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UPDATE - Hummingbird Resources upgrade enhances economics of Mali gold project

Last updated: 12:36 02 Dec 2014 GMT, First published: 13:36 02 Dec 2014 GMT

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Hummingbird Resources (LON:HUM) described as “highly positive” the results  of infill and extension drilling on 1.8mln ounce Yanfolila gold project in Mali.

Of greatest interest was the 153% increase in the oxide and transitional indicated ore resource , which has grown to 600,000 ounces. 

These high grade, shallow lying zones are expected to provide the basis for the initial mine and so are key to the whole operation.

As chief executive Dan Betts said, the upgrade continues to burnish Yanfolila’s credentials as an economically “attractive”, low cost mine.

“The positive impact the upgrade will have on the ongoing optimisation, engineering studies and life of mine scheduling leaves Hummingbird in an even stronger position as we move towards mine construction in the first quarter of next year,” Betts said.

The upgrade in the resource follows on from the drilling results garnered in October, the highlight of which was an intercept of almost 42 grams per tonne of gold over 3 metres.

In the announcement, Hummingbird also revealed Komana East, the first pit to be mined, now contains 160,000 ounces at a grade of 3.12 grams per tonne, up from 132,000 ounces. 

And it said an additional 159,000 ounces of gold have been discovered in the easy-to-mine zones across initial five starter pits, which represents a 34% increase.

This impact on the economics  of these extra ounces has prompted to Hummingbird to consider factoring in some flexibility to the initial processing plant. 

This would allow it produce more than the initial 55,000 ounces a year if the company wished.

Cantor added that a resource upgrade of this size could have a significant positive impact on the life of the operation at that production rate, or be used as the basis to design the mine with higher annual production.

Either way, Hummingbird continues to be in an attractive position with funding for the US$52mln capex already in place. 

The average enterprise value/resource metric is US$50/oz for the London-listed sector, while Hummingbird currently trades at US$13.5/oz. 

Hummingbird should be in production by early 2016 and the potential for a re-rating in the short term is clear. 

Buy with a target price of 115p. Shares rose 1.3% to 36p.


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