LONDON (Alliance News) - Nyota Minerals Ltd Wednesday said it has entered a deal with KEFI Minerals PLC to sell its remaining 25% in the Tulu Kapi Gold project in Ethiopia for GBP1.5 million in cash and shares, after failing to fund its cash calls for the site.
The gold exploration company said the sale values KEFI Ethiopia, which owns 100% of Tulu Kapi, at GBP6 million, the same price as when Nyota sold 75% of the site to KEFI in December 2013 for GBP4.5 million.
Completion of the sale is dependant on certain conditions including shareholder approval, but if it goes ahead, KEFI will pay Nyota GBP750,000 in cash and 50 million shares in the company, which would bring Nyota's holding in KEFI Minerals to 14.6%.
Nyota said that it made the decision to sell its remaining stake as it was unable to fund a cash call by KEFI of GBP325,492, which was due on May 2, for costs incurred at the site between March 12 and June 30. Nyota said it expected further dilution if it did not fund further subsequent quarterly cash calls.
The company said that it does not have the financing options available to fund Tulu Kapi development, evaluation of Nyota's own northern blocks on the site, and its working capital requirements, so it decided to sell its remaining stake.
Nyota said it will use the sale cash consideration to focus on further evaluating its Northern Block Licences, along with other opportunities in Ethiopia and elsewhere that it has identified.
The company has struggled in recent months, deciding to sell down its interest in Tulu Kapi at the end of 2013 after struggling to find a joint venture partner at the site. In March, the company announced that its shareholders had voted against both its remuneration plan and a planned 10% share placing facility, which was being set up to help fund the Tulu Kapi development and help general working capital.
Nyota said at the time that steps had been taken in the current year to address remuneration concerns, including reducing the board to three persons and agreeing in January to a material reduction in salary for the CEO and fees for other directors.
In May, KEFI Minerals said it had increased the targeted open pit mine production at the Tulu Kapi Project to 1.2 million ounces from KEFI's previous estimate of 800,000 ounces in December 2013, and continued to fast track development of the site.
In a separate statement on Wednesday, KEFI Minerals said it has conditionally raised GBP2.1 million through a placing of 141.7 million shares at 1.5 pence per share.
The company said the placing means that it can complete the acquisition of Tulu Kapi, solely fund a revision of the site's Feasibility Study, and restart an application for the Mining Licence at Tulu Kapi, which will occur towards the end of 2014.
"We have taken the opportunity to take full control over the Tulu Kapi project and funding flexibility. This is important as our work since the acquisition of our controlling 75% interest indicates that the project will be bigger and last longer than had initially been assumed," KEFI Managing Director Jeff Rayner said in a statement.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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