFS”).
The Kingdom of Saudi Arabia had previously announced policies to encourage minerals exploration and development and these
came into effect from 1 January 2021. This is a very positive development although there were some delays experienced by the
Company during the year as we awaited the introduction of the new mining regulations.
BREXIT
The Group has no operations or material exposure to the UK. Brexit has not had any appreciable impact on the Group.
COVID 19
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which
has continued to spread, and any health-related developments, has adversely affected workforces, economies, and financial markets
globally, potentially leading to an economic downturn. The outbreak of the virus impacted the company both operationally and
financially and the Company issued COVID-19 updates throughout the year. It is the Company’s priority to protect its workforce and
the local communities surrounding its Ethiopian and Saudi Projects. The Company has followed, and continues to follow, the
requirements and recommendations issued by the respective governments and regional and local health authorities at all times to
reduce the risk of COVID-19 exposure and avoid the spread of the virus.
Exploration and development programs re-commenced as government-imposed travel restrictions eased and conditions deemed safe
to deploy equipment and personnel into the field. To date, it is not possible for the Company to predict the duration or magnitude of
the adverse results of the outbreak and its effect on the Company’s business or ability to raise funds. In the preparation of these
financial statements, the Company has incorporated the potential impact of COVID-19 into its estimates and assumptions that affect
the carrying amounts of its assets and liabilities and the reported amount of its results using the best available information as of
December 31, 2020.
Environmental and Social Impact
The Group continues to meet all environmental obligations across its tenements. Progressive rehabilitation of disturbed areas has
occurred in accordance with licence conditions and will continue to occur in the future.
The Company recognises and responds to the growing expectations from community, regulators and industry leaders for more open
community engagement and stakeholder consultation. The Company engages with local stakeholders, including government,
pastoral leaseholders, and local community as an integral part of the exploration process (More information is available in the
Environmental, Social and Governance section of report in pages 8 to 11).
Progress Report
The Group considers that despite the effect of the covid-19 pandemic, which is being monitored closely, its primary projects in
Ethiopia and Saudi Arabia continue to move forward although the pace has been somewhat less than the Company planned due to
awaiting the implementation of the legislative changes in Saudi and the current political and social state of affairs in Ethiopia. Control
over cash management is continuous and this includes the periodic review of the Group’s cash flow needs through cash flow
projection, appraisal of technical reports monitoring the marketplace and the Group’s physical presence in the Kingdom of Saudi
Arabia and the Federal Democratic Republic of Ethiopia. The Board of Directors holds meetings on a regular basis to review the on-
going situation and believe that no changes are required to the current overall strategy. Further information is set out in Note 2 of
the Financial Statements (Going Concern).
Progress over the last year and plans for next against our strategic objectives are noted below:
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 35
Group Strategic Report (continued)
For the year ended 31 December 2020
Strategy Objective
Progress in 2020
Focus in 2021
Define additional reserves
and resources in Saudi
Arabia and Ethiopia
Brought forward the planning for underground
mining at TKGM given sustained increase in
gold prices.
Secure funding for each
suitable project
The maiden Mineral Resource and Preliminary
Economic Assessment (“PEA”) for our Hawiah
Project in Saudi Arabia was delivered.
Ethiopia:
Established potential sources of development
capital at the subsidiary level thus providing an
opportunity to increase the beneficial
ownership in the Project for KEFI.
Senior project finance lenders for Tulu Kapi -
East African Trade and Development Bank Ltd
and African Finance Corporation Limited are
completing their due diligence work in the run
up to providing a potential $140 million in
project financing to the Tulu Kapi project.
RAB Capital, became KEFI’s largest single
shareholder holding approximately 12%.
Develop profitable metals
production
Process plant Front-End-Engineering-and-
Design was completed by principal contractors
Lycopodium Limited.
Regional Exploration Projects:
In both Saudi Arabia and in Ethiopia obtain
additional exploration licenses and start field
programs.
Finance: approval and execution of detailed
finance documentation; receipt of Project
equity/subordinated debt subscriptions (senior
debt drawdown is anticipated to follow in
second half of 2021).
Ethiopia:
Continue access road construction and
electricity connection from main grid to site;
begin bulk earthworks for on-site infrastructure
and start fabrication of plant components in
various factories internationally.
Once all funding is in place commence the full
construction and development of the project.
Saudi:
Hawiah Copper-Gold-Zinc-Silver Project:
Company has budgeted in 2021 to fund its
share of the following activities.
Commence 13,500m ‘Phase 4’ diamond-
drilling program, coupled with a post-drilling
MRE, which is intended to upgrade strategic
portions of the Hawiah deposit to allow for
preliminary mine planning and design as
required during a PFS.
Report expanded mineral resource and Update
Preliminary Economic Assessment.
Maintain strong
Environmental, Social and
Governance standards and
practices
Board and Management strengthened in
readiness for project implementation. During
2020 Mr. Adam Taylor was appointed as a
Non-Executive Director of the Company.
On-going compliance with relevant social,
other
employment
environmental,
legislation along with relevant international
standards.
and
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 36
Group Strategic Report (continued)
For the year ended 31 December 2020
Results
As at 31 December 2020, the Group’s market capitalisation was £49.2 million (2019: £13.8 million). At the year end the Group had
equity of £23.2 million (2019: £17.5 million).
The focus during the year has been preparing the way for 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, selected contractors and preferred project financiers.
The activity levels resulted in similar administrative expenditure and project transaction expenses in comparison to the previous year.
The directors consider that the project in its Licence areas in Saudi Arabia has not yet met the criteria for capitalization. These criteria
include, among other things, the development of feasibility studies to provide confidence that mineral deposits identified are
economically viable,
Cash Flow
Net cash in the 12 months to 31 December 2020 increased by £1.1 million. During the year the company made net cash placements
of £7 million and a bridging loan of £0.8 million. The net cash from financing was £7.8 million. The cash outflow during the period
was £6.7 million of which £2.2 million was used in operating activities and a further £4.7 million used on exploration and evaluation
capital.
Balance sheet
The Company’s Non-current assets of £25 million relate to the capitalised exploration and mine development costs of the Tulu Kapi
Gold project in Ethiopia. During the year, this increased by approximately £3.2 million, essentially as a result of capital expenditure
during the year. The Company had total liabilities of £3 million (2019: £5.2 million), of which £1.5 million related to amounts owed to
staff and shareholders. During the year, the Company repaid bridging financing. by issuing shares to the value of £1.8 million.
Operating Expenses
Exploration expenditure
Administrative expenses, mainly on project development preparations
Investigatory, pre-decisional project finance transaction costs
Share based payments
Share of loss from jointly controlled entity
Other
Gain from dilution of equity interest in joint venture
Loss on convertible note: Difference between the issue price and date of conversion price
Foreign exchange loss
Interest cost
Loss for the year
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
(25)
(2,365)
(316)
(51)
(1,673)
124
1,033
-
(347)
(100)
(3,720)
(29)
(2,133)
(205)
(250)
(591)
15
-
(1,045)
(185)
(1,150)
(5,573)
The results for the year are set out in the consolidated statement of comprehensive income on page 62.
The activities for the year have resulted in the Group’s loss before tax of £3.7 million (2019 £5.6 million). No dividends were declared
or paid during the year by the Board of Directors. (2019: nil). The loss for the year decreased primarily due to a gain of £1 million on
the dilution of the equity interest in the Saudi Arabia joint venture and because the company did not have any convertible note costs.
(2019 £1.1 million). The Group has continued to keep a tight control on its administrative costs. During the year the company had a
loss on foreign exchange during the year due to depreciation of the Ethiopian Birr and the strengthening of the USD.
The value of the share of the loss of operations in the joint venture in Saud Arabia increased due to the higher activity levels at
Hawiah. KEFI has a very conservative policy and expenses all costs relating to its project in Saudi Arabia.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 37
Group Strategic Report (continued)
For the year ended 31 December 2020
Results (continued)
Funding
The Company made placements during the year of £9.8 million for working capital, goods and services, and debt repayments through
the issue of 989,052,146 new ordinary shares at average price of 1.00 pence as follows:
•
•
•
•
•
149,000,000 new Shares to certain project contractors, repay advances and other third parties in settlement of outstanding
invoices of approximate raise £1.9 million (before expenses).
569,230,761 new Shares to raise cash of approximate £3.7 million.
8,461,538 new Shares exercising warrants.
186,000,000 new Shares to raise cash of approximate £3.0 million.
76,359,847 new Shares to certain project contractors, repay advances and other third parties in settlement of outstanding
invoices of approximate raise £1.2 million (before expenses).
The details of each placing are as follows:
Issued
10 Jan 2020 (2)
14 May 2020 (1)
28 May 2020 (1)
16 Oct 2020 (1)
20 Nov 2020 (1)
14 Dec 2020 (1&2)
Gross placement raised before expenses
Less Share Issue Costs
Less Warrant Valuation
In cash
(1)
(2) Settlement of liabilities
Placement
price (pence)
1.25
0.65
0.65
0.65
1.60
1.60
£’000
1,863
740
2,959
55
2,976
1,221
9,814
(390)
(769)
8,655
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. We align with large industry specialists such as those we have selected as
our principal project contractors for TKGM, which is KEFI’S first development project. We also engage leading independent
industry specialist advisers to ensure compliance with the largest international standards and techniques. Furthermore, we
encourage and reinforce alignment with local stakeholders at every reasonable opportunity, illustrated by our inclusion of Ethiopian
private sector investors in our long planned Ethiopian Public Private Partnership.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 38
Group Strategic Report (continued)
For the year ended 31 December 2020
Risk
Description
Mitigation
Exploration industry risk 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 (Refer
to page 6) that highlights this particular risk).
In Ethiopia regional exploration is at an early
stage but significant potential has already been
identified for further gold orebodies to be
discovered near Tulu Kapi.
In Saudi Arabia, G&M commenced drilling at
Hawiah in September 2019 and quickly
confirmed a large-scale VMS style of
mineralisation underlying the outcropping 4.5km
long gossanous ridge.
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.
Political risk
The Group employs the most up to date
exploration techniques together with highly
qualified industry staff and consultants.
Development and implementation of a robust
exploration plan.
Review of exploration plan by the Board’s
technical committee.
Identify attractive prospective areas to apply
for or acquire.
The Group maintains cooperative and
proactive relation with all relevant government
departments and adheres to all required
permitting process and title requirements.
The daily interface with the various
government agencies and with the community
at Tulu Kapi have not adversely affected the
activities of the Group and KEFI enjoys a good
working relationship with the relevant
authorities in both Ethiopia and the Kingdom of
Saudi Arabia. Permanent management teams
in which local staff play significant senior roles
are maintained in each of these countries to
continuously monitor developments and
quickly and efficiently resolve matters as they
arise.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 39
Group Strategic Report (continued)
For the year ended 31 December 2020
Principal risks and uncertainties (continued)
Risk
Description
Mitigation
Community relations risk Mutual support between the Group’s operations
and the communities around them is vital to the
success of our activities and for maintaining our
social license to operate. Actions by those
communities may have an adverse impact on
the Group’s ability to obtain permit, increase
costs and longer project lead time.
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. We employ
staff locally who are aware of community
sensitivities and ensure that consultation is
frequent and on-going. Our community
development will be focused on: sustainable
job creation; skills transfer (education and
training); and infrastructure development.
Our employment policies and terms are
designed to attract, incentivise and retain
individuals of the right caliber.
Integration of skillful personnel to train and
develop new and less experienced employees.
Retention of key
personnel
Strategic Partner risk
The successful achievement by the Group of its
strategies, business plans and objectives
depend upon its ability to attract and retain
certain
key personnel. Achievement of
objectives will help the Group promote a positive
culture in which employees feel they can directly
contribute to the Group’s success.
Strategic partnerships play a role in delivering
growth, project development and funding. They
do this by providing not only capital but also
local knowledge and
strategic
experience. Strategic partnerships include joint
venture partners, governments and contractors.
input with
The Company maintains good working
relationships with its Joint Venture partners
who were selected by KEFI as partners for
their knowledge and capability in their home
country, with frequent meetings and
continuous monitoring of performance.
Any joint venture arrangement contains an
element of counterparty risk and may not always
develop as planned.
Tulu Kapi gold project
Depending on the timing of completion of project
financing, there is a possibility of delays to the
start of production and cost overruns relating to
development of this project.
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.
KEFI has established a company in Ethiopia –
TKGM - for its Tulu Kapi gold mining project,
with one of the main shareholders the
Government of Ethiopia. Reached agreement,
that when the agreed infrastructure elements
are completed, the Government will receive
more shares in TKGM.
In 2018, the Group carried out an independent
technical due diligence risk review of Tulu Kapi
gold project in Ethiopia. The purpose of the
review was to identify any fatal flaws or critical
technical issues that would result in a
significant negative effect on the Project
economics, significant environmental damage,
or serious danger to health and safety. Since
that time, periodic reviews have been
conducted to provide up to date status
assessments.
Overall, the identified risks are manageable
and capable of mitigation and this remains
unchanged.
The Group monitors its exposure to commodity
price fluctuations as part of its overall financial
planning and will consider the use of
appropriate hedging products to mitigate this
risk as it approaches production.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 40
Group Strategic Report (continued)
For the year ended 31 December 2020
Principal risks and uncertainties (continued)
Risk
Financial risks
Description
Mitigation
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. The Group monitors its exposure to
foreign exchange rate fluctuations as part of its
overall financial planning and the Board
reviews these risks regularly and considers
whether any additional actions are appropriate.
Funding risk: The Group relies primarily upon
existing shareholders to meet its funding
requirements for on-going exploration and pre-
development activities which are therefore
dependent upon the Group’s ability to obtain
continued financing through the debt and equity
markets. Where a project moves into the
development stage, such as at Tulu Kapi, it is
then possible to consider other means such as
project financing. Although the Group has been
successful in the past in obtaining the
necessary 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 favourable. Please also refer to
Note 2 of the Financial Statements ‘Going
Concern’.
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.
COVID-19 was characterized as a global
pandemic by the World Health Organization on
March 11, 2020, and has resulted in travel
restrictions and business slowdowns or
shutdowns in affected areas
COVID-19 has had a significant negative
impact on the global economy and to a lesser
extent the mining industry generally which may
mean it is harder to secure additional funding
than has historically been the case.
The Company continues to consider a range of
financing options to provide and maintain
appropriate levels of working capital and
funding for the long-term development of the
Tulu Kapi Gold project and the advancement
of the Saudi initiatives.
Maintenance of discussions with existing
lenders and potential finance providers.
Address potential gating items to securing
project finance.
Looking for new funding options.
We are following World Health Organization
protocols and local government rules and
recommendations at all of our projects and
corporate offices.
Implemented mitigation measures during the
2020 COVID-19 pandemic to ensure that our
operations could continue whilst at the same
time ensuring the safety of our employees and
contractors.
As a result of historical and ongoing proactive
discussions with stakeholders, the Board has a
reasonable expectation that the Group will be
able to raise further funds in order to meet its
obligations
COVID-19 risk
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 41
Group Strategic Report (continued)
For the year ended 31 December 2020
Principal risks and uncertainties (continued)
Directors' section 172 statement
The following disclosure describes how the Directors deal with the matters set out in section 172(1)(a) to (f) and forms the Directors'
statement required under section 414CZA of The Companies Act 2006. The matters set out in this section are that Directors must
act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members
as a whole, and in doing so have regard (amongst other matters) to:
•
•
•
•
•
•
the likely consequences of any decision in the long term.
the interests of the Company's employees.
the need to foster the Company's business relationships with suppliers, customers and others.
the impact of the Company's operations on the community and the environment.
the desirability of the Company maintaining a reputation for high standards of business conduct.
the need to act fairly between members of the Company.
In the Group Strategic Report section of this Annual Report, the Company has set out the short to long term strategic priorities, and
described the plans to support their achievement. The Board has identified KEFI’s stakeholders to include staff, suppliers, customers,
partners, local government and the wider community.
This analysis is divided into two sections - the first to address Stakeholder engagement, - and the second to address principal
decisions made by the Board with emphasis on how the regard for stakeholders influenced the decision-making.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 42
Stakeholder Group
Importance of
Engagement
How did Board and/or Management
Engage
Shareholders/Investors/Joint
Venture Partners
All substantial shareholders that own more
than 3% of the Company's shares are listed
on page 54 within the Report of Directors.
Existing and prospective equity investors
and project level joint venture partners are
important stakeholders.
KEFI has established a company in
Ethiopia – TKGM - for its Tulu Kapi gold
mining project, partnering with the
Government sector and has reached an
agreement, subject to certain conditions, for
further funding from the private sector.
In the Kingdom of Saudi Arabia, KEFI
conducts all of its activities through a joint
venture with a large local partner where
KEFI is operator with a 34% interest.
Workforce
The Company workforce comprises
Senior Management
Contractors
Addis Ababa
Tulu Kapi Field Operations
Other
7
18
24
2
Of senior management, two are
permanently based at the Group’s head
office in Nicosia and the others base
themselves at the Group’s operational
centers in Nicosia, Ethiopia and Saudi
Arabia as needed.
Staff levels will expand rapidly as we move
into the construction and development of
the Tulu Kapi gold project.
Community
KEFI works alongside communities at its
Ethiopian project site and has active
community programs underway.
KEFI regards its host communities as some
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.
The company has a strong commitment to
maximising local participation in the
workforce and supply chain and
The Company requires further
funding to develop both of these
projects.
Access to capital is important to
the long-term successful
development of the KEFI
businesses in both Ethiopia and
Saudi Arabia.
The aim of engagement activities
is to get investor involvement in
our strategic objectives (refer
page 53 of the Report of the
Board of Directors) and the
accomplishment of those
objectives.
Our aim is to establish an
investor base that prefers to
invest on a long term basis and
seeks to help the Company to
achieve its long term objectives.
Over the course of 2020, the
RAB Capital became a 12%
shareholder in the Company
The key mechanisms of engagement
included:
Regular meetings by the executive
Chairman and Finance Director with
substantial shareholders.
Regular meetings with joint venture
partners.
In the case of the Tulu Kapi project and the
Saudi activities, our partners have directors
alongside KEFI on local operating company
Boards.
Annual general meeting, annual report,
quarterly operational updates and Investor
presentations.
One-on-one investor meetings.
Quarterly webinars, other regular news and
project updates.
KEFI Gold and Copper is committed to
providing full and transparent disclosure of
its activities, via the RNS system of the
London Stock Exchange.
See also the “Relations with Shareholders”
section of the Report of the Board of
Directors on page 53.
The company's day to day
running and long-term
development relies on the
recruitment, retention and
incentivisation of staff, and
provision of a safe working
environment
The key means of engagement with staff
includes regular internal calls, meetings and
visits to project sites by members of the
Board and executive team and a regularly
reviewed remuneration framework including
short term and long-term incentives.
Mutual support between KEFI
and TKGM’s operations and the
communities around them is vital
to the success of our activities
and for maintaining our social
license to operate.
Our community development is
focused on sustainable job
creation, skills transfer
(education and training), and
infrastructure development.
KEFI has an open dialogue with respective
local government bodies and with
community leaders regarding the
development of each of our projects.
TKGM has launched an education and
training program with the Ethiopian Ministry
of Mines and Petroleum.
As an example of KEFI’s engagement with
the wider community in which it operates
KEFI has taken the following initiatives in
and commitments in Ethiopia:
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 43
Stakeholder Group
Importance of
Engagement
How did Board and/or Management
Engage
emphasises transparency in all dealings
and compliance with leading international
standards for social and environmental
aspects including World Bank IFC
Principles and the Equator Principles.
Suppliers
KEFI needs a wide range of services to
maintain its business activities.
During the company’s construction phase at
Tulu Kapi and ongoing during the
production phase, its supplier numbers are
expected to rise significantly in-line with the
scale-up of the project concerned.
In the construction phase, we will be using
key suppliers under commercial
engineering contracts to deliver the mine
and plant, all of whom are large
international vendors.
At a local level, we are partnering with the
Government of Ethiopia for the provision at
Tulu Kapi of infrastructure elements and will
also partner with a variety smaller
companies as development progresses.
Lenders
Debt finance is a key element of the
financing mix for a company like KEFI
which is now in the project development
phase at its Tulu Kapi project.
Regulators/Government
Multiple departments and agencies of
national, regional and/or local government
are involved in the licensing and monitoring
of mining activities.
Already provided a local school and water
wells.
Extensive consultation for resettlement
compensation and will apply International
Standards to the compensation and re-
settlement community process.
Facilitated selection of new host lands from
17 alternative sites offered by the
authorities.
Committed to supporting development of
new host land, community development
programs and maximization of local
procurement and employment, with support
for training.
Please also see the Social License section
on page 8.
The management team continues to work
closely with proposed EPC suppliers to
finalise their TKGM project work, contracts
and end deliverables.
One on one meetings between management
and suppliers occur on a regular basis with
vendor site visits as needed.
Our suppliers are fundamental to
ensuring that the Company can
construct the project on time and
budget. Using quality suppliers
ensures that as a business we
meet the high standards of
performance that we expect of
ourselves and vendor partners.
It is important to maintain good
working relationships and credit
terms with suppliers to ensure
the timely and cost-effective
delivery of services and supplies.
It is important to identify and
build relationships with lenders to
ensure sufficient finance can be
secured to support project
development.
Management maintained continuous
dialogue with potential lenders throughout
the year, in particular in relation to the Tulu
Kapi project and has now engaging with a
consortium of African based banks to
provide finance to the project subject to due
diligence and other normal commercial
conditions.
It is important for KEFI and its
operating subsidiaries to build
strong and supportive working
relationships with all relevant
government departments and
ensure that it receives, and
complies with, the required
licenses and authorities to
operate its projects.
The governments, need to
ensure that KEFI and the
relevant operating subsidiaries
are meeting their responsibilities
as per their licenses and to
understand the needs of KEFI as
Management have regular interaction with
the relevant departments and personnel in
the various levels of government.
Periodically, meetings are arranged
between the Board of KEFI and senior
government officials in order to foster a
direct dialogue, and a clear understanding
within a framework of transparency.
KEFI views the establishment of active, two-
way, relationships with government
stakeholders as critical in the successful
development of its projects and in its long-
term commitment to each jurisdiction.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 44
Stakeholder Group
Importance of
Engagement
How did Board and/or Management
Engage
an operating entity with respect
to relevant governmental
requirements.
Principal Decisions
KEFI defines principal decisions as those that have long-term strategic impact and which are material to the Group and its key
stakeholder groups detailed above. In making the following principal decisions during the year the Board considered the outcome
based on the relevant stakeholders as well as the need to maintain a reputation for high standards of business conduct.
1. Project Financing for the Tulu Kapi Gold Project
The Company has adopted a bank-based proposal for the financing of the Tulu Kapi gold project which is financially more attractive
and more straightforward to execute as the proposed bank lenders are actively working in Ethiopia, are familiar with the local market
and many of our local stakeholders and considered more compatible with the Project consortium. Further details are available in the
Finance Director’s Review on page 5.
2. 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 to minimise Tulu Kapi’s development funding requirements through engineering, contracting and
project finance, which have been designed to provide an economically robust project and an appropriate financing plan. Nearly all
capital requirements are to be met at the project level by the combination of project contractors, partners and financiers. Nonetheless,
capital is vital to any enterprise and capital market conditions have been difficult and the Company continues to be successful raising
fresh capital where others are not.
In May 2020 and December 2020 the Board raised, in total, an additional £7.9 million equity to provide further working capital to allow
continued progress at Tulu Kapi and in Saudi as well as settle outstanding debt. This was duly completed with investment from new
and existing shareholders as well as management and certain suppliers.
In making these decisions the Board considered:
•
•
•
All stakeholders: Maintaining the Group as a going concern in the interest of all its stakeholders.
Shareholders: The impact on existing shareholders of raising additional equity was considered with the Board weighing up
the need to maintain the Group as a going concern against the resulting equity dilution. Equity market conditions were also
factored into the decision-making process to strike the optimum balance between the short-term capital requirements of
the Group and the price at which funds could be raised. The long-term value potential of Tulu Kapi Gold Mine project
provides KEFI with significant upside and its best opportunity to become cash flow positive in the near term. Continuing to
move the project through the financing and construction phases and into production is critical in helping KEFI to achieve its
long-erm goals and maximize value to shareholders.
Employees and Suppliers: The Board also concluded that securing more working capital would help the Group to retain
key staff and suppliers who can help the Group achieve its business objectives.
Some of the other key decisions made during 2020:
• Continuing evaluation of existing license areas and assessment of projects.
• Dilution of interest in the Saudi joint venture from 40% to 34%.
• Undertaking pre-feasibility studies in Saudi Arabia as part of the operating licence process.
• Completion of diamond and Reverse Circulation drill programs and commencement of resource estimation for the projects
in accordance with JORC reporting standard in Saudi Arabia.
• Continued assessment of corporate overheads, expenditure levels and wider market conditions.
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
4 June 2021
Cargil Management Services Limited
27/28 Eastcastle Street
London, UK
Company Secretary
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 45
Report of the Board of Directors
For the year ended 31 December 2020
The Board of Directors presents its report for KEFI Gold and Copper PLC and its subsidiaries together with the financial statements
of the Group for the year ended 31 December 2020.
Business Review:
A review of the business during the year is contained in the Executive Chairman’s report on pages 3 to 4 and the finance directors
report on the pages 5 to 6. The Group’s business and operations and the results thereof are reflected in the attached financial
statements. It is the business of the Group to explore for value adding mineral resources and to turn commercially viable prospects
into producing assets.
Introduction
The following information is set out in the Group Strategic Report and should be read in conjunction with this Directors report.
Incorporation and Principal Activities
•
• Review of Operations, Funding
•
Key Performance Indicators
• Organisation Overview
•
•
•
Strategic Approach, Business Model,
Principal Risks and Uncertainties
Future Developments
Board of Directors - Current
The members of the Board of Directors of the Company as at 31 December 2020 and at the date of this report are shown on pages
12 to 13. 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 six Directors and full details of Resumes of the KEFI Directors are available on pages 12 to 13.
Directors’ indemnities
The Group maintains directors’ and officers’ liability insurance providing appropriate cover for any legal action brought against its
Directors.
Remuneration report
This remuneration report for the year ended 31 December 2020 outlines the remuneration arrangements of the Company and the
Group. The remuneration report details the remuneration arrangements for key management personnel (“KMP”) who are defined as
those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the
Group, directly or indirectly, including any director (whether executive or otherwise) of the parent Company.
Details of key management personnel of the Parent and Group are set out below.
Executive Directors, Senior Executives and Officers are entitled to receive options under the Company’s Employee Share Option
Scheme.
While the Group’s operations have been in the project exploration and evaluation stage, the objective of the Board has been to
minimise the number of senior executives it employs to maintain the total remuneration of such executives at a level that is
commensurate with the resources of the Group and the level of activity undertaken.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 46
Report of the Board of Directors (continued)
For the year ended 31 December 2020
Remuneration report- continued
Remuneration philosophy
The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and appropriate for
the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value
for shareholders.
The Board believes that executive remuneration satisfies the following key criteria:
Competitiveness and reasonableness
Acceptability to shareholders
Performance linkage/alignment of executive compensation
Transparency
These criteria result in a framework which can be used to provide a mix of fixed and variable remuneration, and a blend of short
and long-term incentives in line with the Company’s limited financial resources. Fees and payments to the Company’s Non-
Executive Directors and Senior Executives reflect the demands which are made on, and the responsibilities of, the Directors
and the senior management. Such fees and payments are reviewed annually by the Board. The Company’s Executive and Non-
Executive Directors, Senior Executives and Officers are entitled to receive options under the Company’s Employee Share Option
Scheme.
Non-executive director remuneration arrangements
The Board seeks to set remuneration of non-executive Directors at a level which provides the Company with the ability to attract
and retain Directors of the highest calibre, whilst incurring a cost which is appropriate at this stage of the Company’s
development. Non-Executive Director base fees are set at a basic fee of £25,000 p.a. plus any other statutory payroll costs and
with additional remuneration as may be approved by the Board for work in excess of normal Board requirements. The Company
has assumed responsibility for any potential liability to National Insurance Contributions (NICs) for Non-Executive Director Mr.
Norman Ling, both employer and employee contributions in respect of, or by any reason of, the payment of fees. Mr. Norman
Ling is also paid a daily rate of £800.00 per day for other additional services rendered to the Group. At present, no remuneration
fees are paid to Directors for being members of the different committees.
Non-Executive Directors are entitled to be paid reasonable travelling, accommodation and other expenses incurred as a
consequence of their attendance at meetings of Directors and otherwise in the execution of their duties as Directors. Non-
executive Directors are also entitled to additional remuneration for extra services or special exertions.
In April 2021 the Company entered into arrangements with First Aqua DMCC (‘First Aqua’), a company associated with Non-
Executive Director Mr. Adam Taylor to assist the Company in its financing efforts whether in one or a series of transactions, in
either public or private offerings of equity, convertible debt or equity, equity linked securities, straight debt, any other securities
or similar capital raising efforts. Under these arrangements First Aqua will be entitled to receive a cash success fee equal to 6%
of funds invested by any investor introduced by First Aqua.
Executive director and key management personnel (“KMP”) remuneration arrangements
Service agreements: Remuneration and other terms for KMP are formalised in contractor agreements. Details of these
agreements are set out below.
Executive directors and other key management personnel: Executive remuneration packages comprise a mix of the following
components: Fixed remuneration and other benefits and long-term incentives provided by the issuing of options under the
Employees and Contractors Option Plan.
Fixed remuneration and other benefits
The level of fixed remuneration is set so as to provide a base level of remuneration, which is both appropriate to the position
and competitive in the market. Fixed remuneration for most executives is comprised of base salary, and in some cases includes
other benefits such as housing, medical care and vehicles. The Company does not have a retirement benefit scheme for
executive directors.
Cash Payment Bonus
The following cash payment bonus is payable provided they have delivered to the Company the following milestones:
Milestones for cash bonus
Tranche 1: Entering into a senior facility agreement for the TKGM Project and receipt by the
Company of at least $20,000,000 of funding for the Project (Funding no later than 31st
December 2021
Harry Adams
John Leach
$0.5Million
$0.5Million
Tranche 2: Completion of the Project within the Project budget approved by the senior lenders $0.5Million
Tranche 3: Upon the sale and physical delivery of 35,000 ounces of gold equivalent
$0.5Million
-
-
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 47
Report of the Board of Directors (continued)
For the year ended 31 December 2020
Remuneration report- continued
Long term share incentives
The Employees and Contractors Option Plan of the Group was established in 2014. The Company's full Share Option Plan 2014
is available on the Company website. The objective of the Plan is to provide an opportunity for senior executives and contractors
to participate as equity owners in the Company and to reward key executives and contractors in a manner which aligns this
element of remuneration with the creation of shareholder wealth. At the discretion of the Board and subject to the Rules of the
Plan, executives may be granted options under the Plan.
Directors and Key Management
Personnel
Agreement
type
Term
Notice
Period
Other Benefits
Managing Director and Finance Director
Consulting
Services
Roll forward
arrangement
General Manager Ethiopia
International Mining Performance: Head
of Operations, Head of Systems, Head of
Human Resources and Technical Planning
Consulting
Services
Consulting
Services
Roll forward
arrangement
Roll forward
arrangement until
30 December 2020
12 Months Medical; Air tickets home; Share
Options. Life insurance and accident
insurance premiums paid.
12 Months Medical/Air tickets home. In country
6 Months
accommodation; Share Options.
50% of fees paid in Shares and 50% in
cash; Share Options.
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 29 June 2021 are as follows:
Director
H Anagnostaras-Adams
J Leach
N Ling
M. Tyler
R Robinson
Options
Shares
32,231,312
18,525,743
2,295,486
2,000,000
1,000,000
%
1.5%
0.9%
0.10%
0.10%
0.05%
Grant Date
Expiration
Date
Exercise
Price
Pence
H.
Anagnostaras-
Adams
J. Leach
M. Tyler
R.
Robinson
A. Taylor
N. Ling
17-Mar-21
16-Mar-25
2.55
37,766,978
7,189,168
01-Feb-18
31-Jan-24
22-Mar-17
21-Mar-23
05-Aug-16
04-Aug-22
19-Jan-16
18-Jan-22
4.5
7.5
10.2
7.14
20-Mar-15
19-Mar-21
22.44
1,200,000
1,200,000
3,442,184
674,083
-
882,353
943,412
382,353
314,471
58,824
2,735,688
-
2,735,688
-
2,735,688
-
-
1,200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
314,471
117,647
43,734,927
10,318,899
2,735,688
2,735,688
2,735,688
1,632,118
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 48
Report of the Board of Directors (continued)
For the year ended 31 December 2020
Options (continued)
Options issues on the 17 March 2021 vest in three equal instalments, the first after one year, the second after two years and the third
after three years from the date of grant.
All other options 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. Further details on options terms are available in note 18.2.
Directors’ emoluments
In compliance with the disclosure requirements of the listing requirements of AIM, the aggregate remuneration for the Directors of
KEFI for the year ended 31 December 2020 is set out below:
31 December 2020
Salary
and fees
Other
compensation³
Bonus Paid
in Shares
Share based benefit
incentive options²
2020
Total
Executive
£’000
£’000
£’000
£’000
£’000
H. Anagnostaras-Adams¹
J. Leach
Non-Executive
M Wellesley Wood¹
N. Ling4
M Tyler¹
R Robinson¹
A Taylor
31 December 2019
Executive
H. Anagnostaras-Adams
J. Leach
Non-Executive
M Wellesley Wood¹
N. Ling
M Tyler¹
R Robinson¹
225
169
-
28
28
26
13
489
33
25
-
-
-
-
-
58
73
33
-
-
-
-
-
106
6
5
-
3
-
-
-
14
Salary
and fees
£’000
Other
compensation
£’000
Bonus Paid in
In Shares
£’000
Share based benefit
incentive options²
£’000
225
189
18
36
26
13
507
24
13
-
-
-
-
37
39
18
-
42
39
21
159
32
24
12
7
-
-
75
337
232
-
31
28
26
13
667
2019
Total
£’000
320
244
30
85
65
34
778
1Appointments and Retirement as Director: Mr. R Robinson appointed as Director in August 2019. In April 2019 the board roles were changed - Mr. Wellesley-
Wood passed away and H. Anagnostaras-Adams was appointed as Executive Chairman. Mr. Adam Taylor was appointed in July 2020 as Non-Executive Director.
2Share 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.
4 Mr. Ling received additional compensation for consulting work requested from time to time by the Board that was over and above normal Board requirements.
5 ̑During the 2020 year salary and fees paid to Mr. Adams £27K of and Mr Leach of £31K were paid in ordinary shares.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 49
Report of the Board of Directors (continued)
For the year ended 31 December 2020
Corporate governance statement
The Directors of the Company have elected to follow the main principles of the QCA Corporate Governance Code. The QCA
Corporate Governance Code identifies ten principles that focus on the pursuit of medium to long-term value for shareholders without
stifling the entrepreneurial spirit in which the Company was created. In addition to the details provided below, governance disclosures
can be found on page 11 and the Company’s website: https://www.kefi-minerals.com/about/corporate-governance.
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 Executive Chairman, in conjunction with the executive team, ensures that the Directors’ knowledge is kept up to date
on key issues and developments pertaining to financial and governance matters, its operational environment and to the Directors’
responsibilities as members of the Board. During the course of the year, the Executive Chairman received updates and advice from
the Company Secretary and the NOMAD to ensure the Company’s compliance to the Rule 26 disclosures which became effective
from the 28 September 2018. 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 four Non-Executive Directors. The Non-Executive Directors, Richard Robinson, Norman Ling, Mark Tyler
and Adam Taylor 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, except for Adam
Taylor. 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.
Change of Company Name
On the 13 August 2020 the Company name changed from KEFI Minerals PLC to KEFI Gold and Copper PLC
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.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 50
Report of the Board of Directors (continued)
For the year ended 31 December 2020
Board Committees
The Board has established the following committees, each of which has its own terms of reference:
Audit and Financial Risk Committee
The Audit and Financial Risk Committee considers the Group’s financial reporting (including accounting policies) and internal financial
controls. The Audit and Financial Risk Committee comprised Three Non-Executive Directors: Mark Tyler (Chairman), Norman Ling
and Richard Robinson, and is responsible for ensuring that the financial performance of the Company is properly monitored and
reported in this capacity and interacts as needed with the Company’s External Auditors. The Finance Director is invited and attends
the committee meetings to provide his skills and knowledge in 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 comprised four Non-Executive Directors: Mark Tyler (Chairman), Adam Taylor, Norman Ling and Richard
Robinson. 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.
Attendance Meetings of Directors and Committees
The following table sets out the number of Directors’ meetings held during the financial year and the number of meetings
attended by each director:
Board of Directors Meetings
H. Anagnostaras- Adams
J. Leach
N. Ling
M. Tyler
R. Robinson
A. Taylor¹
Audit Committee²
R. Robinson
N. Ling
M. Tyler
Held
Attended
11
11
11
11
11
4
11
11
11
11
11
4
Held
Attended
2
2
2
2
2
2
Remuneration Committee
Held
Attended
N. Ling
M. Tyler
R. Robinson
A. Taylor¹
¹Mr. Adam Taylor was appointed in July 2020 as Non-Executive Director.
² All directors are invited to Audit Committee meetings due to the small size of the company.
3
3
3
2
3
3
3
2
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 51
Report of the Board of Directors (continued)
For the year ended 31 December 2020
Board Evaluation and Succession Planning
The QCA Code states that the Board should regularly review the effectiveness of its performance as a unit, as well as that of its
committees and individual director. In 2020 the process was facilitated internally by the Board. In order to prepare for the mine build
and operational phases of the Company’s development, the Board has implemented a number of management and Board changes
during the year including the appointment Mr. Adam Taylor as an additional Non-Executive Director. At the moment the company
has three independent Directors
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 Group’s planning and an important aspect of the Group’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 Group finances its operations through equity and holds its cash as a liquid resource to
fund its obligations of the Group. Decisions regarding the management of these assets are approved by the Board. Please refer to
page 74 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.
Ethical values and behaviours
The Board has the means to determine that ethical values and behaviours are recognised and respected via the senior management
team (“Exco”) to whom local country management reports. The Board of KEFI also adheres to KEFI’s Corporate Governance policies
that cover, for example, ethical behaviour, anticorruption and anti-bribery as well as a whistle-blowing policy. The Board is also aware
that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees
behave. A large part of the Company’s activities is centred upon what needs to be an open and respectful dialogue with employees,
clients and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the
Company to successfully achieve its corporate objectives.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 52
Report of the Board of Directors (continued)
For the year ended 31 December 2020
Wider stakeholder needs and social responsibilities
The Group’s long-term success relies upon good relations with all its stakeholders, both internal and external. The Board affords
highest priority to ensuring that it maintains a strong understanding of the needs and expectations of all stakeholders. Feedback is
sought regularly across several platforms. The Group’s stakeholders include shareholders, employees, suppliers, customers,
regulators, industry bodies and creditors. The principal ways in which their feedback on the Group is gathered are via meetings and
conversations.
Understanding and meeting shareholder needs and expectations
The Board is aware of the needs and expectations of shareholders. The Company engages with its shareholders through quarterly
conference calls and at its Annual General Meeting (“AGM”). The Board supports the use of the AGM to communicate with both
institutional and private investors. All shareholders are given the opportunity to ask questions and raise issues; this can be done
formally during the meeting or informally with the directors afterwards.
Experience, skills and capabilities of the Board Directors
Experience, skills and capabilities of the Board of Directors who have been appointed to the Company have been chosen because
of the skills and experience they offer. The Board of Directors has strong, relevant experience across the areas of mining, accounting
and banking. The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience,
including in the areas of gold mining and exploration. All Directors receive regular and timely information on the Group’s operational
and financial performance. Relevant information is circulated to the Directors in advance of meetings. Skills and knowledge have
been gained through aggregated experience in gold mining and the wider sector and these are maintained through ongoing
involvement and participation within the industry. All Directors retire by rotation at regular intervals in accordance with the Company’s
Articles of Association.
Governance structures and processes that support good decision-making
Details of the Company's corporate governance arrangements are provided in its governance statement on the website
https://www.kefi-minerals.com/about/corporate-governance. There are no matters expressly reserved for the Board. The Board
considers the Group’s governance framework is appropriate and in line with its plans.
Website publication
The Directors are responsible for ensuring that the annual report and the financial statements are made available on a website.
Financial statements are published on the Company's website in accordance with applicable legislation governing the preparation
and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Relations with shareholders
The Board attaches great importance to providing shareholders with clear and transparent information on the Company's activities,
strategy and financial position. The Board typically meets with large shareholders following the release of financial results and regards
the AGM as a good opportunity to communicate directly with shareholders via an open question and answer session. The Company
regularly holds public question and answer calls in support of announcements, providing smaller and private investors with direct
access to management. The Board receives regular updates on the views of shareholders through briefings and reports from the
Managing Director, Financial Director and the Company’s brokers. In addition, analysts’ notes and brokers’ briefings are reviewed to
achieve a wide understanding of investors’ views.
The Company discloses contact details on its website and on all announcements released via RNS, should shareholders wish to
communicate with the Board. Details of all shareholder communications are provided on the Group's website. Historical Annual
Reports, notices of all general meetings from the last five years and the resolutions put to a vote at AGMs can be found on the
Company’s website. Over the last five years all resolutions put to a vote at AGMs have been duly passed. Whilst this has not occurred,
should a significant proportion of votes be cast against a resolution at any general meeting the Board would naturally seek to
understand the rationale for this through its engagement with shareholders.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 53
Report of the Board of Directors (continued)
For the year ended 31 December 2020
Shareholders holding more than 3% of share capital
The Shareholders holding more than 3% of the share capital of the Company as at 28 May 2021 and as far as the Directors’
are aware:
Name
Percentage
Number
Hargreaves Lansdown (Nominees) Limited
Interactive Investor Services Nominees Limited
Pershing Nominees Limited
Barclays Direct Investing Nominees Limited
Vidacos Nominees Limited
Hsdl Nominees Limited
Lawshare Nominees Limited
Jim Nominees Limited
Hsbc Global Custody Nominee (Uk) Limited
Interactive Brokers Llc
Going concern
21.02%
14.02%
8.10%
7.00%
6.52%
6.37%
4.35%
4.32%
4.00%
2.78%
452,455,697
301,740,907
174,298,275
150,660,627
140,365,049
137,063,917
93,709,278
92,910,601
86,164,070
59,937,983
The Directors note that the assessment of the Group’s ability to continue as a going concern involves judgement regarding future
funding available for the development of the Tulu Kapi Gold project, exploration of the Saudi Arabia exploration properties and for
working capital requirements. They consider that the group can continue to adopt the going concern basis in preparing the financial
statements and refer to Note 2 of the financial statements on page 68 for further information and disclosure of the uncertainty.
Events after the reporting date
On 12 April 2021, the Company received notice from Brandon Hill Capital Ltd a warrant holder to exercise warrants over a total of
15,000,000 new Ordinary Shares of 0.1p at a price of 0.65 pence per share.
Nominated advisor
The Company’s nominated advisor is SP Angel Corporate Finance LLP.
Auditors
BDO LLP has expressed their willingness to continue in office as auditor and a resolution to re-appoint BDO LLP will be proposed at
the forthcoming 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.
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
4 June 2021
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 54
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 have elected
to prepare the financial statements in accordance with international accounting standards in conformity with the requirements of the
Companies Act 2006. Under company law Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the group and company and of the profit or loss of the group and company for that
period. The Directors are also required to prepare the financial statements in accordance with the rules of the London Stock Exchange
for companies trading on AIM.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently.
•
• make judgements and estimates that are reasonable and prudent.
•
state whether the financial statements comply with international accounting standards in conformity with the requirements
of the Companies Act 2006.
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and
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 to enable them to ensure that
the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with the above requirements in preparing the financial statements. So far as each of
the Directors are aware, there is no relevant audit information of which the Group’s auditor is unaware; having taken all the steps the
Directors ought to have taken to make themselves aware of any relevant audit information and to establish that the Group’s auditor
is aware of that information.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 55
Independent auditor’s report to the members of KEFI Gold and Copper Plc
Opinion on the financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31
December 2020 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the Parent Company financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Kefi Gold and Copper Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for
the year ended 31 December 2020 which comprise of the consolidated statement of comprehensive income, the consolidated and
company statements of financial position, the consolidated and company statements of changes in equity and the consolidated and
company statements of cash flows and notes to the financial statements, including a summary of significant accounting policies. The
financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in
conformity with the requirements of the Companies Act 2006 and, as regards the Parent Company financial statements, as applied
in accordance with the provisions 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remain independent of the Group and the Parent 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.
Material uncertainty relating to going concern
We draw your attention to note 2 of the financial statements which explains that the Parent Company and the Group’s ability to
continue as a going concern is dependent on the Company’s ability to raise adequate financing from lenders, shareholders or other
investors before the end of June 2021, in order to meet operational commitments and overheads. There are currently no unconditional
or binding agreements in place and there is no guarantee that any course of funding will proceed. The Group also relies on the
continued management of its payable balances through ongoing negotiation with management and suppliers. Their deferral is not
guaranteed by any binding agreement. These conditions indicate the existence of a material uncertainty which may cast significant
doubt over the Parent Company’s and the Group’s ability to continue as a going concern. Our opinion is not modified in respect of
this matter.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. We have highlighted going concern as a key audit matter as a result of the
estimates and judgements required by the Directors in their going concern assessment and the effect on our audit strategy. We
performed the following work in response to this key audit matter:
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 56
Independent auditor’s report to the members of KEFI Gold and Copper Plc
• We discussed the impact of Covid-19 with management and the Audit Committee including their assessment of risks and
uncertainties associated with areas such as the Group’s workforce, supply chain that are relevant to the Group’s business
model and operations. We compared this against our own assessment of risks and uncertainties based on our
understanding of the business and sector information.
• We obtained management’s going concern assessment and supporting forecasts and performed a detailed review of the
cash flow forecasts, challenging the key assumptions based on empirical data and comparing of historic actual monthly
expenditure.
• We discussed with the Directors how they intend to raise the funds necessary for the Group to continue as a going
concern in the required timeframe and considered their judgement in light of the Group’s previous successful fundraisings
and strategic financing. We reviewed correspondence and term sheets from potential investors in connection with the
planned project financing, and documentation from the potential sources for short-term financing planned for June-July
2021.
• We reviewed the adequacy and completeness of disclosures in the financial statements in respect of going concern.
Overview
Coverage
Key audit matters
Materiality
98% (2019: 99%) of Group loss before tax
100% (2019: 100%) of Group total assets
Carrying
value
exploration assets
of
Going concern
2020
2019
Group financial statements as a whole
£400,000 (2019: £300, 000) based on 1.5% (2019: 1.5%) of total assets.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of
internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of
management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
The Group operates through the parent company based in the United Kingdom whose main function is the incurring of administrative
costs and provides funding to the subsidiaries in Ethiopia as well as one joint venture company in Saudi Arabia. The two Ethiopian
subsidiaries are considered to be significant components, while the Saudi Arabian joint venture is not considered a significant
component. The financial statements also include 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 component. A full scope audit of the Ethiopian subsidiary was carried out by a locally based component auditor, which was a
BDO network firm. All significant risks were audited by the BDO Group audit team.
The joint venture company and the non-trading subsidiaries of the Group were subject to analytical review procedures performed by
the Group audit team and the component auditor.
Our involvement with component auditors
For the work performed by the component auditor, we determined the level of involvement needed in order to be able to conclude
whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a
whole. Our involvement with the component auditor included the following:
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 57
Independent auditor’s report to the members of KEFI Gold and Copper Plc
• Detailed Group reporting instructions were sent to the component auditor, which included the principal areas to be
•
•
covered by the audits, and set out the information to be reported to the Group audit team.
The Group audit team was actively involved in the direction of the audits performed by the component auditor for Group
reporting purposes, along with the consideration of findings and determination of conclusions drawn.
The Group audit team reviewed the component auditor’s work papers remotely, and engaged with the component auditor
by video calls and emails during their fieldwork and completion phases.
Key audit matters
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) that 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. In addition
to the matter referred to in the Conclusions relating to going concern section we identified the following as key audit matter.
Key audit matter
Carrying Value
of Exploration
Assets
(see
note 12)
The exploration and evaluation assets of the
Group, as disclosed in note 12, represent the
key assets for the Group. Costs are capitalised
in accordance with the requirements set out in
IFRS 6: ‘Exploration for and Evaluation of
Mineral Resources’.
impairment
The Directors are required to assess whether
there are potential indicators of impairment for
the Tulu Kapi exploration asset and whether
to be
an
performed. No indicators of impairment to the
asset were identified, and disclosure to this
effect has been included in the financial
statements.
test was required
There are a number of estimates and
in
judgements used by management
assessing
the exploration and evaluation
assets for indicators of impairment under
applicable accounting standards. These
estimates and judgements are set out in Note
the
4 of
subjectivity of these estimates along with the
material carrying value of the assets make this
a key audit area.
financial statements and
the
How the scope of our audit addressed the key audit
matter
We considered the indicators of impairment applicable to the
Tulu Kapi exploration asset, including those indicators
identified in IFRS 6: ‘Exploration for and Evaluation of Mineral
Resources’ and reviewed management’s assessment of
these indicators. The following work was undertaken:
We reviewed the licence documentation to confirm that the
exploration permits are valid, and to check whether there is an
expectation that these will be renewed in the ordinary course
of business.
We tested a sample of costs capitalised to check that these
meet the capitalisation criteria of applicable accounting
standards by agreeing the costs to supporting documentation.
We made specific inquires of management and reviewed
market announcements, budgets and plans which confirms
the plan to continue investment in the Tulu Kapi project
subject to sufficient funding being available, as disclosed in
note 2.
We considered whether
feasibility study
performed by Micon suggested any indicators of impairment
for the project.
the detailed
Based on our knowledge of the Group, we considered whether
there were any other indicators of impairment not identified by
management.
We have reviewed the adequacy of disclosures provided
within the financial statements in relation to the impairment
assessment against the requirements of the accounting
standards.
Key observations:
Based on our work performed we considered management’s
assessment and the disclosures included in the financial
statements to be appropriate.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 58
Independent auditor’s report to the members of KEFI Gold and Copper Plc
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality
as follows:
Group financial statements
Parent company financial statements
Materiality
£400,000
£300,000
£230,000
Basis for determining materiality
1.5% total assets
2020
2019
2020
2019
£180,000
Rationale for the benchmark applied We consider total assets to be the financial metric of the most interest to shareholders
and other users of the financial statements given the Company’s status as a mining
exploration company and therefore consider this to be an appropriate basis for
materiality.
Performance materiality
£300,000
£220,000
£172,000
£135,000
Basis for determining performance
materiality
75% of materiality for the financial statements as a whole. This is based on our overall
assessment of the control environment and the low level of expected misstatements
Component materiality
We set materiality for each component of the Group based on a percentage of 90% of Group materiality dependent on the size and
our assessment of the risk of material misstatement of that component. Component materiality ranged from £230,000 to £360,000.
In the audit of each component, we further applied performance materiality levels of 75% of the component materiality to our
testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £20,000 (2019:
£15,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report
and Accounts 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 our report, we do not express any form of assurance
conclusion thereon. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 59
Independent auditor’s report to the members of KEFI Gold and Copper Plc
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report
and Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic report and the Directors’ report for the financial year for which
the 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.
In the light of the knowledge and understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or
the Directors’ report.
Matters on
which we are
required to
report by
exception
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:
•
•
adequate accounting records have not been kept by the Parent Company, or returns adequate
for our audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities, 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 and the Parent Company’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 Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
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 material
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 financial
statements.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 60
Independent auditor’s report to the members of KEFI Gold and Copper Plc
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company. We determined that
the most significant which are directly relevant to specific assertions in the financial statements are those related to the reporting
framework (IAS, the Companies Act 2006. AIM rules and the QCA Corporate Governance Code), and terms and requirements
included in the Group’s exploration and evaluation licenses.
• We understood how the Company is complying with those legal and regulatory frameworks by making enquiries to management,
and those responsible for legal and compliance procedures. We corroborated our enquiries through our review of board minutes
and other supporting documentation.
• Directing the component auditor to ensure an assessment is performed on the extent of the components’ compliance with the
relevant local and regulatory framework. Reviewing this work and holding meetings with relevant internal management to form
our own opinion on the extent of Group wide compliance.
• We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and
•
•
•
•
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Testing the appropriateness of journal entries made through the year by applying specific criteria to detect possible irregularities
and fraud;
Performing a detailed review of the Group’s year end adjusting entries and investigating any that appear unusual as to nature
or amount and agreeing to supporting documentation;
For significant and unusual transactions, particularly those occurring at or near year end, obtaining evidence for the rationale of
these transactions and the sources of financial resources supporting the transactions;
Assessed whether the judgements made in accounting estimates were indicative of a potential bias (refer to key audit matters
above);
• Reviewing minutes from board meetings of those charges with governance to identify any instances of non-compliance with
laws and regulations; and
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations
in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely we are to become aware of it.
further description of our
A
responsibilities
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
is available on
the Financial Reporting Council’s website at:
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
4 June 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 61
Consolidated statement of comprehensive income
Year ended 31 December 2020
Notes
Year Ended
Year Ended
Revenue
Exploration costs
Administrative expenses
Finance transaction costs
Share-based payments and warrants-equity settled
Share of loss from jointly controlled entity
Impairment of jointly controlled entity
Operating loss
Change in value of financial assets at fair value through profit and loss
Other income
Gain on Dilution of Joint Venture
Loss on convertible note
Foreign exchange(loss)/gain
Finance costs
Loss before tax
Tax
Loss for the year
Loss attributable to:
-Owners of the parent
Loss for the period
Other comprehensive expense:
6
8.2
18
20
20
6
14
20
23
8.1
9
31.12.20
31.12.19
£’000
£’000
-
(25)
-
(29)
(2,365)
(2,133)
(316)
(51)
(1,088)
(585)
(4,430)
(16)
140
1,033
-
(347)
(100)
(3,720)
(205)
(250)
(591)
-
(3,208)
11
4
-
(1,045)
(185)
(1,150)
(5, 573)
-
-
(3,720)
(5,573)
(3,720)
(5,573)
(3,720)
(5,573)
Exchange differences on translating foreign operations
-
215
Total comprehensive expense for the year
(3,720)
(5,358)
Total Comprehensive Income to:
-Owners of the parent
(3,720)
(5,358)
Basic diluted loss per share (pence)
10
(0.224)
(0.775)
The notes on pages 68 to 102 are an integral part of these consolidated financial statements.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 62
Statements of financial position
Company Number: 05976748
31 December 2020
The
The
The
The
Group
Company
Group
Company
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Investments in jointly controlled entities
Current assets
Financial assets at fair value through OCI
Trade and other receivables
Cash and cash equivalents
Notes
2020
£’000
11
12
13.1
13.2
14
15
16
35
24,510
-
-
24,545
54
448
1,315
1,817
2020
£’000
3
-
13,680
-
13,683
-
6,600
1,192
7,792
2019
£’000
2019
£’000
39
21,200
-
-
3
-
12,575
-
21,239
12,578
70
1,234
150
1,454
-
6,967
65
7,032
Total assets
26,362
21,475
22,693
19,610
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital
Deferred Shares
Share premium
Share options reserve
Accumulated losses
Attributable to Owners of parent
Non-Controlling Interest
Total equity
Current liabilities
Trade and other payables
Loan and borrowings
Total liabilities
Total equity and liabilities
17
17
17
18
2,138
23,328
33,118
1,273
(37,824)
22,033
19
1,204
2,138
23,328
33,118
1,273
(40,736)
19,121
-
23,237
19,121
21
23
3,125
3,125
26,362
2,354
-
2,354
21,475
1,149
23,328
25,452
1,118
1,149
23,328
25,452
1,118
(34,640)
(36,265)
16,407
1,075
17,482
4,247
964
5,211
14,782
-
14,782
3,864
964
4,828
22,693
19,610
The notes on pages 68 to 102 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 £5.1 million (2019: £6.8 million) has been included in the
financial statements of the parent company.
On the 4 June 2020, the Board of Directors of KEFI Gold and Copper PLC authorised these financial statements for issue.
Harry Anagnostaras-Adams
Executive Director- Chairman
John Edward Leach
Finance Director
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 63
Consolidated statement of changes in equity
Year ended 31 December 2020
Attributable to the owners of the Company
Deferred
Share
shares
capital
Share
premium
Share
options
reserve
Foreign
exch
reserve
Accum.
losses
Owners
Equity
NCI
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
9,719
12,436
21,581
1,032
(215)
(30,276)
14,277
-
-
-
-
-
-
2,322
-
(10,892)
-
1,149
-
-
-
-
-
-
989
-
-
-
-
-
-
-
-
-
-
10,892
-
23,328
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,056
(185)
-
-
25,452
-
-
-
-
-
-
8,056
(390)
-
-
-
-
250
(164)
-
-
-
-
1,118
-
-
-
53
(665)
767
-
-
-
(5,573)
(5,573)
215
-
215
-
(5,573)
(5,358)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
164
1,045
-
-
-
(34,640)
(3,720)
-
(3,720)
-
-
665
-
-
(129)
250
-
-
7,423
(185)
-
-
16,407
(3,720)
-
(3,720)
53
-
-
9,812
(390)
(129)
£’000
1,075
-
-
-
-
-
-
-
-
-
-
1,075
-
-
-
-
-
-
-
-
129
£’000
15,352
(5,573)
215
(5,358)
250
-
-
7,423
(185)
-
-
17,482
(3,720)
-
(3,720)
53
-
-
9,812
(390)
-
At 1 January 2019
Loss for the year
Other comprehensive income
Total Comprehensive Income
Recognition of share-based payments
Forfeited options
Expired warrants
Issue of share capital
Share issue costs
Deferred Shares
Non-controlling interest
At 31 December 2019
Loss for the year
Other comprehensive income
Total Comprehensive Income
Recognition of share-based payments
Forfeited options
Expired warrants
Issue of share capital and warrants
Share issue costs
Non-controlling interest
At 31 December 2020
2,138
23,328
33,118
1,273
- (37,824)
22,033
1,204
23,237
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve
Description and purpose
Share capital: (Note 17)
amount subscribed for ordinary share capital at nominal value
Deferred shares: (Note 17)
Share premium: (Note 17)
under the restructuring of share capital, ordinary shares of in the capital of the Company were sub-
divided into deferred share.
amount subscribed for share capital in excess of nominal value, net of issue costs
Share options reserve (Note 18) reserve for share options and warrants granted but not exercised or lapsed
Foreign exchange reserve
cumulative foreign exchange net gains and losses recognized on consolidation
Accumulated losses
Cumulative net gains and losses recognized in the statement of comprehensive income,
excluding foreign exchange gains within other comprehensive income
NCI (Non-controlling interest):
(Note 19)
the portion of equity ownership in a subsidiary not attributable to the parent company
The notes on pages 68 to 102 are an integral part of these consolidated financial statements.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 64
Company statement of changes in equity
Year ended 31 December 2020
Share
capital
Deferred
shares
Share
premium
Share
options
reserve
Accumulated
losses
Total
£’000
£’000
£’000
£’000
£’000
£’000
At 1 January 2019
Loss for the year
Deferred Shares
Recognition of share-based
payments
Forfeited options
Expired warrants
Issue of share capital
Share issue costs
At 31 December 2019
Loss for the year
Deferred Shares
Recognition of share-based
payments
Forfeited options
Expired warrants
Issue of share capital and warrants
Share issue costs
At 31 December 2020
9,719
-
12,436
-
21,581
-
(10,892)
10,892
-
-
-
-
4,056
(185)
-
-
-
-
-
1,032
-
-
250
-
(164)
-
-
(30,696)
(6,778)
14,072
(6,778)
-
-
-
250
-
164
-
-
1,045 7,423
- (185)
23,328
25,452
1,118
(36,265)
14,782
-
-
-
-
-
-
-
-
-
-
-
-
8,056
(390)
-
-
53
-
(665)
767
-
(5,136)
(5,136)
-
-
-
53
-
665
-
-
- 9,812
- (390)
19,121
(40,736)
2,138
23,328
33,118
1,273
-
-
-
2,322
-
1,149
-
-
-
-
-
989
-
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve
Description and purpose
Share capital (Note 17)
amount subscribed for ordinary share capital at nominal value
Deferred shares: (Note 17)
under the restructuring of share capital, ordinary shares of in the capital of the Company were sub-
divided into deferred share (Note 17).
Share premium: (Note 17)
amount subscribed for share capital in excess of nominal value, net of issue costs
Share options reserve: (Note 18)
reserve for share options and warrants granted but not exercised or lapsed
Accumulated losses
cumulative net gains and losses recognized in the statement of comprehensive income
The notes on pages 68 to 102 are an integral part of these consolidated financial statements.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 65
Consolidated statement of cash flows
Year ended 31 December 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax
Adjustments for:
Depreciation of property, plant and equipment
Share based payments
Issue of options
Fair value loss to derivative financial asset
Fair value loss on convertible note
Gain on Dilution of Joint Venture
Share of loss from jointly controlled entity
Impairment on jointly controlled entity
Exchange difference
Finance costs
Changes in working capital:
Trade and other receivables
Trade and other payables
Cash used in operations
Interest paid
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Project exploration and evaluation costs
Acquisition of property plant and equipment
Advances to jointly controlled entity
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital
Issue costs
Proceeds from convertible notes
Proceeds from bridge loans
Repayment of convertible notes and bridge loans
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents:
At beginning of the year
At end of the year
Notes
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
(3,720)
43
624
51
16
-
(1,033)
1,088
585
244
100
(2,002)
(123)
(67)
(2,192)
-
(2,192)
(3,029)
(40)
(1,320)
(4,389)
7,331
(335)
-
750
-
7,746
1,165
150
1,315
11
18
18
14
23.3
20.1
20
20
8.1
12
13.2
17
17
23.1.2
23.1.2
23.1.2
16
16
(5,573)
10
156
94
11
1,045
-
591
-
215
1,150
(2,301)
35
780
(1,486)
(288)
(1,774)
(2,443)
(11)
(236)
(2,690)
1,825
(185)
2,775
617
(506)
4,526
62
88
150
Cash and cash equivalents in the Consolidated Statement of Financial Position includes restricted cash of £20,000 (2019: £20,000).
The notes on pages 68 to 102 are an integral part of these consolidated financial statements.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 66
Company statement of cash flows
Year ended 31 December 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax
Adjustments for:
Depreciation of property plant equipment
Share based payments
Issue of options
Fair value loss to derivative financial asset
Gain on Dilution of Joint Venture
Impairment of jointly controlled entity cost
Impairment of amount receivable from jointly controlled entity
Exchange difference
Expected credit loss
Finance costs
Changes in working capital:
Trade and other receivables
Trade and other payables
Cash used in operations
Interest Paid
Net cash used in operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property plant and equipment
Investment in subsidiary
Advances to jointly controlled entity
Loan to subsidiary
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital
Issue costs
Proceeds from convertible notes
Proceeds from bridge loans
Repayment of convertible notes and bridge loans
Net cash from financing activities
Net increase/(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
31.12.20
£’000
31.12.19
£’000
(5,136)
(6,778)
18
18
23.3
20.1
20
20
13.1
13.2
15
17
17
23.1.2
23.1.2
23.1.2
16
16
2
624
51
-
(1,033)
1,088
585
1,845
18
100
(1,856)
(91)
(174)
(2,121)
-
(2,121)
5
156
94
1,045
-
181
591
1,035
242
1,150
(2,279)
22
775
(1,482)
(288)
(1,770)
(2)
(1)
(1,104)
(1,251)
(1,320)
(236)
(2,069)
(1,236)
(4,495)
(2,724)
7,331
(335)
-
750
-
7,746
1,130
65
1,195
1,825
(185)
2,775
617
(506)
4,526
32
33
65
Cash and cash equivalents in the Company Statement of Financial Position includes restricted cash of £20,000 (2019: £20,000).
The notes on pages 68 to 102 are an integral part of these consolidated financial statements.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 67
Notes to the consolidated financial statements
Year ended 31 December 2020
1. Incorporation and principal activities
Country of incorporation
KEFI Gold and Copper PLC (the “Company”) was incorporated in United Kingdom as a public limited company on 24 October 2006.
Its registered office is at 27/28, Eastcastle Street, London W1W 8DH.The principal place of business is Cyprus.
Principal activities
The principal activities of the Group for the year were:
•
•
Exploration for mineral deposits of precious and base metals and other minerals that appear capable of commercial
exploitation, including topographical, geological, geochemical and geophysical studies and exploratory drilling.
Evaluation of mineral deposits determining the technical feasibility and commercial viability of development, including the
determination of the volume and grade of the deposit, examination of extraction methods, infrastructure requirements and
market and finance studies.
• Development of mineral deposits and marketing of the metals produced.
2. 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 accounting standards
in conformity with the requirements of the Companies Act 2006. They comprise the accounts of KEFI Gold and Copper PLC and all
its subsidiaries made up to 31 December 2020. The Company and the consolidated financial statements have been prepared under
the historical cost convention, except for the revaluation of certain financial instruments.
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date. Subsidiaries are all entities over
which the Group has power to direct relevant activities and an exposure to variable returns. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases
When the excess is positive, goodwill is recognised in the statement of financial position, if the excess is negative, a bargain purchase
price is recognised in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a
business combination are expensed as incurred.
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified
as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value
of the contingent consideration are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries have been included in the consolidated
financial statements from the date that control commences until the date that control ceases.
An investor controls an investee if and only if the investor has all the following:
An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the investee; and
(c) the ability to use its power over the investee to affect the amount of the investor’s returns.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Going concern
The assessment of the Group’s ability to continue as a going concern involves judgment regarding future funding available for the
development of the Tulu Kapi Gold project, exploration of the Saudi Arabia exploration properties and for working capital
requirements. In considering the Group’s ability to continue as a Going Concern, management have considered funds on hand at
the date of approval of the financial statements, planned expenditures covering a period of at least 12 months from the date of
approving these financial statements and the Group’s strategic objectives as part of this assessment. The Group has also considered
the potential impact of COVID 19 in respect of its forecasts.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 68
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
2. Accounting policies (continued)
Going concern (continued)
As at the date of approval of the financial statements, the Group will require some further bridging short-term financing to fund
activities until financial close. The Company has arranged funding facility options that it is able to drawdown and use when funding
is considered necessary during this period. The Company has used this type of funding in the past successfully. The Company and
Group are managing payables through continuing negotiation with its management and its suppliers, with the support of its Corporate
Broker whilst it focuses on completing the project financing at Tulu Kapi. The forecasts show that the Group will require further funding
before the end of June 2021 in order to fund working capital and other obligations. The ability of the Company and Group to continue
as a going concern is dependent upon its ability to continue to raise adequate financing from lenders, shareholders and other
investors to meet its funding requirements and to successfully continue to maintain informal extended settlement agreements with
its management and suppliers until such funding is available. Financing will also be required to continue the development of the Tulu
Kapi Gold Project through to production.
At the date of approval of these accounts, the Company KEFI has cash balances of £713,000 and its current liabilities exceed current
assets. Management consider they have access to sources of short term funding which, while not fully completed, are sufficiently
advanced that they can be drawn before the end of June 2021.
In addition to the short term funding requirements, the Group will require additional funding within the going concern consideration
period in order to continue as a going concern, and to advance the development of the Tulu Kapi mine (Further details on project
financing are available on page 5 of the Finance Director’s Report).
As a result of historical and ongoing proactive discussions with stakeholders, the Board has a reasonable expectation that the Group
will be able to raise further funds in order to meet its obligations. It should be noted that the impact of COVID-19 on the Company
has been managed over the last twelve months, and the Company has successfully raised equity funding during this time.
Funding could be impacted by the Ethiopia’s sixth federal election that are occurring against the backdrop of heightened ethnic
tensions and internal conflict. The Government of Ethiopia remains committed to making the upcoming elections free fair, and
democratic. At the date of signing this Annual Report, the results of the election, currently scheduled to be held on the 21 June 2021,
are uncertain. Until the election results are known, there exists political uncertainty that could impact the company’s ability to conclude
binding funding agreements within currently planned timeframes.
Subject to the above, which the Board has a reasonable expectation can be achieved, the Directors have concluded that it is
appropriate to prepare the financial statements on a going concern basis. However, there are currently no unconditional, binding
agreements in place in respect of any additional funding and there is no guarantee that any course of funding will proceed or that
suppliers will continue to agree to extended settlements. Therefore, as set out above, this indicates the existence of a material
uncertainty which may cast significant doubt over the Group’s ability to continue as a going concern and, therefore, it may be unable
to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the
adjustments that would result if the Group was unable to continue as a going concern.
Functional and presentation currency
The individual financial statements of each Group entity are measured and presented in the currency of the primary economic
environment in which the entity operates. The consolidated financial statements of the Group and the statement of financial position
and equity of the Company are in British Pounds (“GBP”) which is the functional currency of the Company and the presentation
currency for the consolidated financial statements. Functional currency is also determined for each of the Company’s subsidiaries,
and items included in the financial statements of the subsidiary are measured using that functional currency. GBP is the functional
currency of all subsidiaries.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 69
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
2. Accounting policies (continued)
Functional and presentation currency (continued)
(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 2020 (2019: 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.
Property plant and equipment
The annual depreciation rates used are as follows:
Furniture, fixtures and office equipment
Motor vehicles
Plant and equipment
Intangible Assets
25%
25%
25%
Cost of licenses to mines are capitalised as intangible assets which relate to projects that are at the pre-development stage. No
amortisation charge is recognised in respect of these intangible assets. Once the Group starts production these intangible assets
relating to license to mine will be depreciated over life of mine.
Interest in jointly controlled entities
The group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant
activities of the arrangement to the group and at least one other party. Joint control exists where unanimous consent is required
over relevant decisions.
The group classifies its interests in joint arrangements as either:
- Joint ventures: where the group has rights to only the net assets of the joint arrangement
- Joint operations: where the group has both the rights to assets and obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group considers:
- The structure of the joint arrangement
- The legal form of joint arrangements structured through a separate vehicle
- The contractual terms of the joint arrangement agreement
- Any other facts and circumstances (including any other contractual arrangements).
The Group accounts for its interests in joint ventures using the equity method. The Group accounts for its interests in joint operations
by recognising its share of assets, liabilities, and expenses in accordance with its contractually conferred rights and obligations.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 70
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
2. Accounting policies (continued)
Finance costs
Interest expense and other borrowing costs are charged to the statement of comprehensive income as incurred and is recognised
using the effective interest method.
Tax
The tax payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the statement of
comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. Tax is payable in the relevant jurisdiction at the rates described in note 9.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax liabilities are generally recognized for all taxable differences and deferred
tax assets are recognized to the extent that taxable profits will be available against which deductible temporary differences can be
utilized. The amount of deferred tax is based on the expected manner of realisation or settlement of the carrying amounts of assets
and liabilities, using tax rates that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off deferred tax assets against deferred
tax liabilities and when the deferred taxes relate to the same fiscal authority.
Investments
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognized as an expense in
the period in which the impairment is identified, in the Company accounts.
Exploration costs
The Group has adopted the provisions of IFRS 6 “Exploration for and Evaluation of Mineral Resources”. The company still applies
IFRS 6 until the project financing is secured. Once financing is secured the project moves to the development stage.
Exploration and evaluation expenditure, including acquisition costs of licences, in respect of each identifiable area of interest is
expensed to the statement of comprehensive income as incurred, until the point at which development of a mineral deposit is
considered economically viable and the formal definitive feasibility study is completed. At this point costs incurred are capitalised
under IFRS 6 because these costs are necessary to bring the resource to commercial production.
Exploration expenditures typically include costs associated with prospecting, sampling, mapping, diamond drilling and other work
involved in searching for ore. Evaluation expenditures are the costs incurred to establish the technical and commercial viability of
developing mineral deposits identified through exploration activities. Evaluation expenditures include the cost of directly attributable
employee costs and economic evaluations to determine whether development of the mineralized material is commercially justified,
including definitive feasibility and final feasibility studies.
Impairment reviews for deferred exploration and evaluation expenditure are carried out on a project by project basis, with each project
representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise such
as: (i) unexpected geological occurrences that render the resource uneconomic; (ii) title to the asset is compromised; (iii) variations
in mineral prices that render the project uneconomic; (iv) substantive expenditure on further exploration and evaluation of mineral
resources is neither budgeted nor planned; and (v) the period for which the Group has the right to explore has expired and is not
expected to be renewed.
Development expenditure
Once the Board decides that it intends to develop a project, development expenditure is capitalized as incurred, but only where it
meets criteria for recognition as an intangible under IAS 38 or a tangible asset under IAS 16 and then amortized over the estimated
useful life of the area according to the rate of depletion of the economically recoverable reserves or over the estimated useful life of
the mine, if shorter.
Share-based compensation benefits
IFRS 2 “Share-based Payment” requires the recognition of equity-settled share-based payments at fair value at the date of grant and
the recognition of liabilities for cash-settled share-based payments at the current fair value at each statement of financial position
date. The total amount expensed is recognized over the vesting period, which is the period over which performance conditions are
to be satisfied. The fair value is measured using the Black Scholes pricing model. The inputs used in the model are based on
management’s best estimate, including consideration of the effects of non-transferability, exercise restrictions and behavioural
considerations.
Where the Group issues equity instruments to persons other than employees, the statement of comprehensive income is charged
with the fair value of goods and services received.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 71
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
2. Accounting policies (continued)
Convertible loan notes
Convertible loan notes are regarded as compound instruments, consisting of a liability component and an equity component. The
component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the
substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the
prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost
basis until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the
amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in
equity, net of income tax effects, and is not subsequently remeasured.
When the terms of a new convertible loan arrangement are such that the option will not be settled by the Company in exchange for
a fixed number of its own equity instruments for a fixed amount of cash, the convertible loan (the host contract) is either accounted
for as a hybrid financial instrument and the option to convert is an embedded derivative or the whole instrument is designated at fair
value through profit and loss. Where the instrument is bifurcated, the embedded derivative, where material, is separated from the
host contract as its risks and characteristics are not closely related to those of the host contract. At each reporting date, the embedded
derivative is measured at fair value with changes in fair value recognised in the income statement as they arise. The host contract
carrying value on initial recognition is based on the net proceeds of issuance of the convertible loan reduced by the fair value of the
embedded derivative and is subsequently carried at each reporting date at amortised cost.
Prior to conversion the embedded derivative or fair value through profit and loss instrument is revalued at fair value. Upon conversion
of the loan, the liability, including the derivative liability where applicable, is derecognised in the statement of financial position. At the
same time, an amount equal to the redemption value is recognised within equity. Any resulting difference is recognised in retained
earnings. Where the Company enters into equity drawdown facilities, whereby funds are drawn down initially and settled in shares
at a later date, those shares are recorded initially as issued at fair value based on management’s best estimation, with a subsequent
revaluation recorded based on the final value of the instrument at the date the shares are issued or allocated. Where the value of the
shares is fixed but the amount is determined later, the fair value of the shares to be issued is deemed to be the value of the amount
drawn down, less any transaction and listing costs.
Warrants
Warrants issued are recognised at fair value at the date of grant. The charge is expensed on a straight-line basis over the vesting
period. The fair value is measured using the Black-Scholes model. Where warrants are considered to represent a transaction cost
attributable to a share placement, the fair value is recorded in the warrant reserve and deducted from the share premium.
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial assets are recognised
initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights
to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial
asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a
separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when,
the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 72
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
2. Accounting policies (continued)
Financial instruments
Non-derivative financial assets
The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset
was acquired.
Amortised cost: These are financial assets where the objective is to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction
costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment. Trade and other receivables, as well as cash are classified as amortised cost.
Financial asset at fair value through other comprehensive income: Financial assets (debt) which are held with the objective as above
but which maybe intended to be sold before maturity and also includes strategic equity investments (that are not subsidiaries, joint
ventures or associates) which would be normally held at fair value through profit or loss, could on irrevocable election be measured
with fair value changes flow through OCI. On disposal, the gain or loss will not be recycled to P&L.
Financial asset at fair value through profit and loss: Financial assets not meeting the criteria above and derivatives.
Impairment of financial assets: Financial assets at amortised cost consist of trade receivables, loans, cash and cash equivalents and
debt instruments. Impairment losses are assessed using the forward-looking Expected Credit Loss (ECL) approach. Trade receivable
loss allowances are measured at an amount equal to lifetime ECL’s. Loss allowances are deducted from the gross carrying amount
of the assets
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, and call deposits with maturities of three months or less from the acquisition
date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-
term commitments.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial
liabilities are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of
the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities as other financial liabilities. Such financial liabilities are recognised initially at
fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at
amortised cost using the effective interest method.
Other financial liabilities comprise trade and other payables and borrowings.
Financial assets and liabilities at fair value through the profit or loss
Financial assets and liabilities at fair value through the profit or loss comprise derivative financial instruments. Subsequent to initial
recognition, financial assets at fair value through the profit or loss are stated at fair value. Movements in fair values are recognised
in profit or loss unless they relate to derivatives designated and effective as hedging instrument, in which event the timing of the
recognition in the profit or loss depends on the nature of the hedging relationship. The Group does not currently have any such
hedging instruments.
New standards, amendments and interpretations effective in 2020
A number of new and amended standards and interpretations issued by IASB have become effective for the first time for financial
periods beginning on (or after) 1 January 2020 and have been applied by the Group in these financial statements. None of these
new and amended standards and interpretations had a significant effect on the Group because they are either not relevant to the
Group’s activities or require accounting which is consistent with the Group’s current accounting policies.
New standards, amendments and interpretations that are not yet effective and have not been early adopted
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are
effective in future accounting periods and which have not been adopted early. None of these are expected to have a significant effect
on the Group, in particular:
•
•
•
•
IFRS 3 Business Combinations: Amendment – Definition of Business
IFRS 9, IAS 39 and IFRS 7: Interest rate benchmark reform
IFRS 16 Leases: COVID-19-Related Rent Concessions
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors:
Amendment – Disclosure Initiative – Definition of Material
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 73
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
2. Accounting policies (continued)
New standards, amendments and interpretations that are not yet effective and have not been early adopted
• Revisions to the Conceptual Framework for Financial Reporting.
The principal accounting policies adopted are set out above.
3. Financial risk management
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand with an original maturity
date of less than three months. To mitigate our inherent exposure to credit risk we maintain policies to limit the concentration of credit
risk, and ensure liquidity of available funds. We also invest our cash and equivalents in rated financial institutions, primarily within
the United Kingdom and other investment grade countries, which are countries rated BBB- or higher by S&P the Group does not
have a significant concentration of credit risk arising from its bank holdings of cash and cash equivalents.
Financial risk factors
The Group is exposed to market risk (interest rate risk and currency risk), liquidity risk and capital risk management arising from the
financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The Group does not consider this risk to be significant.
The Company has borrowings outstanding from its subsidiaries, the ultimate realisation of which depends on the successful
exploration and realization of the Group’s intangible exploration assets. This in turn is subject to the availability of financing to maintain
the ongoing operations of the business. The Group manages its financial risk to ensure sufficient liquidity is available to meet
foreseeable needs and to invest cash assets safely and profitably.
Market risk - Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s
operating cash flows are substantially independent of changes in market interest rates as the interest rates on cash balances are
very low at the moment. 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
Sensitivity analysis
2020
£’000
2019
£’000
1,315
150
An increase of 100 basis points in interest rates at 31 December 2020 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
Profit or Loss
Equity
Profit or Loss
2020
£’000
13
(3)
2020
£’000
13
(3)
2019
£’000
1
(0.2)
2019
£’000
1
(0.2)
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 74
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
3. Financial risk management (continued)
Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk
arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the
functional currency of the entity.
The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Australian Dollar,
Euro, Turkish Lira, US Dollar, CHF, Ethiopian Birr and Saudi Arabian Riyal. Since 1986 the Saudi Arabian Riyal has been pegged to
the US Dollar, it is fixed at USD/SAR 3.75. The Group’s management monitors the exchange rate fluctuations on a continuous basis
and acts accordingly.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date
are as follows; with the Saudi Arabian Riyal exposure being included in the USD amounts.
Liabilities
Assets
Liabilities
Assets
Australian Dollar
Euro
Turkish Lira
US Dollar
Ethiopian Birr
2020
2020
£’000
£’000
47
127
7
1,694
630
3
-
-
10
363
2019
£’000
42
126
1
2,205
208
2019
£’000
-
2
24
51
284
Sensitivity analysis continued
A 10% strengthening of the British Pound against the following currencies at 31 December 2020 would have increased/(decreased)
equity and profit or loss by the amounts shown in the table below. This analysis assumes that all other variables, in particular interest
rates, remain constant. For a 10% weakening of the British Pound against the relevant currency, there would be an equal and
opposite impact on the loss and equity.
Equity
Profit or Loss
Equity
Profit or Loss
AUD Dollar
Euro
Turkish Lira
US Dollar
Ethiopia ETB
Liquidity risk
2020
£’000
4
13
1
168
27
2020
£’000
4
13
1
168
27
2019
£’000
4
12
(2)
215
(8)
2019
£’000
4
12
(2)
215
(8)
The Group and Companies raises funds as required on the basis of projected expenditure for the next 6 months, depending on
prevailing factors. Funds are generally raised on AIM from eligible investors. The success or otherwise of such capital raisings is
dependent upon a variety of factors including general equities and metals mark sentiment, macro-economic outlook and other factors.
When funds are sought, the Group balances the costs and benefits of equity and other financing options. Funds are provided to
projects based on the projected expenditure.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 75
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
3. Financial risk management (continued)
Carrying Amount
The Group
31-Dec-20
Trade and other payables
Loans and Borrowings
31-Dec-19
Trade and other payables
Loans and Borrowings
The Company
31-Dec-20
Trade and other payables
Loans and Borrowings
31-Dec-19
Trade and other payables
Loans and Borrowings
Capital risk management
£’000
3,125
-
3,125
4,247
964
5,211
2,354
-
2,354
3,864
964
4,828
Contractual Cash
flows
£’000
Less than
1 year
£’000
Between 1-5
year
£’000
More than 5
years
£’000
3,125
-
3,125
-
3,125
3,125
4,247
964
4,247
964
5,211
5,211
2,354
-
2,354
-
2,354
2,354
3,864
964
3,864
964
4,828
4,828
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefit for other stakeholders and to maintain an optimal capital structure to reduce the costs of capital.
This is done through the close monitoring of cash flows.
The capital structure of the Group consists of cash and cash equivalents of £1,315,000 (2019: £150,000) and equity attributable to
equity of the parent, comprising issued capital and deferred shares of £25,466,000 (2019: £24,477,000), other reserves of
£34,391,000, (2019: £26,570,000) and accumulated losses of £37,824,000 (2019: £34,640,000). 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).
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 76
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
3. Financial risk management (continued)
Fair value estimation
The fair value of trade and other receivables is estimated as the present value of future cash flows discounted at the market rate of
interest at the reporting date. For receivables and payables with a remaining life of less than one year, the notional amount is deemed
to reflect fair value. All other receivables and payables are, where material, discounted to determine the fair value.
Differences arising between the carrying and fair value are considered not significant and no-adjustment is made in these accounts.
The carrying and fair values of intercompany balances are the same as if they are repayable on demand.
The fair values of the Group’s loans and other borrowings are considered equal to the book value as the effect of discounting on
these financial instruments is not considered to be material. The instruments have been valued using the Company’s volume
weighted average share price as shown on AIM (Note 23.3).
As at each of December 31, 2020 and December 31, 2019, 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:
Financial assets
Cash and cash equivalents (Note 16) – Level 1
Financial assets at fair value through OCI (Note 14) - Level 2
Trade and other receivables (Note 15)
Financial liabilities
Trade and other payables (Note 21)
Loans and borrowings (Note 23)
Carrying Amounts
2019
2020
£’000
1,315
£’000
150
54
448
70
1,234
3,125
-
4,247
964
Fair Values
2019
£’000
150
70
1,234
4,247
964
2020
£’000
1,315
54
448
3,125
-
4. Use and revision of accounting estimates and judgements
The preparation of the financial report requires the making of estimations and assumptions that affect the recognized amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of
which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
Accounting Judgement:
Going concern
The going concern presumption depends principally on securing funding to develop the Tulu Kapi gold mining project as an
economically viable mineral deposit, and the availability of subsequent funding to extract the resource, or alternatively the availability
of funding to extend the Company’s and Group’s exploration activities (Note 2).
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 77
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
4. Use and revision of accounting estimates and judgements (continued)
Capitalisation of exploration and evaluation costs
The directors consider that the project in its Licence areas in Saudi Arabia has not yet met the criteria for capitalization. These criteria
include, among other things, the development of feasibility studies to provide confidence that mineral deposits identified are
economically viable. Capitalized E&E costs for the Group’s project in Ethiopia have been recognized on acquisition, and have
continued to be capitalised since that date, in accordance with IFRS 6. The technical feasibility of the project has been confirmed,
and once the financing is secure the related assets will be reclassified as development costs in line with above.
Estimates:
Share based payments.
Equity-settled share awards are recognised as an expense based on their fair value at date of grant. The fair value of equity settled
share options is estimated through the use of option valuation models, which require inputs such as the risk-free interest rate,
expected dividends, expected volatility and the expected option life, and is expensed over the vesting period. Some of the inputs
used are not market observable and are based on estimates derived from available data. The models utilized are intended to value
options traded in active markets. The share options issued by the Group, however, have a number of features that make them
incomparable to such traded options. The variables used to measure the fair value of share-based payments could have a significant
impact on that valuation, and the determination of these variables require a significant amount of professional judgement. A minor
change in a variable which requires professional judgement, such as volatility or expected life of an instrument, could have a
quantitatively material impact on the fair value of the share-based payments granted, and therefore will also result in the recognition
of a higher or lower expense in the Consolidated Statement of Comprehensive Income. Judgement is also exercised in assessing
the number of options subject to non-market vesting conditions that will vest. These judgments are reflected in note 18.
Impairment review of asset carrying values (Note 12)
Determining whether intangible exploration and evaluate assets are impaired requires an assessment of whether there are any
indicators of impairment, by reference to specific impairment indicators prescribed in IFRS 6 (Note 2). This requires judgement. This
includes the assessment, on a project by project basis, of the likely recovery of the cost of the Group’s Intangible exploration assets
in the light of future production opportunities based upon ongoing geological studies. This also involves the assessment of the period
for which the entity has the right to explore in the specific area, or if it has expired during the period or will expire in the near future,
if it is not expected to be renewed. Management has a continued plan to explore. During the latest review of the Micon due diligence
review of the Tulu Kapi Gold Project report dated the 10 August 2020 there were no indicators of impairment.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 78
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
5. Operating segments
The Group has two operating segments, being that of mineral exploration and corporate. The Group’s exploration activities are
located in the Kingdom of Saudi Arabia (through the jointly controlled entity) and Ethiopia. Its corporate costs which include
administration and management are based in Cyprus.
Corporate
Ethiopia
Saudi Arabia Adjustments Consolidated
£’000
£’000
£’000
£’000
£’000
2020
Corporate costs
(2,252)
(65)
Foreign exchange (loss)/gain
(1,577)
1,230
Gain on Dilution of Joint Venture
-
Net Finance costs
(416)
-
-
-
-
1,033
-
1,033
(1,088)
(585)
(640)
-
(640)
-
-
-
-
-
-
-
-
-
-
(2,317)
(347)
1,033
(416)
(2,047)
(1,088)
(585)
(3,720)
-
(3,720)
(4,245)
1,165
-
-
-
-
(4,245)
1,165
-
-
(4,245)
1,165
17,063
2,361
15,823
7,288
-
-
(6,524)
26,362
(6,524) 3,125
Corporate
£’000
Ethiopia
£’000
Saudi Arabia
£’000
Adjustments
£’000
Consolidated
£’000
(2,561)
(41)
Foreign exchange (loss)/gain
(1,254)
1,069
Loss on change in fair value of
convertible on conversion
(1,045)
-
Net Finance costs
(1,150)
-
-
(Loss)/Gain before jointly
controlled entity
Share of loss from jointly
controlled entity
Loss before tax
Tax
Loss for the year
Total assets
Total liabilities
(6,010)
1,028
(6,010)
-
(6,010)
15,205
4,833
1,028
-
1,028
13,542
6,432
-
-
-
-
(591)
(591)
-
(591)
-
-
-
-
-
-
-
-
-
(2,602)
(185)
(1,045)
(1,150)
(4,982)
(591)
(5,573)
-
(5,573)
-
-
(6,054)
22,693
(6,054) 5,211
(Loss)/gain before jointly
controlled entity
Share of loss from jointly
controlled entity
Impairment of jointly controlled
entity
Loss before tax
Tax
Loss for the year
Total assets
Total liabilities
2019
Corporate costs
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 79
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
6. Expenses by nature
Exploration costs
Depreciation of property, plant and equipment (Note 11)
Directors’ fees and other benefits (Note 22.1)
Consultants’ costs
Auditors’ remuneration - audit current year
Legal Costs
Ongoing Listing Costs
Other expenses
Shareholder Communications
Travelling Costs
Total Administrative Expenses
Share of losses from jointly controlled entity (Note 5 and Note 20)
Impairment of jointly controlled entity (Note 20)
Share based option benefits to directors (Note 18)
Share based benefits to employees (Note 18)
Share based benefits to key management (Note 18)
Share based benefits to suppliers
Cost for long term project finance (Note 8)
Operating loss
2020
£’000
25
43
653
343
114
373
162
352
245
80
2,365
1,088
585
14
21
16
-
316
4,430
2019
£’000
29
10
703
236
73
325
140
232
206
208
2,133
591
-
75
34
47
94
205
3,208
The Group’s stages of operations in Saudi Arabia as at the year-end and as at the date of approval of these financial statements
have not yet met the criteria for capitalization of exploration costs. The Company only capitalises direct evaluation and exploration
costs for the Tulu Kapi gold project in Ethiopia.
7. Staff costs
Salaries
Social insurance costs and other funds
Costs capitalised as exploration
Net Staff Costs
Average number of employees
2020
£’000
688
97
(756)
29
44
2019
£’000
554
78
(621)
11
43
Excludes Directors’ remuneration and fees which are disclosed in note 22.1. TK project direct staff costs of £756,000 are capitalised
in evaluation and exploration costs and all remaining salary costs are expensed. Most of the group employees are involved in Tulu
Kapi Project in Ethiopia
8. Finance costs and other transaction costs
8.1 Total finance costs
Interest on short term loan
Interest on short term loan related party (note 22.2)
Transaction costs for unsecured convertible loan facility (note 23.2)
Total finance costs
8.2 Total other transaction costs
Cost for long term project finance
Total other transaction costs
2020
£’000
100
-
-
100
316
316
2019
£’000
737
15
398
1,150
205
205
The above costs for long term project finance relate to pre-investigation activities required to fund TK Gold project.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 80
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
9. Tax
Loss before tax
Tax calculated at the applicable tax rates at 12.5%
Tax effect of non-deductible expenses
Tax effect of tax losses
Tax effect of items not subject to tax
Charge for the year
2020
£’000
(3,720)
(477)
336
286
(145)
-
2019
£’000
(5,573)
(705)
655
52
(2)
-
The Company is resident in Cyprus for tax purposes. A deferred tax asset of £1,601,000 (2019: £1,293,159) 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
30%. 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 2020, the balance of tax losses which is available for offset against
future taxable profits amounts to £ 12,812,000 (2019: £ 10,345,000). Generally, loss of one source of income can be set off against
income from other sources in the same year. Any loss remaining after the set off is carried forward for relief over the next 5 year
period.
Tax Year
2015
£’000
2016
£’000
2017
£’000
2018
£’000
2019
£’000
2020
£’000
Total
£’000
Losses carried forward
1,541
2,340
1,797
1,784
1,602
3,748
12,812
Ethiopia
KEFI Minerals (Ethiopia) Limited is subject to other direct and indirect taxes in Ethiopia through its foreign operations. The mining
industry in Ethiopia is relatively undeveloped. As a result, tax regulations relating to mining enterprises are evolving. There are
transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain.
The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where
the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
current and deferred tax provisions in the period in which such determination is made.
The government of Ethiopia cut the corporate income tax rate for miners to 25% more than three years ago from 35%, and has
lowered the precious metals royalty rate to 7% from 8%. According to the Proclamation, holders of a mining licence are required to
pay royalty on the sales price of the commercial transaction of the minerals produced. Development expenditure of a licensee or
contractor shall be treated as a business intangible with a useful life of four years. If a licensee or contractor incurs development
expenditure before the commencement of commercial production shall apply on the basis that the expenditure was incurred at the
time of commencement of commercial production. The mining license stipulates that every mining company should allocate 5% free
equity shares to the Government of Ethiopia.
United Kingdom
KEFI Minerals (Ethiopia) Limited is resident in United Kingdom for tax purposes. The corporation tax rate is 19%. In December
2016, KEFI Minerals (Ethiopia) Limited elected under CTA 2009 section 18A to make exemption adjustments in respect of the
Company’s foreign permanent establishment’s amounts in arriving at the Company’s taxable total profits for each relevant accounting
period. This is an exemption for UK corporation tax in respect of the profits of the Ethiopian branch.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 81
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
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
Net loss for basic and diluted loss attributable to equity shareholders
Weighted average number of ordinary shares for basic loss per share (000’s)
Weighted average number of ordinary shares for diluted loss per share (000’s)
Loss per share:
Basic loss per share (pence)
Year Ended
31.12.20
£’000
(3,720)
(3,720)
1,663,197
1,748,804
Year Ended
31.12.19
£’000
(5,573)
(5,573)
718,976
768,840
(0.224)
(0.775)
There was no impact on the weighted average number of shares outstanding during 2020 as all Share Options and Warrants were
excluded from the weighted average dilutive share calculation because their effect would be anti-dilutive and therefore both basic
and diluted earnings per share are the same in 2020.
11. Property, plant and equipment
The Group
Cost
At 1 January 2019
Additions
At 31 December 2019
Additions
At 31 December 2020
Accumulated Depreciation
At 1 January 2019
Charge for the year
At 31 December 2019
Charge for the year
At 31 December 2020
Net Book Value at 31 December 2020
Net Book Value at 31 December 2019
Motor
Vehicles
Plant and
equipment
£’000
£’000
Furniture,
fixtures and
office
equipment
£’000
71
-
71
-
71
34
3
37
34
71
-
34
66
11
77
25
102
66
6
72
3
75
27
5
72
-
72
14
86
71
1
72
6
78
8
-
Total
£’000
209
11
220
39
259
171
10
181
43
224
35
39
The above property, plant and equipment is located in Ethiopia.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 82
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
12. Intangible assets
The Group
Cost
At 1 January 2019
Additions
At 31 December 2019
Additions
At 31 December 2020
Accumulated Amortization and Impairment
At 1 January 2019
At 31 December 2019
Impairment Charge for the year
At 31 December 2020
Net Book Value at 31 December 2020
Net Book Value at 31 December 2019
Total
exploration and
project
evaluation cost
£’000
19,023
2,443
21,466
3,310
24,776
266
266
-
266
24,510
21,200
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 83
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
13. Investments
13.1 Investment in subsidiaries
The Company
Cost
At 1 January
Additions
Dissolutions
At 31 December
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
12,575
1,106
(1)
13,680
11,324
1,251
-
12,575
The Company carrying value of KEFI Minerals Ethiopia which holds the investment in the Tulu Kapi Gold project currently under
development is £13,680,000 as at the 31 December 2020.
During the year management reviewed the value of its investments in the Company accounts to the project estimated NPV value.
The result of the review shows that the NPV value is higher than the cost recorded in the company accounts.
As guidance to the shareholder further details are available in the front section of this report in the Finance Director’s Report on page
5 under the Tulu Kapi project section.
13.1 Investment in subsidiaries (continued)
Subsidiary companies
Date of
acquisition/
incorporation
Country of
incorporation
Mediterranean Minerals (Bulgaria) EOOD
08/11/2006
Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket¹
08/11/2006
Bulgaria
Turkey
KEFI Minerals (Ethiopia) Limited
30/12/2013
United Kingdom
KEFI Minerals Marketing and Sales Cyprus Limited
Tulu Kapi Gold Mine Share Company
30/12/2014
31/04/2017
Cyprus
Ethiopia
Effective
proportion of
shares held
100%-Direct
100%-Indirect
100%-Direct
100%-Direct
95%-Indirect
¹ Dogu voluntary liquidated during the year.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 84
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
13. Investments (continued)
13.1 Investment in subsidiaries (continued)
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
27/28 Eastcastle Street, London, United Kingdom W1W 8DH.
KEFI Minerals Marketing and Sales Cyprus Limited
23 Esekia Papaioannou Floor 2, Flat 21 1075, Nicosia Cyprus.
Tulu Kapi Gold Mine Share Company
1st Floor, DAMINAROF Building, Bole Sub-City, Kebele 12/13, H.No, New.
The Company owns 100% of Kefi Minerals (Ethiopia) Limited (“KME”)
During 2020 the company voluntary liquidated its dormant subsidiary Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket.
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
KME owns 95% of Tulu Kapi Gold Mine Share Company (“TKGM”), a company incorporated in Ethiopia which operates the Tulu
Kapi project. The Tulu Kapi Gold Project mining license has been transferred to TKGM. The Government of Ethiopia is entitled to a
5% free-carried interest (“FCI”) in TKGM. This entitlement is enshrined in the Ethiopian Mining Law and the Ethiopian Mining
Agreement between the Ethiopian Government and KME, as well as the constitution of the project company and is granted at no
cost. The 5% FCI refers to the equity interest granted by the company holding the mining license. The Ethiopian Government has
also undertaken to invest a further USD$20,000,000 (Ethiopian Birr Equivalent) in the project in return for the issue of additional
equity on normal commercial terms ranking pari passu with the shareholding of KME. Such additional equity is not entitled to a free
carry. Upon completion of each element of the infrastructure and approved by the Company will issue the additional equity. At the
date of this report no equity was issued.
The Company owns 100% of KEFI Minerals Marketing and Sales Cyprus (“KMMSC”), a Company incorporated in Cyprus. The
KMMSC was dormant for the year ended 31 December 2020 and 2019. KEFI Minerals Marketing and Sales Cyprus holds the right
to market gold produced from the Tulu Kapi Gold Project. It holds no other assets. It is planned that KMMSC will act as agent and
off-taker for the onward sale of gold and other products in international markets.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 85
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
13. Investments (continued)
13.2 Investment in jointly controlled entity
The Group
At 1 January/31 December
Increase in investment
Exchange Difference
Loss for the year
Impairment
On 31 December
The Company
At 1 January/31 December
Increase in investment
Exchange Difference
Impairment Charge for the year
On 31 December
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
-
1,896
(223)
(1,088)
(585)
-
-
1,896
(245)
(1,651)
-
181
236
(196)
(221)
-
-
181
236
(196)
(221)
-
Jointly controlled entity
Date of acquisition/
incorporation
Country of
incorporation
Effective proportion of
shares held
Gold and Minerals Co. Limited (G&M)
04/08/2010
Saudi Arabia
34%-Direct
The Company owns 34% of G&M. More information is given in note 20.1. During the year the Company diluted its holding in G&M
from 40% to 34% and this resulted in a gain of £1,033,000.
14. Financial assets at fair value through Other Comprehensive Income (OCI)
Relates to bond sold in Ethiopia to the public to finance the construction of the Grand Ethiopian Renaissance Dam. The full
amount was repaid and received in January 2021.
The Group
At 1 January
Foreign currency movement
Interest Received
On 31 December
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
70
(16)
-
54
81
(11)
-
70
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 86
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
15. Trade and other receivables
The Group
Share Placement1
Other receivables
VAT Refund
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
232
38
178
448
1,154
-
80
1,234
¹ In December 2020 14,500,000 ordinary shares were issued and funds were received post year end.
The Company
Share Placement1
Other Debtors
Prepaid
Advance to KEFI Minerals (Ethiopia) Limited (Note 22.2) ²
Advance to Tulu Kaki Gold Mine Share Company (Note 22.2)¹
Expected credit loss
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
232
88
18
3,918
2,605
(261)
6,600
1,154
-
4,851
1,204
(242)
6,967
Amounts owed by subsidiary companies total £8,927,000 (2019: £8,415,000). A write off of £2,404,000 (2019: 2,360,000) has been
made against the amount due from the non-Ethiopian subsidiaries because these amounts are considered irrecoverable.
The Company has borrowings outstanding from its Ethiopian subsidiaries, the ultimate realisation of which depends on the successful
exploration and realisation of the Group’s intangible exploration assets. Management is of the view that if the Company disposed of
the Tulu Kapi asset, the consideration received would exceed the borrowings outstanding. Nonetheless, Management has made an
assessment of the borrowings as at 31 December 2020 and determined that any expected credit losses would be £261,000 (2019:
£242,000) for which a provision has been recorded. The advances to KEFI Minerals (Ethiopia) Limited and TKGM are unsecured,
interest free and repayable on demand. At the reporting date, no receivables were past their due date.
¹The Company advanced £1,993,000 (2019: £1,076,000) to the subsidiary Tulu Kapi gold Mine Share Company during 2020. The
Company had a foreign exchange translation loss of £591,000(2019: Loss £171,000) the current year loss was because of the
continued devaluation of the Ethiopian Birr.
²Kefi Minerals (Ethiopia) Limited: during 2020, the Company advanced £76,000 (2019: £152,000) to the subsidiary. The Company
had a foreign exchange translation loss of £1,008,000 (2019: Loss £856,000) the current year loss was because of the continued
devaluation of the Ethiopian Birr.
The TKGM and KME loans are denominated Birr. The Company bears the foreign exchange risk on these loans and any
movements in the Ethiopian Birr are recorded in the income statement of the Company.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 87
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
16. Cash and cash equivalents
The Group
Cash at bank and in hand unrestricted
Cash at bank restricted
The Company
Cash at bank and in hand unrestricted
Cash at bank restricted
17. Share capital
Authorized Capital
Year
Ended
31.12.20
£’000
Year
Ended
31.12.19
£’000
1,295
20
1,315
1,172
20
1,192
130
20
150
45
20
65
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 2019
Share Equity Placement 27 Feb 2019
Share Equity Placement 17 Apr 2019
Sanderson Share Equity Placement 17 Apr 2019
Sanderson Share Equity Placement 11 Jun 2019
Share Equity Placement 11Jun 2019
On the 8 July 2019 Sub-divided into one new ordinary share
of 0.1p and one deferred share of 1.6p
Share Equity Placement 5 Aug 2019
Arato Convertible Note Share Equity Placement 14 August
2019 to 19 Nov 2019
Share Equity Placement 20 Dec 2019
Share issue costs
At 31 December 2019
Number of
shares ’000
571,703
Share
Capital
9,719
Deferred
Shares
12,436
Share
premium
21,581
Total
43,736
57,000
12,615
2,250
22,500
14,700
969
214
38
383
251
-
-
-
-
-
-
(10,892)
10,892
8,500
310,606
149,000
8
310
149
-
-
-
-
-
-
-
12
7
67
43
-
162
2,051
1,714
969
226
45
450
294
-
170
2,361
1,863
(185)
(185)
1,148,874
1,149
23,328
25,452
49,929
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 88
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
17. Share capital (continued)
At 1 January 2020
Share Equity Placement 10 Jan 2020
Share Equity Placement 14 May 2020
Share Equity Placement 28 May 2020
Conversion of Warrants to Equity 16 Oct 2020
Share Equity Placement 20 Nov 2020
Share Equity Placement 14 Dec 2020
Share issue costs
Broker warrants: issue costs
Warrants: fair value split of warrants issued to shareholders.
Number of
shares ’000
1,148,874
149,000
113,846
455,385
8,462
186,000
76,360
-
-
Share
Capital
1,149
149
114
456
8
186
76
-
-
Deferred
Shares
23,328
-
-
-
-
-
-
-
Share
premium
25,452
1,714
626
2,503
47
2,790
1,145
(390)
(367)
(402)
Total
49,929
1,863
740
2,959
55
2,976
1,221
(390)
(367)
(402)
At 31 December 2020
2,137,927
2,138
23,328
33,118
58,584
Deferred Shares 1.6p
At 1 January
Subdivision of ordinary shares to deferred shares
At 31 December
Number of Deferred
Shares’000
2020
2019
-
680,768
680,768
-
680,768
680,768
£’000
£’000
2019
2020
-
10,892
10.892
-
10,892
10.892
Deferred Shares 0.9p
2019
2020
2019
2020
At 1 January
Subdivision of ordinary shares to deferred shares
At 31 December
1,381,947
-
1,381,947
1,381,947
-
1,381,947
12,436
-
12,436
12,436
-
12,436
The deferred shares have no value or voting rights.
2020
During the period the Company issued 989,052,146 new ordinary shares at average price of 1.00 pence for working capital, goods
and services, and debt repayments (note 18.3).
2019
During the period August 19 to November 19 the Company issued 310,605,668 Shares to Arato Global Opportunities Limited.
(‘Arato’), for an aggregate consideration of £2,362,500. On issue of the shares, an amount of £2,051,894 was credited to the
Company’s share premium reserve which is the difference between the issue price and the nominal value 0.1 pence. Further details
available in note 23.
The Company also agreed to issue Sanderson, on the 5 August 2019, 8,500,000 Ordinary Shares for Sanderson to release the
company from changes in security and related arrangements. The shares were issued at 2 pence and an amount of £161,500 was
credited to the Company’s share premium reserve.
Restructuring of share capital into deferred shares
On the 28 June 2019 at the AGM, shareholders approved that each of the currently issued ordinary shares of 1.7p (“Old Ordinary
Shares”) in the capital of the Company be sub-divided into one new ordinary share of 0.1p (“Existing Ordinary Shares”) and one
deferred share of 1.6p (“Deferred Shares”). With effect from 8 July 2019 at 8.00am, each ordinary share in the Company has a
nominal value of 0.1p per share.
The Deferred Shares have no value or voting rights and were not admitted to trading on the AIM market of the London Stock
Exchange plc. No share certificates were issued in respect of the Deferred Shares.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 89
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
18. Share Based payments
18.1 Warrants
In the note 18 when reference is made to the “Old Ordinary Shares” it relates to the ordinary shares that had a nominal value of 1.7p
each and were in issue prior to the 8 July 2019 restructuring. Shares issued after the 8 July 2019 restructuring have a nominal value
of 0.1p and will be referred to as (“Existing Ordinary Shares”).
2020
The Company issued 149,000,000 short term warrants to subscribe for new ordinary shares of 0.1p each at 2p per share in
accordance with the December 2019 and January 2020 share placement and as approved by shareholders on 6 January 2020. The
warrants expired on 30 April 2020. The Company performed a fair value split by fair valuing the warrants using Black Scholes and
assumed that this value is the residual share amount.
On 16 December 2019, the Company issued 7,450,000 warrants to subscribe for new ordinary shares of 0.1p each at 2p per share
to Brandon Hill pursuant to the Placing Agreement. The warrants expire 2 years from the date of issue (10 January 2020).
During May 2020, the Company issued 28,461,538 to the broker. These warrants allow the broker to subscribe for new ordinary
shares of 0.1p each at 0.65p per share in pursuant to the Placing Agreement. The warrants expire within three years of the date of
First Admission.
During November 2020, the Company issued 11,175,000 broker warrants to subscribe for new ordinary shares of 0.1p each at 1.60p
per share to Brandon Hill pursuant to the Placing Agreement. The warrants expire within three years of the date of First Admission.
During the period 1 January 2020 to 31 December 2020, 149,000,000 warrants issued to shareholders expired and 8,461,538 were
exercised by Brandon Hill.
2019
On 2 August 2019, the Company issued 19,500,000 warrants to Arato to subscribe for existing ordinary shares of 0.1p each at an
exercise price of 2.5p per share under the terms of the unsecured convertible loan notes. These warrants expire on 2 August 2022.
During the period 1 January 2019 to 31 December 2019, 3,709,652 warrants were cancelled or expired.
Details of warrants outstanding as at 31 December 2020:
Grant date
19-Sep-18
02-Aug-19
06 Jan 2020
29 May 2020
20 Nov 2020
Expiry date
20-Sep-23
02-Aug-22
06 Jan 2023
29 May 2023
20 Nov 2023
*Exercise price
2.50p
Expected Life Years
5 years
Number of warrants
000's*
2,000
2.50p
1.25p
0.65p
1.60p
3 years
3 years
3 years
3 years
19,500
7,450
20,000
11,175
60,125
Outstanding warrants at 1 January 2020
- exercised warrants
- expired warrants
- granted
Outstanding warrants at 31 December 2020
Weighted average ex. Price
2.50p
0.65p
2.50p
2.13p
1.56p
Number of warrants* 000’s
21,500
(8,462)
(149,000)
196,087
60,125
The estimated fair values of the warrants were calculated using the Black Scholes option pricing model.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 90
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
18. Share Based payments (continued)
The inputs into the model and the results for warrants granted during the year are as follows:
19-Sep-
18
02-Aug-
19
16-Dec-
19
6-Jan-
20
19-May-
20
29-May-
20
20-Nov-
20
Closing share price at issue
date
Exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
Estimated fair value
2.12p
2.5p
70%
5yrs
1.2%
Nil
1.15p
1.40p
2.5p
75%
3yrs
0.33%
Nil
0.48p
1.34p
1.25p
97%
1.65p
2.00p
109%
2yrs 0.4years
0.63%
Nil
0.27p
0.60%
Nil
0.72p
0.75p
0.65p
98%
3yrs
0.04%
Nil
0.47p
1.06p
0.65p
99%
3yrs
-0.03%
Nil
0.73p
1.68p
1.6p
101%
3yrs
0.05%
Nil
1.06p
Expected volatility was estimated based on the historical underlying volatility in the price of the Company’s shares.
For 2019, the impact of issuing warrants to suppliers is a net charge to income of £nil (2019: £94,000) and a further charge of
£769,000 was processed to share premium that relates to warrants issued to brokers and company shareholders. At 31 December
2020, the equity reserve recognized for share based payments, including warrants, amounted to £1,273,000 (2019: £1,118,000).
During the 2020 year an amount of £200,000 was processed in share premium to reflect shares issued and committed in December
2019 but received shareholder approval in January 2020.
Share options reserve table
Opening amount
Warrants issued costs
Share options charges relating to employees(Note 6)
Share options issued to directors and key management (Note 6)
Forfeited options
Exercised warrants
Expired warrants
Closing amount
18.2 Share options reserve
Details of share options outstanding as at 31 December 2020:
Grant date
Expiry date
*Exercise price
20-Mar-15
16-Jun-15
19-Jan-16
23-Feb-16
05-Aug-16
22-Mar-17
01-Feb-18
19-Mar-21
15-Jun-21
18-Jan-22
22-Feb-22
05-Aug-22
21-Mar-23
31-Jan-24
22.44p
22.44p
7.14p
12.58p
10.20p
7.50p
4.50p
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
1,118
769
21
30
-
-
(665)
1,273
1,032
94
34
122
-
-
(164)
1,118
*Number of
shares 000’s
1,529
382
4,088
176
883
7,024
11,400
25,482
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 91
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
18. Share Based payments (continued)
18.2 Share options reserve
Outstanding options at 1 January 2020
- granted
- expired/forfeited
Outstanding options at 31 December 2020
Weighted average
ex. Price*
8.95p
-
23.10p
7.35p
Number of shares*
000’s
28,365
-
(2,883)
25,482
The Company has issued share options to directors, employees and advisers to the Group.
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 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 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.
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.
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. Expected volatility was
estimated based on the historical underlying volatility in the price of the Company’s shares.
For 2020, the impact of share option-based payments is a net charge to income of £51,000 (2019: £161,000). At 31 December 2020,
the equity reserve recognized for share option-based payments, including warrants, amounted to £1,273,000 (2019: £1,118,000).
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 92
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
18. Share Based payments (continued)
18.3 Share Payments for services rendered and obligations settled.
January 2020 placement of 149,000,000 shares
On 6 January 2020, following approval by shareholders, the Company issued 49,419,600 new ordinary shares ("Remuneration
Shares") and 99,580,400 new ordinary shares (“Settlement Shares”) of 0.1p each in the capital of the Company at an issue price of
1.25p. The net raise amounted to £1,862,500, with liabilities and other obligations listed below settled in shares.
November and December 2020 placement of 92,109,407 shares
All Remuneration Shares, Settlement Shares and Placing Shares were issued at a value of 1.60 pence per share. The net raise
amounted to £1,473,750, with liabilities and other obligations listed below settled in shares.
The total shares issued during 2020 for services and obligations was as follows:
Name
For services rendered and obligations settled
H Anagnostaras-Adams
J Leach
Norman Arthur Ling
Mark Tyler
Richard Lewin Robinson
Other employees and PDMRs
Amount to settle other Obligations
Total share based payments
Amount to settle loans
Unsecured Convertible loan facility
Unsecured working capital bridging finance
Number of
Remuneration
and Settlement
Shares
000
18,062
12,924
2,000
2,000
1,000
44,168
30,702
110,856
6,000
124,255
241,111
Amount
000
248
176
25
25
13
624
413
1,524
75
1739
3,338
The parties above agreed that the amounts subscribed in the share placements during the year be set-off against the amount due
by the Company at the date of the share placement.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 93
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
19. Non-Controlling Interest (“NCI”)
As at 1 January 2019
Acquisitions of NCI
Additions
Result for the year
As at 1 January 2020
Acquisitions of NCI
Impact of 5% free carry on additions to assets during the year
As at 31 December 2020
Year Ended
£’000
1,075
-
-
-
1,075
-
129
1,204
During 2018, the Government of Ethiopia received its 5% free carried interest acquired in the Tulu Kapi Gold Project. The group
recognized an increase in non-controlling interest in the current year of £129,000 and a decrease in equity attributable to owners of
the parent of £129,000.
The NCI of £1,204,000 (2019: £1,075,000) represents the 5% share of the Group’s assets of the TKGM project which are attributable
to the Government of Ethiopia
The Mining Proclamation entitles the Government of Ethiopia (GOE) to 5% free carried interest in TKGM. The 5% NCI reflects the
government interest in the TKGM gold project. The GOE is not required to pay for the 5% free carry interest. The GOE can acquire
additional interest in the share capital of the project at market price. The GOE has committed US $20,000,000 to install the off-site
infrastructure in exchange for earning equity in Tulu Kapi Gold Mine Share Company. The shareholder agreement signed with the
GOE in April 2017 states that once the infrastructure elements are properly constructed and approved by Company the relevant
shares will be issued to Ministry of Finance and Economic Cooperation (MOFEC)
The financial information for Tulu Kapi Gold Mine Project as at 31 December 2020:
Amounts attributable to all
shareholders
Exploration and evaluation assets
Current assets
Cash and Cash equivalents
Equity
Current liabilities
Loss for the year
Year Ended
Year Ended
31.12.20
31.12.19
£'000
£'000
24,620
21,305
184
124
24,928
24,163
765
24,928
-
129
86
21,520
21,142
378
21,520
-
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 94
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
20. Jointly controlled entities
20.1 Joint controlled entity with Artar
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
33.65%
Gold & Minerals Co. Limited has the following registered address: Olaya District. 659, King Fahad Road, Riyadh, Kingdom of Saudi
Arabia.
The summarised financial information below represents amounts shown in Gold & Minerals Co Limited financial statements prepared
in accordance with IFRS and assuming they followed the group policy of expensing exploration costs.
Amounts relating to the Jointly Controlled
Entity
SAR’000
Year Ended
31.12.20
100%
SAR’000
Year Ended
31.12.19
100%
£’000
Year Ended
31.12.20
100%
Non-current assets
Cash and Cash Equivalents
Current assets
Total Assets
Current liabilities
Total Liabilities
381
11,160
546
107
720
162
12,087
989
74
2,176
106
2,356
(2,626)
(2,626)
(1,701)
(1,701)
(512)
(512)
Net (Liabilities)/Assets
9,461
(712)
1,844
Share capital
Capital contributions partners
Accumulated losses
Exchange rates SAR to GBP
Closing rate
2,500
97,401
(90,440)
9,461
2,500
71,457
(74,669)
(712)
Income statement
SAR’000
SAR’000
(15,785)
14
-
(15,771)
(7,156)
(42)
-
(7,198)
Loss from continuing operations
Other comprehensive income
Translation FX Gain from SAR/GBP
Total comprehensive income
Included in the amount above
Group
Group Share 33.65% of loss from continuing
operations
Joint venture investment
Opening Balance
Loss for the year
FX Loss
Additional Investment
Impairment
Closing Balance
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
£’000
Year Ended
31.12.19
100%
22
145
33
200
(343)
(343)
(143)
505
14,436
(15,084)
(143)
0.2020
£’000
(1,475)
(8)
537
(946)
487
18,987
(17,630)
1,844
0.1949
£’000
(3,279)
3
729
(2,547)
(1,088)
(591)
£’000
-
(1,088)
(223)
1,896
(585)
-
£’000
-
(591)
-
591
-
-
Page 95
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
20. Jointly controlled entities (continued)
20.1 Jointly controlled entity with Artar
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 33.65% shareholding in G&M with ARTAR holding
the other 66.35%. 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 has five Directors, of whom two are nominated by KEFI However, decisions about
the relevant activities of G&M require the unanimous consent of the five directors.G&M is treated as a jointly controlled entity and
has been equity accounted. KEFI has reconciled its share in G&M’s losses.
A loss of £1,088,000 was recognized by the Group for the year ended 31 December 2020 (2019: £591,000) representing the Group’s
share of losses in the year.
As at 31 December 2020 KEFI owed ARTAR an amount of £0 (2019: £456,000) - Note 21.1.
During 2020 the Company diluted its interest in the Saudi joint-venture company Gold and Minerals Limited ("G&M") from 40% to
33.65% by not contributing its pro rata share of expenses to G&M. This resulted in a gain of £1,033,000 in the Company accounts
The accounting policy for exploration costs recorded in the G&M audited financial statements is to capitalise qualifying expenditure
in contrast to the Group’s accounting policy relating to exploration costs which is to expense costs through profit and loss until the
project reaches development stage (note2). Consequently, any dilution in the Company’s interest in G&M results in the recovery of
pro rata share of expenses to G&M.
21. Trade and other payables
21.1 Trade and other payables
The Group
Accruals and other payables
Other loans
Payable to jointly controlled entity partner (Note 20.1)
Payable to Key Management and Shareholder (Note 22.3)
Other loans are unsecured, interest free and repayable on demand.
The Company
Accruals and other payables
Payable to jointly controlled entity partner (Note 20.1)
Payable to Key Management and Shareholder (Note 22.4)
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
1,510
134
-
1,481
3,125
1,829
169
456
1,793
4,247
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
873
-
1,481
2,354
1,615
456
1,793
3,864
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 96
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
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:
Short term employee benefits:
¹Directors' consultancy fees
Directors’ other consultancy benefits
²Short term employee benefits: Key management fees
Short term employee benefits: Key management other benefits
Share based payments:
Share based payment: Directors bonus
¹Share based payment: Directors' consultancy fees
Share option-based benefits to directors (Note 18)
²Share based payments short term employee benefits: Key management fees
Share option-based benefits other key management personnel (Note 18)
Share Based Payment: Key management bonus
Year Ended
31.12.20
£’000
Year Ended
31.12.19
£’000
489
58
686
39
1,272
106
-
14
292
16
-
428
507
37
539
21
1,104
159
-
75
290
47
-
571
1,700
1,675
¹Directors’ fees paid to the Executive Director Chairman and Finance Director are paid to consultancy companies of which they are
beneficiaries.
²Key Management comprised the Managing Director Ethiopia, Head of Operations, Head of Systems and Head of Planning.
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 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 Transactions with shareholders and related parties
The Group
Name
Winchcombe Ventures Limited
Nanancito Limited
Members of International Mining
Performance
Nature of transactions
Relationship
Receiving of management and other
professional services
Receiving of management and other
professional services
Interest paid on loans advanced
Key Management
and Shareholder
Key Management
and Shareholder
Key Management
and Shareholder
2020
£’000
578
298
-
2019
£’000
580
293
15
876
888
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 97
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
22. Related party transactions (continued)
22.2 Transactions with shareholders and related parties (continued)
The Company
Name
Nature of transactions
Relationship
KEFI Minerals Marketing and Sales
Cyprus Limited
Tulu Kapi Gold Mine Share Company¹
Kefi Minerals (Ethiopia) Limited²
Expected credit loss
Finance
Subsidiary
Advance
Advance
Subsidiary
Subsidiary
2020
£’000
-
2,605
3,918
(261)
6,262
2019
£’000
-
1,204
4,851
(242)
5,813
The TKGM and KME loans are denominated Birr. The Company bears the foreign exchange risk on these loans and any movements
in the Ethiopian Birr are recorded in the income statement of the Company. Further details on the details of the movement of these
loans are available in note 15
Management has made an assessment of the borrowings as at 31 December 2020 and determined that any expected credit losses
would be £261,000
The above balances bear no interest and are repayable on demand.
22.3 Payable to related parties
The Group
Name
Nature of transactions
Relationship
Nanancito Limited
Fees for services
Winchcombe Ventures Limited
Fees for services
Directors
Fees for services
Key Management and
Shareholder
Key Management and
Shareholder
Key Management and
Shareholder
22.4 Payable to related parties
The Company
Name
Nature of transactions
Relationship
Nanancito Limited
Fees for services
Winchcombe Ventures Limited
Fees for services
Directors
Fees for services
Key Management and
Shareholder
Key Management and
Shareholder
Key Management and
Shareholder
2020
£’000
1,073
280
128
2019
£’000
720
632
441
1,481
1,793
2020
£’000
1,073
280
128
2019
£’000
720
632
441
1,481
1,793
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 98
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
23. Loans and Borrowings
23.1.1 Short Term Working Capital Bridging Finance
Unsecured working capital bridging finance
Currency
GBP
Interest
See table
Maturity
On
Demand
Repayment
See table below
2020
Unsecured working capital
bridging finance
Balance 1
Jan 2020
Drawdown
Amount
Transaction
Costs
£’000
Interest
Repayment
Shares
Repayment
Cash
Year Ended
31 Dec 2020
£’000
£’000
£’000
£’000
£’000
£’000
Repayable in cash in less
than a year
2019
889
889
750
750
-
-
100
100
(1,739)
(1,739)
-
-
-
-
Unsecured working capital
bridging finance
Balance 1
Jan 2019
Drawdown
Amount
Transaction
Costs
£’000
Interest
Repayment
Shares
Repayment
Cash
Year Ended
31 Dec 2019
£’000
£’000
£’000
£’000
Repayable in cash in less
than a year
Repayable in Kefi Ordinary
Shares at the option of the
lender in less than a year
615
-
615
555
62
617
-
-
-
737
15
752
£’000
(724)
-
(294)
(77)
(371)
(724)
£’000
889
-
889
The short term working capital finance is unsecured and ranks below other loans. Although there was no binding agreement to
convert the loans into shares, the lenders agreed to convert the debt into shares and the loan balance of £1,739,000 was fully repaid
in 2020 during the relevant share placements.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 99
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
23. Loans and Borrowings (continued)
23.1.2 Reconciliation of liabilities arising from financing activities
2020 Reconciliation
Cash Flows
Balance
1 Jan
2020
£’000
Inflow
(Outflow)
Fair Value
Movement
Finance Costs
Shares
£’000
£’000 £’000
£’000
£’000
Balance
31 Dec
2020
£’000
Unsecured working capital
bridging finance
Short term loans
Convertible notes
Sanderson unsecured
convertible loan facility 23.2
2019 Reconciliation
Unsecured working capital
bridging finance
Short term loans
Convertible notes
Sanderson unsecured
convertible loan facility 23.2
Arato Global Opportunities
limited unsecured
convertible loan notes 23.3
889
750
889
750
75
75
-
-
-
-
-
-
-
-
-
-
100
100
(1,739)
(1,739)
-
-
(75)
(75)
-
-
-
-
Balance
1 Jan
2019
£’000
Inflow
(Outflow)
Fair Value
Movement
Finance Costs
Shares
£’000
£’000 £’000
£’000
£’000
Balance
31 Dec
2019
£’000
615
617
(724)
615
617
(724)
-
-
752
(371)
889
- 752
(371)
889
-
525
-
215
(665)
-
2,250
(70)
1,045
183
(3,408)
75
-
- 2,775
(70)
1,045
398
(4,073)
75
615
3,392
(794)
1,045
1,150
(4,444)
964
23.2 Unsecured Convertible loan facility
During the year ended 31 December 2020 the Company did not enter into any convertible loan facilities.
On 28 November 2018, the Company entered into a secured convertible loan facility of up to £4,000,000 with Sanderson Capital.
Partners Limited. The Company utilized only £525,000 of the facility, all of which has been repaid before its expiry on 28 November
2019 except for £75,000 that was repaid during the January 2020 placement. On 5 August 2019, the Company entered into new
unsecured £2,250,000 convertible note facility (see note 23.3) with Arato Global Opportunities Limited
For accounting purposes, the secured convertible loan facility should be separated into their liability and equity components by first
valuing the liability component. The difference between the face value of the secured convertible loan facility and the fair value of the
liability component, was immaterial hence the secured convertible loan facility has not been separated into the liability and equity
components.
The terms of the facility were:
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 100
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
23. Loans and Borrowings (continued)
23.2 Unsecured Convertible loan facility
The facility was for up to £2,000,000 with an option for a second facility £2,000,000. The second facility was never used.
•
• On drawdown a 5% fee, payable in shares at the higher of 2p per share or the preceding 5 day VWAP, was applied at the
time of drawdown. Drawdown’s to be at least 30 days apart and subject to no fundamental change in the business plan.
Company could repay the loan outstanding for an early repayment fee of 5% but in this case lenders had the option to
convert half of any repayment by the Company into new ordinary shares at a fixed price of 2p per share. No early repayment
was made. Lender could convert at any time, part or all of any outstanding balance at a price not below 2p and did so in
June 2019 converting £450,000. The agreement expired on 28 November 2019.
The amount owing as at 31 December 2019 of £75,000 was settled in shares in January 2020.
•
23.3 Arato Global Opportunities Limited unsecured convertible loan notes
On 2 August 2019 the Company signed a convertible loan note with Arato Global Opportunities Limited (“Arato”) for £2,250,000 (as
amended on 20 September). The loan notes carried no coupon and are repayable at a premium of 5%. The term of the loan notes,
all of which have been repaid, was three years. The following transaction costs were incurred. The Company issued 19,500,000
warrants at an exercise price of 2.5p, which vested immediately and expire on 2 August 2022. The Company paid to Arato
establishment fees of £70,265 for the establishment if this convertible note-facility.
Drawdown amount during the year
Premium of 5%
Date
Number of
shares
¹90% VWAP
issue price
²VWAP on
date of
conversion
000’s
pence
pence
14-Aug-19
17,511
02-Sep-19
16,942
11-Sep-19
21,111
13-Sep-19
4,825
21-Sep-19
19,021
04-Oct-19
15,086
11-Oct-19
14,320
24-Oct-19
23,732
01-Nov-19
23,853
08-Nov-19
25,247
15-Nov-19
102,182
0.96
0.77
0.88
0.87
0.97
0.84
0.8
0.66
0.6
0.63
0.68
1.07
0.90
1.26
1.23
1.11
0.99
0.88
0.76
0.77
0.76
1.18
19-Nov-19
Difference in the carrying value of loan converted compared with amounts required to be recognized in share
premium.
26,776
0.98
1.85
Closing Balance
31-Dec-19
000’s
2,250
113
(187)
(152)
(266)
(59)
(211)
(149)
(126)
(180)
(184)
(192)
(1,207)
(495)
1,045
-
¹ They were convertible at the election of the lender at 90% of the lowest one day volume weighted average share price as shown
on AIM over the three trading days immediately preceding the conversion date.
²The conversion price is calculated at volume weighted average share price of a KEFI Ordinary Share as shown on the London Stock
Exchange on the date that the notice of conversion was received from Arato.
The difference between fair value of shares on conversion and issue share price resulted in a loss on change in fair value of
£1,045,000.
During the twelve months ended 31 December 2019, Arato converted an aggregate of £2,250,000 of principal and £113,000 of the
finance costs into approximately 311 million shares of ordinary shares of the Company with an aggregate fair market value of
£3,408,000. As a result of the conversion, Arato became a shareholder in the Company and details of this related party convertible
loan notes transaction are disclosed in this note.
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 101
Notes to the consolidated financial statements (continued)
Year ended 31 December 2020
24. Contingent liabilities
The company has no contingent liabilities.
25. Contingent asset
In 2011, the Company sold four Licences in Turkey to AIM listed Ariana Resources (AIM:AAU) in return for cash consideration and
a Net Smelter Royalty (“NSR”) of 2% over any production that may arise from the licenses. No value has been attributed to the NSRs
in the 2019 financial statements due to uncertainty as to when or if income from the NSRs will eventuate. During the year, the NSR
was assigned to Ariana Resources.
26. Capital commitments
The Group has the following capital or other commitments as at 31 December 2020 £1,964,000 (2019: £2,159,000),
Tulu Kapi Project costs
Saudi Arabia Exploration costs committed to field work that
has been recommenced
31 Dec 2020
£’000
558
31 Dec 2019
£’000
895
1,406
1,264
27. Events after the reporting date
On 12 April 2021, the Company received notice from Brandon Hill Capital Ltd a warrant holder to exercise warrants over a total of
15,000,000 new Ordinary Shares of 0.1p at a price of 0.65 pence per share.
KEFI Gold and Copper is listed on AIM (Code: KEFI)
www.kefi-minerals.com
KEFI Gold and Copper PLC
ANNUAL REPORT 2020
Page 102
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