The National Bank of Ethiopia, Ethiopia's central bank, has approved signed term sheets with the project finance banks that will provide the long-term development debt finance for Aim-listed Kefi Minerals' Tulu Kapi gold project.

The company says this reaffirms the Ethiopian government's ongoing support of it and its project finance plan for Tulu Kapi Gold Mines Share Company (TKGM).

"As previously stated, the two proposed senior debt underwriters and co-lenders are leading African banks and this approval will now trigger their normal processes for credit approval and documentation, with a view to full financial closure later this year in accordance with recent company guidance," Kefi notes.

Further, Kefi  has also received confirmation that the National Bank of Ethiopia has registered the past investment by TKGM of $49-million in 2014.

Subsequent predevelopment investment will also be registered in due course, relating to expenditure during 2015 to 2019.

Kefi notes that this is important, as this past investment ensures compliance with the 30%:70% (equity:debt) capital ratio as approved specifically for foreign direct investment into the project.

These central bank approvals are material to Kefi as they clear the way for full project finance completion, as do the various related and previously reported approvals by the central bank, which included the setting of the permissible capital ratio for the project, permission for gold price hedging as and when required, and for the establishment and use of bank accounts in major international financial centres, the company adds.

While these matters are conventional for mining project finance internationally, they are new to Ethiopia and required lengthy due process by Kefi as a first-mover in this new priority sector.

Other finance-related steps recently taken by the Ethiopian government include an agreement to transfer the TKGM project equity that will be earned by the government from its $20-million investment in the project, to an Oromia regional mining fund.

The government has also signed various procurement contracts for building offsite roads and the electricity transmission connection.

Moreover, the government and Kefi have agreed changes to their shareholder agreement and the TKGM foundation documents to admit additional project equity investors into TKGM if required, although both parties are actively collaborating directly with the proposed project private equity investors to facilitate their subscription. Kefi's percentage interest within TKGM remains unaffected.

"We are pleased to receive the formal consent of the Ethiopian central bank to the project's finance plan and terms, once again highlighting the support Kefi is receiving in-country for the development of Tulu Kapi. This permits the triggering of the project lenders' formal processes for credit approval and documentation with a view to full financial closure in October.

"The strengthening gold price and dollar exchange rate to the Ethiopian birr have further improved the economics of Tulu Kapi and the robustness of the development to meet the various conventional covenants required by the financing banks,” comments Kefi chairperson Harry Anagnostaras-Adams.