KEFI Minerals : Half Year Report

27-28 Eastcastle Street London W1W 8DH United Kingdom

Tel: +90 232 381 9431

Fax: +90 232 381 9071

Email: info@kefi-minerals.com

KEFI Minerals (AIM: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and Democratic Republic of Ethiopia, is pleased to provide an update on development funding and announces its unaudited interim results for the half-year ended 30 June 2016. The statement below encompasses the activities of the Company's subsidiary, KEFI Minerals (Ethiopia) Limited ("KME"), in Ethiopia and its joint venture, Gold & Minerals Limited ("G&M"), in the Kingdom of Saudi Arabia.

• Despite the expansion of activities since the full permitting, in April 2015, of the Tulu Kapi Gold Project ("Tulu Kapi" or "the Project"), KEFI has maintained tight cost control, illustrated by Administrative costs at £861,000 (H1 2015: £876,000)

• At Tulu Kapi, the Company has assembled an experienced development team and first-tier backers, including government, industry and financial organisations, and is poised to trigger the development by the end of 2016. The Project targets:

  • Steady-state gold production of 115,000 oz pa from 2018 from the open pit at an impressive All-in Sustaining Costs ("AISC") level of c. US$746/oz

  • Cash flows in the first 3 production years sufficient to repay all project debt, fund the development of the Tulu Kapi underground mine as well as the equity component of the initial operation in Saudi Arabia, exploration and consideration of the commencement of dividends

• In Saudi Arabia, KEFI's gold discovery at Jibal Qutman has shaped up to be a viable project based on preliminary analysis, with a low-capex requirement and an apparent capacity to generate the net cash flows for financing an ambitious Saudi exploration program by the G&M joint venture, of which KEFI is 40% owner and operator. G&M targets:

  • To apply for a mining licence at Jibal Qutman after assessing the outcomes of the Government sectoral policy review, which is expected by year-end 2016

  • To explore its large portfolio of licences and applications, starting with the large target for precious and base metals at Hawiah, where G&M has commenced fieldwork, focusing on depth-measurement of large buried targets using geophysical surveys, as a prelude to drilling

• Raised £1.75 million (c. US$2.5 million) through the placing of new ordinary shares at 0.35p per share to provide working capital pending arrangement of Tulu Kapi project finance

• As part of preparations for the development phase, Mr John Leach has joined the senior executive team as Finance Director and Mr Mark Wellesley-Wood, experienced African mining operator, joined the Board as Non-Executive Director

• Since 30 June 2016, the Company has fully discharged the inherited VAT liability and is now entitled to an ETB73,497,020 refund (approximately £2.5 million) and also raised approximately £3.8 million (approximately US$5 million) on the 26 July 2016, before expenses, through the issue of 761,921,740 Placing Shares at a price of 0.5p per share.

Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals, commented: "We are pleased with the tremendous progress made in the first six months of the year as we built on the momentum of 2015. In particular, the progress made on the ground at the Tulu Kapi Gold Project in Ethiopia has been excellent. The project economics are better today than at any time and with all-in costs estimated at US$746/oz, we believe it puts the Tulu Kapi project in the lowest cost quartile of gold producers globally.

"In the second half of the year, our focus is on working with the Government of Ethiopia on the community resettlement, livelihood restoration and community resettlement programmes. Also, we are in advanced discussions with potential finance syndicate participants. As a result, the Board looks to the future with confidence."

In the first six months of the year, the Company further de-risked the Project, reinforcing robust economics with advanced plans and preparation of contractual arrangements. All-in costs estimated at US$746/oz puts the project in the lowest cost quartile of gold producers globally. On the financing side, the foundation of risk management for the finance plan is that all scheduled commitments are met even if the price of gold sits at US$900/oz.

The estimated total capital requirement for Tulu Kapi remains c. US$130-140 million, inclusive of financing costs and an allowance for contingencies, which is a significant reduction in capital expenditure from the inherited estimate of c. US$289 million. At present, the Company is structuring the remainder of the finance syndicate around the commitments from project contractors Ausdrill and Lycopodium and from the Government of Ethiopia for project-level equity of US$20 million, and for long-term loans from the Development Bank of Ethiopia for approximately half of the senior secured debt of US$65-85 million, depending upon the final preferred structure.

The Company is engaged in encouraging dialogue with a number of potential lenders as possible participants in the finance syndicate alongside the Development Bank of Ethiopia, as well as existing and potential new equity investors. The range of choices has expanded during the past f ew months, mainly attributable to a higher gold price, and are being advanced in parallel with the Project timetable.

On the operational side, the Company is actively working with the Government of Ethiopia at all levels, on the community resettlement, livelihood restoration and community development programs. The first phase of the community resettlement programme is anticipated to commence by the end of 2016. This would trigger minor works at Tulu Kapi with major works to commence in Q2 2017.

On the 7 June 2016, the Company announced the appointment of market leader Lycopodium as its Engineering, Procurement and Construction ("EPC") contractor. The Front End Engineering and Design ("FEED"), procurement, detailed engineering and preparation of contractual documentation are being conducted in parallel with the community resettlement schedule .

During the period, the Company completed an internal Preliminary Economic Assessment ("PEA") of Tulu Kapi's underground mining potential, confirming the eco nomic viability of an underground mine based on current Mineral Resources and increased combined production from the open pit and underground mine to approximately 150,000 oz pa.

(40%-owned by the Company with KEFI as operator)

In Saudi Arabia, the Company has been focusing on its near-term development proposition at Jibal Qutman where the Mineral Resources currently stand at 28.4Mt at 0.80 g/t Au for 733,045 oz of gold. This G&M discovery is shaping up to be a viable cash flow producer with a low-capex requirement and with a capacity to generate the net cash flows for financing the ambitious Saudi exploration program. G&M awaits clearance from the regulator to submit a Mining Licence for potential development after Tulu Kapi starts up in Ethiopia.

At Hawiah, G&M has identified a huge target for precious and base metals based on the surface -sampling of a six-kilometre long gossan (oxidised mineralisation exposed on the surface) and the results of the geophysical surveys of the ground beneath the gossan. The Saudi venture is a strategic long -termpriority and the Company is confident of having established an early-entrant position in what will emerge as a world-class minerals province.

Shareholders, existing and new, continued to support the Company and, on 22 March 2016, KEFI announced the successful fundraising of £1.75 million (c. US$2.5 million) through the placing of new ordinary shares at 0.35p per share (the "Placing") to provide working capital pending the arrangement of Tulu Kapi project finance.

Post period, the Company appointed RFC Ambrian Ltd as joint brokers. In addition, it welcomed Mr Mark Wellesley-Wood, an experienced African mining operator, to the Board as Non-Executive Director and appointed Mr John Leach as Finance Director as this function expands in scale and responsibility .

In addition, since 30 June 2016, the Company has fully discharged the inherited VAT liability and is now entitled to an ETB73,497,020 refund (approximately £2.5 million) and also raised approximately £3.8 million (approximately US$5 million) on the 26 July 2016, before expenses, through the issue of 761,921,740 Placing Shares at a price of 0.5p per share .