Fair value 7.3 pence29 Nov 2024 14:06
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Determining a fundamental or "fair value" share price for KEFI requires analyzing the company's assets, projected cash flows, and the value of its projects. Here’s a breakdown based on the fundamentals:
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Key Metrics for Valuation
1. Tulu Kapi Gold Project (Ethiopia)
Annual Production: ~140,000 ounces of gold.
Gold Price (Current): ~$1,950 per ounce.
Revenue Potential: $273 million per year at full production (140,000 ounces x $1,950).
All-In Sustaining Cost (AISC): $850 per ounce, leaving a margin of ~$1,100 per ounce.
Annual Operating Cash Flow: ~$154 million ($273M - $119M AISC).
2. Project Life
Tulu Kapi’s initial open-pit mine life is ~7 years, with potential for extension based on underground resources and exploration.
3. Net Present Value (NPV)
Reported NPV (at $1,700/oz gold): ~$250 million for Tulu Kapi.
Adjusted for current gold prices (~$1,950/oz), the NPV increases to ~$320 million.
4. Other Assets
KEFI also has interests in gold and copper exploration projects in Saudi Arabia, such as the Jibal Qutman and Hawiah projects. These are less advanced but add speculative upside.
5. Outstanding Shares
Current outstanding shares: ~4 billion (exact number subject to confirmation).
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Valuation Estimate
To estimate the fundamental value per share, we calculate as follows:
1. Total Company Value: Using the adjusted NPV of Tulu Kapi (~$320M), plus a conservative valuation of $50M for Saudi assets, gives a total value of $370M.
2. Value Per Share:
Total Value ÷ Outstanding Shares = $370M ÷ 4B = $0.0925 per share.
Converting to GBP (at $1 = £0.79): £0.073 per share.
This fundamental valuation of 7.3p per share reflects the intrinsic value of KEFI’s projects, assuming successful execution and no further significant delays.
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