13th Jan 2016 11:48
LONDON (Alliance News) - KEFI Minerals PLC Wednesday said it has refined its development and financing plan for the Tulu Kapi gold project in Ethiopia, with production still set to start sometime in 2017.
The plans have been refined following feedback from the financiers, which engaged with the recently appointed contractors, project partner, debt financiers and consultants. In terms of current progress, front end development engineering and design (FEED) is now at an advanced stage, KEFI said, and the development schedule anticipates production starting in 2017, in line with previous guidance.
"The development and financing plan has been further improved with the syndicate of contractors and bankers which has emerged from our rigorous international selection process. Despite very tough capital market conditions, Tulu Kapi's robust economics have attracted support for production start-up in 2017 as planned," said Harry Anagnostaras-Adams, chairman of KEFI.
"Whilst we continue to optimise our financing options pending finalisation and approval by the National Bank of Ethiopia in mid-2016, we have already selected our preferred syndicate of contractors and the investors of equity and non-equity capital, and look forward to working with this high calibre consortium to bring this project to fruition," he added.
Starting with the syndicate's preferred development plan, KEFI said Tulu Kapi would produce 980,000 ounces of gold over a decade, averaging 115,000 ounces per year excluding the first and last year of the project. That compares to the definitive feasibility study (DFS) released last year which suggested the project would produce 960,000 ounces over 13 years at an average rate of 95,000 ounces a year.
Alongside higher production rates, the project's all-in sustaining cash cost also would come in lower at USD742 per ounce compared to the DFS estimates of USD780 per ounce. Gold was trading at USD1,082 per ounce on Wednesday - suggesting KEFI would have a margin of around USD340 per ounce based on the new cost assumptions and current prices.
Tulu Kapi is projected to generate net operating cashflow of USD66.0 million per year under the amended plans, compared to the DFS projections of only USD47.0 million.
Moving onto the funding plan for the project, KEFI said it will need USD120.0 million of initial funding for Tulu Kapi, of which around USD100.0 million will be debt-based, but said the "exact quantum" will be finalised nearer to financial closing, which is anticipated in the second quarter of 2016.
The other USD20.0 million will come from an investment by the government of Ethiopia at project level, building on the USD50.0 million it has already invested in the project to date.
Around 10% of gold production from Tulu Kapi will also be hedged as part of a risk-management programme and net cashflow after tax averages around USD32.0 million per year. However, that is based on a gold price of USD1,250 per ounce and KEFI said that cashflow figure would fall to only USD22.0 million per year based on a gold price of USD1,100 per ounce - which is still higher than current prices.
Kefi shares were trading down 1.1% to 0.351 pence per share on Wednesday.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
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