reports
- Charles Gibson
Securing Lanstead: Tulu Kapi financing underway
This morning, KEFI announced it is to raise £5.62m (gross) via the issue of 1.7bn shares at a price of 0.33p, including £4.62m from Lanstead. The majority of the funds raised will be expended on the development of Tulu Kapi over the next 12 months, with the next largest segment being directed towards exploration and the balance to corporate costs. Directors and contractors have supported the fund-raising by subscribing for c £0.4m. Afterwards, a 17:1 consolidation of the shares has been proposed...
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- Charles Gibson
Still aiming high
Since our last note in July, KEFI has updated its capex forecast for Tulu Kapi as well as the consequential funding mix. KEFI has also advised that the start of Tulu Kapi gold production is now expected to be mid-2018 (vs late 2017) due to recent events in Ethiopia and subsequent mitigating actions by the government. Finally, Edison has also updated our long-term gold price forecasts which have reduced our valuations.
Update: Steady as she goes
KEFI has raised £3.8m (gross) in equity, via the issue of 761.9m shares yesterday at a price of 0.5p per share. Notably, Odey Asset Management subscribed above its pro rata shareholding to increase its interest in KEFI to 29.5%. Odey is also reported to have offered to underwrite the placing, although this was rendered superfluous by the level of demand from other investors. Ausdrill (a contractor and existing shareholder) subscribed to maintain its shareholding at 7.31%. KEFI’s share price c...
Update: Reduced capex estimate
Since our last update note on 10 March, KEFI has announced a £1.75m equity raising; confirmation that the Ethiopian government is to take an additional 20% interest in Tulu Kapi in return for a US$20m funding commitment relating to infrastructure (vs our prior expectation of 25%); a reduced capex estimate and modified funding requirement mix; and, replaced the construction contractor with market leader Lycopodium.
Update: Going underground
KEFI’s announcement of the results of a preliminary economic assessment (PEA) of an underground operation at Tulu Kapi indicates a project with an estimated NPV8 of US$44m, based on a gold price of US$1,250/oz and 100% ownership (cf US$156m for the open-pit project on the same basis). The project envisages producing 50koz of gold pa (in addition to that from the open pit) over four years, at a cash operating cost of US$664/oz and all-in sustaining costs (AISC) of US$845/oz.
Update: Another piece falls into place
KEFI has announced that it has selected its preferred lenders for Tulu Kapi and that the lenders have indicated non-binding terms for project finance including senior secured project loans of US$60m, with an average tenor of six years. With five of six key partners pre-engaged in the project, only a streaming partner now remains outstanding.
Update: Beyond Tulu Kapi
KEFI’s announcement that it has conditionally placed 877.2m shares at 0.3p/share to raise US$4.0m (£2.6m) substantially completes the company’s planned equity funding ahead of the development of the Tulu Kapi project. The fund-raising was notable for the commitment shown by directors, management, contractors (Ausdrill) and Odey Asset Management (which has now increased its shareholding in KEFI to 26%).
Update: Beyond Tulu Kapi
On 13 October, KEFI announced that it had appointed Sedgman as its preferred processing plant contractor at Tulu Kapi. Inter alia, Sedgman’s scope of work includes an estimated cost of c US$63m for a 1.5-1.7Mtpa plant, which compares favourably with the DFS and our most recent cost estimates and throughput rates. To expedite the development of the project further, early front-end engineering and design (FEED) work is reported to have started. Similarly, on 14 October, KEFI announced that it ha...
Update: More gold faster and cheaper
KEFI’s DFS on Tulu Kapi was based on a conventional owner-operator model to estimate costs from first principles (see page 2). However, to minimise initial capex, management then invited final bids from fixed-price plant building and mining contractors. In collaboration with these, it has also been able to announce a 25% expansion of the proposed processing rate to 1.5Mtpa, such that KEFI shares now offer investors an IRR of 38.6% in sterling terms over 12 years (vs 25.9% over 17 years previou...
Initiation: Good times For Tulu Kapi
KEFI acquired Tulu Kapi in western Ethiopia for US$9.7m, or an average of US$5.14 per contemporary resource ounce. By subsequently reinterpreting the ore body in the light of new data, it has been able to devise a mine plan that extracts essentially the same quantity of metal by mining only half the tonnage of rock. As a consequence, upfront capital expenditure has been halved and the economics of the project transformed.
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