TIDMKEFI
RNS Number : 1862L
KEFI Minerals plc
17 July 2017
17 July 2017
KEFI Minerals plc
("KEFI" or the "Company")
PROJECT FUNDING OF US$135M FOR TULU KAPI GOLD PROJECT
"KEFI signs terms for funding all on-site infrastructure,
already having signed terms to fund all off-site
infrastructure"
KEFI Minerals (AIM: KEFI), the gold exploration and development
company with projects in the Kingdom of Saudi Arabia and the
Federal Democratic Republic of Ethiopia, is pleased to announce the
signing of a mandate letter and heads of terms for US$135 million
of project funding with Oryx Management Limited ("Oryx") to finance
and operate all the on-site infrastructure at the Company's Tulu
Kapi Gold Project in Ethiopia (the "Project"). The planned
financing package also includes funding finance charges during a
30-month construction and production ramp-up period.
Highlights
-- Mandate signed with infrastructure specialist Oryx to operate and lease-finance all on-site infrastructure at the Project.
-- Oryx to establish a special purpose vehicle (the "Finance
SPV") to issue bonds, the proceeds of which would be used to build
and own all the on-site infrastructure for the Project which it
would lease to the Project company, Tulu Kapi Gold Mines Limited
("TKM"). The receipt of lease payments from TKM would be used by
Finance SPV to pay the principal and interest on its bonds.
-- Oryx to also operate the on-site ore processing infrastructure on an open-book, cost plus performance-bonus based operating contract.
-- Ethiopian Government to fund the building of all off-site
infrastructure for the Project, in accordance with previously
announced and executed Shareholders Agreement. The relevant
Government agencies will operate and maintain the off-site
infrastructure.
-- Ausdrill Limited (through its subsidiary African Mining
Services Pty Limited) to supply and operate all the mining
equipment under a mine services agreement structured as a
conventional schedule of rates contract, whereby the contractor is
paid per tonne of material delivered.
-- All contractors to be accountable to and supervised by KEFI subsidiary TKM.
-- Ignoring historic investment of c.US$60 million, the
Project's remaining funding requirement has now been successfully
reduced from c.US$289 million when KEFI took control in 2014 to an
amount of c. US$160 million (before overlaying the Oryx proposal)
to a residual balance of US$32 million. The residual balance of
US$32 million, which includes c.US$13 million of contingency
provisions, will now be refined, structured and sourced. This
residual amount will also be further evaluated over the coming
months and may be reduced.
-- A variety of sources to finance the estimated residual
requirement of US$20-30 million are being considered, including
working capital facilities with Development Bank of Ethiopia,
Project-level equity with a mining and engineering group and
further equity from KEFI in the Project company.
-- It is currently estimated that KEFI's holding in TKM, will be
c.75%, without the issue of further Project-level equity to any
third party, and under any scenario, it is KEFI's preference to
retain majority ownership and control of the Project.
-- Tulu Kapi's cash flow projections (supported by the 2017
Update to the Definitive Feasibility Study, "DFS") at a gold price
of US$1,250/oz support the Company's plan to rapidly pay down the
project finance indebtedness at the same time as pursuing a focused
and exciting exploration program, and also to consider commencing
dividends to shareholders early in the Project's life. An indicator
of the projected cash flow strength is that under these
assumptions, Oryx could be repaid around half-way through the
9-year term.
-- Timetable agreed with the Ethiopian Government and Oryx for
financing to be provided and development to start before the end of
2017.
A new investor presentation has been uploaded to the Company's
website: www.kefi-minerals.com
Commenting KEFI's Executive Chairman, Harry Anagnostaras-Adams,
said:
"KEFI has selected a development funding approach considered
more appropriate for start-up purposes than bank debt due to its
longer 9-year tenor and its repayments commencing 30 months after
drawdown.
This Project has been designed in close collaboration with the
selected project contractors, Ausdrill for mining and Lycopodium
for processing, and in partnership with the Ethiopian
Government.
At a gold price of US$1,250/oz, Tulu Kapi's robust project cash
flow projections, combined with the innovative financing proposal
from Oryx, looks to well serve KEFI's objective to rapidly repay
debts whilst implementing our targeted exploration programs and
commencing dividends during the early production years.
We welcome Oryx to the Tulu Kapi syndicate and look forward to
putting the funding in place to commence development of Tulu Kapi
this year."
Further Details
On-site Infrastructure
The Company has signed a mandate letter and heads of terms for
US$135 million of project funding with Oryx to finance (via the
issuance of bonds by its Finance SPV) and to operate (under an
open-book operating contract) all the on-site infrastructure at the
Project. The overall arrangement with Oryx is analogous to a Build,
Own, Operate and Transfer ("BOOT") arrangement.
The on-site infrastructure will be contract-built by Lycopodium
Minerals Pty Limited ("Lycopodium") and includes the processing
plant, provided under a lump sum (Engineering, Procurement,
Construction or "EPC") contract, and accommodation village,
earthworks, water dams and tailing storage facility provided under
a cost plus margin (Engineering, Procurement, Construction,
Management, or "EPCM") arrangement.
The key financing terms agreed with Oryx are summarised
below:
Summary of Bonds
------------------------------ ------------------------------------
Source of Funds: Luxembourg listed bonds arranged
by Oryx and issued by its
Luxembourg incorporated special
purpose vehicle ("Finance
SPV")
------------------------------ ------------------------------------
Amount: US$135 million
------------------------------ ------------------------------------
Tenor: 9 years from drawdown
------------------------------ ------------------------------------
Security: Bonds securitised against
the underlying physical assets,
with the collateral benefit
of all security granted in
respect of the lease from
Finance SPV to TKM (see below)
------------------------------ ------------------------------------
Interest Rate: Fixed coupon of 8% p.a.,
paid semi-annually from the
issue date
------------------------------ ------------------------------------
Non-Redemption Period 3 years from drawdown
("NRP")
------------------------------ ------------------------------------
Repayment schedule: As from end of NRP, sinking
fund redemptions based on
lease payments received by
Finance SPV from TKM
------------------------------ ------------------------------------
Early Repayment: No early repayment prior
to NRP. Thereafter diminishing
call premium based on US
Government yields
------------------------------ ------------------------------------
Summary of Lease terms
and TKM arrangements
for operating infrastructure
------------------------------ ------------------------------------
Term of lease 9 years
------------------------------ ------------------------------------
Early termination: TKM may terminate the lease
at any time on 3 months'
written notice and payment
of an early pay-out amount
which includes a penalty
if done before end of NRP
and thereafter is merely
the present value based on
US Government yields
------------------------------ ------------------------------------
Lease payments: Quarterly in US$, commencing
month 30
------------------------------ ------------------------------------
Potential yield enhancement Zero at gold price US$1,100/oz
supplement: and rising in a linear manner
to a cap which raises total
aggregate interest rate embedded
within the lease rental from
8% to 16% p.a. at gold price
of US$1,700/oz
------------------------------ ------------------------------------
Security: Guarantee from KEFI
Tulu Kapi Gold Project
Shares in TKM
Direct agreements
------------------------------ ------------------------------------
Financial Covenants: None
------------------------------ ------------------------------------
Other Covenants: Positive and negative covenants
to include:
Revise mine plan if material
underperformance
Cash sweep
Right to cash flows from
satellite deposits if required
to recover amounts owing
by TKM
------------------------------ ------------------------------------
Operating contract for Open-book, cost plus performance
on-site infrastructure: / key performance indicator
based operating contract
------------------------------ ------------------------------------
Structure: Plant and infrastructure
fixed-asset lease-to-buy,
coupled with Operating &
Maintenance services. Analogous
to the Build-Own-Operate-Transfer
("BOOT") schemes widely used
for infrastructure funding
------------------------------ ------------------------------------
Ownership: Ownership of on-site infrastructure
reverts to Project company
TKM following full repayment
and termination of the lease
------------------------------ ------------------------------------
Hedging: Agreement to allow modest
level of gold hedging
------------------------------ ------------------------------------
Conditions precedent to closing the Oryx proposal include:
-- Completion of due diligence by independent technical experts, accountants and lawyers;
-- Approval of draft formal documentation by National Bank of Ethiopia; and
-- Oryx completing the fund-raising of listed debentures.
Prior to closing the Oryx proposal, KEFI is permitted to advance
competing financing proposals. However, the Directors of KEFI
believe that the Oryx proposal has significant advantages for
KEFI:
-- Appropriate and low risk start-up finance for a company's first mine
-- Equity dilution minimised
-- Structure provides development funding on a safer basis than bank debt due to, inter alia:
o Lease payments commencing 30 months after drawdown
o Longer term of 9 years
-- Debt can be repaid quickly if all goes according to plan:
Cash flow projections at a gold price of US$1,250/oz indicate
capacity to repay in about full half-way through 9-year term
-- Further reinforces the Company's key contracting
relationships at both financial and operational level
-- No stipulated hedging required but it has been agreed to
jointly consider a modest hedging policy as part of risk
management
-- Provides on-site infrastructure for processing additional ore
from potential underground mine below Tulu Kapi open pit and
targeted satellite deposits
As announced on 24 May 2017, the strong Project cash flows as
detailed in the 2017 Definitive Feasibility Study Update are
expected to support rapid repayment of the Project financing.
Off-site Infrastructure
As announced on 5 May 2017, the Ethiopian Government has agreed
to finance the budgeted US$20 million of capital expenditure for
off-site infrastructure in exchange for Project equity of c. 20% in
addition to its 5% free-carry. The Government's electricity and
roads authorities will operate the relevant power lines and roads
following completion of construction.
Proposed Sources and Applications of Project Development
Funding
US$
million
---------------------------------------------- ---------
Funding requirement:
---------------------------------------------- ---------
Total funding needs before project financing
structure, as previously reported 160
---------------------------------------------- ---------
Extra funds required for project funding
structure, particularly during grace period 33
---------------------------------------------- ---------
Total funding requirement 193
---------------------------------------------- ---------
Proposed sources:
---------------------------------------------- ---------
Bonds via Finance SPV 135
---------------------------------------------- ---------
Ethiopian Government 20
---------------------------------------------- ---------
Equity Funds already committed to KEFI
for Project, from Lanstead and Lycopodium 6
---------------------------------------------- ---------
Residual working capital funding required
(including US$13 million contingency) 32
---------------------------------------------- ---------
Total sources 193
---------------------------------------------- ---------
It should be noted that Lycopodium has confirmed its current
intention to subscribe for US$2.5 million of new ordinary shares in
KEFI upon execution of the EPC contract and the Company continues
to receive monthly settlements from Lanstead under the Settlement
Agreement entered into with Lanstead in February 2017. The estimate
of US$6 million in the above table is based on the Company's
current share price.
The Company intends to refine the requirement for the residual
working capital funding of up to US$32 million before the closing
of Oryx funding, expected during the second half of 2017. Further
detailed engineering and procurement work may lead to some savings
in the US$13 million contingency within the residual funding
requirement.
There are a number of options open to the Company to secure the
remaining funding including working capital facilities covering
gold-in-ore-stockpiles with Development Bank of Ethiopia,
Project-level equity with mining and engineering groups and further
equity from KEFI in the Project company. It is currently
anticipated that a combination of financing sources will ultimately
be used, with KEFI's preference to retain majority ownership and
control of the Project.
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.
ENQUIRIES
KEFI Minerals plc
Harry Anagnostaras-Adams (Executive
Chairman) +357 99457843
John Leach (Finance Director) +357 99208130
SP Angel Corporate Finance
LLP (Nominated Adviser)
Ewan Leggat, Jeff Keating +44 20 3470 0470
Brandon Hill Capital Ltd (Joint
Broker)
Oliver Stansfield, Alex Walker,
Jonathan Evans +44 20 7936 5200
RFC Ambrian Ltd (Joint Broker)
Jonathan Williams
Beaufort Securities Ltd (Joint
Broker) +44 20 3440 6817
Elliot Hance +44 20 7382 8300
IFC Advisory Ltd (Financial
PR and IR)
Tim Metcalfe, Heather Armstrong +44 20 3053 8671
NOTES TO EDITORS
Oryx Management Limited
Oryx Management Limited ("Oryx") is privately held Jersey
incorporated company created for the purpose of identifying,
evaluating, effecting and managing investment-ready opportunities
for fixed asset leasing in the resources sector.
Oryx's alternative financing solution for the sector is to
provide process plant and infrastructure assets to projects on a
fixed-asset lease-to-buy basis, coupled with providing operating
& maintenance services in relation to such Assets.
The founders and board of directors of Oryx comprise experienced
mining professionals, chemical engineers and financiers with
significant experience in the natural resources and construction
sector. Its Australian, UK and African executive team has a close
relationship with Lycopodium Limited, an Australian headquartered
international engineering and project management consultancy which
provides a complete range of services for the evaluation,
development and implementation of projects worldwide.
KEFI Minerals plc
KEFI is the operator of two advanced gold development projects
within the highly prospective Arabian-Nubian Shield, with an
attributable 1.93Moz (100% of Tulu Kapi's 1.72Moz and 40% of Jibal
Qutman's 0.73Moz) gold Mineral Resources (JORC 2012) plus
significant resource growth potential. KEFI targets that production
at these projects generates cash flows for further exploration and
expansion as warranted, recoupment of development costs and, when
appropriate, dividends to shareholders.
KEFI Minerals in Ethiopia
The Tulu Kapi gold project in western Ethiopia is being
progressed towards development, following a grant of a Mining
Licence in April 2015.
Following completion of KEFI's Definitive Feasibility Study for
Tulu Kapi, the Company is now progressing contractual terms for
project construction and operation. Latest estimates for annual
gold production are c. 120,000oz pa and All-in Sustaining Costs
(including operating, sustaining capital and closure but not
including financing charges) of <US$800/oz. Tulu Kapi's Ore
Reserve estimate totals 15.4Mt at 2.12g/t gold, containing
1.05Moz.
All aspects of the Tulu Kapi (open pit) gold project have been
reported in compliance with the JORC Code (2012) and subjected to
reviews by appropriate independent experts. These plans now also
reflect the agreed construction and operating terms with project
contractors, and have been independently reviewed by experts
appointed for the project finance syndicate.
A Preliminary Economic Assessment has been published that
indicates the economic attractiveness of mining the underground
deposit adjacent to the Tulu Kapi open pit, after the start-up of
the open pit and after positive cash flows have begun to repay
project debts.
The projected cash flows indicate that the net cash build-up
(after servicing financing) in the first three production years is
US$61 million to US$251 million for the gold price range of
US$1,100/oz to US$1,900/oz which prevailed during the past seven
years.
KEFI Minerals in the Kingdom of Saudi Arabia
In 2009, KEFI formed G&M in Saudi Arabia with local Saudi
partner, Abdul Rahman Saad Al-Rashid & Sons Company Limited
("ARTAR"), to explore for gold and associated metals in the
Arabian-Nubian Shield. KEFI has a 40% interest in G&M and is
the operating partner. To date, G&M has conducted preliminary
regional reconnaissance and has had five exploration licences
("ELs") granted, including Jibal Qutman and the more recently
granted Hawiah EL that contains over 6km strike length of
outcropping gossans developed on altered and mineralised rocks with
all the hallmarks of a copper-gold-zinc VHMS deposit.
At Jibal Qutman, G&M's flagship project, Mineral Resources
are estimated to total 28.4Mt at 0.80g/t gold for 733,045 contained
ounces. The shallow oxide portion of this resource is being
evaluated as a low capital expenditure heap-leach mine
development.
ARTAR, on behalf of G&M, holds a large portfolio of EL
applications. ELs are renewable for up to three years and bestow
the exclusive right to explore and to obtain a 30-year exploitation
(mining) lease within the area. The Kingdom of Saudi Arabia has
instituted, and is further overhauling, policies to encourage
minerals exploration and development, and KEFI Minerals supports
this priority by serving as the technical partner within G&M.
ARTAR also serves this government policy as the major partner in
G&M, which is one of the early movers in the modern resurgence
of the Kingdom's minerals sector.
Further information on KEFI can be found at
www.kefi-minerals.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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