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MEI Online: Plant Operation News: Africa: October 21st 2015


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:: Tulu Kapi Gold Project Update


KEFI Minerals, the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Federal Democratic Republic of Ethiopia has announced the appointment of Sedgman Limited as the preferred contractor for Plant Construction & Start-up for its Tulu Kapi Gold Project in Ethiopia.

Sedgman is an industry specialist, based in Australia, with strong African operations and a successful track record. The principal terms and consequences of this appointment are set out below, which are subject to full detailed documentation.

Scope of work under the proposed contractual arrangements will cover:

  • detailed equipment specification and procurement – with a Front End Engineering Design (“FEED”) stage to commence this quarter;
  • construction to occur under a fixed-price lump sum contract (Engineering, Procurement and Construction);
  • start-up management;
  • estimated cost of c. US$63 million for 1.5-1.7 million tonnes per annum depending on ore-type from year to year to be refined during the FEED stage; and
  • performance guarantees:
    • to remain in place until the end the first year of production; and
    • to ensure successful start-up before the final contractual retention sums are paid by KEFI.

This compares favourably with the previous estimate, in the Definitive Feasibility Study, of a total cost of US$61 million for a 1.2 million tonne per annum plant. The 2015 DFS also did not anticipate a fixed-price lump sum contract for construction with performance guarantees.

Project Economics and Next Steps

Based on the proposal from Sedgman, expected production in the first five years has been increased to an average of 105,000oz per annum.

The consequence of the planned project contractors’ arrangements is that KEFI’s peak funding requirement remains at c. US$120 million (plus provisions for cost-overruns and finance charges). The planned sources of funds remain unchanged, being a combination of debt and gold streaming finance of US$100 million together with project-level equity of $20 million from the Government of Ethiopia.

The Company anticipates the next steps for the project to comprise the following:

  • commence the “FEED stage” of plant planning, involving detailed engineering and procurements;
  • procurement planning will allow potential involvement of the Government export credit agencies of Australia and South Africa, to help minimise financing costs and risks;
  • appoint the contractor for Mine Establishment and Operation;
  • update the debt-financiers’ independent technical experts for debt-providers’ formal credit approvals;
  • complete legal documentation for approval by all syndicate members, including Government of Ethiopia; and
  • during 2016, KEFI will initiate drill-out of potential satellite deposits to identify any opportunities to further expand production. KEFI has already revised its plans to lift production from the initially contemplated c. 80,000oz per annum to c. 105,000oz per annum.

Wayne Nicoletto, Chief Operating Officer of KEFI Minerals, commented: “The intense competition during the contract tendering process, culminating in today’s appointment of Sedgman as preferred contactor for the plant, demonstrates the industry’s recognition of the potential of Tulu Kapi and of its successful overhaul by KEFI.”

Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals, added: “The project has robust economics and the support of major industry players. Our finance team can now move on to finalising the financing package and syndicate for Government approval, and progress towards the construction phase.”




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