KEFI Gold and Copper plc (LON:KEFI), the gold and copper exploration and development company focused on the Arabian-Nubian Shield with a pipeline of projects in the Federal Democratic Republic of Ethiopia, and the Kingdom of Saudi Arabia, has advised the Board of Tulu Kapi Gold Mines (TKGM) has formally launched the Project.
The TKGM Board includes representatives from both KEFI and the Ethiopian Federal and Oromia Regional Governments. This decision to launch Tulu Kapi follows deployment of dedicated site policing and the conditional confirmations that quickly ensued from all members of the Project’s finance syndicate.
An updated corporate presentation will be uploaded to the company website and includes a summary of Early Works, Major Works, Key Milestones, Finance Plan and Key Economic Metrics which are summarised below.
Early Works until September 2024:
· Completion of preparation for community resettlement;
· Detailed engineering for procurement;
· Community consultations on social development plans; and
· Recruitment and other organisational development.
Concurrent closing of project financing:
· Independent monitoring over the next few months that Early Works’ field activities progress on schedule under the newly established policing and related safety protection systems;
· Satisfaction of all other conditions precedent, all usual for such a transaction and mostly administrative;
· Execution of definitive detailed documentation; and
· Drawdown of financing syndicate equity-risk capital October 2024 to mid-2025 followed by debt capital.
Major Works from October 2024:
· Procurement and fabrication of plant internationally;
· Resettlement of community;
· Site earthworks;
· Grade-control drilling;
· Transportation to site and assembly of plant and associated infrastructure;
· Mining; and
· Definitive Feasibility Study (DFS) on underground mine.
Finance Plan includes:
· Debt Risk Capital:
o US$190 million secured debt from the development banks.
· Equity Risk Capital, excluding historical investment of c. US$100 million sourced from KEFI’s shareholders:
o US$110 million Equity Risk Note sourced by KEFI from Ethiopian subsidiaries of multinational corporations, repayable in cash or, at KEFI’s election, with KEFI shares issued at market prices (VWAP) in the second year of production; and
o US$20 million TKGM share subscriptions from Federal and Regional Government.
Key Economic Metrics, using the same financial model and underlying metrics reported in the recent Quarterly Update – see announcement 13 May 2024:
· Employment: approximately 1,000 direct jobs and 5,000-10,000 indirect jobs;
· Foreign Direct Investment of approximately $500 million including historical investment;
· At current gold price of c. US$2,350/oz:
o Hard currency exports of c. US$377 million average per annum;
o Royalties and taxes of US$69 million average per annum; and
o Operating expenditures c. US$119 million average per annum, with preferential procurement locally, subject to quality and price.
· With AISC c. US$887/oz (All-In-Sustaining Costs) and Break-Even Costs (including debt service) c $1,315/oz, the project provides an attractive IRR to equity of +50%; whilst at gold price US$1,550/oz, the IRR still remains +20% (noting that because of the lower impact of the gold-price-based royalties, AISC drops to US$831/oz and Break-Even Cost drops to US$1,091/oz).
Recently approved exemptions from exchange and capital controls facilitate that investors and other financiers are assured of unrestricted capital servicing.
Harry Anagnostaras-Adams, KEFI Gold and Copper’s Executive Chairman commented:
“Our launch timing is fortuitously coinciding with the improved conditions in Ethiopia and all-time high gold prices. Tulu Kapi’s high grade and high process recovery, combined with our project design, has resulted in a robust set of economics for long-term operations which should support further exploration and development along with good opportunities to continue supporting local social development projects such as the already provided local school and water supply. The returns for the capital investors and lenders are attractive and the recent exemptions from exchange controls has rendered the Ethiopian mining investment climate internationally competitive.
“We can now proceed to safely complete our Early Works on schedule and satisfy all conditions precedent to drawdown full project finance as outlined, thus enabling the Major Works to commence from October 2024. This deliberately sequenced and disciplined approach is commensurate with being a first mover adhering to the highest performance standards in respect of safety, social, environmental, technical and other aspects. We are determined to ensure that Tulu Kapi preserves its standing as a showcase project for an important new business sector for Ethiopia.
“We greatly appreciate the support of the community and all local and international stakeholders.”
