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

It's to provide the legal capacity for the Board to have maximum flexibility.

Excellent. In terms of the share price, and this is probably the last 1 on this. The question says, despite the substantial progress, share price remains significantly below many investors' expectations. What milestones do you think are going to help close that gap going forward? And another question says, why should I invest in KEFI rather than waiting in a couple of years and you'll be in production?

I won't give advice on people making their investment choices because it really is up to them what their risk return profile is and what their portfolio is and what their personal priorities are for their family and far be it for me to tell an individual what to do. But to answer the question in respect of the -- how to bullet the derisking of the company's value and how the shares should sort of adjust themselves. I think what's referred to as the curve is a really, really good theoretical sort of thought provoker. I personally like it a lot. It doesn't mean to say it acts in perfect symmetry and you can predict the world from day to day, but it's basically reflecting the fact that as one risk project at key points of derisking. One would expect ordinarily to close the gap between whatever the share market cap is and the theoretical value. In my observation, in my working life, and I started my career as an investment banker valuing things all the time and so on. And around production time, in a positive environment and a company that knows how to grow that demonstrates it knows how to discover and perform. One would expect it to be trading at some premium above NPV at 5%. That's industry standard statistic. It's not just a made-up number, it's just empirical fact. And wherever you are in the stages before production, empirically, statistically, one is likely to be at a discount. Today, we've barely started construction, and we've barely closed the financing -- and so we're at a pretty big discount. And that will close. drawdown of the first debt, I'd imagine would be a significant milestone for beginning to close the gap, so to speak. Eddie sitting at the next webinar or 2 or whatever and saying we're still on track and the doses have turned up on site and the bore mills half built over there in in the factory. We'll just keep closing the gap. And then when Jeff ends up in just look what we found down the road, it will jump a bit further. Is the process as we do risk because it's been a very hard road. And it's perfectly understandable that the markets, if you like, cynical until it sees the evidence of progress. I think that's just natural sensible human conduct. So I don't think it's anything other than normal. And this recent few months has been thrown, if you like, the whole index has been straight. The whole sector has been strong by the geopolitics of that area. -- scrambling around to get diesel and to keep the show on the road. No 1 anticipated that 4 months ago, but the whole world have to scramble around to get diesel. And we have the screen on a lot less than a lot of mining companies would have had to, I'm sure. So again, I was asked the question -- a major institution rang me up the other day and said the same question, why is the share so weak? I said you're a student of the market every day. I don't star at the shares every day. I don't pretend them a good share trader. It's not what I do. But I said, would you mind just looking up the index that you use to measure the sector and just compare our share price from the first of March onwards. And that as we were talking, this institutional guy managing well over $1 billion. I looked up the index and say, oh, you're actually the same as the index -- we index go down for the last 3 months. It's less to do with e to do with geopolitics and what's happened at the gold price. So I think we'll break out when we put runs on the board. And I think the last few months, we've been following the index. And it's a very depressing thing just to follow the index. I'd like to think we do better than the index, but there you are. That's what's happened.

Well, thank you, Harry, and understood. You mentioned a progress to the Cathy. Eddy, hopefully, we'll be able to share some photographs and other things showing the developments of sites. -- respecting the fact that there may be security constraints on what exactly we can share.

I'm looking forward to showing progress on housing, work earth works and things like that. And you're right, there are constraints around what we can and current photograph there. You have to remember, we have a lot of security on site. And a lot of what we do is quite confidential, understandably because it's about keeping people safe. and secondly, equipment and asset safe.

Yes. Understood. Moving on to management. We've had a number of questions on this. I'm going to start with the blunt question at the top. This one to you, Harry. The question says, when will you retire?

I think a question might be from my wife. -- believe it's anonymous, I don't know. Well I think that what's happening in the industry is a once in a lifetime for me, at least. Never never has the industry been better positioned globally. Secondly Ethiopia for the private sector and for the gold sector, in particular, has never been positioned like this ever. It was the world's last empire, the only country in Africa never to have been colonized and has only just opened its doors and we're the first guys who've done it to international standards and which is why Jeff was asked to come back because we are running around looking at things before the pack turns out. In that environment, coupled with the fact that we've launched this very large development program based on trust that's been developed over a decade or more with the government, the community with major development banks with local investors with local leaders like Atos, with our own staff who take it on this mission and they didn't need to. There's no way I'm walking out tomorrow. I'm going to deliver on my word and -- it's both commercial and contractual and moral commitment to deliver. Having said that, we've already started building succession -- and if I fell under robust tomorrow, I don't believe you'll skip a beat. Moreover, touch wood. I'm not filling under a bus tomorrow and in a few years' time, having delivered on our promise I'll be very proud of the team that's in place. And if they want to ask me any questions for any support, I'd be more than happy to turn up and give it, but they'll probably push me out of the way by them. So that's it's a long-winded answer, but it's a simple truth that 1 has to follow through and deliver on our word before we move on.

Thank you, Harry. You talk about the wider management team. Eddy and Jeff, maybe if you could just give us a very short overview of your roles within the company and what your focuses are.

Jeff, do you want to.

No, you go ahead.

Eddy Solbrandt, I'm the Chief Operating Officer. I've got an interesting portfolio. I'm the Project Director for all my sins. So I've got to deliver this project in full, but I've also got to build the operating organization and get the company ready for operating and build the structures, the systems, the processes and also the culture that underpins all of that.

Well, I'm a geologist, and my role is to find another deposit as simple as that and has to be a stand-alone deposit. Our target is roughly 1 million ounces, but that it could be higher or lower depending on the grade. And the current gold price, you can go down to mine some pretty low grades and make a lot of money. In Australia, for instance, there are some underground mines that are making huge profits at 3 grams per tonne. We wouldn't have thought that years ago. So at Tulu Kapi itself, we've got around about 300,000 ounces outside the pit. And we need to expand the underground. So we're looking at 1 million-ounce target for the underground at Tulu Kapi. Elsewhere, I was talking earlier about the opportunities in Ethiopia. And we're looking for stand-alone projects.

Excellent. Thank you. Eddie, you talk about the organizational culture. Is that Australian -- is it -- it seems to be an Australian bias to the team.

Excuse me, I'm a German, and you can tell by the accent. No, it's not. We have -- I think we've got 1 Australian in the management team who really is an Australian Armenian. He's been living in Armenia for 25 years. We've got 2 Ukrainians. We've got at least half a dozen or more ethiopeans. Let me see, we've got 2 Namibians South African and probably an English manor 2, I can't remember at the moment. So it is a multicultural environment. But the standing point is taking these unique experiences that everybody has, from different cultures and blending them into a very vibrant safety conscious, resilient culture that is uniquely is.

Thank you. Moving back to Addis. You're obviously involved with a number of significant businesses and investment initiatives across Ethiopia what was it attracted you to join the Cathy Board and what continues to give you comments in the company's prospects and the team you're working with?

So I mean, I'll be honest, I'm my heart on Latino and myself. So I would say Harry is a very convincing young man. In terms of Easter niches and convincing people, and it looks like a tidy barbed is also a bit for what it needs to be. I've learned a lot. But beyond the personality of Harry, I think he's passion for the project and more so he's passion for the country. is actually what can Visp. Harry is very, very, very passionate about Ethiopia. He understands it and in ways that I haven't seen before. I advise a lot of foreign investors coming into Ethiopia, including Alicante, which is the largest investor in the country and Harry's as passionate as they come. And that's what kept me.

Thank you, Addis. We now move on to a few sort of clarification questions, and the first one does relate to what we've just been talking about. The question asks this is all well and good, but why should shareholders approve more incentive options for management at the AGM.

We're not actually asking for anything different. The shareholders have approved it every year in the last 20 years that so many options can get allocated as an incentive and we're just asking for that policy to be refreshed and renewed. That's all it is. It's no different to what's been approved every year for 20 years. And we pay average salaries for the industry. I get criticized occasionally by people saying, "Oh, it's much above average earnings in this country or that. It has nothing to do with average earnings in a country. To do with an industry attracting industry experienced people for starting up a gold mine and doing it in a country for the first time and you have to pay them average salaries and average incentives or they simply won't turn up or should they. It's not a charity. Why would they work for less than what is industry standard -- so it's not -- we're not trying to propose anything different. It's what's always been refreshed annually. And so that's what we're doing now. And I think the other -- probably the other point to comment on the option scheme is that Essentially, it's a reward potentially for the value of the company increasing significantly and sharing some of that with the people who are on the ground away from their families much of the time, nearly all of the time and dealing with the issues day-to-day with security or whatever at the sort of the mine phase, so to speak. And as I say, they're doing it to add value. They're excited. They love their work and they want to make some money. It's as simple as that. And for the options to have any value, I mean, the options are exercisable at 2P, which is at issuance. I think there was 60%, I think, from memory, above what the share price was. So they had to add a lot of value, if you like, before their incentives could create any value for them. So I hope that answers the question.

Yes. Thank you. Just going through others that have just come in. 1 for you, Eddy. The question says, how do you think about the execution risk for Tulu Kapi and the over 1,000 line item plan that you're going through? Is there any particular aspects of concern until first gold pool?

I guess the biggest concern is always community. We are relocating 360-odd families. This next phase involves 1,001 parcels of land. So you are always conscious that moving our community is a stressful thing for the people that are being moved. I mean everybody's moved house, I guess, once and you know what that entails. So I'm very focused on making sure that we community relations well. But also, as I said earlier, monitoring the critical path. And that's that golden thread that if we cross that line, we're going to slip behind.

Okay. Another one question, just a bit of clarity on debt drawdown. Can you give an indication of broadly when the first debt drawdown is expected? And what will those proceeds be used for?

The disbursement schedule is ex budget of X and Y and Z dollars and per month for 27 months. And the first $100 million approximately is from equity and the next $240 million approximately is from debt that first $100 million takes us to around about October, perhaps early October. It depends on the flow from week to week. And then one draws down from there on. And the money is going off in different directions. -- continually, obviously, some of it for procurement of the next item for fabrication and whatever it is required for that piece of the job, as Eddy said, this whole package of jobs. And the budget allocates month-by-month progress claims and progress payments on edge package of work.

Thank you. We're now drawing to the allotted time. But you're all with me in London this afternoon. I know that the Board have been having various meetings discussing various topics, meeting with advisers, pesumably, one topic that has been on the agenda is the to the main market of the London Stock Exchange. Harry, in particular, is there any comments that you can make on that process.

The first comment I'd make is that a couple of years ago, we had no global institutional shareholders on the register, the parent company register. We have one of the main families of Saudi Arabia as a partner in the country. We have the government as a partner in Ethiopia. But on the parent company share, we just had always effectively been supported by -- mostly by long-standing, relatively small investors compared to the global institutional market. And a couple of years ago, 1 or 2 quite large institutions joined the register and in the last 6 months, I think $8 plus $1 billion institutions, 2 of them, over $1 trillion institutions joined the register. And they joined the register with a view to growing their investment with the progress. And that's a very deliberate move on our part to strengthen and deepen the capital that's behind the company. And all the capital providers are comforted by allowing big institutional shareholders to join the table. If there's a problem, if there's an opportunity, big deep pockets. So there to support the company if it needs support. And that's a good risk mitigant as well as opportunity maximize for everybody. In that context, we have to go to a main exchange. There might be that many global institutions who come in on the stock exchange. But there's sort of that many who can come into a main stock exchange. And we've made the decision that, that would be the London Stock Exchange even though we could go to the ASX on the TSX, but we've decided to go to the London Stock Exchange. And some of the discussions during the course of this week have been with the sponsor that's been appointed for that transition to the main exchange, the stock breaking Stifel and legal advisers have heard Burt Smith the Board and senior executives. And so we've gone through that in some detail, the Finance Director, who couldn't make this particular session is up to his balls as we speak in detailed planning of what that program entails and the work that has to be carried out for it. So we're getting into the detailed planning stage now. I can't tell you what the Finance Director has concluded with the brokers and the advisers. But they're all meeting and working through and they're selling a schedule of works and timetables in order to do it as fast as is reasonably practicable and professional. So it's on the table. It's being worked on. We met in London for that reason, amongst others. And we took the opportunity to have this were but a whilst we're all here, and I had a team with me, which isn't always together. So we're working on it, and we're rolling up our sleeves on it, but it's too early to say when it can happen until we've done all the homework properly.

l, thank you, Harry, and thank you for everybody who's submitted questions in advance and during the course of this session. We've now reached a lot of time because I know you've got other things to move on to later today. But thank you very much, Harry. Thank you, Addis. Thank you, Eddy, and thank you, Jeff. Thank you, everyone.

Thank you to the leadership for joining us today. That concludes the KEFI Golden Copper live interactive discussion. Please take a moment to complete a short survey following this event. The recording of this event will be made available on Engage investor. I hope you enjoyed today's webinar.