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.
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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