JOHANNESBURG (miningweekly.com) – Gold exploration and development company Kefi Minerals is in the final stages of selecting two principal contractors and the shortlisted financiers for the $135-million mining and processing plant development at the 1.2-million-ton-a-year Tulu Kapi gold mine, in Ethiopia.

The Aim-listed group on Monday said it was “refining and confirming” the contracting terms to select the preferred mining and plant construction engineering, procurement and construction management contractors within the current quarter.

Major works on the project were expected to start in the fourth quarter of this year, with Kefi eyeing commissioning of the 80 000 oz/y to 90 000 oz/y gold operation by the end of 2016.

Kefi was also unpacking potential opportunities to further reduce peak capital requirements from the 2015 definitive feasibility study (DFS) estimate of $130-million, said executive chairperson Harry Anagnostaras-Adams.

“We expect to reduce [peak capital needs] to below $120-million, depending on final contracting terms agreed with preferred contractors, detailed engineering, procurement of plant and the extent, if any, of government funding of infrastructure to be constructed within the public domain,” he explained.

Kefi noted that the contractors under consideration would also propose targeted cost‐savings and contribute to the development funding.

“We appreciate the considered and punctual responses received from shortlisted project contractors, will soon make our selections thereof and then move onto optimising the financing structure with the preferred contractors, the government of Ethiopia and, of course, the shortlisted financiers,” said Anagnostaras-Adams.

The project’s financing arrangements would be concluded by the third quarter of the year, as shortlisted financiers were engaged to optimise the funding mix and terms between the financiers, the contractors and the Ethiopian government.

To ensure “robust planning” in the short-term market environment, Kefi noted that financing scenarios were being stress-tested at gold spot prices down to $850/oz, while the project’s DFS assumed a $1 250/oz long-term gold price.

“Kefi's confidence as regards project economics vis-à-vis the future gold price is also reinforced by the gold price outlook in Ethiopia birr, which has increased from Birr16 800/oz five years ago to Birr22 600/oz at present,” the company said.