HomeBase MetalsEnlarged funding package structured to enable start of Tulu Kapi

Enlarged funding package structured to enable start of Tulu Kapi

KEFI has assembled a full funding package of US$356 million estimated to be required for the development of the Company’s Tulu Kapi Gold project by KEFI subsidiary Tulu Kapi Gold Mines Share Company.

This package is designed to fund all infrastructure, the start-up of the open pit mine and the initial development of the underground mine.

The signing of detailed binding documentation and the launch of full Project development is expected to coincide with the end of the Ethiopian wet season in October 2021. All equity and debt funding would be committed and binding upon signing, and subject only to normal conditions for such a transaction.

Debt disbursement would follow after subscription of equity-risk capital, as is normal in such projects, and the timing of receipt will be structured to meet Project requirements. Upon financial completion and any remaining conditions precedent being satisfied, it is expected KEFI will have achieved the following:

  • Fully-funded the development of TKGM’s open-pit gold mine for start of production in mid-2023;
  • Have reserves set aside for cost-overruns for production start-up or, if not needed, available to trigger initial stages of development of Tulu Kapi underground mine from late 2023;
  • Retained ownership of c.70% of TKGM, versus originally estimated 45% ownership; and
  • Successfully minimised ownership dilution at the KEFI level by (a) maximising subsidiary-level finance, and (b) arranging for KEFI-subsidiary-level financing with conversion rights into KEFI shares to be based on the VWAP at the time of production (which the Company believes will be materially higher than at current levels), if not repaid beforehand.

It is expected that the non-KEFI shareholding in TKGM, of c.30%, will comprise Government and non-Government local organisations and these relationships willstrongly reinforce the Project’s very deliberate efforts to align at community
and district levels and with government at all levels.

Advanced conditional approvals, which have already been received, account for c.63% of the US$356 million
aggregated funding sources and the remaining c.37% (c.US$131 million) is expected to come from existing identified
parties working alongside those who have already resolved their conditional approval. All parties have agreed to enter
into binding documentation at the same time.

Contracting of works for the processing infrastructure and the open pit mine

Contracts were issued and work started last year with the Ethiopian Electric Power Corporation and Ethiopian Roads Authority for Project offsite works. In respect of on-site works, the principal on-site contractors, Lycopodium and Corica Mining Services Share Company, each the largest in Africa in their respective specialised contracting areas, have signed letters of intent and produced all-but agreed final forms of detailed documentation for execution at financial completion.

Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented:

“It is a great pleasure to update on the full funding plan for the Tulu Kapi Gold Project. With principal approvals now received from the majority of the syndicate, we are focused on satisfying the remaining conditions precedent which are normal for a transaction of this nature. We are finalising outstanding documentation for all parties to allow the funds
to flow for full Project development from October this year.

“It has taken a great deal of work by all involved, to rigorously ensure Ethiopia’s first major mining project for 30 years is designed, financed and operated to the highest standards socially, environmentally and operationally. Whilst we are conscious of the recent turbulent situation in Ethiopia, which I am pleased to note appears to be abating, the conflict areas have been over 1,000km from Tulu Kapi and have not had any impact on the Project.

“This is a very exciting moment for our Tulu Kapi Gold Project and we are proud to be backed by a top-class international and local syndicate that has been assembled by KEFI. Doing so as gold markets have strengthened is terrific.”

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