Katoro Gold plc (Incorporated in England and Wales)

(Registration Number: 9306219)

Share code on AIM: KAT

ISIN: GB00BSNBL022

(“Katoro” or “the Company”)

 07 May 2020

Katoro Gold plc (‘Katoro’ or the ‘Company’)

BLYVOOR GOLD PRODUCTION JV – SCOPING STUDY RESULTS

Katoro Gold plc (AIM:   KAT), the AIM listed gold and nickel exploration and development company, is pleased to announce the results of the scoping study (the ‘Study’) completed in respect of the Company’s Blyvoor near term gold production opportunity (the ‘Project’).

HIGHLIGHTS:

·    The Study demonstrated an unlevered Project Net Present Value (‘NPV5’) of US$131million, a 25% Internal Rate of Return (‘IRR’) and a Return on Investment (‘ROI’) of 260%

·    Mine life of 25 years building to a production capacity of 500,000 tons per month and 35,000 ounces of gold production per annum. Overall production of 661,171 ounces of gold over the 25 years, generating revenue of US$992m

·    Low cost operation with an estimated All-in Sustaining Cost (‘AISC’) of US$727 per ounce of gold and an All-in Cost (‘AIC’) of US$920 per ounce of gold. Total Project capital costs of US$110m across the life of the Project, with peak funding requirement of US$36.4m

·    The Study utilised a gold price of US$1,500 per ounce compared to the current price of c. US$1,700 per ounce

·    Based on the current data available, Minxcon has estimated the potential Mineral Resource at the Project which is used in the Study to be 1,290,000 ounces of gold with 277,000 ounces in the Measured and Indicated categories and 1,013,000 ounces in the Inferred category

·    Following rigorous independent evaluation and assessment the Project demonstrates robust technical and economic viability

Louis Coetzee, Executive Chairman of Katoro, said: 

“When Katoro signed the Project agreement in January 2020 we believed the Project represented a unique opportunity for near-term gold production and potentially considerable financial returns.

“We were keen to subject the Project to thorough independent validation, and the completion of the scoping study was an important step in that process with pleasing results.

“The Study (Preliminary Economic Assessment) results announced today have exceeded the board’s expectations and importantly back our initial confidence by demonstrating the robust technical and economic viability of the Project.

“The Study has highlighted areas where, in the build up to production, we can add further technical and economic value, and has confirmed that sufficient historical work has already been undertaken to allow the Project to immediately progress to the definitive feasibility stage.

“A detailed review of the Study is now underway and a further update to the market will be provided in due course considering the findings in detail and outlining the next steps in project development, including with regard to project level financing negotiations.”

BACKGROUND:

On 30 January 2020 Katoro entered into a binding conditional agreement to form a 50/50 unincorporated joint venture (‘JV’) with Blyvoor Gold Operations (Pty) Ltd (‘Blyvoor’) and its holding company, Target Mine Consulting (Pty) Ltd (‘Target’). Katoro and Blyvoor are together, the JV Partners.

Blyvoor has the necessary mining licence, environmental impact assessment (‘EIA’) and supporting approvals in place to commence operations once funding has been secured and plant construction completed. The life of the “New Order Mining Right” is thirty years, renewable in 2047, and the EIA (approved in 2000) was updated in 2017 to reflect the proposed mining process for the tailings dam.

SCOPING STUDY RATIONALE:

Minxcon (Pty) Ltd (‘Minxcon’) was mandated by Blyvoor Gold Operations (Pty) Ltd – on behalf of the JV Partners – to complete a Scoping Study on the Blyvoor Gold Tailings Retreatment Project situated in Carletonville, South Africa to independently assess and evaluate all historical technical studies and development work that has been done in terms of the Blyvoor tailings facilities, to amongst others provide an opinion on:

·    Whether the historic technical work done is adequate in scope and standard to immediately proceed with a definitive / bankable feasibility study; and

·    Economic, technical and operational feasibility of the Blyvoor gold tailings retreatment project

Blyvoor had completed a number of studies in developing the project. Minxcon was mandated to review, optimise and collate these into a single scoping study (Preliminary Economic Assessment) on the TSF retreatment project.

SCOPING STUDY KEY OUTCOMES:

Important Information for Shareholders

Katoro shareholders should note that there is no certainty that the Project Funding will be secured for the construction and commissioning of a plant to reprocess material from the Tailings.  In the event that the Project Funding is not secured, the conditions of the Agreement will not have been satisfied and the JV will not be formed, meaning that the Company will have no interest in the JV and/or the Tailings.  Katoro shareholders should also note that in such an instance, whilst the Loan would become repayable by the JV Partners pursuant to the terms of the Agreement, there is no guarantee that the Loan will be repaid in full or if it is repaid, will be repaid in a timely manner.

Katoro shareholders should be aware that there is no certainty that the projected returns set out above for the Project will be achieved, as there is no certainty that the Project Funding will be secured. The returns to Katoro will also be affected by the structure of the Project Funding, which the Board currently expect to be fully funded by debt.  The Project Funding terms will affect how economical the Project is to the Katoro shareholders.  In addition, if the Project Funding is in the form of a mixture of debt and equity, as opposed to just debt as currently proposed by the Board, it could potentially lead thereto that the Parties interest in the JV could be diluted.

Also, there can be no guarantee that in the event that the Tailings are reprocessed, that the projected production and/or recovery rates will be achieved, or that the targeted 500,00tpm of material within three years will be achieved, which could result in lower returns and which may require additional funding to be secured.

Unless defined specifically in this announcement, terms in this announcement will have the same meaning as defined in the Company announcement of 30 January 2020.

This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) no. 596/2014.

**ENDS**

For further information please visit www.katorogold.com or contact: