Name of the Project
Tulu Kapi gold project.

Location
Ethiopia.

Client
Kefi Minerals.

Project Description
A definitive feasibility study (DFS) update for the Tulu Kapi project was completed in May 2017.

The 2017 DFS incorporates due diligence and refinements since the 2015 DFS published in August 2015, and provides increased confidence in the company’s plans to develop the project.

The 2017 DFS has similar outcomes to the 2015 DFS.

Forecast openpit gold production has increased slightly from 961 000 oz to 980 000 oz over ten years, owing to improved metallurgical recovery, with an average of about 115 000 oz/y for the first eight years of production. This is based on warranted processing plant throughput, which has increased from 1.2-million tonnes a year to 1.5-million tonnes a year for normal operations and to 1.7-million tonnes a year when processing softer ores.

The mining method planned is conventional openpit drill-and-blast, load-and-haul, reflecting a semiselective mining approach, whereby a bulk mining approach is applied to 79% of ore, or 95% of all material, and a selective mining approach to 21% of ore, or 5% of all material.

The processing plant comminution circuit refined and primary semiautogenous (SAG) mill and secondary ball mill circuit have been replaced with larger SAG‐only circuit. The DFS‐approved grind size for the processing plant has increased from P80 = 75 μm to 150 μm.

The designs for the tailings storage facility (TSF) and water storage dams have also been revised.

The TFS has been relocated downstream to reduce capital costs, with no reduction in capacity for a neutral balance.

New access roads have also been refined to decrease capital costs.

Various components remain unchanged from the 2015 DFS, including geology and mineralisation (ore reserves and mineral resources); metallurgical testwork data; and environmental and social permitting,

Mining the underground deposit below the planned openpit has not yet been fully considered, and will be addressed in due course.

A preliminary economic assessment completed in early 2016 evaluating the current indicated resource – 1.1-million tonnes grading at 5.6 g/t gold, has indicated that the addition of an underground mine has the potential to increase total openpit and underground gold production to more than 150 000 oz/y over four years.

The orebody remains open and further potential will be added.

Jobs To Be Created
Not stated.

Net Present Value/Internal Rate of Return
The net present value (NPV) of the project at the start of construction has decreased from $125-million at an 8% discount rate in the 2015 DFS to $97-million in the 2017 DFS, while the NPV at the start of production has increased from $256-million to $272-million.

The internal rate of return has decreased from 28% in the 2015 DFS to 22% in the 2017 DFS.

Payback has increased from $2.5 years to three years.

Value
The $160-million total funding requirement for the project is consistent with Kefi’s recent guidance for required funding.

Duration
The 2017 DFS update development schedule sets gold production to start in late 2019, the exact timing of which will flow from the start of major construction, depending on resettlement of the community. This assumes the community resettlement will occur in early 2018. The community and Kefi are, however, preparing for this to occur in late 2017, so that construction can start earlier.

Latest Developments
Kefi Minerals has signed the terms for $135-million in funding with Oryx Management to finance and operate all the on-site infrastructure at its Tulu Kapi gold project.

This latest mandate letter and heads of terms with the infrastructure specialist follows Kefi’s signing of terms with the Ethiopian government to fund the construction of all off-site infrastructure for the project.

Oryx has said that it will establish a special purpose vehicle to issue bonds, with the proceeds used to build and own all the on-site infrastructure for the project, which it will then lease to the project company Tulu Kapi Gold Mines.

“Ignoring historic investment of about $60-million, the project's remaining funding requirement has now been successfully reduced from $289-million when Kefi took control in 2014 to $160-million, before overlaying the Oryx proposal, to a residual balance of about $32-million,” he pointed out.

The residual balance, which includes $13-million of contingency provisions, will now be further evaluated and refined, structured and sourced over the next few months, with the possibility of further reducing this amount.

“A variety of sources to finance the estimated residual requirement of $20-million to $30-million are being considered, including working capital facilities with the Development Bank of Ethiopia, project-level equity with a mining and engineering group and further equity from Kefi in the project company,” Kefi executive chairperson Harry Anagnostaras-Adams has said.

It is expected that the financing from the Ethiopian government and Oryx will be provided and that development will start before the end of this year.

The planned financing package includes funding finance charges during the 30-month construction and production ramp-up period.

Oryx will operate the on-site ore processing infrastructure on an open-book, cost-plus performance bonus-based operating contract.

Ausdrill will 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.

Kefi believes that, based on the projected cash flow strength, Oryx could be repaid about half-way through the nine-year term.

Key Contracts and Suppliers
Oryx Management (finance and operation of all the on-site infrastructure) and Ausdrill (mine services).

On Budget and on Time?
Too early to state.

Contact Details for Project Information
Kefi Minerals, tel +90 232 381 9431, fax +90 232 381 9071 or email info@kefi-minerals.com.