Hummingbird Resources rapidly advancing Dugbe F project in Liberia

It is almost a year to the day since Hummingbird Resources (LON:HUM) joined the AIM market with the grand ambition of opening a new gold district along the Birimian Craton in Liberia.

In that time two things have happened. The first is chief executive Daniel Betts and his team have delivered in a 12 month period what should have taken two or three years.

The second is the share price has fallen around 25 per cent. Betts is phlegmatic: “You can’t really predict what the market is going to do. My job is to keep the team focused and deliver on our promises.”

In 2011 a total of 30,000 metres have been drilled, which has helped to take the Dugbe F project to a NI 43-101 resource of 1.8 million ounces of gold at 1.3 grams per tonne from 800,000 ounces previously.

Drilling on the satellite Tuzon deposit has delivered some of the best intersections to date.

A resource statement from Tuzon is due next month, and analysts say an additional 1.2 million ounces would give the Dugbe F area the critical mass needed to go into mine development.

“As soon as you are north of 3 million ounces you are able to start considering commitments to a pre-feasibility study and mine development in the minable radius of Dugbe F,” agreed Betts.

It would be a multi-pit development around a central point – there are currently 3 other anomalies at soil and trench sampling stage within a 5 kilometre radius.

“It won’t be a complete resource at Tuzon because it won’t be drilled out,” the Hummingbird CEO said.

“The idea is to get a resource that will increase the number in this mineable radius from 1.8 million ounces to a number that people start to realise this is a mine in the making, and no longer just an exploration project where people are hoping to find something.”

If it is able to compile an economic resource around Dugbe F, then Betts may split his Liberia operation into two discrete teams – one tasked with developing the asset, with the other responsible for continuing the exploration effort.

“Realistically if everything went absolutely smoothly we could have something up and running inside three years,” he added.

“The challenge we have to overcome is do we have the quantity and the grade to make an economic mine.

“Whilst relatively low grade, but not unusual for Birimian deposits, it is near surface and is open-pittable and easily extractable.  It also has the benefit of being only 70 kilometres from the port of Greenville.”

It is worth remembering there is more to Hummingbird than just this one target. In fact there is the potential here to open up a whole new gold district.

For the uninitiated, the Birimian is elephant country. It is host to multi-million ounce mines such as Morila, Chirano and Ahafo.

That the Liberian portion has remained untapped owes more to the years of civil war that preceded this recent period of political stability than it does to the unpromising geology of the area.

So far Hummingbird has drilled only a small portion of a geological anomaly called the Dugbe shear zone, which extends for around 70 kilometres from the coast of Liberia in a north-easterly direction.

With US$23 million in the bank the group has the financial wherewithal to go hunting for the “two or three” other potential mines in the vicinity.

“The region is covered in artisanal mines, but has been largely untouched by modern exploration techniques,” said Duncan Hughes of Ambrian Capital.

“Hummingbird has demonstrated that soil sampling and trenching work exceptionally well in the tropical soil.

“A number of anomalies remain untested with drilling, including Sacker to the south-west along strike from Dugbe F.

“More importantly though, the company has covered less than one-third of the Dugbe licences with soils, and not tested the area of most extensive artisinal mining at Tienhpo.”

The company has field teams on the other on its other licence areas and is bringing them up the value curve. But the group may offload its stake in the Mount Ginka iron ore licence at some stage.

The share price fall, meanwhile, is the result of a number of factors, not least the sell-off in the small cap sector.

However there is also a discount being applied because Hummingbird’s licences are in Liberia – probably unfairly given the stability of the nation under Ellen Johnson Sirleaf, the country’s Harvard educated president.

“The incumbent government and president were voted in for a second six-year term in November,” said Ambrian’s Hughes

“We met with mining ministers and were encouraged by the clearly supportive and favourable fiscal terms and mining code in the country.

“Liberia used to be Africa’s largest exporter of iron ore, and exports resumed recently showing it is as an extractive industry focussed economy.

“We believe it is only a matter of time before the market sees the potential of Liberia as a mining jurisdiction and the current discount afforded Liberian mining stocks is removed.”

One upsides of the recent share price fall is provides an opportunity to acquire the stock on a bargain basement rating – which makes it the cheapest West African gold explorer with an enterprise value of US$33 an ounce of gold.