14th Oct 2015 09:21
LONDON (Alliance News) - Kefi Minerals PLC shares rose on Wednesday after it said it has appointed African Mining Services as its preferred contractor to establish the mine operation at the Tulu Kapi gold project in Ethiopia, its second appointment for the mine in two days.
Kefi shares were up 11% to 0.470 pence per share on Wednesday morning.
The miner said African Mining has "strong African operations and a successful track record". It is a subsidiary of drill and blast exploration company Ausdrill Ltd.
Under the contract, African Mining will conduct pre-mining earthworks and define the life of the open pit operation, with payments being based on each cubic metre of development delivered. Kefi will still determine some of the input costs that African Mining must use, such as the cost for fuel and explosives to conduct the work.
The next step for the pair is to jointly optimise the detailed operating plan for the benefit of the project and to prepare matching detailed contractual documentation.
In the meantime, Kefi reiterated the current estimates that the operation will have an all-in-sustaining cost of around USD760 per ounce. To put that into context, gold was trading at around USD1,175 per ounce on Wednesday, which would give the company around a USD415 per ounce margin based on those current figures.
The peak funding requirement of USD120 million was also reiterated, which will still be split between USD100 million of debt funding and USD20 million of project equity funding from the government.
African Mining Services is the second preferred contractor appointed by Kefi. On Tuesday, the miner said it had chosen Australian-based mineral processing and associated infrastructure company Sedgman Ltd.
Sedgman was contracted for the front-end engineering and design work for the plant at the project whereas African Mining Services is responsible for the mine itself.
In that announcement about Sedgman, Kefi said it will produce more gold for the same amount of funding compared to previous estimates and said it has also hired Sedgman on a fixed-price basis which could bring down costs and minimise potential cost over-runs in certain areas.
The estimated capacity for the plant that will be built by Sedgman will be capable of processing 1.5 to 1.7 million tonnes of ore per year, costing Kefi USD63.0 million.
That compared to previous estimates that it would need to spend USD61.0 million for a plant capable of processing only 1.2 million tonnes of ore per year. The previous estimates also did not envisage the contractor work being carried out under a fixed-price deal, meaning the chances of cost over-runs has now been alleviated.
In the first five years of production at Tulu Kapi, Sedgman believes Kefi will produce 105,000 ounces of gold per year, up from previous estimates of only 80,000 ounces per year.
By Joshua Warner; [email protected]; @JoshAlliance
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