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Fieldfisher advised KEFI Minerals plc, the AIM-quoted gold exploration and development company, on the negotiation of its mining agreement with the Ministry of Mines of the Federal Democratic Republic of Ethiopia and the granting to KEFI of a large scale mining licence for its Tulu Kapi gold project. The mining agreement was signed at a formal ceremony at the Ministry of Mines by His Excellency Ato Tolossa Shagi, the Minister of Mines, and Harry Adams, Executive Chairman of KEFI.
The large scale mining licence will enable KEFI to mine gold on 7 km2 of land in Western Wellga, Genji Wereda, Tulu Kapi locality in Ethiopia for a period of 20 years. KEFI is currently evaluating construction of a 1.2Mtpa processing plant with an estimated annual gold production of 86,000 ounces. A full definitive feasibility study is well underway and will be completed to a standard required for formal credit approvals of project finance in mid-2015. Tulu Kapi has a probable ore reserve of 1.0 million ounces and mineral resources totalling 1.7 million ounces of gold. At the signing ceremony, the Minister said that KEFI had allocated a total investment of US$151.6 million to the project which would create 700 jobs. The Minister went on to say that the company is expected to produce 28,875 kg of gold in the coming ten years which would generate sales of US$1.2 billion, adding that KEFI will pay to the Government US$130 million in tax and royalty fees over this period.
KEFI is only the second internationally-owned mining company to be granted a large scale mining licence and mining agreement in Ethiopia. The mining agreement defines the fiscal, commercial and legal framework for the development and execution of the Tulu Kapi project. The Ethiopian Government considers the signed agreement a 'trail blazer' and a template for other international mining companies hoping to operate in the country.
Partner and Head of Mining and Metals, Jonathan Brooks, worked with KEFI, its project finance advisers and its Ethiopian legal adviser to negotiate and finalise the agreement.
Jonathan said: "We are delighted to have advised KEFI on such a significant project for Ethiopia and the opening up of its mining sector to international investment. We look forward to continuing to work with KEFI as it secures its financing to enable it to commence construction and bring Tulu Kapi into production in 2017."
Fieldfisher has acted for KEFI for a number of years, including on its acquisition in 2013 of a controlling stake, and the purchase in 2014 of the remaining interest, in the Tulu Kapi project from Nyota Minerals Limited.