Minesite.com - Powers On In Saudi Arabia
Kefi Minerals Powers On In Saudi Arabia, As Its Gold Resource Continues To Grow
24 Sep 2013 by Alastair Ford
A small gold exploration junior with assets in a country unused to mining? You’d expect shares its shares to have been slammed over the past year or so, right?
Though there have been ups and downs, shares in Kefi Minerals are currently trading at 2.825p, which is almost exactly where they were 18 months ago.
By some measures that performance would be marked down as modest at best.
But in comparison to other exploration juniors like Greatland, down by more than 70 per cent over the same period, or even producers like Amara, down by more than 80 per cent, it stands out as a real achievement.
So why is Kefi punching so far above its weight in such a difficult market?
Partly it’s because the company’s previous weakness – that its assets are all in Saudi Arabia – has been transformed into a strength.
Before Kefi set to work with the drill bit, investor awareness of Saudi Arabia was pretty minimal.
There was a property owned by Barrick where work had ground to a halt. There was local champion Maaden, which seemed to have snapped up the choicest assets long ago. There was a cumbersome bureaucracy that took years to grant Kefi the simplest of exploration licenses. And all-in-all there was a country completely in thrall to oil, with little apparent inclination to pay serious attention to mining.
“There were up to a dozen companies looking at Saudi”, says Kefi’s managing director Jeff Raynor. “At least six-to-ten had applications in. Most of them have given up and walked away.”
But Kefi kept the faith. After an excruciating wait, the licenses came through, helped along by Kefi’s Saudi partner Abdul Rahman Saad Al-Rashid and Sons (ARTAR), a conglomerate with interests in construction, property, agriculture and healthcare. Kefi immediately set to work with the drill bit.
“We are now the only foreign company active in gold exploration in Saudi”, says Jeff.
Given the amount of ground the company has either under license or under application – around 2,000 square kilometres – and given the results it’s been getting so far, it’s no wonder investors have been taking an interest.
Never mind that the gold price is easing away from US$1,350 back towards US$1,300 and possibly lower, the company is already well on the way to its stated target of a one million ounce discovery.
“It’s a pretty unique area”, says Jeff. “It’s Pre-Cambrian terrain. Albeit that Maaden’s got a big slice of the action, we’re in a pretty unique situation. We are getting licenses, we’re moving quickly. Within eight months of starting to drill we announced our first resource.”
The Jibal Qutman license now boasts 415,000 ounces at 0.89 grams per tonne, and counting. “We’re growing the resource”, says Jeff.
“We’re still drilling away. We haven’t closed off the resource. The resource estimate we have goes up to the first week in September, and used the data we had available. But there’s a backlog of samples. We’ll keep drilling until we find the end of it.”
So how many ounces could there be at Jibal Qutman, the first of Kefi’s 21 granted and pending licenses. “I’d hate to put a number on it”, says Jeff. “But each of these little pods have 50,000 to 200,000 ounces each.”
There are drill targets three kilometres, four kilometres, and five kilometres away from the northern tip of the known mineralisation, so there’s definitely potential for more. “Clearly we can double it in the mid-term”, says Jeff.
After that, who knows?
Having said that, there will come a time, probably at the end of October, when the exploration drilling pure and simple will ease up, and the company will start to look a little bit more closely at what’s already in the bag.
“We’ll isolate out an amount of resource and do a feasibility on that”, says Jeff. “We’ll concentrate on that area, do our metallurgy, mine planning and infrastructure.”
In the meantime, an application will go in for a mining license, and infill drilling will continue.
The mining license won’t take as long as the exploration licenses did, according to Jeff. “The exploration license involves 12 government departments. When it comes to mining we don’t have to go back to those departments. Three mining licenses have been granted over the last few years. They took less than 12 months.”
So that bodes well, but in the meantime Kefi needs money to keep going. Now that it’s taking great strides in Saudi Arabia this is proving less of a challenge that it was before. The company raised £550,000 in July at 2.1p, and Jeff subsequently put £21,000 of his own money in on the same terms.
“We’ve got sufficient to take us through to the first quarter of next year”, says Jeff. “Being a joint venture, 40:60, that’s been a help stopping cash burn. So when we do go and raise funds, we’re not asking for much.”Critics will say that Jibal Qutman is low grade. But Jeff has an answer for that.
“Because we’re in a low cost part of the world our studies show it’s economic. It has a low stripping ratio. It’s a shallow-looking pit, around 400 metres in width and seven metres deep. And we know of deposits similar to ours where they’ve found higher grade feeder zones.”
The next few months should be very interesting indeed.