REG - Kefi Gold and Copper - Signing of Tulu Kapi Financing Umbrella Agreement

KEFI Gold and CopperAnnouncement

30/06/2022 09:15

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RNS Number : 7986Q  Kefi Gold and Copper PLC  30 June 2022

30 June 2022

KEFI Gold and Copper plc

("KEFI" or the "Company")

Signing of Tulu Kapi Financing Umbrella Agreement

KEFI (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 that on the 30 June 2022 the Tulu Kapi
Gold Mines Share Company ("TKGM") project finance syndicate signed a funding
'Umbrella Agreement' as outlined in the Company's announcement on 15 June
2022.

The Umbrella Agreement sets out the role and contribution of each finance
syndicate member in relation to the Company's Tulu Kapi Gold Project ("Tulu
Kapi" or the "Project") and, whilst reflecting the conditionality of the plan
and intended flexibility within the syndicate, it sets out a full funding
package, covering historical and budgeted future expenditure.

In addition, at a meeting this week between the Ethiopian Minister of Mines
and the Company and TKGM's senior management, the Minister confirmed that the
media reports of licence cancellation were inaccurate, that the Tulu Kapi
mining licence is not cancelled and that regular progress reviews would
continue so as to ensure the earliest possible Project launch.

The funding structure has been designed in strict compliance with the policies
and guidance of the National Bank of Ethiopia (the central bank).  The plan
has also been approved unanimously by the Board of Directors of TKGM, which
comprises KEFI and Ethiopian Government representatives and it remains
consistent with previous Company guidance as notified on 23 August 2021.

The Project action plan now includes the following key steps:

·    The Company has completed the assembly of the information requested
by the Ministry of Mines and has started conducting meetings with the Minister
and his team to clarify any aspects. The Minister has agreed to a progress
review at the end of July 2022 to ensure a satisfactory outcome;

·    to formalise the outcome of successful meetings last week with the
principal Government agencies which administer financing policy whereby a key
condition precedent was satisfied in-principle - that both of the Company's
longstanding banking groups have the right to invest and lend on the same
terms;

·    to document the positive outcome of a successful inspection last week
by independent security experts and to finalise with security authorities the
requirements for Project launch at the start of the Ethiopian dry season in
October 2022;

·    to finalise the individual definitive agreements for the Project
financing and the contracting services for Project implementation; and

·    to arrange execution of Project insurances.

Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented:

"The Tulu Kapi Gold Project has been designed to the highest international
regulatory standards and has had historical investment of approximately US$80
million. The Project has assembled a first-class management team backed by a
first-tier syndicate of African experienced specialist organisations and
funders.

"No other mining project of this scale in Ethiopia has been brought to this
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
extensive technical re-design of the Project, overhaul by the Ethiopian
authorities of financial policies which previously hindered mining project
finance and the patient and cautious traversing of recent well publicised
events in the country.

"We are taking all measures to drive the Project safely forward, respect the
national priority to develop Ethiopia's mining sector and place the highest
importance on social licence in the very supportive Tulu Kapi community. We
are pleased that the Minister of Mines and other Ethiopian government
officials have expressed their continued support.

"The deposit was discovered some 15 years ago, and KEFI itself was invited in
some eight years ago to remedy the Project's technical defects, which took
about two years. We then collaboratively reviewed, with Government agencies,
the financial regulations prevailing in Ethiopia that hindered modern mining
project finance and assembled a first-class international syndicate which all
signed terms sheets in 2019.

"Since then, the syndicate has completed technical and legal due diligence
whilst the Company ensured the Project could proceed on the ground, traversing
previously reported challenges.  The decision to trigger financing and
Project launch procedures was confirmed within the syndicate last month, some
three months after the Ethiopian Government lifted its national State of
Emergency. We very much appreciate the collaboration and mutual trust with our
Federal and Regional Government co-shareholders in the operating subsidiary
TKGM and the multitude of government agencies with whom we deal daily.

"The signing of the Umbrella Agreement is a very important step and we look
forward to completing the outstanding matters that will allow for full Project
construction to commence in the Ethiopian dry season starting in October
2022."

 

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)  +44 (0) 20 3470 0470
 Jeff Keating, Adam Cowl
 Tavira Securities Limited (Lead 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

 

Notes to Editor

KEFI Gold and Copper PLC

Mission

 

The mission of KEFI is to discover and acquire economic gold and copper
mineralisation and follow through with cost-effective responsible exploration,
mine development and production in compliance with local laws and
international best practice.

 

Our geological region of focus is the Arabian-Nubian Shield, due to its
outstanding prospectivity for gold and copper.

 

Our activities provide a strong project pipeline covering the spectrum from
our Tulu Kapi Gold Project at the funding stage in Ethiopia, to our Hawiah
Copper-Gold and Jibal Qutman Gold Projects at the feasibility study stage in
Saudi Arabia, and to walk-up drill targets in both countries.

 

Since incorporation 16 years ago, KEFI has invested some £72 million in these
activities and today the Company sits with advanced projects that have project
NPV's that are already multiples of the amount invested. KEFI has a leading
position in the two countries that contain the majority of the Arabian-Nubian
Shield. We now have three advanced projects in these now strongly
pro-development countries and are focused on a sequential mine development
path to build a mid-tier mining company over the next few years.

 

Approach

 

KEFI was launched in 2006 as a £2.5 million initial public offering ("IPO")
on the AIM Market of the London Stock Exchange and was then led by exploration
specialists. The 2014 acquisition of the Tulu Kapi Gold Project triggered the
appointment of management with track records in developing and operating mines
in Africa. KEFI partners with appropriate local organisations, such as Abdul
Rahman Saad Al Rashid and Sons Limited ("ARTAR") in the Kingdom of Saudi
Arabia in our Gold and Minerals Limited ("G&M") joint venture and with the
Federal Government and the Oromia Regional Government in Ethiopia for our TKGM
joint venture.

 

Our community plans are in accordance with the International Finance
Corporation (World Bank) Performance Standards and Equator Principles.
Operationally, we align with industry specialists such as Lycopodium Limited
("Lycopodium") - our principal process plant contractors in both Ethiopia and
Saudi Arabia.

 

Some elements of Tulu Kapi's development commenced in Q4-2019 and were stalled
repeatedly by civil disturbance. These have now re-started and full
construction is planned to begin in October 2022 once the local dry season
begins. Annual gold production remains projected at 140,000 ounces from the
Tulu Kapi open pit to increase to c.190,000 ounces when the underground mine
starts up a few years later.

 

In Saudi Arabia, we now have two development projects in progress after being
held up for many years awaiting a regulatory overhaul. We look to develop our
Jibal Qutman Gold Project ("Jibal Qutman") and then to follow with the startup
of the Hawiah Copper-Gold Project ("Hawiah"). Both projects are now in the
feasibility study stage and are projected, between them, to add similar scale
of gold-equivalent production to that projected for Tulu Kapi in Ethiopia.
Copper will provide the majority of Hawiah's revenue.

 

We have also registered applications in Saudi Arabia for exploration of
prospects selected from our proprietary database, covering four major new
project areas and aggregating more than 1,000 square kilometres.

 

Timing

 

KEFI's objective is to have three projects in production by 2026 at a net
production rate of c.4,000 gold-equivalent ounces (KEFI beneficial interest
200,000 oz gold-equivalent).

 

The potential net operating cash flow from these projects is currently
estimated to exceed £137 million (US$185 million) per annum. The next few
years will be focused on multi-pronged development and exploration during
which our cash flow production should commence and escalate.

 

The operating environment for KEFI has improved considerably in recent times.
Since H1-2020, the estimated net present value ("NPV") of our assets has
tripled to £348 million (c.9 pence per share, based on today's issued
capital) due to exploration and permitting success in Saudi Arabia and an
expected greater equity interest in Tulu Kapi.

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