RE: New Research Note - 0.9p Divs p/shr + 10 x Bagger18 Mar 2022 08:10
“Otherwise, the government’s policy directive requiring a maximum 50% debt gearing (defined as debt/[debt+equity]) for new projects has been waived in the case of Tulu Kapi, which has prior approval to expand the debt portion of its funding requirement to 70% of the total. In addition, clarification received from the regulator (the National Bank of Ethiopia) indicates that historical exploration spend on the project of c US$70m will be deemed to contribute towards equity for the purposes of this calculation.
Group
KEFI’s partner in Saudi Arabia, which funds 70% of all equity requirements, is the Al Rashid family – one of the world’s wealthiest families. At the same time, the Saudi sovereign wealth fund’s Saudi Investment Development Fund has publicly stated its priority to provide up to 75% project debt for new mine developments. Accordingly, KEFI’s equity share of the development requirements for Hawiah and Jibal Qutman should be just 7.5% (30% of 25%) of combined capital expenditure of both of US$199m (US$160m plus US$39m) – ie just US$14.9m – to be funded after Tulu Kapi starts up. Note that Tulu Kapi is projected (by KEFI) to accumulate a cash balance”
“For the purposes of our valuation (below) therefore, Edison has assumed that KEFI will raise US$10m in top company level equity only, plus a further US$2m for interim exploration purposes in FY22. In reality however, US$3m of this US$12m assumed equity raise (relating to Jibal Qutman) could be deferred until FY24 with a corresponding reduction in associated dilution to the extent that KEFI’s share price is higher than that currently prevailing.”
Seems a pathway to development in Saudi has been cleared. Good to see an explanation over the historical spend on TK.
Sign In
Follow the stocks
