Kefi Minerals (LON:KEFI) has reiterated its Tulu Kapi project in Ethiopia stands up even with the recent drop in the gold price.
Gold has shed about US$200 per ounce in the past couple of months but at the current price of US$1,150, the NPV based on an underground and open pit model is US$74mln.
The junior remains in talks to arrange the finance for US$150-160mln required to build the mine.
Kefi said it was confident it will announce a co-lender to coincide with the scheduled end of the Ethiopian State of Emergency at the end of the first quarter of 2017.
Harry Adams, executive chairman, said the state of emergency declaration in October had put off some financiers but it had switched focus to others, which had proved to be a wise decision in retrospect.
Ethiopia is still a role model of growth in Africa, he added, and Kefi is working with government, contractors, community and financiers towards triggering a mine development in mid-2017.
Immediate priorities are the shareholders’ agreement relating to the government’s investment in the project, which is now with the relevant ministry for final review and execution.
A resettlement plan and associated compensation; where the company and community are now awaiting verification of the compensation calculations, which would pave the way for resettlement.
Finally, Adams hopes the project funding package will be ready by the end of the first quarter when the state of emergency is scheduled to be lifted.
A target of US$20mln has been set for the equity portion of the financing, though Kefi is also listening to alternative funding options to minimise equity dilution. More project finance reduces the net present value but boosts the internal rate of return.
“The calm and pro-development situation in Ethiopia, combined with the financing proposals being considered by KEFI, make the board confident that the Tulu Kapi Gold Project starts development in 2017,” said Adams.
He added the government has also encouraged the company to explore the district around Tulu Kapi and elsewhere in Ethiopia.
Targets have been identified for both satellite gold deposits and stand-alone development projects.
Shares drifted 2% lower to 0.235p.
--updates for detail, quotes and share price--