Tulu Kapi Update

KEFI (AIM: KEFI), the gold and copper exploration and development company focused on the Arabian-Nubian Shield, with a pipeline of projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, with the most advanced being the shovel-ready, high-grade Tulu Kapi Gold Project ("Tulu Kapi" or the "Project") in Ethiopia.

Early Works Progress

Excellent progress is being made with the intense Early Works programme following Project launch in May 2024 to take Tulu Kapi through to September 2024, and provide the basis for full financial close and commencement of Major Works in October 2024, ahead of commissioning of production in mid-2026.

The dismantling of the old exploration camp is progressing and the planned security system is being installed, including private on-site security, with permanent off-site Government protection. Site inspections confirm progress as expected.

Recently appointed Senior Project Manager, Jacques Kruger, has further optimised the overall development schedule with principal contractor Lycopodium in preparation for the final confirmations for fixed-price-lump-sum components, which is a precondition for signing all Project financing definitive documentation.

Along with both the Project's banks, KEFI executives are in regular contact with the relevant Government officials to resolve the remaining few administrative issues, having previously successfully dealt with all required regulatory revisions and permissions. Since the receipt of ground-breaking exemptions from exchange and capital controls, as announced on 5 October 2023, the Government has continued to implement far-reaching reforms of the financial and general regulatory system as part of its drive to generate private sector growth.

Project Finance Approval Process

The US$320 million full Project funding package remains as previously announced:

• US$190 million secured lenders, being East and Southern African Trade and Development Bank Ltd and African Finance Corporation Limited;
• US$20 million equity investors in TKGM, being the Ethiopian Federal and Regional Governments; and
• US$110 million regional equity and note Investors in the Ethiopian holding company.

If historical investment by KEFI and the mining fleet supplied by PW Mining are included, total Project spending from the Project's original inception will aggregate to approximately US$500 million.

The foreshadowed internal corporate re-organisation is being implemented to facilitate closing with regional investors and, in due course, the local stock exchange listing of securities issued to locals by the Ethiopian holding company which will hold the shares in Tulu Kapi Gold Mines Share Company ("TKGM") and all licences and applications for other projects which include gold, lithium, nickel and copper.

Subject to finalisation of full Project financing, KEFI's current beneficial ownership of 95% in TKGM will likely be diluted to c.80% upon closing. Equity subscriptions into TKGM are at entry valuation of approximately US$200 million whilst the NPV of TKGM equity is estimated at c.US$650 million*.

* NPV calculations are based on the DFS (Definitive Feasibility Study) financial model for the Tulu Kapi open pit updated for refinements in consultation with lenders, contractors and input pricing updates generally, plus the PEA (Preliminary Economic Assessment) financial model for the Tulu Kapi underground mine. Assumed gold price US$2360/oz being the current spot market; and £/$ exchange rate = 1.27, discount rate of 5% applied against net cash flow to equity, after debt service and after tax.