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

Good afternoon, ladies and gentlemen, and welcome to the KEFI Gold and Copper PLC investor Q&A session. This meeting is scheduled for 30 minutes. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll, and if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to Executive Chair Harry Anagnostaras-Adams. Good afternoon, sir.

Good afternoon. I'll just explain that I won't be giving a presentation today just because time doesn't permit today, but we did publish our quarterly report and attached a PowerPoint in the last week or so, so I encourage anyone who's interested in those in particular to read them off the website. So I will just be focusing on answering the questions. And I've got here a list of questions that have already been received. And as the introducer explained, we'll -- anything I don't get to in the next half hour, we'll assemble answers for and publish them later. Mindful of time, I'll just get on with it. There are several questions, and bear with me. I'll just scroll through them.

"Could you give your general perspective on investment in the general mining space, particularly in the last year?" I think great, great fortunes have been made in the mineral sector over -- throughout history of man. And obviously that's why it's attractive to certain investors, but there's certainly high risk chasing a return. And in the last year, the sector has been, they say, cyclically poor from an investment -- as an investment sector, but many others have as well. I know that Silicon Valley has had a rough time as well in the last year. And some of the majors, some major indexes have had a rough time in the last year. So the KEFI shares themselves have stayed relatively stable, but -- [ kind of the market ] cycle hadn't been against us in these last 12 months, but all I can say is that -- I mean, in such a high-risk sector, it's critical to very closely follow people and the projects and in some cases the country where [ it's a front team out ]. "Do you think that -- if KEFI had compromised their correct, in my view, high moral stance in dealing with national and regional governments, that the Tulu Kapi mine would be in construction or even producing by now? Is the current environment more receptive of KEFI's ideals?" We don't set out to be moral preachers or policemen or anything like that. We just follow the rules. And we represent not just the shareholders and therefore have to comply with regulatory requirements, but we also represent syndicate members, banks and other investors and contractors. And they all expect compliance. And so that's what we do, and -- but we do stand our ground if we need to because that's a prerequisite for our work. Is the current environment more conducive? Yes. It's recently improved enormously. "Re bulletin boards, what action can the company take against anonymous posters who are posting defamatory comments?" I think mainly we rely on self policing by people who participate in the bulletin boards. And any silly poster, I suppose, would be dealt with by the posters, so I think the only thing that really bothers any company, it's not KEFI alone, is if there are sponsored people who are doing things for commercial reasons, but in the worst possible case where there's attempts of extortion or anything like that, which is obviously extremely unusual, one can take legal action. I've been involved with that in a previous life in a previous company in another country, and the culprits are in jail. Why is investing in KEFI today better than it was in the past? I think it's the first moment that you can tick the box of the countries being -- running with us, really running with us, not just our people working hard on the ground and our assets having advanced to a point of development, at least in Ethiopia. [ I think it's the ] first moment one can say that. KEFI IPO-d as a prospector. It took the first 6 or 7 years to focus on a particular region after trying various countries. And since 2014, it's assembled 5 million ounces of gold and gold equivalent. KEFI's beneficial interest is about half of that and it's about 50-50 in Saudi and Ethiopia, but it's only really recently that in both countries the red carpet is being rolled out for the sector. And that's you don't need to be a genius to work out that Ethiopia has improved markedly from when it had a civil war. And Saudi Arabia is now promoting very strongly its mineral sector. That's the first time in -- since 2008, when we focused on the Arabian-Nubian Shield, that's all I can say that that's the case. "When will the market finally wake up to the KEFI share value?" I mean it's investors are probably better to comment on that than me. I think, as we -- as management focuses on delivery against milestones and targets, hopefully, the shares just naturally de-risk and better reflect the intrinsic theoretical values. So the NPVs and other sort of measures of value give you a theoretical value, in my mind, but the real value of the company only reflects what it's achieving and the proximity of the next success. And hopefully, as we start to put runs on the Board -- and now that things, I think, are running with us, that will tend to happen. "Do you regret working in Ethiopia or Saudi Arabia?" No. I -- Tigray and -- took longer than anticipated, but I couldn't do what I do in my life if I drove by, staring at a rear-vision mirror. I just can't operate that way. How has KEFI fared compared with the other companies in those countries? As unbiased as I can be, I think, better than most. I could list any number of companies that have declared force majeure or haven't been able to progress anything. I know, we know most of these companies very well, but because of the nature of our projects, where they are and particularly to [ look happy where it is ] and it's not in a -- no border zone. I mean it has no artisanal conflict. It has no legacy issues. Things like that, that were important in our selection of the project. [ It's sort of time to roost ]. We can actually get cracking and whereas other projects can't, so I think, better than most. How confident is the Board of Directors that financial closing will come in H1 2023? We are confident, but I think, instead of just giving you a one-line answer, I might just define what a financial close sort of breaks into, in sort of my language, anyway. First thing I would say is that funds drawdown from banks won't be until 2024, after equity has been used up. Funds drawdown from project equity will be as soon as possible after the signing of definitive agreements by all parties. And the signing of a definitive agreement is today's focus. Everybody is working hard. The whole syndicate of banks, contractors and principal investors met in Cape Town, along with all principal advisers a couple of weeks ago. We meet in Addis Ababa in 2 days time. We'll meet in London again in a couple of weeks time. I mean all this is not just [ of a job to be ] flying around. There is a whole bunch of people working hard to iron out their differences or iron out their remaining few issues to resolve. None of it is rocket science, but when you've got a dozen parties and all of their advisers, you've just got to go through it properly and just keep at it until you finish the job. "In Ethiopia, what communication has occurred between the government and KEFI in relation to outstanding items at present outstanding conditions at precinct?" Outstanding conditions [ presently maybe,] to closure. Is the government keen to progress? Yes, the communication is daily literally. This is, I believe, 1 of the 3 national priority projects the council of ministers touches on every week, so it's a very important project. And it's now under the spotlight, if you like, with proactive collaboration. I'm sure some shareholders would know that we had some friction in the past and what I would call less-than-requisite collaboration in some particular areas, but that's all disappeared now. Same question: In Ethiopia, what impact has the change of ministers had on financial closing? Does this change the process? And can the old ministers interfere? I don't really want to talk about personalities, but anyway, I think I've already said it's much better now and history is history. "Please set out the financing steps to Tulu Kapi project finance closing. It seems so complicated." Well, it is complicated. It would be really simple if we wanted to put up a $390 million. We'd only have ourselves to deal with, but the reality is that we lead and we coordinate. But we have no right to instruct the government or the banks or the big investors. It's their money, so we have to, as I said, coordinate and lead, but we're not in a position to instruct. And it's extremely frustrating, I know, for a shareholder who doesn't have insight as to what's going on day to day, but I think it should be obvious to everybody that the last few years have been extremely challenging in the country, in Ethiopia. And I think it's becoming obvious now that, that chapter in the country has finished and so we can get on with it. We were pushing for Q2 -- or Q4, rather, last year to wrap up things, for everyone to sign definitive agreements. And that phase was known to take no less than a few months and -- but didn't -- we didn't quite get there at the end of December and we're still in that phase. What is that phase? It required increased security. There's now very, very strong deployment of very large numbers of security forces all around that area. And that's well and truly in train. We have to close out the few remaining regulatory issues, which is why we're meeting in Addis Ababa in a couple of days to go through that face-to-face with legal advisers or government agencies. So it's mainly things really in the hands of government, but as I said earlier, the government could not be more energetic to support and close out. Following signing of definitive agreements, when we've [ patted down ] the security and the last regulatory issues and the community is already ready to roll -- there are thousands of people involved and have to be ready. We've got to launch really. And that is each individual household has to countersign their settlement contracts and [ write ] insurances and attach schedules to contracts and register them in the various jurisdictions, confirm final procurement prices in all the contracts. Because we will have fixed-price commitments by contractors to protect the project and they can't fix those prices until we're very, very close to launch. The supply chain internationally has gone a bit berserk the last few years. And contractors can't give a fixed-price lump sum until we are very close to proceeding placing orders. So that's sort of a last-minute thing. We think we've catered for it, but that has to be done properly and formally. We have to trigger general meetings for our shareholders to approve any conversion rights. That's what I'd call the launching phase that follows immediately after everyone signing. It's sort of unstoppable at that stage, but we've got to do it all to start [ drawing your ] money. What are the cash solutions pre the TK funding, as we are starting to run very low and the Saudi Arabian development requires more, to keep the momentum going? No rocket science here. We -- for years, we've used unsecured advances to keep things rolling until we get to critical milestones. And that's what we're doing right now. "How are the landowners at Tulu Kapi taking the further delay in their resettlement?" You're talking about thousands of people here, so I can't talk for every one of all these people, but by and large, they're embarrassed that we've been held up. There was a breakdown of law and order in much of the countryside since that civil war and during the civil war and very basic policing and law and order; and it has to be reinstated. And they know we got held up. They know we wanted to go ahead. They know that we didn't want to waste their time or waste their money, and we're embarrassed. How is the OLA fighting affecting Tulu Kapi financing? It's not. The political rivalries within the region or the country are not interfering with Tulu Kapi. Nobody wants to interfere with a project -- with this project at least and any -- most projects at least, let's say, to this one, because they don't want to do thing against the community. The community wants it and there's no competing community interest. There's no interest by artisanal people or anything like that, so it's everybody wants it to go ahead, but as I said, it has to be done properly. And it will be. With the possible Saudi listing, will it be better to list the gold and minerals joint venture rather than listing KEFI? Would ARTAR likely consider this? I don't think it's appropriate for me to talk about what ARTAR would or would not do. We can only talk about what we would do. And we would list KEFI on a major regional market which understands its own region better than people in far distant lands and is hungry to invest in its region. So we would. And the joint venture may at some other stage, but then as you point out correctly, that would be largely an ARTAR decision because they're the majority holders of that joint venture. The reference to Saudi shareholders on the structure slide first appeared in Slide 7 of the presentation of 28th November, but the dual listing proposal was mentioned only last month. Is there any significance to be drawn from the sudden appearance of the reference to Saudi shareholders? I -- all that's saying is we are likely to get major regional investors involved, and we're already planning that. We've made that clear in the slide showing the structure of the Tulu Kapi investment for years now, and -- but now because of the takeoff of Saudi Arabia and the takeoff of our joint venture in Saudi Arabia and the takeoff of the capital markets in Saudi Arabia, there's more likelihood that Saudi investors will become part of it as well. That's just -- it's not saying anything profound. KEFI stated in the fourth bullet point on Page 5 of the progress report of 23rd of January that KEFI -- that TKGM owes KEFI circa $12 million via KME. [ Full exercise of warrants ] will provide GBP 14.4 million. Will the company now clarify, how much [ further will be ] paid into TKGM; and thus clarify, how much of the GBP will be -- remain to fund operations outside of Ethiopia? No, we're not ready to do that. We have to sort of -- we have to close so we know exactly how much of that warrant money is required and how much of that TKGM money can be repaid to KEFI. That's what we're doing. We're [ jolting ] everybody into position and closing. We've got it covered one way or the other, you might say. "What is the situation with the exploration licenses around Tulu Kapi? The previous [ mines minister ] said -- was said to have awarded them to a Hong Kong shell company." We're addressing that matter. What happens if the warrant at 1.6p are not exercised? How will this affect Tulu Kapi? The market will set the price. And the company will deal -- if the market is 1p or 10p, we'll deal and get the show on the road. The value of the shares is theoretically 10p at today's metal prices. So the market will set the price. "Does KEFI intend to mine all these licenses themselves, or are they looking to joint venture?" I think that's referring to all the licenses we have in Saudi Arabia. We recently issued 15 licenses in the space of a year, which is compared with a handful in the previous 14 years which shows you how much the country is taking off on minerals and, I suppose, how well respected our joint venture is there. As an answer: Some exploration licenses will flop. Exploration is exploration. It's not a -- that's why it's called exploration. So -- and our success rate of 2 discoveries out of 3 or so licenses historically is incredible. It's amazing. And I don't -- I'm not suggesting we're going to have 12 discoveries out of 15 licenses in the future. That would be a first for mankind. Whatever the rate of discovery is, we'll give it a good shake. And we've got an excellent team and a fantastic database we've developed over 15 years, so we are extremely well positioned. And the JV partners will do whatever creates best value for the JV. It might be developing it like we are proposing with the 2 discoveries to date. It might be joint venturing it with somebody else if that makes sense because it's multibillion-dollar deposits and best to bring in a major. We might sell it. We might be. [ The majority of the ] JV will deal with that. That will be a problem of success. And the fact that a small AIM company has put all this together will, hopefully, one day, be recognized as an achievement as we move forward. The AIM market itself has been particularly weak. And obviously we've relied on our financial engineering and other geological and engineering skills to bring these projects to where they are and where they will be shortly. And we will take the company onto major stock exchange boards internationally as well as in London in due course as we put the runs on the Board and the value of the company progresses up the curve to its theoretical present values of hundreds of millions of pounds. So that's the game we're in to create enormous wealth in this high-risk game. We've certainly demonstrated high risk. I think anyone who's watched us has seen it. And I think we're in a better position than ever to start to generate the rewards that compensate for the high risks we've all had to live through or have been with us for some years. I'll leave it there. I do have to run off to the airport. And I appreciate your attention. As I said, we picked up the top 20 questions that we can work our way through. And everything else, we'll write up answers and put them on the website when we get a chance. Thank you very much. And have a good evening or morning or whatever it is wherever you are. Thank you very much. Thanks.

Harry, that's great. And thank you once again for updating attendees online today. Could I please ask attendees online not to close this session, as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of KEFI Gold and Copper PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.