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In the news: KEFI Minerals, Metminco & Hummingbird Resources

Published: 11:33 08 Sep 2016 BST

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We are getting terrific traction for our KEFI Minerals roadshow which kicks off in London next week. KEFI Minerals (AIM:KEFI) appointed RFC Ambrian as broker over the summer and we are marketing Harry Anagnostaras-Adams (Chairman) and Wayne Nicoletto (COO) in London the week of the 12th September.
KEFI is a gold exploration and development company whose main project is Tulu Kapi in western Ethiopia, which is being rapidly progressed towards development. A Mining Licence was granted in April 2015, KEFI’s definitive feasibility study was then completed and it is now refining contractual terms for project construction and operation. Latest estimates for annual gold production are around 100,000oz pa over a ten-year period at AISC of approximately US$741-762/oz at a gold price range of US$1,200- 1,500/oz. Tulu Kapi’s ore reserve estimate totals 15.4Mt at 2.12 g/t gold, containing 1.05Moz. The first eight production years of the open pit are estimated to yield an average of 115,000oz pa.
Further to the DFS on the open pit project, a PEA has been published for the adjacent underground resource. This indicates the economic attractiveness of mining the underground deposit adjacent after the start-up of the Tulu Kapi open pit and positive cashflows have begun to repay project debts. At a gold price of US$1,350/oz, the projected cashflows indicate a cash build-up in the first three production years of US$190m; this would be sufficient to repay all project debts, fund the development of the underground mine and commence dividend payouts.

COMPANIES

METMINCO

ASX:MNC | A¢0.30 | US$9.2m | Speculative Buy | TP : A¢1.20
Updated Scoping Study work confirms attractive Underground Only Development Option
Metminco has released the findings of updated scoping study work completed on the underground only development of its Miraflores gold project in Colombia completed by SRK. The results build on the updated JORC resource statement announced on 21 July and the estimated mineable resource that was announced on 31 July, adding updated operating and capital costs and providing updated resulting financials.
COMMENT: The results broadly confirm our valuation for Miraflores as outlined in our report Metminco - Agreement to Acquire the Quinchia Gold Portfolio, 7 March 2016 published on 23 August 2016. The Scoping Study results included an after-tax NPV8 of US$73m and an IRR of 26% assuming a gold price of US$1,300/oz.
The company states that it now plans to raise the funds required to complete a Bankable Feasibility Study on the project, which it aims to have completed during 1Q 2017. It expects to be able to complete the social and environmental work required to secure the Environmental License during 2017 allowing a production decision to be taken by the end of 2017.
We maintain our Speculative Buy rating for the company and our Target Price of A¢1.20, as detailed in the aforementioned report.

Scoping Study work outlines an underground operation with 414koz of gold production over a mine life of 9 years. — As announced in July, measured and indicated resources on which the work was undertaken were 9.2Mt grading 2.81g/t for 832koz, assuming a 1.2g/t cut-off. Within this, mineable resources at a 2g/t cut-off were estimated at 4.0Mt grading 3.51g/t for 455koz of gold, including the processing of 0.2Mt of low grade stockpiled material. With a processing rate of 475ktpa the project has a projected mine life of 9 years.
Steady state production of ~50koz pa at AISC of US$648/oz — The project comprises a longhole open stoping mining operation allied to a processing plant combining gravity and CIL of flotation concentrate that is expected to recover 91% of the contained gold. AISC, comprise cash costs of US$555/oz, a 4% royalty of US$52/oz and sustaining capex equivalent to US$41/oz.
Initial capex of US$81m, equivalent to US$196/oz of gold recovered — The project is presented assuming the leasing of the mining fleet, which helps to limit upfront capital costs to US$81m, including a 21% contingency of US$14m. Sustaining capital costs are estimated at US$14m over the remaining life of the operation.
Third-party investment of up to US$45m into Los Calatos recognises significant upside from further (funded) de-risking. In mid-June the company announced that it had secured up to US$45m of investment from CD Capital in return for a stake of up to 70% in its Los Calatos project in Peru. This allows the project to be funded without corporate dilution at a significant premium to any foreseeable near-term equity investment in the company.
We maintain our SPECULATIVE BUY rating. We base our target price of A¢1.2 on a 0.25x risked multiple of Miraflores NPV8, allowing for the de-risking of the project’s parameters and it achieving permitting and funding milestones. We value Los Calatos at a 2x multiple of CD’s initial US$16m investment for 51% at the project level, again allowing for substantial uplift through the progression of the PFS/DFS process.

HUMMINGBIRD RESOURCES

LON:HUM | 24p| US$112m | BUY | TP : 37p
Taurus Bridge Extension
Hummingbird Resources has agreed a 3-month extension to the bridge facility with Taurus Mining Finance Fund, to 8 December 2016. The US$10m bridge was originally announced on 11 August 2014, and was expanded to a US$15m facility on 1 September 2015, before being extended by 6 months on 25 February 2016.

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