REG - Kefi Gold and Copper - Final Tulu Kapi Umbrella Agreement Signed

KEFI Gold and CopperAnnouncement

27/04/2023 10:15

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RNS Number : 7026X  Kefi Gold and Copper PLC  27 April 2023

27 April 2023

KEFI Gold and Copper plc

("KEFI" or the "Company")

Final Tulu Kapi Umbrella Agreement Signed

KEFI Gold and Copper (AIM: KEFI), the gold and copper exploration and
development company with projects in the Federal Democratic Republic of
Ethiopia and the Kingdom of Saudi Arabia, is pleased to announce the signing
of the Final Umbrella Agreement (the "Agreement") for the project financing of
the Company's Tulu Kapi Gold Project ("Tulu Kapi" or the "Project") held under
Tulu Kapi Gold Mines Share Company ("TKGM").

The Agreement was signed at a ceremony in Addis Ababa attended by a number of
senior Ethiopian Government officials, the British Prime Minister's trade
envoy, the Ambassadors to Ethiopia for Britain and for Australia, in addition
to representatives of the Project's participants and financing parties.

The Agreement sets out all syndicate roles and finance conditions, and
conditions precedent to final formal approval being granted.  The Agreement
also confirms that project costs and financial contributions have been
updated, along with technical and legal due diligence having been updated,
definitive agreements prepared and that the key required government actions
have been agreed.

The Agreement sets out the development sequence for Tulu Kapi over the course
of 2023 as formally laid out for the Ethiopian Ministry of Mines and signed by
Project contractors PW Mining ("PWM") and Lycopodium ("Lycopodium").  PWM
will provide mining services under its life-of-mine mining services agreement
(the largest single component of life-of-mine operating costs at c.US$992
million) and Lycopodium will provide engineering, procurement, and
construction management supply and labour hire services in respect of
processing infrastructure under its contracts (the largest component of the
c.US$320 million development costs).

The signing of the Agreement follows the further refining of the Project
financing plans with the Project's principal bankers, led by Eastern and
Southern African Trade and Development Bank ("TDB").  The positive refinement
of the proposed financing terms over the past month reflects the support being
shown by TDB and co-lender Africa Finance Corporation ("AFC") who signed the
Initial Umbrella Agreement in June 2022.  Signing of the Agreement follows
AFC reaching an agreement with the Ethiopian Government in March 2023 for
Ethiopian country membership, which now enables the same local rights and
protections to both of our co-lenders.

Along with the rest of the Project finance syndicate, the co-lenders have
issued conditional approvals subject to the Ethiopian Government's formal
confirmation of the few remaining outstanding items, notably clarification of
the details of capital controls for internationally syndicated project
financings.  Whilst the principles have already been approved for TKGM,
specific working rules are being considered to ensure the Project can operate
smoothly.

The proposed c.US$320 million Project development financing (excluding the
mining fleet provided by PWM, which is charged as part of mine operating
costs) now provides for an up to c.US$245 million package from the co-lenders,
comprising US$140 million senior debt, US$50 million mezzanine debt and up to
US$55 million equity-risk ranking notes.  This significant proposed package
from the co-lenders significantly reduces the share-ownership dilution of
TKGM's shareholders, whilst respecting the co-lenders' requirements for
appropriate debt-to-equity ratios.  This aspect is expected to be a major
accomplishment in the financing and reflects the robust economics of the
Project and long-term outlook for the gold price.  At the current gold price
of c.US$2,000/oz, all US$190 million of senior and mezzanine debt is projected
to be capable of repayment within approximately two years of production cash
flows commencing.

KEFI's has already provided historical equity investment of c.US$95 million in
the development of the Project to date.  The residual Project equity finance
requirement of US$75 million will be via share subscriptions in TKGM, and be
covered by KEFI and its local partners.  The largest local partners in TKGM
are the Federal and Regional Governments whose component is c. US$28 million.

KEFI's own underlying source of equity capital includes regional investors
into the Company's subsidiary KEFI Minerals (Ethiopia) Limited ("KME"), to
support the development of a priority sector as set by Ethiopian Government
policy.  The largest of these regional investors is a British multinational
industrial group investing US$15 million.

To complement the equity funding by local partners into TKGM and regional
investors into KME, KEFI considers that the potential exercise of existing
KEFI warrants will complete the required equity requirement and will leave
KEFI with an economic interest of 70-80% in TKGM.

The Agreement signed by the principal contractors sets out all syndicate
member roles and finance contributions and conditions precedent to Project
launch.  It also sets out the final launch sequence as detailed formally with
the Government via the Ministry of Mines.

All parties have invested much time and cost to launch the Project and have
drafted individual definitive agreements.  Signing of these is conditional on
mutually interdependent formal shareholder and lender approvals in compliance
with their respective review, approval and notice provisions.  As with any
such international mining project finance transactions, these approvals will
require independent certification of security and community readiness,
placement of insurances, mortgage registration and similar standard procedural
conditions precedent and subsequent.

All parties are working with Government to obtain the final required
clearances and, in the meantime, preparing for full construction start to
coincide with the next dry season at Tulu Kapi, which is expected to start in
October 2023, having already prepared the community and procured the plant and
equipment, with full production targeted to start in 2025.

KEFI expects to call a general meeting in June 2023 for its shareholders to
approve the final funding proposal and syndicate as laid out in the Final
Umbrella Agreement.

KEFI Executive Chairman, Harry Anagnostaras-Adams, commented:

"We move forward successfully despite the complexities of such syndications
and, in particular, being the first to do so against the backdrop of a
fast-changing Ethiopia. It is heartening to witness Ethiopia proactively
working to regain its position as one of the highest growth countries
globally.

"We thank the new Minister for Mines, H.E Habtamu Tegegn, and his team for
their energetic leadership and his commitment to rapidly advancing the mining
sector in Ethiopia.

"We push for construction in Q4 2023 following procurement and community
preparations.  In the meantime we await progress from Government on the
remaining financial regulatory, security and community preparations and to
which we lend our unwavering support.

"The Tulu Kapi Gold Project will be delivered to the highest international
standards including World Bank IFC Performance Principles."

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 (Managing Director)                         +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)
 Tim Metcalfe, Florence Chandler                                      +44 (0) 20 3934 6630

 

Notes to Editor

KEFI Gold and Copper plc

KEFI is focused primarily on the development of the Tulu Kapi Gold Project in
Ethiopia and its pipeline of highly prospective exploration and development
projects in the Kingdom of Saudi Arabia, also in the Arabian-Nubian Shield.
KEFI targets that Tulu Kapi Gold, along with its two most advanced Saudi
projects Jibal Qutman Gold and Hawiah Copper-Gold will come into production
over the period 2025-2027 and will generate cash flows for capital repayments,
further exploration and dividends to shareholders.

 

 

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