Undeniably undervalued25 Aug 2020 08:18
KEFI remains focused on the preparations and subsequent completion of the outlined finance milestones to ensure the closing of full Project funding in October 2020 and for gold production to commence in 2022, in line with recent guidance. This month we focus on finalisation of the detailed terms sheets with the preferred provider of subordinated debt/offtake-linked finance, likewise for the Project equity.
The current price provides compelling economics for KEFI's projects and, in my view, gold prices could continue to increase as interest rates remain low as monetary expansion and government debt continues to rise globally.
The spot gold price is currently more than US$800/oz higher than our Ore Reserves assumption of US$1,098/oz and US$600/oz higher than our base case assumption of US$1,300/oz used for Tulu Kapi financing plans. Recent industry analysts' consensus forecasts seem to be for a new base case of US$1,500 with upside beyond US$2,000/oz.
As announced on 19 June 2020, the strong Project fundamentals are summarised below at different gold prices, based on the 2020 Tulu Kapi Plan for the open pit added to that of the PEA-based NPV of the underground project. NPV's are based on after-debt and after-tax cash flows discounted at 8% from the viewpoint of KEFI shareholders as at today.
Tulu Kapi Gold Project
Assumed Long-Term Gold Price
US$1,400/oz
US$1,700/oz
US$2,000/oz
IRR for Open Pit Only
29%
52%
70%
All-in Sustaining Costs ("AISC") - USD/oz
856
877
898
All-in Costs ("AIC") - USD/oz
1,066
1,087
1,108
Average EBITDA for 100% of Project (USD Millions)
79
111
148
NPV's for 100% of Project
USD Millions
236
422
607
GBP Millions
189
337
485
NPV's for KEFI 45-70% of Project
USD Millions
105-165
190-295
273-425
GBP Millions
85-132
152-236
218-340
These illustrative NPV's are shown for 100% of the Project and for KEFI's assumed 45-70% beneficial interest i.e. the previous base case beneficial interest of 45% is now redundant and will be higher. We now target up to 70%.
The value-indictors set out above with ranges of £85-340 million exclude KEFI's two other advanced projects - Hawiah (copper-gold) and Jibal Qutman (gold) projects in Saudi Arabia and compare favourably with the Company's current market capitalisation of approximately £35 million.
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