KEFI Minerals, the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Federal Democratic Republic of Ethiopia, has signed a mandate letter and heads of terms for $135 million of project funding with Oryx Management to finance and operate all the on-site infrastructure at its Tulu Kapi gold project in Ethiopia. The planned financing package also includes funding finance charges during a 30-month construction and production ramp-up period.
- Mandate signed with infrastructure specialist Oryx to operate and lease-finance all on-site infrastructure at the project
- Oryx to establish a special purpose vehicle to issue bonds, the proceeds of which would be used to build and own all the on-site infrastructure for the project which it would lease to the project company, Tulu Kapi Gold Mines Ltd (TKM). The receipt of lease payments from TKM would be used by Finance SPV to pay the principal and interest on its bonds
- Oryx to also operate the on-site ore processing infrastructure on an open-book, cost plus performance-bonus based operating contract
- Ethiopian Government to fund the building of all off-site infrastructure for the project, in accordance with previously announced and executed Shareholders Agreement. The relevant Government agencies will operate and maintain the off-site infrastructure
- Ausdrill (through its subsidiary African Mining Services) to supply and operate all the mining equipment under a mine services agreement structured as a conventional schedule of rates contract, whereby the contractor is paid per tonne of material delivered
- All contractors to be accountable to and supervised by KEFI subsidiary TKM
- Ignoring historic investment of some $60 million, the project’s remaining funding need has now been successfully reduced from circa $289 million when KEFI took control in 2014 to an amount of about $160 million (before overlaying the Oryx proposal) to a residual balance of $32 million. The residual balance of $32 million, which includes approximately $13 million of contingency provisions, will now be refined, structured and sourced. This residual amount will also be further evaluated over the coming months and may be reduced
- A variety of sources to finance the estimated residual requirement of $20-30 million are being considered, including working capital facilities with Development Bank of Ethiopia, project-level equity with a mining and engineering group and further equity from KEFI in the project company
- It is currently estimated that KEFI’s holding in TKM, will be some75%, without the issue of further project-level equity to any third party, and under any scenario, it is KEFI’s preference to retain majority ownership and control of the project
- Tulu Kapi’s cash flow projections (supported by the 2017 Update to the DFS) at a gold price of $1,250/oz support the company’s plan to rapidly pay down the project finance indebtedness at the same time as pursuing a focused and exciting exploration program, and also to consider commencing dividends to shareholders early in the project’s life. An indicator of the projected cash flow strength is that under these assumptions, Oryx could be repaid around half-way through the nine-year term
- Timetable agreed with the Ethiopian Government and Oryx for financing to be provided and development to start before the end of 2017.
Commenting KEFI’s Executive Chairman, Harry Anagnostaras-Adams, said: “KEFI has selected a development funding approach considered more appropriate for start-up purposes than bank debt due to its longer nine-year tenor and its repayments commencing 30 months after drawdown.
“This project has been designed in close collaboration with the selected project contractors, Ausdrill for mining and Lycopodium for processing, and in partnership with the Ethiopian Government.
“At a gold price of $1,250/oz, Tulu Kapi’s robust project cash flow projections, combined with the innovative financing proposal from Oryx, looks to well serve KEFI’s objective to rapidly repay debts whilst implementing our targeted exploration programs and commencing dividends during the early production years.
“We welcome Oryx to the Tulu Kapi syndicate and look forward to putting the funding in place to commence development of Tulu Kapi this year.”
Tulu Kapi has a Probable Ore Reserve of 1.0 Moz and Mineral Resources totalling 1.7 Moz. Planned gold production is forecast to be circa 115,000 oz/y at an AISC of $777/oz over the initial eight years of mining the open pit.