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Kefi secures $30m project funding for Tulu Kapi – now ready and funded to build mine: BUY

By HotStockRockets | Wednesday 13 June 2018

Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A very pleasant start to the week for we long suffering shareholders in Kefi Minerals (KEFI). That is to say it has announced that an Ethiopian consortium has stumped up $30 million in project finance for the Tulu Kapi gold mine, meaning it is fully funded into production.

There still needs to be final documentation and Government approval but $9 million should arrive in August and the rest on the closing of project finance. The ownership of Tulu Kapi thereafter will be: circa 23% by the Ethiopian Government and 77% by KME. KME would be owned 70% by KEFI (equivalent of 54% of TKGM) and 30% by the Ethiopian investment syndicate (equivalent of 23% of TKGM).

Thus the terms are broadly consistent with historic estimates of NPV at the start of construction of $115 million and at start of production of $192 million respectively, ignoring the underground deposit and exploration prospects. So Kefi has 54% of that, ie as things stand $62 million plus its assets in Saudi and the deep pit Tulu Kapi on top.

At 3.9p mid the market cap is c £13 million, call it $18 million. Now we accept that the PLC may have to raise some more cash (norra lot relative to the value of this mine) to pay its costs until the mine is producing. We accept that there is still some operating risk, building a mine – even an open pit – is not that simple, but the discount to fair value is utterly excessive.

The stance thus remains BUY at up to 5p, our target – based on the open pit mine alone – is 13p+ to sell.

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