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Hummingbird boosts estimated value of Mali project by quarter

Net present value rises to US$109mln from US$88mln based on a gold price of US$1,100
Hummingbird boosts estimated value of Mali project by quarter
The design changes also lowered the cost of production to US$686 per ounce, a US$34 cut

-- adds broker comment --

A reworking of the economics of its Yanfolila gold project in Mali has increased the project’s value by a quarter, said Hummingbird Resources (LON:HUM).

A definitive feasibility study (DFS) was only published in January but upgraded designs for the open pit mine and new metallurgy and technical data added 7% or 44,000 ounces of gold to reserves. It takes the total to 709,800 ounces.

Net present value (NPV) 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: "When we published our DFS in January we said at the time that we were in the process of optimising the mine schedule based on the maiden reserves from December 2015. 

"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. 

The company was now in a much better position to negotiate the final funding package for Yanfolila, he added.

Broker 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 September and 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.”

It price target was unchanged at 45p per share.  

Shares rose to 19.3p.

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