KEFI Gold and Copper (KEFI) has initiated discussions with its Saudi joint venture partner, ARTAR, to exit their Saudi Arabian joint venture, Gold and Minerals (G&M). This move would relieve KEFI of the obligation to contribute $10 million to maintain its 25% stake in G&M, which otherwise would dilute to 15%.
While the removal of this financial burden is positive for KEFI, interpreting the remaining stake’s implied value at $15 million might be misleading. The valuation based on historical investment costs differs from an open market transaction. In March 2024, KEFI’s share value was estimated at 2.21p. Adjusting for various factors such as gold price inflation, financing terms, and project delays, this valuation rises to 2.31p. However, if KEFI reduces its stake in G&M to 15%, the valuation drops to 2.15p per share. A complete sale of its G&M stake for $15 million would further lower it to 2.02p per share.
Despite this, KEFI’s other assets hold significant potential. Using a long-term copper price of $10,000 per tonne, the company’s 15% stake in the Hawiah and Jibal Qutman projects could collectively be valued at $49.2 million, contributing 0.62p per share to KEFI’s overall valuation. These projects, combined with its retained interest in Tulu Kapi, present promising opportunities, though a discount may be applied based on their developmental stages. KEFI’s financial forecasts currently assume it retains a 15% interest in G&M, but these projections will be updated once a deal is finalised.
Looking ahead, KEFI’s assets could generate substantial free cash flow, averaging approximately £82.4 million annually between 2027 and 2032. This could enable dividends of 0.59p per share during the period from 2028 to 2034. At current metals prices, the valuation of KEFI’s shares could increase significantly, potentially reaching 6.33p now and 9.27p in 2028, with an additional potential value of 2.25p per share for Guji-Komto. Over the next 13 years, this translates to a projected internal rate of return of 48.9%, with assumptions that the Tulu Kapi project begins commissioning in late 2026.
KEFI’s strategic moves and asset potential signal opportunities for growth and increased shareholder value. The outcomes of its joint venture negotiations and the progress of its projects will be pivotal in shaping its future trajectory.
London-listed company KEFI Gold and Copper plc (LON:KEFI) is an exploration and development company focused on gold and copper deposits in the highly prospective Arabian-Nubian Shield. The Company operates in Ethiopia and Saudi Arabia with projects including Tulu Kapi project, Jibal Qutman EL and Hawiah.
