RE: Kefi!18 Jul 2023 10:01
Near-term cashflow from commissioning and production from Tulu Kapi: It is
expected that shovels will soon be moving earth at Tulu Kapi, a high-grade, low-cost
open-pit operation that will produce strong margins and an estimated $86m free
cashflow per year over an initial eight-year mine life.
• Advanced assets in two jurisdictions: Other than Tulu Kapi in Ethiopia, KEFI has the
Hawiah copper-gold and Jibal Qutman gold projects in Saudi Arabia, which are host to
significant established resources that remain open for further growth. These assets
are being advanced through engineering and economic studies. In production, these
assets would provide asset, jurisdiction and commodity diversification, and a
significant increase in attributable cashflow.
• High-quality exploration assets: We believe that the ANS is one of the last significant
greenstone belts to undergo systematic exploration using modern methods, and
massive potential remains to be discovered. KEFI is a relatively earlier mover in the ANS,
and has secured prospective licences with evidence of historical mining. These licences
could add to KEFI’s resource base, given further exploration. Furthermore, the potential
to add further resources around the advanced assets should not be overlooked.
WHI view: Having secured funding for the Tulu Kapi gold mine project in Ethiopia, KEFI is
set to become AIM’s next gold producer. Over an initial eight-year mine life, the open-pit
operation will produce strong margins, in the region of $950/oz of gold produced at our
forecast long-term gold price of $1,850/oz. The mine could then transition to an
underground operation, in our opinion, adding at least four further years of gold production
and revenues. With an established operational base and revenues to drive exploration, KEFI
will be well-placed to maximise the significant potential of the underexplored ANS. We
believe that the combination of high-potential projects with the experience and
commitment of the executive team and partners, is likely to deliver further success for KEFI
and its shareholders. The underlying value of KEFI’s assets has increased significantly since
our last full note (June 2021), and we see fair value at 3.9p per share.
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