Optimisation Study Yanfolila Gold Project Mali

RNS Number : 1737G

Hummingbird Resources PLC

02 March 2015

 



Hummingbird Resources plc / Ticker: HUM / Index: AIM / Sector: Mining

 2^nd March 2015

Hummingbird Resources plc ("Hummingbird Resources" or "the Company")

Optimisation Study Completed at Yanfolila Gold Project, Mali

Hummingbird Resources, the multi-project gold company, is pleased to announce the results of its Optimisation Study which highlights the increased size, extended life of mine ("LOM") and robust economics of the Yanfolila Gold Project in Mali ('Yanfolila') and the defined path to production in H1 2016, with construction commencing on time in H1 2015.

Optimisation highlights:

·    NPV US$72.4m (post tax, 8%, US$1,250/oz gold)

·    IRR 35.1%

·    100,000oz year 1 full production after ramp up and 79,000oz p.a. over the 6.5 year LOM

·    2.64g/t LOM grade over initial LOM

·    US$641/oz C1 cash operating costs and all-in sustaining costs US$733/oz

·    US$71.6m capex for a larger and longer life 1 Mtpa project

·    Production due in H1 2016 following 12 month construction schedule

·    Opportunities identified to significantly improve economics and extend LOM

Mine construction highlights:

·    Construction scheduled to commence shortly

·    Initial work to include:

o Plant earthworks

o Mine infrastructure development

o Grade control and further infill drilling

·     Detailed update on construction programme to follow

Dan Betts, CEO of Hummingbird Resources, said, "The Optimisation Study shows a low-cost, low technical risk and quick route to gold production for Yanfolila with robust economics.  The initial target is 100,000oz of gold for the first year of full production after ramp up with a LOM production of 79,000oz/year and an all-in sustaining cash cost of US$733/oz from a 1Mtpa plant.  In addition, there are multiple options to significantly increase the project economics and LOM, and importantly we have the team with the operational experience to achieve this.

"We are looking forward to extending the bridge imminently with Taurus while they finalise due diligence and documentation for the full draw down. Construction is expected to commence this month and we look forward to delivering a mine and generating significant free cash and strong returns for shareholders."

Nick Farr-Jones, Director of Taurus Funds Management Mining Finance Fund said, "We are pleased with the continued progress that has been made through the Optimisation Study process since our provision of the US$10m Bridge Finance Facility in September last year. We have communicated our willingness to increase the size of this Facility to US$15m to assist in progressing physical works required prior to the onset of the wet season as we finalize our legal and technical due diligence for the larger Project Construction Facility."

Optimisation study:

Hummingbird Resources has received the results of its optimisation study at its Yanfolila Gold Project located in Mali.  The study, which highlights the robust economics of the project, includes the finalisation of detailed plant engineering and process design work, enhanced geotechnical, hydrological and hydrogeological studies, as well as a robust mine plan, which will allow for the commencement of mine construction in H1 2015.  This is scheduled to take 12 months, leading to first gold in H1 2016.

The Optimisation Study has been published on our website and can be viewed from the following link.

http://www.rns-pdf.londonstockexchange.com/rns/1737G_-2015-3-1.pdf

Project economics

The base case provides a low-cost, low technical risk, quick route to gold production. The table below provides the key parameters and results of the Optimisation Study.

Yanfolila Project	Base case
Gold price (US$)	US$1,250
Initial full production	100,000oz
Initial mine life	6.5 years
LOM production	79,000oz p.a.
LOM grade	2.64 g/t
Initial capex (US$)	US$71.6m
Average recovery	94%
Annual processing	1Mtpa
Payback (after tax)	< 3 yrs
Direct C1 cash operating costs (US$/oz)	US$641
All-in sustaining costs (US$/oz)	US$733
After tax NPV (8%) (US$m)	US$72.4
After tax IRR	35.1%

Sensitivity

The base case study was conducted at a gold price of US$1,250/oz.  Below are the sensitivities to the gold price at US$1,100/oz and US$1,400/oz.

Gold price sensitivities
Gold price (US$/oz)	IRR (post tax)
1,100	21.5%
1,250	35.1%
1,400	48.1%

Gold inventory

Yanfolila has acurrent 1.8Moz gold inventory with multiple high grade pits (2.8g/t av.)  

Current gold inventory
Category	Tonnes (t)	Grade (g/t)	Gold (oz)
Indicated	8,188,100	3.3	870,400
Inferred	11,910,000	2.5	947,000
Total	20,098,100	2.8	1,817,000

Opportunities identified to significantly improve economics and extend life of mine

The Company has identified a number of areas where there is the potential to improve the economics of the Yanfolila.  These include:

-     Resource - the current mine plan includes only 6.3Mt of ore compared to the gold inventory of 20.1Mt.  For example, if additional higher grade ore could be introduced into the mine schedule, such as from the nearby Gonka deposit, this could significantly enhance the production levels and the economics, and longer term there is potential for underground mining operations at this deposit.

-     Geotechnical - a review of the pit design is being carried out and an adjustment to the pit slopes could significantly reduce the strip ratio and/or add additional economic ounces to the mine plan resulting in a significant increase to the IRR and NPV.

-     Mine Scheduling - a review of the mine schedule is being carried out in conjunction with the above, utilising stockpiling and blending with a view to enhance the LOM economics.

-     Opex / capex - these will remain under review and competitive tender processes are ongoing.

-     Milling - the plant has been designed to process 1Mtpa 50:50 blend of oxide and fresh ore, and has the potential to process increased volumes of the softer oxide material that forms the majority of the plant feed.

-     Power - a review of power suppliers is ongoing, and a potential 1MW solar project is being considered to potentially reduce operating costs.

Open pit mining

The mine plan at Yanfolila is expected to consist of progressively mining five deposits (some of which consist of several pits): Komana East, Komana West, Guirin West, Sanioumale East and Sanioumale West, with a plant throughput of 1Mtpa (increased from originally planned 850ktpa).  The plant has been designed to process 1Mtpa of a 50:50 blend of oxide and fresh ore giving a likely higher capacity when processing softer oxide ore and giving the potential to extend the LOM through processing fresh ore.  Hummingbird Resources will contract a mining service provider to apply industry standard open pit mining methods according to its mine production schedule.  A competitive tender is underway for awarding this contract and will be concluded in the coming months.

Mining methods will include excavating the soft oxidized ore near the surface, and drilling and blasting harder transitional and some fresh rock - 67% of ore processed during the LOM is oxide ore. Drilling and blasting requirements will vary by year as most of the saprolitic (oxide) material is free-digging, whilst all of the un-weathered material (sulphide/fresh) requires drilling and blasting. Loading will be done with a combination of excavators and front-end loaders.  Material will be loaded into 50t to 90t trucks depending on the deposit's location and pit size.  Where possible, material will be taken directly to the mineral sizer, but at satellite deposits, material will be placed in stockpiles near the pits.  This material will then be reclaimed with front-end loaders and loaded into 50t trucks and hauled to the mineral sizer.

Mineral processing and tailings

Once the ore is fed into the process plant, it will undergo the following process steps to produce gold doré.

Soft run of mine ore will be initially crushed by a mineral sizer and passed through 18mm and 180mm screens.  The ball mill will grind the feed into finer particle size (80% passing through a 106 µm screen) to enable gold recovery via gravity concentration or carbon in leach ("CIL").  Approximately 40% of the gold is gravity recoverable.

A select fraction of the mill output will be separated and fed into a gravity gold circuit applying centrifugal force to concentrate heavy, gold bearing particles for intensive leaching.  Once leached, the gold bearing pregnant leach solution will be piped into an electrowinning cell.  The gravity tails will be returned to mill stream.

The main mill product will flow to the CIL process.  The CIL process will apply controlled cyanide bearing leach solution to the finely ground ore to remove gold from the ore and dissolve the gold into solution.  This pregnant leach solution will flow to elution and electrowinning processes to produce solid gold particles.

The gold solids recovered from the gravity and CIL circuits will be transported into the secure gold room, where they will be smelted at a high temperature to produce molten gold, which will be poured into gold doré bullion and shipped to a refinery.

Energy requirements

The project is estimated to require an initial 2.6MW base load power to operate, with 5.6MW installed power, and will contract the power generation on a diesel rental basis. Installation of 1MW of solar PV on a turnkey rental basis is under consideration to reduce opex.  The cost of diesel generated power is US$24c/kWh.

Mine and processing wastes

Mine waste rock will be removed from the open pits to access gold bearing ore in line with the production schedule.  This waste material will be taken directly to the waste rock dumps or used in the construction of haul roads and the Tailing Management Facility ("TMF"). Currently six waste rock facilities are planned for Yanfolila.

Once the gold is removed from the ore using the gravity and CIL processes, the remaining solid tailing materials will be sent to the cyanide detoxification process.  Once detoxified, the tailings will be pumped as a slurry to an engineered TMF for safe storage through the mine closure and reclamation process.  The supernatant water will be reclaimed from the TMF and recirculated to the plant.

Site infrastructure

The overall site plan contains all facilities required to mine and process one million tonnes of ore per year:

·    Site access road

·    Camp

·    Haul roads

·    Process plant and infrastructure

·    Water treatment plants

·    Tailing management facility

·    Waste rock dumps

·    Auxiliary buildings and other infrastructure, such as an airstrip

The infrastructure for the process plant will include a 5.6MW diesel generator power plant, fuel farm and a substation, reagent storage, change house, a laboratory, a control room and an event pond to protect the environment in case of flooding.  The layout also provides areas for a mine workshop, administrative offices and possibly a solar array.

A run-of-mine ("ROM") stockpile will be located adjacent to the crusher.  A front-end loader will be used to reclaim material from the ROM stockpile.  An allowance has been made for additional stockpiles farther from the ROM.  Material from these stockpile(s) would be reclaimed with loaders and trucks.  It is anticipated that 500,000t will be stockpiled and reclaimed each year.  All of the mill feed (1Mtpa) will be sent through the crusher either by direct tipping or from stockpiles.

The process plant area will contain a soft rock run of mine tip, an air compressor structure, ball mill ball storage, the ball mill area, intensive cyanidation area, the CIL area, a carbon regeneration kiln, cyanide detoxification area, raw and process water tanks, a gold room and a tower crane to service the CIL agitator shafts.

The TMF will be situated midway between Komana East and Komana West pits, to the north east of the processing plant.  The TMF will contain and store tailings from the process plant.

MTB Project Management Professionals Inc. has reviewed the information contained in this announcement and, with the exception of the information regarding the resource for which MTB has no direct responsibility for, confirmed it is in accordance with the facts as they are aware and it does not omit anything likely to materially affect the import of the statements and conclusions.

**ENDS**

For further information please visit www.hummingbirdresources.co.uk or contact: 

Daniel Betts Thomas Hill Robert Monro	Hummingbird Resources plc	Tel: [phone]
Stewart Dickson  Jeremy Stephenson	Cantor Fitzgerald Europe Nominated Adviser and Broker	Tel: [phone]
Lottie Brocklehurst Felicity Winkles Hugo de Salis	St Brides Partners Ltd Financial PR/IR	Tel: [phone]

Notes to Editors:

About Hummingbird Resources Plc

Hummingbird Resources (AIM: HUM) is building a leading gold production, development and exploration company. The Company has two core gold projects, the near-term production Yanfolila project in Mali and the Dugbe development project in Liberia. Its current focus is on bringing Yanfolila, which has a 1.8Moz gold inventory, to production in H1 2016.  The high grade gold project has the potential to turn a profit in a varying gold price environment and will allow for quick returns with low operating costs.  A US$75 million debt facility has been agreed with Taurus Mining and construction is expected to commence in H1 2015.

The 4.2Moz Dugbe project in Liberia provides Hummingbird with excellent development upside. An optimisation of the DFS is ongoing while Yanfolila is brought to production in the near term. Additionally, the Company has 5,000km² of highly prospective exploration ground in Mali and Liberia and is constantly evaluating quality new assets.

For more information, please visit www.hummingbirdresources.co.uk

 

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