Conditional Consortium Completion for Tulu Kapi

22 October 2020

KEFI Gold and Copper plc

("KEFI" or the "Company")

Conditional Completion of Consortium to fund the Tulu Kapi Gold Project

KEFI expected to increase Project ownership from 45% to c.65%

KEFI Gold and Copper plc (AIM: KEFI), the gold exploration and development company with projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, is pleased to announce that it has now assembled the full consortium and set the conditional terms for the independently reviewed development funding package of c.US$221 million for the Company's flagship Tulu Kapi Gold Project (the "Project" or "Tulu Kapi").

Highlights

Financially strong African-experienced Investors have conditionally offered a minimum of US$40 million Project funding

The Company has entered into two non-binding term sheets for a combined minimum of US$40 million of investment with the Ethiopian division of a global industrial company ("Local Investor"), which is listed on the London Stock Exchange with a market capitalisation exceeding £1 billion and also with one of the world's leading commodity trading companies ("Mining Financier"). Both organisations have extensive experience in Africa. The terms sheets are complementary to, and consistent with, the plans already approved by the board of Tulu Kapi Gold Mines Share Company ("TKGM") and the Ethiopian regulatory authorities.

The Project finance structure now comprises KEFI's Government Partners (both the Federal Government of Ethiopia and the Regional Government of Oromia), leading African banks as Mandated Senior Project Lenders (Eastern and Southern African Trade and Development Bank  and Africa Finance Corporation ), strong African specialist investors into KEFI Group companies (the Local Investor and Mining Financier) and the African-experienced principal contractors.

RAB Capital, KEFI's largest single shareholder holding approximately 12%, has also welcomed the new parties to the consortium, and the proposed appointments of new directors to the boards of the respective KEFI subsidiary companies.

This overall proposed package, further detailed below, is currently being considered by the Senior Project Lenders, before detailed documentation is assembled for approval by consortium member boards and the Ethiopian central bank, the National Bank of Ethiopia .

As KEFI has succeeded in sourcing the Mining Financier to conditionally provide offtake-linked financing, the Company and its Government Partners will be able to retain a higher beneficial ownership of the Project. For KEFI, this is now expected to be c.65%, compared with the previously envisaged 45% ownership. As outlined below, this approach is expected to materially increase the value of the Project to both the Company and its Government Partners.

Whilst the impact of COVID-19 has regularly disrupted a multitude of activities for all existing and new Project stakeholders requiring reshuffling of schedules, the Project remains on track with its key target of commissioning gold production in Q4 2022. This has been made possible by the patient and disciplined support from the community, Government, Senior Lenders and other stakeholders. TKGM directors and management are on the ground in Ethiopia liaising with and supporting wherever possible the dedicated teams of the many Government agencies involved.

Project Funding Structure

Whilst KEFI has now signed agreements and non-binding terms sheets with all consortium members, it should be  emphasised that all these individual agreements remain conditional on completion of due diligence, confirmation of regulatory compliance, internal approvals and the execution of full detailed documentation by each consortium member. It is currently scheduled that all these outstanding matters will be completed in the current quarter, to avoid any delay to the Project timetable to commissioning in Q4 2022 .

The independently reviewed Project development and disbursement schedules show project equity funding continuing in the current quarter and over the ensuing six months ("Equity Closings"), with senior debt funds drawn down in mid-2021 ("Debt Closing").

The Project development funding requirement and expected sources now comprise the following:

which are currently intended to be provided as follows:

Notes to the above table:

Community Programmes

Having pulled together this refined Project development funding package, TKGM has  triggered low-cost but important next steps for the community resettlement programmes so as to ensure on-site construction can start in early 2021. These include starter homes for the first phase of resettled persons.

All social and environmental programmes are planned to World Bank IFC Standards and exceed the requirements of local regulations. TKGM integrates ESG (Environmental, Social and Governance) considerations into its development and production programme.

Expansion of Planned Project Production and of KEFI's Beneficial Ownership

Over the recent months, KEFI has successfully focused on:

More specifically:

Note: The Project NPV's include production from the open pit and undergound mines and are derived using an 8% discount rate. The NPVs are internally derived using independently created financial models of net cash flows after tax and debt service, based on the Definative Feasibility Study (DFS) for open pit and Preliminary Economic Assessment (PEA)for underground mining. 

The above table indicates an NPV equating to a KEFI share price of 11p at a 65% interest and a US$1,700/oz gold price, excluding any other KEFI assets, notably the deposits discovered Saudi Arabia, the Hawiah copper-gold-zinc-silver and Jibal Qutma gold deposits.

Commenting, Harry Anagnostaras-Adams, Executive Chairman of KEFI, said: "I am delighted that we continue to attract strong African experienced participants in our Tulu Kapi funding structure in a manner that enables KEFI and its Government Partners to increase their beneficial ownership, for KEFI to c.65% of the Tula Kapi Project. The refined structure set out today is in accordance with the overall plan already approved by TKGM and the regulatory authorities and now includes investment from a well-capitalised and internationally prominent local investor and a global mining finance specialist.

"The pandemic has meant that the TKGM team have worked even more closely with the Government agencies at all levels and other stakeholders, enabling us to adhere to the overall Project timetable targeting production start-up in Q4 2022.

"The improved gold price outlook and our negotiations over the past few months have switched KEFI's focus from owning 45% of a 140,000 oz p.a. operation to owning 65% of 190,000 oz p.a. operation, essentially doubling KEFI's beneficial interest in terms of net production per annum. The Ministry has reserved for KEFI its exploration rights to over 1,000 square kilometres of the surrounding land for exploration and we are confident that in due course we will significantly boost reserves from satellite deposits and further expand the mine life beyond the term of the current economic model. We see Tulu Kapi as a mining district and not just one or two mines.

"Our progress and the Project economics are ever more compelling for KEFI and its shareholders and I look forward to reporting further progress in due course."

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

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