KEFI Minerals plc (LON:KEFI) 1.68p, Mkt Cap 10.8m – Tapping into ANS mineral potential
- The 1.1moz Tulu Kapi Project is in final funding stages with community resettlement start scheduled for mid-2019 and full project funding closure before YE19 paving the way for a two year construction period with first gold in mid-21 (SPA schedule).
- The project is estimated to run at c.135kozpa and $810/oz AISC generating an average of $75mpa in EBITDA and $96m NPV (DR10%, post debt/lease payments) using $1,350/oz gold price and 28.0 USD:BIRR exchange rate (v current spot 29.0 and up to 38.0 in the black market). Our estimates exclude c.$20m in buffer cash at the end of construction period included in NPV estimated by KEFI Minerals reflecting more conservative set of assumptions.
- KEFI holds a 45% effective interest in the project reflecting $60m invested to date (including pre-KEFI investment by previous shareholders). With the development capex largely funded by equity partners (ANS and Government of Ethiopia) and proposed $160m worth of infrastructure bonds proceeds, we estimate KEFI interest in the Tulu Kapi NPV at $67m or 7.4p per share.
- The Company engaged an experienced and well respected team of mining (AMS) and EPC/EPCM (Lycopodium) contractors and Owners’ Team for oversight of development minimising project development execution risk.
- KEFI has got support from the federal government that is contributing $20m of infrastructure related spending in what is to become the first new major mining project in decades.
- The orebody remains open in the dip direction and down plunge with the current mineral resource for the ‘below 1,400 RL’ part of the deposit (ie >350m from surface) estimated at 0.2moz (90% in the Indicated category) and representing a potential source of high grade material from the underground operation (5.7g/t). Tulu Kapi UG resource contributes $6m (45% interest) to the NPV or 0.7p.
- Additionally, the Company is in the process of renewing exploration permits over the 1,900km2 of prospective ground offering growth potential as well as optionality to processing of new discoveries given adjacent future Tulu Kapi CIL plant.
- In Saudi Arabia, KEFI is a 40% investor and technical partner at Gold & Minerals, a local JV with a leading local industrial group ARTAR, focused on the central-southwestern part of the prolific Arabian Nubian Shield prospective for gold and VMS deposits. The team is planning to launch a drilling programme once Tulu Kapi construction is started testing gold oxide at surface and the underlying copper-gold-zinc sulphide mineralisation.
- Using our DCF valuation model (10%DR, $1,350/oz) we arrive at NAVPS of 7.8p based on 644m shares in issue. The extent to which KEFI will be able to realise value gains depends on the amount of dilution the Company will incur funding operations through the Tulu Kapi development stage. Next major catalysts to the share price include start of relocation programme, infrastructure bond placing and start of construction.
*SP Angel act as Nomad and broker to KEFI Minerals plc
| Valuation | Interest | Att US$m | GBp/shr |
| Tulu Kapi OP | 45% | 67 | 7.4 |
| Tulu Kapi UG (50% risked) | 45% | 6 | 0.7 |
| Jibal Qutman (50% risked) | 40% | 7 | 0.8 |
| Project Value | 80 | 8.8 | |
| Adjustments | |||
| Net Debt | – | – | |
| Corporate overheads | -9 | -1.0 | |
| Company NAV | 71 | 7.8 | |
| GBPUSD exchange rate 1.4, DR 10%, Gold price $1,350/oz |
