Hummingbird Resources PLC (LON:HUM) is spinning out a number of non-core exploration permits following an outline deal struck with privately-owned Kola Gold.
The pair plan to create a new company to hold the 10 Mali exploration properties covering 1,600 square kilometres called Cora Gold Inc.
"This transaction doubles our exploration exposure in Mali and provides us with an introduction to Senegal and exciting new mineralised ground in Mali where we are currently focused on bringing Yanfolila, one of Africa's highest margin undeveloped gold projects, to production next year,” said chief executive Dan Betts.
Yanfolila, in Mali, is the company’s flagship project and will start producing next year with aim of churning out 107,000 ounces of the yellow metal a year.
The Kola deal will allow Hummingbird to channel its efforts in this and the 4.2mln-ounce Dugbe asset in Liberia.
The AIM-listed gold explorer and developer will own 43% of Cora Gold, which must raise US$4mln.
Hummingbird will have buy-back and royalty rights over the four permits closest to Yanfolila that could add “significant upside” to the operation there.
"With a dedicated exploration team that we know and trust, that has extensive experience in these gold belts and a budget to explore we look forward to unlocking the exploration value together with Kola,” said Betts.
“Should these exploration efforts be fruitful, we have buy-back and royalty rights over the permits closest to Yanfolila which could add significant upside to our current mine plan as we bring Yanfolila into production in 2017.
“Additionally, owing to the presence of the mine at Yanfolila, any high grade proximal discoveries will instantly be more valuable to Cora Gold because they will be able to be processed at Yanfolila without the necessary capex to build a new mine.”
Broker Shore Capital noted that the deal allowed the group to develop the flagship Yanfolila site, without sacrificing exploration upside.
"Exploration success at these permits proximal to Yanfolila could potentially add significant upside here. "The reason is that the ores could be processed at the Yanfolila plant, obviating the need to sink additional capital into new plants," also highlighted analyst Yuen Low. Shares gained 0.56% to 22.375p.