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(Alliance News) - Shares in KEFI Minerals PLC surged Monday as it signed an early agreement for financing for the Tulu Kapi gold project in Ethiopia.
Shares were trading at 1.82 pence each in London on Monday morning, up 43%, having been at 0.66p in October when the Ethiopian government was experiencing delays in approving the project, which have since been resolved.
A week ago, Nicosia, Cyprus-based KEFI said it was choosing between a long-standing bond-lease based package or a conventional bank-project finance proposal from African banks to finance the mine.
It has gone with the bank-based proposal, it said Monday, believing it to be financially "more attractive" and easier to executive.
"In addition, the proposed bank lenders are actively working in Ethiopia, are familiar with the local market and many of our local stakeholders and thus considered more compatible with the project consortium," said KEFI.
KEFI noted the total funding requirement for infrastructure and mining for the mine is USD154.9 million, but a bond-lease based financing package would lead to interest payments twice that of a bank loan, and also higher financing-related costs.
"We have been very well supported by the bond-lease proposal and now we also have an attractive bank-loan based alternative because capital market support for our project has recently improved markedly, both inside and outside Ethiopia," said KEFI Finance Director John Leach.
"The expected savings from the preferred bank-based infrastructure finance proposal provide our project subsidiary, Tulu Kapi Gold Mines, with the opportunity to develop and further explore the underground Tulu Kapi deposit and significantly increase value for shareholders, without reducing net cash flows available for other purposes," he added.
The first six months of work will be funded by project partners, including the Ethiopian government. KEFI would then plan to draw the bank loan mid-2020.
By George Collard; georgecollard@alliancenews.com
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