Name of the Project
Tulu Kapi gold project.

Location
Ethiopia.

Project Owner/s
Kefi Minerals.

The Tulu Kapi Gold Mines Share Company (TKGM) will hold the Tulu Kapi project. 

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

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

The 2017 DFS has similar outcomes to those of the 2015 DFS.

The mining method planned is conventional openpit drill-and-blast, and 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 a 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 TSF 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.

Key planning assumptions that have been introduced since the 2017 DFS include:

• reworked production plans for years 1 to 3, with forecast gold production expected to increase from 115 000 oz/y in the 2017 DFS to 145 000 oz/y;
• expanding the capacity of the project’s processing plant to between 1.9-million and 2.1-million tonnes a year, depending on the hardness of the ore; and
• recasting the mining plans to allow for faster mining, intensified grade-control drilling and enhanced flexibility to switch between bulk mining and selective mining.

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 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.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
The net present value of the project at the start of construction on a 100% basis is estimated at $175-million. The internal rate of return has increased from 22% in the 2015 DFS to 60% in the 2017 DFS.

Payback is three years.

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

The additional $12-million funding required for the reworked production plans, and the plant and infrastructure expansion announced at the end of October 2017, have been offset by other savings and financier Oryx Management’s offering to expand its facility from $135-million to $140-million.

In addition, the reworked estimates also reflect the strategy agreed with Oryx Management to install greater processing capacity from the outset to achieve: 
• a quicker cashflow from the openpit and capacity to process additional ore from targeted satellite deposits, and
• greater protection against downside risks by facilitating the faster processing of lower-grade ore from the openpit.

Planned Start/End Date
Commissioning of the project is expected for the second half of 2020.

Latest Developments
Despite the need to adjust and reschedule many tasks, owing to Covid-19, Kefi Minerals has remained focused on the preparations and finance milestones to allow for major site activities to start at the Tulu Kapi gold project from October.

In terms of health and safety, which the company has highlighted as its biggest priority, the greatest impact of Covid-19 and the restrictions imposed, has been the overhaul of procedures and teams to engage with the significant numbers of households and people surrounding Tulu Kapi.

Other Covid-19-related initiatives include the company’s offering beds and bedding to a regional isolation centre.

To date, there have been no reported cases of Covid-19 at Tulu Kapi.

In terms of project equity, TKGM's longstanding partners, Kefi and government, are coordinating with private-sector partner ANS Mining Share Company to maintain the planned structure of the public–private partnership, despite the local liquidity strains experienced this year and other effects of the Covid-19 pandemic.

To that end, ANS Mining, which is the investment vehicle for a syndicate of leading Ethiopian banking, insurance and investment organisations, has re-affirmed its commitment to the project following government's injection of significant liquidity into the local financial markets over past few weeks.

Government is also collaborating directly with ANS Mining and its shareholders to reinforce project momentum.

In addition, as an important new development, government has now also advised Kefi and ANS Mining that it will try to arrange either direct or indirect funding in this quarter in TKGM from its investment institutions for the required amounts if there is any further delay in investment through ANS Mining. 

Moreover, should this investment be provided by entities outside of ANS Mining, there will be a proportionate adjustment to the TKGM shareholding. Kefi's interest in TKGM will remain unaltered.

In a proactive move, the project partners are also updating the shareholder agreement to account for any specific changes in schedule and budget, as a result of Covid-19 to provide greater flexibility and avoid any potential delays in the overall project timetable.

In terms of project contractors and lenders, the two project contractors and the two project lenders are regularly liaising with TKGM and adjusting their joint plans to take account of the various Covid-19 protocols.

With regard to the timetable, the directors of TKGM and Kefi have resolved to remain focused on using every reasonable effort to preserve the overall scheduled target of starting full gold production at Tulu Kapi in 2022, and on full financial close of the project funding in October.

Off-site infrastructure construction programmes are continuing for road and electricity connections.

Covid-19 has, to date, had no discernible impact on project costs.

However, the gold price outlook for the project now appears significantly higher than the $1 098/oz assumed for determining ore reserves or the $1 300/oz assumed in base case financial studies.

Kefi executive chairperson Harry Anagnostaras-Adams has said that the unprecedented scale of the stimulus packages announced by various governments globally, combined with low or negative interest rates, will provide welcome relief for society and also reinforce the probability that the gold price will continue to strengthen and, thus, bolster the Tulu Kapi investment case.

Key Contracts and Suppliers
Ausdrill (mine services).

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