KEFI Gold and Copper has officially launched the Tulu Kapi Gold Mines (TKGM) project. This significant step involves representatives from KEFI and the Ethiopian Federal and Oromia Regional Governments on the TKGM Board. The decision follows the deployment of dedicated site policing and conditional confirmations from all members of the Project’s finance syndicate.
A detailed corporate presentation will soon be available on the company’s website, summarising Early Works, Major Works, Key Milestones, the Finance Plan, and Key Economic Metrics.
The Early Works phase, continuing until September 2024, focuses on completing preparations for community resettlement, detailed engineering for procurement, community consultations on social development plans, and recruitment alongside other organisational development. Concurrently, project financing activities will include independent monitoring to ensure that Early Works’ field activities progress on schedule under the newly established policing and related safety protection systems. Fulfilment of all conditions precedent, mostly administrative, is required along with the execution of definitive detailed documentation. The drawdown of financing syndicate equity-risk capital is expected from October 2024 to mid-2025, followed by debt capital.
From October 2024, the Major Works phase will begin, encompassing the international procurement and fabrication of the plant, resettlement of the community, site earthworks, grade-control drilling, transportation and assembly of the plant and associated infrastructure, mining operations, and a Definitive Feasibility Study (DFS) on the underground mine.
The Finance Plan includes US$190 million secured debt from development banks. In terms of equity risk capital, excluding historical investment of approximately US$100 million sourced from KEFI Gold and Copper’s shareholders, KEFI has sourced US$110 million Equity Risk Note 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. Additionally, US$20 million will come from TKGM share subscriptions from the Federal and Regional Government.
Key Economic Metrics, based on the financial model and underlying metrics reported in the recent Quarterly Update (announcement dated 13 May 2024), include approximately 1,000 direct jobs and 5,000-10,000 indirect jobs. Foreign Direct Investment is estimated at approximately $500 million, including historical investment. At the current gold price of approximately US$2,350/oz, hard currency exports are projected to average US$377 million per annum, with royalties and taxes averaging US$69 million per annum, and operating expenditures averaging US$119 million per annum with preferential local procurement subject to quality and price. The project’s All-In-Sustaining Costs (AISC) are approximately US$887/oz, and Break-Even Costs (including debt service) are approximately US$1,315/oz, providing an attractive IRR to equity of over 50%. Even at a gold price of US$1,550/oz, the IRR remains over 20%, with AISC dropping to US$831/oz and Break-Even Cost dropping to US$1,091/oz.
Recently approved exemptions from exchange and capital controls ensure 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 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. This supports further exploration and development, along with opportunities to continue local social development projects such as the local school and water supply. The returns for capital investors and lenders are attractive, and recent exemptions from exchange controls have 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 draw down full project finance as outlined, thus enabling the Major Works to commence from October 2024. This deliberately sequenced and disciplined approach aligns with being a first mover adhering to the highest performance standards in safety, social, environmental, technical, and other aspects. We are determined to ensure that Tulu Kapi preserves its standing as a showcase project for a new business sector in Ethiopia.
“We greatly appreciate the support of the community and all local and international stakeholders.”
