Name and Location
Tulu Kapi gold project, Ethiopia.

Client
Kefi Minerals.

Project Description
A scoping level review of the Tulu Kapi project, acquired by Kefi in December 2013, indicates potential for further improvement in the economic performance of the project.

The review has confirmed that the targeted openpit mine production for the project can be increased to 1.2-million ounces a year, as opposed to the company’s preacquisition estimate of 800 000 oz/y.

Value
Capital expenditure is estimated at $143-million.

Duration
The definitive feasibility study (DFS) is planned for completion in late 2014, with construction scheduled to start in 2015.

Latest Developments
Kefi has announced an updated Joint Ore Reserves Committee-compliant probable ore reserve of 12.9-million tons at 2.41 g/t of gold for one-million ounces of gold at its wholly-owned Tulu Kapi project.

“The independent verification of the one-million-ounce Tulu Kapi reserve complements our recently published production, cost and valuation estimates and completes the independent substantiation of Kefi’s overhaul of the Tulu Kapi gold project.

“With the achievement of this latest milestone, we are on track for starting project development in the first half of 2015,” Kefi chairperson CEO Harry Anagnostaras-Adams has said.

The mineralisation modelled and metallurgical testwork available indicates that conventional carbon-in-leach extraction could be used to produce gold.

The company will apply for a mining licence this month.

Kefi is also negotiating a power purchase deal with local authorities.

Meanwhile, Kefi has reactivated the mining licence application (MLA) for the project after it was suspended by the project’s previous owner in 2013.

Ethiopian Mines Minister Tolassa Shagi Moti has confirmed the government's intention to expedite the processing of the MLA, with construction on the mine to start in early 2015.

The MLA includes a plan for the 11-year openpit mine, together with plans to test the feasibility of heap-leach processing of the lower-grade material to be stockpiled during openpit operations.

The application also outlines the establishment of an underground mine beneath the openpit, where indicated resources have already been reported and the orebody remains open at depth.

Kefi chairperson Harry Anagnostaras-Adams says the reactivation of the MLA marked an inflection point in the company’s history.

Further, the company has received headline indicative terms for the financing of the project from several financial institutions, all of which are familiar with the project and has undertaken initial due diligence.

The project finance plan is intended to be implemented in parallel with the project development timetable, and will comprise a $10-million initial development programme, including the first phase of community resettlement and initial construction works, such as roads, surface water drainage and catchments.

This phase, dubbed Stage 1, will likely start in the first quarter of 2015 and is intended to be funded by early-stage secured loan finance.

The finance plan will further comprise a between $120-million and $150-million major works programme for mine, process plant and infrastructure to start in the fourth quarter of 2015, with the cost depending on whether Kefi deploys contract mining and uses a second-hand plant or whether it proceeds as an owner-operator with new plant and equipment.

This phase – Stage 2 – is intended to be funded through senior secured debt of some $100-million.

Kefi also plans to secure nonsenior debt funding in mid-2015 of up to $30-million, which is expected to comprise a mix of equity and mezzanine finance, such as second-ranking high-yield debt, to further fund development.

The anticipated early-stage finance is expected to take the form of a senior short-term secured loan of no less than $10-million, repayable upon drawdown of the project finance facility of $100-million, which will have a tenor of up to eight years with an initial two-year grace period.

The headline terms have been tabled to the financial regulatory authorities as part of the MLA process and its facilitation is included in the draft mining agreement being discussed between Kefi and the Ethiopian government and their respective banking and legal advisers.

In the interim, following independent verification of Kefi’s overhaul of the project, the company is focusing on completing a full update to the definitive feasibility study (DFS) for review with the financiers.

The update will include plans to optimise the mine design with refined geotechnical due diligence, as well as more detailed engineering and scheduling across a range of topics.

In addition, the company says it will expand and reorganise its management team to ensure that planned development of the project and the successful pursuit of related growth opportunities in Ethiopia and in Saudi Arabia, occurs on time and within budget.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Not stated.

Contact Details for Project Information
Kefi Minerals, tel +90 232 381 9431, fax + 90 232 381 9071 or email info@kefi-minerals.com.