08:00 Mon 08 Jun 2020
Hummingbird Res. - Acquisition of the Kouroussa Gold Project
("Hummingbird" or the "Company")
Acquisition of the
Project Highlights
§ Hummingbird to acquire the
§ The acquisition of the Project turns Hummingbird into a near term multi-asset producer with jurisdictional diversification in line with the Company's strategy
§ First gold production targeted within 2 years, with production of circa 100,000oz per annum and AISC of circa
§ Similar metallurgical flow sheet and process plant design to Yanfolila allows Hummingbird to leverage construction and operational expertise gained to date
§ Estimated capital development cost of circa
§ Illustrative pre-tax project IRR, NPV and free cash at range of gold prices1:
Gold Price US$/oz |
IRR |
NPV10 US$m |
Cumulative Free Cash US$m |
1,350 |
51% |
110 |
167 |
1,500 |
69% |
162 |
233 |
1,750 |
98% |
251 |
344 |
2,000 |
97% |
338 |
454 |
1 Internally generated by the Company based on information acquired from Cassidy and inclusive of the 2% royalty retained by the vendors
§ Significant exploration potential is known to exist at depth beneath the Koekoe deposit with another 6 high priority targets identified from intersections which require follow up work or surface bulk sampling results
§ Letter of Intent from the Company's West African Bankers,
§ Well established and stable mining jurisdiction with a number of world class bauxite and gold mines owned and operated by major international companies
Key terms of acquisition
§ Initial consideration of
§ Equivalent to approximately
§ All significant beneficial owners of Cassidy subject to 12 month lock in and 12 month orderly market
§ Deferred consideration of
§ Additionally, Cassidy shall retain a 2% net smelter royalty on all gold sales by or on behalf of the Company over and above the first 200,000 ounces of its production and sales up to a maximum of 2.2m ounces of production and sales
"The intended acquisition of
"Kouroussa is a high grade, high margin project with a number of similarities and synergies with Yanfolila which we are confident we can harness to our advantage. Over the last few years we have looked at a vast number of projects and Kouroussa ticks every box in terms of a next mine for Hummingbird. It is of the scale, geology, process circuit design and grade that are all perfect for our team's experience to be put to immediate use, and it is in line with our strategy to focus on high margin projects.
"I am delighted to welcome the shareholders of
"We look forward to updating the market as the development of Kouroussa progresses."
David Crichton-Watt, Chairman of
"As long term gold investors, we were attracted to the Kouroussa project by its exceptional grade and exploration potential. Having taken the project to the point where it is ripe for development into a significant mine, we are delighted to become significant shareholders in Hummingbird whose track record together with the proximity and uncanny project similarities with Yanfolila means they are the ideal partners to develop the project and unlock the potential of Kouroussa rapidly for all stakeholders. I am personally delighted to have the opportunity to participate in this journey with Hummingbird as a highly supportive long term shareholder."
**ENDS**
For further information, included an updated Corporate presentation, please visit www.hummingbirdresources.co.uk or contact:
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Tel: +44 (0) 20 7409 6660 |
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Strand
Nominated Adviser |
Tel: +44 (0) 20 7409 3494 |
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Broker |
Tel: +44 (0) 20 7523 8000 |
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Blytheweigh
Financial PR/IR |
Tel: +44 (0) 20 7138 3205 |
Notes to Editors:
Strategy and acquisition rationale
Hummingbird's strategy is to become a multi mine company focusing on margin and cash returns to create long term shareholder value, through a three pronged approach:
1. Extending mine life at Yanfolila,
Extending the mine life at Yanfolila remains a high priority and the drill results announced last week; both exploration holes close to the plant and holes targeting underground developments at Komana East are encouraging in this regard.
2. Diversification of cashflows and returns with high margin projects
Geographic diversification of producing assets should provide excellent risk mitigation against single mine and jurisdictional operations. The acquisition of Kouroussa as a high grade, high margin, additional mine, which leverages Hummingbird's operational and construction experience is a significant step in developing this second strand of our strategy.
3. Capital allocation
It is critical to maintain discipline in the allocation of capital with the objective of prioritising extending mine life and value accretive diversification. As part of this it is incumbent on us to maximise the value from non core assets which are not a natural fit for the Company at the current time and may be a significant drain on the Company's resources and/or represent a risk to the wider group. An example of this is the recently announced farm in agreement in
Details of the Acquisition
Hummingbird has agreed to acquire all of the share capital in Cassidy Gold Guinée S.A. ("
The consideration is payable by:
1. Initial consideration of
2. Deferred consideration of
3. Additionally, Cassidy shall retain a 2% net smelter royalty on all gold sales by or on behalf of the Company over and above the first 200,000 ounces of its production and sales up to a cap of 2.2m ounces (the "Royalty").
The Initial Consideration currently represents approximately 9.1% of the share capital of the Company as enlarged by the issue of shares to satisfy the Initial Consideration.
The new ordinary shares allotted to the Majority Sellers to satisfy the Initial Consideration and, if applicable, the Deferred Consideration will be subject to separate lock-in and standstill agreements whereby the legal and beneficial owners of such shares shall agree not to dispose or deal with them (except in customary limited circumstances) for a period of 12 months without Hummingbird's consent, and also agree without such consent not to (i) acquire any additional interests in Hummingbird shares for a period of 2 years; or (ii) vote any such shares other than in line with any recommendation of Hummingbird's board of directors for a period of 12 months. Additionally, the Majority Sellers will be subject a further 12 month orderly market provision.
The Deferred Consideration shall be payable (if due) in cash within 5 business days of the end of Hummingbird's financial year (or at Hummingbird's option in Hummingbird shares using the VWAP of such shares over the 30 trading days prior to the end of the financial year) in relation to each 100,000 ounces over 400,000 ounces that has been published, with any balance being carried forward to the next financial year.
Principal Conditions
Hummingbird has been granted exclusivity in relation to the proposed acquisition until the end of
The principal conditions to be fulfilled before completion include:
(a) Completion of confirmatory due diligence;
(b) Exchange of a mutually agreed SPA containing customary protections and warranties; and
(c) Approval from the Government of Guinea for the change of control of
Background & location
The Project is situated near the town of Kouroussa in the Kouroussa Prefecture in eastern
Link to Figure 1: Location map highlighting the geology of the of
http://www.rns-pdf.londonstockexchange.com/rns/2305P_1-2020-6-8.pdf
Geology
Exploration in the area commenced in earnest in the 1940's with the identification of auriferous veins. Modern exploration techniques including regional mapping, geophysics, geochemistry and drilling commenced in the mid-1980's with exploration activities resulting in a number of Mineral Resource Estimates being conducted on the Project since 2008. The latest Mineral Resource Estimate was completed in early 2020 by
Three main mineralised areas have been defined to date by drilling: the Koekoe Area which consists of the JJ, KD, Sanu Filanan and
The mineralisation at Koekoe is interpreted to be structurally controlled, with the four main mineralised zones thought to be caused by the same structural regime. The four mineralised zones include the northwest striking Sanu Filanan, JJ and KD zones and the east-west oriented
A distinguishing characteristic of the Koekoe deposit is the frequency at which visible gold is observed in drill core and gold grades in excess of 300g/t have been assayed.
Mineralisation within the Kinkine deposit is interpreted to be related to an intrusive gabbro with the gold hosted within both the intrusive lithology and the overlying sediments. The mineralisation occurs as a series of stacked shallow dipping zones, which are oriented sub-parallel to the intrusive contact. The majority of the mineralisation defined to date is relatively shallow (within 100m of the surface), although some deep drilling has identified the potential for deeper mineralisation as it is open to the South West with mineralisation plunging below the shallow near surface drill holes.
The X-Vein area comprises the originally explored X-Vein and X-Vein West deposits. Both of these deposits are considered to be structurally controlled, with X-Vein previously considered as an underground operation. Being open to the North, there still exists significant exploration upside potential and bulk sampling (20 tonne) results from X-Vein West returning gold grades of over 8g/t.
Link to Figure 1: Location map highlighting the geology of the of
http://www.rns-pdf.londonstockexchange.com/rns/2305P_1-2020-6-8.pdf
Mineral Resources
Within the Project, Mineral Resources have been defined at four deposits, Koekoe, Kinkine,
Link to Figure 2: Map of the Project's mineral deposit locations
http://www.rns-pdf.londonstockexchange.com/rns/2305P_1-2020-6-8.pdf
The tabulation of the
The Mineral Resource Estimate for Koekoe is tabulated below:
Mineral Resource Estimate for the |
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Resource Classification |
Type |
Cut-Off Grade |
Tonnes |
Au g/t |
Ounces |
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Koekoe Deposit |
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Indicated |
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0.5 |
3,816,000 |
3.96 |
486,000 |
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Underground |
3.5 |
3,000 |
5.19 |
1,000 |
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Total Indicated |
Variable |
3,819,000 |
3.96 |
487,000 |
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Inferred |
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0.5 |
3,523,000 |
2.99 |
338,000 |
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Underground |
3.5 |
94,000 |
6.86 |
21,000 |
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Total Inferred |
Variable |
3,617,000 |
3.09 |
359,000 |
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Total Koekoe |
Variable |
7,436,000 |
3.54 |
846,000 |
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All tonnages reported as dry metric tonnes. Minor discrepancies may occur due to rounding to significant figures |
All tonnages reported as dry metric tonnes. Minor discrepancies may occur due to rounding to significant figures. The MRE in the table above relates to the Estimation and Reporting of Mineral Resources compiled by Mr.
For the Mineral Resource Estimates completed in 2018 for the
These Mineral Resources are reported as per the table below:
Mineral Resource Estimate for the |
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Resource Classification |
Type |
Cut-Off Grade |
Tonnes |
Au g/t |
Ounces |
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Inferred |
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0.5 |
1,743,000 |
1.59 |
89,000 |
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0.5 |
1,743,000 |
1.59 |
89,000 |
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X-Vein Deposit |
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Inferred |
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0.5 |
354,000 |
7.33 |
83,000 |
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Total X-Vein |
0.5 |
354,000 |
7.33 |
83,000 |
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All tonnages reported as dry metric tonnes. Minor discrepancies may occur due to rounding to significant figures. The MRE in the table above relates to the Estimation and Reporting of Mineral Resources compiled by Mr. N.B. The block models have not been reported in accordance with the JORC Code (2012), however the classification has been completed in accordance with the "Australasian Code for Reporting of Mineral Resources and Ore Reserves" (the JORC Code as prepared by the |
The 2012 Mineral Resource Estimate as completed by
Mineral Resource Estimate for the |
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Resource Classification |
Type |
Cut-Off Grade |
Tonnes |
Au g/t |
Ounces |
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Kinkine Deposit |
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Indicated |
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0.43 |
1,883,900 |
2.20 |
133,300 |
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Underground |
1.25 |
96,500 |
1.70 |
5,300 |
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Total Indicated |
Variable |
1,980,400 |
2.18 |
138,600 |
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Inferred |
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0.43 |
63,200 |
1.60 |
3,300 |
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Underground |
1.25 |
324,400 |
1.76 |
18,400 |
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Total Inferred |
Variable |
387,600 |
1.74 |
21,700 |
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Total Kinkine |
Variable |
2,368,000 |
2.11 |
160,300 |
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1. All tonnages reported as dry metric tonnes. Minor discrepancies may occur due to rounding to significant figures.
2. The MRE block model quantities and grade estimates have been classified according to the CIM Definition Standards for Mineral Resources and Mineral Reserves (
3. Mineral resources are reported in relation to a conceptual pit shell. Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. All composites have been capped where appropriate.
4. Open pit mineral resources are reported at a cut-off grade of 0.43 g/t for laterite and saprolite material, 0.48g/t for transitional material and 0.53 g/t for fresh material. Cut-off grades are based on a price of
5. Underground mineral resources are reported at a cut-off grade of 1.25 g/t for laterite and saprolite material, 1.28 g/t for transitional material and 1.37 g/t for fresh material, and below the material considered potentially mineable via open pit methods. Cut-off grades are based on a price of
Previously due to insufficient funds available to
Technical Services
Hummingbird will establish a dedicated Project team to provide management and technical services. This will be comprised of key members of staff who previously developed the
Future Development Strategy by Hummingbird
§ Based on the technical due diligence undertaken to date, Hummingbird envisages:
o Open pit mining from the KoeKoe deposit of 5.66Mt of ore at 3.01g/t with a strip ratio of 12:1 (waste to ore) to be undertaken by a contract mining company
o A 1Mtpa conventional CIL processing plant (similar flowsheet to Yanfolila Phase 1), processing 4.1Mt with an average feed grade of 3.86g/t and metallurgical recoveries in excess of 93.7% over an initial 4.25 year Life of
o Processing of marginal ore from stockpiles can extend the LoM beyond 5 years
o Supporting infrastructure including a Tailings Storage Facility, site wide water supply, workshops and stores, administration offices and accommodation camp.
o A capital development cost of circa
§ Additionally there are known Indicated Resources within the permit areas which are not included in this base case scenario, and the Company believes there is opportunity to expand LoM from both these resources and future exploration potential within and around the permit areas.
§ Hummingbird intends to leverage from existing process plant design at Yanfolila to fast track engineering with a selected EPCM Contractor and the experienced Project team. Yanfolila provides a robust operating and costs basis for initial assessment of Kouroussa, and the Company believes there are significant synergies and opportunities for optimisation between the two.
§ The Project benefits from good infrastructure with paved roads to site from both
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o Geology - completing structural geology and de-risking resource estimate
o Complete mine design and ore schedule
o Tender the Mining Contract
o Complete process design and final metallurgical testwork
o Select and award an EPCM contract
o Commence Front End Engineering Design of the process plant
o Order items of equipment with long lead times
o Finalise Permitting, including updates to ESIA & Operating permit
o Complete design and costing of the TSF and Site Wide Water supply
o Establish construction camp and admin buildings, including clinic
o Identify fuel and power suppliers
o Complete security risk assessment and establish airstrip
§ This will allow the project to be optimised and de-risked ahead of final funding and will ensure the Project can be developed economically and expediently.
§ Following a 3 month award and mobilisation phase of key contractors, the Company envisages a 12 month construction period.
§ There will be 3 months of pre-production mining ahead of commissioning and ramp-up to commercial production.
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