Aim-listed Kefi Minerals has recorded progress in achieving the goals of closing full project funding for its Tulu Kapi gold project, in Ethiopia, in October and for gold production to start in 2022.

"I am pleased to report that development and financing activities have been adjusted following recent operational and global events, and plans remain on schedule for project finance closure in October, acceleration of construction in 2021 and gold production in 2022,” says Kefi executive chairperson Harry Anagnostaras-Adams.

He says that, after inputs from all project contractors, last week, Tulu Kapi Gold Mines Share Company (TKGM) has now signed off all capital expenditure, operating and financing requirements as the final 2020 Tulu Kapi plan.

“These detailed and comprehensive project updates and revisions were within expectations and show a reduced overall project funding requirement.

"The senior secured financiers are fully engaged in achieving our timetable and the final details of the finance plan await confirmation of the level of commitment from Ethiopian institutional investors, which we still expect will be clarified later this month,” he says.

As previously reported, despite Covid-19, the implementation of the project development activities has continued as planned.

In terms of infrastructure for the connection of roads and power and security upgrades, this long-lead activity is on schedule, so that it does not hold up on-site construction over the next two years when new roads and electricity are required.

A road is being built into new host lands for Tulu Kapi residents to be resettled.

Security has also been significantly expanded in the mine licence area and surrounding district.

In terms of infrastructure for ore processing, process plant front-end engineering design was completed by principal contractors Lycopodium, after updating pricing from the plant fabricators and integrating the results of recent geotechnical drilling in final designs of foundations for plant and dams.

In terms of capital requirements, the 2020 Tulu Kapi Plan shows total funding needs of about $221-million.

Over the past 12 months, estimated capital expenditure (capex) for infrastructure has generally moved within the range of plus or minus 5% as refinements were considered and procurement markets varied with exchange rates, recent Covid-19 impacts and other factors.

Estimated capex on owner's costs and interest during construction and other finance effects have fluctuated, with a net material overall saving despite some costs having increased.

However, this is being more than offset by significant savings by changing the mix of the proposed funding sources and in particular using a more traditional project financing approach.

The material changes over the past 12 months are that total funding needs are about $21-million lower.

The revised senior secured portion of $110-million reflects that, in late 2019, Kefi announced that it had selected a bank-loan-based project financing proposal.

The company has now advised that the selected proposal was from Eastern and Southern African Trade and Development Bank and Africa Finance Corporation, two African development finance institutions as underwriters and co-lenders. 

The loan-based proposal is preferred over the previously considered bond-based financing and the revised senior secured portion of the funding reflects this change.

A term sheet was signed, subject to the banks' internal credit approval processes.

Subsequently, key provisions which required regulatory review for foreign loans have received approvals from the Ethiopian central bank.

The revised project level equity of $111-million (including subordinated debt and offtake facilities) reflects the expected contributions by the Ethiopian government of $20-million, other Ethiopian investors of up to $38-million, working capital facilities of $28-million and by KEFI Minerals (Ethiopia) (KME) of $10-million.

Also, the final structure will look to source some offtake-linked subordinated facilities for the balance of funds required depending upon the final participation confirmed from Ethiopian institutions.

Moreover, some expenditure has already started and been funded by the existing TKGM partners (the government and KME) on long-lead development activities.

Further, the various parties are confidentially engaging to finalise the structure with TKGM and with the approval of the senior secured financiers, for their participation in the companies below Kefi.

These parties include local institutions and international mining-experienced investors and offtake specialists.