KEFI Minerals plc (LON:KEFI) Executive Chairman Harry Anagnostaras-Adams caught up with DirectorsTalk for an exclusive interview to discuss their recently announced bond mandate, next steps to complete the funding package for the project, timeline for construction at Tulu Kapi and where they are on their Saudi Arabia and Ethiopia operations.
Q1: You’ve announced today that you’ve formally mandated a bond arranger for the placement of $160 million of Listed Infrastructure Bonds, can you tell us a bit more about this and how it fits into the overall funding of your Tulu Kapi gold project?
A1: Tulu Kapi was originally, on day one if you like, a decade ago, it was a $350 million proposition in terms of projected cost. When we took control of it four years ago, it had already had $50 million spent on it and we reduced it by redesigning the whole project to about approximately $200 million by some capex savings and effectively having the mining contractor Ausdrill put up mining equipment.
So, for a $200 million project in broad terms as we positioned it let’s say 18 months ago, the bond issue is by far the most important component, it’s three quarters of that and those sums include various financing charges and so on, on top of drill capex. So, the importance of it is that the bond is three quarters of what the project now requires and it’s the most important single component.
It being a 9-year tenure with 2.5 years grace period offered before the project needs to start debt servicing, that bond is not only three quarters of what we require but it’s also very attractive from the point of view of risk management for study of the operation so it’s a very carefully designed and tailor-made financing for three quarters of what’s required.
Q2: What are the next steps and what still needs to be achieved to complete the funding package for the project?
A2: The reason really for having to make the formal appointment today that we announced is because the impact is the formalities being triggered in Luxemburg such as the formation of Finance SPV which actually issues the bond for the group. Also, the appointment of custodians to administer the funds, the lodgement of prospectus for approval by the Stock Exchange in Luxemburg which is the largest stock exchange for bonds in the world, I think, or at least the second largest, and largest in this part of the world.
So, all those things have to happen before one literally places the bond to the prospective investor so today’s announcement triggers those important legal regulatory steps in Luxemburg.
There’s a detailed action plan, obviously, with all of the things that are happening and the things I’ve just mentioned take place over the next 2 months and a number of things happening in parallel on the ground. The list of tasks is starting to shrink at last but it’s a long list with lots of teams in Luxemburg, Tulu Kapi, London, Perth, all chiselling away at it and leading to drill down in September, at the end of the Ethiopian wet season.
Q3: Now, I know there has been an increase in in the level of funds being sought, it’s only slight but why was this?
A3: The potential bond holders prefer that the project raise more money than just enough to be safe. If we don’t need it, we can repay it, but everyone prefers to be erring on the safe side to make sure that everything is covered, that’s all it is.
Q4: Once the funding’s in place, can you remind us of the timeline for construction and what the Tulu Kapi project is ultimately looking to achieve?
A4: Well, it’s a 2-year building schedule, there are incentives to do it quicker, but the base case is to be in production 2 years after drill down.
What it looking to achieve? 140,000 ounces out of a fairly straightforward open cut mine with very conventional, fairly simple processing much like any number of mines in the Kalgoorlie district, around Western Australia, where a lot of our ideas, plans, experience and so on have been drawn from. 140,000 ounces a year out of a bankable reserve in a bankable plan that allows us to then lever off that into the surrounding district to bring on additional production from satellite deposits.
Also, to start up our activities in Saudi Arabia in a more robust fashion that we’ve been allowed to so far there, the Saudi’s are reviewing their regulations, it’s been a long time coming but were quite convinced this year, we’ll be allowed to be attracting there so the timing might actually work out quite well. Tulu Kapi is a sort of underlying test flow in the company, in the group, which allows us to then lever into the very large exploration projects we have around us.
Ultimately, we want to be dividend-paying, high-growth explorer/developer so we want to pay dividends, but we also want to have very high growth in a very prolific and prospective part of the world.
Q5: Obviously, it’s exciting times for KEFI Minerals, but outside of Tulu Kapi, KEFI has operations in Saudi Arabia, as you’ve mentioned, and further exploration potential in Ethiopia. Can you tell us where you are with these?
A5: We’ve applied for large exploration rights in both Ethiopia and Saudi Arabia but both initiatives re in close discussions with our partners and the regulators, our partner in Saudi Arabia is ARTAR, it’s an Al Rashid family conglomerate and in Ethiopia it’s the government itself.
These areas include large targets for gold and also for copper, we pegged a whole VHMS belt for copper in Saudi Arabia for instance. Both countries are very keen to kick this minerals sector of theirs forward, their very strong ancient mining but very low profile modern mining albeit very high growth from a very small base in the last few years in this Arabian-Nubian Shield.
Now, we’ve taken some view to position carefully and do what we regard as the pole position in both countries, the largest countries in the Arabian-Nubian Shield so we do have first-mover position in a highly prospective area and we do believe that we have the highest quality partners one can have and great team.
So, that’s where we are, we’ve basically established a very strong pole position with strong partners with a strong team. Now, with Tulu Kapi lining up for development, it provides us an underlying cash flow with a long-term ambition to trigger a dividend to our shareholders combined with a high growth in a prospective part of the world.