Publication of Scoping Study

RNS Number : 7493B

Hummingbird Resources PLC

08 April 2013

 



Monday 8 April 2013

Hummingbird Resources plc

("Hummingbird Resources" or the "Company") (AIM: HUM)

Robust Economics Confirmed by Preliminary Economic Assessment

"The current project is robust from a technical and economic perspective and WAI can see no reason why this project should not proceed to a Definitive Feasibility Study."  WAI PEA Report April 2013.

Hummingbird Resources, the Liberian gold explorer with a 3.8 Moz gold Resource, announces results of the Preliminary Economic Assessment ("PEA") on its Dugbe 1 Project in Liberia, West Africa.  The PEA was conducted by Wardell Armstrong International ("WAI") a leading independent mining consultancy, with input from a number of other internationally recognised firms.

Highlights:

·     Post-tax NPV (10%) of $337m for a 3.5Mtpa owner-operated mine giving an IRR of 43% (assuming a US$1,500/oz gold price)

·     Capital cost to build a 3.5Mtpa tank leach operation of US$212m with a payback period of 3 years

·     Contract mining may significantly reduce initial capex to US$143m and increase IRR to 55%

·     20 year LOM produces free cash of  $954 million

·     Average annual gold production of 125,000oz per annum

·     A low strip ratio of 3:1 at Tuzon and potential gold recovery of up to 90%

·     PEA publication meets requirements for payment of second $5m tranche under the Anglo-Pacific Group royalty agreement

·     Significant potential for further optimisation

WAI has completed a number of different financial scenarios for the Dugbe 1 Project, assuming variable mining rates and using both tank and heap leach technologies. The 3.5mtpa plant tank leach process has been identified by the Company as possessing the best balance of shareholder return, deliverability and achievable capital requirements.

On an owner managed basis, such a mine will produce an average of 125,000oz of gold annually and require initial capital of US$212 million which will be paid back after only three years of production. For the first five years of life, the mine will have a low stripping ratio of 2.4:1 and an operating cash cost of US$759/oz which increases to 4.3:1 and US$904/oz over the life of mine and these figures includes total royalty and G&A.  A financial model over the 20 year life of mine produces a post-tax NPV (using a discount rate of 10%) of US$337 million and an IRR of 43.4%.

Hummingbird's comprehensive metallurgical testwork programmes, including 600 5m composite samples taken across the extent of both ore bodies, has indicated recovery rates of 88-90% from a CIL ("conventional tank Carbon in Leach") operation, with an average stripping ratio of 3:1 at Tuzon and 6:1 at Dugbe. 

It is estimated that first production could be achieved within 18 months from the commencement of construction of a 3.5Mtpa plant.

In the Dugbe 1 Project, which is situated only 40 miles by road from the deep-water port of Greenville in southeastern Liberia, gold mineralisation has been defined in the Dugbe and Tuzon deposits, with a combined NI43-101 compliant Inferred Resource of 94.15Mt at an average grade of 1.27g/t Au. The Dugbe 1 3.8Moz resource converts to a potentially mineable resource of 67.94Mt at an average grade of 1.31g/t, for 2.87Moz Au fully diluted.

Financial model based on owner operated tank leach scenario with a three year trailing gold price of US$1500/oz:

LOM Totals (owner operated)	Unit	Tank Leach
		2Mtpa	3.5Mtpa	5Mtpa	8Mtpa
Total Ore Treated	kt	67,937	67,936	67,936	67,936
Total Gold Produced Moz	Moz	2.5	2.5	2.5	2.5
Total Revenue	$M	3,796	3,796	3,796	3,796
Total  Operating Cash Cost $/oz years  1-5	$/oz	814	759	768	782
Total Operating Cash Cost $/oz LOM	$/oz	1,006	904	878	835
Initial Capital Expenditure	$M	156	212	281	357
Sustaining Capital Expenditure	$M	52	44	35	33
Total Royalty, G&A	$M	389	389	389	389
Taxes	$M	277	298	266	227
Operating Free Cash Flow	$M	764	954	990	1,065
NPV 10%	$M	170	337	378	504
IRR	%	30.4	43.4	38.6	47.0
Payback	Years	3	3	3	3
Strip yrs 1-5	years	1.8	2.4	2.6	3.0
Grade yrs 1-5	g/t	1.42	1.41	1.35	1.31

NB: Models based on a gold price of US$1,300/oz and $1,700/oz are included in the appendix.

In order to produce post tax cash flows, an initial tax-free period of three years has been estimated to account for capital redemption, followed by a tax rate of 30% in addition to a 5% royalty calculated on revenue. Cash cost includes Total Royalty, G&A.

The PEA supports the Company's decision to rapidly progress the Dugbe 1 Project towards a Definitive Feasibility Study.  To achieve this objective, Hummingbird Resources intends to:

o  Complete the programme of infill drilling  currently underway, so that the first ten years of production falls within the Measured & Indicated category as a basis for the conversion to reserves;

o  Finalise the appointment an EPC/EPCM contractor to lead the Definitive Feasibility Study ("DFS");

o  Optimise revenue during the initial five years of production by improving the definition of higher grade resource blocks;

o  Consider cost saving options through alternative means of power generation;

o  Optimise the process route and refine capital costs;

o  Further investigate the benefits of contract mining;

o  Conduct an Environmental and Social Impact Assessment to international standards; and

o  Search for additional gold resources within reach of a central processing plant. The basis for this exploration is the 13,000 line km airborne geophysical survey currently being flown over the Dugbe Shear Zone.

During 2013, Hummingbird will commence a DFS and concentrate on infill drilling and trenching at Dugbe 1, as well as undertaking wider regional exploration.

A drilling programme is currently underway at Dugbe 1 with over 9,000m of drilling already completed this year (initial drill results were released on 28 March 2013). This drilling is ongoing with two diamond core drill rigs at site, drilling over 4,000m a month.  The initial aim of this work is to provide additional data on a closer sample spacing to define the spatial grade correlation and enable the Mineral Resource classifications to be upgraded.  Efforts will focus on targeting higher grade ore for the initial stage of mine production as well as refining the operating and capital costs of the project.

With the IFC investment and the Anglo Pacific royalty agreement, the Company is fully funded for its 2013 work programme.

Dan Betts, CEO of Hummingbird, said:

"The completion of the Company's PEA is a significant milestone for Hummingbird Resources and shows that the Tuzon and Dugbe F ore bodies make a compelling case for a stand-alone mine with an attractive financial return. The economics can only be strengthened when our nearby Sackor discovery and the potential to discover additional gold resources on our extensive acreage are also taken into account.

As Arthur Schopenhauer noted; "all truth passes through three stages: First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident." The PEA goes a long way to proving that the project already has robust economics and that a mine should be built.

Being fully financed through our 2013 work programme, we have already commenced the work which takes us towards a Definitive Feasibility Study. During the course of the next 12 months the Company will look to enhance the results of the PEA which already displays a number of positive attributes. These include the low strip ratio, high tank leach recoveries, the proximity to a port and a pro-mining jurisdiction. Our future efforts will focus on targeting higher grade ore for the initial stage of mine production, as well as refining the operating and capital costs of the project. 

I would like to take this opportunity to thank the staff at Hummingbird and all the consultants. They have all worked so diligently to not only discover from nothing Liberia's biggest gold deposit but to complete this extensive piece of work which outlines the country's largest and potentially most profitable gold mine. It is a remarkable achievement. " 

WAI PEA Report April 2013

"In terms of the size and average gold grade of the project, Dugbe 1 is considered to represent an attractive financial opportunity with a robust pay-back period."

Conference call information

Hummingbird Resources will host an analyst conference call today, 8th April 2013, at 9.30am BST, to present and discuss the results of the Scoping Study. To join the conference call, please dial:

                UK toll free: 0808 2370038

                UK number: 0203 4262845

A live webcast of the presentation will be available at: https://arkadin-event.webex.com/arkadin-event/onstage/g.php?t=a&d=702942350 and the password is: 638210

The webcast will be available on the Company's website from approximately 1.00pm BST.

Enquiries:

Hummingbird Resources plc       Daniel Betts, Chief Executive Officer Thomas Hill, Finance Director Robert Monro, Head of Business Development	[phone]
Liberum Capital Limited Nominated Adviser and Joint Broker Tom Fyson / Christopher Kololian	[phone]
FTI Consulting LLP Financial PR Ben Brewerton / Oliver Winters / Victoria Huxster	[phone]

Appendices

1:            WAI Mineable Resource Estimation

WAI Estimate: Potential Mineable Resource for a Tank Leach Process Route February 2013 (using 0.5g/t lower cut off)
Classification	Total Tonnes	Grade	Contained Gold
	Mt	Au g/t	g	oz
Tuzon
Ore**	38.37	1.31	50,256,491	1,615,784
Waste	115.03	-	-	-
Strip Ratio	3.00	-	-	-
Dugbe F
Ore**	29.56	1.32	38,915,457	1,251,161
Waste	181.89	-	-	-
Strip Ratio	6.15	-	-	-
Total
In Situ Ore**	67.94	1.31	89,171,948	2,866,944
Waste	296.91	-	-	-
Strip Ratio	4.37	-	-	-

2:            Detailed Capital Costs:

Initial Capital Expenditure (owner operated)	Tank Leach
Direct Costs $m	2Mtpa	3.5Mtpa	5Mtpa	8Mtpa
Mining	53.50	68.70	103.30	134.02
Total Process	38.17	53.41	66.67	87.70
Total Infrastructure and Inf Power	14.19	19.85	24.59	25.77
Tailings Management Facility	6.94	9.71	12.03	15.95
Total Direct	112.80	151.67	206.58	263.43
Total Indirect	43.00	60.15	74.88	93.82
Total Initial Capital Expenditure	155.80	[211.82]	281.46	357.26

3:            Headline mining numbers, both owner operated and contract mining, assuming a gold price of $1,500/oz:

LOM Totals (owner operated)	Unit	Tank Leach
		2Mtpa	3.5Mtpa	5Mtpa	8Mtpa
Total Ore Treated	kt	67,937	67,936	67,936	67,936
Total Gold Produced Moz	Moz	2.5	2.5	2.5	2.5
Total Revenue	$M	3,796	3,796	3,796	3,796
Total  Operating Cash Cost $/oz years  1-5	$/oz	814	759	768	782
Total Operating Cash Cost $/oz LOM	$/oz	1,006	904	878	835
Initial Capital Expenditure	$M	156	212	281	357
Sustaining Capital Expenditure	$M	52	44	35	33
Total Royalty, G&A	$M	389	389	389	389
Taxes	$M	277	298	266	227
Operating Free Cash Flow	$M	764	954	990	1,065
NPV 10%	$M	170	337	378	504
IRR	%	30.4	43.4	38.6	47.0
Payback	Years	3	3	3	3
Strip yrs 1-5	years	1.8	2.4	2.6	3.0
Grade yrs 1-5	g/t	1.42	1.41	1.35	1.31

LOM Totals (contract mining)	Unit	Tank Leach
		2Mtpa	3.5Mtpa	5Mtpa	8Mtpa
Total Ore Treated	kt	67,937	67,936	67,936	67,936
Total Gold Produced Moz	Moz	2.5	2.5	2.5	2.5
Total Revenue	$M	3,796	3,796	3,796	3,796
Total  Operating Cash Cost $/oz years  1-5	$/oz	952	893	906	930
Total Operating Cash Cost $/oz LOM	$/oz	1,235	1,103	1,077	1,017
Initial Capital Expenditure	$M	102	143	178	223
Sustaining Capital Expenditure	$M	67	48	41	42
Total Royalty, G&A	$M	389	389	389	389
Taxes	$M	119	173	153	138
Operating Free Cash Flow	$M	384	641	699	818
NPV 10%	$M	118	257	299	418
IRR	%	38.2	55.3	46.2	56.4
Payback	Years	3	2	3	2
Strip yrs 1-5	years	1.8	2.4	2.6	3.0
Grade yrs 1-5	g/t	1.42	1.41	1.35	1.31

4:            Flexing the gold price to $1,300/oz and $1,700/oz

LOM Totals (owner operated)	Unit	Tank Leach - 3.5Mtpa
		$1300	$1500	$1700
Total Ore Treated	kt	67,936	67,936	67,936
Total Gold Produced Moz	Moz	2.5	2.5	2.5
Total Revenue	$M	3,290	3,796	4,303
Total  Operating Cash Cost $/oz years  1-5	$/oz	749	759	769
Total Operating Cash Cost $/oz LOM	$/oz	894	904	914
Initial Capital Expenditure	$M	212	212	212
Sustaining Capital Expenditure	$M	44	44	44
Total Royalty, G&A	$M	364	389	415
Taxes	$M	178	298	419
Operating Free Cash Flow	$M	594	954	1,315
NPV 10%	$M	186	337	489
IRR	%	29.4	43.4	57.0
Payback	Years	3	3	2
Strip yrs 1-5	years	2.4	2.4	2.4
Grade yrs 1-5	g/t	1.41	1.41	1.41

LOM Totals (contract mining)	Unit	Tank Leach - 3.5Mtpa
		$1300	$1500	$1700
Total Ore Treated	kt	67,936	67,936	67,936
Total Gold Produced Moz	Moz	2.5	2.5	2.5
Total Revenue	$M	3,290	3,796	4,303
Total  Operating Cash Cost $/oz years  1-5	$/oz	883	893	903
Total Operating Cash Cost $/oz LOM	$/oz	1,093	1,103	1,113
Initial Capital Expenditure	$M	143	143	143
Sustaining Capital Expenditure	$M	48	48	48
Total Royalty, G&A	$M	364	389	415
Taxes	$M	52	173	293
Operating Free Cash Flow	$M	281	641	1,002
NPV 10%	$M	106	257	409
IRR	%	32.7	55.3	76.2
Payback	Years	3	2	2
Strip yrs 1-5	years	2.4	2.4	2.4
Grade yrs 1-5	g/t	1.41	1.41	1.41

5:            Outline Mine Plan

5.1:         Mining Operation

Mining at the Dugbe 1 Project will be a conventional open pit operation with ore and waste extracted via drill, blast, load and haul.  The mining equipment fleet is likely to consist of equipment similar to Atlas Copco FlexiROC D60 track-mounted drills for blast hole drilling, and Liebherr 8m3 and 15m3 shovels for ore and waste excavation.  Upon loading, ore will be hauled from Dugbe F and Tuzon in plant such as CAT 777G 90t haul trucks to a centralised ROM pad, from where it will be crushed in a primary crusher before being fed to the processing plant. Waste from Dugbe F and Tuzon will be hauled in 90t trucks to waste dumps located on the footwall side of each pit.

Mining operations at the Dugbe 1 Project will have a life of mine average strip ratio of approximately 3:1 at Tuzon and 6:1 at Dugbe F.  The average strip ratio for the first 10 years of mine life on a 3.5Mtpa plant is 2.8:1.  The resultant open pit footprint at Tuzon is approximately 1,750m along strike by 730m and some 200m deep with a resultant total rock tonnage of approximately 115Mt.  The Dugbe F footprint is approximately 2,750m in strike with a maximum width of 1,000m and a total rock tonnage of approximately 181Mt.

5.2:         Processing

Mineral Processing test work has been undertaken at a number of different internationally respected laboratories.  This test work has demonstrated that the mineralised rocks at Dugbe F and Tuzon are amenable to cyanidation.

Two principal process routes have been considered: conventional tank carbon in leach (CIL) and heap leach using sodium cyanide with subsequent gold recovery.  Gold recoveries of up to 90% are anticipated with tank leach and 60% with heap leaching. 

A conceptual flow sheet for a 3.5mtpa CIL operation comprises the following key stages and components:

Stage 1 - Ore receiving section: ore will be delivered to a static grizzly (600mm material), then move to a jaw crusher (150mm material), and next to an ore stockpile for a maximum of 12 hours. This circuit will treat approximately 750t/hour.

Stage 2 - Grinding: ore will be fed into an 8.5m x 4.35m semi-autonomous (SAG) mill fitted with a 6,000kW motor at a rate of 440tph. Ore will be ground to 80% passing through 850µm. From hydrocyclone classification underflow material will pass through a closed circuit Ball mill, before returning to the SAG mill.

Stage 3 - CIL circuit: Product from the grinding circuit will be pumped from the pre-leach sump to six 3,300m³ tanks operating in series.

Stage 4 - Doré production: this will comprise an elution circuit of AARL type design.

Stage 5 - Carbon regeneration: this stage will comprise a diesel fired rotary kiln and regenerated carbon will be returned to the CIL circuit.

Stage 6 - Cyanide detoxification: the final stage of the process will include cyanide detoxification) prior to disposal of wastes in a Tailings Management Facility ("TMF"). A nominal cost for cyanide detoxification has been included in the CAPEX but the precise nature and extent of any cyanide treatment will be determined during the ESIA to be undertaken as part of the Definitive Feasibility Study.

5.3:         Tailings Management Facility and Mine Layout

The Environmental and Social Scoping Report (WAI, April 2013) has provided a provisional mine layout and identified a potentially suitable naturally occurring valley some 2.5km to the north of the Tuzon deposit that could support a TMF. The cost of the TMF has been estimated at US$9.71m.

5.4:         Infrastructure

It is assessed that the infrastructure cost for the project will be under US$20m and this will include the upgrade of the road from Greenville to a two-lane laterite road suitable for heavy mining equipment.

6:            Power

It is estimated that a 3.5Mtpa plant will require 17.5MW of installed power. For the PEA, power estimations have been worked out using US28cents/kWh, which is based on using Light Fuel Oil (LFO) leased generators.  On this basis it is believed there is significant optimisation that can occur to reduce opex on the project and all possibilities will be evaluated during the DFS and we anticipate significant cost saving in this area. For example, the option of using HFO generators will be investigated and indicative figures so far from a leading power generation company has suggested a ten year generator rental agreement including HFO could produce power in the order of US17c/kWh.

Furthermore, a desktop scoping study conducted by Knight Piesold in 2012 into the opportunity for hydroelectric power concluded that there were a number of regional sites that could be suitable for a run-of-river hydro scheme sufficient to produce up to 30MW of power at a cost of US18c/kWh. Lastly, a study will also be conducted into the opportunity to use crude palm oil (CPO) from nearby oil palm plantations that could be mixed direct with LFO to make biodiesel.

7:            Capital Expenditure

Summary of the initial capital expenditure required for each production rate 

Summary of Initial Capital Expenditure for the Dugbe 1 Project
	Tank Leach
Direct Costs $m	2Mtpa	3.5Mtpa	5Mtpa	8Mtpa
Mining	53.50	68.70	103.30	134.02
Total Process	38.17	53.41	66.67	87.70
Total Infrastructure and Inf Power	14.19	19.85	24.59	25.77
Tailings Management Facility	6.94	9.71	12.03	15.95
Total Direct	112.80	151.67	206.58	263.43
EPCM	10.08	14.10	17.56	22.00
Contingency	11.86	16.59	20.66	25.88
Freight	1.78	2.49	3.10	3.88
Comms and Vendors	0.89	1.24	1.55	1.94
Spares	2.97	4.15	5.16	6.47
Temporary Facilities	1.78	2.49	3.10	3.88
Working Capital	13.64	19.08	23.76	29.76
Total Indirect	43.00	60.15	74.88	93.82
Total Initial Capital Expenditure	155.80	211.82	281.46	357.26

8:            Mineral Processing and Infrastructure Initial Capital Expenditure

In order to generate an initial capital estimate for each production rate, a base case capital expenditure for each process route was estimated and scaled using an industry standard method. The estimates have been made on the basis of a rented diesel generated power scenario.

	Tank Leach
Direct Costs $m	2Mtpa	3.5Mtpa	5Mtpa	8Mtpa
Mining	53.5	68.7	103.3	134.02
Single Stage Crushing	4.99	6.98	8.64	11.46
Milling	16.78	23.47	29.07	38.54
Leaching	6.66	9.31	11.54	15.29
Carbon Circuit	3.89	5.45	6.75	8.94
Gold Room	0.80	1.13	1.39	1.85
Tailings Detoxification	1.77	2.47	3.06	4.06
Reagents	1.44	2.02	3.02	3.32
Others	1.84	2.58	3.19	4.23
Total Process	38.17	53.41	66.67	87.70
Infrastructure	13.53	18.93	23.45	24.25
Inf Power	0.66	0.92	1.14	1.52
Total Infrastructure and Inf Power	14.19	19.85	24.59	25.77
Tailings Management Facility	6.94	9.71	12.03	15.95
Total Direct	112.80	151.67	206.58	263.43

Notes to Editors:

Hummingbird Resources plc is an AIM quoted mineral exploration company incorporated in England and Wales and headquartered in London.  Since its establishment in November 2005, the Company and its subsidiaries (the "Group") has been active in Liberia, West Africa, and is currently the holder of the largest area of mineral exploration ground in the highly prospective Birimian geological region of eastern Liberia.  The Group's total Inferred Resource is 3,835,000 ounces of gold.  The Group has published a PEA on its project showing on a 3.5Mtpa tank leach operations and NPV of US$337m on a Capex of US$212m for an IRR of 43.4%.  This gives a payback period of 3 years and is based on a 10% discount rate and US$1,500 gold price (three year average gold price at time of release).

The Group has published a NI43-101 compliant Inferred Resource on its Dugbe F deposit of 43.01 million tonnes at 1.28 g/t Au to give 1,764,000 ounces of gold using a lower cut-off grade of 0.5 g/t Au and no upper cut-off grade.  In addition, the Group has declared an Inferred Resource on its Tuzon project of 51.1 million tonnes at 1.26 g/t Au to give 2,071,000 ounces gold using a lower cut-off grade of 0.5 g/t Au and an upper cut-off grade of 7.0 g/t Au.  Tuzon lies 2.6km to the east of the Dugbe F deposit.  Exploration is being carried out to best industry practices.

In 2013 the Group is moving the Dugbe 1 Project towards feasibility and is currently infill drilling its existing Resources as well as continued regional exploration work.

The Group currently holds exploration licences covering approximately 7,000 square kilometres in total, which constitutes a significant proportion of eastern Liberia containing the Birimian sequence.

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

 

END

 

 

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