KEFI Gold and Copper on the cusp of full-scale construction at Tulu Kapi

It’s been a long road and the way ahead’s not always been clear.

But KEFI Gold and Copper () is now on the cusp of greenlighting construction at the Tulu Kapi gold project in Ethiopia. 

And, as the gold price continues to break new highs, the timing couldn’t be better.

The plan is to complete the construction camp and security camp during April and May, to complete certain work on costings and to ready certain locals for resettlement. Then, in June, resettlement will begin, and construction can then begin in earnest. It will take around 18 months to get the project ready for production, with ramp up complete six months after that.

 “The project is ready to rock’n’roll,” says Harry Anagnostaras-Adams, KEFI’s progenitor and executive chairman.

“The government is pushing us to start. The gold price is at an all time high, the banking has just come through in the past few weeks. We’ve got to go.”

Indeed, you get the feeling that Tulu Kapi is at last at that point where the momentum will take over. Three years after the civil war in Ethiopia ended, the banks have at last got comfortable with the country again. Indeed, Ethiopia is booming, and investors are falling over themselves to get in. Addis Ababa is the air hub of Africa, and the country has resumed its place as one of the fastest growing economies in the world, with low cost hydro-electricity, new industrial parks, a just-launched stock exchange and a just-injected IMF development recovery package

It hasn’t always been like that. 

“KEFI was formed as a frontier markets explorer twenty years ago,” says Anagnostaras-Adams. “For half of those twenty years it was stuck in the mud, bogged down by archaic regulation and political issues. But if we hadn’t been there and persisted through, we wouldn’t be in the pole position we’re in today. Tulu Kapi is indeed going ahead.”

With its rich mineral endowment, how could it not?

Tulu Kapi, as the studies show, is rich in high grade ore. The open pit resource grades at 2.1 grams per tonne gold, while the underground portion grades at 5.5 grams. 

“That,” as Anagnostaras-Adams says, “is high grade in anyone’s language.”

What’s more the orebody is pretty straightforward. 

“It’s a dead ringer for many West Australian gold mines,” says Anagnostaras-Adams. 

“It’s being done in line with absolutely conventional Kalgoorlie goldfield practices. There’s nothing weird. The plant is a simple carbon-in-leach flowsheet. It complies with all the environmental standards. The recovery is free-milling. Even the bankers’ models show recoveries at 94%.”

Overall the resource rings in at 1.7 million ounces of gold, although at this stage only a million has been included in the bankable study. And drilling out even more ounces when the time comes ought not to be too much of a challenge either. 

The second to last hole drilled by the company intercepted 90 metres of ore grading 2.8 grams gold, a clear signpost to continuing mineralization at depth.

The general speculation is that there might be another million ounces there at least, and maybe more.

Be that as it may, it’s the million ounces in the study which will get mined first – and profitably.

The current modelling shows all-in-sustaining costs running at around US$900 per ounce which, with the gold price running so high, allows for a very chunky margin indeed. So large, in fact, that the first year’s cashflow from Tulu Kapi could theoretically pay off the entirety of the US$240 million in debt that it will take to get the project built. Not many companies can say that.

Of course, the good times in the gold markets may not roll forever, but the low cost of production leaves plenty of room for manoeuvre. 

So, in just over two years’ time, it looks as though Tulu Kapi will be up and running and producing gold at the rate of 140,000 ounces per year. The open pit will produce at that level for around seven years, during which time the underground portion will also be developed. At that point production should rise to around 170,000 ounces per year, with costs marginally higher at US$1,000 per ounce. 

With all that in place KEFI will be in a strong position to start looking around for other opportunities. It seems likely the company will largely be exited from its other main area of operations, Saudi Arabia, by then, so the focus is likely to be on Ethiopia itself.

Here, opportunities abound. The civil war created a backlog of development projects, and now they are all up for grabs. Allied Gold is already making plenty of waves in the country, with its Kurmuk project, supported by Wheaton Precious Metals. But KEFI has been there longer, and its relationships are deep enough that Anagnostaras-Adams has been appointed an honorary consul. So, don’t expect the company to sit still over the coming years.