Hello there ! 

The source code on Github is licensed under MIT, so it is completely okay to reuse parts or all of it for private, free or even commercial projects. Feel absolutely free to build your own game on it, and make sure to tell me if you ever release something so that I can be happy about it :) 

As to the mod kit, it should only be useful as an example for how to set up the content, since it only adds content to the existing source code on Github. Basically if you compile the source code and open it in a regular Unreal editor, you would have the mod kit, minus the game content included in the mod kit - that we ask you don't use in your own game. Since your plan is to create new assets, the easiest path is to do just that - fork the source project, add new content, looking at the mod kit for how to set it up.