Banks mull increasing Tulu Kapi debt package – Kefi

Aim-listed Kefi Gold and Copper has reported that project finance banks are considering increasing the proposed project finance debt package for the Tulu Kapi gold project, in Ethiopia, from $190-million to $240-million, subject to all conditions being satisfied and remaining formal approvals being obtained.

“We are all working to complete these formal approvals and definitive detailed documentation this quarter,” says Kefi.

The company notes that document execution and launch of major works are expected to follow as the remaining conditions are satisfied.

It explains that the expanded bank facility, combined with other initiatives being taken, indicates that the $320-million project development finance package is covered.

Following these refinements to the development finance package, Kefi says it is now expecting an 80% beneficial interest in Tulu Kapi.

Moreover, Kefi says the increased Tulu Kapi loan proposal reflects the conclusions of the banks' due diligence on the project and its economics, noting that the consequential lending ratios remain well within normal conventions.

The company adds that this reflects the project's high grades – openpit grade 2.1 g/; high metallurgical recovery of about 94%; low unit costs; and an all-in sustaining cost of $800/oz to $1 000/oz depending on the assumed gold price.

“The outstanding conditions precedent of the banks for approving all detailed definitive documents are that the Ethiopian government formally ratifies the already approved country membership of the second bank; and the whole syndicate confirms the already drafted detailed definitive documentation and other normal conditions for mining project finance transactions.

“This is all expected to be achieved in the current quarter,” says Kefi.

At the current gold price, in excess of $2 700/oz, it is estimated that Kefi will be potentially capable of repaying all debt from the estimated net cash flows in excess of $258-million, a figure which assumed a gold price of $2 600/oz, in the project's first full year of production, the company says.

"Today's announcement that our project finance banks are looking to increase the Tulu Kapi project debt offering from $190-million to $240-million is testament to Kefi's focus, diligence and tenacity – and the fact that the various stars are aligning around our Tulu Kapi project in Ethiopia, as they also have around our emerging projects in Saudi Arabia.

"The past two years have seen regulatory reforms in both countries, our flagship Tulu Kapi project being readied for development with the two Saudi Arabia advanced projects following, and metal prices having taken off,” says Kefi executive chairperson Harry Anagnostaras-Adams.

He notes that Tulu Kapi's high grades and high recoveries offer the potential to repay all project finance debt from the estimated net cash flows of the first full year of production, at $2 600/oz gold price.

“Moreover, at $2 100/oz to $2 600/oz gold, project net present value to Kefi shareholders is 6.9p to 10.5p a share, 12 to 17 times the current share price, ignoring our other assets,” adds Adams.