TIDMKEFI
RNS Number : 8451C
Kefi Gold and Copper PLC
22 October 2020
22 October 2020
KEFI Gold and Copper plc
("KEFI" or the "Company")
Conditional Completion of Consortium to fund the Tulu Kapi Gold
Project
KEFI expected to increase Project ownership from 45% to
c.65%
KEFI Gold and Copper plc (AIM: KEFI), the gold exploration and
development company with projects in the Federal Democratic
Republic of Ethiopia and the Kingdom of Saudi Arabia, is pleased to
announce that it has now assembled the full consortium and set the
conditional terms for the independently reviewed development
funding package of c.US$221 million for the Company's flagship Tulu
Kapi Gold Project (the "Project" or "Tulu Kapi").
Highlights
-- Non-binding term sheets signed to complete the US$221
million consortium for Project development funding
-- Experienced African investors conditionally agree to
contribute a minimum of US$40 million to the Project
-- KEFI beneficial Project ownership expected to increase
to c.65% from previously envisaged 45%, increasing
NPV attributable to KEFI by c.33%
-- First production remains on track for Q4 2022, targeting
to lift average gold production from original 140,000oz
p.a. to 190,000oz p.a. within 3 years of start-up
-- In-house estimates indicate an anticipated Project
NPV for KEFI of 11p/share (assuming 65% interest and
US$1,700/oz gold price). This excludes any other KEFI
assets, notably the Hawiah copper-gold-zinc-silver
and Jibal Qutman gold deposits discovered in Saudi
Arabia.
Financially strong African-experienced Investors have
conditionally offered a minimum of US$40 million Project
funding
The Company has entered into two non-binding term sheets for a
combined minimum of US$40 million of investment with the Ethiopian
division of a global industrial company ("Local Investor"), which
is listed on the London Stock Exchange with a market capitalisation
exceeding GBP1 billion and also with one of the world's leading
commodity trading companies ("Mining Financier"). Both
organisations have extensive experience in Africa. The terms sheets
are complementary to, and consistent with, the plans already
approved by the board of Tulu Kapi Gold Mines Share Company
("TKGM") and the Ethiopian regulatory authorities.
The Project finance structure now comprises KEFI's Government
Partners (both the Federal Government of Ethiopia and the Regional
Government of Oromia), leading African banks as Mandated Senior
Project Lenders (Eastern and Southern African Trade and Development
Bank and Africa Finance Corporation ), strong African specialist
investors into KEFI Group companies (the Local Investor and Mining
Financier) and the African-experienced principal contractors.
RAB Capital, KEFI's largest single shareholder holding
approximately 12%, has also welcomed the new parties to the
consortium, and the proposed appointments of new directors to the
boards of the respective KEFI subsidiary companies.
This overall proposed package, further detailed below, is
currently being considered by the Senior Project Lenders, before
detailed documentation is assembled for approval by consortium
member boards and the Ethiopian central bank, the National Bank of
Ethiopia .
As KEFI has succeeded in sourcing the Mining Financier to
conditionally provide offtake-linked financing, the Company and its
Government Partners will be able to retain a higher beneficial
ownership of the Project. For KEFI, this is now expected to be
c.65%, compared with the previously envisaged 45% ownership. As
outlined below, this approach is expected to materially increase
the value of the Project to both the Company and its Government
Partners.
Whilst the impact of COVID-19 has regularly disrupted a
multitude of activities for all existing and new Project
stakeholders requiring reshuffling of schedules, the Project
remains on track with its key target of commissioning gold
production in Q4 2022. This has been made possible by the patient
and disciplined support from the community, Government, Senior
Lenders and other stakeholders. TKGM directors and management are
on the ground in Ethiopia liaising with and supporting wherever
possible the dedicated teams of the many Government agencies
involved.
Project Funding Structure
Whilst KEFI has now signed agreements and non-binding terms
sheets with all consortium members, it should be emphasised that
all these individual agreements remain conditional on completion of
due diligence, confirmation of regulatory compliance, internal
approvals and the execution of full detailed documentation by each
consortium member. It is currently scheduled that all these
outstanding matters will be completed in the current quarter, to
avoid any delay to the Project timetable to commissioning in Q4
2022 .
The independently reviewed Project development and disbursement
schedules show project equity funding continuing in the current
quarter and over the ensuing six months ("Equity Closings"), with
senior debt funds drawn down in mid-2021 ("Debt Closing").
The Project development funding requirement and expected sources
now comprise the following:
Total Development Funding US$300M
Less, already spent US$79M (1)
Additional funding required as notified on 19 US$221M
June 2020
Senior debt at up to c. 60% of additional funding US$132M (2)
required (under 50% of Total Development Funding)
Project Equity at c. 40% of additional funding US$168M
required (over 50% of Total Development Funding)
Less, already spent US$79M
Additional equity and shareholder loans required US$89M
which are currently intended to be provided as follows:
-- Conditionally agreed minimum investments by
each of the following:
o Investment into TKGM by KEFI's Government US$20M
Partners
o Local Investor to fund KEFI's further subscription US$10M (3)
for TKGM shares
o Mining Financier to fund KEFI shareholder US$30M (4)
loans to TKGM
-- Residual (based on minimum commitments indicated)
o to be refined and allocated within consortium US$29M (5)
Notes to the above table:
1) Pre-2014 spending of US$49M has already been registered
in accordance with local regulatory procedures. The total
of US$79M includes other relevant amounts incurred. These
amounts are important as they form the bases for:
a) equity allocations inside TKGM between Government and
KEFI, and
b) the regulatory compliance with permitted capital ratios
for this foreign direct investment.
2) Senior Lenders signed off original term sheets in September
2019 indicating provision of up to c.60% of additional
funding required pending due diligence. They will advise
the final amount after completion of all due diligence;
3) Local Investor share subscription into wholly-owned KEFI
subsidiary KEFI Minerals (Ethiopia) Limited ("KME") for
an expected 6.7% interest. This approach has already been
authorised by the Ethiopian regulatory authorities;
4) It is intended that the subordinated offtake-linked development
capital of a minimum US$30M from the Mining Financier
will be structured as a shareholder loan to TKGM via a
KEFI Group company. Detailed terms include the following:
a. The full amount borrowed from the Mining Financier
will be on-lent to TKGM as KEFI shareholder loans.
b. The shareholder loans to TKGM will be fully subordinated
to the Senior Lenders.
c. The loan facilities provided by the Mining Financier
will comprise a term loan and a working capital facility
which is a revolving credit line with a tenor to match
that of the Mining Financer's offtake rights over 800,000
ounces of gold production at market-based gold pricing.
d. An interest rate which has already been approved by
the central bank.
5) The partners in TKGM (the Government and KEFI) will finalise
their respective Project-level equity-capital contributions
and the sourcing thereof (for KEFI it is intended to be
from the providers of equity or subordinated loans to
KEFI subsidiary companies rather than from any parent
company share issues) when the Senior Lenders have completed
their due diligence and regulators confirm compliance.
There are no unresolved policy matters.
Community Programmes
Having pulled together this refined Project development funding
package, TKGM has triggered low-cost but important next steps for
the community resettlement programmes so as to ensure on-site
construction can start in early 2021. These include starter homes
for the first phase of resettled persons.
All social and environmental programmes are planned to World
Bank IFC Standards and exceed the requirements of local
regulations. TKGM integrates ESG (Environmental, Social and
Governance) considerations into its development and production
programme.
Expansion of Planned Project Production and of KEFI's Beneficial
Ownership
Over the recent months, KEFI has successfully focused on:
a) minimising the COVID-19 impacts on the Project schedule;
b) responding to the higher gold price by bringing forward
the planning for underground mining; and
c) sourcing development capital at the subsidiary level,
substantially increasing the beneficial ownership in
the Project for both KEFI and our Government Partners.
More specifically:
a) COVID-19 impacts have required continual refinement of
operational policies, procedures, schedules and activities;
b) because of the improved gold price outlook, we are revising
the planning assumption of US$1,098/oz gold for determination
of Project Ore Reserves and also looking to bring forward
the timing of underground development once open pit production
has settled down. In this context, it is now reasonable
to assume the addition of underground ore during the
third year of mining the open pit, lifting combined production
to an average of 190,000 oz pa; and
c) the Project NPV's are presented below, highlighting the
impact of increased ownership to c. 65%.
Tulu Kapi Gold Project Assumed Long-Term Gold Price
-------------------------------------- ----------------------------------------
US$1,400/oz US$1,700/oz US$2,000/oz
-------------------------------------- ------------ ------------ ------------
NPVs for 100% of Project reported at
KEFI 2020 AGM
------------ ------------ ------------
US$ Millions 236 422 607
------------ ------------ ------------
GBP Millions 189 337 485
------------ ------------ ------------
NPVs for 45% of Project reported at
KEFI 2020 AGM
------------ ------------ ------------
US$ Millions 105 190 273
------------ ------------ ------------
GBP Millions 85 152 218
------------ ------------ ------------
NPVs for 100% of Project updated for
Funding Structure
------------ ------------ ------------
US$ Millions 238 406 573
------------ ------------ ------------
GBP Millions 181 310 438
------------ ------------ ------------
NPVs for 65% of Project updated for
Funding Structure
------------ ------------ ------------
US$ Millions 154 264 373
------------ ------------ ------------
GBP Millions 118 201 284
------------ ------------ ------------
Note: The Project NPV's include production from the open pit and
undergound mines and are derived using an 8% discount rate. The
NPVs are internally derived using independently created financial
models of net cash flows after tax and debt service, based on the
Definative Feasibility Study (DFS) for open pit and Preliminary
Economic Assessment (PEA)for underground mining.
The above table indicates an NPV equating to a KEFI share price
of 11p at a 65% interest and a US$1,700/oz gold price, excluding
any other KEFI assets, notably the deposits discovered Saudi
Arabia, the Hawiah copper-gold-zinc-silver and Jibal Qutma gold
deposits.
Commenting, Harry Anagnostaras-Adams, Executive Chairman of
KEFI, said: "I am delighted that we continue to attract strong
African experienced participants in our Tulu Kapi funding structure
in a manner that enables KEFI and its Government Partners to
increase their beneficial ownership, for KEFI to c.65% of the Tula
Kapi Project. The refined structure set out today is in accordance
with the overall plan already approved by TKGM and the regulatory
authorities and now includes investment from a well-capitalised and
internationally prominent local investor and a global mining
finance specialist.
"The pandemic has meant that the TKGM team have worked even more
closely with the Government agencies at all levels and other
stakeholders, enabling us to adhere to the overall Project
timetable targeting production start-up in Q4 2022.
"The improved gold price outlook and our negotiations over the
past few months have switched KEFI's focus from owning 45% of a
140,000 oz p.a. operation to owning 65% of 190,000 oz p.a.
operation, essentially doubling KEFI's beneficial interest in terms
of net production per annum. The Ministry has reserved for KEFI its
exploration rights to over 1,000 square kilometres of the
surrounding land for exploration and we are confident that in due
course we will significantly boost reserves from satellite deposits
and further expand the mine life beyond the term of the current
economic model. We see Tulu Kapi as a mining district and not just
one or two mines.
"Our progress and the Project economics are ever more compelling
for KEFI and its shareholders and I look forward to reporting
further progress in due course."
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
Enquiries
KEFI Gold and Copper plc
Harry Anagnostaras-Adams (Executive
Chairman) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance LLP (Nominated
Adviser and Joint Broker) +44 20 3470 0470
Jeff Keating, Soltan Tagiev, Adam
Cowl
Brandon Hill Capital Ltd (Joint Broker) +44 20 7936 5200
Oliver Stansfield, Jonathan Evans
IFC Advisory Ltd (Financial PR and
IR) +44 20 3934 6630
Tim Metcalfe, Florence Chandler
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
MSCPPGBWUUPUGMG
(END) Dow Jones Newswires
October 22, 2020 02:00 ET (06:00 GMT)
Kefi Gold And Copper (LSE:KEFI)
Historical Stock Chart
From Apr 2024 to May 2024
Kefi Gold And Copper (LSE:KEFI)
Historical Stock Chart
From May 2023 to May 2024