JOHANNESBURG (miningweekly.com) – Aim-listed Kefi Minerals has signed the terms for $135-million in funding with Oryx Management to finance and operate all the on-site infrastructure at its Tulu Kapi gold project, in Ethiopia.

This latest mandate letter and heads of terms with the infrastructure specialist followed Kefi’s signing of terms with the Ethiopian government to fund the building of all off-site infrastructure for the project.

“Kefi has selected a development funding approach considered more appropriate for start-up purposes than bank debt, owing to its longer nine-year tenor and its repayments commencing 30 months after drawdown,” explained Kefi executive chairperson Harry Anagnostaras-Adams.

In an update to shareholders on Monday, he said Oryx would establish a special purpose vehicle to issue bonds, with the proceeds used to build and own all the on-site infrastructure for the project, which it would then lease to the project company Tulu Kapi Gold Mines.

“Ignoring historic investment of about $60-million, the project's remaining funding requirement has now been successfully reduced from $289-million when Kefi took control in 2014 to $160-million, before overlaying the Oryx proposal, to a residual balance of about $32-million,” he pointed out.

The residual balance, which includes $13-million of contingency provisions, will now be further evaluated and refined, structured and sourced over the next few months, with the possibility of further reducing this amount.

“A variety of sources to finance the estimated residual requirement of $20-million to $30-million are being considered, including working capital facilities with the Development Bank of Ethiopia, project-level equity with a mining and engineering group and further equity from Kefi in the project company,” Anagnostaras-Adams noted.

It is expected that the financing from the Ethiopian government and Oryx will be provided and that development will kick off before the end of this year.

The planned financing package includes funding finance charges during the 30-month construction and production ramp-up period.

Oryx will operate the on-site ore processing infrastructure on an open-book, cost-plus performance bonus-based operating contract.

Ausdrill will supply and operate all the mining equipment under a mine services agreement structured as a conventional schedule of rates contract, whereby the contractor is paid per tonne of material delivered.

Kefi believed that, based on the projected cash flow strength, Oryx could be repaid around half-way through the nine-year term.

“Tulu Kapi's cash flow projections at a gold price of $1 250/oz support the company's plan to rapidly pay down the project finance indebtedness at the same time as pursuing a focused and exciting exploration programme, and also to consider commencing dividends to shareholders early in the project's life,” Anagnostaras-Adams concluded.