Kefi Gold and Copper (KEFI.L) Tulu Kapi Full Funding Package Assembled

Enlarged funding package structured to enable start of Tulu Kapi development at the end of the Ethiopian wet season

KEFI (AIM: KEFI), the gold and copper exploration and development company with projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, is pleased to report that it has now assembled the full funding package of US$356 million estimated to be required for the development of the Company’s Tulu Kapi Gold project (“Tulu Kapi” or the “Project”) by KEFI subsidiary Tulu Kapi Gold Mines Share Company (“TKGM”). This package is designed to fund all infrastructure, the start-up of the open pit mine and the initial development of the underground mine.

Highlights

· Tulu Kapi full funding package of US$356 million assembled

·Enlarged funding package now covers full development of Tulu Kapi, including initial underground development

·Financial completion through the signing of binding documentation and the launch of full development expected at the end of the Ethiopian wet season in October 2021

· KEFI to retain c.70% interest in TKGM

·NPV* to KEFI of US$376 million (at current prices) or 12.6p per share for the Company’s Tulu Kapi and Hawiah copper-gold projects

* Net Present Value (“NPV”) is internally derived using independently created financial models of net cash flows after tax and debt service discounted at 8% per annum, based on Definitive Feasibility Study (“DFS”) for Tulu Kapi open pit gold-silver mine, Preliminary Economic Assessment (“PEA”) for Tulu Kapi gold-silver underground mine and PEA for Hawiah underground copper-gold-zinc-silver mine. Metal prices assumed for the were prevailing spot market prices at 14 August 2021.

Project Funding

The signing of detailed binding documentation and the launch of full Project development is expected to coincide with the end of the Ethiopian wet season in October 2021. All equity and debt funding would be committed and binding upon signing, and subject only to normal conditions for such a transaction. Debt disbursement would follow after subscription of equity-risk capital, as is normal in such projects, and the timing of receipt will be structured to meet Project requirements.

Upon financial completion and any remaining conditions precedent being satisfied, it is expected KEFI will have achieved the following:

· Fully-funded the development of TKGM’s open-pit gold mine for start of production in mid-2023;

· Have reserves set aside for cost-overruns for production start-up or, if not needed, available to trigger initial stages of development of Tulu Kapi underground mine from late 2023;

· Retained ownership of c.70% of TKGM, versus originally estimated 45% ownership; and

· Successfully minimised ownership dilution at the KEFI level by (a) maximising subsidiary-level finance, and (b) arranging for KEFI-subsidiary-level financing with conversion rights into KEFI shares to be based on the VWAP at the time of production (which the Company believes will be materially higher than at current levels), if not repaid beforehand.

It is expected that the non-KEFI shareholding in TKGM, of c.30%, will comprise Government and non-Government local organisations and these relationships will strongly reinforce the Project’s very deliberate efforts to align at community and district levels and with government at all levels.

Advanced conditional approvals, which have already been received, account for c.63% of the US$356 million aggregated funding sources and the remaining c.37% (c.US$131 million) is expected to come from existing identified parties working alongside those who have already resolved their conditional approval. All parties have agreed to enter into binding documentation at the same time.

Contracting of Works for the Processing Infrastructure and the Open Pit Mine

Contracts were issued and work started last year with the Ethiopian Electric Power Corporation and Ethiopian Roads Authority for Project offsite works. In respect of on-site works, the principal on-site contractors, Lycopodium Limited and Corica Mining Services Share Company, each the largest in Africa in their respective specialised contracting areas, have signed letters of intent and produced all-but agreed final forms of detailed documentation for execution at financial completion.

Harry Anagnostaras-Adams, Executive Chairman of KEFI, commented:

“It is a great pleasure to update on the full funding plan for the Tulu Kapi Gold Project. With principal approvals now received from the majority of the syndicate, we are focused on satisfying the remaining conditions precedent which are normal for a transaction of this nature. We are finalising outstanding documentation for all parties to allow the funds to flow for full Project development from October this year.

“It has taken a great deal of work by all involved, to rigorously ensure Ethiopia’s first major mining project for 30 years is designed, financed and operated to the highest standards socially, environmentally and operationally. Whilst we are conscious of the recent turbulent situation in Ethiopia, which I am pleased to note appears to be abating, the conflict areas have been over 1,000km from Tulu Kapi and have not had any impact on the Project.

“This is a very exciting moment for our Tulu Kapi Gold Project and we are proud to be backed by a top-class international and local syndicate that has been assembled by KEFI. Doing so as gold markets have strengthened is terrific.”

Detailed Funding Sources

Notes:

· Federal and Regional Government Organisations: The participation of organisations representing the Federal and Regional Government and their investment authorities is via their equity investments into TKGM;

· Local Private Organisations: Government participation has been supplemented by equity investments into TKGM from private organisations with extensive involvement within the district surrounding the Project. This significantly enhances alignment with local stakeholders down to the community level;

· Longstanding Proposed Senior Lenders: Eastern and Southern African Trade and Development Bank (TBD) and Africa Finance Corporation (AFC) bring extensive in-country experience as well as being leading African multilateral banks;

· The Global Mining Finance Specialist is an active investor in Africa and elsewhere and will, upon closing, have the right to appoint a Director to TKGM as well as other monitoring and oversight rights;

· Local Subsidiary of International Group: this organisation has a long-standing presence in Ethiopia and sees this is an opportunity to reinvest accumulated local profits into an important new sector for the country Its rights to convert subordinated loans into shares of KEFI after 3 years (after a year of production) is designed to avoid KEFI dilution at pre-production share prices;

· Expected cash build-up during production commissioning estimated at US$20 million. Shown here for completeness and the finalised finance plan at signing will need to ensure that the Project is fully funded independent of gold proceeds during commissioning;

· KEFI: equity is provided by KEFI after all parties have signed, as part of the Project launch, as approved by Senior Lenders and other Lead Financiers. Historical pre-development investment by KEFI subsidiary KEFI Minerals (Ethiopia) Limited was c. US$70 million, which is excluded from the above table showing development funding;

· Corica Mining Services: is Africa’s largest mining services contractor. Its arrangement allows that it be paid for work in quoted shares of KEFI after 2 years and is designed to avoid KEFI dilution at pre-production share prices; and

· Cost-overrun facility: If the planned cost overrun facility remains unutilised upon Project completion (successful commencement of production as judged by Senior Lenders), it is proposed that those funds may be utilised to fund the initial mine development to the +5 g/t underground deposit.

Project Economics:

· Capital expenditure estimates for the open pit now cater for anticipated cost-inflation of approximately 10% overall over the past 18 months since estimates were presented for review by independent experts for the lenders. For the underground mine, we have used estimates from the Preliminary Economic Assessment (PEA) which will be replaced in due course by the results of the Feasibility Study to be conducted during construction of the open pit.

· At current metal prices (14 August 2021 spot market prices: US$1,780/oz Au, US$4.30/lb Cu, US$1.37/lb Zn, US$24/oz Ag):

. All-in-sustaining-cost (“AISC”) of Tulu Kapi Open Pit project is estimated at US$870/oz which is similar to previous estimates when taking into account that AISC is affected by increased metal prices (because royalties increase on a per ounce basis); and

. The NPV of KEFI’s beneficial ownership in the two main projects is estimated at £274 million (US$376 million) or 12.6 pence per KEFI share in issue.

Enquiries

KEFI Gold and Copper plc

Harry Anagnostaras-Adams (Executive Chairman)

+357 99457843

John Leach (Finance Director)

+357 99208130


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