KEFI MInerals tees up US$135mln finance package to build Tulu Kapi mine in Ethiopia

 17 Jul 2017
Infrastructure specialist Oryx is to put up US$135mln in new debt through a lease and payback arrangement

KEFI Minerals plc (LON:KEFI) has agreed a finance package for the construction of the bulk of its Tulu Kapi gold mine in Ethiopia.

Infrastructure specialist Oryx is to put up US$135mln in new debt through a lease and payback arrangement that will also see it become the processing plant operator.

Mining will be carried out by contractor Ausdrill.

The package will see a new special purpose vehicle set-up for the mine that initially will be 75% owned by KEFI.

Harry Adams, KEFI’s executive chairman, said a development funding approach was more appropriate for start-up purposes than bank debt due to its longer 9-year tenor and as repayments started 30 months after drawdown.

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.”

Due diligence still has to be carried out and KEFI said the door is still open for other finance offers but added the Oryx proposal had significant advantages.

These include low start-up capital, minimal equity dilution and the nine year term.

Coupon on the debt is 8% and KEFI believes that on cash flow projections already published it can repay US$135mln within four and half years at a gold price of US$1,250.

If the deal with Oryx is concluded, it will leave KEFI needing to find a further US$30mln to fund the project completely.

Methods to fund this potentially include a loan from the Ethiopian Development Bank, new equity or a project level investment into the special purpose vehicle.

Work is expected to start on the mine before the end of 2017.

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