Gold and copper exploration and development company Kefi Gold and Copper has announced that almost all the prerequisites to begin construction at the Tulu Kapi gold project, in Ethiopia, are now in place.

The company revealed details of where the project stands in an operational update issued on September 5 covering developments in Ethiopia regarding Kefi, as well as its wholly-owned Kefi Minerals (Ethiopia) (KME) and majority-owned Tulu Kapi Gold Mines Share Company (TKGM), also in Ethiopia. The update covers the period since the release of Kefi’s quarterly operational update on August 9.

The company said it would remain focused on final credit and board approvals for the project financing ahead of the project launch in the fourth quarter, with the first production expected by the end of 2025.

Kefi has focused on the Arabian-Nubian Shield since 2008, assembling a pipeline of projects in Ethiopia and Saudi Arabia. Kefi is primarily focused on developing the advanced Tulu Kapi project, which has a probable ore reserve of 1.05-million ounces and mineral resources totalling 1.7-million ounces.

Kefi said the average planned gold production at Tulu Kapi is forecasted to be more than 140 000 oz/y at an all-in sustaining cost of about $950/oz. The necessary Ethiopian laws and regulations continue to be revised in conjunction with the finalisation of the syndicate's definitive agreements among itself and with government agencies.

In the past few weeks, syndicate lenders met with the company in Addis Ababa to finalise details with the National Bank of Ethiopia regarding capital controls. A recent development was the publication of a new NBE directive on August 14 concerning foreign exchange controls, which is now being combined with TKGM-specific project details.

The changes within the directive are positive for the country, and Kefi has said that it is incorporating them for its own situation. This is one of the final action points remaining to complete the Tulu Kapi financing package, according to the company. The meeting will address the specific details and documentation requirements flowing from these changes with respect to the Tulu Kapi development.

Other project finance syndicate members are meeting with the company and the Ethiopian Ministry of Mines (EMM) in Perth, Australia, addressing the few remaining loose ends with EMM-facing agreements. These parties have also been participating in instructive mine and processing plant inspections while in Australia.

A recent development was the publication by the EMM of a draft new Mining Proclamation, which is now being compared with TKGM-specific project details.

Field teams are meeting with local government in the zonal government centre Ghimbi and municipal government centre Genji, planning the launch of community programmes.

An independent technical expert working with the lenders, Behre Dolbear International, has conducted a report and provided confirmation of TKGM's preparedness for the development launch.

Security measures have been heightened in the district surrounding the project site and Kefi’s offices. This enhancement includes regular independent monitoring carried out by security expert Constellis.

Its latest report has concluded that TKGM's approach to securing the mining licence area, as well as its other sites and transportation routes, aligns with sensible and pragmatic security practices that match best management practices for security.

Further, planning for grade-control drilling has been initiated as part of the preparations for the openpit operational readiness programmes scheduled for next year.

Additionally, there is ongoing planning for resource-extensional drilling, which is essential for the feasibility study of the underground mine for 2024 to 2025.

In terms of regional project financing, historical expenses incurred before development, totalling about $90-million, were funded through equity and obtained from stock markets in the UK, Australia and Canada.

In the past month, the details regarding the $390-million allocated for development funding have been further refined within the finance syndicate. All members of this syndicate are actively engaged in the region and intend to contribute funds at the subsidiary level.

The first manner in which this will be achieved is that a mining services contractor will provide $70-million for the mining fleet as per the TKGM mining services agreement. The remaining project finance of $320-million will consist of both debt-risk capital, which includes senior and subordinated debt, making up about 60%, which is equivalent to $190-million out of the total $320-million, to be invested at the TKGM level by Kefi’s co-lenders.

Additionally, there will be equity-risk capital amounting to $130-million.

The first $40-million of this will be allocated as share capital to local partners in subsidiary companies.

The other $90-million will be provided by major international corporations in the form of equity risk notes (ERN). Some of these ERNs are non-convertible and can only be repaid in cash from future revenue.

Meanwhile, some ERNs have the potential to be converted into Kefi shares starting from the end of the third year after fund drawdown. The conversion will occur at the higher of the price at the fund drawdown or the prevailing market prices based on a volume-weighted average price.

There is, however, an option for Kefi to elect cash repayment, which is considered feasible, given the expected healthy surplus cash generation from the project, either at or near the current long-term consensus gold price of $1 850/oz.