KEFI Gold and Copper is preparing for a robust launch in the Tulu Kapi Gold Project in Ethiopia, with key financing milestones and regulatory changes enhancing funding structures.
The development budget of $320 million, excluding a $100 million historical equity investment, has been secured at the subsidiary level. Following final approvals from the lead bank, all parties have initiated formal approval processes, including progress with the co-lending bank and local equity-capital investors.
Recent regulatory changes have improved the equity funding structure, lowering overall finance costs. These include foreign exchange exemptions, an increase in the debt-to-equity ratio from 70:30 to 80:20, and the re-investment of local currency retained earnings into new business sectors as foreign direct investment.
Within the development capital budget of US$320 million, US$100 million will be provided through the issuance of two types of Equity Risk Notes (“ERN”), one type for MNC’s with no operations in Ethiopia and another lower-cost ERN for those with accumulated retained earnings in Ethiopian operations.
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The company reports that it can now focus on the lower-cost ERN, fixed at 12% per annum. These notes remain repayable in cash from operations or, as a fall-back, in KEFI equity (at KEFI’s election), convertible in year 4 (being year 2 of full production) at the then prevailing KEFI share price.
KEFI confirms a longstanding and large MNC investor in the ERN has now received initial board approvals. All syndicate members have agreed on a schedule for all remaining pre-launch tasks, including their respective formal approvals, ahead of the full financial close in mid-2024.
Harry Anagnostaras-Adams, KEFI Executive Chairman, said:
“I am delighted to report the initial board approval of a major local equity-capital provider. And it is especially pleasing that the instrument designed for this transaction, the equity risk note, has been streamlined under the lower-cost approach. Our modelling and production profile for this high-grade open pit gold mine, based on a gold price of US$1,864/oz (versus the current spot of US$2,170/oz), shows sufficient cash will have been generated at the proposed time of repayment to repay these ERN in cash at the time they fall due.
“When combined with the credit committee approved US$95 million debt from the lead bank, Eastern and Southern Trade and Development Bank (“TDB”), and the Ethiopian Federal and Regional Governments’ US$20 million commitment, with the potential to increase to US$40 million, this accounts for US$215 million to US$235 million.
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“I can also advise that the company has received confirmation from the co-lender, Africa Finance Corporation (“AFC”), that its approval processes are underway and progressing well for its intended US$95 million investment, which would provide the balance of the required funding for the project launch.
“All syndicate members are supportive and are working to ensure final documentation is entered into by mid-2024 to enable the full project launch and drawdown of funds. I look forward to providing further updates as appropriate.”