Name of the Project
Tulu Kapi gold project.

Location
The project is located in western Ethiopia.

Project Owner/s
KEFI Minerals will own 80% of the exploration and holding company for Ethiopia, KME, which, in turn, will own 56% of Tulu Kapi Gold Mines Share Company (TKGM), thus bestowing KEFI with a 45% beneficial interest in the project.

Project Description
Tulu Kapi has an ore reserve estimate of 15.4-million tonnes at 2.1 g/t gold for 1.1-million ounces of gold.

Openpit gold production is estimated at 140 000 oz/y over a seven-year mine life.

Total life-of-mine production is estimated at 980 000 oz.

The conventional openpit mining operation will include a carbon-in-leach processing plant. The mine will be connected to Ethiopia’s electricity grid through  a new 47-km-long, 132 kV dedicated power line relatively close to the country’s major hydropower-generation source. An emergency diesel power plant will also be installed to provide emergency backup power for critical process equipment in the event of a grid power failure.

A preliminary economic assessment indicates the economic attractiveness of mining the underground deposit adjacent to the Tulu Kapi openpit after the startup of the openpit and after positive cashflows have begun to repay project debts.

Potential Job Creation
Not stated.

Net Present Value/Internal Rate of Return
The project has a net present value, at an 8% discount rate, of $207-million at an assumed long-term gold price of $1 300.

The openpit has an internal rate of return of 49%.

Capital Expenditure
The project is estimated at $260-million.

Planned Start/End Date
The start of full gold production at Tulu Kapi is expected in 2022.

Latest Developments
Ethiopia's central bank, the National Bank of Ethiopia, has approved signed term sheets with the project finance banks that will provide for the long-term development debt finance for the Tulu Kapi gold project.

The company says this reaffirms the Ethiopian government's ongoing support of it and its project finance plan for Tulu Kapi Gold Mines Share Company (TKGM).

"As previously stated, the two proposed senior debt underwriters and co-lenders are leading African banks and this approval will now trigger their normal processes for credit approval and documentation . . . to full financial closure later this year in accordance with recent company guidance," KEFI has noted.

Further, KEFI has also received confirmation that the National Bank of Ethiopia has registered the past investment by TKGM of $49-million in 2014.

Subsequent predevelopment investment will also be registered in due course, pertaining to expenditure from 2015 to 2019.

KEFI has indicated that this is important, as this past investment ensures compliance with the 30%:70% (equity:debt) capital ratio as approved specifically for foreign direct investment in the project.

These central bank approvals are material to KEFI, as they clear the way for full project finance completion, as do the various related and previously reported approvals by the central bank. These included the setting of the permissible capital ratio for the project, permission for gold price hedging as and when required, and for establishing and using bank accounts in major international financial centres, the company has said.

While these matters are conventional for mining project finance internationally, they are new to Ethiopia and has required a lengthy due process by KEFI as a first-mover in this new priority sector.

Other finance-related steps recently taken by the Ethiopian government include an agreement to transfer the TKGM project equity that will be earned by the government from its $20-million investment in the project to an Oromia regional mining fund.

Government has also signed various procurement contracts for building offsite roads and the electricity transmission connection.

Moreover, government and KEFI have agreed to changes to their shareholder agreement and the TKGM foundation documents to admit additional project equity investors into TKGM if required, although both parties are actively collaborating directly with the proposed project private equity investors to facilitate their subscription. KEFI's percentage interest within TKGM remains unaffected.

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.