Shares in KEFI Minerals (LSE:KEFI) bounced 7.6pc to 2.2p this morning after the business announced that it has secured an investment of up to $35m from an Ethiopian investment syndicate. KEFI, a gold exploration and development company with projects in Ethiopia and Saudi Arabia, said the investment will be made via Arabian Nubian Shield Resources (ANS Resources), a company that is in the process of incorporation.
An initial payment of $9m will be made following completion of remaining due diligence and the execution of a binding share subscription agreement and is expected this quarter. ANS Resources is being established as an investment vehicle to enable subscription by numerous Ethiopian financial institutions and family offices.
KEFI said the initial $9m will be set aside into a locked account, with commitment to the full amount being invested by year-end alongside full project-finance commitments. The firm operates two advanced gold development projects in Ethiopia’sArabian-Nubian Shield called Tulu Kapi and Jibal Qutman, with an attributable 1.93Moz gold mineral resource plus significant resource growth potential. It expects production at these projects to generate cash flow for further exploration and expansion, recoupment of development costs and dividends to shareholders.
Ethiopia’s government has partnered with KEFI on Tulu Kapi and has already committed $20m to developing off-site infrastructure for the project including roads and power. The company is preparing to trigger the development of 140,000oz gold per year from Tulu Kapi for a seven-year period with all-in sustaining costs of around $800/oz.
On today’s news, KEFI’s managing director, Harry Anagnostaras-Adams, said: ‘Project equity investor ANS Resources is being carefully structured to provide diversified local equity participation in Ethiopia’s first modern mine development for its exciting new gold sector. This approach also ensures clear Tulu Kapi Gold Project control by KEFI, as required by the planned non-equity financiers. ANS Resources represents a diversified group of financial investors assembled specifically for this transaction and its involvement will be a further significant milestone in unlocking the gold potential of the Tulu Kapi orebody and district.”
‘Subscription by both the Government of Ethiopia and ANS Resources to project company TKGM implies a valuation of c. US$66 million to a residual KEFI holding of 54%. This compares with investment to date by KEFI shareholders (including shareholders which KEFI inherited from the previous project owner) of US$60 million. It also compares with the previously reported NPV of US$57-97 million (NPV at start of construction versus NPV at start of production) for KEFI’s proposed final interest in the Tulu Kapi open pit development, whilst ignoring any potential upside from underground mining, Tulu Kapi district exploration or its portfolio of targets in Saudi Arabia.’