Hummingbird Resources PLC (LON:HUM) is spinning out a number of non-core exploration permits following an outline deal struck with privately-owned Kola Gold.
The pair plan to create a new company to hold a number of Hummingbird’s non-core gold exploration permits in Mali plus some of Kola’s in Mali and Senegal. In all, ten properties covering 1,600 sq km.
Significantly, City broker Shore Capital said the deal allowed the group to develop its flagship Yanfolila project without sacrificing exploration upside.
"This transaction doubles our exploration exposure in Mali and provides us with an introduction to Senegal and exciting new mineralised ground in Mali where we are currently focused on bringing Yanfolila, one of Africa's highest margin undeveloped gold projects, to production next year,” chief executive Dan Betts told investors.
Hummingbird will own 43% of Cora Gold, which must raise US$4mln.
The AIM group will have buy-back and royalty rights over the four permits closest to Yanfolila that could add “significant upside” to the operation there.
Yanfolila due to start producing next year
Yanfolila, in Mali, is the company’s flagship project and will start producing next year with the aim of churning out 107,000 ounces of the yellow metal a year.
The Kola deal will allow Hummingbird to channel its efforts in this project and the 4.2mln-ounce Dugbe asset in Liberia.
Meanwhile, Yanfolila in Mali remains one of the best projects among the UK-listed junior mining sector, according to resource-focused broker RFC Ambrian.
In a definitive study in February, total resources at Yanfolila were defined at 1.8mln 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.
The high grade Gonka resource is in addition to this and would be worked initially as an open pit, then underground.
The processing plant will have a throughput capacity of 1.24 mln tonnes a year, producing up to 121,000oz of the yellow metal each year.
Last month, shareholders approved a placing and subscription to raise funds for the construction of the mine.
Added to an over-allotment option in respect of 16.8mln shares, the amount raised in total was £49.5mln (US$70mln).
Bringing the mine on stream will cost US$88mln, estimated Ambrian, comprising US$79mln of capex and US$9mln of working capital.
If you add in the US$15mln required to repay the Taurus bridge loan and the total funding requirement is in the region of US$110mln, the balance of which Ambrian expects to be secured as debt finance.
Yanfolila receives a DFS upgrade
Hummingbird's update in February improved upon the DFS (definitive feasibility study) numbers published in January for Yanfolila.
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 rose to US$109mln from US$88mln based on a gold price of US$1,100.
Using a 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.
In the DFS, total resources were 1.8 mln ounces of gold with an additional 390,700 ounces of exploration potential.
And there's the Dugbe gold development
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