Emerging gold producer Kefi Minerals has reached an agreement with an Ethiopian investment syndicate that wants to acquire a 30% ownership interest in Kefi subsidiary Kefi Minerals Ethiopia (KME), which holds the company’s interest in the Tulu Kapi Gold Mines (TKGM).
Under the proposed terms, which remain subject to final documentation and government approval, the syndicate will invest about $30-million in local currency, the equivalent of $9-million of which will be invested in August this year and the balance upon closing of project finance.
The proceeds will be used to fund project finance closing, community and development costs.
This, the Aim-listed company said on Monday, will mean that, upon closing of project finance, the ownership of the Tulu Kapi gold project, through TKGM, would be about 23% by the Ethiopian government and 77% by KME.
KME will be owned 70% by Kefi, which is equivalent to about 54% of TKGM, and 30% by the Ethiopian investment syndicate, which is equivalent of 23% of TKGM.
At about $1-million per percentage point of ownership, the proposed equity pricing terms for the Ethiopian investment syndicate are broadly consistent with those entered into with the Ethiopian government for its committed investment of local currency (Birr) equivalent of $20-million into TKGM, except that the Ethiopian government is also entitled to a 5% free-carried interest in TKGM.
Subsequently, Kefi has now assembled the proposed full project funding consortium including contractors, equity and nonequity capital.
However, for the project to proceed, all stakeholders now rely on closing out the remaining Ethiopian government processes and approvals, along with the completion of due diligence.
“We are delighted to have agreed terms with the Ethiopian investment syndicate, which further strengthens our alignment with local stakeholders for our Tulu Kapi project. Their investment on roughly the same terms as the Ethiopian government means that 46% of the project equity will now be held by the Ethiopian government and local investors to complement the other benefits,” commented Kefi Minerals chairperson Harry Adams.
He added that Kefi's remaining 54% beneficial interest in the project gives the company an implied valuation of about $66-million based on these transaction metrics, while not including any value for the Tulu Kapi underground deposit or the exploration prospects in Ethiopia and Saudi Arabia.