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Hummingbird Resources Ltd: THE INVESTMENT CASE

Hummingbird's Yanfolila study underscores potential

The DFS for Yanfolila was published by Hummingbird Resources..
Hummingbird's Yanfolila study underscores potential
INVESTMENT OVERVIEW: HUM The Big Picture
The processing plant will have a throughput capacity of 1.24mln tonnes a year, producing up to 121,000 ounces of the yellow metal each year...

-- adds upgrade to DFS --

Hummingbird Resources has improved upon the DFS (definitive feasibility study) numbers published in January for Yanfolila, its Mali-based gold project.

Upgraded designs for the open pit mine and new metallurgy and technical data added 7% or 44,000 ounces of gold to reserves to take the total to 709,800oz.

Net present value rises to US$109mln from US$88mln based on a gold price of US$1,100.

Using the current gold price of around US$1,250 per ounce, the NPV jumps 84% to US$162mln.

The design changes also lowered the cost of production to US$686 per ounce, a US$34 cut.

Dan Betts, chief executive, said: "An AISC of under US$700/oz and a 42% IRR [internal rate of return] at a US$1,100 gold price clearly marks Yanfolila as one of the highest margin, undeveloped gold projects in Africa. 

In the DFS total resources were 1.8 mln ounces of gold with  an additional 390,700 ounces of exploration potential.

The plan is to mine five open pits in succession, starting with Komana East and Komana West, and then progressing to Guirin West, Sanioumale East and Sanioumale West.

There is also the prospect of a high grade Gonka resource, which would be worked initially as an open pit, then underground.

The processing plant will have a throughput capacityhttp://images.intellitxt.com/ast/adTypes/icon1.png of 1.24 mln tonnes a year, producing up to 121,000oz of the yellow metal each year.

Africa- focused Hummingbird is not just about Yanfolila though.

It also has the 4.2mln ounce Dugbe gold development project in Liberia, providing further upside for mine development and greater production.

Dugbe was given a boost late last year after it emerged a new water-generated power plant in south-east Liberia 10km from the site was being mulled as it could provide a sustainable and low-cost source of power for the mine.

At Dugbe, the miner is currently optimising the DFS. The firm also has 5,000 sq km of further exploration ground in Mali and Liberia.

But for now attention is on Yanfolila, where the target is for a first gold pour in 2016 depending on the funding for the US$75mln upfront cost coming through.

Fund manager Taurus has agreed to put up the money and is still carrying out due diligence in advance of the full debt draw down.

RFC Ambrian said the continuing NPV and margin growth at Yanfolila, set against an improving sector backdrop, should strengthen the company’s hand in finalising financing for the project.

The company has secured an extension of the US$15m bridge loan to Septemberand negotiations with Taurus remain ongoing.

The recovering gold price environment should also increase access to alternative sources of capital.

“With an initial direct capex of US$79mln (inclusive of the US$2mln already spent on earthworks), our projected US$10-15mln working capital requirement, and the US$15mln outstanding bridge loan from Taurus, we estimate the company’s total financing requirement to be in the region of US$100-110mln.”

Next steps at the mine face will be to incorporate pit design for Gurien West and Sanioumale East and West, and their subsequent inclusion into the reserve category.  Gonka remains a further source of upside.

Even so, RFC added that clarity on the provision of project financing is the critical path item before it will change its target price of 45p per share.  

Shares rose to 19.3p.

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