Last close As at 05/08/2026
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▲ 0.14 (12.78%)
Market capitalisation
GBP166m
Research: Metals & Mining
KEFI Minerals
KEFI Minerals |
Another piece falls into place |
Preferred banks selected |
Metals & mining |
11 February 2016 |
Share price performance
Business description
Next events
Analyst
KEFI Minerals is a research client of Edison Investment Research Limited |
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KEFI has announced that it has selected its preferred lenders for Tulu Kapi and that the lenders have indicated non-binding terms for project finance including senior secured project loans of US$60m, with an average tenor of six years. With five of six key partners pre-engaged in the project, only a streaming partner now remains outstanding.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
0.0 |
(0.9) |
(0.4) |
0.0 |
N/A |
N/A |
12/14 |
0.0 |
(2.6) |
(0.4) |
0.0 |
N/A |
N/A |
12/15e |
0.0 |
(1.8) |
(0.1) |
0.0 |
N/A |
N/A |
12/16e |
0.0 |
(6.3) |
(0.3) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Funding proceeding as expected
In December 2013, KEFI shareholders approved the acquisition of Tulu Kapi with a target of producing >80koz Au pa from 2017. Based on progress over the past two years, this target looks achievable. KEFI’s most recent announcement on funding progress follows the government of Ethiopia’s formal confirmation of its intention to invest US$15-20m in return for a 20-25% interest in the project. In conjunction with KEFI’s confirmation of a total project funding requirement of US$120m (excluding financing costs and cost overrun facilities), this suggests a balance of US$40m to be secured in the form of a ‘streaming’ deal (vs our US$45m assumption). As is common to such financings, one of the conditions of the syndicate is a degree of hedging, although this has been limited to 100koz. Moreover, while details are not yet available, this is believed to be in the form of a ‘squirrelling’ arrangement, ie KEFI has the option, but not the obligation, to use the hedge and can roll forward any unused hedge into the future. As expected, a formal due diligence process is underway. In addition, it is understood that a syndicate of Far Eastern investors is interested in investing in KEFI and/or that raising funds in the form of a corporate bond issue also remains a possibility.
Valuation: Up 14.4% at 2.39p and reduced risk
In our note of 1 December 2015, we valued KEFI at 2.09p/sh. This rises to 2.17p/sh as a result of recent sterling weakness and 2.39p/sh as 2015 segues into 2016. Albeit the detailed terms of the related hedging are not yet known, financing is currently proceeding very much in line with our expectations, and each new tranche self-evidently removes a degree of risk from the valuation. Ceteris paribus, the valuation should rise to c 3.18p/sh in FY19 (vs 3.05p/sh previously), equating to a (depleted) resource multiple of US$69.83/oz cf estimated costs of discovery of less than US$5/oz in Ethiopia and US$10/oz overall. Management has indicated that it is progressing a number of initiatives in Ethiopia and Saudi Arabia to be advanced during the construction of Tulu Kapi to leverage off its cash flows once debt is paid down and dividends are feasible. We estimate that successful execution of this strategy could result in a valuation as high as 5.22p in FY19 (vs 5.01p previously), which would put KEFI on a modest contemporary P/E ratio of 4.9x FY19e EPS.
Financial summary
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015e |
2016e |
2017e |
|
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
PROFIT & LOSS |
||||||
Revenue |
|
0 |
0 |
0 |
0 |
42,976 |
Cost of Sales |
(927) |
(2,071) |
(1,697) |
(1,971) |
(33,397) |
|
Gross Profit |
(927) |
(2,071) |
(1,697) |
(1,971) |
9,578 |
|
EBITDA |
|
(927) |
(2,071) |
(1,697) |
(1,971) |
9,578 |
Operating Profit (before amort. and except.) |
(927) |
(2,189) |
(1,857) |
(5,908) |
2,964 |
|
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
|
Exceptionals |
(442) |
(379) |
(200) |
0 |
0 |
|
Other |
0 |
0 |
0 |
0 |
0 |
|
Operating Profit |
(1,369) |
(2,568) |
(2,057) |
(5,908) |
2,964 |
|
Net Interest |
4 |
(413) |
10 |
(367) |
(3,595) |
|
Profit Before Tax (norm) |
|
(923) |
(2,602) |
(1,847) |
(6,275) |
(631) |
Profit Before Tax (FRS 3) |
|
(1,365) |
(2,981) |
(2,047) |
(6,275) |
(631) |
Tax |
0 |
0 |
0 |
0 |
0 |
|
Profit After Tax (norm) |
(923) |
(2,602) |
(1,847) |
(6,275) |
(631) |
|
Profit After Tax (FRS 3) |
(1,365) |
(2,981) |
(2,047) |
(6,275) |
(631) |
|
Average Number of Shares Outstanding (m) |
493.4 |
952.4 |
1,928.5 |
2,621.6 |
2,621.6 |
|
EPS - normalised (p) |
|
(0.4) |
(0.4) |
(0.1) |
(0.3) |
(0.0) |
EPS - normalised and fully diluted (p) |
(0.4) |
(0.4) |
(0.1) |
(0.3) |
(0.0) |
|
EPS - (IFRS) (p) |
|
(0.3) |
(0.3) |
(0.1) |
(0.2) |
(0.0) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Gross Margin (%) |
- |
- |
- |
- |
22.3 |
|
EBITDA Margin (%) |
- |
- |
- |
- |
22.3 |
|
Operating Margin (before GW and except.) (%) |
- |
- |
- |
- |
6.9 |
|
BALANCE SHEET |
||||||
Fixed Assets |
|
7,152 |
9,299 |
15,849 |
63,918 |
83,194 |
Intangible Assets |
6,900 |
9,139 |
10,688 |
9,800 |
8,912 |
|
Tangible Assets |
252 |
160 |
3,937 |
52,894 |
73,058 |
|
Investments |
0 |
0 |
1,224 |
1,224 |
1,224 |
|
Current Assets |
|
4,014 |
1,061 |
508 |
3,854 |
7,200 |
Stocks |
0 |
0 |
0 |
1,791 |
3,581 |
|
Debtors |
655 |
335 |
422 |
1,977 |
3,532 |
|
Cash |
3,279 |
640 |
0 |
0 |
0 |
|
Other |
80 |
86 |
86 |
86 |
86 |
|
Current Liabilities |
|
(3,363) |
(3,202) |
(2,296) |
(2,300) |
(2,583) |
Creditors |
(3,363) |
(3,202) |
(2,296) |
(2,300) |
(2,583) |
|
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
|
Long Term Liabilities |
|
0 |
0 |
(3,339) |
(48,102) |
(71,959) |
Long term borrowings |
0 |
0 |
(3,339) |
(17,027) |
(42,430) |
|
Other long term liabilities |
0 |
0 |
0 |
(31,075) |
(29,530) |
|
Net Assets |
|
7,803 |
7,158 |
10,721 |
17,370 |
15,851 |
CASH FLOW |
||||||
Operating Cash Flow |
|
(1,424) |
(2,006) |
(2,690) |
(5,313) |
6,515 |
Net Interest |
4 |
(413) |
10 |
(367) |
(3,595) |
|
Tax |
0 |
0 |
0 |
0 |
0 |
|
Capex |
(877) |
(3,133) |
(7,598) |
(52,894) |
(26,778) |
|
Acquisitions/disposals |
(1,083) |
(750) |
0 |
0 |
0 |
|
Financing |
4,735 |
3,663 |
6,299 |
13,811 |
0 |
|
Dividends |
0 |
0 |
0 |
0 |
0 |
|
Net Cash Flow |
1,355 |
(2,639) |
(3,979) |
(44,763) |
(23,857) |
|
Opening net debt/(cash) |
|
(1,924) |
(3,279) |
(640) |
3,339 |
48,102 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
|
Other |
0 |
0 |
0 |
0 |
0 |
|
Closing net debt/(cash) |
|
(3,279) |
(640) |
3,339 |
48,102 |
71,959 |
Source: Company sources, Edison Investment Research
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