KEFI refinements boost economics of Ethiopia mine

The changes were made after discussions with potential debt financiers, who will stump up US$100mln of the US$120mln of capital costs of building Tulu Kapi, and after talking other partners.

The company is making refinements to its plan before work begins.

KEFI Minerals (LON:KEFI) has agreed a series of tweaks and refinements to its Tulu Kapi gold project in Ethiopia that have enhanced further the economics of the planned mine.

The changes were made after discussions with potential debt financiers, who will stump up US$100mln of the US$120mln of capital costs of building Tulu Kapi, and after talking to other partners.

Production, which is expected to begin next year, will be 980,000 ounces of the precious metal over 10 years rather than the previous 960,000 over 13 years. This gives annual output of 115,000 ounces, 20,000 ounces more than previously slated.

In the process, all-in sustaining costs come down to a top-quartile US$742 an ounce from US$780 and operating cash flows increase US$19mln a year to US$66mln.

Under the new plan the internal rate of return would be 50%, while the net present value is put in the order of US$197mln at a discount rate of 8%.

The company is also being asked to use gold hedging of around 10% of base case production as part of a risk management programme to mitigate the fluctuations of the price of the yellow metal.

Chairman Harry Anagnostaras-Adams said: "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.

“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."

The equity financing portion of the build (US$20mln) is being provided by the Ethiopia government.