Last close As at 05/08/2026
GBP0.01
▲ 0.14 (12.78%)
Market capitalisation
GBP166m
Research: Metals & Mining
On 1 February, KEFI announced the appointment of David Munro, former MD of Billiton, and his two partners at International Mining Performance, to the senior management team as a prelude to triggering development and operations. This followed the announcement on 18 January that KEFI had terminated, by mutual agreement, its relationship with Oryx relating to its funding plans. Simultaneously, in its quarterly operational update, it reported that the funding approach remains unchanged, albeit with a simplified structure. KEFI also released the results of the final Tulu Kapi project models agreed by the consortium (and uploaded into the formal financing data rooms), which demonstrated some value improvements for shareholders compared with recent guidance.
KEFI Minerals |
Greater exposure to gold price beckons |
Development preparations |
Metals & mining |
1 February 2018 |
Share price performance
Business description
Next events
Analyst
KEFI Minerals is a research client of Edison Investment Research Limited |
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On 1 February, KEFI announced the appointment of David Munro, former MD of Billiton, and his two partners at International Mining Performance, to the senior management team as a prelude to triggering development and operations. This followed the announcement on 18 January that KEFI had terminated, by mutual agreement, its relationship with Oryx relating to its funding plans. Simultaneously, in its quarterly operational update, it reported that the funding approach remains unchanged, albeit with a simplified structure. KEFI also released the results of the final Tulu Kapi project models agreed by the consortium (and uploaded into the formal financing data rooms), which demonstrated some value improvements for shareholders compared with recent guidance.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
0.0 |
(2.0) |
(3.0) |
0.0 |
N/A |
N/A |
12/16 |
0.0 |
(2.5) |
(1.6) |
0.0 |
N/A |
N/A |
12/17e |
0.0 |
(2.9) |
(0.9) |
0.0 |
N/A |
N/A |
12/18e |
0.0 |
(2.8) |
(0.4) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Like-for-like project NPV8 up 15-18%
Compared to its earlier guidance of a project NPV8 of US$74m at US$1,250/oz Au and US$92m at US$1,300/oz at the start of construction, KEFI’s models now indicate a value of US$109m at US$1,300/oz. At the start of production, they indicate a value of US$175m at US$1,300/oz Au vs US$131m at US$1,250/oz Au and US$152m at US$1,300/oz, previously. The models reflect a two-year schedule set out with the contractors, to start construction in 2018, mining in 2019 and gold production in 2020.
Greater exposure to gold price upside beckons
Management advises that the simplification of the funding structure reduces operating costs, as does the honing of the project plans and management structure. These refinements are reflected in improved cash flows and NPVs.
Valuation: Clear roadway to value uplift
Our funding assumptions for KEFI remain unchanged. Otherwise, updating our financial model for these new factors (as well as our updated gold price forecasts – see Mining overview: Unlocking the price to NPV discount, published in November 2017), we estimate that Tulu Kapi is capable of generating average cash flows from operations of c £42.4m pa (vs £45.4m previously), which we value at £194.6m (cf £208.3m) or 22.0p per fully diluted share (attributable) at the start of production in 2020, or £61.6m, 13.9p per existing share, currently, using a 10% discount rate. Fully diluted at a share price of 3.75p (vs 3.50p previously), our valuation is 8.26p/share (cf 7.68p previously), based on the net present value of expected future dividends, discounted at 10% pa. This valuation then increases to 13.3p in 2023 and further, to 17.87p, in the event that KEFI is successfully able to leverage its cash flow from Tulu Kapi into other development assets in the region.
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
Cost of Sales |
(927) |
(2,071) |
(1,634) |
(2,260) |
(2,692) |
(2,538) |
||
Gross Profit |
(927) |
(2,071) |
(1,634) |
(2,260) |
(2,692) |
(2,538) |
||
EBITDA |
|
|
(927) |
(2,071) |
(1,634) |
(2,260) |
(2,692) |
(2,538) |
Operating Profit (before amort. and except.) |
(927) |
(2,189) |
(1,724) |
(2,315) |
(2,747) |
(2,578) |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
(442) |
(379) |
(428) |
1,944 |
(1,900) |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(1,369) |
(2,568) |
(2,152) |
(371) |
(4,647) |
(2,578) |
||
Net Interest |
4 |
(413) |
(319) |
(136) |
(189) |
(242) |
||
Profit Before Tax (norm) |
|
|
(923) |
(2,602) |
(2,043) |
(2,451) |
(2,936) |
(2,820) |
Profit Before Tax (FRS 3) |
|
|
(1,365) |
(2,981) |
(2,471) |
(507) |
(4,836) |
(2,820) |
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(923) |
(2,602) |
(2,043) |
(2,451) |
(2,936) |
(2,819) |
||
Profit After Tax (FRS 3) |
(1,365) |
(2,981) |
(2,471) |
(507) |
(4,836) |
(2,820) |
||
Average Number of Shares Outstanding (m) |
29.0 |
56.0 |
92.8 |
194.9 |
332.7 |
498.6 |
||
EPS - normalised (p) |
|
|
(7.4) |
(6.2) |
(3.0) |
(1.6) |
(0.9) |
(0.4) |
EPS - normalised and fully diluted (p) |
|
(7.4) |
(6.2) |
(3.0) |
(1.5) |
(0.9) |
(0.4) |
|
EPS - (IFRS) (p) |
|
|
(4.7) |
(5.1) |
(2.7) |
(0.3) |
(1.5) |
(0.4) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
- |
- |
- |
- |
- |
- |
||
EBITDA Margin (%) |
- |
- |
- |
- |
- |
- |
||
Operating Margin (before GW and except.) (%) |
- |
- |
- |
- |
- |
- |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
7,152 |
9,299 |
11,926 |
14,053 |
16,142 |
77,957 |
Intangible Assets |
6,900 |
9,139 |
11,845 |
13,992 |
15,856 |
15,856 |
||
Tangible Assets |
252 |
160 |
81 |
61 |
40 |
61,855 |
||
Investments |
0 |
0 |
0 |
0 |
246 |
246 |
||
Current Assets |
|
|
4,014 |
1,061 |
1,012 |
3,561 |
342 |
59,976 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
655 |
335 |
358 |
3,056 |
247 |
247 |
||
Cash |
3,279 |
640 |
562 |
410 |
0 |
59,634 |
||
Other |
80 |
86 |
92 |
95 |
95 |
95 |
||
Current Liabilities |
|
|
(3,363) |
(3,202) |
(1,995) |
(2,067) |
(2,067) |
(2,067) |
Creditors |
(3,363) |
(3,202) |
(1,995) |
(2,067) |
(2,067) |
(2,067) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
(2,203) |
(99,765) |
Long term borrowings |
0 |
0 |
0 |
0 |
(2,203) |
(99,765) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
7,803 |
7,158 |
10,943 |
15,547 |
12,214 |
36,102 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(1,424) |
(2,006) |
(2,729) |
(2,211) |
(1,670) |
(2,538) |
Net Interest |
4 |
(413) |
(319) |
(136) |
(189) |
(242) |
||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(877) |
(3,133) |
(3,507) |
(3,014) |
(2,358) |
(61,855) |
||
Acquisitions/disposals |
(1,083) |
(750) |
0 |
16 |
0 |
0 |
||
Financing |
4,735 |
3,663 |
6,480 |
5,192 |
1,604 |
26,708 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
1,355 |
(2,639) |
(75) |
(153) |
(2,613) |
(37,927) |
||
Opening net debt/(cash) |
|
|
(1,924) |
(3,279) |
(640) |
(562) |
(410) |
2,203 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
(3) |
1 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(3,279) |
(640) |
(562) |
(410) |
2,203 |
40,130 |
Source: Company sources, Edison Investment Research
|
|
Avon started FY18 with a new growth strategy and it is bearing fruit. Order growth is strong as the company is leveraging market dynamics across both divisions. We adjust our forecasts for the more favourable US tax reform, increasing underlying EPS by 7% and 1% in FY18 and FY19 respectively. Management is confident of achieving FY18 expectations.