Ethiopia : KEFI Minerals expects glowing future on the Tulu Kapi gold

The Tulu Kapi gold project, in western Ethiopia, has the potential to make the AIM listed company KEFI Minerals “one of the lowest cost gold producers in the sector”.

The statement of Harry Anagnostaras-Adams, Chairman of the company, at the Annual General Meeting held on 29 June outlined the outlook.

The emerging gold mining company prioritizes open-pit gold production and has consequently refined the 2015 definitive feasibility study of Tulu Kapi with an estimate total ore reserve of 15.4Mt at 2.12g/t gold, containing 1.05Moz.

The initial open-pit gold production is projected at 115,000 ounces per annum at a low All-in Sustaining Cost (AISC) of less than US$800/oz, “which would make us one of the lowest cost gold producers in the sector”, the statement reads.

In this year gone, it reported that KEFI has moved this flagship project in the highly prospective Arabian Nubian Shield in Ethiopia "from the theoretical to the actual".

“The prospect of KEFI becoming a junior gold producer is now a reality”, Harry Anagnostaras-Adams ensured, as the company targets triggering development in 2017 and open-pit production in 2019.

Updated definitive feasibility study and due diligence now make certain that Tulu Kapi is a high-value, low-cost project with robust economics.

Notably, the net cash build-up ranks between 174 million and 229 million US$ in the first three production years, while the payback period goes from 2 to 2.5 years

In addition, the project will yield an after-tax unleveraged NPV of US$100 to US$187 million at the start of construction using a discount rate of 8%.

Anagnostaras-Adams said the project has “significant growth potential beyond the existing open-pit Ore Reserve estimate of 15.4 million tonnes at 2.12g/t gold, containing 1.05 million ounces”.

Hence, in parallel with the open-pit gold production, mining of the underground deposit underneath the planned Tulu Kapi open pit has been evaluated.

The related preliminary economic assessment demonstrated robust economics and the addition of the underground mine would lift gold production to 150,000 ounces per annum.

Given the high profitability of the project, the Government of Ethiopia made approximately 20 million $ equity capital contribution to Tulu Kapi’s development, in May 2017.

The investment will substantially increase the Government’s share of the project from a 5% free-carried interest to about 25%, but depending on the final financing structure.