Chalice Gold Mines is poised to test the appetite of money markets, with the Tim Goyder-headed explorer cleared to start raising funds for its $131 million high-grade gold project after getting the final nod from the Eritrean Government.

Chalice hopes to start construction of the Koka mine early next year, which will mean having to secure finance within the next couple of months against a backdrop of global volatility. In its favour is the positive investor sentiment towards gold projects in Africa and a near record price for the precious metal, which closed at $US1724.85 an ounce in Sydney last night, up $US7.32/oz.

Chalice, which owns 60 per cent of the project, is expected to fund its share with a combination of debt and equity. It has about $9 million in the bank and is scheduled to receive $32 million from the Eritrean Government by January 27, which it agreed to pay for a 30 per cent stake.

News yesterday that Chalice had signed a mining agreement with Eritrea's Government was enough to keep its shares in the black in a falling market. They closed 0.5¢ higher at 27.5¢, while the market's key S&P-ASX 200 index lost 48.3 points to 4184.6.

Chalice wants to establish a 104,000- ounce-a-year gold operation at Koka, which is on the region's Arabian-Nubian shield. At current prices, the operation would be highly profitable, with forecast cash costs of $US338/oz.

With Koka's indicated mineral resource of 840,000oz grading 5.3 grams a tonne, it is one of the highest-grade African deposits being developed by a WA company and will be Eritrea's only second major mine.