JOHANNESBURG (miningweekly.com) – Gold developer Kefi Minerals’ board has approved the development funding plan for the Tulu Kapi project, in Ethiopia, which would see the company raise equity capital for development at project level, rather than at the London-listed public limited company level.

This strategy would reduce value dilution for shareholders, as well as the estimated peak funding requirement.

The Aim-listed company said on Wednesday that discussions with shortlisted construction contractors, including further opportunities for value-engineering, had yielded potential reductions in the peak funding requirement from the $130-million estimated in the defintive feasibility study to $120-million.

This was despite an increase in the planned gold production to an average of 100 000 oz/y.

The company expected debt funding facilities to reach up to $100-million through a senior secured syndicate arrangement, with a portion of these facilities likely to have a tenor greater than the eight years proposed by conventional project finance banks, which was considered prudent owing to volatility in markets generally.

Planned contractor and financier commitment levels have also been incorporated into estimated project cash flows, with the remaining equity investment to develop Tulu Kapi estimated to be $20-million, in addition to the $65-million in equity already invested.

Kefi planned to source this capital as minority equity investment in the project subsidiary, to be priced at a valuation based on Tulu Kapi's net present value, which was about $90-million at the current gold price. The company was in advanced discussions with several interested parties, including Ethiopia’s government.

Formalisation of the funding plan, which required multiparty agreement of detailed documentation with the mine contractor, construction contractor, financiers and government was expected to be completed in the fourth quarter.

However, the mining company had formalised many of the principal terms within the detailed mining agreement executed in April.