KEFI Minerals Plc (LON:KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Federal Democratic Republic of Ethiopia, has today announced the signing of a mandate letter and heads of terms for US$135 million of project funding with Oryx Management Limited (“Oryx”) to finance and operate all the on-site infrastructure at the Company’s Tulu Kapi Gold Project in Ethiopia (the “Project”). The planned financing package also includes funding finance charges during a 30-month construction and production ramp-up period.
Highlights
· Mandate signed with infrastructure specialist Oryx to operate and lease-finance all on-site infrastructure at the Project.
· Oryx to establish a special purpose vehicle (the “Finance SPV”) to issue bonds, the proceeds of which would be used to build and own all the on-site infrastructure for the Project which it would lease to the Project company, Tulu Kapi Gold Mines Limited (“TKM”). The receipt of lease payments from TKM would be used by Finance SPV to pay the principal and interest on its bonds.
· Oryx to also operate the on-site ore processing infrastructure on an open-book, cost plus performance-bonus based operating contract.
· Ethiopian Government to fund the building of all off-site infrastructure for the Project, in accordance with previously announced and executed Shareholders Agreement. The relevant Government agencies will operate and maintain the off-site infrastructure.
· Ausdrill Limited (through its subsidiary African Mining Services Pty Limited) to supply and operate all the mining equipment under a mine services agreement structured as a conventional schedule of rates contract, whereby the contractor is paid per tonne of material delivered.
· All contractors to be accountable to and supervised by KEFI subsidiary TKM.
· Ignoring historic investment of c.US$60 million, the Project’s remaining funding requirement has now been successfully reduced from c.US$289 million when KEFI took control in 2014 to an amount of c. US$160 million (before overlaying the Oryx proposal) to a residual balance of US$32 million. The residual balance of US$32 million, which includes c.US$13 million of contingency provisions, will now be refined, structured and sourced. This residual amount will also be further evaluated over the coming months and may be reduced.
· A variety of sources to finance the estimated residual requirement of US$20-30 million are being considered, including working capital facilities with Development Bank of Ethiopia, Project-level equity with a mining and engineering group and further equity from KEFI in the Project company.
· It is currently estimated that KEFI’s holding in TKM, will be c.75%, without the issue of further Project-level equity to any third party, and under any scenario, it is KEFI’s preference to retain majority ownership and control of the Project.
· Tulu Kapi’s cash flow projections (supported by the 2017 Update to the Definitive Feasibility Study, “DFS”) at a gold price of US$1,250/oz support the Company’s plan to rapidly pay down the project finance indebtedness at the same time as pursuing a focused and exciting exploration program, and also to consider commencing dividends to shareholders early in the Project’s life. An indicator of the projected cash flow strength is that under these assumptions, Oryx could be repaid around half-way through the 9-year term.
· Timetable agreed with the Ethiopian Government and Oryx for financing to be provided and development to start before the end of 2017.
A new investor presentation has been uploaded to the Company’s website: www.kefi-minerals.com
Commenting KEFI Minerals Plc Executive Chairman, Harry Anagnostaras-Adams, said: “KEFI has selected a development funding approach considered more appropriate for start-up purposes than bank debt due to its longer 9-year tenor and its repayments commencing 30 months after drawdown.
This Project has been designed in close collaboration with the selected project contractors, Ausdrill for mining and Lycopodium for processing, and in partnership with the Ethiopian Government.
At a gold price of US$1,250/oz, Tulu Kapi’s robust project cash flow projections, combined with the innovative financing proposal from Oryx, looks to well serve KEFI’s objective to rapidly repay debts whilst implementing our targeted exploration programs and commencing dividends during the early production years.
We welcome Oryx to the Tulu Kapi syndicate and look forward to putting the funding in place to commence development of Tulu Kapi this year.”
