Last close As at 05/08/2026
GBP0.01
▲ 0.14 (12.78%)
Market capitalisation
GBP166m
Research: Metals & Mining
In its quarterly update, released today, KEFI announced that its funding partner, Oryx, is actively implementing finance closing (scheduled this quarter) and has also agreed to expand its proposed finance facility for Tulu Kapi from US$135m to US$140m to allow an increase in ore processing capacity from 1.5-1.7Mtpa to 1.9-2.1Mtpa (depending on ore hardness). This will take plant capacity back to that proposed in Nyota’s 2012 definitive feasibility study – albeit at a reduced capital cost.
KEFI Minerals |
Plant capacity expansion beckons |
Operational update |
Metals & mining |
9 October 2017 |
Share price performance
Business description
Next events
Analyst
KEFI Minerals is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||||
In its quarterly update, released today, KEFI announced that its funding partner, Oryx, is actively implementing finance closing (scheduled this quarter) and has also agreed to expand its proposed finance facility for Tulu Kapi from US$135m to US$140m to allow an increase in ore processing capacity from 1.5-1.7Mtpa to 1.9-2.1Mtpa (depending on ore hardness). This will take plant capacity back to that proposed in Nyota’s 2012 definitive feasibility study – albeit at a reduced capital cost.
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) |
(0.8) |
0.0 |
N/A |
N/A |
12/18e |
0.0 |
(10.8) |
(1.5) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Creates flexibility while capex cost mitigated
Increasing capacity will bring production and cash-flows forward by mitigating the build-up of ore stockpiles that would otherwise exceed two years of production. It will also allow faster mining of the pit (even to the point of bulk mining when appropriate) and create flexibility for the development of either satellite deposits and/or the proposed underground mine at Tulu Kapi. As such, the expansion provides more upside leverage as well as more protection on the downside. In addition to being financed by Oryx, the increase in capital required to fund the capacity expansion will be partially offset by savings in other aspects of the construction budget, such as converting KEFI’s commercial agreement with Lycopodium from an engineering, procurement and construction (EPC) contract to an engineering, procurement, construction and management (EPCM) one.
Valuation: 90% premium to the current share price
A number of details remain unknown regarding the expansion, such as the effect on pit sequencing, unit costs and tailings development. As such, the following valuation is indicative, rather than definitive. Otherwise, our forecasts have been updated to reflect KEFI’s recent H117 interim results, a lower share price and a higher cable rate. Nevertheless, once it is finalised at the higher throughput rate, we estimate that Tulu Kapi should be capable of generating average cash flows from operations of c £47.2m pa (cf £44.4m previously), which we value at £218.9m (or 29.6p per fully diluted share, attributable) at the start of production in 2020, or £59.7m (or 13.5p per existing share, attributable) pre-capex using a 10% discount rate. Note that £218.9m compares with KEFI’s updated (unleveraged) internal project value estimate of US$337m at an 8% discount rate. Fully diluted on this basis at an assumed share price of 4.5p (vs 5.4p previously), we estimate that these potential dividends have a net present value of 8.55p/share. This valuation increases to 15.15p in 2023 and further, to 19.76p, in the event that KEFI is able to successfully leverage its cash flow from Tulu Kapi into other development assets in the region. In the meantime, the company is trading on a resource multiple of just US$8.54/oz cf an estimated global average cost of discovery US$10.16/oz.
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) |
(2,593) |
||
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) |
(2,593) |
||
Net Interest |
4 |
(413) |
(319) |
(136) |
(189) |
(8,182) |
||
Profit Before Tax (norm) |
|
|
(923) |
(2,602) |
(2,043) |
(2,451) |
(2,936) |
(10,775) |
Profit Before Tax (FRS 3) |
|
|
(1,365) |
(2,981) |
(2,471) |
(507) |
(4,836) |
(10,775) |
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(923) |
(2,602) |
(2,043) |
(2,451) |
(2,936) |
(10,774) |
||
Profit After Tax (FRS 3) |
(1,365) |
(2,981) |
(2,471) |
(507) |
(4,836) |
(10,775) |
||
Average Number of Shares Outstanding (m) |
29.0 |
56.0 |
92.8 |
194.9 |
375.2** |
538.1 |
||
EPS - normalised (p) |
|
|
(7.4) |
(6.2) |
(3.0) |
(1.6) |
(0.8) |
(1.5) |
EPS - normalised and fully diluted (p) |
|
(7.4) |
(6.2) |
(3.0) |
(1.5) |
(0.8) |
(1.5) |
|
EPS - (IFRS) (p) |
|
|
(4.7) |
(5.1) |
(2.7) |
(0.3) |
(1.3) |
(1.5) |
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 |
34,285 |
95,954 |
Intangible Assets |
6,900 |
9,139 |
11,845 |
13,992 |
15,856 |
15,642 |
||
Tangible Assets |
252 |
160 |
81 |
61 |
18,183 |
80,066 |
||
Investments |
0 |
0 |
0 |
0 |
246 |
246 |
||
Current Assets |
|
|
4,014 |
1,061 |
1,012 |
3,561 |
122,322 |
38,166 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
655 |
335 |
358 |
3,056 |
247 |
247 |
||
Cash |
3,279 |
640 |
562 |
410 |
121,980 |
37,824 |
||
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 |
(116,631) |
(104,046) |
Long term borrowings |
0 |
0 |
0 |
0 |
(102,242) |
(90,146) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
(14,390) |
(13,900) |
||
Net Assets |
|
|
7,803 |
7,158 |
10,943 |
15,547 |
37,909 |
28,007 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(1,424) |
(2,006) |
(2,729) |
(2,211) |
(1,670) |
(2,538) |
Net Interest |
4 |
(413) |
(319) |
(136) |
(189) |
(8,182) |
||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(877) |
(3,133) |
(3,507) |
(3,014) |
(20,501) |
(61,937) |
||
Acquisitions/disposals |
(1,083) |
(750) |
0 |
16 |
0 |
0 |
||
Financing |
4,735 |
3,663 |
6,480 |
5,192 |
27,299 |
1,087 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
1,355 |
(2,639) |
(75) |
(153) |
4,938 |
(71,570) |
||
Opening net debt/(cash) |
|
|
(1,924) |
(3,279) |
(640) |
(562) |
(410) |
(5,348) |
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) |
(5,348) |
66,222 |
Source: Company sources, Edison Investment Research. Note: *Reflects H117 change in value of financial assets at fair value through profit & loss plus share-based payments. **Assumes final parent company equity financing in Q417.
|
|
Research: TMT
Hot on the heels of its recent US acquisition, XP Power’s trading update confirms that strong trading continued into Q3. Q3 revenues were 35% higher than a year ago, with nine-month revenues up 34% y-o-y and 21% in constant currency. We revise up our revenue forecasts to reflect much stronger than expected trading in Q3, which results in normalised EPS upgrades of 5.7% in FY17e and 7.1% in FY18e.