KEFI Gold and Copper Plc
Annual Report 2021

Plain-text annual report

20 21 ANNUAL REPORT Focused on the Arabian-Nubian Shield Table of Contents Mission ................................................................................................................................................................................................... 2 Approach ................................................................................................................................................................................................ 2 Timing ..................................................................................................................................................................................................... 2 Executive Chairman’s Report 4 Finance Director’s Review ..................................................................................................................................................................... 6 Ownership Value and Ownership Dilution............................................................................................................................................ 7 Financial Risk Management .................................................................................................................................................................. 7 Accounting Policy .................................................................................................................................................................................. 7 Environmental, Social and Governance 9 Social Licence ........................................................................................................................................................................................ 9 Reporting Standards ............................................................................................................................................................................ 11 Independent Validation ........................................................................................................................................................................ 12 Corporate Governance ........................................................................................................................................................................ 13 Board of Directors – KEFI Gold and Copper PLC .............................................................................................................................. 14 Ethiopia and Saudi Arabia 16 Ethiopia ................................................................................................................................................................................................ 16 Ethiopia’s Mining Sector ..................................................................................................................................................................... 16 Saudi Arabia ......................................................................................................................................................................................... 16 Saudi Arabia’s Mining Sector .............................................................................................................................................................. 17 Exploration and Development – KEFI’s History Exploration and Development – Ethiopia 17 17 Tulu Kapi - Background ....................................................................................................................................................................... 18 Tulu Kapi – Permits and Mining Agreement ....................................................................................................................................... 18 Tulu Kapi – Project Launch Preparations ........................................................................................................................................... 18 Tulu Kapi - Geology ............................................................................................................................................................................. 19 Tulu Kapi – Resources and Reserves ................................................................................................................................................. 19 Tulu Kapi - Definitive Feasibility Study and Subsequent Optimisation ............................................................................................ 20 Tulu Kapi – Development Overview .................................................................................................................................................... 21 Tulu Kapi –Underground Mine Potential ............................................................................................................................................ 21 Tulu Kapi –Regional Exploration Potential......................................................................................................................................... 22 Exploration and Development – Saudi Arabia 22 Hawiah Project ..................................................................................................................................................................................... 24 Jibal Qutman Project ........................................................................................................................................................................... 29 Glossary and Abbreviations Competent Person Statement 31 33 Note: All $ figures in this report are US$ KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 1 Mission Mission The mission of KEFI Gold and Copper PLC (“KEFI” or the “Company”) 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 our Tulu Kapi Gold Project at the funding stage in Ethiopia, to our Hawiah Copper-Gold and Jibal Qutman Gold Projects at the feasibility study stage in Saudi Arabia and to walk-up drill targets in both countries. Since incorporation 16 years ago, KEFI has invested some £72 million in these activities and today the Company sits with advanced projects that have project NPV’s that are already multiples of the amount invested. KEFI has a leading position in the two countries that contain the majority of the Arabian-Nubian Shield. We now have three advanced projects in these now strongly pro-development countries and are focused on a sequential mine development path to build a mid-tier mining company over the next few years. Approach KEFI was launched in 2006 as a £2.5 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 the 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 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. Our community plans are in accordance with the International Finance Corporation (World Bank) Performance Standards and Equator Principles. Operationally, we align with industry specialists such as Lycopodium Limited (“Lycopodium”) - our principal process plant contractors in both Ethiopia and Saudi Arabia. Some elements of Tulu Kapi’s development commenced in Q4-2019 and were stalled repeatedly by civil disturbance, These have now re-started and full construction is planned to begin in Q4-2022 once project financing has been finalised and the local dry season begins. Annual gold production remains projected at 140,000 ounces from the Tulu Kapi open pit to increase to circa 190,000 ounces when the underground mine starts up a few years later. In Saudi Arabia, we now have two development projects in progress after being held up for many years awaiting a regulatory overhaul. We look to develop our Jibal Qutman Gold Project (“Jibal Qutman”) and then to follow with the start- up of the Hawiah Copper-Gold Project (“Hawiah”). Both projects are now in the feasibility study stage and are projected, between them, to add similar scale of gold-equivalent production to that projected for Tulu Kapi in Ethiopia. Copper will provide the majority of Hawiah’s revenue. We have have also registered applications in Saudi Arabia for exploration of prospects selected from our proprietary database, covering four major new project areas and aggregating more than 1,000 square kilometres. Timing KEFI’s objective is to have three projects in production by 2026 at a net production rate of 365,000 gold-equivalent ounces (KEFI beneficial interest 187,000 oz or 155,000 ounces of gold plus copper, zinc and silver). The potential Net Operating Cash Flow for these projects is currently estimated to be £137 million ($185 million) per annum. The next few years will be focused on multi-pronged development and exploration during which our cash flow production should commence and escalate. The operating environment for KEFI has improved considerably over the past year. Since H1-2020, the estimated net present value (“NPV”) of our assets has tripled to £348 million (circa 9 pence per share,based on today’s issued capital) due to exploration and permitting success in Saudi Arabia and an expected greater equity interest in Tulu Kapi. With KEFI’s current market capitalisation of £30 million (at 0.7 pence per share), the potential for a substantial rerating of our share price towards NPV as our projects are developed is very clear. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 2 We are confident in our mission, approach and timing. • This photo shows the surface exposure of the +4km-long Hawiah orebody. The rock reveals copper-staining and readily detected gold mineralisation. The French Geological Survey identified it decades ago as part of a cluster of such deposits. • • G&M was the first to test it in 2019, after applying for an Exploration Licence in 2009. • Hawiah already ranks globally in the top 15% VMS deposits with a resource of: 24.9 million tonnes at 0.90% copper, 0.85% zinc, 0.62 g/t gold and 9.8 g/t silver. • G&M plans to develop Hawiah following the development of another of its discoveries, Jibal Qutman Gold. This photo shows a recent meeting of the Tulu Kapi Gold Mines syndicate. KEFI formed the TKGM syndicate of leading banks, contractors of process plants and mining and other specialists. TKGM is structured as a public-private partnership with Ethiopia’s Federal and Regional Governments. • • • • Many new policies have been required from Government agencies, which were previously obstacles to financing. • Ethiopia’s political situation has also delayed project launch. Since the abatement of the civil war at the end of 2021, the scene appears to have finally been set to commence full construction of Tulu Kapi later this year. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 3 Executive Chairman’s Report Due to the improvement in the local working environment in both Ethiopia (security) and Saudi Arabia (regulatory) since late 2021, KEFI now has three (not one) advanced projects in two countries. Combined with the recently reported excellent exploration results at Hawiah and Al-Godeyer in Saudi Arabia, KEFI now has a much-improved position as an early-mover in both countries and with a more balanced portfolio of advancing projects. We can at last focus on a sequential development path to build a mid-tier mining company with aggregate annual production of 365,000 ounces of gold and gold equivalent, in which KEFI will have a beneficial interest of 187,000 ounces of gold and gold equivalent. Our reported Mineral Resources provide a solid starting position for our imminent growth. Since mid-2021, total Mineral Resources have increased from 3.9 million to 4.7 million gold-equivalent ounces. KEFI’s beneficial interest in the in-situ metal content of our three projects now totals 2.1 million gold-equivalent ounces. KEFI’s current market capitalisation of circa £30 million equates to only $19 per gold-equivalent ounce compares very favourably to the prevailing gold price range during 2022 of approximately $1,830-2000/ounce. The underlying intrinsic value of KEFI’s assets has increased from December 2020 to December 2021 based on the three projects’ NPV (at an 8% discount rate and using 31 December 2021 metal prices). At that same deck of metal prices, NPV per share has grown from 3 pence as at mid-2020 to 7 pence as at mid-2021 and 9 pence as at mid-2022 (calculated on the shares in issue today). The growth in underlying intrinsic value is due to our progress in Saudi Arabia in particular – at the Hawiah Copper-Gold Project and the Jibal Qutman Gold Project. These statistics are merely illustrative indicators, but the same pattern emerges whether one assumes prevailing metal prices or analysts’ consensus forecast metal prices. Our operating alliances are with the following strong organisations: • Partners: o o in Saudi Arabia: Abdul Rahman Saad Al Rashid and Sons Ltd (“ARTAR”) in Ethiopia: ▪ Federal Government of the Democratic Republic of Ethiopia ▪ Oromia Regional Government • Principal contractor for process plants in both Ethiopia and Saudi Arabia: Lycopodium Ltd (“Lycopodium”). • Senior project finance lenders for Tulu Kapi: o East African Trade and Development Bank Ltd (“TDB”) o African Finance Corporation Limited (“AFC”) Ethiopia - Tulu Kapi Until a few years ago, Ethiopia had been one of the world’s top 10 growth countries for nearly 20 years and now, having overcome its recent security issues, is demonstrating a clear determination to expedite economic recovery and pursue its economic objectives. Tulu Kapi will be the country’s first large-scale mining project for some 30 years and is designed to the highest international standards. It therefore is imposing many demands on a regulatory system which the Ethiopian Government is upgrading. Under strong Ministerial leadership, the Government is determined to build a modern minerals sector. There is significant potential to increase Tulu Kapi’s current Ore Reserves of 1.05 million ounces of gold and Mineral Resources of 1.7 million ounces. Economic projections for the Tulu Kapi open pit indicate the following returns assuming a gold price of US$1,591/ounce: • Average EBITDA of $100 million per annum (KEFI’s now planned c. 70% interest being c. $70 million); • All-in Sustaining Costs (“AISC”) of $826/ounce, (note that royalty costs increase with the gold price); and • All-in Costs (“AIC”) of $1,048/ounce. The assumptions underlying these projections are detailed in the footnotes to the table on page 21 of this Annual Report. We reactivated Tulu Kapi project launch preparations in early 2022. Ethiopia’s Ministry of Mines has recently been formally advised that progress is on schedule to have secured project finance by mid-year if the security situation is satisfactory and if the few remaining regulatory administrative tasks are also completed punctually. Saudi Arabia – Jibal Qutman Jibal Qutman was KEFI’s first discovery in Saudi Arabia with Mineral Resources in excess of 700,000 ounce of gold. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 4 As a result of a new regulatory system and indications from the Saudi Arabia’s Government that the Mining Licence would progress in 2022, development planning studies have recommenced at Jibal Qutman. The current gold price is considerably higher than the $1,200/ounce used in 2015 when the Company lodged its initial Mining Licence application. Another key change is that several alternative processing options are likely to have become more attractive since 2015. Several consultants have recently been engaged to evaluate processing options for Jibal Qutman and update elements of the Mining Licence application. This work includes open-pit design and scheduling, metallurgy, processing options and updating the Environmental and Social Impact Assessment. Saudi Arabia – Hawiah Hawiah was discovered in September 2019 and now ranks in the: • top three base metal projects in Saudi Arabia; and • top 15% VMS projects worldwide. A three-year 42,000m drilling program has delineated a Mineral Resource of 24.9 million tonnes at 0.90% copper, 0.85% zinc, 0.62g/t gold and 9.8g/t silver. As a scale-comparison with Tulu Kapi, Hawiah’s recoverable metal is now estimated to be in the order of 2.2 million gold-equivalent ounces versus Tulu Kapi’s 1.2 million ounces of gold. The team is progressing at great speed on this exciting project which is located close to major infrastructure. We are working towards completing a Preliminary Feasibility Study (“PFS”) and an updated Mineral Resource in late 2022. Two Exploration Licences (“ELs”) located immediately west of the Hawiah EL were granted in December 2021. Initial exploration of these Al Godeyer ELs has confirmed similar copper-gold mineralisation to the Hawiah VMS deposit and indicated good continuity of the mineralised horizon. Conclusion KEFI is preparing to develop the Tulu Kapi Gold Project, advancing development studies on the Jibal Qutman Gold Project, progressing the PFS for the Hawiah Copper-Gold Project and testing exploration targets in Ethiopia and Saudi Arabia. Simultaneous with the triggering of full development at Tulu Kapi, we intend to re-commence exploration programs in Ethiopia and expand our exploration program in Saudi Arabia. In Ethiopia, the initial focus will be underneath the planned open pit where we already have established an initial resource for underground mining at an average grade of 5.7g/t gold. We also intend to follow-up drilling which indicated good potential for nearby gold deposits in the Tulu Kapi District. In Saudi Arabia, further drilling is in progress at Hawiah and the adjacent Al Godeyer prospect. Along with my fellow Directors, I am very sensitive to the need to generate returns on investment. It is frustrating and disappointing that the pandemic and the geopolitics of both Ethiopia and Saudi Arabia has retarded our progress in recent years and we have been unable to achieve targeted progress. However, our operating environment has turned for the better in both countries and we can now progress on all fronts. By emphasizing conventional project-level development financing, we seek to alleviate the past responsibility of KEFI shareholders to provide all funding and therefore more than 80% of the development capital is planned to be contributed by our partners and other syndicate parties. However, exploration and other pre-development funding will continue to rely exclusively on equity funding by KEFI and its in-country partners. The Directors expect that as milestones are achieved, the Company’s share price should naturally narrow the gap between the Company’s market capitalisation and what we believe to be the significantly higher fundamental valuations of the Company’s projects using conventional measures such as NPV. 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. Executive Chairman Harry Anagnostaras-Adams 1 June 2022 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 5 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. We see the current global supply chain strains as an aftershock which will abate but leave a legacy of cost inflation which has already impacted our projects. We have been adjusting our planning assumptions since the pandemic began. Successful implementation will see KEFI emerge in 2024 as a profitable gold producer of 140,000 ounces per annum. Our growth plans in Ethiopia and Saudi Arabia are likely to lead to much higher gold equivalent production within the following few years. Subject to the signing of Tulu Kapi’s umbrella financing agreement in June 2022 and its adherence over the following few months, the Company has been positioned to commence full construction of the Tulu Kapi mine at the end of the current wet season. Implementation of this plan provides KEFI with project ownership levels as follows: • c. 70% of the Ethiopian mining development and production operation, via the shareholding in TKGM; • 100% of the Ethiopian exploration projects, via the shareholding in KEFI Minerals (Ethiopia) Limited (“KME”); and • 30% of the Saudi development and exploration projects, via the shareholding in G&M. KEFI has funded all of its past activities with approximately £72 million 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 to provide working capital pending the achievement of a short-term business milestone. 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.$356 million (including the mining fleet provided by the contractor of US$56 million, the original budget of US$240 million and provisions for cost-inflation US$50 million) which is dependent upon final procurement price confirmations. These estimates were made in mid-2022 and took into account cost-inflation in the industry until then. We are now re-checking pricing for project launch and final finance planning. The various offers and commitments are made on a non-binding basis for finalisation as we now move to project launch. The financing syndicate has expressed willingness to adjust and refine amongst itself when final procurement and budget prices, expected in the coming two months, are set. It will be optimised by KEFI and the TKGM syndicate which has already conditionally indicated the following participation as at 31 May 2022: $ M 56 Mining fleet to be provided by the mining contractor 140 Senior project debt, to be repaid out of operating cash surpluses 196 Equity Risk Capital 38 Government and Local Investors directly into TKGM 122 KEFI-funded component, separate and in addition to historical investment 160 Total TKGM capital requirement, subject to final procurement clarifications 356 Total of original project budget, plus provision for cost-inflation plus mining fleet KEFI Component to be funded as follows: 60 Subordinated non-convertible, offtake-linked debt 15 Subordinated debt convertible into KEFI shares at VWAP in 3 years 20 Subordinated convertible at a premium over market in H2-2022 27 Recent issues of KEFI shares and the exercise of the attached warrants 122 Provided by KEFI The following needs to be carried out so as to proceed to earliest project finance settlement: • Field activities to demonstrate readiness to launch from a security viewpoint; • Final construction and mining pricing updates confirmed; and • Definitive individual party documentation to be approved with relevant Government agencies, including the Ministry of Mines and the Central Bank of Ethiopia, so that execution may proceed by all syndicate parties. Early preparatory works have commenced to give clearance to both banks to lend on same terms. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 6 Ownership Value and Ownership Dilution An £8.0 million Placing completed in April 2022 will mainly be used to fund: • selected development activities at Tulu Kapi, • exploration at Hawiah and the adjacent Al Godeyer prospect; and • development planning at Jibal Qutman. This paves the way for full construction in Ethiopia from October 2022 at the end of the local wet season, with the initial signing at end of June 2022 setting out any residual conditions to be satisfied. From an ownership value perspective and measuring the Company’s underlying assets on an 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 three main assets having more than tripled from $154 million in June 2020 to c.$471 million (£348 million) in May 2022. This is the result of KEFI raising its planned interest in Tulu Kapi from 45% to c.70%, making a significant discovery at Hawiah and now, due to progress with regulatory approvals, the inclusion of Jibal Qutman. 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 increase issued capital, hopefully via the exercise of the recently issued warrants at 1.6 pence per share. But ownership dilution will be minimised because much of the capital is being raised at the project level and some of the share issues by KEFI will be at prices two and three years after project finance completion. Financial Risk Management In designing the balance sheet senior debt gearing overall, the senior debt to equity ratio for TKGM is 47%:53% ($140 million:$160 million) excluding equity funded historical pre-development costs and 37%:63% ($140 million:$240 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 c.$1,107/ounce (flat) for 10 years, while over the past 10 years the gold price was under that price for only 2.4% of the time; and • At current analyst consensus gold price of $1,641/ounce, senior debt 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 all of our finance syndicate members have made it clear that they wish to proceed according to plan subject only to normal safety and compliance procedures. We have conditionally assembled all of the development finance, mostly at the project level from our small, efficient and economical corporate office in Nicosia, 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 in Saudi Arabia. KEFI’s carrying value of the investment in KME, which holds the Company’s share of Tulu Kapi is £14.3 million as at 31 December 2021. It is important to note KEFI’s planned circa.70% beneficial interest in the underlying valuation of Tulu Kapi is c.£191 million based on project NPV at an assumed gold price of $1,830/ounce and including the underground mine. 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 $156 million (Ethiopian Birr equivalent). John Leach Finance Director 1 June 2022 Footnotes: • Long term analysts’ consensus forecast is sourced from CIBC Global Mining Group Analyst Consensus Long Term Commodity Price Forecasts 30 April 2022. • NPV calculations are based on: Metal prices as at 31 December 2021 of US$1,830/ounce for gold, $9,750/tonne for copper, $3,590/tonne for zinc and $23/ounce for silver; and 8% discount rate applied against net cash flow to equity, after debt service and after tax. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 7 Organisational Development KEFI senior management is drawn from leading mining jurisdictions internationally and is well placed to further drive 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: • Eddy Solbrandt, German - Chief Operating Officer - founder of GPR Dehler, an independent, international management consultancy which specialises productivity improvement for mining companies worldwide; • Brian Hosking, South African - CEO of Saudi Arabia plus Head of Planning & Exploration – 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. The Group Exploration Adviser is Jeff Rayner, the Company’s first Managing Director. The Corporate Development Manager is Rob Williams and the Group Financial Controller is Laki Catsamas. Theron Brand was previously Chief Financial Officer and became Managing Director - TKGM in early 2022. Abera Mamo, our new Country Manager for Ethiopia, was recruited in early 2022. In Ethiopia we employ 50 people – five of whom are expatriates. Many more people support the in-country team form their international locations, as we prepare for full construction. Operations managers include Project Manager AK Roux, whilst the Saudi Exploration Manager is Tomos Bryan and Senior Geologist is 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 with both short-term and long-term incentives tied to business milestones. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 8 Environmental, Social and Governance KEFI recognises the importance of the role that corporate social responsibility (“CSR”) has to play in meeting its goals by understanding, reporting on and improving the CSR metrics that will take our operation forward both for the benefit of our employees and the wider community. Health & safety Mining exploration carries with it inherent risks, but it is our responsibility to mitigate as much as we can these risks. And health & safety is the method by which we will achieve this. The company is working hard to develop formalised training systems and a strong reporting procedure, so we can see areas for improvement right across our operations. Health & safety is about protecting our investment and with our employees being our greatest resource, we are impressing upon them how we will support them. During September 2021 four TKGM employees and contractors were captured during inspections of traffic routes for Tulu Kapi. This led in the company temporarily pausing the finance finalisation and launch of the Project to ensure that the incident was satisfactorily addressed. All four were released unharmed and reunited with their families. We wish to express the Company’s gratitude to all stakeholders involved in the incident’s calm, disciplined, low-key successful management. The welfare of our employees, contractors and their families is our first priority. This incident reinforced the importance of safety for all stakeholders involved in our projects, the community, our operating companies, their employees and contractors, the international financiers and other parties committed to safety and success. Environment Although KEFI’s projects are early stage, we work hard to implement strong disciplines from the outset as we explore and implement development projects to local and international standards. 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. We consider ourselves to be a caring employer that recognises the importance of supporting the community in which we operate. The Company has a history of local contributions. KEFI is committed to developing an environment that has the employees of our operating joint ventures and the community in which they live and work as its pivotal focus. As we operate in remote regions, we have to have systems and modern conveniences at site, ensuring a safe workplace for our staff. We have a program of training and development to help employees achieve their potential. We will also act to make the local community a part of our wider business, so we can have a positive impact on their lives. It is notable that TKGM is a joint Ethiopian-KEFI company with its own long-standing community. Likewise G&M is a joint Saudi-KEFI company with its long-standing community. The companies’ exploration camps and compounds have enjoyed a quiet and productive atmosphere and relationship within their communities from the outset, 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 projects’ teams on the ground for many years. Trust has been earned. And, for instance, in Ethiopia 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. In addition to our obligations to contribute to a community development fund administered by the Ministry of Mines, we established a Tulu Kapi Charitable Endowment, for education, training and infrastructure development in the communities in which we operate. The endowment will be governed by people from government and business in Oromia. With our sites being so remote, maintaining good transport infrastructure is important. With the support of the Ethiopia Government we will ensure the roads locally are of sound quality and be available to the community after the project has ended. The Company will also upgrade the landing strip near to our camp, so light aircraft are able to land and take-off safely. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 9 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. 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 G&M’s 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; and 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; and 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 Q4-2022 are to complete the Stage 1 of 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 Q4-2022. 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 six 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 and Jibal Qutman Projects are 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; and 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. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 10 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 2021 Page 11 Independent Validation 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 2021 Page 12 KEFI 10 ndependent alida onDue DiligenceDe ni ve Feasibilit Stud Resources ReservesEnvironmental SocialFinancial ModelSecurit 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 were 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 more than 80% at the general meetings. Full details of the governance charters and other disclosures can be found on the Corporate Governance page of Company’s website. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 13 Board of Directors – KEFI Gold and Copper PLC 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) which is now a major European copper producer and Venus Minerals PLC which is planning copper production in Cyprus from 2023. 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 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 14 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 and Resigned 31 December 2021 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 2021 Page 15 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. Until a few years ago, Ethiopia was one of the world’s top-ten growth countries for nearly 20 years running and now, having overcome its recent security issues, is demonstrating a clear determination to expedite the economic recovery and the pursuit of its economic objectives. 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. Organised 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 and the global COVID pandemic have strained Ethiopia’s social cohesion and economic performance. However, the security situation has improved enormously in Ethiopia following the end of the civil war in the country’s northern regions during December 2021 and the lifting of the national state of emergency in February 2022. 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 four gold projects are producing in five years, their combined exports would rival total country exports today. Tulu Kapi will be the country’s first large-scale mining project for some 30 years and is designed to the highest international standards. It therefore is imposing many demands on a regulatory system which the Ethiopian Government is upgrading, under strong Ministerial leadership, determined to build a modern minerals sector. 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: • • • 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; and 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. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 16 Saudi Arabia’s Mining Sector Saudi Arabia recently created the Ministry of Industry and Mineral Resources intensify efforts to expand the minerals sector, which is now officially proclaimed to become the third 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 – KEF ’s Histor KEFI’s Mission at its IPO in December 2006 was to discover + 1 million ounce gold (or gold-equivalent) deposits. Rapid prospect and regulatory assessments in several countries led KEFI to focus on the underexplored Precambrian Arabian- Nubian Shield 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 copper- gold VMS project and the Bakir Tepe copper-gold 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 exploration properties; discovered several gold deposits at Jibal Qutman and defined a MRE of 733,000 ounces of gold. Following submittal of an initial PFS, G&M submitted a Mining Licence application. The four surrounding ELA’s have potential to make this project a multi-million ounce gold district; • At Hawiah: o discovered the large Hawiah copper-gold VMS deposit in 2019 o released a maiden MRE and completed an initial PEA in 2020; o acquired the Al-Godeyer Els in late 2021; and o published an updated MRE of 24.9 million tonnes and commenced a PFS in early 2022. In Ethiopia, KEFI identified the potential of the +1 million ounce gold deposit at Tulu Kapi that had been evaluated by 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 £6 million. 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 gold of +1 million ounces and there are 15 known prospects with encouraging drill intercepts in exploration ground reserved for KEFI within a 50km radius of Tulu Kapi. KEFI shareholders have provided £72 million of equity funding since the initial IPO and the Company has now assembled 3 advanced development projects with NPV’s well in excess of that investment and a large pipeline of other projects. Exploration and Development – Ethiopia Tulu Kapi’s gold production is currently estimated to commence at c. 140,000 ounces per annum over the seven years of mining the open pit. The estimated AISC of $800-900/ounce is much lower than the industry average. All aspects of the Tulu Kapi (open pit) gold project have been reported in compliance with the JORC Code (2012) and subjected to reviews by appropriate independent experts. These plans now also reflect 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, particularly extending the current high-grade Resources under the planned open pit and from potential satellite gold deposits around a 50km radius of Tulu Kapi, including the Guji-Komto Project, which has potential for shallow open cut resources of +0.5 million ounces of gold. KEFI is also actively assessing other potential gold deposits in western Ethiopia. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 17 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 Income tax rate for mining of 25%; Stabilisation of fiscal arrangement to protect KEFI in case of future legislative changes. • Government undertaking to facilitate international financing arrangements for Tulu Kapi 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 – Project Launch Preparations During Q1 2022 TKGM reactivated Tulu Kapi project launch preparations and has recently formally advised Ethiopia’s Ministry of Mines of its progress being on schedule and that it can close project finance by mid-year if the security situation is satisfactory and if the few remaining regulatory administrative tasks are also completed punctually. In collaboration with the regulatory agencies at all four levels of the Ethiopian Government, TKGM is implementing a staged Tulu Kapi project launch, with progress to May 2022 as follows: • • essentially completed technical and legal due diligence, as directed by senior lenders’ independent advisers - to satisfy conditions precedent to finance closing; triggered detailed engineering – minimising procurement and construction time; KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 18 • • • • recommenced widespread community engagement, which had been suspended for some months due to previously reported security incidents; restarted district works which have a quick local impact, such as upgrading the exploration camp for the construction workforce and re-establishing the nursery for environmental management programmes; commenced regular independent security monitoring; facilitated the completion of the few remaining regulatory administrative tasks: o o o the Ministry of Mines has now endorsed historical costs up to 2020 of c.$60 million and is now addressing the remainder, incurred after that date or by other companies on behalf of TKGM; the Ministry of Mines formally requested to allow re-commencement of exploration at satellite deposit prospects in the Tulu Kapi district; the Ethiopian Central Bank now addressing permission for both development banks to be allowed to lend on the same terms. It has already revised, at TKGM’s request, local restrictions which effectively blocked modern mining project finance until now – such as the working rules for the London clearing account to avoid restrictions of capital controls, the capital ratio for project debt up to 70/30 debt/equity, the use of gold price hedging if desired, the use of offshore leasing and the application of market-based interest rates. Over the past year, KEFI has maintained the project syndicate, triggered final pricing by the principal contractors and distributed for review an updated term sheet in respect of the offtake-linked mezzanine facility, which is now to involve the senior lenders as well as the metals trader. Tulu Kapi - Geology The Tulu Kapi region has typical Precambrian geology containing metasediments, metavolcanics and intrusive rocks. 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 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 19 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. Reserve Category Cut-off (g/t gold) Tonnes (millions) Probable - High grade 0.90 Probable - Low grade 0.50 - 0.90 Total 12.0 3.3 15.4 Note: Mineral Resources are inclusive of Ore Reserves. Gold (g/t) 2.52 0.73 2.12 Contained Gold (million ounces) 0.98 0.08 1.05 The above Mineral Resources and Ore Reserves were estimated using the guidelines of the JORC Code (2012). Tulu Kapi - Definitive Feasibility Study and Subsequent Optimisation Following KEFI completing the 2015 Definitive Feasibility Study (“2015 DFS”) in June 2015, the cost estimates and mine plan were refined further and summarised in the 2017 DFS Update of May 2017. These refinements were the product of collaboration between the KEFI project management team, its specialist advisers and the project contractors. 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. Project economics are summarised 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 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 20 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 Overview Tulu Kapi is planned to 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 Ethiopia’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. The implementation plans have been agreed on a base schedule of 24 months. Our development plan includes a fixed price, lump-sum processing plant “design and supply contract” with Lycopodium and a warranted ore processing rate of 1.9-2.1 million tonnes per annum. The plant assembly aspect of the development is planned as a reimbursable cost-based arrangement. 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 the African mining services specialist provides the mining equipment, systems and operators and gets paid for performing according to the KEFI/TKGM plans and directions. Tulu Kapi – Underground Mine Potential The Tulu Kapi orebody is amenable to underground mining as ground conditions are good. Gold grades increase and ore lenses thicken with depth. Gold mineralisation remains open along strike, down plunge and at depth. Notably, the most northerly hole drilled into the deepest portion of the deposit intersected 90m at 3g/t gold and demonstrates that the deposit remains open down plunge. An internal PEA of Tulu Kapi’s underground mining potential was completed in March 2016. Based on the 2014 Mineral KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 21 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/ounce; 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. Tulu Kapi – Regional Exploration Potential Regional exploration is at an early stage but significant potential has already been identified for further gold orebodies to be discovered near Tulu Kapi. The Komto-Guji structure strikes over 9km and has potential for 0.3-0.5 million ounces of gold oxide mineralisation in shallow open pits that may be processed by heap leach, or at the Tulu Kapi plant. The Tulu Kapi gold district has enormous potential and is clearly a multi-million-ounce gold system. KEFI is also targeting other gold deposits in western Ethiopia. Exploration and Development – 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 30% beneficial interest in a large portfolio of 20 ELAs and 3 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 Abdulrahman Saad Al Rashid and his family. ARTAR has a legal commitment to transfer its licenses into G&M at any time. ARTAR in the meantime, is fully supportive of our progress in Saudi Arabia is and plays a vital role in our dealings with the Saudi Ministry of Industry and Mineral Resources and other important government organisations. G&M has been successful in discovering and delineating gold resources at Jibal Qutman and copper-gold-zinc-silver resources at Hawiah. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 22 Location of G&M ELs and ELAs in Saudi Arabia, including the main gold and VMS copper deposits in the ANS. G&M identified gold at the Jibal Qutman Prospect in May 2009 and was granted the EL in July 2012. The Jibal Qutman EL is located on the Nabitah-Tathlith Fault Zone, a known geological corridor, highly prospective for gold exploration. 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. Development planning has recently been re-activated following indications from the Saudi Arabian Ministry of Mineral Resources that the Mining Licence application would progress in 2022. 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 followed up on earlier prospecting work undertaken in the 1980’s by the BRGM and was granted an EL in December 2014. Various events delayed exploration and drilling only commencement to September 2019 which rapidly led to a maiden Mineral Resource being estimated in August 2020. Two ELs located immediately west of the Hawiah EL were granted in December 2021. Initial exploration of these Al Godeyer ELs has confirmed similar copper-gold mineralisation to the Hawiah VMS deposit and indicated good continuity of the mineralised horizon. The Al Godeyer’s exploration focus is to deliver an initial Mineral Resource during 2022, with drilling programmes in progress. Key commercial advantages for KEFI in Saudi Arabia are: The G&M joint venture relationship between ARTAR and KEFI; • • 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; KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 23 • Saudi Industrial Development Fund provides loans for up to 75% of the capital cost of mine development at attractive interest rates; and • A new Mining Law implemented in 2021 which will facilitate faster EL processing times. Hawiah Project G&M commenced drilling at Hawiah in September 2019 and quickly confirmed a large-scale VMS style of deposit 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 19.3 million tonnes at 0.9% copper, 0.8% zinc, 0.6g/t gold and 10.3g/t silver, 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 mining methods, conventional flotation and CIL processing to produce copper concentrate, zinc concentrate and a gold/silver doré. In early 2022, KEFI announced an updated Hawiah MRE of 24.9 million tonnes at 0.90% copper, 0.85% zinc, 0.62g/t gold and 9.8g/t silver. This represents a c.30% increase in resource tonnage and c.5% increase in grade over the previous MRE. As a scale-comparison with the Company’s Tulu Kapi Gold Project, Hawiah’s recoverable metal is now estimated to be in the order of 2.2 million gold-equivalent ounces versus Tulu Kapi’s 1.2 million ounces of gold. Hawiah Geology and History 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 unoxidised massive sulphides. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 24 Geological sketch map of the Wadi Bidah Mineral Belt. Modern exploration in the Wadi Bidah began in 1936 with the Saudi Arabian Mining Syndicate. The first documented exploration at Hawiah was in the 1980s by the Bureau de Recherches Geoligiques et Miniere (“BRGM”) of France. Hawiah’s silicified and gossanous ridgeline was originally mapped and trenched by the BRGM which identified its near- surface gold-bearing potential. KEFI’s reconnaissance team identified that the prominent 4.5km long, approximately north-south trending ridgeline represents the leached gossanous cap of a VMS deposit. The Hawiah EL contains bimodal mafic and felsic volcanics and volcaniclastics units with outcropping stratiform VMS mineralisation situated on the eastern limb of a broad, south- plunging regional anticline. G&M has undertaken a sequential exploration program of mapping, rock chip sampling, trenching and geophysics since 2014. 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 variable 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 gold • • Transitional (35-70m depth) – preferentially enriched in copper Fresh (>70m depth) – representing ~90% of the known deposit KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 25 The siliceous gossan at Hawiah. G&M completed four diamond drilling programmes from September 2019 to September 2021. Whilst mineralisation is continuous across the strike length of more than 4.5km, 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. Hawiah Project- Mineral Resource Estimates In August 2020, KEFI announced a maiden MRE of 19.3 million tonnes at 0.87% copper, 0.81% zinc, 0.56 g/t gold and 10.25 g/t silver. Diamond drilling has since continued with an additional 29,892m completed, bringing the total drilling undertaken by G&M to 41,841m. This drilling had three main objectives: • Upgrade existing resources in key areas of the deposit to Indicated category classification for mine planning in the • • PFS; Expand the known resource areas to increase the global tonnage; and Increase drilling density within the copper-rich Transition Zone to demonstrate grade continuity and allow for better evaluation of an open-pit scenario. Following the conclusion of the 2021 drilling programme, an updated Hawiah Mineral Resource was estimated to total 24.9 million tonnes at 0.90% copper, 0.85% zinc, 0.62 g/t gold and 9.81 g/t silver. This MRE is reported in accordance with the JORC Code (2012) and is classified as: • • Indicated Resources of 10.9 million tonnes at 0.96% copper, 0.86% zinc, 0.64 g/t gold and 9.98 g/t silver Inferred Resources of 14.0 million tonnes at 0.85% copper, 0.83% zinc, 0.61 g/t gold and 9.67 g/t silver KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 26 This Hawiah MRE contains a total of 223,000 tonnes (491 million lbs) of copper, 210,000 tonnes (463 million lbs) of zinc, 497,000 ounces of gold and 7.8 million ounces of silver. Long section of Hawiah deposit displaying resource classification and the open pit locations. The updated Hawiah MRE achieved key objectives with: • • • • a 30% increase in tonnage over the maiden MRE; a small increase in metal content due to overall improved grades; 44% of the MRE is now in the Indicated category; and the foundation provided for the Hawiah PFS and estimating an initial Hawiah Ore Reserve. Further information on this MRE is detailed in KEFI’s announcement “Update to Hawiah Mineral Resource” dated 6 January 2022. Long section of the Hawiah deposit displaying Resource NSR values within the Block Model. There is clear potential for expansion of resources with further drilling below the currently drilled depth of this structurally consistent tabular structure. Hawiah Project- Development Studies The initial 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 PFS to support the initial mine development in 2023. Highlights of the internal PEA The positive PEA included the following outcomes: • The maiden MRE alone potentially supports a production rate of 2Mtpa for seven years for net operating cash flow of c.$70 million p.a.; and • After initial capital expenditure of c.$222 million and sustaining capital expenditure of c.$46 million, this provides an estimated net cash surplus of more than $200 million before financing costs and tax. Further information on this PEA is available in KEFI’s announcement “Preliminary Economic Assessment Confirms Hawiah as a High Priority Project” dated 22 September 2020. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 27 Preliminary Feasibility Study With the aim of completing the Hawiah PFS and an updated Mineral Resource in late 2022, the required work is underway with: • • • • • • • initial geotechnical diamond drilling programme now completed; hydrology drilling and pump testing is underway; preliminary underground, open-pit, and surface infrastructure designs now commenced; further metallurgical test work underway on the sulphide mineralisation to determine the preferred flowsheets; trenching across the Camp and Crossroad Lodes to collect bulk samples of the oxide mineralisation now completed; exploration drilling within the Central Zone and resource classification drilling within the Oxide Zone to commence in June 2022; and positive assay results have been received for the Hawiah Phase 1 Oxide drilling (for targeted open pit mining in the first phase of development), with a weighted-average gold grade of 1.7g/t across drill intercepts, which is in- line with expectations. Hawiah’s Exploration Potential The Hawiah massive sulphide deposit remains open along strike and down-plunge, with a deepest mineralised intersect of 590 metres below surface. 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. Two ELs located immediately west of the Hawiah EL were granted in December 2021. Initial exploration of these Al Godeyer ELs has confirmed similar copper-gold mineralisation to the Hawiah VMS deposit and indicated good continuity of the mineralised horizon. Exploration during early 2022 included: • • a Self-Potential (“SP”) geophysical survey that defined a continuous anomaly 1.3km in strike and a second, shorter anomaly which correlate well with outcropping gossans; the presence of gold and copper gossans in all trenches over the main SP anomaly and the majority of trenches over the second SP anomaly. Rock chips taken during mapping these trenches confirmed copper-gold mineralisation with grades of up to 1.8% copper and 7.2g/t gold; and • RC drilling intersected oxide and transition sulphides down to a vertical depth of 35m in the first six holes. A diamond drilling programme has commenced at Al Godeyer and the aim is to deliver an initial Mineral Resource for this “Hawiah look alike” during 2022. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 28 Plan showing Al-Godeyer and Hawiah gossans in relation to ELs. 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. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 29 Mineral Resource Estimate 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 Internal Preliminary Economic Assessment for Jibal Qutman Completed in 2015, an internal PEA for evaluated the feasibility of developing a small heap-leach (“HL”) operation at Jibal Qutman to self-fund G&M’s exploration activities in Saudi Arabia. Metallurgical test work has confirmed that Jibal Qutman oxide mineralisation is amenable to HL processing. The HL approach has the advantages of speeding up the potential development timetable and lowering capital requirements. Key outcomes from the internal PEA were: 1.5Mtpa HL operation; • • Gold production of 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. $600/ounce; and Capital expenditure of c. $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 $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 As a result of the new regulatory system and positive developments at the Saudi Arabian Ministry for Industry and Mineral Resources, development planning studies recommenced at Jibal Qutman in early 2022. The current gold price is considerably higher than the $1,200/ounce used in 2015 when the Company lodged its initial Mining Licence application. Several alternative processing options are likely to have become more attractive since 2015, which may enable more of the known gold deposits to be economically mined. This would result in a larger resource and production profile. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 30 Prior to the commencement of field activities, several consultants have been engaged to evaluate processing options for Jibal Qutman and update elements of the Mining Licence application. This work includes open-pit design and scheduling, metallurgy, processing options and updating the Environmental and Social Impact Assessment. While there has been no formal notification on the award of a Mining Licence at Jibal Qutman, G&M intends to re-establish a base in the nearby city of Bisha. This will be used to coordinate operations ahead of the field camp construction should the Mining Licence application be approved. Glossar 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 KEFI KEFI Gold and Copper PLC KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 31 KME LOM KEFI Minerals (Ethiopia) Limited Life of mine Massive sulphide Rock comprised of more than 40% sulphide minerals MA ML MRE Mt Mtpa oz PEA PFS Mining Agreement Mining Licence Mineral Resource Estimate Million tonnes Million tonnes per annum Troy ounce of gold Preliminary Economic Assessment Pre-Feasibility Study 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. VWAP WBMD Volume weighted average price Wadi Bidah Mineral District KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 32 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 6 January 2022 Hawiah Mineral Resource Mark Campodonic 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 2021 Page 33 Directors, Secretary and Advisers Directors Harry Anagnostaras-Adams, Executive Chairman John Leach, Finance Director Norman Ling, Non-Executive Adam Taylor, Non-Executive (Resigned 31 December 2021) 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 Lead Broker Tavira Securities Limited 88 Wood Street, 13th floor, London, EC2V 7DA, United Kingdom www.tavira.group WH Ireland Limited (Joint Broker) 24 Martin Lane, London,EC4R 0DR United Kingdom www.whirelandplc.com Lawyers Herbert Smith Freehills LLP Exchange House Primrose Street London EC2A 2EG www.herbertsmithfreehills.com 27/28 Eastcastle Street London W1W 8DH United Kingdom www.kefi-minerals.com Share Registrar Share Registrars Limited The Courtyard 17 West Street Farnham GU9 7DR United Kingdom www.shareregistrars.com Public Relations Adviser IFC Advisory Birchin Court 20 Birchin Lane London EC3V 9DU United Kingdom www.investor-focus.co.uk KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 34 Consolidated Financial Statements Year ended 31 December 2021 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 36-48 49-58 59 60-65 66 67 68 69 70 71 72-106 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 35 Group Strategic Report For the year ended 31 December 2021 KEFI Gold and Copper PLC Company number: 05976748 The directors present their Group Strategic Report for the year ended 31 December 2021. Principal Activity and Strategic Approach KEFI Gold and Copper PLC (“K FI” or the “ ompany”) or together with its subsidiaries (“the roup”) was incorporated on 24 ctober 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 operations are 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 and the mine is built and enters into production it is expected that the 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 old Mines Share ompany (“TK M”), owner of the Tulu Kapi old roject in thiopia. The Government of Ethiopia is entitled to a 5% free carried interest and a 7% royalty on gold production. Currently the TKGM finance plan has an estimated capital costs of c.US$356 million in total, comprising a mix of senior project debt, subordinated debt, and project equity. The financing syndicate’s umbrella agreement is currently being formalised with groups that have deep, large scale experience in Africa and includes the Ethiopian division of a global industrial company and a leading global commodities trader with mining investments in Africa. The Government of Ethiopia, which is supplying key infrastructure, will own Circ 20% of the project. Two large African banks are the planned Senior Lenders: East African Trade and Development Bank and African Finance Corporation. Further details on the TKGM project financing are available in the Finance Directors Report. The security situation has improved in Ethiopia over the past few months, with the end of the civil war in the country’s northern regions during December 2021, the lifting of the national state of emergency in February 2022, the agreed ceasefire in March 2022, and the focus of the security forces having now switched to the policing of priority areas like the Tulu Kapi district. During Q1 2022 TKGM reactivated Tulu Kapi project launch preparations and has recently formally advised the Ministry of Mines of its progress being on schedule and stepping up activities for signing the financing syndicate umbrella agreement next month, enabling full construction to commence at the end of the wet season in October 2022. subject to the security situation being satisfactory and the remaining regulatory administrative tasks are completed punctually. Company subsidiary TKGM is working intensely with the thiopian Ministry of Mines (the “Ministry”) to expedite the roject and the Ministry has allowed until 8 August 2022 for full Project financing and launch commitments to be achieved. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 36 Group Strategic Report (continued) For the year ended 31 December 2021 Saudi Arabia In the Kingdom of Saudi Arabia, KEFI conducts all of its activities through old and Minerals o. imited (“ &M”), our joint venture company with Abdul Rahman Saad Al Rashid and Sons imited (“Artar”). K FI 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 31% to 30%. On 6 January 2022, K FI announced an updated Mineral esource stimate (“M ”) for the Hawiah volcanic massive sulphide (“VMS”) deposit of 24.9 million tonnes at 0.90% copper, 0.85% zinc, 0.62 g/t gold and 9.81 g/t silver. This represents a c.30 % increase in resource tonnage and c.5% increase in grade over the previous MRE. As a scale-comparison with the ompany’s Tulu Kapi old roject, Hawiah’s recoverable metal is now estimated to be in the order of 2.2 million gold-equivalent ounces versus Tulu Kapi’s 1.2 million ounces. Two Exploration Licences located immediately west of the Hawiah EL were granted in December 202- Al Godeyer and Al Godeyer East - located 12km south-west of the Hawiah discovery. The granting of these licenses is a significant step in the plans for the development of the wider Hawiah project area. The proximity and shared mineralisation style signal an opportunity to potentially enhance the entire Hawiah project. In December 2021 the Company announced that its Hawiah Copper- old VMS roject (“Hawiah”) is advancing through a reliminary Feasibility Study for potential development having completed 2,000m of drilling across the project during the 2019 -2021 initial exploration phase 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 The Board is cognisant of the potential impacts of COVID-19 on the Group. To date, there has been little impact of COVID-19 on the roup’s operations and, whilst the potential future impacts are unknown, the Board has considered the operational disruption that could be caused by factors such as illness amongst our workforce and potential disruptions to supply chain, factoring in these potential impacts and reasonable mitigating actions to forecasts and sensitivity scenarios in the preparation of these financial statements. Also, 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, 2021. 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 9 to 13). Progress Report The Group considers that the effect of the covid-19 pandemic, which we continue to monitor, has lessened its impact on our activities. The ompany’s primary projects in thiopia and Saudi Arabia continue to move forward, However, in thiopia, progress was less than anticipated during 2021 because of social unrest in the country throughout most of the year. The security situation has recently improved. The thiopian Ministry of Mines (the “Ministry”) has allowed until 8 August 2022 for full Project financing and launch commitments to be achieved. The Ministry has been advised that for this to be achieved site access and security will need to be at a sta ndard satisfactory to TKGM, its lenders and its investors. External independent security assessment of the Project site, district, and transport routes are now a standard operating procedure for TKGM and while conditions are improving there is no guarantee that the requisite level of security will be achieved by the Ministry’s date. In Saudi Arabia, the legislative framework has improved and the planned activity for the year has progressed well. ontrol over cash management is continuous and includes the periodic review of the roup’s cash flow needs through cash flow projections, appraisal of technical reports monitoring the marketplace, and the roup’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). During the period under review, the Company raised additional equity funds to finance activities and strengthen the balance sheet in readiness for planned project development in 2022 Progress over the last year and plans for next against our strategic objectives are noted below: KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 37 Group Strategic Report (continued) For the year ended 31 December 2021 Strategy Objective Progress in 2021 Focus in 2022 Define additional reserves and resources in Saudi Arabia and Ethiopia Planning for underground mining at TKGM given sustained increase in gold prices remains a priority. The underground mine is expected to come on stream the commencement of the Tulu Kapi project open pit operations. in year 3 after In January 2022, KEFI announced an updated Mineral Resource Estimate for the Hawiah VMS deposit in Saudi of 24.9 million tonnes at 0.90 % copper. 0.85% zinc, 0.62% g/t gold and 9.81 g/t silver. This represents a c. 30% increase in resource tonnage from that previously reported and a 5% increase in grade. The addition of two new licenses in Saudi during the year – Al Godeyer and Al Godeyer East - some 12 km to the east of Hawiah and part of the same geological setting show promise. In addition, the company has reactivated its Jibal Qutman Project pending positive clarification of an outstanding licensing issue. Regional Exploration Projects. In Ethiopia, exploration areas are highly prospective and the Company is negotiating exploration license areas parallel to the Tulu Kapi trend. The objective is to identify some 300,000 to 500,000 oz of oxide material grading 1.5g/t or better that could be supplement tie planned plant at Tulu Kapi or be developed as separate heap leach operations. to upgrade at Hawiah In Saudi Arabia the plan is to conduct infill drilling the copper/gold/zinc/silver resource and to identify near-surface mineralisation at al Godeyer for inclusion in the early stages of a mine plan. The aim will be to provide an upgraded resource and a preliminary feasibility study by the end of 2022. Secure funding for each suitable project the Company has reaffirmed In Ethiopia sources of development capital at the subsidiary level thus providing an opportunity to increase the beneficial ownership in the Project for KEFI. In Ethiopia, approval and execution of detailed finance documentation is expected by Q3-22; receipt of Project equity/subordinated debt subscriptions is anticipated to follow in Q4-22). (senior debt drawdown In Saudi Arabia, it intended to use the SIDF facility when appropriate and lines of communication in this regard remain active. Senior project finance lenders for Tulu Kapi - East African Trade and Development Bank Ltd and African Finance Corporation Limited are completing their work in the run up to providing a potential $140 million in project financing to the Tulu Kapi project. AB apital, who became K FI’s largest single shareholder in 2021 remain as such, holding approximately 7%. the Saudi Industrial In Saudi Arabia, evelopment Fund (‘SI F’) have advised that it would provide loans for up to 75% of mining project costs, including for resource delineation. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 38 Group Strategic Report (continued) For the year ended 31 December 2021 Strategy Objective Progress in 2021 Focus in 2022 Develop profitable metals production In Ethiopia, major delays were encountered during the year because of civil war in the North of Ethiopia and a declaration of a state of emergency. The situation has improved significantly over the first quarter of 2022 with the end of the civil war and the lifting of the national state of emergency in February 2022. Nonetheless, project work continued during 2021 with the refinement of project planning and engineering work in readiness for project start- up in mid-2022. Maintain strong Environmental, Social and Governance standards and practices Board and Management strengthened in readiness for project implementation. During 2021 Mr. Theron Brand has been appointed as Managing Direct of TKGM and Mr. E. Solbrandt has been appointed as Chief Operating Officer. Particular emphasis has been placed on the ongoing situation in Ethiopia which, as noted in the section above has experienced a number of challenges through the year as a result of civil unrest. Ethiopia: Following the abatement of thiopia’s civil war and the State of Emergency being lifted, the Company has worked with the Ethiopian Ministry of Mines to monitor the situation that it is, and remains, appropriate to recommence activities at the Tulu Kapi site and the wider district. TKGM plans the refurbishment of the existing site camp. Field programmes will for community consultations with regular independent security monitoring, final pricing with contractors and signing of binding documents mid-year. to recommence re-start Once all funding is in place, commence the full construction and development of the project. Saudi: The focus at Hawiah is on providing data for the Hawiah Preliminary Feasibility study and includes a drilling program aimed at upgrading some of the resource to an ‘Indicated’ category, further metallurgical test work and other additional drilling. On-going compliance with relevant social, other employment environmental, legislation along with relevant international standards. and KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 39 Group Strategic Report (continued) For the year ended 31 December 2021 Results The focus during the year has been preparing the way for funding and development of the Tulu Kapi old roject in thiopia (“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 had not yet met the criteria for capitalization. These criteria include, among other things, the completion of feasibility studies to provide confidence that mineral deposits identified are ready for development, Cash Flow Group net cash in the 12 months to 31 December 2021 decreased by £0.9 million. During the year the company received net cash placements from the Dec 2020 and Dec 2021 placement of £0.8 million and a bridging loan of £2.7 million. The total net cash from financing was £3.5 million. The cash outflow during the period was £4.5 million of which £1.5 million was used in operating activities and a further £3 million used on exploration and evaluation capital. Balance sheet The roup’s Non-current assets of £28 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 £3.9 million, essentially as a result of capital expenditure incurred during the year. The £3.9 million costs capital expenditure is directly associated with the TKGM gold exploration project costs and capitalized as intangible exploration and evaluation costs. Such exploration and evaluation expenditure include directly attributable internal costs incurred in Ethiopia and services rendered by external consultants to ensure technical feasibility and commercial viability of the TKGM project. The Group had total liabilities of £6.8 million (2020: £3 million), of which £3.6 million related to amounts owed to staff and shareholders. After the 31 December 2021 after receiving authority from shareholders at the General Meeting held in January 2022 the company issued ordinary shares in settlement of outstanding debt of £3.1 million. This strengthened the balance sheet by repaying bridging financing of £1.2 million and settling amounts owed to irectors/ M ’s and staff of £1.9 million by share set off arrangements. In the parent company financial statements, identified a prior period adjustment in relation to the reclassification of part of an intercompany receivable from current to non-current. As per IAS 1, part of the intercompany receivable should have been classified as non-current as it was not expected to be recovered in the next 12 months. Operating Expenses Exploration expenditure Administrative expenses, mainly on project development preparations Investigatory, pre-decisional project finance transaction costs Share based payments Year Ended 31.12.21 £’000 Year Ended 31.12.20 £’000 - (2,190) (84) (810) (25) (2,365) (316) (51) Share of loss from jointly controlled entity and Impairment (1,482) (1,088) Impairment of jointly controlled entity Other Gain from dilution of equity interest in joint venture Foreign exchange loss Interest cost Loss for the year 418 (75) 428 (8) (1,121) (4,924) (585) 124 1,033 (347) (100) (3,720) The results for the year are set out in the consolidated statement of comprehensive income on page 66. The activities for the year have resulted in the roup’s loss before tax of £4.9 million (2020 £3.7 million). No dividends were declared or paid during the year by the Board of Directors. (2020: nil). The loss for the year increased primarily due to the higher interest costs of £1.1 million and the share-based payments on share options issued of £0.81 million. The Group has continued to keep a tight control on its administrative costs. The value of the share of the loss of operations in the joint venture in Saudi Arabia increased to £1.5 million (2020 £1.1 million) 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 are written off in the year advances are made, this resulted in the reversal of the impairment charge in the current year £0.4 million (2020 £ 0.6) million). KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 40 Group Strategic Report (continued) For the year ended 31 December 2021 Results (continued) Funding The Company made placements during the year of £3.4 million for working capital, goods and services, and debt repayments through the issue of 429,375,788,146 new ordinary shares at average price of 0.79 pence as follows: • • • 15,000,000 new Shares from exercising warrants to raise £0.1 million. 89,375,000 new Shares to raise gross cash of approximate £0.715 million. 325,000,788 new Shares to certain project contractors, repay advances and other third parties in settlement of outstanding invoices of approximate raise £2,6 million (before expenses). The details of 2021 placing are as follows: Issued 15 April 2021 (1) 24 Dec 2021 (2) 24 Dec 2021 (1) Gross placement raised before expenses Less Share Issue Costs Placement price (pence) 0.65 0.80 0.80 £’000 98 2,600 715 3,413 (219) 3,194 In cash (1) (2) Settlement of liabilities: Settling in full the cash amount owed of £2.6 million by way of the issue of new ordinary shares in KEFI Gold and Copper Plc Principal risks and uncertainties The roup’s operations are exposed to a variety of risks, many of which are outside of the roup’s control. The roup 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 TK M, which is K FI’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 2021 Page 41 Group Strategic Report (continued) For the year ended 31 December 2021 Principal risks and uncertainties (continued) 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. 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 7 that highlights this particular risk). 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. eview of exploration plan by the Board’s executive 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. This is particularly relevant to Ethiopia in recent times as political and social unrest was evident throughout the reporting year. However, the situation continues to improve in 2022.See further comment in the section below ‘Tulu Kapi gold project’ Permanent management teams in which local staff play significant senior roles are maintained in each of Ethiopia and Saudi Arabia to continuously monitor developments and quickly and efficiently resolve matters as they arise. KEFI enjoys a robust and pro-active relationship with the relevant authorities in both Ethiopia and the Kingdom of Saudi Arabia. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 42 Group Strategic Report (continued) For the year ended 31 December 2021 Principal risks and uncertainties (continued) Risk Description Mitigation Community relations risk Mutual support between the roup’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 roup’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. Involvement and consultation with these groups in a sustainable and long-term manner is therefore central to our strategy and we employ staff locally who are aware of community sensitivities and ensure that consultation is frequent and on-going. Our community development is focused on: 1. 2. 3. 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 roup’s success. Strategic partnerships play a role in delivering growth, project development and funding. They do this by providing not only capital but also strategic local knowledge and experience. Strategic partnerships include joint venture partners, governments and contractors. input with Any joint venture arrangement contains an element of counterparty risk and may not always develop as planned. The Company maintains good working relationships with its partners who were selected for their knowledge and capability in their home country, with frequent meetings and continuous monitoring of performance. In Saudi, we partner with a leading Saudi industrial group and in Ethiopia we partner with the Government of Ethiopia who are a major shareholder in our Ethiopian subsidiary TKGM. 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 roup’s principal interest is in gold. taking Although than originally longer anticipated to complete project financing due to civil unrest within Ethiopia during 2021, all parties have reconfirmed their commitment to proceed when appropriate. The Ethiopian Ministry of Mines (the “Ministry”) has allowed until 8 August 2022 for full project financing and launch commitments to be achieved. The Ministry has been advised that for this to be achieved site access and security will need to be at a standard satisfactory to TKGM, its lenders and its investors. External independent security assessment of the Project site, district, and transport routes are now a standard operating procedure for TKGM and while conditions are improving there is no guarantee that the requisite level of security will be achieved by the Ministry’s date. 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 2021 Page 43 Group Strategic Report (continued) For the year ended 31 December 2021 Principal risks and uncertainties (continued) Risk Financial risks Description Mitigation Foreign currency risk: The roup’s results are sensitive to foreign currency movements and in particular with its exposure to the Ethiopian Birr, arising from the roup’s primary operations being in Ethiopia. During project development foreign exchange exposure will swing towards USD as much of the project development costs are in this currency. The Group maintains most of its cash in Pounds Sterling and monitors relevant currency movements and takes action where needed. . With regard to the project development period and subsequent, project debt will be denominated in USD as will gold sales thus providing a significant natural hedge. its to meet Funding risk: The Group relies primarily upon existing shareholders funding requirements for on-going exploration and pre- development activities which are dependent on the roup’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 ‘ oing oncern’. The Company has assembled a financing consortium for the Tulu Kapi project that reflects a deliberate effort to involve groups with large scale and deep experience in Africa and includes the Ethiopian division of a global industrial company and a leading commodities trader with mining investments in Africa. We maintain continuous and transparent discussions with lenders and finance providers pending completion of conditions precedent matters and final documentation. COVID-19 risk The roup’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 hairman’s and Finance irector’s eports. 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 throughout most of 2021. This has now to a large extent been significantly reduced in most areas. to continue We follow World Health Organization protocols and local government rules and recommendations at all of our projects and corporate offices. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 44 Group Strategic Report (continued) For the year ended 31 December 2021 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 K FI’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 2021 Page 45 Group Strategic Report (continued) For the year ended 31 December 2021 Stakeholder Engagement 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 57 within the Report of Directors. The Company requires further funding to develop both of these projects. 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 has a 30% interest. In both operating joint venture companies, KEFI has the contractual obligation to nominate the CEO and to propose to the Board all exploration, development and operating plans. In Ethiopia KEFI has a majority of Board seats and in Saudi Arabia our partner has the majority of Board seats. 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 56 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. 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 “ elations with Shareholders” section of the Report of the Board of Directors. 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. Workforce The Company workforce summarized below does not include those specialists retained via contractors in our operating sites or internationally nor the teams in 30%-owned Saudi G&M, and comprises Senior Management Contractors Addis Ababa Tulu Kapi Field Operations Other 7 18 24 2 Of senior management, two are permanently based at the roup’s head office in Nicosia and the others base themselves at the roup’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. Mutual support between KEFI and TK M’s operations and the communities around them is KEFI has. KEFI maintains an open dialogue with respective local government bodies and with KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 46 Stakeholder Group Importance of Engagement How did Board and/or Management Engage 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 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. 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. community leaders regarding the development of each of our projects. As an example of K FI’s engagement with the wider community in which it operates KEFI has taken the following initiatives in and commitments in Ethiopia: 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 9. 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. Suppliers KEFI needs a wide range of services to maintain its business activities. uring 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 of 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. 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 lenders throughout the year, in particular in relation to the Tulu Kapi project and has established a strong and continuing relationship 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. Management has 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 Gold and Copper PLC ANNUAL REPORT 2021 Page 47 Stakeholder Group Importance of Engagement How did Board and/or Management Engage 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 an operating entity with respect to relevant governmental requirements. 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. 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 outco me 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 with bank lenders who are actively working in Ethiopia, are familiar with the local market and many of our local stakeholders and are compatible with the Project consortium. Further details are available in the Finance irector’s eview on page 6. 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, K FI has worked to minimise Tulu Kapi’s development funding requirements through engineering, contracting and project finance, 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 December 2021 and January 2022 the Board raised a combined additional £6.4 million equity to provide further working capital, funds for Tulu Kapi and Saudi and settle outstanding debt. On the finalisation of these placements, the Company discharged its significant material liabilities via set off agreements of approximately £5.7 million. 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-term 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 2021: • • The ongoing evaluation of existing license areas and the assessment of projects resulting in decisions throughout the period prioritizing this activity. Pushing ahead with Tulu Kapi development plans to the extent possible in order to be able to trigger development quickly once conditions allowed • Dilution of interest in the Saudi joint venture from 34% to 30% but now planning to retain this level of ownership going • forward by committing additional shareholder funds when needed in this KEFI operated joint venture. Increased effort in Saudi Arabia following very encouraging results at the Hawiah license and the awarding of two additional licenses in the area by Saudi authorities. 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 1 June 2022 Cargil Management Services Limited 27/28 Eastcastle Street London, UK Company Secretary KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 48 Report of the Board of Directors For the year ended 31 December 2021 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 xecutive hairman’s report on pages 4 to 5 and the finance directors report on the pages 6 to 7. 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 Board of Directors - Current • • • Strategic Approach, Business Model, Principal Risks and Uncertainties Future Developments The members of the Board of Directors of the Company as at 31 December 2021 and at the date of this report are shown on pages 14 to 15. 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 comprised of six Directors during the year and full details of Resumes of the KEFI Directors are available on pages 14 to 15. On the 31 December 2021 the number of Directors reduced to five after Mr. Adam Taylor, resigned as a non-executive director of the Company. Directors’ indemnities The roup maintains directors’ and officers’ liability insurance providing appropriate cover for any legal action brought aga inst its Directors. Remuneration report This remuneration report for the year ended 31 December 2021 outlines the remuneration arrangements of the Company and the roup. The remuneration report details the remuneration arrangements for key management personnel (“KM ”) 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 irectors, Senior xecutives and fficers are entitled to receive options under the ompany’s mployee Share ption Scheme. While the roup’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 2021 Page 49 Report of the Board of Directors (continued) For the year ended 31 December 2021 Remuneration report- continued Remuneration philosophy The objective of the ompany’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 ompany’s limited financial resources. Fees and payments to the ompany’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 ompany’s xecutive and Non- xecutive irectors, Senior xecutives and fficers are entitled to receive options under the ompany’s mployee Share ption 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 irectors of the highest calibre, whilst incurring a cost which is appropriate at this stage of the ompany’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. 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 Harry Adams John Leach 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 2022 (this date was extended from 2021 due to force majeure conditions in Ethiopia). Additionally, Tranche 1 will only be paid when the closing mid-price of the ompany’s shares is above 3.0p for five consecutive trading days Tranche 2: Completion of the Project within the Project budget approved by the senior lenders. Additionally, Tranche 2 will only be paid when the closing mid-price of the ompany’s shares is above 4.0p for five consecutive trading days. Tranche 3: Upon the sale and physical delivery of 35,000 ounces of gold equivalent. Additionally, Tranche 3 will only be paid when the closing mid-price of the ompany’s shares is above 5.0p for five consecutive trading days $0.5Million $0.5Million $0.5Million $0.5Million - - KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 50 Report of the Board of Directors (continued) For the year ended 31 December 2021 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 12 Months Medical; Air tickets home; Share Options. Life insurance and accident insurance premiums paid. General Manager Ethiopia Consulting Services Roll forward arrangement 12 Months Medical/Air tickets home. In country accommodation; Share Options. Chief Operating Officer Directors’ interests Consulting Services Roll forward arrangement 12 Months Medical; Share Options. 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 Shares 54,731,312 31,025,743 2,295,486 5,125,000 7,250,000 % 1.4% 0.8% 0.1% 0.1% 0.2% Shareholder Warrants¹ 11,250,000 6,250,000 - 1,562,500 3,125,000 ¹On 13 January 2022, one Warrant with an exercise price of £0.016 was issued for every two Placing Shares issued in the Placing. The Warrants become exercisable if, during a two- year period following the date of Second Admission, the Warrant Trigger Event occurs. If the Warrant Trigger Event occurs, then (i) the holders of the Warrants must exercise the Warrants within 30 days from the occurrence of the Warrant Trigger Event; and (ii) the Warrants will expire following the end of the 30 day period referenced above if not exercised. If the Warrant Trigger Event has not occurred within two years following the date of Second Admission, then the Warrants shall lapse and will no longer be capable of being exercised. Options 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 1,200,000 1,200,000 3,442,184 674,083 - 882,353 943,412 314,471 2,735,688 - 2,735,688 - 2,735,688 - - 1,200,000 - - - - - - - - - - - 314,471 43,351,574 10,260,075 2,735,688 2,735,688 2,735,688 1,514,471 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 51 Report of the Board of Directors (continued) For the year ended 31 December 2021 Options (continued) Options issued 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 2021 is set out below: 31 December 2021 Salary and fees Other compensation³ Bonus Paid in Shares Share based benefit incentive options² 2021 Total Executive £’000 £’000 £’000 £’000 £’000 H. Anagnostaras-Adams J. Leach Non-Executive N. Ling4 M Tyler R Robinson A Taylor¹ 31 December 2020 225 169 27 25 25 25 496 21 18 - - - - 39 - - - - - - - 286 58 3 20 20 20 407 Salary and fees Other compensation³ Bonus Paid in Shares Share based benefit incentive options² 532 245 30 45 45 45 942 2020 Total Executive £’000 £’000 £’000 £’000 £’000 H. Anagnostaras-Adams J. Leach Non-Executive N. Ling4 M Tyler R Robinson A Taylor¹ 225 169 28 28 26 13 489 33 25 - - - - 58 73 33 - - - - 106 6 5 3 - - - 14 337 232 31 28 26 13 667 1Appointments and Retirement as Director: Mr. Adam Taylor was appointed in July 2020 as Non-Executive Director and resigned on the 31 December 2021, 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 2021 Page 52 Report of the Board of Directors (continued) For the year ended 31 December 2021 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 13 and the ompany’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 approvin g 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 Grou p 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 irectors’ knowledge is kept up to date on key issues and developments pertaining to financial and governance matters, its operational environment and to the irectors’ 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 ompany’s compliance to the ule 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 three Non-Executive Directors. The Non-Executive Directors, Richard Robinson, Norman Ling and Mark Tyler 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. 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 relatio ns consultants in order to ensure that the Board develops an understanding of the views of shareholders about the Company. Board meetings The Board meets regularly throughout the year. The Board is responsible for formulating, reviewing and approving the Company's strategy, financial activities and operating performance. Day to day management is devolved to the Executive Directors who are charged with consulting the Board on all significant financial and operational matters. All Directors have access to the advice of the ompany’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 2021 Page 53 Report of the Board of Directors (continued) For the year ended 31 December 2021 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 ompany’s xternal Auditors. The Finance irector 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), Norman Ling and Richard Robinson. irectors’ 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 irectors’ 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 7 7 7 7 7 7 7 7 7 7 7 7 Held Attended 3 3 3 3 3 3 Remuneration Committee Held Attended N. Ling M. Tyler R. Robinson A. Taylor¹ ¹Mr. Adam Taylor resigned on 31 December 2021 as Non-Executive Director. ² All directors are invited to Audit Committee meetings due to the small size of the company. 1 1 1 1 1 1 1 1 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 54 Report of the Board of Directors (continued) For the year ended 31 December 2021 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 2021 the process was facilitated internally by the Board. In order to prepare for the mine build and operational phases of the ompany’s development, the Board has implemented a number of management and Board changes during the year including the appointment Mr. Theron Brand as Managing Director of TKGM and Mr. Eddy Solbrandt as Group Operations Director. 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 79 of the financial statements. Securities trading The irectors comply with ules 21 and 31 of the AIM ules relating to irectors’ dealings and will take all reasonable steps to ensure compliance by the roup’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 ompany’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 (“ xco”) to whom local country management reports. The Board of KEFI also adheres to K FI’s orporate overnance 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 ompany’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 2021 Page 55 Report of the Board of Directors (continued) For the year ended 31 December 2021 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 roup’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 (“A M”). 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 b e 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 irectors receive regular and timely information on the roup’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. Skills and knowledge h ave 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 t he ompany’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 roup’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 websit e. 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 integr ity 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 activit ies, 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 di rect 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 ompany’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 ompany’s website. ver the last five years all resolutions put to a vote at A Ms 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 2021 Page 56 Report of the Board of Directors (continued) For the year ended 31 December 2021 Shareholders holding more than 3% of share capital The Shareholders holding more than 3% of the share capital of the Company as at 19 May 2022 and as far as the irectors’ are aware: Name Percentage Hargreaves Lansdown (Nominees) Limited Interactive Investor Services Nominees Limited Pershing Nominees Limited Jim Nominees Limited Vidacos Nominees Limited Hsdl Nominees Limited Barclays Direct Investing Nominees Limited Winchcombe Ventures Limited Lawshare Nominees Limited 18.0% 11.5% 10.5% 8.3% 5.3% 5.2% 4.5% 3.8% 3.5% Number 708,268,799 452,465,400 411,882,495 326,504,217 209,039,254 206,130,331 177,463,239 149,823,430 136,634,403 Going concern The irectors note that the assessment of the roup’s ability to continue as a going concern involves judgement regarding fut ure 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 73 for further information and disclosure of the uncertainty. Events after the reporting date Share Placement January 2022 Following the General Meeting on 13 January 2022 the Company admitted 371,817,944 new ordinary shares of the Company at a placing price of 0.8 pence per Ordinary Share. The total shares issued during January 2022 for services and obligations was as follows: Name For services rendered and obligations settled H Anagnostaras-Adams J Leach 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 2022 Number of Remuneration and Settlement Shares 000 22,500 12,500 3,125 6,250 173,530 - 217,905 - 153,913 371,818 Amount £’000 180 100 25 50 1,510 - 1,865 - 1,235 3,100 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 57 Report of the Board of Directors (continued) For the year ended 31 December 2021 Events after the reporting date (continued) In January 2022 393,096,865 warrants were issued that grant the right to be issued one Ordinary Share for an exercise price of 1.6 pence, exercisable following a Warrant Trigger Event provided that such Warrant Trigger Event occurs during a two-year period following the January 2022 issue date. A “Warrant Trigger vent” occurs when the share price of the Company closes at a price equal to or greater than 2.4 pence (being a 50% premium on the Warrant exercise price) for five consecutive days. If the Warrant Trigger Event occurs then the holders of the Warrants must exercise the Warrants within 30 days from the occurrence of the Warrant Trigger Event; after which any unexercised warrants will expire. Share Placement April and May 2022 In April 2022 the Company raised £4.4 million through the issue of 550,000,000 new Ordinary Shares at a placing price of 0.8 pence per Ordinary Share. In May 2022 after receiving shareholder approval at a General Meeting of the Company raised a further £3.6 million through the issue of 450,000,000 Ordinary Shares at the Placing Price of 0.8 pence per Ordinary Share. The Company granted one warrant per two Placing Shares at an exercise price of 1.6 pence exercisable for a period of two years from the May 2022 admission. The 500,000,000 warrants become exercisable on the same Warrant Trigger Event disclosed in the January 2022 note above. Nominated advisor The ompany’s nominated advisor is S Angel orporate Finance . 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 ompany’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 ompany’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 1 June 2022 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 58 Statement of irectors’ 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 irectors are responsible for keeping adequate accounting records that are sufficient to show and explain the ompany’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 ea ch of the Directors are aware, there is no relevant audit information of which the roup’s auditor is unaware; having taken all the steps the irectors ought to have taken to make themselves aware of any relevant audit information and to establish that the roup’s au ditor is aware of that information. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 59 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 roup’s and of the arent ompany’s affairs as at 31 December 2021 and of the roup’s loss for the year then ended; the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards 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 old and opper lc (the ‘ arent ompany’) and its subsidiaries (the ‘ roup’) for the year ended 31 December 2021 which comprise the consolidated statement of comprehensive income, the statements of financial position, the consolidated statement of changes in equity, the company statement of changes in equity and the consolidated statement of cash flow, the company statement 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 UK adopted international accounting standards 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 F ’s thical 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 ompany and the roup’s forecasts indicate that they will require additional funding in Q3 of 2022 to meet working capital needs and other obligations and that while there is potential access to short term funding from shareholders and other alternatives on offer it is currently not committed. These conditions, along with other matters set out in note 2, indicate the existence of a material uncertainty which may cast significant doubt over the arent ompany’s and the roup’s ability to continue as a going concern. ur opinion is not modified in respect of this matter. In auditing the financial statements, we have concluded that the irectors’ 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 o f 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: • We obtained the irectors’ 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 roup’s previous successful fundraisings and strategic financing. We reviewed agreements and term sheets from potential investors in connection with the planned project financing, and documentation from the potential sources for financing planned for September 2022. • We have agreed any projected fund raises to term sheets and any funds raised since year end to bank, we ensured these were reflected in the cash flow forecast. • We reviewed the adequacy and completeness of the disclosures in the financial statements in the context of our understanding of the Group's operations and plans, and the requirements of the financial reporting framework. • We reviewed correspondence with the thiopian Ministry of Mines and the opinion of Kefi’s legal advisors, in order to assess the mining licence validity. • 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 roup’s workforce, supply chain that are relevant to the roup’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. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 60 Independent auditor’s report to the members of KEFI Gold and Copper Plc Overview Coverage1 Key audit matters Materiality 99% (2020: 98%) of Group loss before tax 100% (2020: 100%) of Group total assets Carrying value of exploration assets Going concern Group financial statements as a whole 2021 2020     £430k (2020: £400k) based on 1.5% (2020: 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 roup’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 providing funding to the subsidiaries in Ethiopia as well as one joint venture company in Saudi Arabia. In addition to the Parent Company, 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, which were considered to be not significant components. 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 subsidiaries were 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. Our involvement with component auditors For the work performed by component auditors, 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 component auditors included the following: • • • 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 roup audit team reviewed the component auditor’s work papers remotely, and engaged with the component auditor by video calls and emails during their planning, fieldwork and completion phases. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 61 Independent auditor’s report to the members of KEFI Gold and Copper Plc 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 fin ancial 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 described in the Material uncertainty related to going concern section of our report, we determined the following matter to be a 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 the requirements set out in IF S 6: ‘ xploration for and valuation of Mineral esources’ (“IF S 6”). in accordance with The Directors are required to assess whether there are potential indicators of impairment for the Tulu Kapi exploration asset and whether an impairment test was required to be performed. No indicators of impairment to the asset were identified, and disclosure to this effect has been included in the financial statements. There are a number of estimates and judgements used by management in assessing the exploration and evaluation assets for indicators of impairment under IFRS 6. These estimates and judgements are set out in Note 4 of the financial statements and the subjectivity of these estimates along with the material carrying value of the assets make this a key audit area. 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 and reviewed the irectors’ 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 have reviewed correspondence with the Ethiopian Ministry of Mines for any conditions regarding the validity of the licence. We made specific inquires of the Directors 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. Based on our knowledge of the Group, we considered whether there were any other indicators of impairment not identified by the Directors. 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 the irectors’ assessment and indicators of impairment review included in the financial statements to be appropriate. the disclosures of the 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. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 62 Independent auditor’s report to the members of KEFI Gold and Copper Plc 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 2021 £k 430 2020 £k 400 2021 £k 330 1.5% total assets 2020 £k 230 We consider total assets to be the financial metric of the most interest to shareholders and other users of the financial statements given the roup and arent ompany’s status as a mining exploration company and therefore consider this to be an appropriate basis for materiality. 320 300 247 172 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. Materiality Basis materiality for determining Rationale benchmark applied for the Performance materiality Basis performance materiality for determining Component materiality We set materiality for each significant component of the Group based on 1.5% total assets (2020: 1.5%), based on the size and our assessment of the risk of material misstatement of that component. Component materiality was set at £280k (2020: £230k). In the audit of each component, we further applied performance materiality levels of 75% (2020: 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 £21k (2020: £20k). 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 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 conc lusion 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. 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. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 63 Independent auditor’s report to the members of KEFI Gold and Copper Plc Strategic and report report Directors’ In our opinion, based on the work undertaken in the course of the audit: • • the information given in the Strategic report and the irectors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the Strategic report and the irectors’ 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 irectors’ 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 irectors’ 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 irectors’ esponsibilities, the irectors 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 roup’s and the arent ompany’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. easonable 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. Extent to which the audit was capable of detecting irregularities, including fraud 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 (UK adopted international accounting standards, the Companies Act 2006. AIM rules and the QCA Corporate Governance Code), and terms and requirements included in the roup’s exploration and evaluation licenses. Our procedures included: • We understood how the Company is complying with those legal and regulatory frameworks by making enquiries to the Directors, and those responsible for legal and compliance procedures. We corroborated our enquiries through our review of board minutes and other supporting documentation. • 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. • irecting 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 Directors to form our own opinion on the extent of Group wide compliance • Reviewing minutes from board meetings of those charges with governance to identify any instances of non-compliance with laws and regulations We have considered the potential for material misstatement in the financial statements, including misstatement arising from f raud and considered that the areas in which fraud might occur were management override and missapropriation of cash. Our procedures to respond to these risks included: KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 64 Independent auditor’s report to the members of KEFI Gold and Copper Plc • We made enquiries of Management and the Board into any actual or suspected instances of fraud. • Testing the appropriateness of journal entries made through the year by applying specific criteria to detect possible irregularities and fraud; erforming a detailed review of the roup’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); 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 eporting ouncil’s website at: Use of our report This report is made solely to the arent ompany’s members, as a body, in accordance with hapter 3 of art 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the arent ompany’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 ompany’s members as a body, for our audit work, for this report, or for the opinions we have formed. [Signature] Jack Draycott (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, United Kingdom 1 June 2022 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 65 Consolidated statement of comprehensive income Year ended 31 December 2021 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 (loss)/income Gain on Dilution of Joint Venture Foreign exchange loss 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 8.1 9 31.12.21 31.12.20 £’000 £’000 - - - (25) (2,190) (2,365) (84) (810) (316) (51) (1,482) (1,088) 418 (585) (4,148) (4,430) - (75) 428 (8) (1,121) (16) 140 1,033 (347) (100) (4,924) (3,720) - - (4,924) (3,720) (4,924) (3,720) (4,924) (3,720) Exchange differences on translating foreign operations - - Total comprehensive expense for the year (4,924) (3,720) Total Comprehensive Income to: -Owners of the parent (4,924) (3,720) Basic diluted loss per share (pence) 10 (0.226) (0.224) The notes on pages 72 to 106 are an integral part of these consolidated financial statements. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 66 Statements of financial position Company Number: 05976748 31 December 2021 ASSETS Non-current assets Property, plant and equipment Intangible assets Investment in subsidiaries Investments in jointly controlled entities Receivables from subsidiaries Current assets Financial assets at fair value through OCI Trade and other receivables Cash and cash equivalents The The The Restated The Restated The Group Company Group Company Company Notes 2021 £’000 2021 £’000 2020 £’000 2020 £’000 1 Jan 2020 £’000 11 12 13.1 13.2 15.2 14 15.1 16 63 28,361 - - - 28,424 - 291 394 685 1 - 14,331 - 7,292 21,624 - 24 149 173 35 24,510 - - - 24,545 54 448 1,315 1,817 3 - 3 - 13,680 12,575 - 6,262 19,945 - 338 1,192 1,530 - 5,813 18,391 - 1,154 65 1,219 Total assets 29,109 21,797 26,362 21,475 19,610 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital Deferred Shares Share premium Share options reserve Accumulated losses 17 17 17 18 2,567 23,328 35,884 1,891 2,567 23,328 35,884 1,891 2,138 23,328 33,118 1,273 2,138 23,328 33,118 1,273 1.149 23,328 25,452 1,118 (42,731) (47,310) (37,824) (40,736) (36,265) Attributable to Owners of parent 20,939 16,360 Non-Controlling Interest 19 1,379 - Total equity Current liabilities Trade and other payables Loan and borrowings Total liabilities 22,318 16,360 21 23 5,556 1,235 6,791 4,202 1,235 5,437 Total equity and liabilities 29,109 21,797 22,033 1,204 23,237 19,121 14,782 - - 19,121 14,782 3,125 2,354 3,125 26,362 - 2,354 21,475 3,864 964 4,828 19,610 The notes on pages 72 to 106 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 £6.8 million (2020: £5.1 million) has been included in the financial statements of the parent company. On the 1 June 2022, 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 2021 Page 67 Consolidated statement of changes in equity Year ended 31 December 2021 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 At 1 January 2020 Loss for the year Total Comprehensive Income Recognition of share-based payments Expired warrants Issue of share capital Share issue costs Non-controlling interest At 31 December 2020 1,149 23,328 25,452 1,118 - - - - 989 - - 2,138 - - - - - - - 23,328 - - - - 8,056 - - 53 (665) 767 (390) - 33,118 - - 1,273 - - - - - - - - (34,640) 16,407 (3,720) (3,720) (3,720) (3,720) - 665 53 - - 9,812 £’000 1,075 - - - - - £’000 17,482 (3,720) (3,720) 53 - 9,812 - (129) - (37,824) (390) (129) 22,033 - 129 (390) - 1,204 23,237 Loss for the year Other comprehensive income Total Comprehensive Income Recognition of share-based payments Expired warrants Issue of share capital and warrants Share issue costs Non-controlling interest - - - - - 429 - - - - - - - - - - - - - - - 2,985 (219) - - - - 810 (192) - - - - - - - - - - - (4,924) - (4,924) - 192 - - (175) (4,924) - (4,924) 810 - 3,414 (219) (175) - - - - - - - 175 (4,924) - (4,924) 810 - 3,414 (219) - At 31 December 2021 2,567 23,328 35,884 1,891 - (42,731) 20,939 1,379 22,318 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 72 to 106 are an integral part of these consolidated financial statements. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 68 Company statement of changes in equity Year ended 31 December 2021 At 1 January 2020 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 2020 Loss for the year Recognition of share-based payments Forfeited options Expired warrants Issue of share capital and warrants Share issue costs At 31 December 2021 Share capital Deferred shares Share premium Share options reserve Accumulated losses Total £’000 £’000 £’000 £’000 £’000 £’000 1,149 - 23,328 - 25,452 - 1,118 - (36,265) (5,136) 14,782 (5,136) - - - - 989 - 2,138 - - - - 429 - - - - - - - 23,328 - - - - - - 2,567 23,328 - - - - 8,056 (390) 33,118 - - - - 2,985 (219) 35,884 - 53 - (665) 767 - 1,273 - 810 - (192) - - - - - 53 - 665 - - - 9,812 - (40,736) (390) 19,121 (6,766) (6,766) - 810 - 192 - - - 3,414 - (219) 1,891 (47,310) 16,360 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 72 to 106 are an integral part of these consolidated financial statements. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 69 Consolidated statement of cash flows Year ended 31 December 2021 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 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 Proceeds from sale of financial assets at fair value through OCI 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 bridge loans Repayment of convertible notes and bridge loans Net cash from financing activities Notes Year Ended 31.12.21 £’000 Year Ended 31.12.20 £’000 11 18 18 14 20.1 20 20 8.1 12 11 14 13.2 17 17 23.1.2 23.1.2 (4,924) 17 - 810 - (428) 1,482 (418) 159 1,121 (2,181) (75) 806 (1,450) - (1,450) (2,508) (46) 54 (510) (3,010) 1,045 (219) 2,713 - 3,539 (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 Net increase/(decrease) in cash and cash equivalents (921) 1,165 Cash and cash equivalents: At beginning of the year At end of the year 16 16 1,315 394 150 1,315 Cash and cash equivalents in the Consolidated Statement of Financial Position includes restricted cash of £20,000 (2020: £20,000). The notes on pages 72 to 106 are an integral part of these consolidated financial statements. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 70 Company statement of cash flows Year ended 31 December 2021 CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Depreciation of property plant equipment Share based payments Issue of options Gain on Dilution of Joint Venture Share of loss from jointly controlled entity Impairment on 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 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 31.12.21 £’000 31.12.20 £’000 (6,763) (5,136) 18 18 20.1 20 20 13.1 13.2 15 17 17 23.1.2 23.1.2 2 - 810 (428) 1,482 (418) 1,767 43 1,121 (2,384) 82 1,562 (740) - (740) 2 624 51 (1,033) 1,088 585 1,845 18 100 (1,856) (91) (174) (2,121) - (2,121) - (2) (651) (1,104) (510) (1,320) (2,684) (2,069) (3,845) (4,495) 1,045 (219) 2,713 - 3,539 7,331 (335) 750 - 7,746 (1,046) 1,130 16 16 1,195 149 65 1,195 Cash and cash equivalents in the Company Statement of Financial Position includes restricted cash of £20,000 (2020: £20,000). The notes on pages 72 to 106 are an integral part of these consolidated financial statements. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 71 Notes to the consolidated financial statements Year ended 31 December 2021 1. Incorporation and principal activities Country of incorporation KEFI Gold and Copper PLC (the “ ompany”) was incorporated in United Kingdom as a public limited company on 24 ctober 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 polici es have been consistently applied throughout both periods presented in these financial statements unless otherwise stated. Basis of preparation and consolidation The Company and the consolidated financial statements have been prepared in accordance with UK adopted international accounting standardsin 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 2021. 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. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 72 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 2. Accounting policies (continued) Going concern The assessment of the roup’s ability to continue as a going concern involves judgment regarding future funding available for the development of the Tulu Kapi Gold project, advancement of the Saudi Arabia exploration properties and for working capital requirements. As part of this assessment, 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 its suitability in the context of the roup’s long term strategic objectives. The roup also recognises that within the going concern consideration period it will require funding for its share of the construction development costs of the Tulu Kapi mine (Further details on project financing plan are summarised on page 6 of the Finance irector’s eport). TKGM reactivated Tulu Kapi project launch preparations in early 2022 and funding requirements and project timing could be impacted by security concerns in thiopia. thiopia’s Ministry of Mines has been formally advised that the overall project progress is on schedule and will remain so subject to a satisfactory ongoing security situation. The Tulu Kapi project financing syndicate’s arrangements are being formalised and definitive agreements are in preparation. Subject to these agreements and remaining regulatory and administrative tasks being completed promptly, full construction can proceed from as early as October 2022, being the end of the current wet season. Early preparatory works have commenced, including the regulatory and administrative tasks include items such as government and central bank approval, endorsement of historical costs, working rules for the London clearing account to avoid restrictions of capital controls and clearance for both banks to lend on same terms. However, such tasks and approvals are not yet finalised. At the date of approval of these accounts, the Group has a cash balance of £2.5 million with no debt and all creditors under normal trading terms. The forecasts show that absent the reduction of planned expenditure, the Group will require additional funding in Q3 2022 to meet working capital needs and other obligations. Should this precede financial close (ie full funding) of the Tulu Kapi Gold Project, the Company has potential access to short term funding from shareholders and other alternatives on offer, but currently not committed, as has been the case in the past. Accordingly, and as set out above, this indicates the existence of a material uncertainty which may cast significant doubt over the roup and ompany’s ability to continue as a going concern and, therefore, it may be unable to realise its assets and discha rge its liabilities in the normal course of business. Based on historical experience and current ongoing proactive discussions with stakeholders, the Board has a reasonable expectation that definitive binding agreements will be signed. Accordingly, the Boa rd has a reasonable expectation that the Group will be able to continue to raise funds to meet its objectives and obligations. The financial statements therefore do not include the adjustments that would result if the Group was unable to continue as a going concern. Presentational changes and prior period adjustment Identified a prior period adjustment in relation to the reclassification of part of an intercompany receivable from current to non-current. As per IAS 1, part of the intercompany receivable should have been classified as non-current as it was not expected to be recovered in the next 12 months. This will have an impact on the total non-current assets and current assets figure on the company accounts but has no impact on the group statement of financial position. In addition, this adjustment has no impact on overall net assets or profit of the Company and the Group. The impact on the ompany’s financial position as at 1 January 2020 and 31 December 2020 is as follows Company Statement of Financial Position. Adjustment to recognise reclassification of intercompany receivable Impact of Adjustment on Company Non- Current Assets and Current Assets Company Non-current assets Receivables from subsidiaries Company Current assets Trade and other receivables Company Non-current assets- Receivables from subsidiaries Company Current assets Trade and other receivables 31.12.2020 £’000 - 6,600 01.01.2020 - 6,967 KEFI Gold and Copper PLC ANNUAL REPORT 2021 £’000 6,262 (6,262) 5,813 (5,813) Restated 31.12.2020 £’000 6,262 338 01.01.2020 5,813 1,154 Page 73 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 2. Accounting policies (continued) 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 ompany are in British ounds (“ B ”) which is the functional currency of the ompany and the presentation currency for the consolidated financial statements. Functional currency is also determined for each of the ompany’s subsidiaries, and items included in the financial statements of the subsidiary are measured using that functional currency. GBP is the func tional currency of all subsidiaries. (1) Foreign currency translation Foreign currency transactions are translated into the presentational currency using the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss in the statement of comprehensive income. 2) Foreign operations n 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 2021 (2020: 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 relev ant 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 2021 Page 74 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 roup has adopted the provisions of IF S 6 “ xploration for and valuation of Mineral esources”. 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 i s 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 viabi lity of developing mineral deposits identified through exploration activities. Evaluation expenditures include the cost of directly attribu table 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 whe re 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 IF S 2 “Share based ayment” 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 2021 Page 75 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 deductin g 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 re cognised 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 set tle the liability simultaneously. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 76 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 tr ansaction 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 ’s. oss 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 su ch hedging instruments. New standards and interpretations applied The IASB has issued new standards, amendments and interpretations to existing with an effective date on or before 1 January 2021, these new standards are not considered to have a material impact on the Group during the Year under review. New standards and interpretations not yet effective Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the roup’s accounting periods beginning on or after 1 January 2022 or in later periods, which the Group has decided not to adopt early. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 77 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 2. Accounting policies (continued) New standards and interpretations applied (continued) Effective period commencing on or after IFRS 3 IAS 16 IAS 37 IAS 16 Amendments to IF S 3 ‘Business ombinations’ 01 January 2022 Amendments to IAS 16: Property, plant and equipment 01 January 2022 Amendments to IAS 37: Provisions, contingent liabilities and contingent assets 01 January 2022 Amendments to IAS 16: Property, plant and equipment — Proceeds before intended use 01 January 2022 Improvements to IF Ss’ Improvements to IFRS 1, IFRS 9, IFRS 16 and IAS 41 01 June 2022 Amendments to IAS 8 ¹ Amendments to IAS 8: Definition of accounting estimates 01 January 2023 Amendments to IAS 1 and IFRS Practice Statement 2 Amendments to IAS 12 Amendments IAS 1 ¹Not yet endorsed. ¹ ¹ ¹ Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of accounting policies 01 January 2023 Amendments to IAS 12: Deferred tax related to assets and liabilities arising from a Single transaction 01 January 2023 Amendments to IAS 1: Classification of liabilities as current or noncurrent 01 January 2023 It is not anticipated that new standards, amendments and interpretations to existing standards which have been published that are mandatory for the roup’s accounting periods beginning on or after 1 January 2022 or in later periods will be significant or relevant to the Group. 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. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 78 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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, prima rily 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 roup’s intangible exploration assets. This in turn is subject to the availability of fina ncing 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 roup’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 roup to fair value interest rate risk. The roup’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 2021 £’000 2020 £’000 394 1,315 An increase of 100 basis points in interest rates at 31 December 2021 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 2021 £’000 4 (1) 2021 £’000 4 (1) 2020 £’000 13 (3) 2020 £’000 13 (3) KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 79 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 Australia n 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 ollar, it is fixed at US /SA 3.75. The roup’s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The carrying amounts of the roup’s foreign currency denominated monetary assets and monetary liabilities at the reporting da te 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 2021 2021 £’000 £’000 67 366 - 2,126 1,256 - - - 12 511 2020 £’000 47 127 7 1,694 630 2020 £’000 3 - - 10 363 Sensitivity analysis continued A 10% strengthening of the British Pound against the following currencies at 31 December 2021 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 2021 £’000 7 37 - 211 74 2021 £’000 7 37 - 211 74 2020 £’000 4 13 1 168 27 2020 £’000 4 13 1 168 (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 2021 Page 80 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 3. Financial risk management (continued) Carrying Amount £’000 5,556 1,235 6,791 3,125 - 3,125 4,201 1,235 5,436 2,354 - 2,354 Contractual Cash flows £’000 Less than 1 year £’000 Between 1-5 year £’000 More than 5 years £’000 5,556 1,235 5,556 1,235 6,791 6,791 3,125 - 3,125 - 3,125 3,125 4,201 1,235 4,201 1,235 5,436 5,436 2,354 - 2,354 - 2,354 2,354 - - - - - - - - - - - - - - - - - - - - - - - - The Group 31-Dec-21 Trade and other payables Loans and Borrowings 31-Dec-20 Trade and other payables Loans and Borrowings The Company 31-Dec-21 Trade and other payables Loans and Borrowings 31-Dec-20 Trade and other payables Loans and Borrowings Capital risk management The roup’s objectives when managing capital are to safeguard the roup’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 £394,000 (2020: £1,315,000) and equity attributable to equity of the parent, comprising issued capital and deferred shares of £25,895,000 (2020: £25,466,000), other reserves of £37,775,000, (2020: £34,391,000) and accumulated losses of £42,731,000 (2020: £37,824,000). 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 2021 Page 81 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 roup’s loans and other borrowings are considered equal to the book value as the effect of discounting on these financial instruments is not considered to be material. As at each of December 31, 2021 and December 31, 2020, the levels in the fair value hierarchy into which the roup’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 2020 2021 £’000 394 - 291 £’000 1,315 54 448 5,556 1,235 3,125 - Fair Values 2020 £’000 1,315 54 448 3,125 - 2021 £’000 394 - 291 5,556 1,235 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 ompany’s and roup’s exploration activities (Note 2). KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 82 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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. apitalized & costs for the roup’s project in thiopia 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 in puts 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, cou ld 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 roup’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. TKGM license developments are reflected in Note 12. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 83 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 5. Operating segments The Group has two operating segments, being that of mineral exploration and corporate. The roup’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 2021 Corporate costs (3,007) (68) Foreign exchange (loss)/gain (1,777) 1,769 Gain on Dilution of Joint Venture - Net Finance costs (1,205) - - - - 428 - 428 (1,482) 418 (636) - (636) - - - - - - - - - - (3,075) (8) 428 (1,205) (3,860) (1,482) 418 (4,924) - (4,924) (5,989) 1,701 - - - - (5,989) 1,701 - - (5,989) 1,701 15,966 3,885 19,200 8,963 - - (6,057) 29,109 (6,057) 6,791 Corporate Ethiopia Saudi Arabia Adjustments Consolidated £’000 £’000 £’000 £’000 £’000 - - 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 17,652 2,361 15,823 7,288 - - (6,524) 26,951 (6,524) 3,125 (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 2020 Corporate costs (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 (2,252) (65) Foreign exchange (loss)/gain (1,577) 1,230 Gain on Dilution of Joint Venture - Net Finance costs (416) - - KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 84 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 6. Expenses by nature Depreciation of property, plant and equipment (Note 11) irectors’ fees and other benefits (Note 22.1) onsultants’ 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 2021 £’000 17 535 238 72 737 125 277 121 68 2,190 1,482 (418) 407 148 255 - 84 4,148 2020 £’000 43 653 343 114 373 162 352 245 80 2,365 1,088 585 14 21 16 - 316 4,405 The roup’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 2021 £’000 1,170 220 (1,325) 65 49 2020 £’000 688 97 (756) 29 44 xcludes irectors’ remuneration and fees which are disclosed in note 22.1. TK project direct staff costs of £1,325,000 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 Total finance costs 8.2 Total other transaction costs Cost for long term project finance Total other transaction costs 2021 £’000 1,121 1,121 84 84 2020 £’000 100 100 316 316 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 2021 Page 85 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 2021 £’000 (4,924) (624) 598 70 (44) - 2020 £’000 (3,720) (477) 336 286 (145) - The Company is resident in Cyprus for tax purposes. A deferred tax asset of £1,409k (2020: £1,601k) 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 2021, the balance of tax losses which is available for offset against future taxable profits amounts to £ 11,269k (2020: £ 12,812k). 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 2017 £’000 2018 £’000 2019 £’000 2020 £’000 2021 £’000 Total £’000 Losses carried forward 1,743 1,730 1,602 3,748 2,446 11,269 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. The re 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 t he 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 dev elopment 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 2021 Page 86 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 31.12.21 £’000 (4,924) (4,924) 2,178,908 2,351,643 Year Ended 31.12.20 £’000 (3,720) (3,720) 1,663,197 1,748,804 (0.226) (0.224) There was no impact on the weighted average number of shares outstanding during 2021 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 2021. 11. Property, plant and equipment The Group Cost At 1 January 2020 Additions At 31 December 2020 Additions At 31 December 2021 Accumulated Depreciation At 1 January 2020 Charge for the year At 31 December 2020 Charge for the year At 31 December 2021 Net Book Value at 31 December 2021 Net Book Value at 31 December 2020 Motor Vehicles Plant and equipment £’000 £’000 Furniture, fixtures and office equipment £’000 71 - 71 - 71 37 34 71 - 71 - - 77 25 102 12 114 72 3 75 7 82 32 27 72 14 86 33 119 72 6 78 10 88 31 8 Total £’000 220 39 259 45 304 181 43 224 17 241 63 35 The above property, plant and equipment is located in Ethiopia. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 87 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 12. Intangible assets The Group Cost At 1 January 2020 Additions At 31 December 2020 Additions At 31 December 2021 Accumulated Amortization and Impairment At 1 January 2020 At 31 December 2020 Impairment Charge for the year At 31 December 2021 Net Book Value at 31 December 2021 Net Book Value at 31 December 2020 Total exploration and project evaluation cost £’000 21,466 3,310 24,776 3,851 28,627 266 266 - 266 28,361 24,510 Costs can only be capitalised after the entity has obtained legal rights to explore in a specific area but before extraction has been demonstrated to be both technically feasible and commercially viable. The additions of £3.9 million is directly associated with the TKGM gold exploration project expenditure and is capitalized as intangible exploration and evaluation cost. Such exploration and evaluation expenditure include directly attributable internal costs incurred in Ethiopia and services rendered by external consultants to ensure technical feasibility and commercial viability of the TKGM project. The Company TKGM mining licence is in good standing to 2035 subject to normal compliance of Ethiopian mining regulations. The thiopian Ministry of Mines (the “Ministry”) has allowed until 8 August 2022 for full Project financing and launch commitments to be achieved. The Ministry has been advised that for this to be achieved site access and security will need to be at a standard satisfactory to TKGM, its lenders and its investors. External independent security assessment of the Project site, district, and transport routes are now a standard operating procedure for TKGM and while conditions are improving there is no guarantee that the requisite level of security will be achieved by the Ministry’s date. . KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 88 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 13. Investments 13.1 Investment in subsidiaries The Company Cost At 1 January Additions Dissolutions At 31 December Year Ended 31.12.21 £’000 Year Ended 31.12.20 £’000 13,680 651 - 14,331 12,575 1,106 (1) 13,680 The Company carrying value of KEFI Minerals Ethiopia which holds the investment in the Tulu Kapi Gold project currently under development is £14,331,000 as at the 31 December 2021. During the year management reviewed the value of its investments in the Company accounts to the project estimated NPV value. The result of the review shows that the NPV value is higher than the cost recorded in the company accounts. As guidance to the shareholder further details are available in the front section of this report in the Finance Director’s Report on page 6 under the Tulu Kapi project section. Subsidiary companies Date of acquisition/ incorporation Country of incorporation Mediterranean Minerals (Bulgaria) EOOD 08/11/2006 oğu Akdeniz Mineralleri Sanayi ve Ticaret imited 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 2020. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 89 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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. oğu Akdeniz Mineralleri Sanayi ve Ticaret imited Şirket (Voluntary Liquidated) 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 ompany owns 100% of Kefi Minerals ( thiopia) imited (“KM ”) During 2020 the company voluntary liquidated its dormant subsidiary oğu Akdeniz Mineralleri Sanayi ve Ticaret imited 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 owned 100% of the share capital of oğu Akdeniz Mineralleri (“ ogu”), a private limited liability Company incorporated in Turkey, engaging in activities for exploration and developing of natural resources KME owns 95% of Tulu Kapi old Mine Share ompany (“TK M”), 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 (“F I”) in TKGM. This entitlement is enshrined in the Ethiopian Mining Law and the Ethiopian Mining Agreement between the Ethiopian Government and KME, as well as the constitution of the project company and is granted at no cost. The 5% FCI refers to the equity interest granted by the company holding the mining license. The Ethiopian Government has also undertaken to invest a further USD$20,000,000 (Ethiopian Birr Equivalent) in associated project infrastructure in return for the issue of additional equity on normal commercial terms ranking pari passu with the shareholding of KME. Such additional equity is not entitled to a free carry. Upon completion of each element of the infrastructure and approval by the Company, related additional equity will be issued. At the date of this report no equity was issued. The Company owns 100% of KEFI Minerals Marketing and Sales Cyprus (“KMMS ”), a Company incorporated in Cyprus. The KMMSC was dormant for the year ended 31 December 2021 and 2020. 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 2021 Page 90 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 Reversal of impairment/(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 31.12.21 £’000 Year Ended 31.12.20 £’000 - 1,224 (160) (1,482) 418 - - 1,224 (160) (1,064) - - 1,896 (223) (1,088) (585) - - 1,896 (245) (1,651) - 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 31.2%-Direct The Company owns 31.2% of G&M. More information is given in note 20.1. During the year the Company diluted its holding in G&M from 34% to 31.2% and this resulted in a gain of £428,000. 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 Repayment On 31 December Year Ended 31.12.21 £’000 Year Ended 31.12.20 £’000 54 - (54) - 70 (16) - 54 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 91 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 15. Trade and other receivables 15.1 Current Trade and other receivables The Group Share Placement1 Other receivables VAT receivable Year Ended 31.12.21 £’000 Year Ended 31.12.20 £’000 - 36 255 291 232 38 178 448 ¹ In December 2020 14,500,000 ordinary shares were issued and funds were received post year end. The Company Share Placement1 Other Debtors Prepayments 15.2 Receivables from subsidiaries The Company 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 31.12.21 £’000 Restated Year Ended 31.12.20 £’000 - 15 9 24 232 88 18 338 Year Ended 31.12.21 £’000 3,166 4,430 (304) 7,292 Restated Year Ended 31.12.20 £’000 3,918 2,605 (261) 6,262 In the current year identified a prior period adjustment in relation to the reclassification of part of an intercompany receivable from current to non-current. As per IAS 1, part of the intercompany receivable should have been classified as non-current as it was not expected to be recovered in the next 12 months (Refer to note 2). Amounts owed by subsidiary companies total £7,819,000 (2020: £8,927,000). A write off of £223,000 (2020: 2,404,000) 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 roup’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 2021 and determined that any expected credit losses would be £304,000 (2020: £261,000) for which a provision has been recorded. The advances to KEFI Minerals (Ethiopia) Limited and TKGM are unsecured, interest free and repayable on demand. Settlement is subject to the parent company’s operating liquidity needs. At the reporting date, no receivables were past their due date. ¹The Company advanced £2,628,000 (2020: £1,993,000) to the subsidiary Tulu Kapi gold Mine Share Company during 2021. The Company had a foreign exchange translation loss of £800,000(2020: Loss £591,000) the current year loss was because of the continued devaluation of the Ethiopian Birr. ²Kefi Minerals (Ethiopia) Limited: during 2021, the Company advanced £56,000 (2020: £76,000) to the subsidiary. The Company had a foreign exchange translation loss of £808,000 (2020: Loss £1,008,000) 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 2021 Page 92 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 16. Cash and cash equivalents The Group Cash at bank and in hand unrestricteds Cash at bank restricted The Company Cash at bank and in hand unrestricted Cash at bank restricted 17. Share capital Authorized Capital Year Ended 31.12.21 £’000 Year Ended 31.12.20 £’000 374 20 394 129 20 149 1,295 20 1,315 1,172 20 1,192 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 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 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 93 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 17. Share capital (continued) At 1 January 2021 Conversion of Warrants to Equity 12 April 2021 Share Equity Placement 21 Dec 2021 Share issue costs Number of shares ’000 2,137,927 15,000 414,378 - Share Capital 2,138 15 414 - Deferred Shares 23,328 - - - Share premium 33,118 83 2,902 (219) Total 58,584 98 3,316 (219) At 31 December 2021 2,567,305 2,567 23,328 35,884 61,779 Deferred Shares 1.6p At 1 January Subdivision of ordinary shares to deferred shares At 31 December Number of Deferred Shares’000 2020 2021 - 680,768 680,768 - 680,768 680,768 £’000 £’000 2021 2020 - 10,892 10.892 - 10,892 10.892 Deferred Shares 0.9p 2021 2020 2021 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). 2021 During the period the Company issued 414,375,788 Shares to shareholders, for an aggregate consideration of £3,315,000. On issue of the shares, an amount of £2,900,630 was credited to the ompany’s share premium reserve which is the difference between the issue price and the nominal value 0.1 pence. The funds raised were issued to repay working capital, goods and services, and debt repayments (note 18.3). Restructuring of share capital into deferred shares n the 28 June 2019 at the A M, shareholders approved that each of the currently issued ordinary shares of 1.7p (“ ld rdinary Shares”) in the capital of the ompany be sub-divided into one new ordinary share of 0.1p (“ xisting rdinary Shares”) and one deferred share of 1.6p (“ eferred Shares”). With effect from 8 July 2019 at 8.00am, each ordinary share in the ompany 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 2021 Page 94 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 18. Share Based payments 18.1 Warrants In note 18 when reference is made to the “ ld rdinary 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 (“ xisting rdinary 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 2021to 31 December 2021, 149,000,000 warrants issued to shareholders expired and 8,461,538 were exercised by Brandon Hill. 2021 During December 2021, the Company asked for shareholder approval to issue 393,096,865 warrants, in connection with the December 2021 and January 2022 Placing Shares. The Placing shares have a right to be issued one Ordinary Share for an exercise price of £0.016 and exercisable following a Warrant Trigger Event provided that such Warrant Trigger Event occurs during a two year period following the 17 January 2022 The Warrants will become exercisable provided that, during a two year period following the January 2022 Admission, the on market share closing price of the Ordinary Shares for five consecutive days reaches or exceeds 2.4 pence (being a 50% premium on the Warrant exercise price) (the "Warrant Trigger Event"). If the Warrant Trigger Event occurs, then (i) the holders of the Warrants may exercise the Warrants within 30 days from the occurrence of the Warrant Trigger Event; and (ii) the Warrants will expire following the end of the 30 day period referenced above if not exercised. If the Warrant Trigger Ev ent has not occurred within two years following the 17 January 2022, then the Warrants shall lapse and will no longer be capable of being exercised During the period 1 January 2021 to 31 December 2021,15,000,000 warrants were cancelled or expired. Details of warrants outstanding as at 31 December 2021: 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 5,000 11,175 45,125 Outstanding warrants at 1 January 2021 - exercised warrants - expired warrants - granted Outstanding warrants at 31 December 2021 Weighted average ex. Price 1.56p 0.65p 2.50p 2.13p 1.87p Number of warrants* 000’s 60,125 (15,000) - - 45,125 The estimated fair values of the warrants were calculated using the Black Scholes option pricing model. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 95 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 18. Share Based payments (continued) The inputs into the model and the results for warrants and options granted during the year are as follows: Closing share price at issue date Exercise price Expected volatility Expected life Risk free rate Expected dividend yield Estimated fair value Warrants 6-Jan- 20 19-May- 20 29-May- 20 20-Nov- 20 1.65p 2.00p 109% 0.4years 0.63% Nil 0.27p 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 Options 17-Mar- 21 2.05p 2.55p 89% 4yrs 0.028% nil 1.21p xpected volatility was estimated based on the historical underlying volatility in the price of the ompany’s shares. During 2021 no warrants were issued to shareholders or suppliers. During 2021 the company asked shareholders to approve the issue of 393,096,865 warrants to shareholders that partook in the December 2021 and January 2022 share placement. The issue of these warrants was approved at the General Meeting held in January 2022. Further details are disclosed in this note. 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 Expired options Closing amount 18.2 Share options reserve Details of share options outstanding as at 31 December 2021: Grant date Expiry date *Exercise price 19-Jan-16 23-Feb-16 05-Aug-16 22-Mar-17 01-Feb-18 17-Mar-21 18-Jan-22 22-Feb-22 05-Aug-22 21-Mar-23 31-Jan-24 16-Mar-25 7.14p 12.58p 10.20p 7.50p 4.50p 2.55p Year Ended 31.12.21 £’000 Year Ended 31.12.20 £’000 1,273 - 148 662 - - - (192) 1,891 1,118 769 21 30 - - (665) - 1,273 *Number of shares 000’s 4,088 176 883 7,024 11,400 104,039 127,610 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 96 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 18. Share Based payments (continued) 18.2 Share options reserve Outstanding options at 1 January 2021 - granted - expired/forfeited Outstanding options at 31 December 2021 Weighted average ex. Price* 7.35p 2.55p 22.44p 3.21p Number of shares* 000’s 25,482 104,039 (1,911) 127,610 The Company has issued share options to directors, employees and advisers to the Group. 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 cap acity for a twelve-month period. On 17 March 2021, 85,813,848 options were issued to persons who discharge director and managerial responsibilities ("PDMRs") and a further 18,225,153 options have been granted to other non-board members of the senior management team. The options have an exercise price of 2.55p, expire after4 years, and vest in three equal instalments, the first after one year, the second after two years and the third after three years from the date of grant. Although the directors approved and announced the issue of 119,747,339 options on the 17 March 2021 to certain directors and senior managers only 104,039,001 options were eventually issued. The option agreements contain provisions adjusting the exercise price in certain circumstances including the allotment of ful ly 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 ompany’s shares. For 2021, the impact of share option-based payments is a net charge to income of £809,000 (2020: £51,000). At 31 December 2021, the equity reserve recognized for share option-based payments, including warrants, amounted to £1,891,000 (2020: £1,273,000). KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 97 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 18. Share Based payments (continued) 18.3 Share Payments for services rendered and obligations settled. 2020 Year 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 ompany 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. 2021 Year On 21 December 2021, the Company announced the placing of 324,900,000 Settlement Shares to settle outstanding debts and liabilities of approximately £2.6 million. Thew shares were issued at a price of £0.008 per Ordinary Share. The total shares set off during 2021 and 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 2021 2020 Number of Remuneration and Settlement Shares Amount 000 £’000 Number of Remuneration and Settlement Shares 000 - - - - - - - - - - - - - - - - - - 324,900 324,900 2,599 2,599 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 2021 Page 98 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 19. Non-Controlling Interest (“NCI”) As at 1 January 2020 Acquisitions of NCI Impact of 5% free carry on additions to assets during the year Result for the year As at 1 January 2021 Acquisitions of NCI Impact of 5% free carry on additions to assets during the year As at 31 December 2021 Year Ended £’000 1,075 - 129 - 1,204 - 175 1,379 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 £1,379,000 (2020: £1,204,000) represents the 5% share of the roup’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 2021: 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 31.12.21 31.12.20 £'000 £'000 28,361 329 244 28,934 27,573 1,361 28,934 - 24,620 184 124 24,928 24,163 765 24,928 - KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 99 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 31.21% 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 SA ’000 Year Ended 31.12.21 100% SA ’000 Year Ended 31.12.20 100% £’000 Year Ended 31.12.21 100% £’000 Year Ended 31.12.20 100% Non-current assets Cash and Cash Equivalents Current assets Total Assets Current liabilities Total Liabilities 2,097 5,798 801 8,696 (2,680) (2,680) 381 11,160 546 12,087 (2,626) (2,626) 411 1,136 157 1,704 74 2,176 106 2,356 (525) (525) (512) (512) Net (Liabilities)/Assets 6,016 9,461 1,179 1,844 Share capital Capital contributions partners Accumulated losses 81,300 37,926 (113,210) 2,500 97,401 (90,440) 15,935 7,433 (22,189) 6,016 9,461 SA ’000 SA ’000 (22,524) (246) - (22,770) (15,785) 14 - (15,771) 1,179 0.1960 £’000 (4,415) (48) - (4,463) 487 18,987 (17,630) 1,844 0.1949 £’000 (3,279) 3 729 (2,547) Exchange rates SAR to GBP Closing rate Income statement Loss from continuing operations Other comprehensive income Translation FX Gain from SAR/GBP Total comprehensive income Included in the amount above Group Group Share 31,21% (33.65%) of loss from continuing operations Joint venture investment Opening Balance Loss for the year FX Loss Additional Investment Impairment Closing Balance (1,482) (1,088) £’000 - (1,482) (160) 1,224 418 - £’000 - (1,088) (223) 1,896 (585) - KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 100 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 20. Jointly controlled entities (continued) 20.1 Jointly controlled entity with Artar In May 2009, K FI announced the formation of a new minerals’ exploration jointly controlled entity, old & Minerals o. imited (“ &M”), a limited liability company in Saudi Arabia, with leading Saudi construction and investment group Abdul ahman Saad Al- ashid & Sons ompany imited (“A TA ”). K FI is the operating partner with a 31.21% shareholding in G&M with ARTAR holding the other 68.79%. 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 &M’s losses. A loss of £1,482,000 was recognized by the Group for the year ended 31 December 2021 (2020: £1,088,000) representing the roup’s share of losses in the year. As at 31 December 2021 KEFI owed ARTAR an amount of £285,700 (2020: 0) - Note 21.1. During 2021 the Company diluted its interest in the Saudi joint-venture company Gold and Minerals Limited ("G&M") from 33.65% to 31.21% by not contributing its pro rata share of expenses to G&M. This resulted in a gain of £428,181 (2020: £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 roup’s accounting policy relating to exploration costs which is to expense costs through profit and loss until the project reaches development stage (Note 2). onsequently, any dilution in the ompany’s interest in &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 31.12.21 £’000 Year Ended 31.12.20 £’000 2,499 97 285 2,675 5,556 1,510 134 - 1,481 3,125 Year Ended 31.12.21 £’000 Year Ended 31.12.20 £’000 1,242 285 2,675 4,202 873 - 1,481 2,354 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 2021 Page 101 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 irectors’ other consultancy benefits ²Short term employee benefits: Key management fees Short term employee benefits: Key management other benefits Share based payments: Share based payment: irector’s 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 31.12.21 £’000 Year Ended 31.12.20 £’000 496 39 604 32 1,171 - - 407 272 255 - 934 489 58 686 39 1,272 106 - 14 292 16 - 428 ¹ irectors’ fees paid to the xecutive irector hairman and Finance irector 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. 2,105 1,700 Share-based benefits The Company issued 85,813,848 share options to directors and key management during March 2021. These Options have an exercise price of 2.55p per Ordinary Share and expire after 4 years and, in normal circumstances, vest in three equal instalments, the first after one year, the second after two years and the third after three years from the date of grant. Previously all options, except those noted in Note 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 Nature of transactions Relationship Receiving of management and other professional services which are capitalized as E&E expenditure Receiving of management and other professional services which are capitalized as E&E expenditure Key Management and Shareholder Key Management and Shareholder 2021 £’000 554 232 2020 £’000 578 298 786 876 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 102 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 22. Related party transactions (continued) 22.2 Transactions with shareholders and related parties (continued) The Company Name KEFI Minerals Marketing and Sales Cyprus Limited Tulu Kapi Gold Mine Share Company¹ Kefi Minerals (Ethiopia) Limited² Expected credit loss Nature of transactions Relationship 2021 £’000 Finance Subsidiary - Advance Advance Subsidiary Subsidiary 4,433 3,166 (304) 7,295 2020 £’000 - 2,605 3,918 (261) 6,262 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 2021 and determined that any expected credit losses would be £304,000 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 2021 £’000 2020 £’000 1,350 1,073 834 491 280 128 2,675 1,481 2021 £’000 2020 £’000 1,350 1,073 834 491 280 128 2,675 1,481 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 103 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 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 2021 889 889 750 750 - - 100 100 (1,739) (1,739) - - - - Unsecured working capital bridging finance Balance 1 Jan 2021 Drawdown Amount Transaction Costs £’000 Interest Repayment Shares Repayment Cash Year Ended 31 Dec 2021 Repayable in cash in less than a year £’000 £’000 £’000 £’000 £’000 - - 2,713 2,713 - - 1,121 1,121 (2,599) (2,599) - - £’000 1,235 1,235 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 £1,235,000 was fully repaid in 2022 during the relevant share placements. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 104 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 23. Loans and Borrowings (continued) 23.1.2 Reconciliation of liabilities arising from financing activities 2020 Reconciliation Unsecured working capital bridging finance Short term loans Convertible notes Sanderson unsecured convertible loan facility 23.2 2021 Reconciliation Unsecured working capital bridging finance Short term loans Balance 1 Jan 2020 £’000 Cash Flows Inflow (Outflow) Fair Value Movement Finance Costs Shares £’000 £’000 £’000 £’000 £’000 889 750 889 750 75 75 - - - - - - - - - - 100 100 (1,739) (1,739) - - (75) (75) Balance 31 Dec 2020 £’000 - - - - Balance 1 Jan 2021 £’000 Inflow (Outflow) Fair Value Movement Finance Costs Shares £’000 £’000 £’000 £’000 £’000 Balance 31 Dec 2021 £’000 - 2,713 - 2,713 - - - - 1,121 1,121 (2,599) (2,599) 1,235 1,235 24. Contingent liabilities The company has no contingent liabilities. 25. Capital commitments The Group has the following capital or other commitments as at 31 December 2021 £1,184,000 (2020: £1,964,000), Tulu Kapi Project costs Saudi Arabia Exploration costs committed to field work that has been recommenced 31 Dec 2021 £’000 452 31 Dec 2020 £’000 558 732 1,406 KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 105 Notes to the consolidated financial statements (continued) Year ended 31 December 2021 26. Events after the reporting date Share Placement January 2022 Following the General Meeting on 13 January 2022 the Company admitted 371,817,944 new ordinary shares of the Company at a placing price of 0.8 pence per Ordinary Share. The total shares issued during January 2022 for services and obligations was as follows: Name For services rendered and obligations settled H Anagnostaras-Adams J Leach 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 2022 Number of Remuneration and Settlement Shares 000 22,500 12,500 3,125 6,250 173,530 - 217,905 - 153,913 371,818 Amount £’000 180 100 25 50 1,510 - 1,865 - 1,235 3,100 In January 2022 393,096,865 warrants were issued that have a right to be issued one Ordinary Share for an exercise price of 1.6 pence and exercisable following a Warrant Trigger Event provided that such Warrant Trigger Event occurs during a two year period following the January 2022 When the share price of the Company closes for five consecutive days reaches or exceeds 2.4 pence (being a 50% premium on the Warrant exercise price) (the "Warrant Trigger Event"). If the Warrant Trigger Event occurs then: (i) the holders of the Warrants must exercise the Warrants within 30 days from the occurrence of the Warrant Trigger Event; and (ii) the Warrants will expire following the end of the 30-day period referenced above if not exercised. Share Placement April and May 2022 In April 2022 the Company raised £4.4 million through the issue of 550,000,000 new Ordinary Shares at a placing price of 0.8 pence per Ordinary Share. In May 2022 the Company raised a further £3.6 million through the issue of 450,000,000 Ordinary Shares at the Placing Price of 0.8 pence per Ordinary Share, following shareholder approval of the conditional placement at a General Meeting The Company granted one warrant per two Placing Shares at an exercise price of 1.6 pence exercisable for a period of two years from the May 2022 admission. The 500,000,000 warrants become exercisable on the same Warrant Trigger Event disclosed in the January 2022 note above. KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 106 KEFI Gold and Copper is listed on AIM (Code: KEFI) www.kefi-minerals.com KEFI Gold and Copper PLC ANNUAL REPORT 2021 Page 107 

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