Asa Bridle of Cantor Fitzgerald reports that “KEFI and its operational partners on the Tulu Kapi gold project in Ethiopia continue to make progress with development plans and costings being formalised, and the community resettlement program moving forward. The project could also benefit economically if gold’s move through $1,300/oz can be maintained. The company expects to begin to draw down on the $140 million project loan in 2Q18 in parallel with the community resettlement program and the start of the construction and procurement process. We continue to believe that the project’s value is still unrecognised in KEFI’s share price. Away from Ethiopia, the rolling out of a new minerals policy in Saudi Arabia should allow KEFI’s JV in the country to reactivate its exploration program once the new policy details have been clarified.”
At Tulu Kapi the project contactors have confirmed costings and schedule for the final project models. The Mining Licence transfer to TKGM has been cleared and execution is in process. The community compensation surveys, calculations and negotiations have been completed. The Ethiopian Electricity Power Corporation and Ethiopian Roads Authority have confirmed their budget and schedule commitment to construct the project’s off-site infrastructure and the National Bank of Ethiopia (central bank) has approved most administrative requests and is engaging on the remaining issues. The company also highlights that its previously published project NPV would rise 24% to $92 million at the start of construction and 16% to $131 million at the start of production if a base case $1,300/oz gold price is used versus. the previous $1,250/oz assumption.
KEFI owns 95% of the project with a Probable Ore Reserve of 1.0 Moz and Mineral Resources totalling 1.7 Moz. Planned gold production at Tulu Kapi 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.
The company has announced that it has terminated its relationship with Oryx with the other existing consortium members (Government of Ethiopia, contractors Lycopodium and Ausdrill/African Mining Services) still performing all the various required roles as previously outlined. KEFI will now deal directly with the arranger of the bond and the company still expects to meet its drawdown target of 2Q18 to match with the community resettlement programme and the triggering of procurement and construction. In terms of equity financing, KEFI has again flagged the possibility of additional project-level equity investment in the order of 20% on the same terms as the Ethiopian Government’s agreement (implied project EV of circa $100 million), leaving KEFI shareholders with a 55% stake in the project.
As expected, a new minerals policies has been announced by the Saudi Government to facilitate growth in the sector. KEFI and its 60% Saudi JV partner, ARTAR, have been waiting for this development to rejuvenate the JV’s plans. The JV’s portfolio has been upgraded and now has pegged much of a major structural volcanic hosted massive sulphides (VHMS) belt.
The 40%-owned Jibal Qutman project in Saudi Arabia has Mineral Resources totalling 0.7 Moz.
