TIDMKEFI
RNS Number : 7026X
Kefi Gold and Copper PLC
27 April 2023
27 April 2023
KEFI Gold and Copper plc
("KEFI" or the "Company")
Final Tulu Kapi Umbrella Agreement Signed
KEFI Gold and Copper (AIM: KEFI), the gold and copper
exploration and development company with projects in the Federal
Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, is
pleased to announce the signing of the Final Umbrella Agreement
(the "Agreement") for the project financing of the Company's Tulu
Kapi Gold Project ("Tulu Kapi" or the "Project") held under Tulu
Kapi Gold Mines Share Company ("TKGM").
The Agreement was signed at a ceremony in Addis Ababa attended
by a number of senior Ethiopian Government officials, the British
Prime Minister's trade envoy, the Ambassadors to Ethiopia for
Britain and for Australia, in addition to representatives of the
Project's participants and financing parties.
The Agreement sets out all syndicate roles and finance
conditions, and conditions precedent to final formal approval being
granted. The Agreement also confirms that project costs and
financial contributions have been updated, along with technical and
legal due diligence having been updated, definitive agreements
prepared and that the key required government actions have been
agreed.
The Agreement sets out the development sequence for Tulu Kapi
over the course of 2023 as formally laid out for the Ethiopian
Ministry of Mines and signed by Project contractors PW Mining
("PWM") and Lycopodium ("Lycopodium"). PWM will provide mining
services under its life-of-mine mining services agreement (the
largest single component of life-of-mine operating costs at
c.US$992 million) and Lycopodium will provide engineering,
procurement, and construction management supply and labour hire
services in respect of processing infrastructure under its
contracts (the largest component of the c.US$320 million
development costs).
The signing of the Agreement follows the further refining of the
Project financing plans with the Project's principal bankers, led
by Eastern and Southern African Trade and Development Bank ("TDB").
The positive refinement of the proposed financing terms over the
past month reflects the support being shown by TDB and co-lender
Africa Finance Corporation ("AFC") who signed the Initial Umbrella
Agreement in June 2022. Signing of the Agreement follows AFC
reaching an agreement with the Ethiopian Government in March 2023
for Ethiopian country membership, which now enables the same local
rights and protections to both of our co-lenders.
Along with the rest of the Project finance syndicate, the
co-lenders have issued conditional approvals subject to the
Ethiopian Government's formal confirmation of the few remaining
outstanding items, notably clarification of the details of capital
controls for internationally syndicated project financings. Whilst
the principles have already been approved for TKGM, specific
working rules are being considered to ensure the Project can
operate smoothly.
The proposed c.US$320 million Project development financing
(excluding the mining fleet provided by PWM, which is charged as
part of mine operating costs) now provides for an up to c.US$245
million package from the co-lenders, comprising US$140 million
senior debt, US$50 million mezzanine debt and up to US$55 million
equity-risk ranking notes. This significant proposed package from
the co-lenders significantly reduces the share-ownership dilution
of TKGM's shareholders, whilst respecting the co-lenders'
requirements for appropriate debt-to-equity ratios. This aspect is
expected to be a major accomplishment in the financing and reflects
the robust economics of the Project and long-term outlook for the
gold price. At the current gold price of c.US$2,000/oz, all US$190
million of senior and mezzanine debt is projected to be capable of
repayment within approximately two years of production cash flows
commencing.
KEFI's has already provided historical equity investment of
c.US$95 million in the development of the Project to date. The
residual Project equity finance requirement of US$75 million will
be via share subscriptions in TKGM, and be covered by KEFI and its
local partners. The largest local partners in TKGM are the Federal
and Regional Governments whose component is c. US$28 million.
KEFI's own underlying source of equity capital includes regional
investors into the Company's subsidiary KEFI Minerals (Ethiopia)
Limited ("KME"), to support the development of a priority sector as
set by Ethiopian Government policy. The largest of these regional
investors is a British multinational industrial group investing
US$15 million.
To complement the equity funding by local partners into TKGM and
regional investors into KME, KEFI considers that the potential
exercise of existing KEFI warrants will complete the required
equity requirement and will leave KEFI with an economic interest of
70-80% in TKGM.
The Agreement signed by the principal contractors sets out all
syndicate member roles and finance contributions and conditions
precedent to Project launch. It also sets out the final launch
sequence as detailed formally with the Government via the Ministry
of Mines.
All parties have invested much time and cost to launch the
Project and have drafted individual definitive agreements. Signing
of these is conditional on mutually interdependent formal
shareholder and lender approvals in compliance with their
respective review, approval and notice provisions. As with any such
international mining project finance transactions, these approvals
will require independent certification of security and community
readiness, placement of insurances, mortgage registration and
similar standard procedural conditions precedent and
subsequent.
All parties are working with Government to obtain the final
required clearances and, in the meantime, preparing for full
construction start to coincide with the next dry season at Tulu
Kapi, which is expected to start in October 2023, having already
prepared the community and procured the plant and equipment, with
full production targeted to start in 2025.
KEFI expects to call a general meeting in June 2023 for its
shareholders to approve the final funding proposal and syndicate as
laid out in the Final Umbrella Agreement.
KEFI Executive Chairman, Harry Anagnostaras-Adams,
commented:
"We move forward successfully despite the complexities of such
syndications and, in particular, being the first to do so against
the backdrop of a fast-changing Ethiopia. It is heartening to
witness Ethiopia proactively working to regain its position as one
of the highest growth countries globally.
"We thank the new Minister for Mines, H.E Habtamu Tegegn, and
his team for their energetic leadership and his commitment to
rapidly advancing the mining sector in Ethiopia.
"We push for construction in Q4 2023 following procurement and
community preparations. In the meantime we await progress from
Government on the remaining financial regulatory, security and
community preparations and to which we lend our unwavering
support.
"The Tulu Kapi Gold Project will be delivered to the highest
international standards including World Bank IFC Performance
Principles."
Market Abuse Regulation (MAR) Disclosure
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
Enquiries
KEFI Gold and Copper plc
Harry Anagnostaras-Adams (Managing Director) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance LLP (Nominated
Adviser and Joint Broker) +44 (0) 20 3470 0470
Jeff Keating, Adam Cowl
Tavira Securities Limited (Joint Broker) +44 (0) 20 7100 5100
Oliver Stansfield, Jonathan Evans
WH Ireland Limited (Joint Broker) +44 (0) 20 7220 1666
Katy Mitchell, Andrew de Andrade
IFC Advisory Ltd (Financial PR and IR)
Tim Metcalfe, Florence Chandler +44 (0) 20 3934 6630
Notes to Editor
KEFI Gold and Copper plc
KEFI is focused primarily on the development of the Tulu Kapi
Gold Project in Ethiopia and its pipeline of highly prospective
exploration and development projects in the Kingdom of Saudi
Arabia, also in the Arabian-Nubian Shield. KEFI targets that Tulu
Kapi Gold, along with its two most advanced Saudi projects Jibal
Qutman Gold and Hawiah Copper-Gold will come into production over
the period 2025-2027 and will generate cash flows for capital
repayments, further exploration and dividends to shareholders.
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END
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