KEFI Mining (LON:KEFI) said it was close to making a breakthrough on debt funding for its Tulu Kapi gold project in Ethiopia.
The company has signed a non-binding agreement with an African mining bank and African development bank that have agreed to provide secured loans totalling US$60mln.
They will be repaid over six years, and the banks have asked for gold hedging on just 100,000 ounces of the firm’s 1mln ounce ore reserve.
The capital investment required to get the operation up and running is US$120mln. The Ethiopian government has pledged to stump up US$20mln.
Once the selection process is formally concluded, the plan is to agree the final piece of equity funding required for the project.
KEFI will also complete the front-end engineering and design of the Tulu Kapi as well as agree insurance and an overrun facility.
Last month the company agreed a series of tweaks and refinements to its Tulu Kapi gold project in Ethiopia enhanced further the economics of the planned mine.
Production, which is expected to begin next year, will be 980,000 ounces of the precious metal over 10 years rather than the previous 960,000 over 13 years.
This gives annual output of 115,000 ounces, 20,000 ounces more than previously slated.
In the process, all-in sustaining costs come down to a top-quartile US$742 an ounce from US$780 and operating cash flows increase US$19mln a year to US$66mln.
Under the new plan the internal rate of return would be 50%, while the net present value is put in the order of US$197mln at a discount rate of 8%.