KEFI completes US$340m Tulu Kapi project financing with US$20m royalty deal

KEFI Gold and Copper plc (LON:KEFI) has reported the signing by subsidiary Tulu Kapi Gold Mines S.C. (TKGM) of a US$20 million equity-ranking-royalty with Chancery Royalty Limited. This is a key final part of the US$340 million financing package for the Company’s high-grade/high-recovery Tulu Kapi Gold Project. It has been creatively structured with Chancery Royalty to be an equity-risk ranking royalty and is payable alongside distributions made by TKGM to its shareholders.

A residual US$30 million of equity-risk capital is also in the process of being fully signed up this month. This comprises US$10 million of costs to be incurred during the two-year development programme and settled in KEFI shares at the then market price when applicable costs fall due during this period, and the balance of US$20 million as additional equity-risk ranking TKGM gold royalties issued to two other royalty investors on the same terms as the Chancery Royalty. That will formally complete the US$340 million Project finance package in an optimal manner. Therefore the Project finance package is now effectively covered and the Company is triggering implementation on all fronts in the field. Field teams and contractors have been mobilised and a ‘Ground Breaking Ceremony’ organised.

As a separate and optional matter, consideration continues to be given to the raising of capital in excess of the Project development requirements in the form of Ethiopian BIRR-denominated non-convertible, redeemable preference shares to be issued by the Company’s wholly-owned KME Holdings Limited (KME). 

These figures are summarised as follows:

Footnotes to Project Financing Breakdown:

1.    Features of Equity-Ranking-Gold Royalty:

a.    do not include any entitlement to silver.

b.    payable alongside distributions made by TKGM to its shareholders.

2.    Currency of funds raised:

a.    The Total of Funding for Development Budget US$340 million is in hard currency.

b.    The tabulated ‘Potential Funds in Excess of Development Budget’ is planned to be in the form Ethiopian Birr and represents the opportunity being offered for local participation.

3.    Purpose of offering participation to Ethiopian investors:

a.    Whilst not relying on these investors for the funding of the development budget, KEFI has from the outset offered the opportunity for local participation from both the public and private sectors. This is integral to KEFI’s ‘Ethiopianisation’ policy to maximise alignment of local stakeholders in the local business.

b.    The funds raised would be in excess of development requirements and are earmarked for cost-overrun-reserves, exploration and non-obligatory, but desirable, high-impact social development projects to be designed with the authorities.

Project Contractual Arrangements

Integral with the Project finance arrangements, the following Project contractual arrangements have been closed, or are proceeding for closing by the end of February 2026:

·    Offsite infrastructure installation agreement (with Government agencies) – being implemented in the field;

·    House construction contractor mobilised to site;

·    Lycopodium package of full construction agreements – including its fixed-price lump sum engineering and procurement contract on the back of the already-triggered early Lycopodium works. Lycopodium has already been mobilised and the full documentation for the two-year build is scheduled to be signed in February 2026; and

·    Mining services agreement with BCM including provisions for supply of the mining fleet, under an industry-conventional schedule of rates arrangement providing for payments per tonne produced in compliance with the TKGM-controlled mine plan: a re-tendering has just been closed and the finalised refined contract has been awarded, without equity participation by the contractor as was initially contemplated.

Community Resettlement

The first phase of community resettlement compensation (scheduled within the development schedule) has already largely been paid and the remaining settlements are now progressing. All new replacement lands have been confirmed in the district around the mining licence and the house construction contractor for replacement housing has been mobilised, as has equipment for initial bulk earthworks on the mining licence.

All these financial and contractual arrangements are subject to lender approvals and monitoring.

Economic Metrics

Based on the Project financing being completed as summarised above, key KEFI economic metrics are estimated as follows for gold prices in the range of US$3,000-5,000/oz i.e. these metrics take into account all costs, including debt-servicing and the maximum potential servicing costs of equity-ranking royalties and Preference Shares, as outlined above:

·    Annual production of Tulu Kapi in Ethiopia for the first three years from 2028 based on the open pit mining plan, complemented with initial underground production, and with plant throughput tuned up 15%. This is the ‘2025 Business Plan’ as set out on the KEFI website in March 2025 at: https://www.kefi-goldandcopper.com/files/files/KEFI-Tulu-Kapi-Gold-Project-Overview-March25.pdf.

·    Tulu Kapi All-in Sustaining Costs (AISC) US$1,004 to US$1,144 per oz.

·    The break-even cost after servicing all debt is c.US$1,400/oz and a significant benefit of the successful equity-ranking structuring of the royalty and Preference Shares is that neither financial instrument has any entitlement to cash flow other than via the cash flow available for dividend distribution. Therefore, the minimum break-even cost after servicing all capital (not just secured debt) has now been held at c.US$1,400/oz. In this manner, neither the royalty nor the Preference Shares impose any default-risk of financial leverage upon KEFI’s ordinary shareholders (or secured lenders). On the other hand, the IRR% for ordinary shareholders of TKGM and of KEFI have been enhanced by the royalty and Preference Shares at any gold price above an estimated US$1,946/oz.

·    Tulu Kapi NPV (5%) for KEFI’s planned 83% beneficial interest after all capital servicing at construction start is US$700 million to US$1.5 billion, and an estimated US$847 million to US$1.9 billion at production start.

·    US$148 million initial preliminary valuation of 13% shareholding in Saudi Arabian Gold and Minerals SLA (“GMCO”), based on a notional US$300/oz gold-equivalent 3.8 million oz JORC Resources on the KEFI discoveries. These are now advancing towards development under parallel Definitive Feasibility Studies: Jibal Qutman Open Pit Gold on oxide ore only; Hawiah Open Pit Gold on oxide ore only; Jibal Qutman Open Pit on oxide and sulphide ore; and Hawiah Copper-Gold-Zinc-Silver from underground mining of sulphide ores with associated metallurgical concentrating processes. The anticipated development sequence is in the order listed above, with the first development to be triggered in 2026 and the last several years later. GMCO has developed its board and management structure with board-level input from KEFI alongside independent directors with appropriate experience and the top leadership of majority shareholder, Saudi conglomerate ARTAR – the holding company for the family office of Abdulrahman Al Rashid & Sons.

·    7 to 17 pence per KEFI share (fully-diluted for warrants, options issued and options approved to be issued under the KEFI Incentive Options Plan):

o  7 pence per KEFI share is based on a gold price of US$3,000/oz, the Tulu Kapi NPV at construction start and the initial preliminary valuation of the 13% of GMCO.

o  17 pence per KEFI share is based on a gold price of US$5,000/oz, the Tulu Kapi NPV at production start and the initial preliminary valuation of the 13% of GMCO.

KEFI Gold and Copper Founder and Executive Chairman, Harry Anagnostaras-Adams, commented:

“It is an exciting time to launch Tulu Kapi, one of Africa’s highest margin new gold mine developments. Already bank-backed, Tulu Kapi has been engineered both physically and financially to be a robust for the long-term – it is designed to pay all costs and service all debt at an all-in-breakeven-gold price of c.US$1,400/oz.

“In addition, we have successfully raised significant equity capital at the KEFI subsidiary level in a manner which has minimised ownership dilution for the shareholders of TKGM and KEFI and has not increased Tulu Kapi’s already low all in breakeven point gold price of just US$1,400/oz.

“At US$3,000-5,000/oz gold, average EBITDA for the first 3 years is estimated at US$345 million to US$683 million per annum, both of which significantly exceed KEFI’s current market capitalisation.

“And we will not stop at Tulu Kapi alone. Separate teams are already working on growth plans, both in Ethiopia and Saudi Arabia. These will also be funded and managed under appropriate bespoke structures after consultation with KEFI’s partners, financiers and shareholders as required.

“The gold sector has taken off very strongly, both Ethiopia and Saudi Arabia have taken off for mining generally, and now KEFI’s development pipeline is taking off – starting with Tulu Kapi.

“This is indeed a serendipitous coincidence of several highly significant inflection points. This opportunity is well deserved by our hard-working teams and our patient shareholders, in-country partners – the Governments of Ethiopia and Ethiopia’s Oromia Region, and the Al Rashid family of Saudi Arabia.

“We are especially proud of having been a first mover for 21^st century minerals discovery and development in both of the now high-growth jurisdictions of the under-explored Arabian Nubian Shield, whilst also successfully applying the disciplines of international project financing and the highest ESG standards.”

Chancery Royalty Founder and Managing Director, Jeremy Gray, commented:

“It is my great pleasure to have been given the opportunity to introduce Chancery Royalty into KEFI’s syndicate of world class backers for the high-grade/high-recovery Tulu Kapi Gold Project. Chancery Royalty is focused on partnering with groups that boast world class gold projects and Tulu Kapi is undoubtedly the best undeveloped gold mine in Africa. KEFI has been the exemplar of long-term commitment and discipline for applying industry best practice. They have done a great job and we are here to support for the long term.“