Kefi Gold launches strategic review of GMCO joint venture

13th Nov 2024 14:56

(Sharecast News) - Kefi Gold and Copper announced a strategic review of its stake in the Gold and Minerals (GMCO) joint venture in Saudi Arabia on Wednesday, which it holds with majority partner Abdulrahman Saad AlRashid & Sons (ARTAR).

The AIM-traded firm said that as part of the review, it would forego a $10m investment to maintain its 25% interest, resulting in a reduction of its stake to 15%.

Kefi said it was also evaluating the potential sale of its remaining 15% stake in GMCO, with proceeds from any future sale potentially providing further capital for the company.

The board said the decision reflected Kefi's strategic priority on majority-owned projects, particularly the Tulu Kapi Gold Project in Ethiopia, which was nearing financial close, as well as its significant exploration pipeline in the region.

ARTAR had solely funded GMCO's recent exploration activities, covering Kefi's share, with the dilution based on the historical cost of investments by both partners.

Kefi said it believed any potential sale of the 15% stake could yield a premium, though there were no guarantees.

GMCO, which had spent around $80m on discoveries and feasibility studies, was preparing for significant growth and had outlined a two-stage development plan for its key projects - the Hawiah Copper-Gold-Zinc-Silver and Jibal Qutman Gold deposits.

Initial development would focus on open-pit mining of shallow oxide ores with carbon-in-leach processing, followed by further exploration and expansion to access deeper resources.

Additionally, GMCO said it was set to expand its regional exploration efforts, drawing on its extensive experience and data from 15 years of exploration in Saudi Arabia.

Over the next six months, Kefi and ARTAR would assess strategic options to maximise GMCO's growth and value, ensuring alignment with Kefi's focus on its majority-owned projects.

"Both of Kefi's host countries, Saudi Arabia and Ethiopia, have recently pivoted towards an improved environment for mining," said executive chairman Harry Anagnostaras-Adams.

"And the gold price is at all-time highs. In that context, Kefi considers it important that the two operating partnerships play to their strengths and capitalise on the market dynamics in each country.

"Today's announcement of the strategic review at GMCO reflects that the partners will, over the next six months, review various scenarios to determine the best way forward for the joint venture to build on its successful discoveries and feasibility studies."

Anagnostaras-Adams said that in the meantime, the Kefi board believed it was in the best interests of shareholders to remove the outstanding exploration liabilities with a consequential reduction in the company's stake in GMCO.

"Kefi has made it clear that the priority for its capital is to now optimise shareholder value via majority-owned projects."

At 1414 GMT, shares in Kefi Gold and Copper were down 1% at 0.61p.

Reporting by Josh White for Sharecast.com.