KEFI Gold and Copper Plc (KEFI) Earnings Call Transcript & Summary

Because I'm one of the directors standing for reelection, I will not conduct the formal meeting. I'll ask Rich Robinson to do that. And then when he's conducted the formal meeting and closes the formal meeting after consideration of the resolutions, he will close the meeting and he will invite me to make an informal presentation, which I'll talk to slides. And there are a few questions that were submitted before the meeting that I'll ask Tim if he could read them out, and I'll answer them. Anything that Tim feels isn't really an AGM type of question, we're happy to answer via the website separately and then any questions from the floor. And then we'll finish the informal presentation and have a coffee or tea. So welcome to the Annual General Meeting of KEFI Gold and Copper Plc here in London. On -- in our presence here, physically, we have myself, Harry Anagnostaras-Adams, the Chair -- Executive Chairman; we have Rich Robinson, Nonexecutive and Independent Director; we have Mark Tyler, Nonexecutive and Independent Director. Norman Ling intended to attend, but there's been a tragedy in his family, and he has to look after Selma, his wife, and the family. And he renders -- tenders his apologies. Also coincidentally, Norman is retiring at the close of this Annual General Meeting. He's been a Nonexecutive and Independent Director from the point of the acquisition of the Ethiopian Tulu Kapi project. We will miss him, but he's decided that smelling the roses is more what we'd like to do from now on, and he'll be on hand as an adviser. John Leach, Finance Director, is on the end of a Teams' link from Sydney. And Laki Catsamas, Financial Controller and Secretary, is on a Teams' link from Cyprus. And in terms of official office barriers, I think that's all we need to refer to. Obviously, there are others connected remotely. But I think that's all I need to refer to in terms of official office bearers unless -- if I've forgotten anyone -- MSP secretaries is an official office bearer, the official secretaries of the company, overseeing the official proceedings of the company and the conduct of the share registrars and that sort of thing as well. Okay. So I'll hand it to Rich to handle the -- actually, should I just open the formal meeting and just read the Chairman's statements now, I think?

You go ahead, Harry, yes.

Yes. Okay. So I'll read the Chairman statement. And I'll -- let me forewarn you, it's a bit long this year, but duly long, I think, given the importance of the moment for the company. And before I started, I might just say that we were hoping to have given the market, the shareholders, an update some time ahead of the actual meeting, and we only managed to do that in the hour or so ahead of the meeting just because third parties on whom we were engaging with were a bit slow to give us the opportunity to give a proper report until just now. But an important announcement was just made that I'll refer to out of courtesy to people here, and that is that the umbrella agreement between the financing syndicate in respect of the Tulu Kapi project was signed. The last signature came in literally this morning, which is good news because that was part of the plan. And it was -- came in sort of like a minute to midnight type of thing, but it still came in. And I suppose one of the reasons that it came in at a minute to midnight is that a week or so ago, there were some disturbing messages, sort of free-flowing, stream-of-consciousness messages that were unfounded that seem to be publicizing the media in Ethiopia, which caused a lot of disturbance to ourselves, to our shareholders, to our financing syndicate. And indeed, those messages have been retracted and corrected and withdrawn and attributed to misreporting. And that was reported in this morning's [ RNS ] as well. So let me just assure you the license of that project is in good standing. It was in good standing. It is in good standing. And comments to the contrary through media doesn't change the substance of that fact. And comments by the media interpreting comments by the Ministry of Mines does not change the substance of that fact. With that, let me just move on now to the Chairman's address. This is a 2022 Annual General Meeting in London at Waterloo. Due to the improvement in the local working environment in both Ethiopia as regards security and Saudi Arabia as regards regulatory, since late '21, KEFI now has 3, not 1, advanced projects in 2 countries. Combined with the recently reported excellent exploration results at Hawiah and at Al Godeyer in Saudi Arabia, KEFI now has a much improved position as an early mover in both countries with a more balanced portfolio of advanced projects. It's obvious to anyone that follows us closely that the company had to work very hard to traverse various frontier market risks, including still being developed regulatory regimes and security challenges. I'm pleased to report that our company has not only maintained its excellent record of safety and tenure management, but we're now very well-positioned to emerge over the next few years as a leading explorer, developer, producer in one of the world's great minerals regions: the Arabian-Nubian Shield. Every now and then a comment is made by an independent specialist that resonates for me, and I'd like to share one such snippet with you today. A security specialist was recently involved in monitoring and supporting some actions we took discretely to protect our people on the ground. And I'd like to take the liberty to share one of those expert's comments. The comment was made in the wrap-up report that got tabled internally within the company and partners. The comment was, I appreciate the professionalism and commitment you and your colleagues displayed -- this was addressed to the Managing Director in Ethiopia. "I appreciate the professionalism and commitment you and your colleagues displayed during the circumstances experienced last week. All the individuals involved daily needed assistance and knew exactly what to do and not to do. I would feel extremely safe if I was an employee of KEFI." Now it's hard to convey in words the importance of maintaining one's protection of people above all else, and it's hard to communicate to shareholders the intensity of work that sometimes goes on to do that. But I thought I should read that because it does resonate strongly with me. Our people in the field work tirelessly and usually below the radar of public recognition. I believe, therefore, I'd like to acknowledge our field teams publicly to our shareholders, and I'm referring here to our highly driven teams in both Ethiopia and Saudi Arabia as well as the people in Cyprus and elsewhere. I'm deeply proud of all these teams and although the share price does not reflect what we do and what we achieve, we have indeed a very strong foundation for value creation here at KEFI, both in the discovered and acquired projects that everybody reads about and analyzes a great depth, but also in the quality of our people and systems that are perhaps invisible publicly. We can at last focus on a sequential development path to build a mid-tier mining company with aggregate annual production of [ 465,000 ] ounces or, say, 400,000 ounces gold or gold equivalent in which KEFI has a beneficial interest of about half. Our reported mineral resources provide a solid starting -- pardon me, starting position for our imminent growth. Since mid-'21, 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 these 3 projects is now 2.1 million gold equivalent ounces. KEFI's current market cap of circa GBP 20 million -- I don't know what it is today, but it's obviously been jumping around a lot this last week, at GBP 20 million, it's approximately $12 per gold equivalent ounce, which compares very favorably to the prevailing gold price during 2022 of $1,800 to $2,000 an ounce. The underlying intrinsic value of KEFI's assets have increased from December '20 to December '21 based on the 3 projects' NPVs at an 8% discount rate using December '21 prices. At the same deck of metal prices, NPV per share has grown from 3p in mid-'20 to 7p in mid-'21 to 9p in mid-'22, all calculated using today's total issued capital. The growth in underlying intrinsic value is due to our progress in Saudi Arabia, in particular at the Hawiah gold project and the Jibal Qutman project. These statistics are merely illustrative indicators, but the same patent emerges, whether one assumes prevailing metal prices or analyst consensus metal forecast prices. Our operating alliances are with the following strong organizations. First of all, we have partners in Saudi, the ARTAR Group, which is the family group of Abdul Rahman Saad Al-Rashid; in Ethiopia, the federal government and the Oromia regional government. Our principal contractor in both Ethiopia and Saudi Arabia is arguably the leading gold plant builder in the world like a podium, has built some 60 gold plants in more than 20 African countries alone; our senior project finance lenders for Tulu Kapi; our East Africa Trade and Development Bank, TDB; and Africa Finance Corporation, AFC. Ethiopia. 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, it's 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 over 30 years and is designed to the highest international standards, and therefore, is imposing many demands on a regulatory system which the Ethiopian government is upgrading. Under strong ministerial leadership, the government had determined to build the minerals sector. There is a significant potential to increase Tulu Kapi's current reserves of 1.05 million ounces and resources of 1.7 million ounces. Economic projections for the Tulu Kapi open pit indicate the following returns assuming $1,591 gold, average EBITDA of about 100 million per annum; our share of about $70 million per annum; all-in sustaining costs of $826 million, and that can change particularly depending on royalties because it includes royalties based on the gold price; all-in costs, $1,048 per ounce. The assumptions underlying these projections are detailed in the footnotes to the table on Page 21 of the annual report. We reactivated Tulu Kapi launch preparations in early '22 after we suspended early last year. Ethiopia's Ministry of Mines has recently formally advised that -- has formally been advised that progress is on schedule to launch in Q4 in the dry season if the security situation is satisfactory and if the few remaining regulatory and ministry tasks are completed punctually. Saudi Arabia, Jibal Qutman. Jibal Qutman was our first discovery in Saudi Arabia with mineral resources of over 700,000 ounces of gold. As a result of a new regulatory system and indications from the Saudi Arabian government that the mining license would progress in '22, development planning studies have recommenced at Jibal Qutman. The current gold price is considerably higher than the $1,200 used in 2015 when we lodged our mining license application. Another key change is that several alternative processing options are likely to have become more attractive since 2015 processing of the ore. Several consultants have recently been engaged to evaluate processing options for Jibal Qutman and update elements of the mining license application. This work includes open pit design and scheduling metallurgy, processing and updating the environmental and social impact assessment. In other words, Jibal Qutman is back on to momentum and development pathway after having been put into hibernation by the regulatory system since 2015 until now. Saudi Arabia, Hawiah. Hawiah was discovered in September 2019, now ranks in the top 3 base metal projects in Saudi Arabia and a top 15% VMS projects worldwide, VMS being a style of mineralization called volcanic massive sulfide -- or volcanogenic massive sulfide, which is one of the main sources of base metals [ globally ]. Our 3-year 42,000-meter drilling program has delineated 24.9 million tonnes of ore, 0.9 copper, 0.85 zinc, 0.62 gold grams and 9.8 grams silver. As a scale comparison with Tulu Kapi in Ethiopia, Hawiah recoverable metal is now estimated to be in the order of 2.2 million gold ounces versus Tulu Kapi's 1.05 million in reserve. The recoverable metal in Hawiah today is about that double, if you like, Tulu Kapi. The team is progressing at great speed on this exciting project, which is located close to major infrastructure. We're working towards completing a preliminary feasibility study and an updated mineral resource in late '22. 2 exploration licenses located merely west of Hawiah were granted in December '21. Initial exploration of these, they're called Al Godeyer, exploration license has confirmed similar copper gold mineralization to Hawiah and indicated good continuity of the mineralized horizon. Conclusion. KEFI is preparing to develop the Tulu Kapi project, advancing development studies on Jibal Qutman, progressing the preliminary study on Hawiah copper/gold and testing exploration targets in both Ethiopia and Saudi Arabia. Simultaneous with the triggering of full development at Tulu Kapi, we intend to recommence exploration programs in Ethiopia and expand our program in Saudi Arabia. In Ethiopia, the initial focus will be underneath the planned open pit, where we already have established initial resource for underground at an average grade of 5.7 grams per tonne. We also intend to follow up, drill nearby gold deposits in the district. And in Saudi Arabia, further drilling is in progress at Hawiah and its adjacent Al Godeyer deposits. Along with my fellow directors, I'm very sensitive to the need to generate returns on investment. It's frustrating and disappointing -- pardon me, that the pandemic and geopolitics of both Ethiopia and Saudi Arabia have retarded our progress in recent years, and we've been unable to achieve our targeted progress. However, our operating environment has turned for the better in both countries, and we can now make progress on all fronts. By emphasizing conventional project-level development finance, we seek to alleviate the past responsibility of KEFI shareholders to provide all the funding. And indeed, therefore, more than 80% of development capital is planned to be contributed by our partners and other syndicate parties at the project level. However, exploration and other predevelopment funding will continue to rely exclusively on equity funding by KEFI and its in-country partners. We always have funded exploration with pure equity. The directors expect that as milestones are achieved, the company's share price should naturally narrow the gap between the company's market capitalization and what we believe to be significantly higher fundamental valuations of the company's projects using conventional measures like NPV. We are indeed at an opportune moment created by our team's hard work, by your support as shareholders and your patience and the serendipity of market strengthening as we launch our projects. That one is probably one of the most important things: timing of the things outside our control that drive the value of these projects, which is a highly cyclical gain. The directors are deeply appreciative of all personnel's tenacity and deeply appreciated all personnel steadfast dedication and the support the company received from shareholders and other stakeholders. Lastly, I would like to inform shareholders of the retirement at the close of today's AGM of our longest-serving independent director, Ambassador Norman Ling. Norman has been a great counsel to the Board and management of KEFI, being an especially experienced diplomat in Africa and in Ethiopia in particular. Unfortunately, Norman and Selma Ling could not make it to today's meeting as planned because of a family bereavement. I extend to them our deepest condolences and the company's gratitude for years of support and service to KEFI. That's my Chairman's statement, and thank you for patiently listening. And I'll now hand back to Rich for the formal meeting.

Harry, thank you very much for your statement and for introducing the directors. I'm Richard Robinson, a Nonexecutive Director of KEFI and an Independent Director. Harry has spoken about the professionalism of the team, and I would like for the record to make my remarks about Harry. It is seldom that I've worked with a Chairman who has shown such transparency and such determination for -- in countries which are not easy to operate in. Harry is really one of those exceptional Chairman.

Thank you.

Okay. Well, let's move on to the formal business of the meeting. As there are sufficient members present either in person by corporate representative or by proxy to constitute a quorum, we can now deal with the business of the meeting. You will have received the annual report and accounts for the year ended 31st of December 2021 together with the notice of the meeting. With your permission, I would like to take the notice as read. Does anyone have any objection? Thank you. I would like to suggest that during the formal business of the meeting, questions are restricted to points relating to each resolution as it is proposed. Once the formal business of the meeting is over, we would be happy to take more general questions. Does anybody have any objection to that? Thank you. The first resolution is on the annual report and accounts, which were set out in the notice calling this meeting, and it is to receive and adopt the audited financial statements of the company, the strategic report, the directors' report and the auditor's report for the financial year ended 31st of December 2021. I should be pleased to deal with any questions on the report and accounts. It would be helpful if any shareholder asking a question could give their name and state whether they are a shareholder, a proxy or a corporate representative. There being no questions, I put the resolution to the meeting. I can report that valid proxy votes have been received in relation to this resolution in respect of 1,007,257,546 ordinary shares as follows: for 1,004,483,521; against, 993,470; discretionary, 1,377; votes withheld, 1,779,178. I now propose as an ordinary resolution to receive and adopt the audited financial statements of the company, the strategic report, the directors' report and the auditor's report for the financial year ended 31st of December 2021. Those in favor? Those against? Those abstaining? Thank you. I declare the resolution carried as an ordinary resolution. The next items on the agenda are resolutions relating to the reappointment of Mark Tyler and Harry Adams, who are retiring as directors in accordance with the company's Articles of Association and being eligible, offer themselves for reappointment. So for that reason, I'm chairing the meeting because Harry is up for reelection. A separate resolution in respect of each of these directors will be put to the meeting. Does anyone have any questions relating to any of these resolutions? There have been no questions, I will put the resolution for the reappointment of Mark Tyler to the meeting. I can report that valid proxy votes have been received in relation to this resolution in respect of 1,007,257,546 ordinary shares as follows: for, 985,183,510; against, 14,801,098; discretionary, 646; votes withheld, 7,272,292. I now propose as an ordinary resolution to reappoint Mark Tyler, who retires and offers himself for reappointment in accordance with the company's Articles of Association as a director of the company. Those in favor? Those against? Those abstaining? Thank you. I declare the resolution carried as an ordinary resolution. Turning now to the third resolution, which is to reelect Harry Anagnostaras-Adams. You get it better than I do, Harry. I can report that valid proxy votes have been received in relation to this resolution in respect of 1,007,257,546 ordinary shares as follows: for, 987,331,895; against, 18,584,760; discretionary, 714; votes withheld, 1,340,177. I now propose as an ordinary resolution to reappoint Harry Anagnostaras-Adams, who retires and offers himself for reappointment in accordance with the company's Articles of Association as a director of the company. Those in favor? Those against? Those abstaining? Thank you. I declare the resolution carried as an ordinary resolution. The next item on the agenda is the resolution for the reappointment of the company's auditors. Are there any questions from any shareholders on that? No questions. Thank you. Therefore, I put the resolution to the meeting. I can report that valid proxy votes have been received in relation to this resolution in respect of 1,007,257,546 ordinary shares as follows: for, 999,987,303 shares; against, 5,402,171; discretionary, 100 -- 1,377; votes withheld, 1,866,695. I now propose as an ordinary resolution to reappoint BDO LLP as auditors of the company to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting at which audited financial statements of the company are laid before the company. Those in favor? Those against? Those abstaining? Thank you. I declare the resolution carried as an ordinary resolution. Resolution #5 on the auditor's remuneration is the resolution authorizing the directors to determine the remuneration of the company's auditors. Are there any questions? There being no questions, I put the resolution to the meeting. And I can report that valid proxy votes have been received in relation to this resolution in respect to 1,007,257,546 ordinary shares as follows: for, 998,659,687; against, 6,766,337; discretionary, 1,377; votes withheld 1,830,145. I now propose as an ordinary resolution to authorize the directors to determine the remuneration of the company's auditors. Those in favor? Those against? Those abstaining? Thank you. I declare the resolution carried as an ordinary resolution. Ladies and gentlemen, that concludes the formal business of the meeting. And we will pass on to any general questions as part of the informal follow-up on the meeting. Thank you for your attendance, and I declare the meeting closed.