KEFI Minerals upbeat at Tulu Kapi Project gains momentum

Ethiopia and Saudi Arabia-focussed gold exploration and development company KEFI Minerals announced on Monday that its subsidiary, the Tulu Kapi Gold Mines Share Company (TKGM), has launched the Tulu Kapi Gold Project with its Ethiopian private and public sector partners at the second international Ethiopian Mining Conference and Exhibition.

The AIM-traded firm said the project had gained “significant” momentum in recent weeks and, after a number of delays, was ready for the start of development.

It said it was supported by all consortium members and the Ethiopian Government at all levels.

KEFI claimed to have “strong” local partners, principal contractors and an on-the-ground-team.

The project also now had two alternative project infrastructure finance proposals to consider - the long-standing bond-lease based proposal, and a conventional bank-project finance proposal from a number of African banks.

KEFI said the project's 24-month development schedule was expected to start in January, with the project consortium action plan now agreed.

Looking at its financing, the board said that following the resolution of the internal Ethiopian Government administrative issues, TKGM's three shareholders - KEFI, ANS Mining Share Company and the Ethiopian Government - have completed the examination of the government's internal administrative arrangements, refining them to all stakeholder's satisfaction.

The TKGM shareholders agreement had also been updated and circulated for approvals, and the equity subscription into TKGM was in the process of being carried out, comprising several steps which would take some weeks to complete under local laws and procedures.

KEFI said the planned total investments into TKGM remained unchanged, but the details had been refined, with the Ethiopian Government investment remaining at $20m, with the government now at liberty to allocate its holdings between wholly-owned government entities, as appropriate, to “reinforce social licence”.

ANS Mining's investment remained at $38m, although the initial investment had increased from $11.4m to $15.2m, being $9.5m upon short term closing and $5.7m in due course.

The initial project equity investments were now just subject to normal disclosure and subscription protocols, including board approvals of final documents, notarisation and registration of the share subscription documents by the Ethiopian Department of Trade and Industry under Ethiopian law.

KEFI said the remaining project equity instalments were tied to satisfactory progress in respect of the offsite infrastructure being completed against milestones so that government equity in TKGM could be issued, and the independent assessment reports being satisfactorily updated, as they had been this month, for closing of full project finance so that ANS Mining equity in TKGM could also be subscribed and issued.

On the subject of project infrastructure finance, KEFI said TKGM had recently been offered a bank-based project finance proposal and a term sheet by “leading African banks” as a “competitive alternative” to the long-standing bond-and-lease based debt financing proposal.

The board said the emergence of that alternative funding reflected the improved outlook for Ethiopia, and of the project in light of progress on the ground.

It said the two proposals had their own relative merits, and explained that while the implementation timetables of the two were similar, the differences between the proposals were in respect of the implementation steps, the quantum and profile of net cash flow after capital-servicing, and the flexibility to prepay or refinance in the future once in production.

It said the preferred route would be chosen shortly.

Finally, KEFI said the recent project contracting developments included the Ethiopian Roads Authority and the Ethiopian Electricity Power Organisation, which had committed to a deadline for the new all-weather road and the power connection respectively.

The government had also committed to an aggregate cost for all the off-site infrastructure, and the project contractors - Lycopodium and Perenti Global, formerly Ausdrill - had commenced procedures for locking-in contract pricing.

“I am delighted that the project has reached this stage, after so many delays and setbacks as the country and the sector were going through quite an amazing change,” said KEFI Minerals and TKGM executive chairman Harry Anagnostaras-Adams.

“We have shared the frustrations of our shareholders and our partners, but I now believe the project has encouraging momentum.”

Anagnostaras-Adams said that, as “first mover for modern mining” in Ethiopia, KEFI had done the heavy lifting with the authorities and the community and could now share the benefits as it advanced.

“It is especially pleasing to see the strengthening of capital market interest and support from capital providers both inside and outside Ethiopia for the project.”

At 1134 GMT, shares in KEFI Minerals were down 6.3% at 1.49p.