A local Ethiopian subsidiary of KEFI Gold and Copper (KEFI ), Tulu Kapi Gold Mines S.C, has signed a US$20 million equity-ranking-royalty deal with Chancery Royalty Limited.

This is a key final part of the US$340 million financing package for KEFI's high-grade, high-recovery Tulu Kapi gold project in Ethiopia.

The royalty is an equity-risk ranking royalty and is payable alongside distributions made by TKGM to its shareholders.

A residual US$30 million of equity-risk capital is also in the process of being fully signed up this month. 

This comprises US$10 million of costs to be incurred during the two-year development programme and settled in KEFI shares at the then market price when applicable costs fall due during this period, and the balance of US$20 million as additional equity-risk ranking TKGM gold royalties issued to two other royalty investors on the same terms as the Chancery Royalty. 

At that point the US$340 million project finance package will be formally complete. 

As a separate and optional matter, consideration continues to be given to the raising of capital in excess of the project development requirements in the form of Ethiopian BIRR-denominated non-convertible, redeemable preference shares to be issued by the KEFI's wholly-owned KME Holdings Limited. 

Meanwhile, contractors on the ground are being mobilised, a ground-breaking ceremony is planned, and resettlement is well underway. 

"It is an exciting time to launch Tulu Kapi, one of Africa's highest margin new gold mine developments,” said KEFI’s executive chairman, Harry Anagnostaras-Adams.  

“"At US$3,000-5,000 per ounce gold, average EBITDA for the first three years is estimated at US$345 million to US$683 million per annum, both of which significantly exceed KEFI's current market capitalisation. "And we will not stop at Tulu Kapi alone. Separate teams are already working on growth plans, both in Ethiopia and Saudi Arabia. These will also be funded and managed under appropriate bespoke structures after consultation with KEFI's partners, financiers and shareholders as required.”

 

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The all-in sustaining costs at Tulu Kapi are set to run at between US$1,004 and US$1,144 per ounce of gold produced. The break-even cost after servicing all debt is around US$1,400 per ounce. Given that gold continues to hover at around US$5,000 Tulu Kapi looks an enticing prospect.