KEFI Minerals plc (LON:KEFI) has today advised that the National Bank of Ethiopia, Ethiopia’s central bank, has now approved the signed term sheets with the project finance banks who are expected to provide the long term development debt finance to the Company’s Tulu Kapi Gold Project.
This reaffirms the Government’s ongoing support of the Company and its project finance plan for Tulu Kapi Gold Mines Share Company (“TKGM”), as set out in the Company’s announcement of 2 December 2019. As previously stated, the two proposed senior debt underwriters and co-lenders are leading African banks and this approval will now trigger their normal processes for credit approval and documentation, with a view to full financial closure later this year in accordance with recent Company guidance.
In addition, the Company has also received confirmation that the National Bank of Ethiopia has now registered the past investment in the Project of US$49 million in the period to 31 December 2014 by TKGM, which inherited the rights and obligations of the historical work and spending by KEFI Minerals (Ethiopia) Ltd, a wholly-owned subsidiary of KEFI. Subsequent pre-development investment will also be registered in due course, relating to expenditure during the period 2015-2019 in the lead-up to the recent commencement of Project development activities. This is important because this past investment ensures compliance with the 30%:70% (equity:debt) capital ratio as approved specifically for foreign direct investment into the Project.
These central bank approvals are material to KEFI as they clear the way for full project finance completion, as do the various related and previously reported approvals by the central bank, which included the setting of the permissible capital ratio for the Project, permission for gold price hedging as and when required, and for the establishment and use of bank accounts in major international financial centres. Whilst these matters are conventional for mining project finance internationally, they are new to Ethiopia and required lengthy due process by KEFI as first-mover in this new priority sector.
Other finance-related steps recently taken by the Ethiopian Government also include an agreement to transfer the TKGM Project equity that will be earned by the Government from its US$20 million (Birr equivalent) investment in the Project, to an Oromia Regional Mining Fund. The Government has also signed various procurement contracts for building offsite roads and the electricity transmission connection. In addition, the Government and KEFI have agreed changes to their shareholder agreement and the TKGM foundation documents to admit additional Project equity investors into TKGM if required, although both parties are actively collaborating directly with the proposed Project private equity investors to facilitate their subscription as per the closing timetable, set out in the Company announcement of 24 April 2020. KEFI’s percentage interest within TKGM remains unaffected.
Harry Anagnostaras-Adams, KEFI Minerals Executive Chairman, commented:
“We are pleased to receive the formal consent of the Ethiopian central bank to the Project’s finance plan and terms, once again highlighting the support KEFI is receiving in country for the development of Tulu Kapi. This permits the triggering of the Project lenders’ formal processes for credit approval and documentation with a view full financial closure in October 2020.
“The strengthening gold price and US Dollar exchange rate to Ethiopian Birr have further improved the economics of Tulu Kapi and the robustness of the development to meet the various conventional covenants required by the financing banks.
“I look forward to updating shareholders on subsequent developments.”