-- adds broker comment --
Hummingbird Resources (LON:HUM) said a new report into the construction of a water-generated power plant in south-east Liberia was encouraging for its Dugbe gold development.
A preliminary report from Knight Piesold Consulting looked at four run-of-river hydropower options ranging from 15Mw to 30Mw with varying intakes at a site 10km from Dugbe.
Dan Betts, Hummingbird’s chief executive, said a hydro-electric plant (HEP) plant in south-eastern Liberia would provide a sustainable and low-cost source of power for the Dugbe project and secure a source of domestic power supply for the local region.
A pre-feasibility study is being funded by IFC InfraVentures, one of the groups that commissioned the report on the HEP.
“We also believe the HEP scheme will create a catalyst for growth in the region and provide a significant potential operating cost saving for the development of the Dugbe gold project." added Betts.
The Dugbe gold project would require on average 16Mw though the assumption so far has been this would come from on-site generators.
The pre-feasibility study for the HEP requires further hydrological studies and a satellite survey, but the aim is to publish in the second quarter of 2016.
Cantor added that market’s focus on Hummingbird’s other project Yanfolila, in Mali, in recent months had meant little in the price for Dugbe.
“Following the eradication of Ebola in Liberia earlier this year, the potential for the provision of cheaper power could further support the eventual development of the project.
“The conclusion of the Dugbe HEP study next year should coincide with the start-up of production at Yanfolila.
“As that project begins to generate meaningful cash flow, the company's ability to fund a mine build at Dugbe should increase, making the current zero market valuation inappropriate.
Cantor has a value for Yanfolila of 38p/share and 62p/share for Dugbe.
The broker’s target price is 99p, while ‘buy’ is the investment view.
Shares rose 1% to 25.6p.