KEFI Minerals (LON:KEFI) has revealed it is in negotiations with “several” potential buyers of a stake in its Tulu Kapi gold project, in Ethiopia, including the country’s government.
The news emerged as the AIM-listed mine developer updated on its plans to finance the operation in a way that will minimise dilution for holders of the shares in the publicly quoted company.
Debt funding has always played a part in that plan and KEFI estimates it will require US$100mln via "a senior secured syndicate arrangement”. Negotiations in this regard are well advanced.
The company has also been able to "engineer” down the peak funding requirement to US$120mln – which is US$10mln lower than previous estimates, and half the cost of the original plan outlined by Tulu Kapi’s former owners.
It means KEFI will be left to find a US$20mln equity contribution.
Traditionally, this would be sought from shareholders in the company, but with a market capitalisation of just US$18mln, tapping equity investors in this way would be hugely dilutive.
The solution being put forward is to “source this capital as minority equity investment in the project subsidiary”.
Any investment will be based on the net present value of Tulu Kapi, which is around US$90mln.
“The company is in advanced discussions with several interested parties, including the Government of Ethiopia,” the firm said.
Earlier this week, KEFI unveiled plans to bump up production by 33% to 100,000 ounces of gold a year.
Construction is slated to get underway by the end of the year – once the financing is complete.
Chairman Harry Anagnostaras-Adams said: "KEFI has, in the two years since acquiring Tulu Kapi, overhauled all project development plans and permitted the development of Tulu Kapi.
“Significantly, project development funding has been more than halved to US$120 million.
“KEFI is continuing to move forward according to the plan as agreed with the Government of Ethiopia and as laid out in the past to our shareholders.
“We look forward to updating shareholders upon the finalisation of funding and the commencement of construction by year end."