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 finance plan has now been agreed by all the Tulu Kapi syndicate lead contractors, investors and lenders. It is currently being processed for final reviews and entry into definitive documentation to be signed as soon as possible, with the expectation to achieve this next month.

It remains that financing is to be almost entirely at the project or subsidiary level and remains consistent with previous guidance (see 2021 Annual Report, page 6). The detailed breakdown of the sources and uses of the US$320 million Project funding will be announced at the time of signing definitive documentation.

Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented: “The Tulu Kapi Gold Project is designed to world-leading standards technically, socially, environmentally and in terms of financing arrangements acceptable to international capital markets.

“Today’s important milestone of the debt and equity leads approving the finalised finance plan allows all the respective Boards to formally approve the definitive documentation. I am pleased to report the Project is now up and away.

“Ethiopia’s readiness for foreign direct investment has continued to improve since early 2022 and recent well-publicised positive developments have only served to reinforce that. The Company is confident that we can lift the work programmes to full construction in the new year and be in full production from the open pit in 2025 and from the combined open pit-underground operation a few years later.

“We have been long-standing and resilient supporters of the Ethiopian Government’s efforts to develop its minerals sector and we feel a great sense of responsibility and honour to now be able to push forward at a time which is particularly important for all stakeholders.”

Tulu Kapi Background

Now Focusing on Increased Production and Longer Mine Life at Tulu Kapi

The Company is pleased to report that the plans now contemplate an enlarged Tulu Kapi operation, integrating both an open pit and underground mine, with consequential increases in planned gold exports to US$300 million per annum (at current gold prices when both mines are in production) and with combined mine production extended from 8 to 10 years starting in 2025. KEFI will also request permission from the Ethiopian Ministry of Mines to recommence district exploration during construction to further extend the mine life to well over 10 years for the benefit of all stakeholders.

Initial Project development activities have already started and include camp upgrading for construction, local recruitment, community resettlement, plant procurement engineering and work-programmes and legal formalities to satisfy the many standard conditions precedent for finance drawdowns.  An official Project launch is planned for early 2023, the timing to be determined with the Ministry of Mines.

Conditionality of Project Plans

Since signing the syndicate Umbrella Agreement in June 2022, we have updated all Project costings with international fabricators and other suppliers, updated contract documentation, had both of our banks confirm there are no more policy impediments to their participation, adjusted intra-syndicate finance contributions and started assembling completed documentation for lender review before execution.

As with any project financings standard conditions must be satisfied before and after signing of definitive agreements by all parties, including completion/registration of documents with the various Government agencies, opening international project bank accounts in collaboration with the National Bank of Ethiopia, placing insurances internationally through the Ethiopian agents, registering loan-security, receiving confirmations of tenure for mining and exploration and the independent experts’ confirmation that conditions on the ground remain conducive to the planned operations.

Economic Benefits of the Tulu Kapi Gold Project include:

·    Showcase project as first mover in a high-priority sector
·    A business enterprise that will be the single largest Ethiopian exporter, starting at c. US$250 million per annum (“pa”) and rising over the first four years to US$300 million pa, at current gold prices
·    Direct employment of 1,000 people and indirect employment 5-10 times that number in a high unemployment area of rural West Welega
·    Emphasis on local procurement for production inputs, with annual operating expenses exceeding US$140 million which will have a huge impact on local economic opportunity
·    Emphasis on creation of micro-enterprise in collaboration with appropriate experts, such as the Ethiopian Evangelical Church of Mekane Yesus (“EECMY”)
·    A showcase project in all respects, backed by leading African development banks and encouraging other minerals developers to proceed in Ethiopia.

Social Benefits of the Tulu Kapi Gold Project include:

·    A full spectrum of social programmes in compliance with International Finance Corporation (World Bank) Performance Standards
·    Education, training and employment starting some years ago with the construction of the local school and now expanding into local technical college courses in collaboration with a leading mining colleges and universities in global mining centres
·    Local infrastructure which started some years ago with provision of local fresh water and expansion to include an all-weather road to the highway, mains electricity to site with extra capacity for local reticulation by the authorities for appropriate applications, health clinics and an airstrip
·    Tulu Kapi Charitable Foundation started and is in operation

The Environmental impact:

·    The Tulu Kapi Gold Project has been designed in accordance with the highest international standards and will involve monitoring by global leading experts
·    The site itself was chosen by KEFI because of its environmental and social characteristics, as much as its mineralisation and potential to generate wealth
·    The site has no interest to artisanal miners because of the depth and nature of the gold particles, i.e., unrecoverable by artisanal techniques and only by industrial-scale processes
·    No sulphide mineralisation which therefore avoids the issue of managing potential acid mine drainage
·    The Environmental Impact and Assessment Report has been widely reviewed and the Company is not aware of any negative comment
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