KEFI Minerals (LON: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Federal Democratic Republic of Ethiopia, today provided an operational update for the period from 1 July 2018 to 30 September 2018.
This quarterly operational update encompasses the activities of KEFI Minerals (Ethiopia) Ltd and Tulu Kapi Gold Mines Share Company in Ethiopia and Gold & Minerals Ltd in Saudi Arabia.
Tulu Kapi Gold Project
Project Development Funding
Project development funding has been arranged, subject to normal conditions precedent:
· Equity capital has been committed as follows:
o KME has already funded the pre-development costs of approximately US$60 million;
o The Government of Ethiopia has committed US$20 million (Ethiopian Birr equivalent) to be subscribed over 2019-2020 to fund construction of off-site infrastructure; and
o ANS Mining Share Company (“ANS”) has committed US$30-38 million (Ethiopian Birr equivalent) to be released to TKGM as follows:
§ US$9 million (Ethiopian Birr equivalent) in December 2018, subject to specified Government consents and the receipt of indicative terms sheet from the providers of secured finance; and
§ US$21-29 million (Ethiopian Birr equivalent) at the closure of full development funding in early 2019.
· Secured bonds/lease capital and a separate working capital line have been proposed, subject to normal conditions precedent:
o US$160 million issue of listed senior secured infrastructure bonds of which US$110 million is to fund construction of on-site infrastructure and the balance set aside for financing costs during the construction period and reserves.
o Working capital line via a stockpile financing facility up to US$20 million.
Project Contractors
All principal contractors are planning Project implementation with the KEFI/TKGM team and otherwise remain on standby for finance closing and mobilisation:
· Lycopodium for process plant and associated infrastructure.
· Ausdrill (via subsidiary African Mining Services) for mining services.
· Ethiopian Roads Authority for access roads.
· Ethiopian Electric Power Corporation for power connection.
Ethiopian Government (Federal, Regional, Zonal, Local as the case may be)
The following consents or permits have been granted:
· Development, operational, environmental and social plans.
· Investment and Shareholders Agreement for jointly-owned project company TKGM.
· Capital ratios, hedging and bank account arrangements for TKGM.
· Community resettlement dates and planned actions.
The following consents or permits remain outstanding:
· Registration of equity subscriptions, most already having been endorsed by the Ministry of Mines.
· Endorsement of updated project plans, the 2015 plan already having been approved by the Ministry of Mines.
· Approvals of finance documentation and underlying security arrangements by the central bank (National Bank of Ethiopia).
Timetable and Economics for Project financing and development
· Q1 2019: Community resettlement along with detailed engineering and procurement to start 1 January 2019 and be carried out over the following three months.
· Construction is expected to start in early 2019 and commissioning of production is expected to take place during H2 2020.
· The financial model Base Case (assuming a gold price of US$1,300/oz) indicates a payback of approximately 3 years, an EBITDA of over US$73 million per annum and a post-debt NPV of US$115 million (£82 million) at construction start and US$192 million (£137 million) at production start (100% of project at a discount rate of 8% after tax). The proposed project finance has a tenure of 9 years.
· Projected gold Production Costs are c. US$700/oz, All-in Sustaining Costs are c. US$800/oz and Total Costs, including depreciation and amortisation are c. US$1,000/oz.
· The upside leverage is indicated by a 10% increase in gold price from the Base Case of U$1,300/oz, which are expected to increase the NPV by 50%.
Corporate Structure, Board and Management
KEFI Minerals plc to remain the operating partner in:
· G&M project company in Saudi Arabia alongside Saudi conglomerate Abdul Rahman Saad Al Rashid & Sons Company Limited (“ARTAR”); and
· TKGM project company in Ethiopia alongside new shareholders, the Ethiopian Government and Ethiopian financial institution via ANS.
The Boards and Management of KEFI and TKGM have been expanded recently.
