Aim-listed gold and copper exploration and development company Kefi has announced that the Tulu Kapi Gold Mines (TKGM) board has formally launched the project.

"Our launch timing is fortuitously coinciding with the improved conditions in Ethiopia and all-time high gold prices. Tulu Kapi's high grade and high process recovery, combined with our project design, has resulted in a robust set of economics for long-term operations which should support further exploration and development along with good opportunities to continue supporting local social development projects such as the already provided local school and water supply.

"The returns for the capital investors and lenders are attractive and the recent exemptions from exchange controls have rendered the Ethiopian mining investment climate internationally competitive,” Kefi executive chairperson Harry Anagnostaras-Adams said on May 20.

The TKGM board includes representatives from both Kefi and the Ethiopian federal and Oromia regional governments. This decision to launch Tulu Kapi follows deployment of dedicated site policing and the conditional confirmations that quickly ensued from all members of the project's finance syndicate.

Early works until September will include completion of preparation for community resettlement, detailed engineering for procurement, community consultations on social development plans, and recruitment and other organisational development.

Concurrent closing of project financing will require independent monitoring over the next few months to ensure that early works field activities progress on schedule under the newly established policing and related safety protection systems and will also include the satisfaction of all other conditions precedent. Moreover, the execution of definitive detailed documentation will also need to be carried out and the drawdown of financing syndicate equity-risk capital from October to mid-2025, followed by debt capital.

Major works will begin in October. These will include procurement and fabrication of plant internationally, resettlement of community, site earthworks, grade-control drilling, transportation to site and assembly of plant and associated infrastructure, mining, and a definitive feasibility study (DFS) on an underground mine.

The finance plan includes debt risk capital in the form of $190-million secured debt from the development banks; equity risk capital, excluding historical investment of about $100-million sourced from Kefi's shareholders; $110-million equity risk note sourced by Kefi from Ethiopian subsidiaries of multinational corporations, repayable in cash or, at Kefi's election, with Kefi shares issued at market prices in the second year of production; and $20-million TKGM share subscriptions from the federal and regional governments.

The project is expected to create about 1 000 direct jobs and 5 000 to 10 000 indirect jobs, with foreign direct investment of about $500-million, including historical investment.

At the current gold price of about $2 350/oz, the project is expected to yield hard currency exports of about $377-million average a year, with royalties and taxes of $69-million average a year, and operating expenditures about $119-million average a year, with preferential procurement locally, subject to quality and price.

With all-in-sustaining costs (AISC) about $887/oz and break-even costs, including debt service, of about $1 315/oz, the project provides an internal rate of return (IRR) to equity of more than 50%.

At a gold price of $1 550/oz, the IRR still remains more than 20%, noting that because of the lower impact of the gold-price-based royalties, AISC drops to $831/oz and break-even cost drops to $1 091/oz.

Recently approved exemptions from exchange and capital controls facilitate that investors and other financiers are assured of unrestricted capital servicing, Kefi said.

"We can now proceed to safely complete our early works on schedule and satisfy all conditions precedent to draw down full project finance as outlined, thus enabling the major works to commence from October.

"This deliberately sequenced and disciplined approach is commensurate with being a first mover adhering to the highest performance standards in respect of safety, social, environmental, technical and other aspects. We are determined to ensure that Tulu Kapi preserves its standing as a showcase project for an important new business sector for Ethiopia,” Anagnostaras-Adams said.