Conflict, Settlement Bar KEFI Gold From Access To Wollega Site

KEFI Gold and Copper is still stuck in limbo as protracted conflict continues to block off access to its mining sites in western Oromia and challenges in fulfilling investment capital thresholds persist. Both the government and the company’s management are unable to clear the mining sites from settlers a full decade after KEFI secured a concession covering the most coveted gold deposits in the country and several years after it attained a controversial extension of its license. The firm is once again caught up in the disparity between upbeat performance reports and the seemingly endless setbacks on the ground.

The Reporter approached mining officials and KEFI management to ascertain whether the government is considering revoking the firm’s concession.

“As far as I know, Kefi’s license has not been revoked. Two weeks ago, officials from the federal and regional mining offices visited the site in Tulu Kapi, Wollega. Kefi delayed this long not because the government and the investors were unwilling, but because of the conflict in Oromia,” Zewdu Tadesse, director of mining licensing administration at the Oromia Mining Development Authority, told The Reporter.

KEFI’s managers say they are preparing to embark on the project in Tulu Kapu a decade after the company secured its license.

“We are trying to arrange the resettlement. There are people on the project site, so it needs relocation. The next task will be a valuation for the compensation of the people to be resettled. But these works haven’t started yet,” Abrea Mamo, country director for Tulu Kapi Gold Mine (TKGM), told The Reporter.

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The statement is in direct contradiction to a media briefing in September 2022, when KEFI’s managers said TKGM would be paying out over one billion birr for the resettlement of close to 360 households on the project site.

“The amount will go towards building new homes for the households, direct cash transfers to compensate for the loss of harvests, and community reports,” TKGM management had said.

At the time, Harry Anagnostaras Adams, chairman of KEFI Gold and Copper, also told The Reporter that relocation operations and construction works for the 15 billion birr project would be finalized “within the next two years,” after which gold extraction would commence.

KEFI Minerals acquired 75 percent of the Tulu Kapi project in 2013, with a 10-year license life. The following year, it acquired the project in full. In 2020, Kefi Minerals changed its name to KEFI Gold and Copper.

Tulu Kapi is a gold-rich area located in Tulu Kapi, Wollega Zone, in western Oromia. The project is also called Tulu Kapi Gold Mine S.C.

KEFI had initially planned to commence full project development in 2020, however, the company had not managed to do so by the time its license was due to expire in 2022. The failure led the Ministry of Mines to issue final warnings to the firm, and KEFI’s managers to pile on diplomatic pressure in a bid to extend the deadline.

A letter written to the company by Takele Uma, former minister of Mines, provided a short extension and some breathing room to KEFI in February 2022. The letter indicated the project was not on track despite company reports painting a rosier picture.

“The Ministry has decided to grant an extension in addition to other extensions previously granted in the hope that your company will secure financing from its syndicates and procure the necessary documentation to assert your equity share of the project. This is, however, the Ministry’s generous offer and unreserved support to the viability of the project and not related to any of the issues forwarded from your company,” reads the letter.

At the time, Takele green lighted a six-month license extension set to expire in July 2022.

“Please beware that the six-month extension will remain in effect so long as you provide the Ministry with a genuine progress report every month,” reads the letter.

The Minister who succeeded Takele also reinstated KEFI’s license despite the lack of progress on the ground, according to reliable sources. However, the Ministry’s official reasoning behind the extension is the protracted armed conflict in the Oromia region.

However, insiders say equity requirements also remain unfulfilled.

“KEFI could not meet the USD 80 million in requisite financing. The investors have been negotiating with the Ethiopian government to allow the cumulative expenses to be considered as equity. But the  government refused. KEFI’s managers claim they deposited half a billion dollars in an offshore account, meanwhile, they say they are still mobilizing resources. KEFI has been saying it has received loans from foreign banks, but they have yet to be disbursed,” said an official at the Ministry of Mines who spoke to The Reporter anonymously.

KEFI’s investors managed to persuade the National Bank of Ethiopia (NBE) to change a law enabling the firm to keep its capital in forex in offshore accounts, according to insiders. The central bank’s directive allows investors like KEFI to keep up to 80 percent of their investment capital in offshore accounts, bringing only 20 percent into Ethiopia.

Sources allege this is a loophole that allows foreign investors to present forged documents that indicate they have sufficient capital stored in offshore accounts.

The Ministry official says it is unclear whether KEFI’s license is legally valid or not despite what the Oromia Mining Development Authority or the company’s managers say.

“It has been over a decade since KEFI received the license. It expired a few years ago. But at the time, Takele Uma extended the license blindly. KEFI’s investors also pulled on diplomatic pressure from the UK government to extend the license life. Though KEFIi is incorporated in Cyprus, it is listed on the London Stock Exchange. The new Minister, Habtamu Tegegn, too, kept the license without progress on the ground,” said the official.

KEFI’s management organized an annual general assembly on July 22, 2024. Despite the confusion and difficulties, the statement issued following the assembly indicated the company’s operations are on track.

“I am delighted to be speaking at the AGM in Ethiopia today as we meet with our financing and government partners in the Tulu Kapi Gold Project to further progress the few remaining administrative matters, including the internal corporate reorganization required to facilitate closing with regional investors. At the project site, excellent progress is being made with the intense Early Works programme following the project’s launch in May 2024. The Early Works programme is designed to take Tulu Kapi through to September 2024, and provide the basis for full close of the USD 320 million project finance package and commencement of Major Works in October 2024, ahead of commissioning of production in mid-2026,” stated Harry Anagnostaras-Adams, executive chairperson, during the meeting.

A company report from 2023 forecasts the first bit of gold would be extracted before the end of 2025, while KEFI expects the launch of its underground mine development to take place in 2026.

A KEFI document released last month reveals it is raising equity from two banks: AFC and TDB. The company plans to begin resettlement operations in October this year, with the commissioning of production slated for mid-2026, according to the document.

The document also states KEFI is seeking additional exploration licenses for potential gold sites in the vicinity of its Tulu Kapi license. However, the protracted conflict in Oromia casts a serious shadow of doubt over the company’s ambitions.