Since our last note in April, KEFI has 1) completed its financing of Tulu Kapi by replacing its three-year, US$15m working capital facility with US$10m of additional royalty financing and US$5m in additional Ethiopian preference shares, 2) announced its financial results for FY25 (including a restatement of FY24’s results, principally around the accounting relating to its share of the loss of its GMCO associate in Saudi Arabia and its gain on the dilution of the same investment), 3) signed a US$400m mining contract with BCM, for the provision of services over Tulu Kapi’s initial nine-year mine life, which will enable it to proceed with the deployment of a Caterpillar mining fleet in-country, 4) concluded its AGM and 5) provided an operational update to the market on 4 August. Although its achievements have been somewhat overshadowed by the 28.4% decline in the gold price from its record high of US$5,589/oz on 28 January, it is worth noting that KEFI’s share price has declined by only 39.8% in US dollar terms over the same time frame (ie less than the 2x gearing often invoked for junior explorers) and closely in line with the 38.4% decline in the Van Eck Junior Gold Miners Fund (GDXJ), despite executing a major fund-raising.

Since our note in October, KEFI has provided nine business updates to the market, broken ground at Tulu Kapi and successfully concluded two equity financings (effectively raising £51.5m, or US$68.0m gross). While its March equity financing of £35.8m (gross) was not fully anticipated by the market, it was reported by management to be strongly supported by institutions and was (according to our records) KEFI’s largest since at least 2013 – indicating a good relationship with the broader equity market in London and evident support for the company reducing the potential impact of risks raised in the past month from the Middle East war. More importantly, on the back of today’s overwhelming shareholder approvals at the general meeting, the placing brings funds raised or committed to US$355.0m compared with Tulu Kapi’s financing requirement of US$355.6m (see Exhibit 1), meaning it is now effectively fully funded, with the balance being easily covered by a reported US$50m in additional funding that has been variously offered to KEFI in the form of royalties and preference shares, but not yet accepted. We have also brought our financial model on KEFI up to date.