Kefi Gold and Copper’s Tulu Kapi build to put Ethiopia on global mining map

After three tumultuous years of civil war in Ethiopia, the founder of Kefi Gold and Copper (AIM: KEFI) pinches himself over the East African country’s emergence as a mining investment destination. 

Harry Anagnostaras-Adams’ Kefi, is about to start building the US$320-million Tulu Kapi gold mine in the country’s west, about 360 km from Addis Ababa. With other companies such as the Peter Marrone-led Allied Gold (TSX: AAUC) pulling the trigger on the US$500 million Kurmuk gold mine construction and  Sun Peak Metals (TSXV: PEAK) spending on the Shire gold exploration project – the mining sun is rising on Ethiopia’s portion of the Arabian-Nubian Shield.

“This isn’t just a mine opening; it’s a strategic economic milestone for Ethiopia,” Anagnostaras-Adams, who’s also Kefi’s executive chairman, tells The Northern Miner. “The construction start symbolizes Kefi’s role in the nation’s budding gold sector.” 

Anagnostaras-Adams is an investment veteran from Australia with a focus on mining and a former deputy chair of the Australian Gold Council. At 50, he pivoted to executive roles in mining, and moved to Addis Ababa in 2013 to target underexplored areas.  

He focused on the Arabian-Nubian Shield, leveraging its geological parallels to Australia despite its sparse modern mining development.  

The Tulu Kapi project underlines Kefi’s pursuit of new resources against a backdrop of shrinking global reserves and soaring metal demand. The company also holds two advanced Nubian Shield projects in Saudi Arabia. 

Tulu Kapi would have been in production already were it not for the civil unrest which exploded out of long-simmering ethnic tensions and political disputes in the Tigray region bordering Eritrea in 2016, with war gripping the region from November 2020. While the official figures vary, the war killed between 162,000 and 600,000 people and displaced about 2.7 million others. 

The path to quelling Ethiopia’s unrest, marked by allegations of severe human rights abuses including forced starvation and civilian casualties, culminated in a United Nations-brokered peace agreement in November 2022, signalling a tenuous step towards stability after a conflict with a tragic toll on human life. 

Prime Minister Abiy Ahmed has led the country since April 2018 under the Prosperity Party. President Sahle-Work Zewde, an independent, has been in office since October 2018. Despite the November 2022 peace agreement, Ethiopia continues to face ongoing conflict, war crimes, and crimes against humanity, as noted by the International Commission of Human Rights Experts on Ethiopia in their September 2023 report. 

The government in early December rolled out an increased security presence in the mine’s western region to ensure the area’s relative safety and stability about 1,000 km southwest of the main conflict area. It was one of the company’s preconditions for giving the project build the green light. Others were government licencing of a foreign bank involved with the project financing and relaxed foreign currency controls. 

Ethiopian mining boom 

As of early December, construction crews were on their way to Tulu Kapi, Anagnostaras-Adams says.

Kefi Gold and Copper executive chair Harry Anagnostaras-Adams. Credit: Kefi Gold and Copper

Once the company secures final approvals from lenders, field, legal, plant, and mining teams will move forward with community resettlement (agreements are already in place), secure procurement contracts for the plant and mining fleet, and complete deals among all project partners. 

The teams will also obtain approvals from equity-capital providers, including development banks, regional investors and government entities. 

Tulu Kapi is tapping US$190 million in secured debt from lenders. Another US$130 million in equity capital will come from the Ethiopian government (US$40 million) and from Kefi subsidiaries funded by equity-risk notes (US$90 million), plus additional subsidiary-level funding as needed. 

Kefi is not the only miner bringing in foreign capital. When Allied Gold listed on the TSX in September, raising US$267 million to develop its Ethiopian project Kurmuk, it was one of the largest Canadian initial public offerings by a junior in more than a decade. 

The influx of exploration and development capital reflects the region’s rich geological potential. The Arabian-Nubian shield is a mineral-rich formation that stretches under countries of the Middle East and East Africa. 

Tulu Kapi was discovered in the 1930s and Kefi acquired it in stages between 2013 and 2014. 

The site, at an altitude of 1,600-1,765 metre, features greenstone geology. The gold in Tulu Kapi resides in quartz-albite zones that also hold silver, pyrite, sphalerite and galena. The gold should be 93% recoverable in the planned open pit. 

A May 2017 definitive feasibility study, which was updated earlier this year, pegged Tulu Kapi’s production at 140,000 oz. gold per year over eight years starting in 2025 for total output of 1.2 million oz. gold, at an all-in sustaining cost of US$1,200 per ounce. 

It has a net present value (5% discount) of US$320 million. The mine is expected to average a net cash flow of US$127 million per year. 

Tulu Kapi holds a 2015 reserve base of 15.4 million tonnes grading 2.12 grams gold per tonne for 1.1 million ounces. The measured and indicated resources (inclusive of reserves) total 20.2 million tonnes grading 2.65 grams gold for 1.7 million ounces. 

The company signed the Tulu Kapi mining agreement with the Ethiopian government in April 2015, securing a 20-year mining licence and a 5% free-carried government interest. 

Saudi frontier 

While Tulu Kapi is expected to be Ethiopia’s largest export generator and signal the country’s arrival in the global gold market, Kefi is also advancing two discoveries in Saudi Arabia: the Jibal Qutman gold andHawiah gold-copper projects. 

The Jibal Qutman open pit project has an early 2023 feasibility study. This project is expected to recover a total of more than 500,000 oz. gold over 10 years. 

In May 2015, Kefi updated the global resource to 28.4 million indicated and inferred tonnes at 0.8 gram gold per tonne for 733,045 ounces. 

The company continues to explore the property with plans to add to the resource. 

At Hawiah, which Kefi discovered in 2019, exploration and drilling have established a global indicated and inferred resource of 29 million tonnes at 0.89% copper, 0.94% zinc, 0.67 gram gold and 10.1 grams silver per tonne. 

Anagnostaras-Adams says the project has the potential to become one of the top base metal projects in Saudi Arabia. 

The company plans to progress the feasibility studies for both Saudi Arabian projects next year. 

Anagnostaras-Adams views Saudi Arabia as integral to Kefi’s strategy. The country’s sweeping regulatory changes and support from local financiers and regulatory bodies have facilitated rapid progress. 

“It’s a completely different atmosphere,” he said. “A few years ago, it was difficult to make progress in Saudi Arabia because of slow and old-fashioned regulation. And we had to suspend and bide our time in Ethiopia,” he said noting regulations in both countries have been transformed. 

“You pinch yourself, to be honest, because, for years, you’re biding your time. And all of a sudden, the Arabian-Nubian Shield is taking off.”