KEFI Gold and Copper assembles full funding package of US$356 million

KEFI Gold and Copper plc (LON:KEFI), the gold and copper exploration and development company with projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, has reported that it has now assembled the full funding package of US$356 million estimated to be required for the development of the Company’s Tulu Kapi Gold project by KEFI subsidiary Tulu Kapi Gold Mines Share Company. This package is designed to fund all infrastructure, the start-up of the open pit mine and the initial development of the underground mine.

Highlights

· Tulu Kapi full funding package of US$356 million assembled

· Enlarged funding package now covers full development of Tulu Kapi, including initial underground development

· Financial completion through the signing of binding documentation and the launch of full development expected at the end of the Ethiopian wet season in October 2021

· KEFI to retain c.70% interest in TKGM

· NPV* to KEFI of US$376 million (at current prices) or 12.6p per share for the Company’s Tulu Kapi and Hawiah copper-gold projects

  • Net Present Value is internally derived using independently created financial models of net cash flows after tax and debt service discounted at 8% per annum, based on Definitive Feasibility Study for Tulu Kapi open pit gold-silver mine, Preliminary Economic Assessment for Tulu Kapi gold-silver underground mine and PEA for Hawiah underground copper-gold-zinc-silver mine. Metal prices assumed for the were prevailing spot market prices at 14 August 2021.

Project Funding

The signing of detailed binding documentation and the launch of full Project development is expected to coincide with the end of the Ethiopian wet season in October 2021. All equity and debt funding would be committed and binding upon signing, and subject only to normal conditions for such a transaction. Debt disbursement would follow after subscription of equity-risk capital, as is normal in such projects, and the timing of receipt will be structured to meet Project requirements.

Upon financial completion and any remaining conditions precedent being satisfied, it is expected KEFI will have achieved the following:

· Fully-funded the development of TKGM’s open-pit gold mine for start of production in mid-2023;

· Have reserves set aside for cost-overruns for production start-up or, if not needed, available to trigger initial stages of development of Tulu Kapi underground mine from late 2023;

· Retained ownership of c.70% of TKGM, versus originally estimated 45% ownership; and

· Successfully minimised ownership dilution at the KEFI level by (a) maximising subsidiary-level finance, and (b) arranging for KEFI-subsidiary-level financing with conversion rights into KEFI shares to be based on the VWAP at the time of production (which the Company believes will be materially higher than at current levels), if not repaid beforehand.

It is expected that the non-KEFI shareholding in TKGM, of c.30%, will comprise Government and non-Government local organisations and these relationships will strongly reinforce the Project’s very deliberate efforts to align at community and district levels and with government at all levels.

Advanced conditional approvals, which have already been received, account for c.63% of the US$356 million aggregated funding sources and the remaining c.37% (c.US$131 million) is expected to come from existing identified parties working alongside those who have already resolved their conditional approval. All parties have agreed to enter into binding documentation at the same time.

Contracting of Works for the Processing Infrastructure and the Open Pit Mine

Contracts were issued and work started last year with the Ethiopian Electric Power Corporation and Ethiopian Roads Authority for Project offsite works. In respect of on-site works, the principal on-site contractors, Lycopodium Limited and Corica Mining Services Share Company, each the largest in Africa in their respective specialised contracting areas, have signed letters of intent and produced all-but agreed final forms of detailed documentation for execution at financial completion.

Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented:

“It is a great pleasure to update on the full funding plan for the Tulu Kapi Gold Project. With principal approvals now received from the majority of the syndicate, we are focused on satisfying the remaining conditions precedent which are normal for a transaction of this nature. We are finalising outstanding documentation for all parties to allow the funds to flow for full Project development from October this year.

“It has taken a great deal of work by all involved, to rigorously ensure Ethiopia’s first major mining project for 30 years is designed, financed and operated to the highest standards socially, environmentally and operationally. Whilst we are conscious of the recent turbulent situation in Ethiopia, which I am pleased to note appears to be abating, the conflict areas have been over 1,000km from Tulu Kapi and have not had any impact on the Project.

“This is a very exciting moment for our Tulu Kapi Gold Project and we are proud to be backed by a top-class international and local syndicate that has been assembled by KEFI. Doing so as gold markets have strengthened is terrific.”

Detailed Funding Sources

2020 Annual Report Estimates US$m  Current Estimate US$m
    
20Federal and Regional GovernmentsShare Subscription to TKGM29
5Local Private OrganisationsShare Subscription to TKGM10
140African Multilateral Banks, Senior LendersSenior Term Loans, repaid from operating cash flow140
15Global Mining Finance SpecialistNon-Convertible, Offtake-linked Subordinated Finance35
45Local Subsidiaries of International GroupsSubordinated Convertible into KEFI Shares Year 320
0Budgeted internal spare cash generatedThis cash is generated in addition to Debt Service Reserves20
1 to 21KEFIEquity issue to all shareholders, once all parties have confirmed8
14Mining Services ContractorMine capex paid in KEFI shares at start production in 2 years22
70Mining Services ContractorMine capex paid per tonne in cash56
15Global Mining Finance SpecialistCost Overrun Facility15
325-345 Total Funding Sources356

Notes:

· Federal and Regional Government Organisations: The participation of organisations representing the Federal and Regional Government and their investment authorities is via their equity investments into TKGM;

· Local Private Organisations: Government participation has been supplemented by equity investments into TKGM from private organisations with extensive involvement within the district surrounding the Project. This significantly enhances alignment with local stakeholders down to the community level;

· Longstanding Proposed Senior Lenders: Eastern and Southern African Trade and Development Bank (TBD) and Africa Finance Corporation (AFC) bring extensive in-country experience as well as being leading African multilateral banks;

· The Global Mining Finance Specialist is an active investor in Africa and elsewhere and will, upon closing, have the right to appoint a Director to TKGM as well as other monitoring and oversight rights;

· Local Subsidiary of International Group: this organisation has a long-standing presence in Ethiopia and sees this is an opportunity to reinvest accumulated local profits into an important new sector for the country Its rights to convert subordinated loans into shares of KEFI after 3 years (after a year of production) is designed to avoid KEFI dilution at pre-production share prices;

· Expected cash build-up during production commissioning estimated at US$20 million. Shown here for completeness and the finalised finance plan at signing will need to ensure that the Project is fully funded independent of gold proceeds during commissioning;

· KEFI: equity is provided by KEFI after all parties have signed, as part of the Project launch, as approved by Senior Lenders and other Lead Financiers. Historical pre-development investment by KEFI subsidiary KEFI Minerals (Ethiopia) Limited was c. US$70 million, which is excluded from the above table showing development funding;

· Corica Mining Services: is Africa’s largest mining services contractor. Its arrangement allows that it be paid for work in quoted shares of KEFI after 2 years and is designed to avoid KEFI dilution at pre-production share prices; and

· Cost-overrun facility: If the planned cost overrun facility remains unutilised upon Project completion (successful commencement of production as judged by Senior Lenders), it is proposed that those funds may be utilised to fund the initial mine development to the +5 g/t underground deposit.

Project Economics:

· Capital expenditure estimates for the open pit now cater for anticipated cost-inflation of approximately 10% overall over the past 18 months since estimates were presented for review by independent experts for the lenders. For the underground mine, we have used estimates from the Preliminary Economic Assessment (PEA) which will be replaced in due course by the results of the Feasibility Study to be conducted during construction of the open pit.

· At current metal prices (14 August 2021 spot market prices: US$1,780/oz Au, US$4.30/lb Cu, US$1.37/lb Zn, US$24/oz Ag):

. All-in-sustaining-cost (“AISC”) of Tulu Kapi Open Pit project is estimated at US$870/oz which is similar to previous estimates when taking into account that AISC is affected by increased metal prices (because royalties increase on a per ounce basis); and

. The NPV of KEFI’s beneficial ownership in the two main projects is estimated at £274 million (US$376 million) or 12.6 pence per KEFI share in issue.

Click to view all articles for the EPIC:
Or click to view the full company profile:
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
KEFI Gold and Copper

More articles like this

KEFI Gold and Copper

Gold hits 5-month peak as dollar dips

Gold prices rose to a five-month high on Monday, as the U.S. dollar weakened slightly after more Chinese cities relaxed COVID-19 restrictions over the weekend. Spot gold XAU= was up 0.5% at $1,807.21 per ounce, as of 0233 GMT, after

KEFI Gold and Copper

KEFI in Tulu Kapi Gold Project finance plan agreement

KEFI finalised the costings and finance plan by all the Tulu Kapi syndicate lead contractors, investors, and lenders for the updated US$320M Tulu Kapi Gold Project in Ethiopia. The agreement is currently being processed for final reviews and

KEFI Gold and Copper

KEFI Gold and Copper investor presentation

KEFI Gold and Copper plc (LON:KEFI), the gold exploration and development company with projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, has announced that a new investor presentation has been uploaded to

KEFI Gold and Copper

KEFI nears final signatures to $320m financing plan

Aim-listed Kefi Gold and Copper has confirmed that an updated $320-million finance plan for the Tulu Kapi gold project, in Ethiopia, has been agreed by all of the project’s syndicate lead contractors, investors and lenders. The plan is

KEFI Gold and Copper

KEFI Gold and Copper finalise Tulu Kapi Gold Project finance plan

KEFI Gold and Copper plc (LON:KEFI), the gold exploration and development company with projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, has announced that the updated US$320 million Tulu Kapi Gold Project costings and

KEFI Gold and Copper

Base metals broadly rise on weaker dollar

Base metals prices largely rose on Thursday, as a weaker dollar made greenback-priced metals cheaper to holders of other currencies, while nickel was boosted by hopes of strong demand from the battery sector. Three-month copper on the London Metal Exchange CMCU3

KEFI Gold and Copper

KEFI Gold and Copper rapidly advancing gold projects

KEFI Gold and Copper has released a quarterly operational update encompassing the activities of KEFI Minerals (Ethiopia) Ltd and Tulu Kapi Gold Mines Share Company in Ethiopia, and Gold & Minerals Ltd in Saudi Arabia. Since acquiring Tulu Kapi Gold Mines (TKGM)

KEFI Gold and Copper

KEFI Gold and Copper: Rounding the final bend

KEFI Gold and Copper (KEFI) has, this week, made two announcements pertinent to its future. In the first, it announced the renewal of its Jibal Qutman exploration licence in Saudi Arabia, which opens the way for the commencement

KEFI Gold and Copper

Gold gains nearly 0.1%

Domestic Gold prices gained on Monday as a softer dollar rekindled some of bullion’s appeal for overseas buyers. Meanwhile, the rupee depreciated by as much as 28 paise against the US dollar amid a surge in the global

KEFI Gold and Copper

The Green Transition requires copper

According to an S&P report on The Future of Copper, copper demand is expected to almost double by 2035 and will continue to grow as the world pursues the global transition to net zero. Copper’s natural conductive properties make it the material

KEFI Gold and Copper

KEFI Gold and Copper issued two Jibal Qutman Exploration Licences

·    Two Exploration Licences issued to facilitate development of the Jibal Qutman Gold Project ·    Award of final Jibal Qutman Exploration Licence expected shortly ·    DFS for Initial 500,000 oz gold development Q1 2023, first production 2024 KEFI Gold and Copper

KEFI Gold and Copper

Gold edges higher on softer dollar

Gold prices held firm on Tuesday near a two-week high hit in the previous session, helped by a subdued dollar, while investors awaited U.S. inflation data that could provide cues on the Federal Reserve’s interest rate hike path.

KEFI Gold and Copper

Copper prices increase on weaker dollar

Copper prices rose on Tuesday on a weaker dollar and expectations for better metals demand after Chinese policymakers said they would accelerate infrastructure investment. Three-month copper on the London Metal Exchange CMCU3 rose 0.7% to $7,707 a tonne

No more posts to show