RE: 6p Target12 Nov 2019 09:45
"Updating on KEFI Minerals (KEFI) towards the end of last week we noted the shares soaring back above 1p as it was Government arrangements resolved, Tulu Kapi project development looks ahoy. It is thus not surprising that the company “has received notice from its existing working capital providers to convert the remaining outstanding amount of £657,500 under the loan note issued on 5 August 2019 into new KEFI ordinary shares… at a price 0.68 pence per share”. However…
“This is the final repayment of all amounts outstanding under the loan facility”, though “the final £250,000 has today been arranged for delivery to KEFI in accordance with the terms of the loan facility” – that though meaning any conversion will be based off future prevailing share prices, and the share price having currently soared further higher to 1.85p.
That is with it updated Tulu Kapi “project equity closing processes are now being dealt with… asset level partners are to provide US$58 million of equity in a staged investment into the project, a proportion of which will subsequently be available at the KEFI Minerals plc level to fund Ethiopian-related corporate and exploration costs” and;
“Based on the Tulu Kapi open pit, assume an 8% after tax discount rate applied to net cash flows… a ‘base case NPV’ of £41 million (US$52 million) at US$1,300/oz at start of construction this year if it is assumed that KEFI has to parri passu fund the project equity. If one takes into account that KEFI has already made most of its contribution to project equity and that its partners will now provide the next project equity injection, this ‘KEFI base case NPV’ is more appropriately estimated at £57 million… £100 million (US$127 million) at US$1,460/oz at start of production in 2021.” (our bold)
Those are with there also further Tulu Kapi, other Ethiopia and Saudi Arabia exploration potential – and a market cap still of only £18 million. There thus still currently remain clear financial and operational risks but also very strong upside potential – and, at up to 2.5p, with some uncertainty now removed, our stance is upgraded to STRONG BUY with a target of 6p to sell."
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