REG - Kefi Gold and Copper - Agreement of Tulu Kapi Gold Project Finance Plan

KEFI Gold and CopperAnnouncement

21/11/2022 07:00

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RNS Number : 9833G  Kefi Gold and Copper PLC  21 November 2022

21 November 2022

KEFI Gold and Copper plc

 

("KEFI" or the "Company")

 

Agreement of Tulu Kapi Gold Project Finance Plan

 

KEFI (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 the updated US$320 million Tulu Kapi Gold
Project ("Tulu Kapi" or the "Project") costings and finance plan has now been
agreed by all the Tulu Kapi syndicate lead contractors, investors and lenders.
It is currently being processed for final reviews and entry into definitive
documentation to be signed as soon as possible, with the expectation to
achieve this next month.

 

It remains that financing is to be almost entirely at the project or
subsidiary level and remains consistent with previous guidance (see 2021
Annual Report, page 6). The detailed breakdown of the sources and uses of the
US$320 million Project funding will be announced at the time of signing
definitive documentation.

 

Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented: "The Tulu
Kapi Gold Project is designed to world-leading standards technically,
socially, environmentally and in terms of financing arrangements acceptable to
international capital markets.

 

"Today's important milestone of the debt and equity leads approving the
finalised finance plan allows all the respective Boards to formally approve
the definitive documentation. I am pleased to report the Project is now up and
away.

 

"Ethiopia's readiness for foreign direct investment has continued to improve
since early 2022 and recent well-publicised positive developments have only
served to reinforce that. The Company is confident that we can lift the work
programmes to full construction in the new year and be in full production from
the open pit in 2025 and from the combined open pit-underground operation a
few years later.

 

"We have been long-standing and resilient supporters of the Ethiopian
Government's efforts to develop its minerals sector and we feel a great sense
of responsibility and honour to now be able to push forward at a time which is
particularly important for all stakeholders."

 

Tulu Kapi Background

 

Now Focusing on Increased Production and Longer Mine Life at Tulu Kapi

The Company is pleased to report that the plans now contemplate an enlarged
Tulu Kapi operation, integrating both an open pit and underground mine, with
consequential increases in planned gold exports to US$300 million per annum
(at current gold prices when both mines are in production) and with combined
mine production extended from 8 to 10 years starting in 2025. KEFI will also
request permission from the Ethiopian Ministry of Mines to recommence district
exploration during construction to further extend the mine life to well over
10 years for the benefit of all stakeholders.

Initial Project development activities have already started and include camp
upgrading for construction, local recruitment, community resettlement, plant
procurement engineering and work-programmes and legal formalities to satisfy
the many standard conditions precedent for finance drawdowns.  An official
Project launch is planned for early 2023, the timing to be determined with the
Ministry of Mines.

 

Conditionality of Project Plans

Since signing the syndicate Umbrella Agreement in June 2022, we have updated
all Project costings with international fabricators and other suppliers,
updated contract documentation, had both of our banks confirm there are no
more policy impediments to their participation, adjusted intra-syndicate
finance contributions and started assembling completed documentation for
lender review before execution.

 

As with any project financings standard conditions must be satisfied before
and after signing of definitive agreements by all parties, including
completion/registration of documents with the various Government agencies,
opening international project bank accounts in collaboration with the National
Bank of Ethiopia, placing insurances internationally through the Ethiopian
agents, registering loan-security, receiving confirmations of tenure for
mining and exploration and the independent experts' confirmation that
conditions on the ground remain conducive to the planned operations.

 

Economic Benefits of the Tulu Kapi Gold Project include:

 ·    Showcase project as first mover in a high-priority sector
 ·    A business enterprise that will be the single largest Ethiopian
 exporter, starting at c. US$250 million per annum ("pa") and rising over the
 first four years to US$300 million pa, at current gold prices
 ·    Direct employment of 1,000 people and indirect employment 5-10 times
 that number in a high unemployment area of rural West Welega
 ·    Emphasis on local procurement for production inputs, with annual
 operating expenses exceeding US$140 million which will have a huge impact on
 local economic opportunity
 ·    Emphasis on creation of micro-enterprise in collaboration with
 appropriate experts, such as the Ethiopian Evangelical Church of Mekane Yesus
 ("EECMY")
 ·    A showcase project in all respects, backed by leading African
 development banks and encouraging other minerals developers to proceed in
 Ethiopia.

 

Social Benefits of the Tulu Kapi Gold Project include:

 ·    A full spectrum of social programmes in compliance with International
 Finance Corporation (World Bank) Performance Standards
 ·    Education, training and employment starting some years ago with the
 construction of the local school and now expanding into local technical
 college courses in collaboration with a leading mining colleges and
 universities in global mining centres
 ·    Local infrastructure which started some years ago with provision of
 local fresh water and expansion to include an all-weather road to the highway,
 mains electricity to site with extra capacity for local reticulation by the
 authorities for appropriate applications, health clinics and an airstrip
 ·    Tulu Kapi Charitable Foundation started and is in operation

 

The Environmental impact:

 ·    The Tulu Kapi Gold Project has been designed in accordance with the
 highest international standards and will involve monitoring by global leading
 experts
 ·    The site itself was chosen by KEFI because of its environmental and
 social characteristics, as much as its mineralisation and potential to
 generate wealth
 ·    The site has no interest to artisanal miners because of the depth and
 nature of the gold particles, i.e., unrecoverable by artisanal techniques and
 only by industrial-scale processes
 ·    No sulphide mineralisation which therefore avoids the issue of
 managing potential acid mine drainage
 ·    The Environmental Impact and Assessment Report has been widely
 reviewed and the Company is not aware of any negative comment

Market Abuse Regulation (MAR) Disclosure

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

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 (0) 20 3470 0470
 Jeff Keating, Adam Cowl
 Tavira Securities Limited (Joint Broker)                             +44 (0) 20 7100 5100
 Oliver Stansfield, Jonathan Evans
 WH Ireland Limited (Joint Broker)                                    +44 (0) 20 7220 1666
 Katy Mitchell, Andrew de Andrade
 IFC Advisory Ltd (Financial PR and IR)                               +44 (0) 20 3934 6630
 Tim Metcalfe, Florence Chandler

 

KEFI Gold and Copper plc

 

KEFI is focused primarily on the advancement of its three development projects
in Ethiopia and Saudi Arabia, plus its pipeline of highly prospective
exploration projects in these two large jurisdictions of the under-explored
Arabian-Nubian Shield.

 

KEFI targets that production at Tulu Kapi in Ethiopia and Jibal Qutman in
Saudi Arabia will, between them, generate cash flows for capital repayments,
further organic growth and, ultimately, dividends to shareholders.

 

Both TKGM and G&M are technically guided and supported by KEFI so that
each of these operating joint venture companies as soon as possible builds the
local organisational structure suitable for long term production as well as
exploration and future development opportunities.

 

KEFI Gold and Copper in Ethiopia

 

Ethiopia is currently undergoing a remarkable transformation both politically
and economically.

 

The Tulu Kapi gold project in western Ethiopia is being progressed towards
development, following a grant of a Mining Licence in April 2015. No other
mining project of this scale in Ethiopia has been brought to Tulu Kapi's stage
of advancement during recent years and Tulu Kapi will be the first industrial
scale mine development in Ethiopia in over 30 years. It has taken years of
extensive technical re-design of the project, years of overhaul by the
Ethiopian authorities of financial policies which previously hindered mining
project finance and the patient and cautious traversing by the Company of
recent well-publicised events within the country. The project has imposed many
demands on a regulatory system which the Ethiopian Government continues to
upgrade, determined to build a modern minerals sector. KEFI is honored to play
its part in this process and has assembled a first-tier syndicate of
international industry expert management, contractors, banks and investors.

 

The Company has now refined contractual terms for construction and operation
of the open pit mine. Management has also developed preliminary plans to
develop the underground mine once open-pit production has started and to
produce.

 

All aspects of the Tulu Kapi (open pit) gold project have been reported in
compliance with the JORC Code (2012) and subjected to reviews by appropriate
independent experts. The underground project is defined based on internal
PEA-level analyses which have yet to be subjected to DFS-level investigation
and independent review, which is planned to be carried out during the
construction of the open pit.

 

KEFI remains keen to re-commence its exploration of the additional prospects
it has successfully identified within the Tulu Kapi district exploration area
from within which the mining licence was duly excised as a result of the
successful discovery of the Tulu Kapi deposit. Whilst most historical drilling
was naturally of the Tulu Kapi deposit, there was significant work done on
many further prospects which await follow-up.

 

Whilst awaiting regulatory permission to re-activate the Company's Ethiopian
exploration, which is critical for long term planning for all stakeholders in
the community as well as the Company, the exploration focus has been
successfully switched to Saudi Arabia.

 

KEFI Gold and Copper in the Kingdom of Saudi Arabia

 

In 2009, KEFI formed Gold & Minerals Limited ("G&M") in Saudi Arabia
with local Saudi partner, ARTAR, to explore for gold and associated metals in
the Arabian-Nubian Shield. KEFI has a c. 30% interest in G&M.

 

ARTAR, on behalf of G&M, and G&M directly held over 16 Exploration
Licence (EL) applications pending the introduction of the new Mining Law.
These new regulations have recently been proclaimed and G&M has had ten
new licences issued in the past twelve months - more licence grants than in
the previous 14 years and all highly prospective and strategically important
for G&M, ELs are renewable for up to five years and bestow the exclusive
right to explore and to obtain a 30-year exploitation (mining) licence within
the area.

 

In addition, G&M has a Mining Licence Application over the Jibal Qutman
Gold Project which recent informal indications by the authorities provide some
confidence that the licence will be granted shortly.

 

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