Ethiopia’s first industrial-scale mining project of the century has taken a step closer to fruition as KEFI Gold and Copper secures conditional financing approval from its lead creditor the Trade and Development Bank (TDB), KEFI executive chairman Harry Anagnostaras-Adams tells The Africa Report.

TDB’s decision is “a starter gun” for co-lender the Africa Finance Corporation and equity investors to seek the go-ahead from their boards for a funding packing which totals $320m, Anagnostaras-Adams says, adding, “It’s game on”.

KEFI’s Tulu Kapi gold in the Oromia region of western Ethiopia is 360km west of Addis Ababa. Mining at the site first discovered and first mined by Italian explorers during the 1930s colonial period, will require about 350 households to be resettled. The project is forecast to produce $86m in free cash flow per year over an initial eight-year mine life. Ethiopia’s national government and the regional Oromia government are among the prospective equity investors.

Foreign investment

Ethiopia, which plans to launch a stock market in 2024, has been undertaking partial financial liberalisation to attract foreign investment. A central bank directive in September allows the birr to be converted into hard currency for strategic foreign investments in mining and energy, the first time such a guarantee has been given. The directive also allows the operation of offshore accounts for the projects.

The central bank directive was “critical” in securing the provisional TDB approval, Anagnostaras-Adams says. “We wouldn’t have proceeded without it.” The company has said the government has committed to providing permanent security for the project.

KEFI aims to access equity funding in the middle of this year which will allow a start to construction expected to take two years. The goal is to draw down debt nine to 12 months after the equity.

Airstrip Planned

KEFI, shares in which trade on London’s Alternative Investment Market (AIM), has focused on gold and copper exploration in the Arabian-Nubian Shield since 2008. The company has a joint venture with Saudi Arabia’s ARTAR which is undertaking feasibility studies for a copper-gold discovery at Hawiah and a gold discovery at Jibal Qutman. The company has a further portfolio of Saudi exploration licences.

Only about 25% of Ethiopia’s surface has been geologically mapped, which Anagnostaras-Adams describes as “remarkable”. He expects more industry activity in Ethiopia and East Africa. In West Africa, Anagnostaras-Adams argues that increased terrorism and the spate of coups in recent years are “disconcerting to the industry”. The instability will shift industry attention east, with some companies now looking at Tanzania as well as Ethiopia, he says. In mining terms, “East Africa is the next West Africa.”

Heavy equipment for the Tulu Kapi project will most likely be brought in from the port of Djibouti. The nearest bitumen highway is about 25km away, and KEFI plans to build an all-weather road connection to the project. Anagnostaras-Adams also aims to build an on-site airstrip for about two weekly flights from Addis Ababa. The plan is to move bricks of gold by air from the project to a foreign refinery before sale on international markets.