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KEFI Minerals’ (LON:KEFI) widely anticipated definitive feasibility study (DFS) of its flagship Tulu Kapi project in Ethiopia burnished its potential to be a low cost mine.
The report, which confirmed the ability to produce 960,000 ounces of the precious metal over the next 13 years, will now be reviewed by the technical consultants to potential lenders.
KEFI says it still hopes to agree a funding package for the US$120mln mine, with US$100mln of that initial capital investment financed by debt.
Borrowing the cash rather than funding it through shareholders would result in a higher internal rate of return (IRR), KEFI told investors.
One scenario under consideration yields an IRR of 52%, compared with an all-equity funded return of just 28%.
On that basis the net present value of the Tulu Kapi would be around US$156mln at an 8% discount rate, which contrasts with the company’s current market capitalisation of around US$20mln.
City broker Numis observed: “With permits in hand, everything now rests on the financing to keep things on track.”
The DFS essentially confirmed what the company had previously told investors: Tulu Kapi will be one of the most efficient gold operators with all-in costs put at US$780 an ounce.
The plan is to be producing gold in the early part of 2017 at a steady state 95,000 ounces a year.
"Once production commences, this development will bring substantial benefits to Ethiopia, including the creation of approximately 700 jobs at the mine site over its planned initial 13 year life," said Harry Anagnostaras-Adams.
KEFI, which secured the all-important mining licence for the Tulu Kapi in April, is currently in the throes of raising £2.9mln from investors that will fund the continued development of the project through to financing.
It will also bankroll further exploration. On June 4, the company said there was the potential to double the reserve base at its flagship project.
In the coming weeks and months it will attempt to lower the initial funding requirement through the “tendering and procurement process”.
“The objective is to preserve robust project economics whilst minimising equity dilution,” it added.