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Trust chairman Dr Mohammad Alayan said the $8 million An-Nur Kiwi Academy (AKA) would be open by January 1, 2017 and was expected to educate about 100 year 11 to 13 boys from across the country.
It would be based at the former St Patrick's Primary School in Melbourne St, which the trust plans to develop.
Dr Alayan said resource consent had been granted to run the site as an education facility, and part of the premises was already being used as an early childhood education service for the Dunedin Muslim community.
It opened in April this year and has a roll of 17 children.
However, the trust had decided to delay a decision about whether to build accommodation for the boarding school on site, he said.
Development plans for the school show a new gymnasium with a footprint about the same size as the existing classroom block, a cafeteria and a mosque.
The trust had hoped to have the academy up and running by February this year, but it had a setback when the project failed to gain Ministry of Education funding as a charter school.
The trust's academy proposal was among 35 applicants to the Ministry of Education to establish a charter school. Only five were selected for funding.
Dr Alayan said the trust wanted to establish AKA in Dunedin because it believed Muslim children attending state secular schools were subjected to an educational environment that pressured them to adopt values that contradicted Islamic values, such as evolution theory, sexual relations outside marriage and drinking alcohol.
The academy aims to provide a high-quality education with an emphasis on the Islamic value system, but Dr Alayan said the New Zealand national curriculum would be taught by about 15 to 20 staff, including qualified Islamic studies and Arabic language teachers.