KEFI to mine for Gold in Ethiopia

The project finance plan is intended to be implemented in parallel with the project development timetable, and comprises the following elements:

• $10 million initial development program, including the first phase of community resettlement and initial construction works such as roads and surface water drainage and catchments to start in Q1 2015 (“Stage 1”). This stage is intended to be funded by early-stage secured loan finance;

• $120-150 million major works program for mine, process plant and infrastructure to start during Q4 2015, with the cost depending on whether KEFI deploys contract-mining and certain second-hand plant or if it proceeds as owner-operator with all-new plant and equipment (“Stage 2”). This stage is intended to be funded in the form of senior secured debt of circa $100 million; and

• non-senior-debt funding in mid-2015 of up to $30 million, expected to comprise a mix of equity and mezzanine finance, such as second-ranking high-yield debt.

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 circa $100 million, which will have a tenor of up to 8 years with an initial 2-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.

The MLA includes the plans for the 11-year open-pit mine together with plans to test the feasibility of:

• heap leach processing of lower grade material to be stockpiled during open pit operations; and

• establishing an underground mine beneath the open-pit, where indicated resources have already been reported and the ore body remains open at depth. 

Following independent verification of KEFI’s overhaul of the project, the Company is now focusing on completing a full update to the Tulu Kapi Definitive Feasibility Study (“DFS”) (original DFS completed by the previous owner in December 2012) 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. The goal is to reduce the error band of planning estimates and to reduce capital and operating costs.

Reorganisation

To ensure that planned development in 2015-2016 of the Tulu Kapi gold project in Ethiopia, and the successful pursuit of related growth opportunities in Ethiopia and in Saudi Arabia, happens on time and on budget, KEFI is expanding and reorganising its management team.

The following changes have also been implemented at the Board with immediate effect:

• Mr Harry Anagnostaras-Adams will be Executive Chairman with a particular focus on permitting, financing and team-building including the appointment of an African-experienced mine builder and operator as Managing Director and then the assembly of teams for construction and operations; and

• Mr Jeff Rayner will be the Exploration Director with a particular focus on identifying the Company’s value-adding stages beyond the construction and start-up of the Tulu Kapi open pit. This continues on from the work Mr Rayner has undertaken to date including successfully identifying the Tulu Kapi opportunity, scoping its economic targets and overseeing the independent affirmation thereof.

Harry Anagnostaras-Adams, Chairman of KEFI, commented: “The reactivation of the Mining Licence Application for Tulu Kapi marks an inflection point in KEFI’s history. With the recent verifications of our plans and analysis, as well as the headline indicative terms for project financing, we can see a clear path towards becoming a gold developer. We have the right team and, in Tulu Kapi, the right project to achieve this aim. We look forward to our MLA being granted so that we can progress to the construction phase and to delivering shareholder value.”