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(Sharecast News) - Gold exploration and development company KEFI Minerals updated the market on its Tulu Kapi Gold Project in Ethiopia on Friday, reporting that despite the need to adjust and reschedule a number of tasks due to the Covid-19 coronavirus pandemic, it remained focused on the preparations and finance milestones to enable major site activities to start from October.
The AIM-traded firm said the largest impact of Covid-19 and the restrictions imposed had been the overhaul of procedures and teams to engage with the "significant" numbers of households and people surrounding Tulu Kapi.
Other Covid-19 related initiatives included the company offering beds and bedding to a regional isolation centre.
As at 23 April, Ethiopia had reported 9,771 Covid-19 tests and 116 confirmed cases, which had resulted in three deaths, although there had been no reported cases at Tulu Kapi.
Looking at the project's equity, KEFI said Tulu Kapi Gold Mines' (TKGM) long standing partners, itself and the government, were coordinating with private sector partner ANS Mining to maintain the planned structure of the public-private partnership, despite the local liquidity strains experienced, along with other effects of the Covid-19 pandemic.
To that end, it said ANS Mining - the investment vehicle for a syndicate of leading Ethiopian banking, insurance and investment organisations - had reaffirmed its commitment to the project following the government's injection of "significant" liquidity into the local financial markets during the past two weeks.
It said the government was now collaborating directly with ANS Mining and its shareholders to reinforce project momentum.
In addition, as an important new development, the government had now also advised both KEFI and ANS Mining that it would look to arrange either direct or indirect funding into TKGM this quarter, from its investment institutions, for the required amounts if there was any further delay in investment via ANS Mining.
KEFI said that, in the event that investment was provided by entities outside of ANS Mining, there would be a proportionate adjustment to the TKGM shareholdings, although KEFI's interest in TKGM would remain unaltered.
As a proactive move, the project partners were updating the shareholder agreement to account for any specific changes in schedule and budget as a result of Covid-19, providing greater flexibility and to avoid any potential hold-up in the overall project timetable.
The two project contractors and the two project lenders were said to be regularly liaising with TKGM, and adjusting their joint plans to take account of the various Covid-19 protocols.
KEFI said the directors of TKGM and itself had resolved that, notwithstanding the pandemic, they would remain focused on using "every reasonable effort" to preserve the overall scheduled target of starting full gold production at Tulu Kapi in 2022, and full financial close of the project funding in October 2020.
Off-site infrastructure construction programmes were continuing for road and electricity connections.
The company said to date, the pandemic had no discernible impact on project costs.
However, the gold price outlook for the project now appeared "significantly higher" than the $1,098 per ounce assumed for determining pre reserves, or the $1,300 per ounce assumed in base case financial studies.
"As across much of the globe, Ethiopia, Saudi Arabia and the other countries where we have activities have recently imposed physical isolation protocols to help contain the further spread of the Covid-19 virus," said executive chairman Harry Anagnostaras-Adams.
"We have already made a number of significant changes to help aid in this objective and we will continue to communicate with shareholders on any material consequences.
"We are working closely with our personnel, contractors and stakeholders, including our host governments, in order to implement appropriate safeguards and procedures."
Anagnostaras-Adams said the "unprecedented scale" of the stimulus packages announced by various governments globally, combined with low or negative interest rates, provided "welcome relief" to society, and also reinforced the probability that the gold price would to continue to strengthen and thus bolster the Tulu Kapi investment case.
"Our longstanding and planned new Ethiopian partners are also working hard and remain keen for Tulu Kapi to commence development as soon as possible, as the project will not only generate substantial local employment in these difficult times, but will also generate substantial tax revenue and export income.
"As an important development, the government has advised that it will look to source funding directly into TKGM via its local financial institutions if there is any delay to the anticipated investment via ANS Mining."
At 1354 BST, shares in KEFI Minerals were up 5.97% at 0.71p.
22 Mar 2016 10:46