Tulu Kapi Resource Update

RNS Number : 3567P

Kefi Minerals plc

18 August 2014

 



               18 August 2014

KEFI Minerals Plc

("KEFI" or the "Company")

INDEPENDENTLY VERIFIED jorc COMPLIanT MINERAL resource reporting on TULU KAPI GOLD DEPOSIT in ETHIOPIA

KEFI Minerals (AIM: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Democratic Republic of Ethiopia, is pleased to announce an independently verified updated JORC compliant Mineral Resource reporting of total Indicated and Inferred Resource of 23.7 Mt at 2.51 g/t Au for 1.9 Moz Au at its Tulu Kapi project in Ethiopia.

KEFI Minerals is the manager and operator of the project under the Company's 75%-owned KEFI Minerals (Ethiopia) Limited ("KME") joint venture company with Nyota Minerals. The Competent Persons for the Resources are Simon Cleghorn, Resource Manager of KEFI, and Lynn Olssen, General Manager Geosciences and Senior Principal Consultant of Snowden Mining Industry Consultants Pty Ltd ("Snowden").

HIGHLIGHTS

·     A Mineral Resource  of 1.9 Moz Au (23.7 Mt at 2.51 g/t Au), reported in accordance with the JORC Code (2012), has now been estimated after twelve months of intense review by KEFI and its independent specialists and after taking into account all drilling and trenching conducted to date along with improved understanding of geological structural controls. Several independent experts were consulted in formulating the appropriate process for Tulu Kapi and the final independent sign-off was provided by Snowden after taking into account all of the recommendations and data.

·     The Indicated Resource now stands at 18.4 Mt at 2.57 g/t Au for 1.5 Moz Au and is now being used to finalise pit design, mine scheduling and Ore Reserves.

·     The updated Indicated and Inferred Resources have been reported at a cut-off grade of 0.45 g/t Au above the 1,400 m reduced level (RL) to represent open pittable resources and at a cut-off grade of 2.50 g/t Au below the 1,400 mRL to represent potential underground mineable resources (tabulated below). Average surface RL in the planned pit is 1,750 mRL. These cut-off grades were based on appropriate computerised optimisation techniques after taking into account the final determination of internal dilution of the Mineral Resources, which were completed as part of the Definitive Feasibility Study carried out during 2012.

·     Total Indicated and Inferred Resource in the open pit area is 22.0 Mt at 2.27 g/t Au for 1.60 Moz Au and high grade mineralisation of 1.62 Mt at 5.81 g/t Au for 303,000 oz Au as underground potential, immediately below the planned open pit.

·     Independent Ore Reserve estimation is underway for the open cut and a preliminary economic study on the potential underground resource.

·     The overhaul of the project is now well-advanced, for robust and financeable economics in the context of current gold prices and capital markets. The modifications serve to increase project profitability by optimising mine design and mining plans and to reduce the capital requirements by downsizing the plant from 2 Mt pa to c.1.2 Mt pa and the mining fleet correspondingly.

Resource Category	Reporting elevation	Tonnes (Mt)	Au (g/t)	Ounces (Moz)
	Open Pittable
at Cut-Off Grade 0.45 g/t
Indicated	above 1,400 RL	17.3	2.37	1.32
Inferred	above 1,400 RL	4.77	1.91	0.292
Indicated and Inferred	above 1,400 RL	22.1	2.27	1.61
Underground Mining
at Cut-Off Grade 2.5 g/t
Indicated	below 1,400 RL	1.07	5.88	0.202
Inferred	below 1,400 RL	0.56	5.67	0.102
Indicated and Inferred	below 1,400 RL	1.63	5.81	0.304
Total Combined Resources
Total Indicated	All	18.4	2.57	1.52
Total Inferred	All	5.33	2.30	0.394
Total Indicated and inferred	All	23.7	2.51	1.91

Notes:

·     All figures are reported to three significant figures. This may result in discrepancies in the table due to rounding.

·     KEFI currently owns 75% of KEFI Minerals (Ethiopia) Ltd, which owns 100% of the Tulu Kapi gold project, and has conditionally contracted to purchase the remaining 25%.

Jeff Rayner, Managing Director of KEFI Minerals, commented:

"We are pleased that the independent review of the Tulu Kapi Resource and JORC compliant reporting validates our belief that we have an attractive open pit project and underground mining potential. This review gives us the correct internal resource dilution to accurately plan Tulu Kapi's development and production.

"The next step of producing the estimate of Probable Reserves is already advanced following which the independent reviews of our plans for project, community and finance will occur in quick succession. As a result, we are on track to lodge the mining licence application during Q4 2014, and, at the same time, expand project documentation for the planned project financing. All this gives the Board confidence that development will commence in 2015."

Enquiries

KEFI Minerals Plc
Jeffrey Rayner			[phone]
Fox-Davies Capital (Nominated Adviser and Joint Broker)
Jonathan Evans			[phone]
finnCap Ltd (Joint Broker)
Elizabeth Johnson, Christopher Raggett			[phone]
Luther Pendragon (Financial PR)
Harry Chathli, Claire Norbury, Ivana Petkova			[phone]

COMPETENT PERSONS STATEMENTS

The information in this report that relates to input data used for the Mineral Resources is based on, and fairly represents, information and supporting documentation - the compilation of which was overseen by Simon Cleghorn, Resource Manager and a full-time employee of KEFI and a Member of The Australasian Institute of Mining and Metallurgy. Simon Cleghorn has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Simon Cleghornconsents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

The information in this report that relates to the interpretation, estimation, classification and reporting of the Mineral Resources is based on, and fairly represents, information and supporting documentation - the compilation of which was reviewed by Lynn Olssen who is a Member of The Australasian Institute of Mining and Metallurgy and a full-time employee of Snowden Mining Industry Consultants Pty Ltd. Lynn Olssen has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Lynn Olssen consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

Further information on KEFI Minerals is available at www.kefi-minerals.com 

BACKGROUND TO THE RESOURCE ESTIMATE

·     A number of resource estimates have been carried out at Tulu Kapi since 2009 by various consultants with an expanding database. There has been over 120 kilometres of drilling at Tulu Kapi and over $50 million spent on drilling, project due diligence and planning by previous owners.

·     The 2012 Definitive Feasibility Study resource estimate was published by the previous controlling shareholder of KME (the owner of Tulu Kapi) in October 2012. It was carried out using a semi-constrained block model in Datamine using the dynamic anisotropy methodology. The Mineral Resource estimate was reported above a cut-off grade of 0.3 g/t Au and totalled 14.59 Mt at 2.36 g/t Au for 1.108 Moz Au in the Indicated Resource, and 10.31 Mt at 2.30 g/t Au for 0.764 Moz Au in the Inferred Resource.

·     After acquiring 75% of KME (the owner of Tulu Kapi) in late December 2013, KEFI updated the existing database in January 2014 to incorporate 71 drillholes, totalling over 16,000 m of drilling that were drilled by the previous controller, post the cut-off date of the October 2012 resource estimate.

·     KEFI published its first resource update on 12 March 2014. KEFI used the same October 2012 resource estimation methodology after including more structural data, a corrected database and mining block estimates with the following dimensions: 5.0 m(X) by 5.0 m(Y) by 1.0 m(Z), with 1.0 m composited drillholes. KEFI's March 2014 Mineral Resource was reported in accordance with JORC Code (2012) above a 0.3 g/t Au cut-off and totalled 24.1 Mt at 2.64 g/t Au for 2.051 Moz Au, with an upgrade to 21.2 Mt Au at 2.73 g/t Au for 1.862 Moz in Indicated Resource and 2.9 Mt at 2.03 g/t Au for 0.189 Moz Au in Inferred Resource. The March Mineral Resource was independently reviewed by AMC Consultants Pty Ltd, Australia and all aspects were taken into account in the August 2014 Mineral Resource.

·     KEFI continually refined the resource estimate using additional structural data based on surface mapping and trenching plus a small programme of additional Reverse Circulation (RC) targeted at infill drilling and maximising structural interpretation. This work was performed during March to June 2014.

·     KEFI's resources update published today incorporated geostatistical parameters agreed with Snowden, after rigorous peer review of various aspects including variography, top-cuts and block sizing. The final recommendations as to how to best account for internal dilution resulted in mining block estimates with the following dimensions: 10.0 m(X) by 10.0 m(Y) by 1.5 m(Z), with 1.0m composited drillholes.

·     A tabular comparison of recently published resources, shown at a cut-off grade above 0.3 g/t Au for comparison purposes, as per that reported in the Nyota 2012 Definitive Feasibility Study is presented below.

Resource History Comparative Summary - Indicated + Inferred based on a cut-off grade of 0.3 g/t Au
Period	Tonnes (M)	Au g/t	(M) Oz
October 2012	24.9	2.34	1.90
KEFI March 2014	24.1	2.64	2.05
KEFI - Snowden August 2014	26.1	2.38	2.00

TECHNICAL NOTES ON THE RESOURCE ESTIMATE

·     The Tulu Kapi gold deposit is an orogenic gold deposit located in an area consisting of rocks ranging from Pre-Cambrian to Tertiary in age. The gold mineralisation at Tulu Kapi is hosted by an Upper Proterozoic age intrusive, which comprises a coarse grained syentite pluton. These rocks have been intruded into a volcano-sedimentary sequence that was subsequently transformed to mafic and sericitic schists. The Tulu Kapi primary mineralisation is hosted in mafic syenite.

·     The input data for the estimate comprised 722 drillholes and trenches totalling 118,738.3 m including 298 diamond drillholes (NQ, HQ and PQ diameter) for 72,032.9m, 342 RC drillholes for 45,611 m and 82 trenches for 1,094.4 m. All drilling and sampling was carried out using industry standard methods. Diamond drilling was sampled using half core while RC samples were riffle split prior to crushing and grinding. Analysis was by fire assay using a 50 g charge and AAS finish.

·     Industry standard QAQC sampling and analysis was carried out which indicates that there are acceptable levels of precision and accuracy.

·     Mineralisation domains were determined using a 0.3 g/t Au indicator estimate with dynamic anisotropy to align the estimation with the local dip and strike of the mineralisation trends. The indicator estimate was into a block model with parent cells of 5 mE by 5 mN by 1.5 mRL. The 0.3 g/t indicator was determined from a log-probability plot that showed a change in distribution at this grade. Indicator estimates that were greater than 0.37 (37%) were deemed to be mineralised. This was based on visual review of the probability estimate against the data to confirm continuity of mineralisation.

·     1 m composites were coded within the mineralised domain and by major fault block ("Central Zone" and "UNDP Zone"). Given the shallow oxidation profile, no separation was carried out by oxidation domain.

·     The data distributions are highly skewed and typically have a high (>1.5) coefficient of variation (CV - ratio of standard deviation to the mean). As a result, top cuts were applied to prevent overestimation and smearing of the comparatively high values into surrounding blocks. Top cuts were 30 g/t Au for the Central and UNDP domains and impact on less than 1% of the grade population.

·     Grade estimation was carried out in CAE Studio 3 (Datamine) using ordinary kriging (OK) with dynamic anisotropy to align the estimation with the local dip and strike of the mineralisation trends, into 10 mE by 10 mN by 1.5 mRL parent cells. Block discretisation was set to 4 by 4 by 2 for dynamic anisotropy angles.

·     A kriging neighbourhood analysis (KNA) was carried out to determine optimal block size and estimation parameters. The estimation was performed on the mineralised and non-mineralised material defined within each domain (Central and North).

·     Estimation was run in a three pass kriging plan, the second and third passes using progressively larger search radii to enable the estimation of blocks un-estimated on the previous pass. The search parameters were derived from the variogram analysis, with the first search distances corresponding to the distance at half of the variogram sill value and the second search distance approximating up to the variogram range.

·     Blocks were estimated using a minimum of 10 with a maximum of 30 samples 6 minimum and 30 maximum for pass 2) and a maximum of 8 composites allowed per drillhole.

·     The maximum distance of extrapolation points within the method was 45 m.

·     A global (dry) density value of 1.4 t/m3 was used for all saprolite material. A global (dry) density value of 2.7 t/m3 was used for all fresh material.

·     For the central zone, search radii used during grade estimation were used together with a wireframe encompassing high confidence mineralisation to define classification. Consistent areas of blocks estimated in the first and second searches (within the variogram range) were classified as Indicated Resources and blocks consistently estimated in the third search pass were classified as Inferred Resources. The areas of Indicated Resources are typically drilled out on a 40 m by 40 m grid with areas of 20 m by 20 m.

·     The majority of Mineral Resources contained within the north fault block (UNDP) are classified as Inferred Resources, except for a portion representing more closely spaced drilling (approximately 40 m 40 m) which was estimated in first and second search passes.

·     The Mineral Resource has been reported as mineable by open pit methods above 1,400 mRL, which is the bottom out elevation for the pit optimisation shells generated as part of the definitive feasibility study. Below 1,400 mRL the Mineral Resource is reported as potentially mineable by underground methods.

·     The updated Indicated and Inferred Resources have been reported at a cut-off grade of 0.45 g/t Au above the 1,400 mRL to represent open pittable resources and at a cut-off grade of 2.50 g/t Au below the 1,400 mRL to represent potential underground mineable resources (tabulated above). Average surface RL in the planned pit is 1,750 mRL. These cut-off grades were based on appropriate computerised optimisation techniques after taking into account the final determination of internal dilution of the Mineral Resources, which were completed as part of the Definitive Feasibility Study carried out during 2012.

·     Snowden has independently validated the estimate and checked each stage of the estimation process including review of all parameters, macros and classification criteria. Snowden considers that there are no material issues with the estimate.

NOTES TO EDITOR

KEFI Minerals Plc

KEFI is now positioned as an operator of two advanced gold development projects within the highly prospective Arabian-Nubian Shield, with an attributable 1.6 Moz (75% of Tulu Kapi's 1.9 Moz and 40% of Jibal Qutman's 0.5 Moz) Au Mineral Resources (JORC 2012) plus significant resource growth potential. Upon closure of the acquisition by KEFI of 100% of KME, attributable in-situ gold would be 2.1 Moz (100% of Tulu Kapi's 1.9 Moz and 40% of Jibal Qutman's 0.5 Moz). KEFI targets that production at these projects generate cash flows for further exploration and expansion as warranted, recoupment of development costs and, when appropriate, dividends to shareholders.

Expected milestones for the remainder of 2014 include the following:

·     Independent verification of revised mine plan

·     Independent verification of estimates for capex, opex and closure

·     Closure of acquisition of the remaining 25% of Tulu Kapi

·     Nyota shareholders to receive shares in KEFI

·     Independent verification of Ore Reserves

·     Assembly of bank syndicate and agreement of indicative terms sheet for project finance

·     Re-activation of Tulu Kapi Mining Licence Application, suspended mid-2013 by Nyota

·     Application for Jibal Qutman Mining Licence for G&M Joint Venture in Saudi Arabia

KEFI in Ethiopia

KEFI Minerals has conditionally acquired the remaining 25% to have 100% ownership of the Tulu Kapi licence in western Ethiopia and intends to refine the development plan for the project, aimed at reducing the previously planned capital and operating expenditure. Early research has yielded encouraging results and was summarised in recent announcements in respect of the Tulu Kapi acquisition transaction.

At the end of 2013, the Ethiopian Government improved the fiscal regime applying to the gold sector, and Tulu Kapi in particular. This included lowering the income tax rate for mining (to 25% from 35%); settling of repayment schedule for inherited VAT liability (over three years rather than up-front); the removal of VAT on future exploration drilling expenditure; lowering royalty on gold mining (to 7% from 8%); accelerating the depreciation of historical and future capital expenditure (over four years); and clarifying the workings of the Government's 5% free-carried interest so that it does not impede conventional project financing terms.

KEFI Minerals in the Kingdom of Saudi Arabia

In 2009, KEFI formed the Gold and Minerals Joint Venture Company ("G&M") in Saudi Arabia with local Saudi partner Abdul Rahman Saad Al-Rashid & Sons Company Limited ("ARTAR"), to explore for gold and associated metals in the Arabian Shield. To date, the G&M has conducted preliminary regional reconnaissance and lodged 30 Exploration Licence Applications (ELAs), of which four have been granted. Two of the granted ELs were relinquished in May 2014. 

The ELAs were initially applied for and granted to ARTAR. Incorporation of G&M has been completed and any granted Licences will be transferred into G&M in due course.

The Kingdom of Saudi Arabia has instituted policies to encourage minerals exploration and development and KEFI Minerals supports this priority by serving as the technical partner within G&M. ARTAR also serves this government policy as the major partner in G&M, which is one of the early movers in the modern resurgence of the Kingdom's minerals sector. 

DEFINITIONS OF EXPLORATION RESULTS, RESOURCES & RESERVES

EXTRACTED FROM THE JORC CODE: (December 2012) (www.jorc.org)

A 'Mineral Resource' is a concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.

An 'Inferred Mineral Resource' is that part of a Mineral Resource for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade (or quality) continuity. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to an Ore Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

 An 'Indicated Mineral Resource' is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to assume geological and grade (or quality) continuity between points of observation where data and samples are gathered. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Ore Reserve.

A 'Measured Mineral Resource' is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to confirm geological and grade (or quality) continuity between points of observation where data and samples are gathered. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proved Ore Reserve or under certain circumstances to a Probable Ore Reserve.

An 'Ore Reserve' is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported.

-Ends-

 

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