Name of the Project
Tulu Kapi gold project.

Location
Ethiopia.

Client
Kefi Minerals.

The Tulu Kapi Mines Share Company (TKGM) will hold the Tulu Kapi project. Kefi will own 75% to 80% of TKGM and government the balance.

Project Description
A definitive feasibility study (DFS) update for the project was completed in May 2017.

The 2017 DFS incorporates due diligence and refinements since the 2015 DFS published in August 2015, and provides increased confidence in the company’s plans to develop the project.

The 2017 DFS has similar outcomes to those of the 2015 DFS.

The mining method planned is conventional openpit drill-and-blast, load-and-haul, reflecting a semiselective mining approach, whereby a bulk mining approach is applied to 79% of ore, or 95% of all material, and a selective mining approach to 21% of ore, or 5% of all material.

The processing plant comminution circuit, refined and primary semiautogenous (SAG) mill and secondary ball mill circuit have been replaced with a larger SAG‐only circuit. The DFS‐approved grind size for the processing plant has increased from P80 = 75 μm to 150 μm.

The designs for the tailings storage facility (TSF) and water storage dams have also been revised.

The TFS has been relocated downstream to reduce capital costs, with no reduction in capacity for a neutral balance.

New access roads have also been refined to decrease capital costs.

Key planning assumptions that have been introduced since the 2017 DFS include:
• reworked production plans for years 1 to 3, with forecast gold production expected to expand from 115 000 oz/y in the 2017 DFS to 145 000 oz/y;
• the expansion of capacity of the project’s processing plant to between 1.9-million and 2.1-million tonnes a year, depending on the hardness of the ore; and
• the recast of mining plans to allow for faster mining, intensified grade-control drilling and enhanced flexibility to switch between bulk mining and selective mining.

Various components remain unchanged from the 2015 DFS, including geology and mineralisation (ore reserves and mineral resources); metallurgical testwork data; and environmental and social permitting.

Mining the underground deposit below the planned openpit has not yet been fully considered, and will be addressed in due course.

A preliminary economic assessment completed in early 2016 evaluating the current indicated resource – 1.1-million tonnes grading 5.6 g/t gold – has indicated that the addition of an underground mine has the potential to increase total openpit and underground gold production to more than 150 000 oz/y over four years.

The orebody remains open and further potential will be added.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
The net present value (NPV) of the project at the start of construction on a 100% basis is estimated at $175-million.

The NPV at the start of production on a 100% basis is estimated at $175-million.

The internal rate of return has increased from 22% in the 2017 DFS to 60%.

Payback is three years.

Value
The $160-million total funding requirement for the project is consistent with Kefi’s recent guidance for required funding.

The additional $12-million funding required for the reworked production plans, and the plant and infrastructure expansion announced at the end of October 2017, has been offset by other savings and by financier Oryx Management offering to expand its facility from $135-million to $140-million.

In addition, the reworked estimates also reflect the strategy agreed with Oryx Management to install greater processing capacity from the outset to achieve: 
• a quicker cash flow from the openpit and capacity to process additional ore from targeted satellite deposits, and
• greater protection against downside risks by facilitating faster processing of lower-grade ore from the openpit.

Duration
The 2017 DFS update development schedule sets gold production to start in late 2019, the exact timing of which will flow from the start of major construction, depending on resettlement of the community. This assumes community resettlement will occur in early 2018. The community and Kefi had, however, been preparing for this to occur in late 2017 so that construction could start earlier.

Latest Developments
Project contactors have confirmed the costings and schedule for the final project models, which have been uploaded into the formal financing data rooms, for equity and debt. 

Updated economic outputs show some potential improvements for shareholders when compared to recent company guidance. 

Kefi reports that it remains the case that additional project-level equity investment may minimise the dilution of Kefi shareholders’ beneficial interests. A project-level transaction on the same terms as with government would imply a project valuation of about $100-million (100%) and, under that financing scenario, Kefi shareholders would expect to retain a beneficial ownership interest of about 55% in the project. Considering the stronger gold price, the base case is now $1 300/oz.

Planned funding remains unchanged, but the structure has been streamlined. Oryx Management, which was in charge of the finance and operation of all on-site infrastructure, and Kefi have mutually agreed to terminate their relationship. The structure for the development of the company’s Tulu Kapi project will otherwise remain the same, with the other existing consortium members still performing all the various required roles as previously outlined. 

Key Contracts and Suppliers
Ausdrill (mine services).

On Budget and on Time?
Too early to state.

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