# KEFI Minerals Tulu Kapi Update

- Link: https://www.directorstalkinterviews.com/kefi-minerals-tulu-kapi-update/412815425
- Published: 2020-04-24T07:12:01+01:00
- Author: Giles Arbor

**KEFI Minerals plc** ([LON: KEFI](https://www.directorstalkinterviews.com/company/kefi-gold-and-copper/kefi.l)),
the gold exploration and development company with projects in the Kingdom of Saudi
Arabia and the Democratic Republic of Ethiopia, provided today an update on the 
Company’s Tulu Kapi Gold Project in Ethiopia.

Despite the need to adjust and reschedule many tasks due to COVID-19, the Company
remains focused on the preparations and finance milestones to enable major site 
activities to start at Tulu Kapi from October 2020, as outlined in the Q4 2019 Operational
Update announced on 28 February 2020 .

The current status of the key aspects of the various Tulu Kapi workstreams are as
follows:

 * Health and Safety: Health and Safety is the Company’s first priority. The largest
   impact of COVID-19 and the restrictions imposed has been the overhaul of procedures
   and teams to engage with the significant numbers of households and people surrounding
   Tulu Kapi. Other COVID-19 related initiatives include the Company offering beds
   and bedding to a regional isolation centre. As at 23 April 2020, Ethiopia has
   reported 9,771 COVID-19 tests and 116 confirmed cases, which have resulted in
   3 deaths. There have no reported cases of COVID-19 at Tulu Kapi.
 * Project Equity: Tulu Kapi Gold Mines longstanding partners, KEFI and the Government,
   are coordinating with the private sector partner ANS Mining Share Company (“ANS
   Mining”) to maintain the planned structure of the public-private partnership,
   despite the local liquidity strains experienced this year and other effects of
   the COVID-19 pandemic. To that end:

a. ANS Mining, which is the investment vehicle for a syndicate of leading Ethiopian
banking, insurance and investment organisations, has re-affirmed its commitment 
to the Project following the Government’s injection of significant liquidity into
the local financial markets during the past two weeks;

b. the Government is now collaborating directly with ANS Mining and its shareholders
to reinforce Project momentum. In addition, as an important new development, the
Government has now also advised both KEFI and ANS Mining that it will this quarter
look to arrange either direct or indirect funding into TKGM from its investment 
institutions for the required amounts if there is any further delay in investment
via ANS Mining;

c. in the event this investment is provided by entities outside of ANS Mining, there
will be a proportionate adjustment to the TKGM shareholdings. KEFI’s interest in
TKGM would remain unaltered; and

d. as a proactive move, the Project partners are updating the shareholder agreement,
to account for any specific changes in schedule and budget as a result of COVID-
19, providing greater flexibility and to avoid any potential hold up in the overall
Project timetable.

 * Project Contractors and Project Lenders: The two Project contractors and the 
   two Project lenders are regularly liaising with TKGM and adjusting their joint
   plans to take account of the various COVID-19 protocols.
 * Timetable: The Directors of TKGM and KEFI have resolved that, notwithstanding
   COVID-19, to remain focused on using every reasonable effort to preserve the 
   overall scheduled target of starting full gold production at Tulu Kapi in 2022
   and remain focused on full financial close of the Project funding in October 
   2020. Off-site infrastructure construction programmes are continuing for road
   and electricity connections.

**Project Economics**

COVID-19 has to date had no discernible impact on Project costs. However, the gold
price outlook for the Project now appears significantly higher than the US$1,098/
oz assumed for determining Ore Reserves or the US$1,300/oz assumed in base case 
financial studies. As an illustration, the Project NPV is summarised below at different
gold prices, based on the Definitive Feasibility Study or DFS-based NPV of the open
pit added to that of the PEA-based NPV of the underground project. NPV’s are based
on after-debt net after-tax cash flows discounted at 8% and 16% as at today. The
NPV’s are shown for 100% of the Project and for KEFI’s planned 45% beneficial interest(
being 80% of KEFI Minerals Ethiopia which is planned to own 56% of TKGM) as derived
from the Company’s own model prepared by TKGM’s project finance advisers:

| 8% Discount Rate |     ASSUMED LONG TERM GOLD PRICE |   | 
| 
 | US$1300 | US$1600 | US$1900 |  |   | 
| NPV100% OF PROJECT |  |  |  |  |   | 
| USD Million | 207 | 393 | 576 |  |   | 
| GBP Million | 161 | 307 | 450 |  |   | 
|  |  |  |  |  |   | 
| NPV 45% OF PROJECT |  |  |  |  |   | 
| USD Million | 93 | 177 | 259 |  |   | 
| GBP Million | 73 | 138 | 203 |  |   | 
|    16% Discount Rate | ASSUMED LONG TERM GOLD PRICE |   | 
|  | US$1300 | US$1600 | US$1900 |  |   | 
| NPV100% OF PROJECT |  |  |  |  |   | 
| USD Million | 148 | 297 | 445 |  |   | 
| GBP Million | 116 | 232 | 347 |  |   | 
|  |  |  |  |  |   | 
| NPV 45% OF PROJECT |  |  |  |  |   | 
| USD Million | 67 | 134 | 200 |  |   | 
| GBP Million | 52 | 104 | 156 |  |   | 
|  |  |  |  |  |   | 
|  |  |  |  |  |   | 
| OPEN PIT PROJECT IRR% | 27% | 49% | 67% |  |   | 
|  |  |  |  |  | 
|  |  |  |  |  |  |  |  |  |

> **Executive Chairman of KEFI Minerals, Harry Anagnostaras-Adams, commented:**
> “As across much of the globe, Ethiopia, Saudi Arabia and the other countries where
> we have activities have recently imposed physical isolation protocols to help 
> contain the further spread of the COVID-19 virus. We have already made a number
> of significant changes to help aid in this objective and we will continue to communicate
> with shareholders on any material consequences.
> “We are working closely with our personnel, contractors and stakeholders, including
> our host governments, in order to implement appropriate safeguards and procedures.
> “The unprecedented scale of the stimulus packages announced by various governments
> globally, combined with low or negative interest rates provide welcome relief 
> to society and also reinforce the probability that the gold price will to continue
> to strengthen and thus bolster the Tulu Kapi investment case.
> “Our longstanding and planned new Ethiopian partners are also working hard and
> remain keen for Tulu Kapi to commence development as soon as possible, as the 
> Project will not only generate substantial local employment in these difficult
> times, but will also generate substantial tax revenue and export income.
> “As an important development, the Government has advised that it will look to 
> source funding directly into TKGM via its local financial institutions if there
> is any delay to the anticipated investment via ANS Mining.
> “I would like to thank our various stakeholders and especially the government 
> authorities for their collaborative approach to resolving issues that have arisen
> due to the global COVID-19 pandemic. Despite taking these proactive steps to ensure
> the safety of our stakeholders, we remain steadfast in our commitment to develop
> our assets as previously outlined and unlock the very high inherent value within
> the KEFI portfolio.”

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