Last close As at 05/08/2026
GBP0.01
▲ 0.14 (12.78%)
Market capitalisation
GBP166m
Research: Metals & Mining
The release of KEFI’s updated financial projections for Tulu Kapi earlier this week follows the operational update in October in which it first posited a c 25% increase in ore processing capacity from 1.5-1.7Mtpa to 1.9-2.1Mtpa (depending on ore hardness), funded by an expansion of the proposed Oryx financing facility, from US$135m to US$140m. The detail provided in the updated projections has allowed us to firm up our forecasts and expectations relative to the indicative estimates presented in our update note of 9 October.
KEFI Minerals |
Tulu Kapi financial projections update |
Expanded production confirmed |
Metals & mining |
2 November 2017 |
Share price performance
Business description
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Analyst
KEFI Minerals is a research client of Edison Investment Research Limited |
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The release of KEFI’s updated financial projections for Tulu Kapi earlier this week follows the operational update in October in which it first posited a c 25% increase in ore processing capacity from 1.5-1.7Mtpa to 1.9-2.1Mtpa (depending on ore hardness), funded by an expansion of the proposed Oryx financing facility, from US$135m to US$140m. The detail provided in the updated projections has allowed us to firm up our forecasts and expectations relative to the indicative estimates presented in our update note of 9 October.
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, exceptional items and share-based payments.
Some costs up, some down
In general, our expectations for pit sequencing on 9 October seem almost exactly in line with those implied by KEFI’s projections for expanded production (albeit with c 821kt of additional waste removal over the life of operations) and it was already known that the extra US$12m funding requirement would be offset by capex savings combined with a US$5m expansion of the Oryx facility. In this particular case, however, it seems likely that lease payments will increase from US$7.4m per quarter to US$8.2m to reflect the increased facility. In addition, it appears as if increased drill and blast intensity will add c US$13m to operating costs over the life of operations at Tulu Kapi, to reflect the increased rate of mining. In mitigation of these, KEFI has targeted a further US$23.2m in additional initial capex cost savings via such initiatives as managing stockpiles with a view to reducing them by 25% (saving US$9.0m) and relying on consignment spare parts, rather than initial ones (saving US$4.3m).
Valuation: Immediate 101% upside to the share price
Now that the higher throughput rate has been confirmed, we estimate that Tulu Kapi should be capable of generating average cash flows from operations of c £45.7m pa (cf £47.2m estimate in our note of 9 October and £44.4m previously), which we value at £209.6m (cf £218.9m on 9 October) or 28.0p per fully diluted share, attributable (cf 29.6p) at the start of production in 2020, or £70.7m currently, 15.9p per existing share, attributable (vs £59.7m and 13.5p on 9 October) using a 10% discount rate. Fully diluted on this basis at an assumed share price of 4.375p (vs 4.5p earlier in the month), our valuation is 8.79p/share (cf 8.55p on 9 October), based on the net present value of expected future dividends, discounted at 10% per annum. This valuation then increases to 15.44p in 2024 and further, to 19.19p, in the event that KEFI is successfully able to leverage its cash flow from Tulu Kapi into other development assets in the region. In the meantime, investors can buy shares in the company on a resource multiple of just US$8.31/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) |
(8,200) |
||
Profit Before Tax (norm) |
|
|
(923) |
(2,602) |
(2,043) |
(2,451) |
(2,936) |
(10,793) |
Profit Before Tax (FRS 3) |
|
|
(1,365) |
(2,981) |
(2,471) |
(507) |
(4,836) |
(10,793) |
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(923) |
(2,602) |
(2,043) |
(2,451) |
(2,936) |
(10,792) |
||
Profit After Tax (FRS 3) |
(1,365) |
(2,981) |
(2,471) |
(507) |
(4,836) |
(10,793) |
||
Average Number of Shares Outstanding (m) |
29.0 |
56.0 |
92.8 |
194.9 |
378.9 |
545.6 |
||
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 |
17,819 |
75,701 |
Intangible Assets |
6,900 |
9,139 |
11,845 |
13,992 |
15,856 |
15,642 |
||
Tangible Assets |
252 |
160 |
81 |
61 |
1,717 |
59,813 |
||
Investments |
0 |
0 |
0 |
0 |
246 |
246 |
||
Current Assets |
|
|
4,014 |
1,061 |
1,012 |
3,561 |
141,853 |
59,440 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
655 |
335 |
358 |
3,056 |
247 |
247 |
||
Cash |
3,279 |
640 |
562 |
410 |
141,511 |
59,098 |
||
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 |
(119,810) |
(105,229) |
Long term borrowings |
0 |
0 |
0 |
0 |
(105,493) |
(90,912) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
(14,317) |
(14,317) |
||
Net Assets |
|
|
7,803 |
7,158 |
10,943 |
15,547 |
37,796 |
27,845 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(1,424) |
(2,006) |
(2,729) |
(2,211) |
(1,670) |
(2,538) |
Net Interest |
4 |
(413) |
(319) |
(136) |
(189) |
(8,200) |
||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(877) |
(3,133) |
(3,507) |
(3,014) |
(4,035) |
(58,150) |
||
Acquisitions/disposals |
(1,083) |
(750) |
0 |
16 |
0 |
0 |
||
Financing |
4,735 |
3,663 |
6,480 |
5,192 |
27,185 |
1,057 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
1,355 |
(2,639) |
(75) |
(153) |
21,291 |
(67,832) |
||
Opening net debt/(cash) |
|
|
(1,924) |
(3,279) |
(640) |
(562) |
(410) |
(21,701) |
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) |
(21,701) |
46,131 |
Source: Company sources, Edison Investment Research
|
|
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