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 |
Reduced capex estimate |
Reduced funding requirement |
Metals & mining |
7 June 2016 |
Share price performance
Business description
Next events
Analyst
KEFI Minerals is a research client of Edison Investment Research Limited |
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Since our last update note on 10 March, KEFI has announced a £1.75m equity raising; confirmation that the Ethiopian government is to take an additional 20% interest in Tulu Kapi in return for a US$20m funding commitment relating to infrastructure (vs our prior expectation of 25%); a reduced capex estimate and modified funding requirement mix; and, replaced the construction contractor with market leader Lycopodium.
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) |
(0.2) |
0.0 |
N/A |
N/A |
12/16e |
0.0 |
(2.0) |
(0.1) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items. **FY15 results were released 7 June and close to our estimates.
Capex down, funding down
In its announcement of 2 June, KEFI confirmed an initial capex estimate for Tulu Kapi of US$108.8m, which is 19.5% below that based on the definitive feasibility study of 2015 (although comparable with our more recently updated estimate of US$110.3m). As a result, the company calculates a reduced net funding requirement of US$130m vs US$145m previously. Moreover, whereas this had previously been presumed to include up to US$35-40m in streaming finance, it is now assumed to include a US$20m increase in senior secured debt (US$85m vs US$65m previously) and a subordinated convertible note of up to US$10m.
Valuation: Swings and roundabouts
KEFI anticipates executing syndicated financing documentation at the end of Q316, paving the way for construction later in the year and commissioning towards end-FY17. As a result, we now expect commercial production in H118 (vs H217 previously). In the immediate aftermath of its March equity raise, we valued KEFI at 2.55p/share, rising to c 3.69p/share in FY20 (based on our long-term gold price assumptions and a 10% discount rate). Assuming that the debt characteristics of any subordinated convertible note approximate those of the senior secured debt, the decline in value resulting from our revised commercial production date is more than offset by the removed streaming finance (which was assumed to be expensive relative to debt). Including forex and capex reduction assumptions, our valuation rises to 2.64p/share (on a like-for-like basis) and then increases to 4.35p/share in FY22, when the first substantive dividend is potentially payable (equivalent to US$128.44 per depleted resource oz). In the event that KEFI is successfully able to leverage its cash flow from Tulu Kapi into other development assets in the region, our valuation rises further, to 6.37p, putting it on a contemporary P/E ratio of 7.2x in FY22e. Note that if the convertible has a conversion price of 0.6p per share (ie around the current equity price) and it is fully converted, the resulting equity dilution reduces our valuation from 2.64p to 1.84p/share (rising to 2.96p/share in FY21), although this is also accompanied by proportionately less financial risk in the form of a reduced peak (net debt) funding requirement of £58.8m (US$84.9m) in FY18.
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015e** |
2016e |
2017e |
|
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
PROFIT & LOSS |
||||||
Revenue |
|
0 |
0 |
0 |
0 |
0 |
Cost of Sales |
(927) |
(2,071) |
(1,697) |
(1,971) |
(1,971) |
|
Gross Profit |
(927) |
(2,071) |
(1,697) |
(1,971) |
(1,971) |
|
EBITDA |
|
(927) |
(2,071) |
(1,697) |
(1,971) |
(1,971) |
Operating Profit (before amort. and except.) |
(927) |
(2,189) |
(1,815) |
(2,013) |
(6,063) |
|
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) |
(2,015) |
(2,013) |
(6,063) |
|
Net Interest |
4 |
(413) |
10 |
9 |
(402) |
|
Profit Before Tax (norm) |
|
(923) |
(2,602) |
(1,805) |
(2,004) |
(6,465) |
Profit Before Tax (FRS 3) |
|
(1,365) |
(2,981) |
(2,005) |
(2,004) |
(6,465) |
Tax |
0 |
0 |
0 |
0 |
0 |
|
Profit After Tax (norm) |
(923) |
(2,602) |
(1,805) |
(2,004) |
(6,465) |
|
Profit After Tax (FRS 3) |
(1,365) |
(2,981) |
(2,005) |
(2,004) |
(6,465) |
|
Average Number of Shares Outstanding (m) |
493.4 |
952.4 |
1,583.0 |
2,996.2 |
3,121.0 |
|
EPS - normalised (p) |
|
(0.4) |
(0.4) |
(0.2) |
(0.1) |
(0.2) |
EPS - normalised and fully diluted (p) |
(0.4) |
(0.4) |
(0.2) |
(0.1) |
(0.2) |
|
EPS - (IFRS) (p) |
|
(0.3) |
(0.3) |
(0.1) |
(0.1) |
(0.2) |
Dividend per share (p) |
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 |
11,954 |
15,116 |
68,409 |
Intangible Assets |
6,900 |
9,139 |
10,688 |
9,800 |
8,912 |
|
Tangible Assets |
252 |
160 |
42 |
4,092 |
58,273 |
|
Investments |
0 |
0 |
1,224 |
1,224 |
1,224 |
|
Current Assets |
|
4,014 |
1,061 |
1,105 |
297 |
86 |
Stocks |
0 |
0 |
0 |
0 |
0 |
|
Debtors |
655 |
335 |
422 |
211 |
0 |
|
Cash |
3,279 |
640 |
597 |
0 |
0 |
|
Other |
80 |
86 |
86 |
86 |
86 |
|
Current Liabilities |
|
(3,363) |
(3,202) |
(2,296) |
(2,300) |
0 |
Creditors |
(3,363) |
(3,202) |
(2,296) |
(2,300) |
0 |
|
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
|
Long Term Liabilities |
|
0 |
0 |
0 |
(3,658) |
(52,543) |
Long term borrowings |
0 |
0 |
0 |
(3,658) |
(52,543) |
|
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
|
Net Assets |
|
7,803 |
7,158 |
10,763 |
9,455 |
15,952 |
CASH FLOW |
||||||
Operating Cash Flow |
|
(1,424) |
(2,006) |
(2,690) |
(1,756) |
(4,060) |
Net Interest |
4 |
(413) |
10 |
9 |
(402) |
|
Tax |
0 |
0 |
0 |
0 |
0 |
|
Capex |
(877) |
(3,133) |
(3,661) |
(4,092) |
(58,273) |
|
Acquisitions/disposals |
(1,083) |
(750) |
0 |
0 |
0 |
|
Financing |
4,735 |
3,663 |
6,299 |
1,584 |
13,850* |
|
Dividends |
0 |
0 |
0 |
0 |
0 |
|
Net Cash Flow |
1,355 |
(2,639) |
(43) |
(4,255) |
(48,885) |
|
Opening net debt/(cash) |
|
(1,924) |
(3,279) |
(640) |
(597) |
3,658 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
|
Other |
0 |
0 |
0 |
0 |
0 |
|
Closing net debt/(cash) |
|
(3,279) |
(640) |
(597) |
3,658 |
52,543 |
Source: Company sources, Edison Investment Research. Note: *Assumed Ethiopian government contribution to infrastructure investment. **FY15 results were released 7 June and close to our estimates.
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