Hummingbird Resources Ltd’s (LON:HUM) Yanfolila project in Mali remains one of the best projects among the UK-listed junior sector, according to RFC Ambrian.
Shareholders yesterday approved a placing and subscription to raise funds for the construction of Yanfolila.
Added to an over-allotment option in respect of 16.8mln shares, the amount raised in total was £49.5mln (US$70mln).
Bringing the mine on stream will cost US$88mln, estimates the house broker, comprising US$79mln of capex and US$9mln of working capital.
Add in US$15mln required to repay the Taurus bridge loan and the total funding requirement is in the region of US$110m, the balance of which Ambrian expects to be secured as debt finance.
"We understand that the company is in discussions with a number of debt providers and expects that the debt requirement, post the exercise of the over-allotment option, is now around US$39m."
RFC Ambrian estimates mine construction will take around 12 months and sees first production before the end of 2017.
An “attractive 60% IRR” combined with “calculated capital intensity of US$103/oz of gold recovered" is among the lowest in the West African peer group, it adds.
“Operationally, we see value upsides as including the establishment of JORC-compliant resources/ reserves for near-mine satellites, specifically the high-grade Gonka deposit, and their inclusion in the mining inventory,” the note added.
In a definitive study in February, total resources at Yanfolila were defined at 1.8mln ounces of gold with an additional 390,700 ounces of exploration potential.
The plan is to mine five open pits in succession, starting with Komana East and Komana West and then progressing to Guirin West, Sanioumale East and Sanioumale West.
The high grade Gonka resource is in addition to this and would be worked initially as an open pit, then underground.
The processing plant will have a throughput capacity of 1.24 mln tonnes a year, producing up to 121,000oz of the yellow metal each year.
RFC Ambrian has a target price on the shares of 38p and ‘buy’ recommendation,,
Shares were little changed at 22p.