-- adds brokers' comment --
Hummingbird Resources’ (LON:HUM) first reserves statement for its Yanfolila gold project in Mali has confirmed its low cost potential according to its chief executive.
The explorer said Komana East and West, the first pits to be mined under the current plan, had gross maiden probable reserves of 6.82Mt at a grade of 3.03 g/t or the equivalent of 665,600oz gold.
That is 20% higher than an optimisation study in March, reflecting a higher grade and all of the indicated resources converting into the much more certain reserves category.
Hummingbird now estimates it can increase the amount of ore processed each year by 24% to 1.24Mtpa and increase gold production to 120,000 oz in the first year.
The upgraded plant will also be to handle all ore types with enough for at least five years production not including nearby exploration potential.
The target is first gold pour in 2016 depending on the funding for the US$75mln upfront cost coming through, though brokers suggest with a construction timeline of between 12-15 months 2017 is looking a more realistic target.
Fund manager Taurus has agreed to put up the money and is still carrying out due diligence in advance of the full debt draw down.
Dan Betts, Hummingbird’s chief executive, said the reserve statement and increase in gold grade to 3.03 g/t confirmed Yanfolila as a quality, high-grade, low cost project.
"Additionally, the plant has been designed with the ability to further increase capacity to 1.5Mtpa.
“With so many Indicated ounces outside the mine plan at nearby deposits and high-grade underground potential at Gonka, the company believes there remains significant production upside at Yanfolila.”
Total resources, which include reserves, now amount to 1.8mln oz at a grade of 2.54 g/t, including potential pits at Gonka and also Guiren West, Sanioumale East and Sanioumale West.
Additionally there is a further 390,700ozs not yet included in a defined resource.
A revised estimate of the project’s economics based on the new reserves, plant throughput and production will be published early next year, Hummingbird added.
Broker Peel Hunt said the project spend is now likely to be very low until the Taurus project debt is drawn or alternative financing solutions are found, so a cash call is unlikely.
The broker also noted how the project has progressed from a 60koz/yr of production at a grade of 2.5g/t to 100koz/yr with the ore grading 3g/t.
Numis added it was a decent result with a robust reserve grade and more operating flexibility and throughput in the plant.