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KEFI Gold & Copper shares: focus on Ethiopian gold is generating investor interest


It is all systems go for KEFI Gold & Copper plc (LON:KEFI), the gold exploration and development company with flagship projects in Ethiopia and Saudi Arabia, according to their latest operational update.

KEFI continues its drive to develop the Tulu Kapi Gold Project in Ethiopia. The main task at the moment is getting the financing in place, so that the projected commissioning of the mine can start in the fourth quarter of 2022. The project costs are estimated to be $263m, to build access roads, an electricity grid, on-site infrastructure and fabrication of plant components, as well as to relocate and compensate local communities.

In Saudi Arabia, KEFI has launched a preliminary feasibility study for the development of the Hawiah deposit, projected to start in 2023. In August last year KEFI announced a discovery of 19.2 million tonnes at 0.9% copper, 0.8% zinc, 0.6 g/t gold and 10.3g/t silver. Zinc, silver and gold were also found at the Jibal Qutman field, which has been assessed as having 733,000 ounces of near-surface gold and should be highly profitable with the gold price at the current levels. KEFI has applied for a mining licence for this and other fields in the area.

Ethiopia and Saudi Arabia backing development of mining sector

Harry Anagnostaras-Adams, executive chairman of KEFI, said the two projects, each of which today has an in-situ metal value of about $3bn (at today’s metal prices), provide “excellent potential for returns to shareholders”. He envisages KEFI owning at least 65% of Tulu Kapi in Ethiopia, which will aim for full production from the open pit operation by the first half of 2023, with an estimated production of 190,000 oz of gold per annum. And he estimates KEFI will have 34% of the Hawiah discovery in Saudi Arabia, consisting of mainly copper and gold.

Anagnostaras-Adams has high hopes for the two projects, describing them as ‘transformative’, and says their successful implementation will “firmly position the company at the forefront of the burgeoning minerals sector in the highly prospective Arabian Nubian Shield”.

The finds in Ethiopia have generated a lot of investor interest, including from the Ethiopian federal and regional governments, while Ethiopian private sector groups also are expected to commit funds in May. Both the Ethiopian and Saudi Arabian governments are now boosting their mining sectors with reforms to develop their economies and attract inward investment. For example, in June last year the Saudi Arabian government approved a Mining Investment Law, to help the country’s mining industry, and expanded the role of the Saudi Investment Development Fund specifically to support mining project finance, which may prove useful to the Hawiah Project financing.

RAB Capital is backing KEFI

It is also reassuring to see, among the institutional investors, the name of mining specialist RAB Capital, which now has a 12% of the issued share capital and a seat on the board. For KEFI, it is a ‘welcome involvement’, and one that it views as a long-term participation.

The KEFI share price has returned 168% over the past year, though year-to-date the return is a more modest 3.49%. After a surge of interest in the third quarter of last year, when the share price gained more than 200%, the price has slipped back to 1.96p. Over the past five years, the KEFI stock price is down 62.9%, which is 67.1% below the FTSE 350 Index performance of 4.2% over the same period.

After years in the doldrums, the mining sector now finds itself in the midst of a cyclical upturn for gold and copper. KEFI’s two flagship projects may indeed prove to be ‘transformative’, but not just yet. In the meantime, the still cheap share price will certainly benefit from positive progress reports.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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